Developing a CRM Strategy Jennifer Kirby Key Issues

Developing a CRM Strategy Jennifer Kirby

Key Issues • What is a customer relationship management (CRM) strategy? • How does a CRM strategy fit in with other business strategies? • Only 10 percent to 15 percent of companies know the value of their customer base — yet, this is an important intangible asset and drives the detailed tactics of the CRM strategy. • The benefits of CRM come through increased service and communication; to build real loyalty, how is this managed effectively? These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

What Is a CRM Strategy? • “It boldly states the ideal customer base and how an organization intends to get and keep it. I’ve never yet seen one that does this to any depth. ” — CRM Consultant • “…It’s the decision about which customers are to be managed, via which channels for which products and services: It means revisiting the marketing strategy. ” — CRM Guru • “A CRM strategy is not an infrastructure road map. ” — CRM Program Manager • “We need to understand what customers we have, and who we want, then we can put in place a strategy for developing the value of each segment” — CEO These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

A CRM Strategy: Developing the Customer Asset Base How do we create awareness of what we offer to potential customers of value? Target How can we retain or win back customers of value? How do we Win Back Enquire acquire Customer valuable Life Cycle Retain Acquire Sales Service Marketing customers How do we do this efficiently? Manage Problems Welcome who will value us? Develop How do we develop the customers’ loyalty and value to us by developing our value to the customer? These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

CRM Strategy: Top Ranking Objectives B 2 B B 2 C Percent of Companies Ranking as Top Priority 47 47 Retention Development Acquisition 26 16 37 27 Annual loss in a typical company Customer loss: 10% to 30% Employee loss: 15% to 20% Investor loss: 50% Reduces annual profit by 20 -50% These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

CRM Strategy: Case Study No. 1 • Segment the customer base in deciles of value. • Develop customer profitability. The most-valuable segment by 3 percent, the next three segments by 20 percent, and decrease the losses on the rest — develop services used, lower distribution cost, increase prices and discount according to potential value. • Acquire new customers of the most-valuable type with targeted selling. • Implement retention programs for the most-profitable customers. $15, 000 $10, 000 $5, 000 0 ($2, 500) ($1, 000) 1 2 3 4 5 6 7 8 9 10 Household Deciles Ranked by Profit These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

CRM Strategy: Case Study No. 2 • Understand segment the customer base. • Retain the most-valuable customers after finding out why they defect. • Win back valuable ex-customers. • Develop the loyalty of current customer segments — use differentiated service according to need. • Improve the profitability of unprofitable customers. Communication Value-added Value-tailoring Brand Value These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

CRM Strategy Is an Element of Business Strategy BUSINESS STRATEGY BUSINESS MODEL BRAND PROPOSITION: The Company DNA OPERATIONAL STRATEGY HR STRATEGY MARKETING FINANCE STRATEGY IT STRATEGY CUSTOMER STRATEGY R&D STRATEGY PRODUCTION STRATEGY These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

The Brand Is the Company DNA Step No. 1: Define the Vision Step No. 2: State the Culture: What and who are you? What value will you deliver? What internal capabilities are needed to deliver the value? Promised Customer Experience BRAND PROPOSITION Unifies Internal Delivery Step No. 3: Express the Image How will the value of the brand be communicated? These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

Corporate DNA Example: Mickey’s Signature These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

Mickey’s Signature No. 2 These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

One Mouse, Different Signatures These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

Corporate DNA Consistency These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

Interweaving the Marketing and Customer Strategy Marketing Strategy How do we take advantage of market opportunities and mitigate competitive threats? Customer Strategy How do we get closer to the customer to deliver value to them and create value for us? • Vision: Market Position • Market Definition and Audit • SWOT Analysis • Vision: CVP • Customer Definition and Audit • Capability Analysis • Target market segments • Objective for each market segment: Penetration, Development, Maintenance and Productivity • Measures: Market share, brand equity and market penetration Based on product life cycle • Target customer segments by value • Objective for each customer segment: Acquisition, Development Retention and Efficiency • Measures: Satisfaction, loyalty, cost to serve and employee satisfaction Based on the customer life cycle These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

Relationship Investment Guide Hygiene Factors Maintain Efficiently Claimed Importance High Above average 22 3 Average 19 Overspending Low Trim 2 5 Invest Well above average 4 9 Low Motivators 12 Below average Hidden Opportunities Real Relevance High Poor Study/Invest These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

