CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 2
Acknowledgments A business writer, trying to consolidate and make sense of the varied disciplines that comprise the intricate apparatus of even the simplest new technology trend, incurs many debts ! am grateful to those who have contributed to this book and proud to acknowledge their help "hanks first and foremost to the sub#ects of my case studies, and to those who guided me to them: $eth %eonard of &eri'on (ommunications) *onica "yson of +arrahs -ntertainment) -ntertainment) +arry -gler of -ddie $auer) .ari /pdal of 0nion $ank of 1orway) 2egina Wallace of Juniper $ank) and *ike /verly and -d *agin from +ewlett Packard "hese people had the generosity and authority to say yes "hanks too go to $ill Prentice and 1elle 3chant' of 3A3) .im 3tanick and (arrie $allinger from "eradata) 3usan Poser and 3usan 0mphrey from /racle) and *ary (han, fellow management consultant and world traveler *y reviewers represent the best and the brightest in the (2* industry, and share credit for this books real4 world perspective +ats off to $rian $erliner, Joy $lake, James (raig, (apers Jones, .elly *ooney, 2obin 1eidorf, *arcia 2obinson, David %inthicum, and Anne "homas *anes "hanks, too, to .im *outsos, editor of DB2 Magazine , for letting me reclaim te5t from an article ! wrote on clickstream analysis And to the vendors who provided e5amples of real, working products6$rian +oover of "ouchscape, 7adra 1ally and *ary 8ros of "eradata, 9ancy /shita from /racle, and John 8ill from (hannel Wave6youve enriched the +andbook immensely ! feel as if ! have a personal troop of (2* gurus in 7ran 7ra'er, %inda *c+ugh, and John -arle, who together together corner the market on personal personali'ati i'ation, on, voice recognition recognition and wireless wireless technolo technology, gy, and (2* planning e5pertise, e5pertise, and who plowed through my drafts with the patience and understanding understanding of good friends -van %evy lived through the writing of this book, revealing his own (2* battle scars at aberrant hours and without complaint !m grateful to him for many things, foremost of which is that hes still talking to me now that the books finished Addison4Wesleys Addison4Wesleys *ary /$rien, whose imagination imagination and creativity were the seeds of the +andbook, +andbook, was indispensable in its development, as was editorial assistant Alicia (arey, copy editor e5traordinaire *alinda *c(ain, and the inimitable Addison4Wesley production staff And a final shout out to my colleagues colleagues at $aseline (onsulting 8roup, who picked up the slack when the going got tough, in particular 8ordon %evy and David 2ankell 9ou are (2* best4practices personified personified
About the Author Jill Dyché is a partner with $aseline (onsulting 8roup, a firm speciali'ing in the implementation and analysis of customer databases As vice president of $aselines management consulting practice, Jill leads teams through front4 and back4end reviews of strategic technology initiatives, including data warehousing, database marketing, and (2* planning and implementation Jill Jill spea speaks ks regula regularly rly at marke marketin ting g and and techn technolo ology gy confer conferen ences ces,, and and her her writin writings gs on techn technolo ology gy and and workplace workplace issues have been been featured featured in Information Week , EAI Journal , Oracle Magazine , DM Review ,; ,; The hicago Tri!une , and The Wa"hington Time" 3he is the author of the acclaimed book e#Data$ Turning Data into Information with Data Warehou"ing >>?, which has been translated into 3panis 3panish, h, .orea .orean, n, and and Japan Japanese ese Jill Jill was was recen recently tly named named a W!"! W!"! Woman Woman by Women Women in "echn "echnol ology ogy !nternational
Introduction /n one of those preternaturally warm spring afternoons, when many of their colleagues had forsaken them for the beach beach,, aroun around d @>> @>> confer conferen ence ce attend attendee ees s packe packed d themse themselve lves s into into a hall hall at the the %os %os Angel Angeles es (onvention (enter to hear about (ustomer 2elationship *anagement A group of high4profile e5perts was assembling to deliver a heralded panel discussion on the current and future state of the (2* market Attendance swelled to standing standing room only only /n the panel were e5ecutives from both established and emerging (2* vendors /ne panelist headed a company that sold an !nternet storefront product Another ran a sales4force automation company A third represented a ma#or database vendor vendor "here was a call center system vice president and, to his left, a chief privacy officer At the end of the line sat a renegade technology analyst
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 2
Acknowledgments A business writer, trying to consolidate and make sense of the varied disciplines that comprise the intricate apparatus of even the simplest new technology trend, incurs many debts ! am grateful to those who have contributed to this book and proud to acknowledge their help "hanks first and foremost to the sub#ects of my case studies, and to those who guided me to them: $eth %eonard of &eri'on (ommunications) *onica "yson of +arrahs -ntertainment) -ntertainment) +arry -gler of -ddie $auer) .ari /pdal of 0nion $ank of 1orway) 2egina Wallace of Juniper $ank) and *ike /verly and -d *agin from +ewlett Packard "hese people had the generosity and authority to say yes "hanks too go to $ill Prentice and 1elle 3chant' of 3A3) .im 3tanick and (arrie $allinger from "eradata) 3usan Poser and 3usan 0mphrey from /racle) and *ary (han, fellow management consultant and world traveler *y reviewers represent the best and the brightest in the (2* industry, and share credit for this books real4 world perspective +ats off to $rian $erliner, Joy $lake, James (raig, (apers Jones, .elly *ooney, 2obin 1eidorf, *arcia 2obinson, David %inthicum, and Anne "homas *anes "hanks, too, to .im *outsos, editor of DB2 Magazine , for letting me reclaim te5t from an article ! wrote on clickstream analysis And to the vendors who provided e5amples of real, working products6$rian +oover of "ouchscape, 7adra 1ally and *ary 8ros of "eradata, 9ancy /shita from /racle, and John 8ill from (hannel Wave6youve enriched the +andbook immensely ! feel as if ! have a personal troop of (2* gurus in 7ran 7ra'er, %inda *c+ugh, and John -arle, who together together corner the market on personal personali'ati i'ation, on, voice recognition recognition and wireless wireless technolo technology, gy, and (2* planning e5pertise, e5pertise, and who plowed through my drafts with the patience and understanding understanding of good friends -van %evy lived through the writing of this book, revealing his own (2* battle scars at aberrant hours and without complaint !m grateful to him for many things, foremost of which is that hes still talking to me now that the books finished Addison4Wesleys Addison4Wesleys *ary /$rien, whose imagination imagination and creativity were the seeds of the +andbook, +andbook, was indispensable in its development, as was editorial assistant Alicia (arey, copy editor e5traordinaire *alinda *c(ain, and the inimitable Addison4Wesley production staff And a final shout out to my colleagues colleagues at $aseline (onsulting 8roup, who picked up the slack when the going got tough, in particular 8ordon %evy and David 2ankell 9ou are (2* best4practices personified personified
About the Author Jill Dyché is a partner with $aseline (onsulting 8roup, a firm speciali'ing in the implementation and analysis of customer databases As vice president of $aselines management consulting practice, Jill leads teams through front4 and back4end reviews of strategic technology initiatives, including data warehousing, database marketing, and (2* planning and implementation Jill Jill spea speaks ks regula regularly rly at marke marketin ting g and and techn technolo ology gy confer conferen ences ces,, and and her her writin writings gs on techn technolo ology gy and and workplace workplace issues have been been featured featured in Information Week , EAI Journal , Oracle Magazine , DM Review ,; ,; The hicago Tri!une , and The Wa"hington Time" 3he is the author of the acclaimed book e#Data$ Turning Data into Information with Data Warehou"ing >>?, which has been translated into 3panis 3panish, h, .orea .orean, n, and and Japan Japanese ese Jill Jill was was recen recently tly named named a W!"! W!"! Woman Woman by Women Women in "echn "echnol ology ogy !nternational
Introduction /n one of those preternaturally warm spring afternoons, when many of their colleagues had forsaken them for the beach beach,, aroun around d @>> @>> confer conferen ence ce attend attendee ees s packe packed d themse themselve lves s into into a hall hall at the the %os %os Angel Angeles es (onvention (enter to hear about (ustomer 2elationship *anagement A group of high4profile e5perts was assembling to deliver a heralded panel discussion on the current and future state of the (2* market Attendance swelled to standing standing room only only /n the panel were e5ecutives from both established and emerging (2* vendors /ne panelist headed a company that sold an !nternet storefront product Another ran a sales4force automation company A third represented a ma#or database vendor vendor "here was a call center system vice president and, to his left, a chief privacy officer At the end of the line sat a renegade technology analyst
