CustomerRelationshipManagement

--AWinningCustomerStrategySeminarpresentationApril2004AgendaCustomerRelationshipManagementPresentation 8:00-9:15Break 9:15-9:30Case1–SanFabianSupplyCompany 9:30-10:30Case2–SoloMobilePhoneCompany 10:30-12:00Page2?SiemensICMMP;April2004;ConfidentialWhatisCRMinyourmind?Whatiscustomerrelationshipmanagement?WhatdoesCRMbringtocompanies?AsurveyonseniormarketingexecutivesatFortune1000companiesindicatesawidespreadfrustrationaboutthereturnonCRMinvestmentsCRMinnotatechnologyterm,butinstead,astrategydrivenholisticmanagementapproachSource:BoozAllenHamiltonSurvey,2001Page3?SiemensICMMP;April2004;ConfidentialCRMisacustomer-andvalue-basedmanagementapproachtoincreasethecompanyvalueCustomerRelationshipManagementisa

customer-andvalue-basedcompanyorientation

withthegoalofbuildingupandfullybenefitingfrom

lastingandprofitablecustomerrelationships

throughholisticandindividualized

marketing,salesandserviceconcepts

usingstate-of-the-arttechnologiesCRMdefinitionIdentifyingthetopcustomersandexploitingthemaximumshareoftheirexpensebudgetsRaisingtheefficiencyofcustomermanagementEstablishingcustomerloyaltyand"lifetime"relationshipsFullyexploitingthepotentialcustomersegmentsbyacquiringnewcustomers

Therebyincreasing

thecompanyvalueCRMobjectivesPage4?SiemensICMMP;April2004;ConfidentialCustomerRelationshipManagementdiffersfromclassicalmarketinginmanywaysTraditionalmarketingCustomerrelationshipmanagementObjectivesGeneratesalesCreatealoyalcustomerFocusAcquisitionphaseTotalcustomerlife-cycleTimeframeShorttermMediumtolongtermPerformanceindicatorsMarketshare,salesShareofwallet,customerprofitability,customervalueCustomerknowledgeDemandsfromcustomersegmentsIndividualpreferencesandneedsProductStand-aloneproductIntegrationofproductsandservicesPriceGeneraldiscountsPricedifferentiationonthebasisofcustomerloyaltySaleschannelsTraditionalsaleschannels(multi-level)"Disintermediation",multichannelmanagementCommunicationUnidirectionalcommunicationInteractivedialogwithcustomersandcommunities,

24hrs./7dayavailabilityPage5?SiemensICMMP;April2004;ConfidentialCRMistheholisticapproachtoacustomer-valuebasedcompanyorientation–fourenablerssetuptheframe...CreateGainUnderstandRetainORGANIZATIONSTRATEGYCULTURECRM-StrategyHolisticapproach/

top-managementissueDefinitionoftargetsegmentsandcustomersValue-basedprioritizationOrganizationandprocessesCustomer-orientedstructuresandprocessesCustomerprocess/touchpointinnovationOrganizationalanchoring

oftheCRMresponsibilityTECHNOLOGYTechnologySystemintegrationUseofe-technologiesSelectionofsystem/technologypartnersCulture

andchangemanagementConsolidatingthecustomervalueorientationManagementprocessesandincentivesystemsContinuouschangemanagementandimprovementprocessesCustomervalueCRMenablersPage6?SiemensICMMP;April2004;ConfidentialCRMcreateslastingstrategiccompetitiveadvantages"Understand"marketsandcustomers"Create"superiorcustomeroffers"Retain"profitablecustomers"Gain"profitablecustomersBuildingupsuperiorcustomerknowledge

Identifyingtargetsegmentsanddeveloping

targetcustomerspecificmarketing,

salesandserviceconcepts

Focusingonthehighest-value

customersRaisingtheentrybarriersfor

competitorsbybuildingup

lastingrelationshipswiththe

customers

Developinga"learningrelationship"

inlong-termcustomerrelationshipsRaisingtheentrybarriersforcompetitorsthroughspecificproductandserviceoffersHighercompetitivebarriersbycoveringallsaleschannels

