Developing a CRM Strategy

Jennifer Kirby

Developing a CRM Strategy

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Key Issues

• What is a customer relationship management (CRM) strategy?

• How does a CRM strategy fit in with other business strategies?

• Only 10 percent to 15 percent of companies know the value of their customer base — yet, this is an important intangible asset and drives the detailed tactics of the CRM strategy.

• The benefits of CRM come through increased service and communication; to build real loyalty, how is this managed effectively?


What Is a CRM Strategy?

• “It boldly states the ideal customer base and how an organization intends to get and keep it. I’ve never yet seen one that does this to any depth.” — CRM Consultant

• “…It’s the decision about which customers are to be managed, via which channels for which products and services: It means revisiting the marketing strategy.” — CRM Guru

• “A CRM strategy is not an infrastructure road map.” — CRM Program Manager

• “We need to understand what customers we have, and who we want, then we can put in place a strategy for developing the value of each segment” — CEO


How do we develop the customers’ loyalty and value

to us by developing our value to the customer?

How do we acquire valuable

customers who will

value us?

How can we retain or win

back customers of value?

How do we create awareness of what we

offer to potential customers of value?

How do we do this efficiently?

MarketingSales Service

Develop

Retain Acquire

Target

CustomerLife Cycle

Enquire

WelcomeManage

Problems

Win Back

A CRM Strategy: Developing the Customer Asset Base


CRM Strategy:Top Ranking Objectives

27

26

47

16

37

47

B2B

B2C

Annual loss in a typical company Customer loss: 10% to 30%Employee loss: 15% to 20%Investor loss: 50%

Reduces annual profit by 20-50%

Percent of Companies Ranking as Top Priority

Retention

Development

Acquisition


CRM Strategy: Case Study No. 1

• Segment the customer base in deciles of value.• Develop customer profitability. The most-valuable segment by 3

percent, the next three segments by 20 percent, and decrease the losses on the rest — develop services used, lower distribution cost, increase prices and discount according to potential value.

• Acquire new customers of the most-valuable type with targeted selling.

• Implement retention programs for the most-profitable customers.

Household Deciles Ranked by Profit

($1,000)($2,500)

0$5,000

$10,000$15,000

1 2 3 4 5 6 7 8 9 10


CRM Strategy: Case Study No. 2

• Understand and segment the customer base .• Retain the most-valuable customers after finding out why they

defect.• Win back valuable ex-customers.• Develop the loyalty of current customer segments — use

differentiated service according to need.• Improve the profitability of unprofitable customers.

BrandValue

Value-tailoring

Value-added

Communication


OPERATIONAL STRATEGY

BUSINESS STRATEGY

BUSINESS MODEL

CUSTOMER STRATEGY

MARKETING STRATEGY

MARKETING STRATEGY

BRAND PROPOSITION: The Company DNA

IT STRATEGY

PRODUCTIONSTRATEGY

FINANCE STRATEGYFINANCE STRATEGY

R&D STRATEGY

HR STRATEGY

CRM Strategy Is an Element of Business Strategy


BRANDPROPOSITION

Promised Customer

Experience

Step No. 1: Define the Vision

What and who are you? What value will you deliver?

Unifies Internal Delivery

Step No. 2: State the Culture:

What internal capabilities are needed to deliver the value?

Step No. 3: Express the Image

How will the the value of the brand be communicated?

The Brand Is the Company DNA


Corporate DNA Example: Mickey’s Signature


Mickey’s Signature No. 2


One Mouse, Different Signatures


Corporate DNA Consistency


• Vision: Market Position • Market Definition and Audit • SWOT Analysis

• Target market segments • Objective for each market

segment: Penetration, Development, Maintenance and Productivity

• Measures: Market share, brand equity and market penetration

Based on product life cycle

• Vision: CVP • Customer Definition and Audit• Capability Analysis

• Target customer segments by value • Objective for each customer

segment: Acquisition, DevelopmentRetention and Efficiency

• Measures: Satisfaction, loyalty, cost to serve and employee satisfaction

Based on the customer life cycle

How do we take advantage ofmarket opportunities and

mitigate competitive threats?

Marketing StrategyHow do we get closer to thecustomer to deliver value to

them and create value for us?

