Customer Centricity IBM CMO Study Webinar With Elaine Fletcher And Krishna De

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Insights from the Global Chief Marketing Officer Study

Customer Centricity:

Is it a Panacea or a Pipe-Dream? Elaine Fletcher, IBM Global Business Services

© 2011 IBM Corporation 4

16% Communications

36% Distribution 24%

Financial Services

21% Industrial

3% Public

44% Growth markets

17% North America

35% Europe

4% Japan

Sectors Regions

“The perfect solution is to serve each consumer individually. The problem? There are 7 billion of them.”

Consumer products CMO, Singapore

THE CUSTOMER-CENTRIC VISION

IBM 2011 Global CMO Study by IBM Institute of Business Value, October 2011

Largest sample of face-to-face CMO interviews more than 1,700 CMOs

Customer Centricity: from Insight to Action


50%

5

Preparation for change “ Our survey found that 79 % of respondents expect significant change ahead - with almost 90 % in UK and Ireland feeling ill equipped to manage the explosion of data. “

UKI Under preparedness

Percent of CMOs reporting underpreparedness

IBM Institute for Business Value

Data explosion

Social media

Growth of channel and device choices

Shifting consumer demographics

Financial constraints

Decreasing brand loyalty

Emerging market opportunities

ROI accountability

Customer collaboration and influence

Privacy considerations

Regulatory considerations

Source: Q8 How prepared are you to manage the impact of the top 5 market factors that will have the most impact on your marketing organization over the next 3 to 5 years? n=5 to 59 (n = number of respondents who selected the factor as important)

Global outsourcing

Corporate transparency

87%

70%

80%

69%

40%

67%

41%

53%

72%

60%

59%

78%

43%

Global Compare

71 %

68 %

65 %

63 %

59 %

57 %

56 %

56 %

56 %

55 %

54 %

50 %

47 %


Sources of Insight

“ It is interesting to observe that the majority of CMOs continue to use focus on

understanding markets vs understanding individuals to shape their strategy.”


Sources used to influence strategy decisions Percent of CMOs selecting all sources that apply

Key sources to understand individuals

Source: Q15 What sources of information influence your marketing strategy decisions? n=92

Market research

Corporate strategy

Competitive benchmarking

Customer analytics

Marketing team analysis

Customer service feedback

Financial metrics

Campaign analysis

Brand performance analysis

Sales/sell-through numbers

Test panels/focus groups

R&D insights

Consumer-generated reviews

Third-party reviews & rankings

Retail and shopper analysis

Online communications

Professional journals

Blogs

Supply-chain performance

87% 86%

83%

72%

72%

72%

62%

53%

70%

34%

74%

40%

37%

47%

82%

76%

51%

28%

32%

“The perfect solution is to serve each consumer individually. The problem ? There are 7 billion of them.” Consumer products CMO

Global Compare

82 % 81 % 80 %

74 % 69 % 68 %

68 % 68 % 65 %

61 % 54 % 52 %

48 % 42 % 41 %

40 % 37 % 26 % 25 %


Use of Technology

“ The majority of CMOs appear eager to deploy tools and technologies to grapple with

growing volume, velocity and variety of data.”


UKI Plans to increase the use of technology

Percent of CMOs selecting technologies

Source: Q22 Do you plan to decrease or increase the use of the following technologies over the next 3 to 5 years? n=83 to 87

Social media

Mobile applications

Content management

Tablet applications

Single view of customer

Collaboration tools

Predictive analytics

Search engine optimization

Reputation management

Campaign management

Score cards/dashboards

E-mail marketing

Customer analytics

CRM

78%

78%

83%

72%

70%

55%

69%

60%

50%

57%

51%

57%

52%

47%

Global Compare

82 %

81 %

81 %

80 %

73 %

72 %

70 %

68 %

66 %

63 %

62 %

61 %

56 %

46 %

© 2011 IBM Corporation 8 8

Barriers to Change

“ The data suggests the key three are - Building the business case, Skills and resolving alignment issues within the organisation.”