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # $ As they began talking, it became clear that each of the panelists had a different perspective on (2* "he president of the database company talked at length about connecting databases to applications, after the privacy officer had finished weighing in on the risks of opt4in marketing "he call center e5ecutive discussed new advances in live chat "he analyst inveighed against (2* vendors who didnt offer sufficient analytics, making a few of his co4panelists shift in their chairs !n fact, the discussion topics were so far removed from one another that the panelists might as well have been speaking different languages As the moderator uickly learned, integrating the discussion in any meaningful way was a more significant undertaking than a mere hour would allow As with the (2* marketpl marketplace, ace, there was no holi"tic me""age 6#ust different conversations 3huffling out of the auditorium, none of the attendees left with a clear (2* vision they could take back to work and begin promoting 1evert 1everthel heless ess,, we all have have our our eyes eyes on the (2* ball ball Aberd Aberdeen een 8roup 8roups s B(usto B(ustomer mer 2elati 2elations onship hip *anagement: 9ear =>>> -ditionC report predicts the (2* market will grow from E billion in FGGG to more than =H billion by =>>I 3uch pronouncements6and there are many6represent sufficient ammunition for many companies to target (2* before thoroughly scoping it "he problem is the noise (ompanies worldwide are declaring themselves Bcustomer4focusedC and forking over millions of dollars dollars on (2*4relat (2*4related ed technolo technologies gies /ver4hyp /ver4hyped ed vendor vendor products products clash with varied varied interpretations of (2* ob#ectives, leading many companies to simply automate ineffective marketing and customer support processes And because many of these processes rely on sporadically gathered data and shoddy business practices
How to Read This Book "his book is written for a wide range of readers, from e5ecutives to practitioners Part I is geared toward e5ecutives, pro#ect managers, and businesspeople interested in understanding the components of (2* and their their defin definiti ition ons, s, as well well as how how those those compo compone nents nts are being being used used Part II is for pro#ect managers, consultants, business analysts, and technical practitioners who need practical tips on (2* planning and implementation 2eaders with specific areas of interest can skip to individual chapters Table I-1 briefly e5plains each chapter and its audience focus Table I-1. The Handbook's Chapters and Their Intended Audiences
Part I: Deining CRM Chapter
Part I eplains t!pes o" CR#$o""ering real-li"e eamples o" how businesses are using them$and eplains how the! "it together. Description
Intended Audience
needing an introduction introduction to (2* Chapter 1: +ello, !ntroduces (2*s value proposition from a Any reader needing business perspective and e5plains why and its role in business strategy should read 8oodbye "he companies are rushing to #ump on the (2* this chapter 1ew 3pin on (ustomer %oyalty bandwagon
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # % Chapter 2: (2* -5plores marketings recent history and transition from product focus to customer in *arketing focus to the latest cra'e: improving the customers e5perience
7or e5ecutives in charge of planning and funding customer loyalty, acuisition, and retention programs and for marketing staff, including product, segment, and campaign managers 3ales management might consider starting here prior to reading Chapter 4
Chapter 3: (2* (overs why customer service is the locus of (ustomer support staff members at all levels most (2* programs and how new will en#oy comparing their company contact and (ustomer customer service strategies and center environments with the best practices 3ervice technologies promise to enhance customer outlined in this chapter Also of interest to loyalty6not to mention a companys marketing staff considering other customer revenues touchpoints
3ales managers and sales reps alike can use Chapter 4: 3ales "he birthplace of (2*, 37A includes a variety of tactical and strategic functions this chapter as a benchmark for how theyre 7orce Automation "his chapter goes from managing customer managing their customer contacts and leads leads and accounts to sharing customer Also valuable for field service personnel knowledge via wireless media Chapter 5: (2* 8iven the challenges e4business presents, this chapter discusses where the customer in e4$usiness fits in the supply chain for both $=$ and $=( relationships
7or managers and developers responsible for delivering e4business, particularly e(2*, as well as users and developers of -2P and supply chain management systems
Chapter 6: Analytical (2*
Analytical (2* leverages the data gathered from cross4functional customer touchpoints to help companies make strategic decisions "his chapter covers the risks and rewards of analy'ing and acting on new customer knowledge
7or business people for whom decision support is a critical #ob function, as well as data analysts using sophisticated predictive techniues Also helpful for marketing managers who rely on data analysis for launching new programs
Part II: Deli!ering CRM
Part II describes the key components of a (2* program and offers e5amples and checklists for ensuring they are performed thoroughly and in the right seuence to mitigate risk and ensure successful (2* delivery
Chapter
Description
Intended Audience
Chapter 7: Planning 9our (2* Program
-5plains how to evaluate your company against (2* critical success factors "his chapter also describes how to gauge the comple5ity of your (2* initiative and how that comple5ity determines a range of planning and development activities, including reuirements gathering and 2/! calculation
7or business analysts and consultants who will be gathering and documenting (2* reuirements, as well as pro#ect managers who will be charged with translating them into a working (2* system Also helpful for (2* sponsors and end users who must understand the tasks and resources necessary in (2* planning
Chapter 8: (hoosing 9our (2* "ool
Discusses (2* technology software features and e5plains reuirements4driven technology selection "his chapter contains checklists and interview uestions for both (2* software vendors and application services providers
7or !" e5ecutives and pro#ect managers charged with leading (2* technology selection efforts, as well as stakeholders who need to understand (2* technology4 selection best practices "he vendor evaluation uestions might help vendors better prepare for prospect and client presentations
Chapter 9: *anaging 9our (2* Pro#ect
Describes how to delineate, prioriti'e, and staff (2* pro#ects and highlights some common roadblocks to successful development Discusses establishing success metrics and measuring against them, and includes a (2* !mplementation 2oadmap
"echnical staff, (2* development team members, and pro#ect managers will be interested in the roles integral to (2* pro#ects, as will (2* stakeholders who want to learn more about where to begin
"his chapter introduces some of the main $usiness sponsors and pro#ect managers Chapter 10: interested in ensuring the success of their 9our (2* 7uture roadblocks known to sabotage (2* programs !t also covers some controversial (2* programs, as well as business users (2* trends who want a preview of (2* features on the hori'on
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # & Further Reading A compendium of books, maga'ines,
#ournals, and Web sites to aid readers in their (2* research Glossary
Definitions for the (2*4related terms used throughout the book, as well as coverage of some current business and technology bu''words
"oward the end of the content chapters, youll find a B(hecklist for 3uccess,C describing the best practices involved in achieving the ob#ectives discussed in that chapter
%art I& e"ining CR# Chapter 1. Hello( )oodb!e& The *ew +pin on Customer ,o!alt! "he so4called typical customer no longer e5ists, and companies have been learning this lesson the hard way 0ntil very recently, business was more concerned about the BwhatsC than about the BwhosC !n other words, companies were focused on selling as many products and services as possible, without regard to who was buying them *ost corporations cling to this product4centric view even today, basing their organi'ational structures and compensation plans on the products they sell, not the customers who buy "he $urger .ing slogan of the FG>s inviting the fast4food consumer to B+ave it your wayC was positively unorthodo5 for its era, as companies across industries offered standard products to the consumer population at large *oreover, FGK>s and FG>s corporate America bet their profits on classic marketing tactics6primarily television ads, mass mailings, and billboards6and then sat back and waited for the customers to pour in $ut the baby boomers came of age and competition burgeoned (onsumers had more choices than ever before about where to do their banking, their grocery shopping, and their vacationing Deregulation increased competition even further as it drove prices down (ompanies were forced to invent new methods of interacting with customers to reduce costs and gain market share 0se of automated teller machines s as they and other long4distance companies mailed millions of F>> checks out to consumers, who switched their long4distance service and switched it back again
