how to hug your customers… and …get value with every squeeze! bob thompson ceo, customerthink...

How to Hug Your Customers…and

…Get Value with Every Squeeze!

Bob ThompsonCEO, CustomerThink Corporation

Founder, CRMGuru.com

Copyright 2004 CustomerThink Corporation. All Rights Reserved.

SMART CRM Conference

San FranciscoJune 16, 2004

How to Hug Your Customers, and Get Value with Every Squeeze Copyright 2004 CustomerThink Corporation. All Rights Reserved.

Topics

Strategy

Hugging

Squeezing

Technology


When did CRM really begin?


“Please divert your course 15 degrees to the north to avoid a collision.”

“This is the captain of a U.S. Navy ship. Divert your course immediately!”

“This is the aircraft carrier USS Nimitz, accompanied by three destroyers. I demand that you change your course 15 degrees north or counter measures will be taken.”

“This is a lighthouse. It’s your call.”

“Recommend you divert YOUR course 15 degrees to the south.”“No, I say again, divert YOUR course to the south.”

Radio conversation between a US naval ship and Canadian authorities

off the coast of Newfoundland, October 1995.


Strategy

Power Shift to Customers


Maturing markets

Global trade

Efficient manufacturing

The Internet

Competing for (Relatively) Scarce Customers


J.D. Power 2004 Initial Quality Study

Top 10 Manufacturers– Problems per 100 Cars


“Be Distinct or Be Extinct”Tom Peters

Source: The Discipline of Market Leaders, Treacy & Wiersema

Product Leadership

Operational Excellence

Customer Intimacy


“It’s incredibly arrogant for a company to believe it can deliver the same sort of product that its rivals do and actually do better for very long. That’s especially true today, when the flow of information and capital is incredibly fast.”

Michael Porter

Beyond Product and PriceProduct and Price Aren’t Enough


Major Increase 32%

Some Increase 42%

No Change 20%

Some Decline 3%

Major Decline 1%

No Opinion 2%

Source: CRMGuru Online Survey, 1300 Responses, July 2003

74%

4%

Competitive pressures are increasing…


Major Increase 14%

Some Increase 51%

No Change 26%

Some Decline 5%

Major Decline 1%

No Opinion 3%


65%

6%

…as product lines get more complex


Acquire, grow, and retain profitable customer relationships to create a

sustainable competitive advantage.

CRM Vision

CRM Vision


CRM is Not New…Or is It?

"The true business of every company is to make and keep

customers.” -- Peter Drucker

What is CRM? 360-degree view of the

customer

Improving quality of customer interaction

New software tools and technologies

Getting right data to right employee

Shift from product to customer orientation

Management fad!

Source: META Group/IMT Strategies

“CRM means creating mutual wins for customers and all company stakeholders.” -- Bob Thompson


CRMGuru Study: What is CRM?

“Putting customers at the heart of business”

36% 34%

Sources: CRMGuru Online Surveys: July 2003 and June 2004

“Relationship marketing supported by technology”

16% 15%

“Business strategy to increase customer profitability”

16% 19%“Creating win/win relationships with customers & stakeholders”

23% 23%

“Automation of customer business processes”

9% 7%


Hugging

What Value Are You Delivering to Your

Customers?


Video: The Birth of the Modern Consumer


How Do Customers Define a Great Relationship?

“Service and value just for me”

“Personal”

“Responsive and proactive”

“Win/Win”

“Asks questions”

“A good deal for the money”

“Quality, consistent performance over time”

“Expertise”

“A history of working together”

“Easy to do business with”

Source: CRMGuru.com


Service Matters! Identifying At-Risk Customers Analyze purchase data Use frontline staff to gather

feedback Conduct customer research

surveys Analyze A/R problems Use churn models / technology Monitor milestones / events

Source: Griffin

Product Problem

14%

Other9%Competition

9%

Service problems

68%

Why Customers Leave

Source: Cooley


We tend to focus on conscious processes…

Consumers Marketers

Conscious Processes


Unconscious Processes

…but 95% of thought, emotion, and learning occur in the unconscious mind

Consumers Marketers

Conscious Processes

Source: “How Customers Think” by Zaltman


LEFT BRAIN

Thinking

uses logic

detail oriented

facts rule

words and language

present and past

math and science

can comprehend

knowing

acknowledges

order/pattern perception

knows object name

reality based

forms strategies

practical

safe

RIGHT BRAIN

Feelinguses feeling

"big picture" oriented

imagination rules

symbols and images

present and future

philosophy & religion

can "get it" (i.e. meaning)

believing

appreciates

spatial perception

knows object function

fantasy based

presents possibilities

impetuous

risk taking

How do your customers feel about the solution and services you provide?