Customer Asset Audit Customer Potential (Value to Company) Protect Position Invest to Protect Invest to Win Damage Limitation Over Large share of wallet Counter Competition Invest to Build Win the Opportunity Careful Management Some potential Manage for Profitability Build Selectively Manage for Revenue Manage for Profitability Manage for Revenue Consider Divesting Highly Secure Vulnerable Key Transactional Secure Fragile Strength of Relationship (Value to Customer) These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

Real Examples of CRM Objectives • Return retention to the industry average and then improve to 3% • Measure the propensity to churn, expected lifetime value, and propensity to accept discounts and special marketing offers • Empower CSRs to decide who to keep according to specified criteria • Establish who end users are to build broker loyalty • Build a customer information culture to increase customer advocacy • Improve communication with customers/partners • Reduce staff turnover in call center • Introduce an effective global sales process • Find CRM initiative with highest payback and use to fund others • Retain our most valuable customers for revenue in the short term • Establish our customers’ optimum potential for selective development • Acquire strategically important customers in the new market • Expand cross-selling opportunities with supporters These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

CRM Metrics Corporate Example Customer Strategic Example Operational Example Infrastructure Example Market Share Profit Growth Cost Ratios Revenue Growth Margin Growth Customer Loyalty Key measures to support corporate financial and market goals Lifetime Value Acquisition Risk Profile Customer Profitability Development Staff Satisfaction Retention Cost to Serve Key measures for monitoring the customer strategy Response Levels Complaints RFM Measures NPD Times Cross-Sell Ratio Recommendation Levels Channel-Specific Measures Conversion Ratios Staff Turnover Key measures for monitoring the customer processes Call Answering Times Response Times Staff Qualifications Customer Data Accuracy“Do Not Mail” Markers Staff Sickness Key measures for monitoring efficiency and inputs These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

CRM Strategy — Tactics Marketing Strategy • CVP • Product • Price • Communication: public relations, advertising, sales, promotion, merchandising and direct marketing/messaging • Channel Customer Strategy • CVP by segment • How customized for each segment • How differentiated for each segment • Service/customer care by customer segment/life cycle • Contact by life cycle/segment • How media and content is personalized in communication for each segment • Which channel is used by which segments for what (touchpoints) • Management by segment: who, where, how These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

Tactics for Retention and Building Loyalty Scheme CRM Strategy Attitude and Behavior • • Rational value Creates stickiness Makes sales Retention, attraction, increased sales • Real loyalty? YReward schemes YIncentives YCross-selling YProduct bundling YProduct & price • • Rational and emotional value Creates loyalty Creates relationships Retention, attraction, customer share, recommendations, lower costs and wider margin ¤Brand values ¤Contact ¤Customer care ¤Contracts ¤Products & price These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

Customer Care: The Social Bond That Binds • Improve perceived service and you improve loyalty. • The customer does not care how much you know about them, until they know how much you care. • Stop thinking you are servicing a product — service the customer. • Feeling recognized, valued and cared about is the basis of the bond that is loyalty. Understand & Empathize Advice & Information Build Communities Anticipate the Crisis Collaborate & Involve These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

Relationship Models: Resource Allocation by Segment Contac t Center 10 - 50% >50% Personalized Self. Serve One: One to Few: One: Few to One: One Key Account Teams One: Many < 10% Company Share of Wallet • Upward movement of wallet share is a trigger for additional resource. • Greater customer spend rewarded with greater levels of account management. Relationship Manager One: Few Low Medium Dedicated Hunters High Market Value of Customer These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

CRM Strategy: Capabilities Marketing Strategy Support Customer Strategy Support • Human resources • IT • Knowledge — research • • • Skills and competencies Internal communications Organization IT infrastructure IT architecture Research, analysis and planning • Knowledge management • Customer data strategy • Business process architecture These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.

Recommendations • Establish your market position against requirements and competitors. Define a “value, ” different, customer proposition • Make the brand the company DNA to deliver the proposition • Segment the market for share of wallet and lifetime value • Establish the motivating factors for customer loyalty: Where do you need to excel and where can you cut cost? Any gems? • Value your customer base potential — not just on current profit. • Develop skills in the new areas of customer relationship building — service, contact strategies and relationship models. Understand what technology enables you to do. These slides are for internal use only. External use of Gartner copyrighted material must be approved in writing by Gartner Vendor Relations. Please e-mail your usage request to quote. requests@gartner. com for approval.