Customer Relationship Management (CRM)

1. Customer RelationshipManagement (CRM)

2. As You Build Your Businesses Think About … • How will you know who your most valuable customers are? • Can your customers talk to you? Have you created mechanisms for a dialogue? • Will you ever ask your customers questions and if so how will you remember their answer? • What will you do differently because of what you learn from your customers?

3. Put Yourself In Your Customer’s Shoes • We end up ‘shouting’ at our customers… …who are becoming more adept at “ignoring”

4. CRM Is A Distinct Type Of Marketing Direct Marketing Customer Relationship Marketing Highly Differentiated Customer Needs Mass Marketing Target Marketing Quite Similar Little If AnyDifference Customer Value Highly Disparate

5. What is Customer Relationship Management? • Systematic Use of Information • Customer Data Warehouse • Data analysis and gathering • Predictive modeling • Through On-Going Dialogue • Real-time response • Listening to customer • Personalized, customized offers and messages • To Attract and Keep Customers • Cost-efficient acquisition • Retention focused on profitable and at-risk customers • Across channels • For Long-Lasting Mutually Beneficial Relationships • Customer-based measurements • Continuous customer evaluation

6. Why CRM is Important? • To reach customers who now have easy access to more information • To make effective use of every contact with a customer who can initiate or end contact with a click of a button • To meet higher customer demand for speed, service, convenience and value “Statistics indicate that profits can be increased by 25 – 125 percent just by retaining 5 percent more customers. … it’s no wonder that loyalty, guest, and personalized programs are becoming big business.” – The Value of Friendships, Melody Vargas Business Customer • To build customer loyalty • To ensure customer value • To use technology to foster more personalized and relevant communications Customer Business

7. Why Are Companies Focusing On CRM Now? • Most companies have already attained operating efficiencies and optimum productivity through: • Downsizing, outsourcing, process reengineering • Products are becoming commoditized • Customer’s were temporarily replaced by efficiency • Enabling technology has become much more cost effective • Proliferation of channels & customer segments that use multiple channels • High expectations among customers that “you should know I just applied for a loan on your website” • Downside risk of attrition if not done properly • Upside potential of cross sell, retention, up-sell when done right

8. Company Benefits • Understanding of cause and effect across all TOUCHPOINTS • “Right offer to the right customer at the right time through the right channel” • Consistent messaging, branding and positioning • Provides a customer-centric point-of-view within a product-centric business • Significant improvement in cost efficiencies • Creates platform for on-going customer DIALOGUE • Ability to estimate “Return on Marketing Investment” (ROMI) • Manages customer value – Lifetime Value (LTV)

9. Customer Benefits • An objective partner that really understands my needs • Listens to me, has my best interests at heart, understands my needs • Increased/improved responsiveness • Treat me as an individual (not a number) • Use my information to add value • An ongoing dialog that picks up where it left off; “learning relationship” • Reduced cost-of-doing business • Selectively communicates with me about solutions which are relevant to me

10. What’s More, Is That CRM Is Highly Profitable… • Cutting customer defections by just 5% has the effect of boosting profits between 25% and 85%.* • Today, the average business is losing between 15-35% of its customers annually** • 69% of these defections are due to a poor sales or service interaction with the customer** • And The ROI is tremendous*** • Revenue increases of 42% • Sales costs decreases of 35% • Sales cycle length reductions of 25% • Margin improvements of 2% • Service/support cost reductions of 40% • Customer satisfaction rating increases > 25% * Harvard Business Review ** Forum Corporation ***Insight Technology Group

11. …And The Benefits Compound Over Time Creating ‘intimate’ customer relationships results in lower acquisition costs, more referrals, improved margins and increased sales Benefits of CRM $450 $400 $350 $300 $250 $200 Annual Revenue per Customer $150 $100 $50 $0 Year 1 Year 2 Year 3 Year 4 Year 5 -$50 Duration of Customer Relationship Sales (less sales costs) Improved Margins Referral Revenue Acquisition Savings

12. The 7 Habits of Highly Effective CRM 1. A complete, real-time understanding of the customer 2. Two-way mutually beneficial dialogues with customers 3. Sharing customer information across the organization 4. Coordination of messages across all points of contact 5. Aligned incentives based on customer value 6. Organization structured around customers 7. Anticipate customer needs and proactively respond to them

