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?
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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
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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
Customer
Life Cycle
Enquire
Welcome
Manage
Problems
Win Back
A CRM Strategy: Developing the
Customer Asset Base
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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
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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
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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.
Brand
Value
Value-tailoring
Value-added
Communication


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OPERATIONAL STRATEGY
BUSINESS
STRATEGY

BUSINESS
MODEL
CUSTOMER
STRATEGY
MARKETING
STRATEGY
MARKETING
STRATEGY
BRAND PROPOSITION: The Company DNA
IT STRATEGY
PRODUCTION
STRATEGY
FINANCE STRATEGY
FINANCE STRATEGY
R&D STRATEGY
HR STRATEGY
CRM Strategy Is an Element of
Business Strategy
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BRAND
PROPOSITION
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
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Corporate DNA Example:
Mickey’s Signature
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Mickey’s Signature No. 2
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One Mouse, Different Signatures
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Corporate DNA Consistency
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•
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, Development
Retention and Efficiency
•
Measures: Satisfaction, loyalty, cost
to serve and employee satisfaction
Based on the customer life cycle
How do we take advantage of
market opportunities and
mitigate competitive threats?
Marketing Strategy

How do we get closer to the
customer to deliver value to
them and create value for us?
Customer Strategy
Interweaving the Marketing and
Customer Strategy
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Relationship Investment Guide
High
Low
Claimed Importance
Hygiene
Factors
Overspending
Hidden
Opportunities
Motivators
Real Relevance
Well above
average
Above average
Average
Below average
Poor
9
19
22
12
5

3
2
4
Trim
Study/Invest
Maintain
Efficiently
Invest
Low
Hig
h
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Protect
Position
Invest to
Protect
Invest to Win
Over
Damage
Limitation
Counter
Competition
Invest to
Build
Win the
Opportunity
Careful
Management
Manage for

Profitability
Build
Selectively
Manage for
Revenue
Manage for
Revenue
Manage for
Profitability
Manage for
Profitability
Manage for
Revenue
Consider
Divesting
Strength of Relationship
(Value to Customer)
Customer
Potential
(Value to
Company)
Fragile
Highly
Secure
Secure
Vulnerable
Transactional
Some potential
Large share
of wallet

Key
Customer Asset Audit
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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
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CRM Metrics
Corporate
Market Share
Key measures to support corporate financial and market goals
Customer
Strategic
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 Growth
Cost Ratios
Customer Loyalty
Example
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
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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
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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 schemes
✹

Incentives
✹
Cross-selling
✹
Product bundling
✹
Product & price
❤
Brand values
❤
Contact
❤
Customer care
❤
Contracts
❤
Products & price
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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
Anticipate
the Crisis
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•
Upward movement of wallet share is a trigger for additional resource.
•
Greater customer spend rewarded with greater levels of account
management.
Low
Medium
High
< 10% 10 - 50%
>50%
One:One
to
Few:One
One:Few
One:Many
One:Few

to
One:One
Key
Account
Teams
Market Value of Customer
Company Share of Wallet
Contac
t
Center
Dedicated
Hunters
R
e
l
a
t
io
n
s
h
i
p
M
a
n
a
g
e
r

P
e
r
s
o
n
a
li
z
e
d

S
e
lf
-
S
e
r
v
e

Relationship Models:
Resource Allocation by Segment
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CRM Strategy: Capabilities
Marketing Strategy
Support

•
Human resources
•
IT
•
Knowledge — research
Customer Strategy
Support
•
Skills and competencies
•
Internal communications
•
Organization
•
IT infrastructure
•
IT architecture
•
Research, analysis and
planning
•
Knowledge management
•
Customer data strategy
•
Business process
architecture
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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.