Outline

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Harrahs: A CRM Success Story

Cigna HealthCare: A CRM Failure Learning from Failure: BMC Software Case Data : One Big Hurdle The Other Hurdle : People Issues Build or Buy or Rent? What Works? What Does NOT Work?

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Harrahs Entertainment - How It Outplayed the Competition

Strategy of Big Casino Operators
- If You Build It, They Will Come! Created a fantasyland Las Vegas to attract customers Invested heavily in building costly must-see casinos offering a wide range of amenities malls, dazzling shows, etc Designed to appeal to a broader audience than simply gamblers

Harrahs Strategy was Different

- Expand Gaming Business Outside Nevada & Atlantic City From 4 casinos in 2 states to 26 casinos in 13 states by 2003 Became the first nationwide casino business Saw geographic diversification as a means to Insulate the company from regional economic vagaries AND Provide the opportunity to attract new customers to the Harrahs brand

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Harrahs Strategy
1. Strategic Focus: Casinos
Not Restaurants or Bars or Shows Belief that competing on the basis of billion-dollar facilities was NOT the most prudent use of capital Returns on such facilities often weaken when the novelty wanes

2. Build Lasting Relationships with Core Customers Slot Players for Sustainable Profit Growth
Get customers to visit Harrahs regularly AND Spend more of their gaming money at Harrahs Increase Wallet Share
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Harrahs Strategy
3. IT Investment to Create an Enterprise Data Warehouse AND Analyze the Data for CustomerTailored Marketing 4. Absolute Focus on Customer Service & Customer Satisfaction.

Changed Harrahs from an operations-driven company which viewed each casino as a stand-alone business into a data-driven marketing company that built loyalty to the Harrahs brand in ALL properties.
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Harrahs in 1998 vs. 2002

1998
Expanded rapidly in the mid 1990s - as states such as Iowa and Illinois legalized gaming to raise tax revenues - But company was losing market share as rivals built newer and more opulent properties in each market. Revenue: $1B Stock price: Nose-dived towards $10

2002
16 straight quarters of same-store revenue growth Revenue: Over $ 4B Stock price: Pushing all-time highs at $ 50
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The Bottom-Line
Customers Wallet Share: 42% in 2002 Vs. 36% in 1998 Each percentage-point increase in Wallet Share has coincided with an additional $125M in shareholder value.

Once an also-ran chain of casinos, Harrahs has become the

second-largest operator in the U.S., behind MGM Entertainment, with the highest 3-year investment return in the industry Acquired in Spring 2004 Caesars Palace Casinos
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What Harrahs Knows About You ...

One afternoon, last May at the Rio Resort in Las Vegas.. as I moved from machine to machine, the computers at Harrahs office in Memphis, Tennessee, were collecting an astonishingly detailed account of each second I spent at the Rio
how many different machines I had played on (nine) how many separate wagers I placed (637)

my average bet (25 cents)

the total amount of money Id deposited in the machines ($350)

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How Does Harrahs Get the Data?

A personalized frequent-gambler plastic card with a magnetic stripe called Total Rewards that Harrahs slot players insert into machines while they play. One reward credit per $10 gambled to earn free trips, meals, hotel rooms, etc. Harrahs network links over 40,000 gaming machines, in 26 casinos, in 13 states Card data from each casino captured in a 300-gigabyte transactional database about customer activity at all points of sale Transaction data fed into the enterprise data warehouse that contains information about gambling spends and preferences of 25M customers along with names, addresses and demographic data
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What Does Harrahs Do With the Data?

It can do what its 25 million customers cannot - consistently make good bets! Who is a profitable customer? Who should receive which offers?. It is also important to know when to pull away from an investment in a customer who is not worth it.

From the moment I signed up for my Total Rewards card in the casino lobby and filled in my name, address, date of birth and drivers license number, Harrahs had a pretty good hunch that my long term potential was already low.I was a 32-year old man from the distant state of Montana.did not fit the profile of a high-value customer ! Age, gender, and distance from the casino were identified as
critical predictors of frequency.
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How Harrahs Uses the Data Profile the High-Value Customer

Who are these customers? Harrahs found that 30% of their

customers who spent between $100 and $500 per visit to a Harrahs
casino accounted for 80% of company revenues and almost 100% of profits. Surprise: NOT the gold cuff-linked limousine-riding high rollers that casinos fawned over many years Middle-aged and senior adults with discretionary time and income who enjoyed playing slot machines Did not stay in a hotel but visited a casino on the way home from work or on a weekend night out
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A Perfect Customer ...