Loweringconflictpotentialthrough

theproactiveintegrationofthe

variouschannelsRaisingcustomers'costsofchangingsuppliersbycovering

allneedsCreateGainUnderstandRetainORGANIZATIONSTRATEGYCULTURETECHNOLOGYCustomervaluePage7?SiemensICMMP;April2004;ConfidentialMarketing-Mixarecoreelementsofcustomerrelationship

strategyMarketing-MixTargetMarketproductplacepricepromotionMarketing-Mixprovidesadecision-makingmethodfordecidinghow

tomanagethecustomerrelationshipDifferentiatedproducttargetingdifferentcustomersegmentProductcustomization:design,function,packagingServicelevelPricestrategy:e.g.chargepricepremiumforvaluablecustomersegmentPaymenttermsSpecialdiscountsSelectofMarketingCommunicationvehicletobetterreachtargetcustomer:TVads,PR,SponsorshipEventsforvaluablecustomersVIPclubEffectivechannelstrategy:one-to-onevisit,callcenter,stores…VariouschannelcombinationtomoreefficientlyservetargetcustomersPage8?SiemensICMMP;April2004;ConfidentialThethreemainapplicationareasofCRMOperationalCRMAnalyticalCRMCRMcomponentsCollaborativeCRMcampaignmanagementAutomaticallydistributionERP-integrationCustomerserviceDataMining/DataWarehousePurchaseprobabilityForecastingCustomersegmentationCross-selling-potentialRegional-purchase-behaviorChannel-managementFace-to-FaceCall-CenterBrief/FaxWeb/MailPage9?SiemensICMMP;April2004;ConfidentialTherearequiteafewobstaclestoeffectivelyapplyCRMLackofmarketingfundamentalsLackofclearvaluepropositionandfailuretotargetcustomersTechnologyisintroducedbeforecompaniesmastermarketingfundamentalsRelianceonmassmarketingPoordataqualityIncompleteinformationInaccurateinformationInadequatedatacollectionsystemsLimitedexternalsourcesofdata(e.g.,noorfewlist-rentalcompanies)PoordirectmarketingskillsLackofexperiencedstatisticiansandmarketingprogramdevelopersLackofoutsourcingresources,suchasdirect-mailortelemarketingagenciesHeavyemphasisonacademicandoverlysophisticatedanalysesOrganizationalweaknessesNostrongcentralizedmarketingorproductgroupstodriveCRMCRMregardedasasmall,low-prioritymarketingareaFlawedperformancemeasurements;limitedsupportresources,e.g.,callcenteroperators;littleornocross-functionaleffortPage10?SiemensICMMP;April2004;ConfidentialAbilitytodifferentiateproductBuyingtransactionfrequencyAccesstocustomerinformationAppropriateprogramDifferentindustrieshavedifferentdemandonCRMprogramExampleindustriesValueofcustomerLowHighNoneProgramchoiceWeakStrongNoYesNoYesDatacaptureChangebehaviorDifferentiationDatacapture,differentiationDatacaptureNoneRealestateCommoditytrading,non-brandedgoodsNewspapersThemeparks,museums,playhousesAirlines,hotels,creditcards,telecoms,bankingMembershipservices(e.g.,travel),mail-orderclubsDepartmentstores,retailersGrocery,gasstationsHighLowHighLow11MainobjectivesofCRMinGermantopcompanies[%]1)Increasesalesforexistingproduct/servicerangeVeryimportant/importantEmpiricalresultsconfirmthemainobjectiveforpursuingaCRMstrategyistoincreasecustomerloyaltyMediumLessimportant/notimportantIncreasesalesbycross-/up-sellingWinnewcustomersIncreasecustomerretention/loyaltyIncreaseefficiency/reducecostsinmarketingIncreaseefficiency/reducecostinsalesIncreaseefficiency/reducecostsinserviceIncreaseefficiency/reducecostsinITutilization1) Cross-industrystudy,

