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KIT – University of the State of Baden-Württemberg and National Large-scale Research Center of the Helmholtz Association

KARLSRUHE SERVICE RESEARCH INSTITUTE (KSRI)

www.kit.edu

www.ksri.kit.edu

Towards a Model for Measuring Customer Intimacy in B2B Services François Habryn, Dr. Benjamin Blau, Prof. Dr. Gerhard Satzger, Dr. Bernhard Koelmel IESS Conference - February 17th 2010

Karlsruhe Service Research Institute www.ksri.kit.edu

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Agenda

1

2

Introduction and objectives

Model presentation

Illustrative case study Realization

3 Conclusion


3

Agenda

1

2


Model presentation

Illustrative case study Realisation

3 Conclusion


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The value discipline Customer intimacy is the ability to tailor and shape the offering in order to fit an increasingly fine definition of the customer

Customer Intimacy „Best Total Solution“

Product Leadership „Best Product“

Operational Excellence „Best Total Cost “

Customer Responsiveness

Operational Competence

Product Differentiation

Source: Treacy and Wiersema 1995, The Discipline of Market Leaders

Customer intimacy aims at transforming the customer provider relationship into a „co-creation oriented“ partnership


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In order to achieve high customer intimacy, it is important to understand and manage the relationships established by the employees of the supplier and customer

Customer intimacy is the formal or informal set of relationships established between supplier and customer.

•  multiple points and frequency of contacts •  multiple points of view about the relationship and its benefits to both parties. (Abraham 2006)


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Our objective is the definition and measurement of a customer intimacy grade (CIG) which yields the following benefits

  to obtain a systematical overview of all relationships between employees of a supplier and its customer, and to have the ability to visualize their evolution over time;

  to foster the exchange of customer related information among the employees;

  to analyze and benchmark the relationship with different customers in order to support the provider organization in her choice to invest in one or the other customer.


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Agenda

1

2


Model presentation


3 Conclusion


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Our model is built upon the three following layers


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First, based on litterature review, we have decomposed the concept of customer intimacy to identify our indicators

Customer Intimacy Grade CIGO

C

Relationship Quality RO

C Adaptation AOC

Communication CO

C Trust TOC Commitment

COC

Relationship Bonds BO

C

Interaction IOC Activity IOC Identification IOC

Layer 1 – CIG Decomposition


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In order to reflect these different degrees of granularity we decided to apply graph theory

C1

Interaction Graph GIn

Service Provider Customer

Identification Graph GId


Activity Graph GA


Network Layer

P1

C2

C3 P2

BU2

BU1

60 70

C1 P1

C2

C3 P2

BU1

C1 P1

C2

C3 P2

BU1

30 15

BU2 BU2

60

Graph Interaction Graph GIn Activity Graph GA Identification Graph GId Objective Representation of the

established contacts Representation of the past “adding value” activities (outcomes)

Representation of the perceived similarities

CIG Impact Communication Trust and Commitment Trust Node Individual Individual Individual

Edge Interaction Shared activity Identification

Weight w aggregation based on all interactions between two employees, their frequency and quality

aggregation based on activity duration, impact for the customer and type of activity

aggregation based on perceived similarity factors (e.g. social, geographical, cultural)


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Graph centrality metrics can be calculated for nodes and sets of nodes

Graph Interaction Graph GIn Activity Graph GA Identity Graph GId Degree Centrality CD(v)

Number of contacts in the customer (resp. provider) organization

Number of qualitative relationships

Number of individuals known personally in the customer organization

Closeness Centrality CC(v)

Ease of the communication Intensity of the relationship -

Betweenness Centrality CB(v)

Importance and implicit power of this employee for the overall communication

Degree of involvement in the overall activities with the customer

Ongoing research

C1

Interaction Graph GIn


Identification Graph GId


Activity Graph GA


Network Layer

P1

C2

C3 P2

BU2

BU1

60 70

C1 P1

C2

C3 P2

BU1

C1 P1

C2

C3 P2

BU1

30 15

BU2 BU2

60


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Illustrative case study

0: No Contact between SP and C 1: SP-BU1 recruits the employee P1 who knows C1 and C2

C1


P1

C2 P2

BU2

BU1

2: P2 gets in contact with P1 3: P2 obtains a meeting with C1 and C2 with the help of P1 4: P2 prepares a contract with C1 and C2 for BU2 5: Management needs to decide in which customers to invest


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Then we need to find the elements of Customer Intimacy evidence in customer information containers

CI Event

CIG employee CIG Organization

CI Event CI Event CI Event

CI Event Aggregator Complex Event Processing

CIG Calculator

Customer Information Container

Customer Interaction Channels Customer Information Sources

Mail Phone Face to face

Project Database

CRM Application

Reference database

Social Networks

Support Application

Company´s directory

Production system Web Site Mailing List

Call center


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Agenda

1

2


Model presentation


3 Conclusion


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Conclusion

  A new approach for measuring the degree of intimacy established with a customer   Support the exchange of customer knowledge across business

units´ boundaries   Benchark intimacy grade in order to improve customer relationship

processes

  Future Research   Calibration of the model - weight determination   Specify how to leverage the multiple centrality indicators   Validation through a prototype implementation with CAS   Creation of customer-intimacy based Key Performance Indicators

KIT – University of the State of Baden-Württemberg and National Large-scale Research Center of the Helmholtz Association

KARLSRUHE SERVICE RESEARCH INSTITUTE (KSRI)

www.kit.edu

www.ksri.kit.edu

Thank you for your attention


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BACKUP


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Research Project: Measuring customer intimacy in B2B services. Customer intimacy is ability to taylor and shape the offering in order to fit an increasingly fine definition of the customer (Treacy & Wiersema 1993)