A 62-year old woman who lives within 30 minutes of Kansas City, Missouri and plays dollar video poker Such customers have substantial disposable cash, plenty of time on their hands and easy access to a Harrahs riverboat casino (in this case, on the Missouri river in North Kansas City)

If we only observe her once in a quarter, its likely that its because shes playing three or four times a quarter at our competitors. So were going to make an educated guess and market to her as if she were a more frequent visitor, and well let her confirm or disconfirm that. Then well update the profile on what she does.
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Customer-Tailored Marketing
High-value customers are placed into 90 targeted segments, each of which receives custom-tailored direct-mail incentives to visit any of Harrahs 26 properties. Customers who live far away from Harrahs properties typically receive direct-mail discounts on hotel rooms or transportation. Drive-in customers get food, entertainment, or cash incentives Most offers are time-sensitive, with tight expiration dates.. to encourage visitors to either return soon or switch a visit from a competitor to a Harrahs property For each direct-marketing pitch, response rates and return on investments are trackedfuture campaigns are adjusted accordingly Every marketing campaign is tested first before launch
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Who Gets the Free Steak?

John Smith 33, Male, Lives: Missoula, Montana, Distance: 770 miles Total Rewards Level: Gold Plays: Video Poker $/Bet: 25 cents; $/day: $87.50 $/Visit: $350; Visits/Year: 1 Predicted Life-Time Value: Low Offers: Direct Mail Coupons for Discounted Show Tickets Betty Rogers 62, Female, Lives: Kansas City, Missouri, Distance: 30 miles Total Rewards Level: Diamond Plays: Progressive Slots $/Bet: $1; $/day: $100 $/Visit: $100, Visits/Year: 7 Predicted Life-Time Value: High Offers: Cash, Transportation, Free Meals, Free Lodging, Guaranteed Room Reservation, Valet Parking, Access to Harrahs Diamond Club
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Use Customer Service as a Differentiator for Treating Customer Differently

Split Customers into Gold, Platinum and Diamond tiers based on estimated annual value Greater levels of service to Platinum and Diamond tiers will induce customer aspiration to earn the higher-level card
Example: Our best customers wanted service quickly they didnt want to wait in line to park their cars or eat in restaurants, or check in at the front desk. So we routed our customers into three different lines which created a visible differentiation in customer service. It was essential for our customers to see the perks that others were getting. Every experience in the casino was redesigned to drive customers to want to upgrade their card.
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Harrahs IT Investment
Magnetic Card Readers: Harrahs Total Rewards card readers are installed on all of the companys 40,000- plus gaming machines. The readers capture a customer ID number from each card, and a small LCD screen flashes a personalized greeting along with the customers current tally of reward points. Electronic Gaming Machines: All gaming machines are computerized and networked. Each machine captures transaction data and relays it to Harrahs mainframe computers. Onsite Transaction Systems: IBM-based transaction systems are located at each casino property; they store all casino, hotel, and dining transaction data.
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Harrahs IT Investment
National Data Warehouse: A Unix-based data center in downtown Memphis links all of the casinos mainframe systems and customer data. Customer history and reward-point tallies are passed down from this database to the onsite mainframe systems - which, in turn, relay the data to the card readers. Predictive Analysis Software: Developed by Harrahs and software firm SAS, these programs produce nearly instantaneous customer profiles that allow the company to design and track marketing initiatives and their results.

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Best Data-Driven Marketing Will Fail If Customer Service is Third-Rate!

1. Measuring Customer Satisfaction is a MUST Customers who said they were very happy with the Harrahs experience increased their spending at Harrahs by 24% per year disappointed customers decreased their spending by 10% per year. 2. 3. Training of ALL Harrahs Employees in a Certification Program To Deliver Excellent Service Bonus Plan Rewards Hourly Workers for Achieving Improved Customer Satisfaction If a propertys overall rating rose 3% or more, each employee could earn $ 75 to $ 200 in 2002, Harrahs paid $ 14.2M in bonuses to non-management employees.

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Best Data-Driven Marketing Will Fail If Customer Service is Third-Rate!

4. Reward Depends on Everyones Performance If the valets scores were low but the steak house receptionists were high, the receptionist would check on the valet. 5. Bonus NOT Linked to Financial Performance of the Properties In 2002, one property had record-breaking financial results, but employees did not receive any bonus because their customer service scores were mediocre.

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Food for Thought from Harrahs Approach

Meeting budget at the expense of service is a very bad idea. If youre not making your numbers, you dont cut back on staff. Human resource management is critical, especially in a service business You cant deliver great service if the turnover rate is high. The absenteeism rate will be high. The managers who ought to be thinking about the customers are instead dealing with scheduling, hiring and training. The customer ends up mangled.