UKI Barriers to using technology in marketing

Top 5 selected by CMOs

Source: Q23 What are the top 5 barriers to using technology? n=92

9%

21%

33%

33%

32%

37%

55%

35%

65%

68%

Lack of ROI certainty

Cost

Tool implementation issues

Lack of IT integration with organization

Lack of marketing and IT alignment

Lack of IT skills

Lack of skills of (potential) users

Lack of technological ownership in marketing

Ease of use

Reliability

Business case

IT related

Marketing related

IT and marketing related

Usability

Global Compare

72 %

61 %

47 %

46 %

45 %

43 %

37 %

34 %

25 %

18 %


The Priority from Digital

“ However, confronted with the shift toward emerging digital technologies, CMOs see enhancing customer loyalty as the number one priority. “


UKI Priorities for managing the shift toward digital technologies

Source: Q12 What are your priorities for managing the shift toward emerging digital technologies? (Select top five.) n=92

Use social media as a key engagement channel

Design experiences for tablet/mobile apps

Enhance customer loyalty/advocacy

Monitor the brand via social media

Measure ROI of digital technologies

Use integrated software suites to manage customers

Develop social interaction governance/policies

Monetize social media

Analyze online/offline transaction analysis

Gain comprehensive visibility of supply chain 18%

24%

50%

42%

58%

49%

55%

55%

46%

67%

Global Compare

67 %

57 %

56 %

56 %

51 %

47 %

45 %

37 %

29 %

24 %


IBM’s Business Value Accelerator helps to assess the return on investment and feasibility of a customer-centric approach to sales and customer service . . . across all products and all channels.

X/Upsell success rate increased from <10% to >40%

17% increase in operating profit

Doubled Gross Merchandise Vol (GMV) per contact

Savings to IT alone yielded ROI in one year

Can now streamline processes and deliver higher levels of personalisation

STRATEGY PLANNING: PRODUCT LIFECYCLE PER SEGMENT SEGMENTION DRIVEN PRICING / BUNDLES

THE CUSTOMER-CENTRIC VISION: A PANACEA OR A PIPE-DREAM?

IBM’s CMO Business Value Accelerator

Communications Provider

Electronics Retailer

Grocery Retailer

Online shopping auction site

Financial Services Provider


IBM has developed a business model to quantify the commercial benefits of a Customer Insights programme.

We believe in a self-funding programme built of small steps, which typically take three months and include: • Strong positive in-year ROI • Incremental steps to final business operating model • Alignment of data assets & governance • Next Best Action (cross-sell and service prompts) • Operational benefits/ROI tracking. The model shows the benefits of each step. The interactive control panel lets you configure “what if” scenarios and shows the commercial outcomes.

Is the business case strong enough to win cross-business support?

CUSTOMERS REVENUE

THE JOURNEY


IBM CMO BVA (Business Value Accelerator)

CMOs are under increasing pressure to demonstrate the ROI from Marketing IBM’s BVA includes four work-streams to assess capability, identify gaps and recommend options to improve:

PRE-REQUISITES:

1. Workshop attendees empowered to represent the needs, priorities and current position

2. 3 working days prior to workshop provide IBM with a summary IT architecture and data landscape

OUTPUTS:

Recommendations, Gap & Options Review, Business Model, Roadmap

STEPS:

