CRM ROI for Automative industry_Group2 _Final

CRM ROI for Automotive industryPresented by-

Group2Arun Narayan(U109011)Ashish Sharma(U109012)

Hemant Sharma(U109067)Priyabrata Das(U109077)

Rohan Das(U109083)Karan Kunal(U109023)

Deepak Dugar(U109064)

Introduction

Industry Features

• One of the Biggest and Oldest Industries in the world • Very peculiar in its value chain • OEM doesn’t interact with customer directly• Main customers for OEM are the dealers• Dealers are the point of contact between customer

and brand• Downstream supply chain works on push based

strategy

Indian Auto Industry

• 9th Largest in the world• 2.8 Million units production in 2009• Involved in end to end spectrum of auto industry

value chain • 4th largest exporter of automobiles • Passenger car, motorcycle segment and Commercial

vehicle growing by 8, 9 and 5.2% respectively

Pain Areas

Decreased Sales, Market Share

Lack of Multichannel Capabilities

Lack of Dealer Collaboration

Inefficient Demand Planning and High IT Cost

Lack of Effective Information Sharing

Need for complex data governance requirements

CRM is an enabler…

• Increase revenue and cut costs • Customer retention by increased brand affiliation • Understand demand segmentation and convert

pre sales interaction into final purchase • Interactive colloboration with the dealers • From ‘Push’ to ‘built to order’ service philosophy• CRM a source of competitive advantage

CRM Functions in Auto Sector

Leads Generatio

n

•Targeted Campaigns

•Registering Customer preferences

•Using the corporate standards for customer interactions

After Sales Relationship and Customer

Service

•Regular interactions with the Customer

•Providing the customer service

Supplier

Relationshi

p Manageme

nt

•Tracking the vehicle delivery from supplier to stock

TATA Motors

Reasons for Implementation

Ranked Low in customer Satisfaction

Poor Sales Satisfaction felt by the customers

Challenge of integrating all the 1600 dealerships

Not able to manage the customer information properly

TATA Motors

TATA Motors

Reasons for CRM

• Ranked Low in customer Satisfaction

• Poor Sales Satisfaction felt by the customers

• Inefficient Information sharing

• Lack of proper demand planning

• Renewed focus on customer service

Challenges

• Centralized database • Standardized business

processes• Communicate better with

1600 dealer locations and 10000 users

• Respond promptly to customer requests

• Better feedback on product quality

• Effective measurement of campaigns and programs

Why Siebel and how it helped

• Custom fit with Tata motors existing systems

• Ease of integration with back end ERP system

• Has multi organization support

• Deployed easily over internet

• Robust Partner management capabilities Benefits

• Costs reduction• Improved workflow• Increased Revenue

Hero Honda

• Largest 2 wheeler manufacturer in India

• Holds 50% market share in 2 wheeler segment

• Sales volume grew by 400% in just 6 years

• Sells more than 3 million motorcyles in India

• Supplies motorcycles through more than 500 dealers

• Renders service through more than 700 service points

• Has 240 suppliers for its parts and sub assemblies

Hero Honda

Challenges Proprietary Portal provided no transactions, only information

Synchronize all the dealers work station for efficient streamlined information flow

Robust Feedback mechanism to provide information at the right time.

Solution and Services

Implemented mySAP CRM solution

Was a custom fit as it was able to talk with the existing SAP ERP systems

Benefits •Improved accuracy of deliveries from 98% to 100%

•Better Responsiveness to Customer Charges

•Inventory savings of 10%, transaction costs reduced

Issues & Benefits

Problems faced before CRM implementation

• Exorbitant Costs• Inadequate Focus on Objectives• Insufficient Resources• Inappropriate Metrics• Complex Systems• No Customer Focus• Slow Returns

• Increase revenue and cut costs across the value chain.

• Formulation of successful marketing strategies for future growth.

• Retain the customer by increased Brand affiliation and hence loyalty.

• Understand demand segmentation and convert pre sales interaction into final purchase.

• More collaboration with dealers important link between brand and consumer.

Benefits of CRM in Auto Industry

Benefits of CRM in AutoIndustry

• Enabling collaborative customer centric business.