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The Harrahs Lesson

Harrahs bet against industry wisdom, moved away from the glitz and spectacle; and, instead invested in a ground-breaking customer management strategy that has enabled the company to expand market share relatively cheaply in a business where most companies grow by building costly new properties. Competitors are trying to catch up. But Harrahs has got a formidable lead. Its systems, reserves of data and marketing-led culture will not be easy to replicate.

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A Good Customer Data-Driven Strategy Is NOT Enough - Effective Execution is Key

1. Strategy must be championed at the highest level of the firm, not just within Marketing If I had come in as head of marketing, none of this would have worked. I needed the authority to get things done right across the company G. Loveman, then COO of Harrahs 2. People running day-to-day operations have to change their mindset and be customer-oriented We have a process of quarterly reviews of what each property has done. My predecessor would ask: Did we build any new rooms? Did we finish the renovation of the hotel? Where is the hot dog stand? I never ask any of those questions. I never let them take me on a tour of the building. I ask: What has happened to $ 100 and above customers who live in adjoining zip codes The whole company has become very focused on how we market. 3. Institute systems with carrots and sticks to focus on customer service by linking employee rewards to customer satisfaction.
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Cigna HealthCares IT Transformation

- A Case Example of Bad Execution
1999: Launch of Ambitious IT Project
Objective: An integrated system for enrollment, eligibility and claims processing Consolidate and upgrade several antiquated (some dating back to 1982) back-end systems for claims processing and billing Integrate them with glitzy new customer-facing systems on the front-end

Benefits
Customer service reps will have a single unified view of members Customers would get one bill Medical claims proceed faster and more efficiently

Project Cost : $ 1 Billion

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Cigna HealthCares IT Transformation - The Result

Cigna CIO received the 20/20 Vision Award of CIO magazine

January 2002: System went live

3.5 M members moved from 15 legacy systems to new system in a matter of minutes But migration did not go smoothly resulting in significant glitches in customer service Bottom-line: Fourth largest insurer lost 6% of its health-care membership in 2002 from 13.3M to 12.5M Net loss of $445M in the first 9 months of 2002
Source: CIO Magazine, March 15, 2003
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The CEOs Confession

At October 2002 Conference Call with Investors
Unfortunately we have not executed well on transformation. The cost is greater than anticipated, much of the economic and service benefits are yet to be realized, and transformational shortfalls have led to service shortfalls, which have led to lower new sales and (customer) retention

Comment by CIO of Another Health Insurance Company

CRM is a very important business solution. Our customers want better tools and capabilities and product options, and theyre driving us into this space. But theres a heavy risk involved. How you connect CRM to the back office and bring customers on board makes all the difference. When you stumble, the very credibility of your company is at stake
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The Roots of Failure

1. Late Start of IT Transformation Project Cigna spent $7.6B between 1996 and 2001 from sales of noncore companies such as property and casualty insurance on stock buybacks

What they should have been doing is investing a half or third of the money spent on repurchasing stock to improve IT systems

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The Roots of Failure

2. Urgency to Implement New IT Systems
Sued by thousands of doctors nationwide about delays in payment for patient care - Cigna paid a $300,000 fine to the state of Georgia and signed a consent order promising to reform its claims processing system which was the worst Ive ever seen, according to Georgias insurance commissioner Cignas sales team, in order to win large lucrative employer accounts in an increasingly competitive environment, had promised that the new systems would provide improved customer service and would be up and running in early 2002 Cignas management was under pressure to cut costs after posting disappointing second quarter results in 2002- Anxious for the new systems promised cost reductions and productivity gains to enable laying off 3,100 people and limit hires to 1,100 a total reduction of 2000 positions.
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An Overview of the IT Project

Had to build an entire AS400 infrastructure from scratch to support the two main platforms for claims processing: Power MHS software which was already on a few AS400 computers and ProClaim software still running on IBM mainframes We had to develop our own wrapper architecture to connect these two platforms and integrate claims eligibility on the front-end with banking and billing on the back-end. To do that we had to completely re-engineer the back-end systems Most of the architectural work done in-house but hired Cap Gemini Ernst & Young (CGEY) to help implement the change management and business processes involved CGEY also worked with Cigna HealthCare to develop and implement new customer-facing applications the CRM system
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Cignas CRM System

Customer Self-Service: Enable members to enroll, check the status of their claims and benefits, and choose from different health-plans all online Unified View of Members to Customer Service Reps: Provide the reps a full history of the members interaction with the company when a member called with problems or questions

Objectives:

Software: Bought Two Packages

Siebel software to handle call center functions Computer Sciences package for claims processing
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Implementation Process
Began moving members to new systems in 2001 but in relatively small numbers 10,000 to 15,000 people at a time; there were minor problems that were dealt with but nothing major. At the same time, began laying off customer service reps as part of a planned consolidation of 20 primary and specialty service centers into 9 regional centers Rationale: Expected new IT system to deliver huge gains in productivity from automated claims processing and customer service. Cost of Reorganization: $33M in severance for the 3,100 laid-off employees and $32M to build the new regional centers