Customer Strategy

Interweaving the Marketing and Customer Strategy


Relationship Investment Guide

High

Low

Cla

imed

Imp

orta

nce

Hygiene Factors

OverspendingHidden

Opportunities

Motivators

Real Relevance

Well aboveaverage

Above average

Average

Below average

Poor9

19

22

12

5

3

24

TrimStudy/Invest

MaintainEfficiently

Invest

Low High


ProtectPosition

Invest toProtect

Invest to WinOver

DamageLimitation

CounterCompetition

Invest toBuild

Win theOpportunity

CarefulManagement

Manage forProfitability

BuildSelectively

Manage forRevenue

Manage forRevenue



Manage forRevenue

ConsiderDivesting

Strength of Relationship(Value to Customer)

CustomerPotential(Value to Company)

FragileHighlySecure

Secure Vulnerable

Transactional

Some potential

Large shareof wallet

Key

Customer Asset Audit


Real Examples of CRM Objectives

• Return retention to the industry average and then improve to 3%

• Measure the propensity to churn, expected lifetime value, and propensity to accept discounts and special marketing offers

• Empower CSRs to decide who to keep according to specified criteria

• Establish who end users are to build broker loyalty

• Build a customer information culture to increase customer advocacy

• Improve communication with customers/partners

• Reduce staff turnover in call center

• Introduce an effective global sales process

• Find CRM initiative with highest payback and use to fund others

• Retain our most valuable customers for revenue in the short term

• Establish our customers’ optimum potential for selective development

• Acquire strategically important customers in the new market

• Expand cross-selling opportunities with supporters


CRM Metrics

CorporateMarket Share

Key measures to support corporate financial and market goals

CustomerStrategic

Key measures for monitoring the customer strategy

Operational

Key measures for monitoring the customer processes

Infrastructure

Key measures for monitoring efficiency and inputs

Revenue Growth

Profit Growth

Margin GrowthCost Ratios

Customer LoyaltyExample

Lifetime Value

Customer Profitability

Cost to Serve

Acquisition

Development

Retention

Risk Profile

Staff Satisfaction

Response Levels

RFM Measures

Conversion Ratios

Complaints

NPD Times

Staff Turnover

Cross-Sell Ratio

Recommendation Levels

Channel-Specific Measures

Call Answering Times

Customer Data Accuracy

Response Times

“Do Not Mail” Markers

Staff Qualifications

Staff Sickness

Example

Example

Example


CRM Strategy — Tactics

• CVP • Product • Price

• Communication:public relations, advertising, sales, promotion, merchandising and direct marketing/messaging

• Channel

• CVP by segment• How customized for each

segment • How differentiated for each

segment • Service/customer care by

customer segment/life cycle• Contact by life cycle/segment• How media and content is

personalized in communication for each segment

• Which channel is used by which segments for what (touchpoints)

• Management by segment: who, where, how

Marketing Strategy Customer Strategy


Tactics for Retention and Building Loyalty

Behavior Attitude and Behavior

• Rational value • Creates stickiness• Makes sales• Retention, attraction,

increased sales• Real loyalty?

• Rational and emotional value• Creates loyalty• Creates relationships• Retention, attraction, customer

share, recommendations,lower costs and wider margin

Loyalty Scheme CRM Strategy

Reward schemesIncentivesCross-sellingProduct bundlingProduct & price

Brand values Contact Customer care Contracts Products & price


Build Communities

Customer Care:The Social Bond That Binds

• Improve perceived service and you improve loyalty.

• The customer does not care how much you know about them, until they know how much you care.

• Stop thinking you are servicing a product — service the customer.

• Feeling recognized, valued and cared about is the basis of the bond that is loyalty.

Advice &Information

Collaborate& Involve

Understand& Empathize

Anticipatethe Crisis


• Upward movement of wallet share is a trigger for additional resource.• Greater customer spend rewarded with greater levels of account

management.

Low Medium High

< 1

0%10

- 5

0%>

50% One:One

toFew:One

One:Few

One:Many

One:Fewto

One:One

Key Account Teams

Market Value of Customer

Com

pany

Sha

re o

f W

alle

t

Contact

Center

DedicatedHunters

Relationship Manager Personalized Self-

Serve

Relationship Models:Resource Allocation by Segment


CRM Strategy: Capabilities

Marketing StrategySupport

• Human resources• IT • Knowledge — research

Customer StrategySupport

• Skills and competencies • Internal communications • Organization • IT infrastructure • IT architecture • Research, analysis and

planning• Knowledge management• Customer data strategy • Business process

architecture


Recommendations

• Establish your market position against requirements and competitors. Define a “value,” different, customer proposition

• Make the brand the company DNA to deliver the proposition

• Segment the market for share of wallet and lifetime value

• Establish the motivating factors for customer loyalty: Where do you need to excel and where can you cut cost? Any gems?

• Value your customer base potential — not just on current profit.

• Develop skills in the new areas of customer relationship building — service, contact strategies and relationship models. Understand what technology enables you to do.

Documents

Developing a CRM Strategy