• Path from push manufacturing model towards built-to-order service philosophy.

• With increasing competition and low margins, better CRM is turning out to be source of competitive advantage.

• Better and customized service means reduced incentives for customer.

The Metrics

CRM Metrics The Right Questions

•Common Mistake : Customer Service Performance KPI are based on the quantifiable rather than the true level of satisfaction of the Customer

• New KPI should more accurately reflect whether or not the Customer actually feels that they've received a level of service that meets their needs.

• "Are you satisfied with the responses to your queries?" •"Were your questions answered adequately and professionally?" •"Is there anything else we can help you with today?”

CRM Metrics The Focus Areas

Customer Relationship

Product Knowledge

Customer Profitability

Customer Profiling

Customer Value

Customer Conversion

Customer Loyalty

CRM Metrics Into the nitty-gritty

Marketing metrics

• New customer retention rates• Number of responses by campaign• Number of purchases by campaign• Revenue generated by campaign• Cost per interaction by campaign• Number of new customers acquired by campaign• Customer retention rate• Number of new leads by product• Number of customer referrals


Sales metrics

• Number of prospects• Number of new customers• Number of retained customers• Number of open opportunities• Close rate• Renewal rate• Number of sales calls• Number of sales call per opportunity• Amount of new revenue• Amount of recurring revenue• Time to close by channel• Margin• Sales stage duration• Sales cycle duration• Number of sales calls made• Number of proposals given• Competitive knockouts


Service metrics

• Cases closed same day• Number of cases handled by agent• Number of service calls• Average number of service requests by type• Average time to resolution• Average number of service calls per day• Percentage compliance with service-level agreement (SLA)• Percentage of service renewals• Customer satisfaction level• Complaint time-to-resolution• Propensity for customer defection

CRM Metrics The Auto Industry

5 Key Retail CRM Measurements

Customers contacted

Appointments

Shows

Sales

Profits


8 primary retail CRM process categories

Incoming showroom

visitors

Incoming sales calls

Incoming internet leads

Incoming service

enquires

Outbound unsold follow

up

Outbound sold follow up

Outbound prospecting

contacts

Outbound Service follow

up


Outbound sold follow up sub categories (examples)

Lease renewal Retail retention

Sold customer referral mining

Sold customer new model

introduction


Inbound service sub categories (examples)

Service drive walk-ins

Incoming service calls

Online service enquires


Outbound service sub categories(examples)

Completed RO follow up and

Service RemindersSpecial order parts Recall appointment

contactsUnsold additional

needed repairs

Unsold additional needed

maintenance

Unsold service contact follow up /

prospecting

Lost service customer recovery

Service marketing / prospecting

New vehicles sales-to-service transition

Used vehicles sales-to-service

transition

RISKS

“All large gains arise from a bet against poor odds” Paul Strassman

“80% of sales and marketing automation projects will meet or exceed expectations provided that expectations are defined up front and you do your homework first” Barton Goldenberg

RISKS

Assessing the impact of risk shows how to ‘do your homework first’ to minimise risk and gives four techniques to quantify the impact of risk on the business case.Strategy/process consulting: initial cost (try to negotiate on a success fee basis to share risk?) plus budget for more process improvements after the pilot and after rollout.Configuration, interfaces and installation: initial cost (try to negotiate on a success fee basis to share risk) plus budget for more configuration and interface work both after the pilot and after rollout.Productivity lag is the cost of the time spent by your staff being trained, understanding the system, changing the way they do things and ascending the learning curve. A particular risk is that sales staff spend time providing informal support to other users, configuring the system etc. The costs will be a mixture of reduced administrative efficiency (overtime payments) and possible reductions or delays in achieving forecast sales.

Risk Identification and Risk Quantification are sometimes combined and called Risk Assessment or Risk Analysis. Risk Response Development is also known as Risk Mitigation. Risk Response Development and Risk Response Control are sometimes combined and called Risk Management.