January 2002: Moved 3.5M customers in one fell swoop problems erupted immediately
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A Migration to Nowhere!
- Customers Suddenly Had Trouble with Coverage
In one case, Cignas systems could not confirm health coverage for some new members for several weeks Workers at another company effectively lost coverage when their membership information would not load properly into the new system Cigna issued member ID cards with incorrect identifiers. - Prescription icons were missing Result: People could not get their prescriptions filled at their local drug stores Morgan Stanley analysts heard about these snafus in late January 2002 and promptly downgraded Cignas stock
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Call Centers Besieged by Calls

- No Help However!
Lay offs resulted in not enough call center reps to handle the load - people waited on hold, and waited No help when they did reach someone, since the newly hired reps had not been adequately trained on the CRM system You can have the best system in the world, but if you have people with relatively little tenure, youre not going to get the best service.
Cigna has since hired back a number of reps it laid off!
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Cignas Mis-Steps in Execution

1. Converting data from back-end systems to CRM systems is NOT 1-2-3 - Data has to be cleaned and filtered in order to be understandable to customer service reps taking calls and members seeking information online When you take data from the back-office system that was built to process claims and expose that data to the front-end, it starts looking funny for example, compressing the 9-digit zip code to 8 to save space on disks and transferring that data as is to the front-end makes your company look awkward. 2. Rush to go live resulted in the Cigna team not having time to do a very thorough volume testing or end-to-end testing.
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Cignas Mis-Steps in Execution

3. CIO of Cigna Corp., the parent company, blames the IT staff of Cigna HealthCare and the system integration consultants. The business divisions had autonomy, and you cant secondguess the people on the ground every day. The business unit was working with a name-brand systems integrator and they were not knocking on the door saying, Dont go live, dont go live. Can you truly expect the corporate CIO to have more visibility into the day-to-day workings of whats going on in that project than the people in charge of it?
Big Issue: Corporate Governance of IT in a multi-division organization At the end of the day, you have to strike the right balance between central IT authority and strong functional guidance thats aligned with the business
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Post-Mortem Changes at Cigna

1. CIO of Cigna HealthCare business unit and IT manager in charge of transformation were let go. 2. Brought in more experienced managers to monitor the project

3. Slowed down the pace of migration and shored up those processes around the conversion of customer data
4. Instituted more thorough testing practices 5. Moved 20 experienced application developers into the project 6. Relying less on its systems integrator and more on in-house IT staff to manage the project

Project cost well over $1 Billion budget

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Cigna Recovered from the IT Disaster!

July 2002: Cigna was able to move additional members to the new IT systems without major incident Jan 2003: Successfully migrated another 700,000 members

Launched MyCigna.com, an online portal where Cigna members can look up their benefits, check on the status of their claims, retrieve health info and talk to nurses online
Able to cut another 3,900 positions as part of a streamlining of Cignas sales force and medical management team New IT systems have enabled that downsizing by eliminating duplication in claims processing and billing Customer satisfaction surveys conducted by Cigna in late 2003 show that 83% are satisfied with the service they get compared to 58% earlier in the year
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Lessons from Cigna Failure

1. Keep the project management in-house - Even if you hire a consultant to implement your IT integration project. Have experienced project managers to monitor every stage of the process. 2. Test, and retest, in a real environment and end-to-end before going live - Take your time moving data from the legacy systems to the new platforms, and do it in bite-size chunks so that you can fix glitches as you go. 3. Make sure your back-end data is cleansed and filtered for front-end use - When it comes to data migration, take nothing for granted.
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Lessons from Cigna Failure

4. Bring in a focus group of customers

- After you've tested the system with your sales, marketing and customer service reps, go back and redesign the front end so that customers can actually use it.
5. Train and retrain the customer service reps on the new systems 6. Don't expect productivity gains for months after the new platforms go live - Don't make business decisions based on anticipated projected savings or gains. Wait to see if they materialize.
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CRM Hot Area for IT Spending But A Big Challenge to Implement

CRM involves a radical cultural shift that reshapes a companys sales, marketing, and customer service Unfortunately, it doesnt occur magically once the software is booted up Too often, companies see CRM as software, when it is merely an enabler, a tool in their tool kit

The Big Hurdle: Change Management

87% of respondents in a recent survey conducted by online resource center, CRM Forum, pinned the failure of their CRM programs on the lack of adequate change management
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Learning from Failure - Case of BMC Software

Succeeded the third time after two failed attempts

What Went Wrong? No Customer Strategy - CRM focused on performing processes faster

Top Management Involvement - Not much!

