ed thompson gartner crm vision: business and technology strategies for more- profitable customer...

Ed Thompson

Gartner CRM Vision: Business and Technology Strategies for More-Profitable Customer Relationships

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• CRM budgets are less protected. So far, CRM has survived the economic slowdown, but pressure is building.

• CRM is dangerous. Failure rates are rising, mistakes will be seen by everyone and the impact on the enterprise will be greater.

• CRM is still a fantasy in most enterprises. CRM done at a department level suboptimizes the customer relationship.

• CRM can provide a fundamental competitive advantage. Those enterprises that succeed are reaping substantial long-term benefits.

• CRM should benefit both the supplier and customer. Few initiatives provide any benefit to the customer.

• CRM is not just about creating a unified view of the customer. The customer would like a unified view of the supplier too.

• CRM will evolve beyond customers. The future of CRM will include a greater focus on employees, partners and prospects.

Conclusions


1. What is the value of CRM to enterprises, and what drivers are continuing to force its acceptance?

2. How will organizations develop and implement a business vision for CRM?

3. What will CRM look like in the future, and how can enterprises position themselves now to be prepared for these changes?

Key Issues


0

10

20

30

40

50

60

Jan Feb Mar Apr May Jul

No change yet

No change, butmonitoring thesituation

Yes, planning tospend moreslowly, more in2H01 once I

have a better readYes, planning tospend less

Yes, seniormanagementrequested acutback inspendingYes, doing dealsthat are smallerthan I would haveotherwise

225 respondents with average revenue of $10 billion

Aug

Has the Slowing Economy/Stock Market Decline Made You Re-evaluate Spending in the Last Month?

No. of Respondents


• Microsoft Office upgrade – 29%• E-commerce initiatives – 27%• Network equipment – 24% • Security software – 24% • Windows 2000 server – 22%• Windows 2000 desktop – 21%• Wireless initiatives – 21% • Unix servers – 20%• Storage hardware – 20%• PCs – 18%• Net. and app. mgmt. software – 18%• Call center projects – 18%• CRM software – 17%• Employee portal projects – 17%• ERP software – 16%• Web site enhancements – 16%• Consulting – 16%

• Database software – 14%• Customer service apps. – 14%• New custom development – 14%• Document mgmt. software – 13%• Marketing/analytics – 13%• Mainframe hardware – 13%• Content mgmt. – 11%• Business intelligence tools – 9%• Mainframe software – 7%• Storage software – 7%• Supply chain mgmt. – 5%• Sales force automation – 4%• E-mail response software – 4%• Mainframe system mgmt. – 4%• Procurement software – 2%• E-store software for Web site – 1%

Which Areas Are Likely to See the Biggest Spending Increase in 2H01?


Market Trends

1. Increasing Customer Education and Expectations Consumer complaints 2000 = 5x 1995

2. Customer Relationship Complexity Rises R(f) = (Segments) x (Products) x (Channels) x (Partners)

3. Rising Global Internet Adoption More accessible competition and more coordination between partners

Executive Trends

4. Intensified CEO Attention on CRM CRM = profit increase = stock price increase = bonus increase?

5. Protected CRM Budget Allocation

6. Formalization of Governance for Customer Relationships CRMO, CCO, customer advocate?

CRM Implementation Trends

7. Shift in CRM Application Architectures and Spending DIY --> package; C/S --> Web; best of breed --> suites; per seat -->role-based; $2,500 -->$250 per seat; buy -->ASP + rent

8. Explosion of Customer Data Web, chat, e-mail, instant messaging, expanded contact centers

9. Vendor Churn Leading to a Power Shift 500 --> 50 vendors; best of breed --> ESP and ERP

10. Increasing Numbers of Project Failures 65 percent --> 80+ percent in mid-2003

Top 10 Trends: The Siren Call of CRM?