The Cost o" Acuiring Customers 1owadays, the competition is #ust a mouse4click away -mbattled companies are slouching toward the reali'ation that without customers, products dont sell and revenues dont materiali'e "hey have been forced to become smarter about selling, and this means becoming smarter about whos buying (ompanies are reading the competitive writing on the wall and looking to technology for a leg up "his, combined with the oft4uoted factoid that it costs a company si5 times [1] more to sell a product to a new customer than it does to sell to an e5isting one6the old Bbird in the handC thus coming to roost6has motivated businesses to try to ma5imi'e e5isting customer relationships And the main way to suee'e every drop of value from e5isting customers is to know who the best customers are and motivate them to stay that way !ndeed, a good starter definition of customer relationship management CR#/ is
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # ' [1]
Although si5 times is acknowledged as the prevalent figure, reports on new4customer acuisition costs vary, from as low as three times to as high as thirteen times
"he infrastructure that enables the delineation of and increase in customer value, and the correct means by which to motivate valuable customers to remain loyal6indeed, to buy again As well see throughout this book, (2* is about more than simply managing customers and monitoring their behaviors (2* has the potential to change a customers relationship with a company and increase revenues in the bargain "he most forward4thinking companies have recogni'ed from past failures that (2* smacks of strategy, and thus technology alone cant address high4profile issues such as new4customer acuisition and Web4based marketing "o these companies, (2* is much more than a standalone pro#ect accounted for by a single organi'ation, its a !u"ine"" %hilo"o%h& that affects the company4at4large
•
•
•
•
•
BWe want to thoroughly understand our customers needs6even before they know them themselvesC6A mid4market financial institution BDecreasing customer churn by increasing customer satisfactionC6A competitive local e5change carrier B*otivating customers to initiate revenue4generating contacts with usC6An online insurance company B!ncreasing the likelihood of the right response by a given customer or customer segmentC6A catalog retailer B"o use technology to improve customer service and enable a greater degree of customer differentiation in order to deliver uniue customer interactionsC6A data services firm BWe want to attract customers6both old and new6through more personali'ed communicationsC6 An online retailer
"he point here is that there is not one but many visions for (2* success (2* promises to help companies get to know their customers well enough to understand which ones to keep and which ones they should be willing to lose6and why6and how not to overspend in the meantime (2* also means automating many of the business processes and accompanying analysis and saving precious time in the bargain And saving money (harles 3chwabs multimillion4dollar investment in 3iebels (2* product, which the brokerage firm uses to track each interaction with a customer or prospect, was recouped in less than two years[2] 3tories of wildly successful (2* programs have invaded both print and cyberspace, spurring otherwise cynical e5ecutives to turn their heads in the (2* direction After all, who could argueM [2]
2oberts4Witt, 3arah %, B!ts the (ustomer, 3tupidC ' Magazine , June =, =>>>, =K
Who indeedM "he estimated > percent of companies who have tried implementing standalone (2* systems and failed, as well as the legions of other companies who have taken missteps on their e4business #ourneys might have a few comments As with enterprise resource planning <-2P?, supply chain management <3(*?, and other wide4reaching corporate programs that mandate a combination of innovative technologies, new business processes, and organi'ational buy4in, (2*s failures are vast and visible
0rom Customer Acuisition to Customer ,o!alt! !n his book Wh& We Bu& , self4described retail anthropologist Paco 0nderhill notes that if consumers purchased only what they really needed, the economy would collapse !ndeed, one could argue that the heady mi5ture of good times and popular fads from protein bars to same4se5 fragrances to sport utility vehicles has created a veritable buying fren'y $ut consumers are fickle, and more cynical than ever before We no longer believe what we read and see, and for large purchases were more inclined to do our own research 9our company has #ust announced another strategic allianceM 9ouve got a cool new animated logoM 9oure on your fourth round of venture fundingM 3o what, so what, and so whatM
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # ( (onsumers are also busier than ever and have conseuently placed a premium on their leisure time After all, why tramp through aisle upon aisle of merchandise when ! can order groceries off the Web and spend more time with the kidsM And pi''aM And dog foodM And even that sport utility vehicleM !n a recent Information Week survey[3] , of the companies actively implementing (2*, GI percent claimed increased loyalty and customer satisfaction would #ustify their (2* investment "he second4highest percentage, EI percent, stated the need to demonstrate increased revenue "he implied mandate for most of these early adopters seems to be Bcustomer loyalty at any cost6even if we dont see a return on investmentC [3]
3weat, Jeff, B%ots of (ompanies Are "hinking About (ustomer 2elationship *anagement, $ut Progress (an $e &ery 3low6(2* 0nder 3crutiny,C Information Week via (/*"-N online, 3eptember F@, =>>>
!t certainly doesnt take much for a consumer to turn her head to a competing product or vendor A #a'' buff has a mental list of the (Ds she wants to buy When (D 1ow e4mails her a discount code for the new Dave $rubek recording, she goes to the site and buys it despite her hefty Bwish listC on Ama'oncom $ut #ust as loyalty is becoming the mantra on every e5ecutives lips, customer satisfaction rates are plummeting !ts practically routine these days for consumers to vow never to do business with a particular merchant 2egardless of their frenetic embrace of the customer, companies seem to be angering customers at a faster pace than they are serving them !n June =>>>, (ortune columnist 3tewart Alsop wrote a scathing piece on 3print P(3 and its poor service "he column, titled BDear 3print: 9ou "icked /ff the Wrong 8uy,C provoked hallelu#ahs from 3print P(3 customers, one of whom responded: ! hate 3print and spend way too much time fantasi'ing about its demise ! have friends who have 3print too, and we talk to one another like members of a support group Whenever !m in line at 3print stores, ! feel it is my duty to reach out to and dissuade as many prospective customers as ! can Another reader weighed in with this: "o list all my horrifying e5periences would render this letter too long for publication And another
to 2ptimi3ing the Customer 4perience (ompanies are spending millions of dollars trying to prevent acerbic customer testimonials like the ones weve been talking about and to figure out tactics that will not only help them keep customers, but keep their customers coming back "hroughout the book, scenarios such as the following will illustrate such tactics from customer4focused companies around the world:
+cenario 9ouve spent two grueling weeks of nonstop business in %ondon and are ready to head home &irgin Atlantic Airways sends a driver to fetch you at your hotel and bring you to the airport 0pon arrival at +eathrow, the driver stops at an outdoor kiosk 9our window magically rolls down to reveal a uniformed &irgin associate, who politely reuests your ticket As the associate checks you in, the driver retrieves your luggage from the trunk6the Bboot,C in the local vernacular6tags it, and deposits it on the baggage conveyor belt "he &irgin associate smiles and hands you your boarding pass
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # ) "he driver then proceeds to the terminal, pointing the way to the entrance of the 0pper (lass lounge, which features sleek décor, laptop hookups, and a beauty salon As you enter and stow your carry4on bag, a waiter asks for your drink order *idway through your haircut, Peter 7rampton walks by on his way to the bar and gives you a little wave /nce in flight, you are of fered a pair of fleece pa#amas and a free massage -veryones been super friendly !n fact, youve made no special reuests since you left the hotel, have barely lifted a finger, and still have the cash you left the hotel with s rock star is probably not in most companies marketing plans $ut there are subtler ways to give customers an e5perience they will remember and look for again "he most visionary businesses understand that singular customer e5periences will drive loyalty to levels unknown "hose who have already adopted a customer4focused culture understand that (2* done well influences customer emotion !t makes customers feel good, personally connected !t humanize" their purchase or service reuest or complaint "hese companies define the truly loyal customer as someone who feels such good will toward the company that he BsellsC its products to others, in effect acting as a voluntary