13. All The CRM Hype In The Marketplace Has Led To A Number Of Misconceptions vs. Myths Reality • CRM Is A One-Off Initiative or Project • CRM Is Really Direct Marketing On Steroids • CRM Is Marketing’s Job • We’re Customer Focused Because We’re Constantly Communicating With Our Customers • CRM Is Common Sense • CRM Is Something I Can Buy or Install • It’s Really Expensive • It’s An Operating Philosophy That Is Ongoing & Requires Continuous Imprv. • CRM Is Highly Targeted, But That Where The Similarities End – Mutually Beneficial & A Dialogue • It May Start With Marketing, But CRM MUST Be Enterprise Wide • Put Yourself In Your Customer’s Shoes; Barraging Customers With Self-Serving Messages Is Not CRM • Yes, It Is Common Sense, But It’s Very Difficult To Scale • Technology Is The Enabler That Should Follow A Well Conceived CRM Strategy • Absolutely NOT

14. Technology Is An Enabler Not A Driver A Competitively Advantaged Strategy Will Drive Your Technology Choices… Customer Relationship Management (CRM) Strategy Tactics Prioritize Customers Understand Their Needs Leverage Insights Continuous Learning Enablers Technology …otherwise you’d be assessing technology in a vacuum

15. Getting Started... • Customers • Put your customers in control of their personal information • Assign customers to value tiers • Only ask customer for information if you KNOW what you are going to do with it • Launch a customer contact team • Technology & Data • Integrate customer touchpoints & data • Organization • Centralize marketing funds • Establish consistent success metrics – LT & ST • Develop simple business rules • Systematic Learning

16. Recommendations • Focus on achieving rapid, accumulated results through small incremental steps • Don’t try to “boil the ocean”… start small and grow • Think about what the customer really wants • Get business issues ironed out first • Figure out the processes early • Align incentives • Be minimalist on the technology, don’t over-engineer • Keep it simple

17. CRM Case Studies

18. Bank example:Increase Profits $118 million in 3 years $48 $118 $86 $8 $30 $32 Millions of Dollars Add New Customers Increase Closure Rate Increase Retention Decrease Losses from Unprofitable Customers Sub-total From Current Customers Total Current Customers * Before project costs

19. Customer Data Contact info (e-mail) Wireless Telecom Case Study Customer Registration Billing System Operational System Marketing Database • Revenue Billing Errors • Connectivity Issues • Dropped call / Coverage problems • Outbound Campaigns • Welcome kits/e-mails • Best Customer Programs • Customer Profitability,tenure Operational Data Layer Triggers, Business Rules, Pop-up Screens, Recommendations Web Call Center Retail Results: Monthly churn reduced from 12% to 5%.

20. Success Story - Wireless • Client • Top 3 Provider of Prepaid Wireless Services in US with a Customer Base of 1.5mm • Situation • Client had no formal Customer Retention Program in place and had MONTHLY churn of 10-12% • Solution • Developed & implemented 3 retention programs • Customer Reminder – email/outbound calling of soon to deactivate customers • Win Back – email recently deactivated customers • Welcome – Outbound call to new customers ensuring they had no phone problems • Outcome • Within one year • Reducing churn by over 50% to a monthly rate of 4-6% • Total impact is $60–$90 million in annual revenues

21. Wells Fargo Case Study Objective Situation Drivers • Increase on-line Sales & Service dramatically • Improve coordination of efforts between on-line and off-line channels • Lack of integrated customer strategy • On-line behavioral insights could not be translated into off-line marketing strategies • Inconsistent offers across channels (e.g. consumer credit) • Customer frustration increased due to lack of cross channel memory • Lack of integrated customer information was a major cause of lack of coordination • Create integrated customer information view (detailed transaction behavior across channels) • Develop new strategies, marketing programs, and decision models to take advantage of this new information • Implement new processes to execute these plans • Organize Marketing around new processes • Skills Inventory, Training and Recruiting to fill gaps

22. Wells Fargo Case Study Solutions Results Next Steps • More effective integration • Personalized, real-time offers • Click through and open rates increased 3x to 6x across product lines • 80%-100% sales growth for past 2 years • On-line share of total sales has increased to 17% of total (equivalent of 500 branches!) • # of service calls fielded by call center is down by 20-25% despite rise in sales volume. • True real-time service integration while maintaining sales momentum

23. Success Story - Pharmaceutical • Client • Largest Pharmacy Benefits Manager in the U.S. with 60 million patients • Situation • Client was marketing through corporate clients rather than directly to members and patients. Wanted to shift focus to individuals and needed infrastructure, process and analytical help. • Solution • Developed & implemented processes, models and tools for marketing direct to consumers and trained client staff on basics and advanced direct marketing techniques. • Outcome • Saved $4 million in first year; targeted calling, drug and channel shifting, infrastructure savings • Estimated NPV of entire project is $200 million