Relationship Health IndicatorSmall Professional Services Firm

LEFT BRAIN

Thinking

Breadth of services used

Tenure as customer

Financial health

Average contract size

Uses custom services

Pays on time

RIGHT BRAIN

Feeling

Asks for advice

Freely gives input and complaints

Face-to-face meetings

Invited to customer events

Gives an endorsement

Friendly


Loyalty Leaders Grow Faster, Spend Less

Average LoyaltyLeader

100%85%

0

50

100

150

200

250%

Costs

Average LoyaltyLeader

100%

220%

0

50

100

150

200

250%

Growth

Source: Reichheld


Southwest’s Performance is Not Accidental

Source: Preliminary Findings from Bristol Group and CRMGuru study of Customer Relationship Quality, October 2003

Global Study of Customer Relationship Quality


Customer Satisfaction Trends -- Airlines

Source: American Customer Satisfaction Index

50

55

60

65

70

75

80

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Southwest

Continental

Delta

Industry Average

American

Northwest

United

US Air


Satisfaction matters…sort of

Source: American Customer Satisfaction Index


Metrics: Keep it simple…


Would you recommend your airline?


Why does AOL need to do this?


To fill the leaky customer bucket!


Enterprise Rent-A-CarSuperior Service, Superior Profits

LowestRegionTop Box

CorporateTop Box

CorporateTop 2 Box

FY 95 FY96 FY97 FY98 FY99 FY00 FY 0150

60

70

80

90

100%

8889 90 90

92 93 93

68 6972 72

7577 77

5558

65 65

70 71 71

“At Enterprise, loyalty is everything. If we don’t satisfy customers so that they come back, we can’t build the business.”

Andy Taylor, CEO Enterprise Rent-A-Car

Satisfaction Trends

Source: Reichheld


Main grocery shop ?

Daily top up ?

Eat now ?

Eat later ?

Fill up the car ?

Buy a TV ?

© Copyright, dunnhumby 2004 — confidential

Tesco: “You are what you eat”

© Copyright, dunnhumby 2004


I have to stick to a budget

The microwave is a godsend for me!

I love baking on a Sunday afternoon

I love exotic and adventurous food

I care about the environment

© Copyright,dunnhumby 2003© Copyright, dunnhumby 2004 — confidential

Shopping data leads to greater insight of key customer groups



... making data make sense ...

Pricing/ promotion Strategy

Format Development

Local Store Research

Customer Acquisition

Shopping Analysis

Targeted Communication

Personal Relationships

Better RangingMedia Effectiveness

Data & systems management

Customer Insight


At Tesco, the “R” in CRM stands forRELEVANCE


Listen! Profitable CRM Projects Start by Understanding Customer Needs

“If you’re constantly getting feedback from your customers …and you’re willing to listen, you can make the most of the opportunities implicit in those needs.”

Michael Dell, in Direct From Dell

“Businesses survive or decline based on their employees’ ability to listen. Hire the smartest, best people you can get, orient them to customer satisfaction at the expense of all else, then get out of their way and let them work.”

Doug Allred, SVP Customer Advocacy for Cisco Systems


Squeezing

What’s the Return on Your Customers?


Does CRM Really Work?

What is the CRM success rate?

Which factors drive success?

What is a realistic payback period?

Do actual benefits meet expectations?

Which applications generate the best

ROI?


Global study of CRM projects Benefits (Pct of Projects)

Increase customer

satisfaction (51%)

Increase customer

acquisition rate (50%)

Increase share of

customer (48%)

Decrease customer

defection rate (37%)

Decrease front office

staffing costs (33%)

Investment 33% -- less than $50K

24% -- $50K - $250K

28% -- $250K to $2.5M

15% -- over $2.5M

Source: CRMGuru Study of 448 CRM Projects, 2002


Two-Thirds of CRM Projects Deliver ROI(www.crmguru.com/blueprint)

Metrics Churn Rate

Share of Wallet

Customer Satisfaction

Customer Acquisition Rate

Front Office Staffing Costs



51% Achieved Payback in 18 Months or Less

Don’t KnowMore than 24

months

Less than 6 months

6 to 12 months

13 to 18 months

19 to 24 Months



Four Factors Drive 72% of Success Customer-centric strategy: using

customer satisfaction and

attrition data, getting customers

involved in planning

Frontline training and support:

explaining value of CRM,

providing new skills training

Organizational change: workflow

design, changing roles and

responsibilities

Goals measured statistically: current

performance and CRM goals

measured



Potential CRM benefits are strategic…

0 20 40 60 80 100 120 140 160 180 200

Decrease costs andexpenses

Enhance executivedecision making

Improve internalproductivity

Increase customersegment profitability

Increase salesrevenue

Gain competitiveadvantage

Improve loyalty /reduce churn

#1 Benefit #2 Benefit #3 Benefit

Source: CRMGuru Study of CRM projects, 2004


…but actual benefits are more tactical

- 50 100 150 200 250 300

Increased customersegment profitability

Improved loyalty /reduced churn

Gained competitiveadvantage

Decreased costsand expenses

Increased salesrevenue

Enhanced executivedecision making

Improved internalproductivity

Major Moderate Minor



CRM underperforms on strategic benefits

0 5 10 15 20 25

Percentage of Total Responses

Decrease costs andexpenses

Enhance executivedecision making

Improve internalproductivity

Increase customersegment profitability

Increase salesrevenue

Gain competitiveadvantage

Improve loyalty /reduce churn

Potential

Actual



Success is in the Eye of the Beholder

Yes67%

No17%

Don’t Know16%

17% 26% 19%

14% 34% 29%

17% 46% 33%

19% 42% 36%

0% 20% 40% 60% 80% 100%

Percent of Responses (Exclude Don't Know or N/A)

Partners

Customers

Employees

Management

Failure (0-4) Troubled (5-7) Success (8-10)

Is your CRM project a Success?