How the Internet Changed the Rules "alk to a marketing e5ecutive for a large bank or credit card company and she might claim to have been doing (2* long before the term was invented !ndeed, large financial institutions were at the forefront of relationship marketing, which6as well discuss in Chapter 26is a subset of (2* "he emergence of the !nternet heralded a new opportunity for customer relationship building 7or one thing, search engines made it easier for customers to find online merchants and interact with them And, once found, those merchants offered customers more streamlined ways of ordering and receiving products and services *oreover, the !nternet simplified bidirectional communication, for the first time offering a better way for consumers to relay personal information to the merchant !nstead of waiting to be mailed a form to open an account or order a phone line, a prospective customer needed only to send an application through
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # * cyberspace, resulting in shorter delivery time, improved accuracy, and uite often a higher positive perception[4] !n fact, the !nternet is an environment of 'ero latency, offering real4time information and often on4demand product delivery [4]
!n FGGG, percent of customer uestions were handled online and customer satisfaction levels increased by => percent over FGG@, according to u"tomer /ervice on the Internet by Jim 3terne >>?
!nternet users appreciate not having to go out of their way to buy what they want, and the simpler the process, the higher the potential for customer satisfaction !ndeed, the Web offered customers options they hadnt had with other delivery channels, namely: •
=H4hour access
•
0p4to4the4minute information
•
"he ability to research a product or merchant )uring a shopping trip
•
/nline customer support
•
/nline self4service
•
Personali'ed content
(onsider the old way A customer needs a new set of window blinds +e goes to the kitchen, finds the yellow pages, and calls his local blind company "he representative e5plains they can have someone come out and measure for the blinds a week from "hursday "he rep arrives from the blind company, measures, and shows the customer photos of various blind styles and colors "hen the rep takes another two days to write up an estimate Almost two weeks later the customer has the pricing information he needs 1ow he must decide whether to get another estimate or take his chances with the only vendor hes contacted (ompare that to the Web version "he customer enters Bmini blindsC in his favorite search engine, which returns the Web sites for several catalog window treatment firms +e chooses a company, which displays a series of blind designs and prices4per4inch "he customer chooses a design he likes, enters his window measurements, and receives a price online, including ta5 and shipping $efore purchasing, he browses a couple of other window4ware Web sites for additional blind designs and prices, eventually placing his order in less than an hour Although basic, the above e5amples illustrate why the Web has made doing business easier than ever 7or the customer, the time savings6even if he has to measure the window himself6is improved by orders of magnitude Plus, while he awaits delivery he can revisit the Web site to validate measurements or refresh his memory on his chosen style 7or the blind retailer, the order arrives electronically, decreasing sales time while reducing the chance of error <"he measurements, after all, are now the customers responsibility? 7urthermore, the company has captured other information6the customers preferred blind style, his neighborhood, his interior color scheme 6for potential use in follow4up communications At the =>>> (omde5 conference in %as &egas, (isco (-/ John (hambers put a new spin on leveraging customer loyalty with the !nternet (hambers demonstrated a Web4connected gas pump that allowed a customer to swipe a Bloyalty cardC 3wiping the card not only starts the gas flowing, it also illuminates a digital screen displaying personali'ed messages such as traffic reports while the customer pumps her gas A customers initial reluctance to subscribe to such services can be more than offset by the value they provide
5hat's In a *ame6 $eing the )e rigueur bu''4term of the moment, (2* was bound to spawn similar acronyms 7ollowing are some (2*4related terms you will come across in this book and elsewhere in your (2* readings: •
more simply, (2* that is Web4based 7or instance, when you log on to golf retailer chipshotcom to see if theyve shipped your new titanium driver, thats e(2* •
ERM 3omewhat confusingly, many e5perts and publications are using -(2*, alternatively
coined B-2*,C to refer to BenterpriseC (2*, meaning a (2* program that spans an enterprise4wide view of a customer
'RM BPartner relationship managementC allows a company to manage its alliance partner and
reseller relationships to provide customers with the optimal sales channel while streamlining the
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 10 sales process Determining incentives for various Web referral sites based on the profitability of the customers they send your way is one P2* tactic •
cRM B(ollaborative (2*C denotes situations in which customers can interact directly with the
organi'ation, usually through the Web Dell, for instance, allows customers to choose their own workstation components, essentially designing their own P(s •
/RM B3upplier relationship managementC resembles P2* in that it focuses on keeping e5ternal
vendors happy, but 32* limits its focus to actual suppliers /ften operationally focused, 32* helps companies evaluate and categori'e suppliers for given pro#ects to optimi'e supplier ualification and selection, thereby streamlining the supply chain •
•
m(2*: B*obile (2*C suggests the provision of data to customers, suppliers, and business partners via wireless technologies 5(2*: 9oure bound to see other letters preceding the (2* acronym, and the B5C is simply used as a placeholder for other (2* hybrids to come
!rrespective of the type of (2* a company is looking into, the common denominator is motivating the right customers to continue doing business with you Well see the various types of (2* at work in the ne5t several chapters Another important (2* distinction is BoperationalC versus BanalyticalC (2* "he distinction is an important one, because it speaks to the tactics a company is taking in implementing its (2* strategy As well see in Part II of the +andbook, there is no one right answer to (2* implementation as long as business reuirements drive the initiative O%erational RM1 also known as Bfront4officeC (2*, involves the areas where direct customer contact occurs Well refer to these interactions as customer BtouchpointsC A touch%oint can be an inbound contact
6eg, a call to a companys customer support hotline6or an outbound contact6eg, an in4person sales call or an e4mail promotion "he ma#ority of self4described (2* products on the market today fall into the operational category Figure 1-1 illustrates the various levels of operational (2* 0igure 1-1. 2perational CR#& Touching the customer
/perational (2* enables and streamlines communications to and from customers, but this doesnt necessarily mean optimi'ing service Just because a banking customer checks her balance on your Web site wont conclusively establish that she doesnt prefer to perform her transactions in the branch $ut how do you know for sureM Anal&tical RM1 also known as Bback4officeC or BstrategicC (2*, involves understanding the customer
activities that occurred in the front office Analytical (2* reuires technology
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 11 0igure 1-7. Anal!tical CR#& 8nderstanding the customer
As well see throughout the +andbook, the refined4business4actions piece of the pu''le is the most difficult of all to put in place "he greater the number of missing pieces, the harder it is to construct a meaningful (2* picture Put another way, if enhanced customer loyalty is the door, integration is the key
CR# and Business Intelligence Analytical (2*, when done right, involves large amounts of cross4functional data "his data is often stored on a )ata warehou"e1 a repository of corporate data from various sources intended to facilitate business analysis
•
•
•
•
Were using data mining to e5ecute our corporate4wide (2* initiative !t allows us to predict what customers might buy ne5t /ur new (2* system allows us to analy'e customer behaviors and to give our salespeople global customer information, rather than select bits and pieces like they had before /nce we started doing (2*, we could access all of our customers from one system (ustomer relationship management allows the company to analy'e claims data to better understand which types of claims are most prevalent for a given customer segment +allelu#ah We finally know which customers are buying which products