Identifying and Managing Risks

Eight errors, which have caused most of the failures in sales, marketing or customer service systems projects undertaken to date:1. The system users2. The processes3. Speed of change4. Politics and vested interests5. Mobile systems6. Over-reliance on unproven CRM project methodologies7. The need for rework8. Inadequate funding

Risks come and go; for each one that goes there will be another two waiting to take its place. Therefore risk management has to be ongoing and contingency plans in place.

Quantifying the impact of risk and intangibles

To get a better fix on the impact of intangibles, here are four techniques that work and are easy to understand:Analyse the costs and benefits twice: using the most optimistic/most pessimistic estimates in turn. The aim here is to identify how sensitive the cost benefit analysis is to your assumptions on the monetary value of, for example, improved customer loyalty. Use probability theory to estimate the expected value of costs and benefits: If you are unsure about the extent of future costs and benefits but a number of possible outcomes are likely, you can use probability theory to calculate their value on a weighted average basis.Identify the cost of achieving the intangible benefits: This method works back from the known costs and benefits to identify the residual level of cost that can not be justified by the quantified benefits.Use a high cost of capital to compensate for risk: This is the least preferable method. The argument goes that the cost of capital for a project should take account of inflation and the risk premium required by investors.

Risk Management Strategies

A number of alternative strategies are available when planning risk responses, These are:1. Avoidance — seeking to eliminate uncertainty.2. Transfer — seeking to transfer ownership and/or liability to

a third party.3. Mitigate — seeking to reduce the size of the risk exposure

below an acceptable threshold.4. Accept — recognizing residual risks and devising responses

to control or monitor them.

Comparing different Packages

ROI !!

•A cheaper way to waste time than making long distance calls – at work!•What makes it cumbersome- challenges?

• Enterprise Wide Impact• Effects both revenue & costs – at many profit and cost

centers• Often strategic impetus than tactical• It gets you Competitive Advantage- that’s intangible• Faster decision making, one point info – Hard to

quantify• Timeframe for assessment? – Perpetual Annuity

Framework to assess ROI

•Return ÷ Investment %•INVESTMENT • Calculating Total Cost of Ownership (TCO)• One time costs – Software license, hardware, system

integration, training, change management costs, etc• Ongoing costs - AMC, ongoing training, consultant

charges, license renewal fees, etc.

• GARTNER SAYS : A majority of businesses are going to underestimate the costs of CRM by as much as 40-75 %

Returns

•Defining METRICS for measurable returns• Set feasible goals and KPIs• Classify returns – break it down to granular KPI levels

•Say• Revenue Enhancements• Margin Enhancements• Cost reductions (remember this is different from cost)• Time gain and thus labor hours and money saved• Other benefits

A Closer look at Returns

•Revenue Enhancements• Increase in Sales (sales, revenue/sale, inc. in close rates,

enhanced productivity, etc)• Improved Customer retention (red. In lost customers,

increase in re-order percentages)• Increased cross selling (no of products sold across product

lines/customer)• Less stock outs ( Calculate reduced loss due to immediate

ordering or calc lead time decrease * revenue saved per day)•Margin Enhancements

• Upsell more profitable models (analytics, customer pref. directed sales pitch)


•Cost Reductions• Reduced customer acquisition costs• Decrease in cost of sales

•Decreased cost to Retain and Serve customers, including:• Red. In Customer Service Representatives (CSRs)• Due to web interface, streamlines work flows, less call

times• Reduced telecommunications costs ((sales force using

web interface vs. long-distance faxes)• Fewer penalties due to more accurate servicing ( less

invoice inaccuracies, less fines)


•Other benefits• Improved brand equity

Can this be measured? May be increase in repurchase rates, referral programs can help measure this.

• Increased channel partner satisfaction Measure it through surveys, correlate changed perception

with business impactConvert business impact to measurable KPI based $$ impact !!

• Superior Market Intelligence Better forecasts thus better production and inventory planningNot all cost savings can be attributed to this but a part

• Product Development supportReduced number of pilot tests

A daunting task indeed !

•For analyzing returns, • Detailed Benchmarking• Determine TCO – OTC and Ongoing Costs • Have measurable feasible business goals in mind• Derive KPIs based on the 4 domains discussed for Returns –

• Yet, just a breather for the Consultant – CIO Cartel for the Green Signal !!