Top 10 Causes of Failure in CRM Today

1. Management has little customer understanding or involvement

2. Rewards and incentives are tied to old, noncustomer objectives

3. Staff culture does not have a relentless focus on the customer

4. Limited or no input from the customers’ perspective

5. Thinking technology is the solution

6. Lack of specifically designed, mutually reinforcing processes

7. Poor-quality customer data and information

8. Little coordination of multiple departmental initiatives and projects

9. Creating the CRM team is left to last and lacks business staff

10. No measures or monitoring of benefits and a lack of testing


No implementation

Unintegrateddepartmentalprojects

Integration of morethan one project

"True" CRM

2000 2001

7%3%

45%

35%

17%

30%

33%30%

United States – 75 percent implementing, 8 percent “true”

Implementing CRM Is a Fantasy ... for Most in Europe 2000 vs. 2001


Applications

Emphasis

Goals

Population Mix

Dedicated/Proprietary

Call CenterSFA

Varies

Cost Reduction

RevenueEnhancement

ComplexInfrastructure

10% to 20%

45% to 50%

10% to 30%

5% to 10%

Less than 1%

Sub-departmental

(Type C)

Departmental

Multidepartmental (Type B)

Enterprise

Extraenterprise (Type A)

Varies

Efficiency

Closed Loop

Analytics

UniversalViewCRM

InfrastructureCompetitive Advantage

Not All CRM Strategies Are the Same


Guiding Principles for Successful CRM

Extend breadth and depth of relationships

Leverage and enhance brand equity

TouchpointsValue Network

Focus on customer value, satisfaction and loyalty

Minimize transaction barriers and lower costs

E-CRM

Self-Service


CRM is a business strategy whose outcomes optimize profitability, revenue and customer satisfaction (the why?) by organizing around customer segments, fostering customer-satisfying behaviors and implementing customer-centric processes (the how?).

CRM technologies should enable greater customer insight, increased customer access, more-effective customer interactions, and integration throughout all customer channels and back-office enterprise functions (win-win outcomes?)

Gartner Definition of CRM, But … Every Enterprise Should Have Its Own


Best Time/Cost

Best Product at Best

Time/Cost

Best Time/CostPlus High Touch

Operational Efficiency

CustomerIntimacy

High Touch and Best Product

BestProduct

EnterpriseResourceTrade-Off

Product Superiority

BestHigh Touch

Customer Value Propositions


External:Customer Experience

Internal:OrganizationalCollaboration

Organizational Structure

People: Skillsand Empowerment

Incentives and Compensation

Data Mgmt. and Applications

IT Infrastructure

Processes

Metrics

Definition and Segmentation

Customer Communications

Customer Requirements

Customer Feedback

Metrics

Customer Expectations

Processes

Zen and the Art of CRM: Yin and Yang


The Eight Building Blocks of CRM

Perceived pain points: Least pain Some pain Most pain

Strategy

OrganizationalCollaboration

CustomerExperience

Metrics

Information Technology

Processes

CRM

Vision


Customer Process Re-Engineering

1. All customer-facing processes are mapped 2. Key processes are identified with customer input

3. Prioritized by impact on customer satisfaction4. Measured by contribution to customer value

5. Implemented in front and back office6. Given a cross-functional “owner”

7. Implemented with partners8. Targets sent to customers9. Compensation for failure

10. A customer SLA11. SLAs vary by

segment?12. By…….

TelecomProvisioningFault RestorationService ReliabilityNew Service IntroSalesperson Know-How

Auto InsuranceClaims HotlineClaims ProcessingInquiry HandlingClaims TrackingProblem Resolution

Retail Banking“We’re speeding up your processes”

Interbank TransfersAvailable Balance

Seven-Day Account Transfer ProcessingReal-Time Account Balance

ATM, Telephone, Branch, TV, Internet

HorizontalDeath

WelcomingChange Address

Quote to CashWinback

Campaign to Compensation

Individual?