&aluable as they are, none of these capabilities reuires a (2* product !n fact, companies from brokerage houses to pharmaceutical firms were performing these duties long before the (2* acronym came along "he combination of data warehouses and analytical toolsets has given companies the ability to drill down into integrated data to reveal interesting6even competitively differentiating6findings 2ather than e5trapolating what types of promotions to launch and guessing who would respond, companies have begun relying on business intelligence analysis to provide them with hard facts that help them make better, more informed decisions and reap unforeseen rewards
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 12 $ut even the e5perts are confused about the differences between business intelligence and (2*, and the media often e5acerbates the misunderstanding Publications and conference presentations routinely confuse the two terms Data warehouse vendors whose markets are waning6most large companies already have at least one data warehouse6are hanging out the (2* shingle without refashioning the message %ikewise, (2* vendors who reali'ed too late that data analysis capabilities were vital are now pitching (2* data marts along with their core products /ne popular (2* book concentrates the ma#ority of its te5t and all its case studies on decision support analysis !n August =>>>, a high4profile management #ournal dedicated an entire issue to (2*, featuring a do'en Bbest practices,C most of which involved analy'ing customer data rather than focusing on deployed (2* applications And there was the well4attended (2* conference presentation offering the Bnine types of (2*,C four of which6database, decision support, analysis and data mining, and Brules repositoryC [5] 6 smacked more of business intelligence than of the overarching business strategy of (2* [5]
B2ules repositoryC refers to the storage of business rules that describe data and how its used 7or instance, a business rule that ensures a discount for a high4value customer could be e5ecuted at the time the customer places an order or could simply define that the term BrevenueC refers to booked revenue rather than billed revenue
Although often misrepresented, the differences between business intelligence and (2* are distinct 9es, they both involve critical business decisions and both rely on information technology to deliver value "he e5amples in Table 1-1 illustrate the distinction 9our first impression might be that (2* is more comple5 than business intelligence !n fact, at most companies the number of true (2* users is a mere subset of the business population using business intelligence +owever, business intelligence, when not e5ploited to its full potential, can result in analysis for analysis sake "he ma#or difference between $! and (2* is that RM integrate" information with !u"ine"" action* !n each of our e5amples, the (2* action will be tested and further refined (2* combines data analysis with the deployment of specific business actions "he ability to access data is, by itself, immensely powerful, but many business intelligence environments simply use data to confirm already held hypotheses "he mandate of (2* is the ability to act on that data and to change fundamental business processes to become more customer4centric Table 1-1. Business Intelligence 9ersus CR# Business Intelligence
CRM
CRM Rationale
Display the name and address Display "ech(os most recent inbound contact 3alespeople become aware of business customer "ech(o on my personal digital assistant
/nce a month for the ne5t si5 months, send a (onvert casual visitors to direct4mail solicitation to customers most likely freuent visitors to rent ne5t months new features who are not weekly visitors to the store
Display a list of customers who (ontact all high4value customers who have have lodged a complaint within lodged a complaint 8enerate retention the past I> days recommendations for each customer
7ocus on retaining high4 value customers
!dentify the top five purchased office sup4plies !ncrease the likelihood of and trial4run an automated Web reuest4for4 price improvements on uote <27O? system for limited uantities to test commodity purchases price improvements
%ist the e4mail addresses for 3end profitable registered customers a @ registered customers who online discount if they fill in a form e5plaining abandoned their shopping carts why they abandoned their shop4ping carts during their last Web visit 3end F> percent off to unknown visitors if they complete the form
2eward repeat customers who are profitable and gather valuable prospect behavior data
The #anager's Bottom ,ine /perational aspects aside, (2* is first and foremost a business strategy, one that helps a company tighten its business practices across organi'ations while forging an ironclad connection with its customers !t is not only a response to competitive pressures facing every industry6from deregulation to supply4chain
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 1$ efficiencies to the massive demand for Web4based customer interaction6it is also considered a strategic imperative, garnering e5ecutive4level attention and eually lofty budgets !n the business4to4consumer <$=(? space, (2* means keeping pace with a savvy and increasingly impatient consumer base that is closer than ever to finding your main competitor and more willing than ever to share their bad e5periences with your prospects As for the business4to4business <$=$? segment, as well see in Chapter 5, optimi'ing supplier and partner communications is more critical than ever *aking it all work together and seamlessly involves nothing short of organi'ational choreography "hat (2* is a business strategy is now a well4worn ma5im "hat it involves much more than information technology is sometimes disheartening news to many a manager gunning for that elusive uick win "he (2* best4practice company is the one that understands how to improve business practices and customer relationships by using (2* technology and customer data as part of an overarching program that also involves process and organi'ational changes, with the ultimate aim of differentiating itself through superior customer relationships As well see throughout the +andbook, defending customers and profits while inspiring loyalty takes more than #ust (2* vendor tools !t takes understanding which type of (2* can best foster high4impact relationship improvements "he following four chapters present the various types of (2* and their components so you can decide on the best definition of (2* for your organi'ation
Chapter 7. CR# in #arketing !n the FGK>s, the practice of motivational research sought to understand what made people tick "he hope was that company researchers could discover how to better market their products *otivational research involved everything from scientists showing volunteers a series of advertisements and measuring the subtle physical responses to administering 2orschach tests and e5trapolating visceral reactions to conducting traditional focus groups, a practice that endures today in the consumer packaged goods and entertainment industries "he scope of these efforts remained unwavering in its product focus, however, with the customer acting as an ancillary component of the purchase cycle $rand was king, as the saying went, and it would take many iterations of the marketing lifecycle for companies to understand the importance of a customer4focused business strategy
0rom %roduct to Customer& A #arketing Retrospecti9e !n fact, product marketing became a study unto itself, its students testing the waters with a variety of gimmicks and promotional ideas Part research, part guessing game, and part leap of faith, the practice of product marketing evolved into a formali'ed organi'ation in most companies, and the process, as shown in Figure 2-1, was predictable 0igure 7-1. The process o" product marketing
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 1%
Product marketing campaigns were designed to reach as many people as possible *ass marketing campaigns not only treated all customers as if they had the same needs and wants, but also focused on the product being pitched, not on its potential buyer *ass marketing a product means stocking the same shelves across all stores with the same product and alerting potential customers in the same way "he underlying assumption was that the availability and choice of products a company offered consumers was the principal determinant of its success A product focus nevertheless does not imply a lack of market understanding /n the contrary, as companies launched and re4launched their products, they began analy'ing the responses to determine the success of marketing campaigns $usiness #ournals wa5ed poetic on product distribution strategies, and statisticians were suddenly in demand as companies began institutionali'ing such data analysis practices as product revenue analysis and price4elasticity modeling "he FGK>s introduced the phenomenon of Bdirect marketingC Direct marketing involved communicating with large numbers of consumers6usually through promotional mailings or maga'ine advertisements6and inviting them to respond to the promotion >,>>> customers and costs GE,>>>, the company nets a significant loss [1] [1]
As reported in IO *aga'ine, August F@, =>>>
Target #arketing As consumers began purchasing and using products, more data became available about them Data analysts began associating products to the customers who were buying them And it was through these analysis activities6as well as rising temperatures in the competitive climate and a few timely maga'ine articles6that companies began to understand that their