No Efforts to Get Buy-In from Employees - Believed that software would sell itself No Attention Paid to Required Organizational Changes
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The Third Time - BMC did it Right!

Project Headed by VP of Sales for North America - Supported by Manager of Marketing Programs Defined the CRM programs requirements with the help of 175 employees, who served as the early champions

Communicated the benefits to employees

Showed how the CRM system would help the sales force to achieve its targets

Rolled out the CRM program in stages to capitalize on early wins - also, reduced risk of any problems affecting the entire company
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Murphys Law for Data

The Data You HAVE Is NOT The Data You WANT Is NOT The Data You NEED
Data problems are more difficult to solve than hardware and software problems.
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Gaps in MIS Data - An Old Problem

Citibank
We found that management didnt even have a good profile of its market and customers. It didnt really know in summary form what (its position was) with respect to discrete market segments There was very little account profitability and not even market segment profitability information.

General Electric
Information on orders, sales and margins are of maximum value when tied to meaningful market segments. And segment-based data are of limited use to finance, hence the common misalignment problem between finance and marketing.
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A More Serious Problem . . .

Data That is NOT Available
Soft Data relating to ...
Customers Buying Process Reasons for Infrequent Purchase Reasons for Defection Quality of Customer Support Who Should Collect This Data ? People at the Customers Touch-Points . . . Field Sales, Telesales, Service, Call Centers, Storefront, . . .
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How to Get Soft Customer Data ?

1. Careful design of the form to collect data Keep It Simple Minimize Text Data Use Check Boxes, Rating Scales 2. Train the Data Providers 3. Motivate the Data Providers To get good quality data
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Data Management Issues

Development of Relevant and Clear Data Definitions and Coding Standards Streamline Procedures for Data Collection and Flow : Eliminate unnecessary paperwork

Ensure timeliness of data

Assign responsibility and authority to a specific individual: The Data Administrator A demanding job for which appropriate rewards must be given
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Data Quality: The Cornerstone of CRM

Inaccurate and low-quality data costs US businesses $611 B each year in bad mailings and staff overhead alone More injurious than the unnecessary printing, postage and staffing costs is the slow but steady erosion of an organizations credibility among customers and suppliers as well as its inability to make sound decisions based on accurate information.

Mission Statement of Cullen/Frost Bankers (an $8 B financial holding company in San Antonio,Texas) More than 98% of our companys assets and those of our customers are managed by data and information and less than 2% are in the form of cold hard cash. Just as we are careful and meticulous in managing cash and negotiables, we have a duty and obligation to exercise a high degree of care with the data that is the basis for customer relations and decision-making.
Source: The Data Warehousing Institute Report, 2001 L. Mohan

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Data Cleansing - A Must When Creating the CIF

The Problem: CIF requires data from a disparate set of databases, located in various parts of the enterprise containing data of varying ages collected from various sources and channels, and stored in a multitude of different architectures and platforms Ex: Shell Exploration and Production took 7 months to map data from 27 data sources in a 450 GB data warehouse, using a tool from Kalido Ltd. Every system has its own internal set of codes. Going back and cleansing the data in those host systems wasnt an option. It would have taken too much time and been too expensive. Corporate politics was not too bad because no single business unit lost control of its data. And now they all contribute to a greater understanding of the company as a whole. Once the concept was proved, we had pressure from the top to integrate other applications as well. They could see themselves what information they could now get and how powerful it is.
Source: Computerworld, Apr. 15,2002
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Cleaning House An Action Plan

1. Determine which types of information must be captured Form a data mapping committee but keep it small or risk never reaching agreement 2. Find mapping software that can harvest data from different sources such as legacy applications, PC files, HTML files, unstructured data sources and enterprise-wide systems (ERP) Start with a high payoff project inside a business unit that is a big revenue generator for the company - you will get the cost justification for the buy-in from the top Create an ongoing process for data hygiene - to keep the data clean.
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3.

4.

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Extracting, Transforming & Cleansing Customer Data - 80% of Firms Underestimate Time & Resources*
Example: Problem: Poor quality of customer master data in the ERP system of a manufacturer - a subset of large customers was labeled with an incorrect industry classification code. Result: Overlooked in market segmentation analysis performed by the Marketing dept. - this customer segment received no promotions, which would have generated an estimated $ 5M in revenue within one year.
Good data quality does not drive value in and of itself but it is the means to achieve high-value benefits. Although data quality maintenance is not the front-facing functional module in a CRM project, it is a necessity to get value from the CRM investment.
* Source: Gartner Viewpoint, Nov.29, 2001
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The Politics of Data - Most Vexing Problem

Information = Power Who has access to What Data ?