• CRM is not adapted for complex B2B services: if focuses on the outcome of the relationship rather than on the relationship itself

  Provide a model for measuring the customer intimacy grade with specific customers at multiple levels of granulity (employee, team, business unit)

  Validate the results with a prototypical implementation through an empiric usability test

Scenario / Problem Motivation

Objective

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Number of items

Pur

chas

ing

cycl

e co

mpl

exity

Classic CRM

Research Focus Integrated

relationship management

•  Several employees with different objectives interact with the customer (e.g. sales, support, services) without knowing each other

•  They use different tools which are not integrated (email, phone, customer db)

•  Silo organization and globalization make collaboration between employees more complex

Customer Provider

Post Sales Product A

Service Delivery B

Pre Sales Product C

Business Unit 1

Business Unit 2

Business Unit 3 Lack

of i

nter

nal

colla

bora

tion

= employee / team

•  Obtain systematical overview of all relationships between supplier and customer employee; visualize their evolution over time; •  Create awareness of the employees on the relationship they own and foster exchange of customer related information; •  Analyze and benchmark the relationship with different customers in order to support the organization in her choice to invest in one or the other customer.

Benefits


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There is currently no generally accepted means for quantifying customer intimacy

  No measurement for individual customers

  Qualitative but not quantitative models

  No leverage of existing information systems

  Individual or organizational aspects but not both

Author Characteristics

Niven, 2002 5 aspects to implement in a balanced scorecard

Cuganesan, 2008 Focus on accounting numbers, but no formula presented at the end

Kaplan, 2005 Focus on value creation and cost of differentiation

Potgieter & Roodt, 2004

Evaluation of the readyness of an organization to pursue a CI strategy from a cultural perspective

Tuominen, Rajala, & Mo, 2004

5 stages maturity model, qualitative model

Yim, Tse, & Chan, 2008 Focus on services, evaluation of the relationship between customer firm and customer staff relationship

Donaldson and O´Toole 2007

Characteristics of close relationships


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The following table illustrates some of the customer intimacy events which can be read from information systems

Event Source Metric Non routine service encounter goes right

Help Desk – Customer support

Number of problems recorded and solved – average severity – average duration to solution

Shared activities Project database Role in the project, Number of project with the same customer, Average project duration, Project impact for the customer

Interactions Email, Phone calls, calendars

Number of emails, phone calls, face to face meetings; regularity of the interaction; time since first interaction

Successful outcomes Project database Number of closed opportunities, number of completed projects

Customized contracts CRM – Sales Force Automation

Contract definition - Special payment term, Specific purchasing procedures, long term contract


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Model calibration: CI events identified previously must be aggregated in a form that is satisfactory for the user

  Conjoint analysis The objective of conjoint analysis is to determine

what combination of a limited number of attributes is most influential on respondent choice or decision making. (wikipedia)

  Analytical Hierarchy Process comprehensive and rational framework for

structuring a decision problem, for representing and quantifying its elements, for relating those elements to overall goals, and for evaluating alternative solutions. (wikipedia)

  Analytical Network Process is a more general form of the analytic hierarchy

process (AHP) used in multi-criteria decision analysis. ANP does not require independence among elements, so it can be used as an effective tool in these cases.

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Managing the relationships with customers is important and existing information systems shows some limits in that regard

  “Much of the (CRM) software on the market today helps automate process, but doesn't necessarily provide incremental value back to the user.

  Sales people often complain that Customer Relationship Management or Sales Force Automation is just an administrative burden” (AMR Research 2008)

  CRM is not adapted for complex B2B services: if focuses on the outcome of the relationship rather than on the relationship itself


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Relationship bonds are exit barriers that tie the customer to the supplier and maintain the relationship (Liljander & Strandvik 1995)

Fußzeile: Name, Vortragstitel... 2/17/10

Bond Includes following adaptation

Technological Service adaptation, process adaptation, Resource etc.

Time Time specific service delivery agreements

Knowledge Knowledge of the strength and weaknesses of the customer. Knowledge on the customer perception of quality of service

Legal Contract duration, contract flexibility. Impact of the contract on the customer

Geographical Geographical distance between employees from the service provider and customer


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The requirements on our CIG model are following...

Motivation Requirement Avoid resistance from employees to adopting the system Provide easy of operationalization of the model

Automate the measurement using information available in information systems

Provide a meaningful and individualized indicator

Provide specific information for individual customers

Provide the means to understand the relationship composition and to identify the „boundary spanners“

Provide a measurement at multiple levels of granularity: individuals, teams, business units, whole entreprise

Provide the ability to easily compare different relationships

Provide quantified information


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The objective of this thesis is to evaluate the relationship with a customer, leading to the creation of a Customer Intimacy Grade (CIG)

This project can be decomposed along the following milestones:

1.  Decomposition of the concept of customer intimacy into meaningful aspects called CI Components

2.  Identification of the element of customer intimacy evidence inside information systems called CI Events

3.  Aggregation of the CI events in order to calculate the CI components and the CIG using graph theory

4.  CIG Calibration using the analytical network process theory

5.  Validation of the benefits of using this indicator through a prototypical implementation and an empiric analysis, in partnership with CAS AG.


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We assume that in the field of B2B Services, high customer intimacy is developed when both the quality of the relationship and the degree of adaptation are high

Fußzeile: Name, Vortragstitel... 2/17/10

Solution tailored to customer

needs

Quality of the relationship with the customer High Low

Low

H

igh

Standard Solutions for Anonymous Markets

Undirected Adaptation

Inflexible Response to Customer Needs

Deg

ree

of a

dapt

atio

n to

the

cust

omer

Customer Intimacy

iess10 i 1

Education

customer customer intimacy

customer provider relationship

measuring customer intimacy

high customer intimacy

concept of customer

customer intimacy grade

research center

graph centrality metrics