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 1& "echnically, the si'e of a target market can range from the sum of all customers to a single individual, but during the early days of target marketing when companies began using information technologies in creative new ways, market segmentation was the most widely adopted approach Although many data points across the organi'ation from products to sales channels might be segmented, segmentation is most often associated with dividing customers into categories based on their demographics: age, gender, and other personal information [2] -ven => years after customer segmentation had been embraced by marketing departments, many still divided their customers on the basis of whether they were business or residential [2]
!n *arch of FGKH, author Daniel 9ankelovich wrote about B1ew (riteria for *arket 3egmentationC in the 3arvar) Bu"ine"" Review1 arguing that demographic segmentation, while valuable, was not the only way a company could categori'e its customers
*odern companies assign a variety of segments to their customers, often dynamically defining segments and temporarily regrouping customers for specific campaigns *arketing departments routinely group customers into the following categories: •
8eography or regionality
•
Psychographics[3] [3]
BPsychographicC segments define groups of customers with similar interests, opinions, and preferences
•
7irmographics[4] [4]
B7irmographicsC characteri'e a business and are used especially often in business4to4business <$=$? communications •
!nfographics [5] [5]
B!nfographicC segments delineate customers according to how they want to be communicated with
Preferred sales channel
•
Profitability
•
1umber of products
•
3ales territory
•
"enure
•
%ifetime value
•
+ousehold demographics
•
2isk score
•
%ife stage
•
Privacy preferences
$y segmenting customers, companies could begin more speciali'ed communications about their products *uch of this relies on the companys understanding its business strategies to the e5tent that it knows its most desirable segments 7or instance, if a bank has set its sights on deriving most of its profits from fee4 income products offered in its investment services line, customers of this organi'ation will likely have different preferences and characteristics from those opening savings accounts 3egmenting customers based on their preferred line of business or desired product features can reveal interesting facts about their different preferences and behaviors 7or instance, $oots, a 0. retailer, segments customers who respond to promotions based on whether they are Bdeal seekers,C BstockpilersC
According to B"aking Advantage,C 4$4 Direct magazine1 3eptember =>>>
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 1' *any companies with the ability to analy'e detailed customer data tend to segment customers on the basis of how likely they are to purchase a new product or service /ne of my clients, a leader in cable television, segments its customers based on their Bpropensity to buy,C as illustrated in Table 2-1 $ased on this segmentation, the cable company trying to up4sell customers to digital "& service offers customers in its 3keptics segment digital cable for the price of standard cable service for a three4month period "he net cost is only si5ty dollars6twenty dollars more per month6and there is a high likelihood of retention "he -arly Adopters receive an e4mail offer6B7or a limited time onlyC6for digital cable plus @>> minutes of free long distance per month for si5 months "he value of this service is @> per month to the consumer6the cost to the cable company is negligible "he -arly Adopters end up keeping the digital cable and will most likely remain long distance customers as well Table 7-1. %ropensit!-to-Bu! +egments Segment:
Description:
Early Adopters
Pragmatists
*ost likely to buy Will purchase new newly offered products products after value is and services well understood *ight -specially attracted to need to see the product technology innovation in action
Percentage of FF customer base:
HK
Septics
!aggards
/nly purchase if value Await mass4 is proven (hances acceptance of product increase with rebates prior to purchase 1ot or money4back likely to respond to guarantees new promotions =E
F@
"he advantage of target marketing is that, if the company has @> million customers, only FH million or so6 =E percent6will receive the promotional mailing for digital service At a bulk rate of eight cents per mailing, target marketing saves the company almost I million in postage alone <"he company might incur labor and mail service costs, which would also be sharply reduced? "his allows the cable company to steer clear of disinterested prospects and avoid the all too common practice of over4communicating to customers !t fosters the customers perception that marketing is a tailored service, not an annoyance "hrough the significant cost savings and increased response rates, target marketing #ustified increased e5penditures for information technology !n fact, the better companies became at analy'ing data about their customers, the more effective their campaigns became, creating the closed4loop effect illustrated in Figure 2-2 0igure 7-7. Re"ining marketing campaigns
Figure 2-2 illustrates that the more a company knows about its customers, the more detailed its marketing messages can be 2efined marketing campaigns, targeted to customer segments rather than to the mass populace, became the marketing +oly 8rail
Relationship #arketing and 2ne-to-2ne
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 1( "hat is until relationship marketing came along Populari'ed by 2egis *c.enna in his FGGI book, Relation"hi% Marketing$ /ucce""ful /trategie" for the Age of the u"tomer1 relationship marketing was embraced as a way for marketing departments to get to know their customers more intimately by understanding their preferences and thus increasing the odds of retaining them "arget marketing, cross4 selling, and customer loyalty programs evolved from one4off pilot pro#ects and became formali'ed as part of core marketing and sales processes Also in FGGI, Don Peppers and *artha 2ogers predicted the demise of the mass marketing tactic of relying on economies of scale to churn out huge uantities of standardi'ed products "hey declared the need to focus less on products and more on customer relationships !n their watershed book The One to One (uture1 Peppers and 2ogers argued that in coming years you will not be trying to sell a single product to as many customers as possible !nstead, youll be trying to sell a single customer as many products as possible6over a long period of time, and across different product lines "o do this, you will need to concentrate on building uniue relationships with individual customers, on a F:F basis [7] [7]
Peppers, Don and *artha 2ogers, PhD, The One to One (uture$ Buil)ing Relation"hi%" One u"tomer At a Time 1ew 9ork: Doubleday, FGGI
Peppers and 2ogers rounded out marketings evolution from mass4marketing standard products to segmenting customers to true relationship marketing, or one4to4one Figure 2-3 shows the stages and their differences 0igure 7-:. #arketing e9ol9ing
/ne4to4one means not only communicating with customers as individuals, but also developing custom products and tailored messages based on customers unspoken needs !t relies on a two4way dialog between a company and its customers to foster a true relationship and allow customers to truly e5press the desires the company can help fulfill !t relies as heavily on the customers e5perience of the company as it does on the specific marketing messages he receives "he concept of Bpermission marketingC goes hand4in4hand with one4to4one: customers not only need to be communicated with as individuals, they themselves should be able to stipulate how and when After all, as 3eth 8odin says, B9ou cant build a one4to4one relationship with a customer unless the customer e5plicitly agrees to the processC [8] Permission marketing implies that the customer will decide when and for what reason she will accept to be interrupted with a marketing message *ost of the time, its when the customer perceives there is value to her in such an interruption A current e5ample is Ama'oncoms notification of /prahs new $ook (lub selection to subscribers who have opted in [8]
8odin, 3eth, 'ermi""ion Marketing$ Turning /tranger" into (rien)"1 an) (rien)" into u"tomer" 1ew 9ork: 3imon and 3chuster, FGGG, K@
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 1) "he vision of one4to4one and permission marketing relies even more heavily on information technology to track individual customers, understand their differences, and acknowledge their interaction preferences "he purveyors of these visions often stop short of discussing how e5actly a company can not only differentiate each discrete customer, but also put the business processes and organi'ational structures and technologies in place to treat them differently