Where do CRM packages differ?

•No of user licenses in basic vs. Premium plans (renewal plans), AMC•On Demand OR On-premise•Infrastructure Requirements and costs thus•Consultancy charges•Adaptability to the business requirements ( additional modules needed or additional support needed?) - SUITABLE•Scalability? •Flexibility and obviously Fitness !

The Figures

ROI

Although the purpose of CRM is to form lasting relationships with customers, it's sometimes easy to lose sight of the fact that our focus on the relationship is meant for the purpose of making more money.

The goal of CRM - is to sell more and more vehicles at an overall lower operating expense.

ROI is all that matters in any type of marketing. In the end that is what CRM is: a form of marketing.Whatever the goals for CRM, the return on investment is the primary driver.John Wanamaker said it best- I know that half my marketing is wasted, I just don't know which half. Using a well executed CRM system, one will know which half, and be able to do more with the customers. This action is associated with the system and the sales and service team.

The latest study by IDC shows CRM projects yielding animmediate increase of 8% in revenuesa target growth of 16% within two yearsThis is for large projects with avg investment of 3.1million undertaken by large companies in Western Europe and US.

This minority saw – revenue increases of up to 42%sales costs decreases of as much as 35%sell cycle length reductions of 25%margin improvements of 2%customer satisfaction rating increases of as much as 20%

Some typical hard costs for small, medium and large automobile cos

A case example - AUDI

Audi’s emblem of four rings signifies one of Germany’s oldest established automobile manu-facturers.Founded by engineering visionary August Horch in 1909, the Audi name originated by translating Horch’s name, which means ‘listen’ in German, into Latin, ‘Audi’ (audio).With a commitment to implementing progressive technology,Audi became a globally respected producer of automobiles, most recently in the luxury sector.Today, Audi remains focused on satisfying customer needs by building a brand that exemplifies individuality, exclusivity and excellence.

AUDI

Audi believed redefining the customer experience through Customer Relationship Management(CRM) would unlock customer retention.

In 1999, the Board of Directors declared CRM an organizational core competency in order to develop the infrastructure needed to enhance marketing, sales and service across customer touchpoints.

Audi set out to build a central customer database and a plan to act on that data to spark the interactions required to meet customers’ needs.

Central to the plan was mySAP CRM, launched in April 2002.By using mySAP CRM to stimulate customer loyalty,Audi expects a 22% Internal Rate of Return (IRR) on its mySAP CRM investment

The ROI of CRM (AUDI)Measurable gains in the form of increased revenue contribution and improved productivity constituted the bulk of Audi’s return on its mySAP CRM investment.

While Audi launched mySAP CRM in 2002,benefits have been calculated starting in 2003 to allow for employee acclimatization to new processes and technology.

From this point, Audi had an IRR of 22% through 2005. The IRR is based on a net operating benefit of €9.5 million on a technology investment of approximately €4.5 million.

Audi’s mySAP CRM technology investment includes hardware, license fees, software, training and consulting services.

Audi’s annual operating costs, averaging approx-imately €1.4 million, stem from the ongoing hosting fees payable to a third-party hosting company.

Major Benefits from CRM Implementation

Benefits from CRM - QuantifiedIncreased contribution from more targeted lead generationUsing mySAP CRM to generate more targeted direct marketing campaigns,Audi is developing more qualified leads for dealers to cultivate. Audi anticipates this lead generation effort will result in a contribution of over €2.3million through 2005.

Cost-savings from retired legacy systemsBy replacing itscomplaint handling system with mySAP CRM,Audi was able to save costs of €400,000.

Productivity improvements from process optimizationSince the implementation of mySAP CRM, customer care representatives can access customer profiles that enable a more efficient interaction when responding to a customer inquiry. These process improvements will generate over €10 million through 2005.

Contribution from increased loyaltyWith the current functionality enabled by mySAP CRM, combined with future plans for dealer integration and global rollout, Audi calculates over €3.3 million increase in contribution through 2005, realizedaccording to the market situation.

CRM ROI for Automative industry_Group2 _Final

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