Sales applications drive a higher percentage of “major” performance improvements

13%

10%

23%

9%

14%

13%

14%

15%

21%

27%

12%

20%

11%

10%

19%

2%

28%

12%

21%

16%

9%

Marketing Sales Service

Increased CustomerSegment Profitability

Improved Loyalty /Reduced Churn

Enhanced ExecutiveDecision Making

Decreased Costs andExpenses

Improved InternalProductivity

Increased SalesRevenue

Gained CompetitveAdvantage



ConclusionsBased on ROI and perceptions, the overall CRM

success rate is about 70%

To improve ROI, focus on customer needs,

organization issues, and appropriate metrics

Strategic gains (loyalty, growth, profitability) lag

behind tactical benefits (productivity, cost)

Sustainable competitive advantage probably comes

with larger or riskier projects


Technology

Does CRM IT Matter?


If you had an unlimited budget to buy all this…


…could you build these?

Guggenheim MuseumNew York City

FallingwaterPennsylvania

Unity Temple


Information Technology: Necessary but Not Sufficient for CRM Success

Necessary: A condition which must hold

for a result to be true, but which does

not guarantee it to be true.

Sufficient: A condition which, if true,

guarantees that a result is also true.

(However, the result may also be true if

the condition is not met.)


CRM spending is trending up

Major Increase 19%

Some Increase 51%

No Change 19%

Some Decline 4%

Major Decline 1%

No Opinion 6%


70%

5%


For competitive advantage, be a first-mover to solve more complex problems

CRM Maturity

Po

ten

tial

Co

mp

etit

ive

Ad

van

tag

e

Low High

Automate

Streamline internal sales and service processes.

More of the same, done faster and cheaper.

SFA, Call Center

Single Channel

Collaborate

Engage customers and partners for win/win/win

Enable many-to-many relationship networks

C-Biz Solutions

CollaborativeNetwork

Innovate

Design different, more effective processes

Use new channels and customer touch points

eCRM, PRM

Multi- Channel

High


“The Internet as a sales channel represents only a fraction of its potential to business. The real

potential lies in its ability to transform relationships with the traditional supplier-vendor-customer chain.”

Michael Dell


Transform your customers’ supply chain from linear point-to-point relationships…

Supplier Partner CustomerManufacturer

CRM PRM CRM

Relationship Management: “Sell-Side” Focus on Lifetime Value, Customer Experience, Revenue/Profit Growth

SCMSCM SCM

Supplier Management: “Buy-Side” Focus on Cost, Cycle Time, Responsiveness


…to optimized value networks

Suppliers Customer

Manufacturer

Partners

Collaborative Relationships: Focus on Mutual Value, Profit, Efficiency, Integrated Processes

GlobalCompetition

Power Shift to Customers

InternetAdoption

Internet StandardsWeb Services


Virtual Extended Enterprise

Cisco Systems 87% of Orders Placed

Online

25% Increase in Customer Satisfaction

70% reduction in order cycle time

$175M savings in annual operating costs

45% inventory reduction for Cisco and its partners

Source: IBM


Closing Thoughts


It’s a great time for CRM technology buyers!

CRM’s reputation is a mixture of hope, hype,

and confusion

Executives are investing in smaller, more

focused projects with clear ROI

Growing awareness of CRM fundamentals

(software is an enabling tool)

CRM software industry is restructuring to meet

the requirements of post-CRM boom


Management and people issues outweigh technology challenges

0% 10% 20% 30% 40% 50% 60%

Other

Selecting service providers

Selecting software vendors

Training end users

Executive buy-in

Understanding IT trends

Integration to legacy apps

Customer data bases

Process redesign

Customer-based metrics

Organization change

Strategy and planning

ManagementPeopleTechnology


When CRM Doesn’t Work, Why Not?

It’s not about Customers

• Ensure customers will perceive value

It’s not about Relationships

• Relationships are two-way streets

It’s not about Management

• You can’t manage what you don’t measure


Pogo by Walt Kelly, from Earth Day 1971

We Have Met the Enemy and

He is Us


A “Smart” Way to Succeed with CRMStrategy for Customer Value

Metrics to Guide Journey

Alignment of Human Resources

Redesign of Customer Processes

Technology to Optimize Results

Drivers

En

ablers


What’s the “One Thing” That is Distinctive about Your Customer Relationships?

The Secret to Strategic CRM Success


Thank You!Bob Thompson

CEO, CustomerThink CorpFounder, CRMGuru.com

1261 Cortez Ave.Burlingame, California 94010

United [email protected]

650-343-8529

how to hug your customers… and …get value with every squeeze! bob thompson ceo, customerthink...

Documents

squeeze copyright

scarce customers

price product

major decline

sort of product

major increase14

major increase32

strategy power shift