Campaign #anagement !f traditional marketing is, as the saying goes, part art and part science, the marketing of the future is pure science with a bit of flourish "he success of corporate marketing programs has become directly proportional to a companys ability to capture and analy'e the right data !n days of mass marketing with its Bbatch and blastC mentality, most companies would decide on a marketing campaign based on someones interesting idea A team of product managers would plan the campaign, coming up with hit4or4miss media guesses and sound bites "hen theyd pull the ripcord and pray !t could take months to figure out whether a campaign was working, and months more to repair and re4launch it Why the throw4it4at4the4wall4and4see4if4it4sticks approachM 7or one thing, finding, entering, storing, and tracking individual customer data records was beyond most companies capabilities, not to mention their budgets Parado5ically, the larger the company, the greater the number of customers and thus the more cumbersome and e5pensive managing customer data became %arge companies began undergoing the +erculean task of collecting and storing customer data in primitive databases !n the FGE>s, the advent of relational databases and data warehouses
$ut only those with the necessary data can really monitor the results of that campaign, and use those results to refine future campaigns, a process known as Bclosed loopC campaign management "his means the ability not only to analy'e and understand whether a campaign is a success and why !t means using that new knowledge as the basis for future campaigns, in effect closing the loop with evolving customer information, as in Figure 2-5 0igure 7-<. Closed-loop campaign management
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 1*
!t could be months or even years before companies understood whether a marketing campaign was successful 1o wonder the practice of campaign management mandated large marketing organi'ations and even larger marketing budgets *any companies relegated the cumbersome work to marketing service bureaus or direct marketing agencies, whose turnaround time was less than stellar *any stayed in their marketing comfort 'ones, e5ecuting ad4hoc, point4in4time campaigns that generated short4term revenues but did nothing to reveal customer preferences or improve customer relationships "he time and cost being spent on these campaigns and the opportunity cost associated with ad hoc or e5perimental promotions were noted by technology vendors, many of them database product companies, who began devising ways of automating key pieces of the campaign management process "he initial developments in campaign management software were list generators %everaging current customer information in e5isting databases, list4generation software dynamically segmented customers for certain campaigns, using standard database ueries "he result was a list of customer names and addresses that fit the specified boundaries 7or e5ample, a marketing department at a bank wants to offer freuent depositors with large balances access to low4interest lines of credit "he specification BDisplay the names and addresses of all customers with checking account balances of over =@,>>> who have an average deposit amount of @>>> or higherC could easily be translated into a uery and submitted to the banks customer database "he resulting list would become the basis for a mailing offer to those customers "he bank saves money not only by applying the principles of target marketing and segmentation6communicating to a proscribed and thus smaller group of customers6but also by avoiding the cost and time involved in searching out those customers manually As campaign management software became more popular, its features became more robust "he richer a companys customer database, the more it could leverage that data to actually understand customer behaviors and institute true one4to4one marketing Products such as Nchange and Prime 2esponse began addressing components of the full campaign lifecycle, including •
(ampaign definition
•
Planning
•
(ustomer segmentation
•
3cheduling
•
2esponse management
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 20 •
/pt4in versus opt4out processing
*ost campaign management products aid the user in defining a workflow, including a schedule for the campaign "his allows a marketing department to delineate discrete tasks, specify costs and e5pected returns, and test various scenarios on different customer segments, campaign schedules, and product offers 3uch products not only shortened the marketing lifecycle, they enabled companies to dedicate more time to customers and less on managing the marketing process 7reeing up time in turn allowed campaigns to be launched in parallel instead of serially 7or instance, a telephone companys single, monolithic custom4calling campaign could become several more4targeted campaigns featuring voicemail, caller4id, call waiting, or packages combining these and other products to specific customer segments *ultiple simultaneous promotions resulted in an increase in overall response rates, often in the double digits $y increasing not only the uality but also the volume of their marketing campaigns through marketing automation, companies were increasing their revenues (2* products offering campaign management present savings of time, labor, and cost and often demonstrate uantifiable returns on investment, as they have to the following companies: •
•
•
An outdoor products catalog company that customi'ed catalogs for specific customer segments > percent An online brokerage firms cross4selling of its new checking account offering to holders of .eogh retirement accounts generated a I= percent response rate from its targeted base of customers, versus H percent from a control group An e4tailer speciali'ing in lifestyle products saw sales of its languishing line of house4brand womens clothing nearly double when the company promoted select casual outfits with a well4known brand of baby products favored by new mothers
When mastered, automated campaign management is like a good wine: it gets better with age With marketing campaigns targeting increasingly smaller customer segments, companies can increase the number of campaigns simply to ensure that they continue interacting with as many customers as possible And by tracking the success of campaigns over time, companies can refine them, resulting in even higher response rates and thus greater corresponding revenues "he practice of closed4loop campaign management6using the results of campaigns to refine future campaigns6has become an acknowledged (2* best practice
CR# #arketing Initiati9es (ompanies simply dont purchase (2* products to automate campaign management without a clear view of what they want to do After all, companies devoid of a marketing vision rarely have sufficient budget for (2* software "hose who do, have a variety of tactics in mind for increasing customer value and loyalty
Cross-+elling and 8p-+elling (ross4selling is the act of selling a product or service to a customer as a result of another purchase "he e5ample of new mothers purchasing products for their babies at the same time they buy clothes for themselves is an e5ample of cross4selling (ross4selling is all the rage nowadays, because selling more services to an e5isting customer increases revenue from that customer and costs less than acuiring a new one %ikewise, companies are frantically looking for opportunities to up4sell, or motivate their e5isting customers to trade up to more profitable products "he youthful voice at the drive4thru window predictably asking, B9ou wanna supersi'e thatMC is the best uotidian e5ample of up4selling "he art of cross4selling and up4selling is understanding which products will increase, rather than decrease, a customers overall profitability 3imply cross4selling a customer an unprofitable product might actually render that customer less profitable than he was prior to the sale (ross4selling done correctly means selling the right product to the right customer !t also means understanding that not every customer is a good candidate for cross4selling 7or instance, credit card customers have proven to be poor cross4selling candidates because favorable interest rates and low fees6 not the card itself or even the issuer6are the dominant determinant of consumer response to credit card offers 0nderstanding the ways by which customers evaluate how and whether to respond to such
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 21 promotions is critical 1ot surprisingly, the desire to improve cross4selling business practices accounts for much of the popularity of (2* marketing automation technologies
Customer Retention !n FGGK, author 7rederick 2eichheld wrote that 03 corporations lose half their customers every five years[9] !ndeed, banks and telephone companies were already in the throes of analy'ing customer attrition to understand why customers were leaving for competitors [9]
