Building a business case for CRM - Company Brief · PDF fileBuilding a Business Case for CRM...
Transcript of Building a business case for CRM - Company Brief · PDF fileBuilding a Business Case for CRM...
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Building a Business Case for CRM
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Questions addressed in this presentation
• Why is Relationship Management important for business?
• Does every business need to invest into CRM?
• Do all business need to adopt similar approaches to implement CRM?
• What approach is to be taken while developing a business plan?
• How to plan for risks during the initiative?
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Relationship Management – Is it really a new concept?
• Human society operates within relationships
• Relationships are all around us– Parent – Child– Husband – wife– Among friends– Doctor – Patient– Seller – buyer
• Customer Relationships Management is NOT a new discipline
• Effective Customer Relationship Management is GOOD business
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Why relationships are key to long-term success
• Humans value relationships, they are attracted by a prospect of being in one
• Members can expect predictable behavior in a relationship
• Engagement parameters are known to all parties, therefore….
• It is easier to grow a relationship into different areas because of the developed trust
• Since relationships take energy to setup, people tend to consolidate their interactions with in a few relationships
• It is easier to maintain a relationship than to setup a new one. Members tend to be “locked-in”
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Focus on Relationships first – Before any systems
• Define the roles of the participants – Company, Customer Type A, Type B
• Strive to gain more than superficial knowledge of customers
• Proactive actions have greater value than reactive actions
• Build a partnership approach in resolving customer issues
• Cater for the evolution of the relationship to capture the Life-Time Value of the customer
These elements are as important to business relationships as they are to normal human relationships
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Why CRM is increasingly important in today’s Business
• The first wave of technology has helped many organizations to improve operational efficiencies
• Improving product quality and reduced margins have left little room for improvement of the product
• Today customers expect quality products and flawless operations
• Effective Customer Relationship Management (CRM) will be the next differentiator
• The new wave of technology is helping enable CRM strategies
• Businesses have to embrace CRM in order to survive in the 21st Century
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Business View of CRM
Business Cycle
CRMProcesses and Technology based on clearly articulated Strategy Marketing
• Market research• Customer Segmentation• Campaign Management• Channel evaluation
Sales• Sales force effectiveness•Opportunity, Account & Order Management• Product, Price and Contract negotiation
Service and Support• Billing and collection• Trouble analysis and resolution• Customer feedback on products and service
Product• Quality • Speed• Operational efficiency
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Functional view of CRM – The complete picture
Customer Interaction PlatformSales Force Enablement Contact Center Customer Service Direct Sales
Phone FAX E-mail Web WAP
Interactive C
RM
Transactional EngineCo-ordination, Personalization, Workflow
Management
Transactional C
RM
Customer Intelligence PlatformCustomer
SegmentationChannel
EvaluationCustomer Surveys
Campaign Management
Product Management
Customer Data
Enterprise Data
Analytical C
RM
Sales Force AutomationContact
ManagementAccount
ManagementOpportunity Management
Funnel Management Sales Forecasts
Sales Force Autom
ation
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CRM relevance quadrants – What businesses will benefit the most from CRM?
