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Building a Business Case for CRM

2002 P1 Consulting Services All rights reserved.

Questions addressed in this presentation

Why is Relationship Management important for business? Does every business need to invest into CRM? Do all business need to adopt similar approaches to implement CRM? What approach is to be taken while developing a business plan? How to plan for risks during the initiative?

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2002 P1 Consulting Services All rights reserved.

Relationship Management Is it really a new concept?

Human society operates within relationships Relationships are all around us

Parent Child Husband wife Among friends Doctor Patient Seller buyer

Customer Relationships Management is NOT a new discipline Effective Customer Relationship Management is GOOD business
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Why relationships are key to long-term success

Humans value relationships, they are attracted by a prospect of being in one Members can expect predictable behavior in a relationship Engagement parameters are known to all parties, therefore. It is easier to grow a relationship into different areas because of the developed trust Since relationships take energy to setup, people tend to consolidate their interactions with in a few relationships It is easier to maintain a relationship than to setup a new one. Members tend to be locked-in P1 Consulting Services

2002 P1 Consulting Services All rights reserved.

Focus on Relationships first Before any systems

Define the roles of the participants Company, Customer Type A, Type B Strive to gain more than superficial knowledge of customers Proactive actions have greater value than reactive actions Build a partnership approach in resolving customer issues Cater for the evolution of the relationship to capture the Life-Time Value of the customer

These elements are as important to business relationships as they are to normal human relationships

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2002 P1 Consulting Services All rights reserved.

Why CRM is increasingly important in todays Business

The first wave of technology has helped many organizations to improve operational efficiencies Improving product quality and reduced margins have left little room for improvement of the product Today customers expect quality products and flawless operations Effective Customer Relationship Management (CRM) will be the next differentiator The new wave of technology is helping enable CRM strategies Businesses have to embrace CRM in order to survive in the 21st Century

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2002 P1 Consulting Services All rights reserved.

Business View of CRM

Business Cycle
Service and Support
Billing and collection Trouble analysis and resolution Customer feedback on products and service

Product
Quality Speed Operational efficiency

CRM
Processes and Technology based on clearly articulated Strategy

Sales
Sales force effectiveness Opportunity, Account & Order Management Product, Price and Contract negotiation

Marketing
Market research Customer Segmentation Campaign Management Channel evaluation

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Functional view of CRM The complete picture

Phone Interactive CRM Transactional Analytical CRM CRM Sales Force Automation FAX E-mail Web WAP

Customer Interaction Platform

Sales Force Enablement

Contact Center

Customer Service

Direct Sales

Customer Data

Transactional Engine Co-ordination, Personalization, Workflow Management

Enterprise Data

Customer Intelligence Platform

Customer Segmentation Channel Evaluation Customer Surveys Campaign Management Product Management

Sales Force Automation

Contact Management Account Management
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Opportunity Management

Funnel Management

Sales Forecasts

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CRM relevance quadrants What businesses will benefit the most from CRM?
Tactical CRM Type B
Competition Low Customer acquisition cost High Companys products portfolio Small Customer sophistication High Support requirements High Competition Low Customer acquisition cost High Companys products portfolio Small Customer sophistication Low Support requirements Low

Strategic CRM
Competition High Customer acquisition cost High Companys products portfolio Large Customer sophistication High Support requirements High Competition High Customer acquisition cost Low Companys products portfolio Large Customer sophistication Low Support requirements Low

Little need for CRM

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Tactical CRM Type A

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Definition of CRM needs

Tactical CRM Type B
CRM required for profitable growth Interactive and Transactional CRM most appropriate

Strategic CRM
CRM required as a matter of survival Need to adopt CRM through out the Enterprise Full and strategic implementation should be sought

Little need for CRM Should focus more on operational efficiencies

CRM required for profitable growth Analytical CRM and Sales Force Automation most appropriate

Little need for CRM

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Tactical CRM Type A

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Examples of businesses in each quadrant

Tactical CRM Type B
Service providers in a regulated or newly unregulated environment Financial institutions with strong market positions

Strategic CRM
Service providers in a unregulated environment Financial institutions with weak market positions

Consumer products companies Monopolies Cinemas and entertainment providers Utilities petrol companies selling to individuals

Little need for CRM

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Tactical CRM Type A

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Objective of a Business Plan

Define appropriate approach and the desired time frame for implementation Estimate the expected benefits
Increase in revenue attributable to the system Decrease in expenses / costs attributable to the system Cost avoidance / intangible benefits

Estimate the investment costs

Cost of the initial solution Yearly maintenance and customization cost Advertising and roll-out expense Additional staffing requirements Training and re-training needs

Build sensitivity analysis into the plan

Net Present Value Break-even point What-if scenarios
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Approach to a CRM Business Plan

Enterprise Profitability
Before After

Time

Review of business as usual (if no CRM is implemented) Estimate of profitability after implementation of CRM Determine Break-even point Net Present Value (NPV) of the solution
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Obtain forecasts for each of the expected benefits

Transactional CRM
Increase in customer satisfaction by x% Increase in sales due to personalization by x% Reduction is costs due to efficient processing by x%

Analytical CRM
Reduction in advertising costs by x% Increase in return from campaigns by x% Increased sales from new products by x%

Interactive CRM
Increased sales from additional channels by x% Reduction in cost per sales due to new channels by x% Reduced costs in servicing customer service requests by x%

Sales Force Automation

Increase revenue from existing customers by X% Increase revenue per sales person by X% Reduce cost of acquiring new customers by X%
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What will it cost?

Initial solution implementation cost
Analysis and detailed design cost Software license cost Hardware cost Integration costs Software customization costs

User training and change management expense Hiring of additional staff for contact centre IT support staff hiring and training expense Budgeting for maintenance, upgrades and continuous customization Telecommunication costs

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Determination of the NPV and IRR

Net Present Value calculation based on the estimated benefits
Net Profitability after CRM

i Internal Rate of Return (IRR) calculation

Net Profitability after CRM

Time

Change in value after application of required discount rate Net Present Value
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Net Present Value = 0 Discount rate which make the NPV equals to zero

Time

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Build What-if Analysis

Investment
Worst Case Best Case

Returns

NPV

% IRR

Project Parameters

Best case and worst case scenarios for CRM benefits Effect of changes in the hurdle rate and project acceptance criteria Effect of project over-run
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Evaluate intangible benefits

Increased customer loyalty and satisfaction Greater management focus on customer Review of business process to match the strategy Automating previously manual processes New training opportunities for the employees Improved quality of information available to management

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Reduce the risk of failure through effective planning

Do not limit the scope to one functional group such as customer service, marketing, or sales Effective CRM is not cheap. The budget allocated must be consistent with the expected benefits Select technology which is aligned to the organisational skills Select technology which is scalable, flexible and robust Plan for benefit measurement and evaluation before and after

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And do not forget the people who will use the system
Seek an executive champion of the project before embarking People resist change and tend to protect their domains Users are not fully committed to the idea of CRM and its benefits Lack of acceptance of the system because it is considered someone elses baby The usage of the system adds to the current work-load without evident benefits

PLAN FOR A CHANGE MANAGEMENT INITIATIVE FOR THE SUCCESS OF THE PROGRAM
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