0nderstanding that customers have left, and knowing specifically who, is non4trivial 0nderstanding why they have left is even more difficult +arder yet is stemming the tide of customer attrition by applying this knowledge to business tactics that encourage customers to stay Analy'ing customer attrition operates on the aphorism established in Chapter 1 that keeping an e5isting customer is far more cost effective than acuiring a new one After all, the more customers leave, the greater the loss of revenue, loss of the initial acuisition investment, and loss of a stable market base for selling new products Although this business tenet hasnt arrested the fren'y to acuire new customers, it has resulted in millions of dollars being spent to analy'e not only why customers leave, but also which customers are the most desirable and thus worth keeping !n the FGE>s, companies began focusing on who had left !n the FGG>s, they began applying characteristics of customers who had left to e5isting customers, thereby pinpointing those customers who might be leaving ne5t 2educing customer defections by even a fraction has been proven to increase profits e5ponentially (urrently, companies are using sophisticated predictive technologies that compare like attributes of similar customers to delineate customers who are Blikely to churn,C and theyre simultaneously personali'ing tailored marketing interactions designed to motivate those customers to stay "he trouble with customer retention strategies is that, once youve identified customers who might leave, how do you keep themM Despite sophisticated churn prediction products, most companies still dont really know whether product giveaways and add4on perks6whose initial cost outlay often e5ceed the resulting revenue contribution6really result in profitability Will the cost of the free mobile phone be recouped in the customers service spendingM +ow often are customers continuing their digital cable subscriptions after the first I
Beha9ior %rediction Although not so much a marketing practice as a marketing enabler, behavior prediction helps marketing departments determine what customers are likely to do in the future 0sing sophisticated modeling and data mining techniues6well discuss some of these in more detail in Chapter 66behavior prediction uses historical customer behavior to foresee future behaviors "his analysis includes several variations: •
'ro%en"it&#to#!u& anal&"i"*
0nderstanding which products a particular customer is likely to
purchase •
5e-t "e6uential %urcha"e* Predicting what product or service a customer is likely to buy ne5t
•
'ro)uct affinit& anal&"i"* 0nderstanding which products will be purchased with other products Also
known as Bmarket basket analysis,C it can be viewed as e5amining products in a shoppers basket to understand possible product associations •
'rice ela"ticit& mo)eling an) )&namic %ricing* Determining the optimal price for a given product,
often for a given customer or customer segment $y understanding how a customer is likely to behave, a company can make a host of marketing decisions based on this knowledge, including these: •
Preemptively offering discounts or fee waivers to e5isting customers who are at risk of churning
•
2efining target marketing campaigns to smaller customer segments or specific products
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 22 •
•
Packaging certain products together and fi5ed4pricing them to sell more products and increase their profitability (ross4selling products likely to be purchased with other products
"he key to all this analysis, and especially to the actions that result, is knowing who your best customers are
Customer %ro"itabilit! and =alue #odeling (alculating overall customer profitability was nirvana for financial institutions in the late =>th century $ut it wasnt easy "hese businesses first had to understand the costs of their various products, then roll those products up to the account level, and then associate a single customer with multiple accounts and perhaps with a household "he e5tensive processing and detailed data reuired to calculate customer profitability combined with the high cost of speciali'ed profitability4modeling products kept it out of reach for even mid4 market banks until recently 7or the first time companies could uantify that price4sensitive customers6 those who bring in paper4thin margins6might never recoup their value, irrespective of their purchase volume, yet certain low4volume customers were nevertheless highly profitable $ut profitability is only a piece of the revenue pu''le A customer can be unprofitable but could have referred three high4value customers to your firm, thereby rendering himself very valuable Despite not being currently profitable, a recent college graduate shows several signs of emerging profitability and thus might be considered valuable over her lifetime Different companies in different industries will have different value metrics (ustomer value is a pregnant phrase, variously referring to a customers lifetime value <%"&?, potential value, or competitive value
Channel 2ptimi3ation "he goal of marketing automation is to offer the right message to the right customer at the right time With the advent of the !nternet, many firms are appending Bthrough the right channel,C to this ma5im . =arious banking ser9ice channels
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 2$
0nderstanding the channels through which specific customers prefer to interact with your company is only a slice of the pie 9our company must also decide how best to communicate with your customers Just because a valuable customer prefers making his deposits in the branch doesnt mean he wont demand comprehensive online statements (hannel management means optimi'ing a companys BinboundC channels with its BoutboundC means of customer interaction and knowing how to choose the best approach for each
%ersonali3ation Practically all of us have purchased something over the !nternet, be it books, large appliances, or a pi''a $ut have you ever noticed that sometimes one of those Web sites seems to be talking right to youM Personali'ation is the capability to customi'e customer communication based on knowledge preferences and behaviors at the time of interaction !t can take any of the following forms: •
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9ou log on to your favorite music Web site "he site greets you with B+i, Jill, welcome back We have some new picks for youC 9ou scroll down and see a variety of new (Ds youve had your eye on but have been too busy to browse through at the record store 9ou double4click on the cover of the new $eastie $oys anthology and listen to one of the cuts While channel4surfing, you come across a hedge trimmer being featured on a home shopping station 9ou know your wife would love it 9ou call to order it and the operator greets you by name and asks for the item number After confirming that the hedge trimmer can be sent overnight, she asks you whether youd like to use your &isa card 3he already has the number 9ou say yes
Although both of these e5amples are leveraging personali'ation, the first e5ample is personali'ation as most people know it: online messages tailored to a particular customer or customer segment 3uch tailored messages can involve anything from inserting the Web shoppers name into the message6 known as Bvariable insertionC6to using detailed customer data to personali'e Web site content 7or instance, a cosmetics e4tailer might want to promote de4fri''ing shampoo to shoppers in the humid southeast and a conditioner with 3P7 protection to shoppers in Palm 3prings *ore specifically, personali'ation technologies can tailor messages to individual customers, accessing current personal data each time the customer visits the site and using it to create custom content "hese technologies enable analysis of each customer over time and across all channels, using customer profile data, past purchases, clickstream data, and Web survey responses to determine, for instance, what product the customer is most likely to purchase ne5t or whether the customer is at4risk and thus deserving of a
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 2% discount offer to lure him back A personali'ed message reflecting the results of that analysis is then delivered in real time when the customer visits the Web site "he following two screens illustrate personali'ation functionality from the "eradata (2* product "he screen in Figure 2-7 depicts the te5t from a pending e4mail marketing campaign, along with a range of possible account balances !nstead of sending the same offer to all the banks prospects for this campaign, the campaign administrator can scale the offer according to the customers current account balance 0igure 7-?. Appl!ing %ersonali3ation Courtes! o" Teradata CR#/
Figure 2-8 shows the first screen as it would be seen by the prospect, having been Bfilled in,C with the actual offer "he prospect is proffered additional high4margin products, allowing the bank to ma5imi'e the opportunity for cross4selling 0igure 7-@. A personali3ed marketing message Courtes! o" Teradata CR#/
CRM Handbook, The: A Bsiness !ide to Csto"er Relationship Ma # 2&
Personali'ation technologies can apply their learnings6if the customer responded to a discount on skis, its likely shell be interested in cold4weather apparel6to future personali'ed messages, having proven improved response rates over time as the customers behavior data becomes ever more enriched "his removes the guesswork, resulting in a creeping understanding of customers and their preferences over that customers relationship with your company .nown as Badaptive personali'ation,C its a critical factor in making it as difficult as possible for your customer to switch to a competitor 7or e5ample, Winecom uses personali'ation to tailor uniue e4mail newsletters to certain customers based on past purchases Personali'ation in the $=( space is largely based on the analysis of a customers clickstreams, his navigation path through a companys Web site $y monitoring a customers clickstream, a company can see not only what a customer purchased but how the customer reached the site in the first place
(hanges to Web impressions
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