Competition – HighCustomer acquisition cost – LowCompany’s products portfolio – LargeCustomer sophistication – LowSupport requirements– Low
Competition – LowCustomer acquisition cost – HighCompany’s products portfolio – SmallCustomer sophistication – LowSupport requirements– Low
Competition – HighCustomer acquisition cost – HighCompany’s products portfolio – LargeCustomer sophistication – HighSupport requirements– High
Competition – LowCustomer acquisition cost – HighCompany’s products portfolio – SmallCustomer sophistication – HighSupport requirements – High
Little need for CRM Tactical CRM – Type A
Tactical CRM – Type B Strategic CRM
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Definition of CRM needs
CRM required for profitable growthAnalytical CRM and Sales Force Automation most appropriate
Little need for CRMShould focus more on operational efficiencies
CRM required as a matter of survivalNeed to adopt CRM through out the EnterpriseFull and strategic implementation should be sought
CRM required for profitable growthInteractive and Transactional CRM most appropriate
Little need for CRM Tactical CRM – Type A
Tactical CRM – Type B Strategic CRM
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Examples of businesses in each quadrant
Consumer products companiesCinemas and entertainment providers
MonopoliesUtilitiespetrol companies selling to individuals
Service providers in a unregulated environmentFinancial institutions with weak market positions
Service providers in a regulated or newly unregulated environmentFinancial institutions with strong market positions
Little need for CRM Tactical CRM – Type A
Tactical CRM – Type B Strategic CRM
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• Define appropriate approach and the desired time frame for implementation
• Estimate the expected benefits– Increase in revenue attributable to the system– Decrease in expenses / costs attributable to the system– Cost avoidance / intangible benefits
• Estimate the investment costs– Cost of the initial solution– Yearly maintenance and customization cost– Advertising and roll-out expense– Additional staffing requirements– Training and re-training needs
• Build sensitivity analysis into the plan– Net Present Value– Break-even point– What-if scenarios
Objective of a Business Plan
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Approach to a CRM Business Plan
• Review of business as usual (if no CRM is implemented)• Estimate of profitability after implementation of CRM• Determine Break-even point• Net Present Value (NPV) of the solution
Enterprise Profitability
Before After
Time
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• Transactional CRM– Increase in customer satisfaction by x%– Increase in sales due to personalization by x%– Reduction is costs due to efficient processing by x%
• Analytical CRM– Reduction in advertising costs by x%– Increase in return from campaigns by x%– Increased sales from new products by x%
• Interactive CRM– Increased sales from additional channels by x%– Reduction in cost per sales due to new channels by x%– Reduced costs in servicing customer service requests by x%
• Sales Force Automation– Increase revenue from existing customers by X%– Increase revenue per sales person by X%– Reduce cost of acquiring new customers by X%
Obtain forecasts for each of the expected benefits
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• Initial solution implementation cost– Analysis and detailed design cost– Software license cost– Hardware cost– Integration costs– Software customization costs
• User training and change management expense
• Hiring of additional staff for contact centre
• IT support staff hiring and training expense
• Budgeting for maintenance, upgrades and continuous customization
• Telecommunication costs
What will it cost?
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Determination of the NPV and IRR
• Net Present Value calculation based on the estimated benefits
Time
Net Profitability after CRM
Change in value after application of required discount rate
Net Present Value
i Internal Rate of Return (IRR) calculation
Time
Net Profitability after CRM
Discount rate which make the NPV equals to zero
Net Present Value = 0
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Build “What-if” Analysis
• Best case and worst case scenarios for CRM benefits
• Effect of changes in the “hurdle rate” and project acceptance criteria
• Effect of project over-run
Investment Returns
NPV % IRR
Worst Case Best Case
Project Parameters
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Evaluate intangible benefits
• Increased customer loyalty and satisfaction
• Greater management focus on customer
• Review of business process to match the strategy
• Automating previously manual processes
• New training opportunities for the employees
• Improved quality of information available to management
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Reduce the risk of failure through effective planning
• Do not limit the scope to one functional group such as customer service, marketing, or sales
• Effective CRM is not cheap. The budget allocated must be consistent with the expected benefits
• Select technology which is aligned to the organisational skills
• Select technology which is scalable, flexible and robust
• Plan for benefit measurement and evaluation “before and after”
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And do not forget the people who will use the system
• Seek an executive champion of the project before embarking
• People resist change and tend to protect their domains
• Users are not fully committed to the idea of CRM and its benefits
• Lack of acceptance of the system because it is considered someone else’s “baby”
• The usage of the system adds to the current work-load without evident benefits
PLAN FOR A CHANGE MANAGEMENT INITIATIVE FOR THE SUCCESS OF THE PROGRAM