1. Workshop to explore priorities and business model

2. Half-day workshop for each quadrant

3. IBM summarises findings from Gap & Options

4. IBM recommends Business Model and Roadmap

1. Multi-channel Customer focused service strategy

2. Definition of desired customer journeys

3. Definition of customer segmentation strategy

4. Track product performance / segment

1. Analytical creation of Customer Insights

2. Embedded Insights/Automation to Deliver consistent experience across all channels

3. Campaign management & optimisation

4. Closed loop feedback

1. Multi-channel Customer focused service strategy

2. Definition of desired customer journeys

3. Definition of customer segmentation strategy

4. Track product performance / segment

1. Analytical creation of Customer Insights

2. Embedded Insights/Automation to Deliver consistent experience across all channels

3. Campaign management & optimisation

4. Closed loop feedback

1. Operating model gap & options review

2. Campaign & Real time event capability/benefit review

3. Enterprise change planning gap & options review

4. Measure ROI gap & options review

1. IT Architecture & systems management gap & options review

2. Data landscape architecture gap & options review

3. Data Governance & DQ gap & options review

1. Operating model gap & options review

2. Campaign & Real time event capability/benefit review

3. Enterprise change planning gap & options review

4. Measure ROI gap & options review

1. IT Architecture & systems management gap & options review

2. Data landscape architecture gap & options review

3. Data Governance & DQ gap & options review

Strategy & Operating Model

Technology & Data

BusinessModel

EffectivenessEfficiency

CustomerExperience



Technology & Data

Technology & Data

BusinessModel

BusinessModel



CustomerExperienceCustomer

Experience


Business Benefit Stakeholder Sample Potential Annual Benefits

Customer Revenue Growth

Increased lending fees Retail & Commercial LOBs

Every 1% improvement in close rate results in €5M additional lending revenue (100,000 loan applications per year, €5,099 average first year revenue per loan – fees and year 1 interest)

Increased average current account & deposit account balances

Retail & Commercial LOBs

Every 1% increase in average balance results in €13M incremental margin (6.75 million deposit customers, current average balance of €10,000, 2% margin)

Enhanced Customer Retention

Reduced customer attrition Revenue from retained Customers

Marketing

Every 0.5% reduction in attrition results in €7M (saved) revenue per year (9 million customers, 6% attrition rate, average annual revenue of €200 per customer)

Enhanced Financial and Risk Management

Reduced write offs / provisions for loan losses Risk

Every 1% reduction in loan losses results in €17M additional profits (€1.7 billion in projected annual retail loan losses)

Improved capital efficiency Finance

Every €100 million in capital freed up could enable €12M in additional profits (12% internal investment hurdle rate)

Optimise Technology Costs

Reduced development effort & applications support Opex

IT/CIO Every 10% reduction in effort results in €3.6M cost savings (€36 million spent annually on related development)

Sample Quantification of Benefits (European Bank)

Retail & Commercial LOBs

Every 1% balance from retained Customers results in €13M incremental margin (6.75 million deposit customers, current average balance of €10,000, 2% margin)


Qualification Questions to ask your client

Questions for CMO to ask self and peers: Director of: Database Marketing, Direct Marketing, Internet Marketing, Relationship Marketing, Field Marketing, Marketing Operations, Customer Insights, Customer Care, Customer Experience, Retention Manager

1. Do you have a single view of each customer, or is customer data locked away in product silos so that you cannot see overall how much business the customer does with you?

2. Can you accurately predict which offer is the best for each customer and make that offer at the right time and over the best channel for them to accept it?

3. How well are you able to assess the return on your marketing investment?

4. What is your customer’s experience like when they cross channels (e.g., web site, stores/branch, phone, when they receive emails from you)? Is it consistent?

5. How well do you take advantage of “inbound” customer interactions for marketing purposes – e.g., presenting personalized messages when someone comes to your web site, or calls your call center, or visits a store or branch?

6. How dependent on IT are you to execute your marketing? Are great marketing strategies going to waste because of an IT backlog? Would you like to be more self-sufficient to remove 3rd party OPEX from Marketing Services suppliers?

Questions to ask CIO/IT

1. Are the people responsible for individual marketing channels such as web sites, email, POS, etc. looking to you for help figure out how to make their systems work together so they can have a single, cross-channel contact strategy?

2. Are you able to do everything the marketing team is demanding of you, as quickly as they’d like? Do you wish you could enable them to do more self-service?

3. Are you supporting separate marketing software applications, missing out on the economies of scale that would come from supporting one integrated platform?

© 2011 IBM Corporation

© 2011 IBM Corporation