Customer Processes and Metrics


► Unified view of supplier, customer► Accessible: Nearby or within reach► Available, convenient: Open 24x7, self-service► Approachable: Via multiple channels► Simple: Easy to use► Transparent: Within the enterprise and across

the supply chain► Trustworthy: Privacy is respected

Greater Customer AccessLower-Cost Access

► Unified view of customer, supplier► Minimizing customer transfers► Creating cross-functional roles► Retraining employees► Empowering employees and restructuring

compensation ► Involving partners► Tracking customer processes

More-Effective InteractionsLower-Cost Interactions

► Unified view of customer, supplier► Churn likelihood► Current profitability► Lifetime value► Channel preference► Life events► Relationship events► External events

Greater Insight Into CustomersGreater Insight for Customers

► Integrating across channels► Providing consistency across channels► Ensuring people resource per channel► Planning new channel life cycles► Consolidating internal and external data► Trading information with partners► Sharing information with customers

Unified View of CustomerUnified View of Supplier

Customer/Supplier Win-Win Outcomes


Dow Chemical consolidated all customer service and sales information into one corporate memory to ensure a consistent face to the customer after having measured customer interface costs and activities per channel.

Compaq created a Partner Relationship Management solution to allow channel partners consistent and greater access to information about leads, products, services and user profiles.

Harrah’s Entertainment shared data across multiple casinos and hotels to create a unified personalized loyalty and rewards system based on customer profitability through greater customer insight.

Ford added a Web-based product configurator to simplify the order-entry system and thus aid its fleet sales dealers in more-effective interactions with fleet buyers and the drivers of the vehicles.

Case Studies of Successful Outcomes


24-Month ROI

Stage

BusinessImpact

2X - 5X

Departmental

1X – 3X

Functional

Efficiency

4X - 7X

Partial CRM

Effectiveness

5X - 10X

Total CRM

Competitive Advantage

Finance SalesService

SupportMarketing

ServiceSalesMrktg

StrategyMetrics

DepartmentsSystems

The Evolution of CRM: Ajax?


Industry CRM InvolvementTechnology & High-Tech

BankingFinancial Svcs.

TelecomRetail

UtilitiesInsurance

Media Petrochemicals

Pharma.AutomotiveDistribution“Dot-Coms”

FMCG or CPGManufacturing

Business ServicesHealthcare

GovernmentConstruction

Gartner estimates:Percentageorganizationsthat haveimplementedmore than oneCRM function

90%

1. More CommodityProduct/Service

2. More Channelsof Communication

3. More GlobalCompetition

Current 5 Yr Projected95%

10%5%


Access: Data Exchange

Integrate: Link Systems

Collaborate: Create a CRM Ecosystem

Implications: – Communities – “E to E” Approach – Part of Several Different CRM

Ecosystems – Not Only Will Channels Merge/Morph, But so Will the Argument of

Who Owns the Customer

Your Company

Customers Prospects

Employees

Channels

Suppliers

PartnersAffiliates Influencers

Future CRM: It’s Not Just for Customers Anymore


Corporate HierarchyValue Chain Network

Franchise

4 companies, 10 vendors each =10,000 permutations

Front Office

Supply Chain Infrastr

ucture

Back Office

Customers

Partners

EmployeesMktg

Fin

Sales

Serv

Prod Revenue Streams

Metrics

Initiatives

$$$Mission

Analytics

Operational S

ystems

The Competitive Future: CRM Ecosystems


Recommendations

1. What is the value of CRM to enterprises, and what drivers are continuing to force its acceptance?

• Recognize that the long-term trends and drivers behind CRM have not changed, despite the slowdown in the U.S., European and other economies.

• Protect the budget for CRM investments — it will come under even greater pressure during the next six to nine months.

• Examine the past mistakes of others and avoid considering CRM a technology issue.

2. How will organizations develop and implement a business vision for CRM?

• Define both enterprise and customer value propositions before charting a CRM strategy.

• Use the “Eight Building Block” model as a checklist to determine which elements of CRM are currently lacking and to identify areas of responsibility where no one is in charge.

• Focus on customer-centric processes and metrics — these are the areas of the Eight Building Blocks that most enterprises have found to be most problematic areas. Implement processes based on customer benefits; start with customers and then work backward.

• Balance the internal focus with that of the customer experience — appoint an individual who is responsible for the external viewpoint.

3. What will CRM look like in the future, and how can enterprises position themselves now to be prepared for these changes?

• Aim for “total CRM” with involvement across the whole enterprise, but don’t try to do it all at the same time.

• Benchmark and invest appropriately for the industry in which your enterprise operates, avoid over-extending investment unnecessarily or being left behind.

ed thompson gartner crm vision: business and technology strategies for more- profitable customer...

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