The politics of competition within the company is a real obstacle to developing a common, shared CRM database.
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Process Change Is Another Hurdle

Employees, especially touch-point personnel, have to change the way they work
how they collect data from customers quality of the data collected how to customize the products and services offered to the customers

Big roadblock for CRM implementation

Why should a sales rep record details of his customer contacts because it doesnt help him sell more? He sees it as filling out forms just for the sake of filling out forms.
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No. 1 Implementation Problem: Resistance to Change

Change in Process Typically Results in: Changes in peoples jobs Changes in required skills Most Important: Must consider what people think, what they believe is important and what motivates them Align these with the new processes May require changes in measurement and reward systems

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One Key to Sell Change

Get key people involved

Buy-in from opinion leaders would persuade others Better to get criticism from the inside, than resistance from the outside Let them take some ownership of the project
Participation creates a feeling of control

Instead of them doing it to you, we are all doing it together

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Managing Change
A very useful framework for thinking about the change process is problem solving. Managing change is seen as a matter of moving from one state to another, specifically, from the problem state to the solved state in a planned, orderly fashion.

The Lewin-Schein Model of Change

Unfreezing

Moving

Refreezing

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People Issues
Levi Strauss
Time to fill orders too long
Embarked on BPR project

Reduced time from 3 weeks to 3 days

BUT.
Created extreme turmoil by demanding that 4,000 workers re-apply for their jobs as part of a reorganization into process groups BPR project timetable stretched to 2-years Had to make repeated promises for no layoffs Spent an extra $14 million for a 2- year education effort to calm

employees

WSJ Nov.26,1996

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Hammer Acknowledges.
...Reengineering forgot about people.
I wasnt smart enough about that. I was reflecting my engineering background and was insufficiently appreciative of the human dimension. Ive learned this is critical.

Expanded BPR three-day basic training class to five

Two more days for people issues

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CRM is Risky Business

ERP : Focus on Internal Processes Resides behind the corporate curtain CRM : Designed for Customer Interaction Every system glitch is in your customers full view

As much as CRM promises to improve customer relations and increase revenues, there is the potential for disaster. Your website has to be friendly . . . Should not confuse visitors . . or, people will not come back.
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CRM from Scratch

- Dell, Cisco, Staples, Kraft . . .
CRM is still a new market space relative immaturity of vendors CIOs leery of sinking millions of dollars into unproven technology You have the cost, the ongoing maintenance, the implementation - thats just to get you started. When you upgrade to the next version, there can be considerable cost in that as well. (Kraft CIO)

You control the evolution of CRM in line with customer needs, using the companys business processes and customer data, without having to rely on upgrades or services from a vendor
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Why Build ?
- One reason : Lack of Integration
CRM packages do not offer adequate tools for integration with back-office applications, e.g., ERP Critical data has to easily flow back and forth between ERP and CRM Systems Otherwise, difficult to create customer profiles with information on shipment performance and customer spending habits The vendors sell you the package, but they fail to tell you what can and can't happen with that software.
(CIO Magazine, August 15, 2000)
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Greatest Drawback
- Adapting Package to Customer Relationships

Tailoring software to entice customer loyalty can be far more challenging than developing process software.

In finance, a company is legally bound to create reports in certain ways. Its a science. In CRM, there are absolutely no rules. Whats the best way to keep a customer happy and loyal ? There is no best way. Its an art.
(CIO Magazine, August 15, 2000) L. Mohan

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Why Dell Chose to Build

- Premier Pages for Business Customers Adapted its own customer-related best practices in its CRM software . . . a competitive advantage Vendors are trying to understand how you develop systems and set up customer relationships. Dell has been doing both for 16 years. (Dell CIO) Technology challenges took a back seat to the challenge of breeding acceptance of the system to target users customers and sales people, who are not technology professionals . . . Hence, had to develop self-managing, simple tools
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Dell Controls Its Destiny!

Weve made the user experience on the Premier Pages very consistent. As we have added functionality, Customers have not had to learn new things. (Dell CIO)

Because Dell built the system, it is Internet-based and linked to Dells back-end system; And, Dell controls its evolution in line with users needs.