200topcompaniesinGermany

Source:RolandBergerResearch2001771495825175920219343542917582715543115433522Page12?SiemensICMMP;April2004;ConfidentialCRMapplicationexamplesHotelAirlineTelecomLoyaltyclubmembership:PointscollectionandrewardCustomerdatabasetosupportquickcheck-inandcustomizedservice(Newspaperintheroom,fruitsandwelcomenotes…)Proactivelydrivesalesleadsbycombiningupcomingtradeshowandconferenceinformationwithconsolicatedcustomerdatatobetterservehighvaluecustomers:corporateaccountandbusinesstravelerMileagecard:mileagecollectionandrewardAirportspecialloungeforvaluablecustomersDifferentiatedservicefordifferentvaluecustomersVIPclub:VIPcustomercangetfastandpersonalizedserviceUsemulti-channeltoapproachcustomersandtofulfillcustomerservice:callcenter,VIPcustomerrepresentatives,Stores,website,etc.Leveragecustomerdatabasetodoup-sellandcross-sell,andmoreimportantly,toreducechurnIndustry(B2B)GlobalAccountmanagement:accountprofilingKeyaccountmanagerfor‘A-class’customersDifferentiatedpaymentpractice:e.g.extendedtermofpaymentPage13?SiemensICMMP;April2004;ConfidentialUp-sellandcross-sellCustomerFeedbackDatacollectionChannelmixtoapproachpotentialcustomersFriendlycustomerinterfaceMulti-channelserviceVIPcustomervalue-addedserviceInformationontheBillNewsLetterCallcentertocollectfeedbackUnderstandreasonstochurnLeveragecustomerdatabasetobuildchurnwarningsystemProactivepromotetocustomerswithinclinationtochurnLoyaltyprogramAcquisitionChurnreductionCustomerServiceVisitourshop!!!GreatdealonMMSCallcenterproductrecommendationProduct/servicedemonstrationatstoreProductinformationonthebillExample:MobileOperatorappliesCRMleversineachcustomerlifecyclestageMobileOperatorExamplePage14?SiemensICMMP;April2004;ConfidentialForconsumergoodscompanies,channelpartnersaswellasconsumersareboththeircustomersMobilePhoneCompanyExampleMobilePhoneCompanyChannel:wholesaler/retailerOperatorServiceEnd-user(consumer)SellHandsetsubsidySellSellUnderstandcustomerneedsisthebasisforasuccessfulcustomerrelationshipmanagementEnd-user/consumeristhemaincustomer,whosedemandmustbeanalyzedindepthandbewell-segmentedAtthesametime,CRMalsoneedstobeusedtofosterrelationshipswithchannelpartnersPage15?SiemensICMMP;April2004;ConfidentialConsumergoodscompaniesshouldapplydifferentCRMstrategyandactionstodifferentcustomertypesChannel:wholesaler/retailerOperatorEnd-user(consumer)MobilePhoneCompanyDisguisedExampleCustomerDemandsCRMleversHighdistributionmarginandlargevolumeIn-timedeliveryandlowstockcostGoodtechnologyandservicesupportHighcustomersatisfactionrateGolden-channelaward:offerawardtobestperformancewholesaler/retailerBetterproductofferingsTechnologycallcentertotimelysupportchannel’srequestontechsupportIncorporatechannel’ssupplychainsystemtoMobilePhoneCompany’ssupplychainsystemtorealizejust-in-timesupplyHighARPUMorenewsubscriberandlowerchurnrateHighercustomersatisfactionrateIncorporatespecialmobileoperatorfunctions/programsintoproductdesignCarryoperatorlogoontheproductTechnologycallcentertooffertimelytechsupportOfferspecialdiscountstoMobileVIPcustomersHighpriceperformanceratioBetterqualityguaranteeandcustomerserviceFeelingofownershipandcarebymobilephonecompanyBetterproductdesigntoserveaspecificcustomersegmentCustomerdatabaseandtargetedpromotionConsumerclub–morevalue-addedfunctionstoclubmembersServicenetworkandcallcenterPage16?SiemensICMMP;April2004;ConfidentialCaseStudiesWewilldotwocasesinthenexthours.Oneisanindustrialgoodscompany,andtheotherisconsumergoodscompanyLet’sseehowcustomerrelationshipcanworkinthesecompaniesPage17?SiemensICMMP;April2004;ConfidentialCaseStudy&Exercises–SanFabianSupplyCompanyBriefIntroductionSituationComplicationResolutionDemandforconstructionmaterialhasdecreasedsinceMacDowellexpandeditsproductioncapacityPhilippineisstillarelationshipdrivenbusinessworldandthewaytodobusinessisdifferentWealthisconcentratedinPhilmarketOneofthelargestsuppliersofbuildingmaterialsinPhilippineTheexclusivedistributorofMacDowellproductsinPhilippineHasgoodreputationforwell-trainedandaggressivesalesforceAmanufacturerofnoncombustible,chemically-resistantmaterialIscurrentlyplaguedbyplantovercapacityandeagertoboostsalesMarketSanFabianMacDowell(MD)MacDowell(MD)WishtoincreasesalesbyhavingmoredealerscarryingtheirproductsWanttotakeuponitselfthewholesaledistributionroleSanFabianhadbeenfillingTherefore,itwantstoterminateexclusivedistributoragreementwithSanFabianWon’ttakeanon-exclusivecontractButMDproductscontributesalottoSanFabiansalesandnetincomeItisnoteasytogetexclusiveagreementwithothersupplierSanFabianWhatwillMacDowelldowithcustomerrelationshipwithSanFabian?HowwillSanFabianreactfacingthechangefromMacDowellPage19?SiemensICMMP;April2004;ConfidentialCaseexerciseTask:Afterreadingthroughthecase,youarerequiredtoanswerfollowingquestionsWhatdoesSanFabiandoforMacDowell?WhatdoesMacDowelldoforSanFabian?WhatchangeisMacDowellproposingandwhy?WhatbenefitsandrisksMacDowellwillgetfromthischange?IfyouarethemanagementofMacDowell,howwillyoutreatthisexclusivedistributorrelationship?WhatareSanFabian’salternativesifyouareinvitedtogiveadvicetoSanFabian?HowcanSanFabiancometoanagreeablesolutionwithMacDowell?20minutesreadinganddiscussionPage20?SiemensICMMP;April2004;ConfidentialKeytakeawaysItisalwaysaharddecisionrelatedtochannelmodels:exclusivevs.selectivevs.massdistribution,whichwecanoftenseeindailybusinessoperationThereisaninevitablelove/haterelationshipbetweenchannelmembers.Bothwantproducttobesold,buteachwantsmoreofthesalesmarginChannelprofitsaremaximizedwhencooperationovercomesconflict.Therefore,howtoachievewin-winbecomesthecriticaltopicDistributorsprovideavarietyofactivitiesonbehalfoftheirmanufacturers.ExclusivedistributionmodelcanstimulatedistributortomakegreatefforttopushthesalesPage21?SiemensICMMP;April2004;ConfidentialCaseStudy&Exercises–SoloMobilePhoneCompanyCasebackground*SoloisaEuropeanmobilephonecompanywhoseproductareallGSMmobilephones.Itisamongthetopthreelargestmobilephonemanufacturerintheworld.SolohasenteredChinamarketin1995andperformedquitewellinChinabeforeyear2000.ItisthethirdlargestplayeronChinamarket,onlyaftertheglobalmobilegiantAAandBB.Soloenjoysgoodreputationofhighqualityandbusinesspeopletargeteddesign.IthadquitesoundcustomerbaseinChinaanditsbrandawarenessishigh.*Disguisedcase,alldataandcompanynameinthiscasearedisguisedSoloMobileSuccessin1990sChallengeandthreatsince2001Chinamobilephonemarketisstillgrowingquickly,butmoreandmoredominatedbyyoungandtrendyproducts.Youngpeopletendtochangetheirmobilephonesmorefrequently.Therefore,Solodecidedtochangeitsfocusandbrandimagesince2001,puttingmoreemphasisonyoungpeopleButtheeffortofchangingbrandpositioningseemstoweakenSolo’sbrandimage.Inarecentmarketsurvey,consumersresponsesshowtheirconfusionofthebrandimageofSoloFastgrowthoflocalbrand–TL,BD,AM,KK,etc.–formedhugethreattoglobalplayersonthemarket.Underthecompetitionpressure,Solo’smarketsharedecreasedfrom15%in2001to5%in2003WhatSoloshoulddotoregainthelostmarketshare?Page23?SiemensICMMP;April2004;ConfidentialTheChinesemobilephonemarketisthefastestgrowingmobilephonemarket*ProjectionCAGR+18%ChinaMobilePhoneMarketSize(allstandards,mio.units)GSMCDMA33’452’355’162’869’777’4***FY7’59’810’812’Page24?SiemensICMMP;April2004;ConfidentialTrendy,FashionableandMulti-functionmobilephonesbecomethemainstreamincompetition