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Factors To Consider in Buy Decision

- When Build is Not Feasible
CRM package should not have to scrap legacy systems Customer-centric design Many early CRM systems were designed with employees in mind, but customers are the real target Ease of use and efficiency are critical. As you Web-enable those CRM applications, youre asking customers to do business the way employees do business. If you satisfy the customer and move to the Net, your cost of doing business will go down. (Cisco CIO) Open Data Standards in CRM software To enable Web development and integration process Vendors willing to enter into a contract to provide services for ironing out glitches in the system
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CRM Software: For a Song

Low-cost, easy-to-implement CRM packages tailored for small and medium size business have matured. Example: SalesLogix from Interact Commerce in Scottsdale, Arizona. - Less than $50,000 for 20 users - Provides common CRM capabilities like lead generation and management, deal tracking, and customer support - Its SFA tool, ACT, used for a long time by sales reps - can buy it in a store for $200 Departments in big companies also often turn to economical CRM packages as a stop-gap measure while they wait for completion of enterprise-wide initiatives, which take years to implement. No packages (even Siebel) can cover the broad range of CRM tasks, at the best of breed level. Hence, define your companys CRM priorities and find the package that dovetails with your requirements.
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An Alternative: Outsource - Use an Application Service Provider (ASP)

Hosted CRM offering from Siebel, Oracle, PeopleSoft,
Directly or through hosting partners like Corio, US internetworking, Must typically license the software (like for an internal deployment) A combination of per-user and support costs to the ASP Extra for software customization Savings: Internal cost of application management and support Aberdeen Report (2001) - 44% savings in Year 1; 15% in Year 2 based on average per-user cost of over $12,000 in Year 1 And over $5,000 in Year 2 for internally deployed CRM Larger companies are still reluctant to let the family jewels - critical customer information - out of their sight. They are also concerned about the long-term stability of CRM ASPs. And finally, they are critical of the lack of customization available from some offerings. Source: eweek, Feb 25,2002
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Subscription Service ASPs

- A Flat Per-User, Per Month Fee: $50 - $125

Compared to typical annual cost of $5,000 per user Plus hardware and support - Total Cost: $15,000 Built from the ground up to to be both different and economical:
Relies on a multi-tenant architecture with a single application much less overhead than multi-user application High-level configuration tools instead of customization though programming changing source code is not supported Frequent, incremental improvement with only one version to support, developing and distributing upgrades that benefit the whole customer base takes much less time and effort Low costs and aggressive pricing ability to host more users with a standard application lowers overhead costs, and savings can be passed on to the customer Offer products strictly as services, with no licensing option savings from lower organizational headcount can be passed on too Consolidated services at a single point provide highly trained staff and the latest in security and communication technology
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The Market Leader: Salesforce.com

Revenue: 425 M. in 2002; $50 M. in 2001
Customers: 3.800; Deployed Seats: 56,000 (Source: Aberdeen Group, March 2002) Launched in 1999 with Web-based SFA service - $50 per user, per month - Trial allowing the first 5 users free for 12 months A No-Risk Guarantee If they try it and dont like it, they can just take their data back.. - Expanded in March 2001 to include full CRM functionality: Marketing Automation and Customer Support Management Launched Enterprise Edition in Feb. 2002 - Added customization and integration features to close the functionality gap between Salesforce.com and enterprise CRM systems E-Business Suite to be out in late 2002 - Limited ERP functions, including order, invoice and contract management Our five-year vision is to offer everything that SAP or Oracle or PeopleSoft offers, but as an online service. CEO Marc Benioff (who left Oracle in 1999), Computerworld, Feb 19,2002
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Example: An Investment Bank in San Francisco - Putnam Lovell Securities Inc

- Started with Salesforces SFA services in October 2000 for 150 employees We looked at Siebel, which would have cost us several million dollars; Onyx and Pivotal would have cost about half a million. Salesforce.com came out to $80,000 (VP of Technology)

- Other aspects of Salesforces services were also a plus. You miss out on the customization features of traditional enterprise applications, but you get Internet service functionality. They upgrade every three months or so and you get the upgrade immediately It can be very painful and expensive to upgrade on the traditional enterprise systems.
Source: Computerworld, Mar.6, 2001
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CRM Systems: Rent or Buy?

CRM Subscription Services

+ Offer rapid deployment

+ Provide some customization and integration options

- Allow less control over data location and privacy

Licensed CRM Software

+ Is highly customizable + Integrates more tightly with other applications + Offers complete control over locally housed application servers and data

- Requires more time to deploy

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Major Reasons Why CRM Fails

1. Data is ignored
At its core, CRM is about data - customers, products, inventory... Huge amounts of data must be in the right place in the right format Must have a detailed understanding of the quality of the data how to clean it up how to keep it clean where to source it what third-party data is required

Good data is an imperative for CRM investments to pay off

Action Item:
Must have a Data Quality Strategy Devote one-half of the total time-line of the CRM project to define data elements and data cleansing
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Major Reasons Why CRM Fails

2. Politics rules
Every business unit in the organization believes it owns the customer Will not hence share data or support other units

Action Item:

Formulate CRM strategy at the enterprise level Appoint a senior manager to oversee cross-departmental CRM
Customer-related processes in most organizations are flawed because of years of minor corrections and neglect of customers demands Automating a flawed process makes it run faster - a real danger because the enterprise can more quickly and efficiently anger its customers Use CRM as a springboard to examine all customer-related processes Remove those that are not needed; rework those that IT impacts

3. A flawed process is automated

Action Item:

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Major Reasons Why CRM Fails

4. No attention is paid to skill sets
It is not enough to install CRM software - you have to train and persuade employees to use it All the money in the world cant save a CRM project if employee training for using the new tools is shortchanged

Action Item:
Educate employees on the benefits of the CRM initiative Train them to use the tools to communicate with the users more effectively Rule of thumb: For each dollar spent on software, $1.50 should be spent on training
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Major Reasons Why CRM Fails

5. Aim of the CRM plan: a comprehensive solution
Project scope is too vast Big Bang implementation has high risk of failure Start small and get early wins Necessary for executive buy-in for funding support

Action Item:

6. Whats In It For Me? question is not addressed

Employee buy-in for CRM is critical

Action Item:
Explore ways for CRM to enrich the jobs of employees Institute performance measurement system that is aligned to CRM goals - it should drive the reward system: What gets measured and rewarded gets done!

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Technology is NOT the Solution

Place more emphasis on : CRM Execution vs. CRM Infrastructure Do Your Homework !

Identify High-Value Customers & Invest CRM on them Pilot Test

. . . Measure returns . . . Proof-of-concept . . . Top Management buy-in
Pay Heed to Non-IT Hurdles Getting Right Data Organizational Barriers Performance Measurement & Reward Systems
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First, Get the Process Right

We did not begin by specifically looking for an enterprisewide CRM solution. The company was looking for ways to address the greatest problem we see in financial services: retention of assets (customer money invested). We determined that CRM is one of the significant steps in solving this critical business problem.
P. Dhore, EVP of Dreyfus Service Corp.

Source: Mining the Value of Data: A CFO Perspective, CFO Research Services, August 2002

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Connect All the Dots

1. Identify the business problem 2. Set specific goals to address the problem 3. Develop the strategy to achieve these goals, incorporating all relevant groups and processes 4. Implement in a series of small steps to get value

We derive more long-term value by trying to hit singles instead of home-runs.

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Low Risk Approach To Build CRM System

- Works Especially When IT Budgets Get Slashed

Break it into smaller modules

with a clearly defined benefit for each

Pick the first module with significance for proof-of-concept and top management buy-in

Phased implementation will harvest benefits

to provide incentives for continuing the CRM project

Best Way To Build a Big System - Not to Build It..Let It Evolve

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Implementing Small Pieces of CRM That Matter to Customers Soon...

Is Better Than a Massive CRM Rollout That Takes Two Years or More to Implement
and Pay Off - Divide long project into blocks of say, 6 months, that will yield benefits independently Examples Improve your automated voice-response so that customers dont hate them as much and press zero! Add/improve self-service features to your Website Provide more customer data to call center operators so they can solve customer problems on the first call Improve the integration between your billing system and the customers ordering system to make selling smoother

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Small is Beautiful Works..

When accurate customer data, advanced IT systems and marketing experts are in short supply For example: Emerging Markets; Small and Medium Enterprises
Problem: Mistaken Notion About CRM Systems
All relevant data must be captured in an integrated data base The data should be accurate

Only the IT-heavy deluxe CRM system will do

You need sophisticated analytical and marketing skills to get good results

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A Pragmatic Approach
1. Determine the profitability of your customers

2. Identify the critical pain points in your current relationships with these customers
3. Limit the project to the top customers (80:20 Rule) 4. Create an integrated data base with metrics that matter about customers Resist the 360-degree customer view results in too much data of too little consequence 5. Clean the data to get satisficing (or good enough) accuracy 6. Analyze the data to get insights into how you can improve the relationships with these customers 7. Develop a plan of action for each customer AND implement it

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The CRM Implementation Team - Some Dos and Don'ts

1. 2. 3. Get Two Project Managers - One from the business side and one from IT IT Project Manager must be an adept dotted-line manager - Since most team members will not be direct reports IT Staff MUST include: - Members with IT background PLUS business knowledge AND ability to communicate with non-technical people in simple English - Enough knowledge of T to be able to liaise effectively with, and translate business requirements to, the T experts - Also, need the business savvy to be able to tell users when something they ask for is not feasible Collaboration with Marketing, Sales and Service Depts. - A MUST - Traditionally IT has been totally disconnected from Customer-facing depts. because of ITs narrow focus on Finance and Operations
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