MorefashionabledesignColordisplayandPoly-phonicringtoneImbeddedcamera,games,MP3CompeteontrendydesignandmorefunctionsVariousformfactors:Clamshell,block,slider,flip,rotateWhilepriceisgoingdownanddownSoloMobilePage25?SiemensICMMP;April2004;ConfidentialNoonehadexpectedthefastgrowthoflocalmobilemanufacturersSoloMobileLocalmanufacturersgainmarketsharemuchfasterthanexpectedWinningfactorsoflocalmobilephonemanufacturersLocalbrandmarketshare%Channelcoverageandcontrol:localmanufacturerusemoresalespeopleandtendtobuildownchannelinsteadofusingagentsHighpenetrationin2nd-3rdTiercitiesandruralareas(whereinternationalplayersareweak)MoreaggressiveadvertisementBetterunderstandmostlocalconsumer’stastefordesignandofferluxurydesignandpackagephones(e.g.putdiamondonthecover)CheaperpriceLocalbrand’schannelcoverageandpenetrationismostdistinctivefrominternationalplayersPage26?SiemensICMMP;April2004;ConfidentialChannelstructureischanging,whichgiveSolonewchallengesSoloMobileChangesinchannelstructureSolo(andotherinternationalplayers)useNationalDistributorfordistributionSoloNDCMCC(Operator)RDRetailerConsumerCurrentchannelstructureQuickdevelopmentofKRC(keyretailchains)inTier1cities,suchasGuoMei,SuNing,whoselldirectlytoconsumers.Mobileoperators(CMCCandUnicom)becomemoreaggressiveinhandsetbusinessbyheavilyusinghandsetsubsidyLocalmobilephonemanufacturer'ssuccessinownchannelbusinessmodelcallmarketattention.PeopletendtoawarethatNDmodelinvolvestoomanyleversinthechannelstructure,thusloweringdistributionefficiencyandmarketresponseandincreasingchannelcost.Internationalplayersarethinkingofusingprovincial/regionaldistributorsinsteadofNationaldistributorsinsomeareaPage27?SiemensICMMP;April2004;ConfidentialSoloisunderheavypressureoflosingmarketshareandloweringbrandawarenessandimageSoloSeniorManagerMobileOperatorNationalDistributorConsumerOurmarketsharedecreasedfrom15%threeyearsagoto5%lastyearandwestillsawadownwardtrendthisyearWeplantoputmoreemphasisonhandsetsubsidyandplaymoreroleinhandsetdistribution.MobilemanufacturerM,N,SareallapproachingusforcooperationWehavelaunchedsomegoodproductslastyearandweinvestinadvertisement,butourpresenceinretailstoresarelowandconsumerscannotseeourproductsinalotstoresSoloMarketingManagerWecarryquitealotbrands.Whatwecareiswhichbrandcangivemebestprofit.WearealsounderpressureoflowermarginandtheemergenceofKRCsIknowSolobrand,butIcannottellwhetherIlikethemornot.Idon’tseetheirnewproductsmuch.SoloMobilePage28?SiemensICMMP;April2004;ConfidentialSoloisthinkingofacustomerrelationshipstrategytohelprecoverthebusinessWenoticedthatinthepastweputtoomuchemphasisonSell,SellandSell,butmisstherealcustomerrelationshipWearelaunchinganewphoneandwewanttoincorporatemorecustomerrelationshipstrategyintothesellingofthisprodu