outline n.
Skip this Video
Loading SlideShow in 5 Seconds..
Outline PowerPoint Presentation


314 Vues Download Presentation
Télécharger la présentation


- - - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

  1. Outline • Harrah’s: A CRM Success Story • Cigna HealthCare: A CRM Failure • Learning from Failure: BMC Software Case • Data : One Big Hurdle • The Other Hurdle : People Issues • Build or Buy or Rent? • What Works? What Does NOT Work? L. Mohan

  2. Harrah’s Entertainment- How It Outplayed the Competition • Strategy of Big Casino Operators - “If You Build It, They Will Come!” • Created a fantasyland Las Vegas to attract customers • Invested heavily in building costly must-see casinos offering a wide range of amenities malls, dazzling shows, etc • Designed to appeal to a broader audience than simply gamblers • Harrah’s Strategy was Different - Expand Gaming Business Outside Nevada & Atlantic City • From 4 casinos in 2 states to 26 casinos in 13 states by 2003 • Became the first nationwide casino business • Saw geographic diversification as a means to… … Insulate the company from regional economic vagaries AND … Provide the opportunity to attract new customers to the Harrah’s brand L. Mohan

  3. Harrah’s Strategy 1. Strategic Focus: Casinos • Not Restaurants or Bars or Shows • Belief that competing on the basis of billion-dollar facilities was NOT the most prudent use of capital • Returns on such facilities often weaken when the novelty wanes 2. Build Lasting Relationships with Core Customers – Slot Players – for Sustainable Profit Growth … Get customers to visit Harrah’s regularly AND … Spend more of their gaming money at Harrah’s – Increase Wallet Share L. Mohan

  4. Harrah’s Strategy 3. IT Investment to Create an Enterprise Data Warehouse AND Analyze the Data for Customer–Tailored Marketing 4. Absolute Focus on Customer Service & Customer Satisfaction. Changed Harrah’s from an operations-driven company which viewed each casino as a stand-alone business into a data-driven marketing company that built loyalty to the Harrah’s brand in ALL properties. L. Mohan

  5. Harrah’s in 1998 vs. 2002 1998 • Expanded rapidly in the mid 1990s - as states such as Iowa and Illinois legalized gaming to raise tax revenues - But company was losing market share as rivals built newer and more opulent properties in each market. • Revenue: $1B • Stock price: Nose-dived towards $10 2002 • 16 straight quarters of same-store revenue growth • Revenue: Over $ 4B • Stock price: Pushing all-time highs at $ 50 L. Mohan

  6. The Bottom-Line • Customer’s Wallet Share: 42% in 2002 Vs. 36% in 1998 • Each percentage-point increase in Wallet Share has coincided with an additional $125M in shareholder value. • Once an also-ran chain of casinos, Harrah’s has become the second-largest operator in the U.S., behind MGM Entertainment, with the highest 3-year investment return in the industry • Acquired in Spring 2004 Caesar’s Palace Casinos L. Mohan

  7. What Harrah’s Knows About You ... One afternoon, last May at the Rio Resort in Las Vegas….. as I moved from machine to machine, the computers at Harrah’s office in Memphis, Tennessee, were collecting an astonishingly detailed account of each second I spent at the Rio • how many different machines I had played on (nine) • how many separate wagers I placed (637) • my average bet (25 cents) • the total amount of money I’d deposited in the machines ($350) L. Mohan

  8. How Does Harrah’s Get the Data? • A personalized frequent-gambler plastic card with a magnetic stripe called Total Rewards that Harrah’s slot players insert into machines while they play. • One reward credit per $10 gambled to earn free trips, meals, hotel rooms, etc. • Harrah’s network links over 40,000 gaming machines, in 26 casinos, in 13 states • Card data from each casino captured in a 300-gigabyte transactional database about customer activity at all points of sale • Transaction data fed into the enterprise data warehouse that contains information about gambling spends and preferences of 25M customers along with names, addresses and demographic data L. Mohan

  9. What Does Harrah’s Do With the Data? It can do what its 25 million customers cannot - consistently make good bets! Who is a profitable customer? Who should receive which offers?…. It is also important to know when to pull away from an investment in a customer who is not worth it. From the moment I signed up for my Total Rewards card in the casino lobby and filled in my name, address, date of birth and driver’s license number, Harrah’s had a pretty good hunch that my long term potential was already low….I was a 32-year old man from the distant state of Montana….did not fit the profile of a high-value customer ! Age, gender, and distance from the casino were identified as critical predictors of frequency. L. Mohan

  10. How Harrah’s Uses the DataProfile the High-Value Customer • Who are these customers? Harrah’s found that 30% of their customers who spent between $100 and $500 per visit to a Harrah’s casino accounted for 80% of company revenues and almost 100% of profits. • Surprise: NOT the gold cuff-linked limousine-riding high rollers that casinos fawned over many years • Middle-aged and senior adults with discretionary time and income who enjoyed playing slot machines • Did not stay in a hotel but visited a casino on the way home from work or on a weekend night out L. Mohan

  11. A “Perfect” Customer …... • A 62-year old woman who lives within 30 minutes of Kansas City, Missouri and plays dollar video poker • Such customers have substantial disposable cash, plenty of time on their hands and easy access to a Harrah’s riverboat casino (in this case, on the Missouri river in North Kansas City) If we only observe her once in a quarter, it’s likely that it’s because she’s playing three or four times a quarter at our competitors. So we’re going to make an educated guess and market to her as if she were a more frequent visitor, and we’ll let her confirm or disconfirm that. Then we’ll update the profile on what she does. L. Mohan

  12. Customer-Tailored Marketing • High-value customers are placed into 90 targeted segments, each of which receives custom-tailored direct-mail incentives to visit any of Harrah’s 26 properties. • Customers who live far away from Harrah’s properties typically receive direct-mail discounts on hotel rooms or transportation…. Drive-in customers get food, entertainment, or cash incentives • Most offers are time-sensitive, with tight expiration dates….. to encourage visitors to either return soon or switch a visit from a competitor to a Harrah’s property • For each direct-marketing pitch, response rates and return on investments are tracked…future campaigns are adjusted accordingly • Every marketing campaign is tested firstbefore launch L. Mohan

  13. Who Gets the Free Steak? “John Smith” • 33, Male, Lives: Missoula, Montana, Distance: 770 miles • Total Rewards Level: Gold • Plays: Video Poker • $/Bet: 25 cents; $/day: $87.50 $/Visit: $350; Visits/Year: 1 • Predicted Life-Time Value: Low • Offers: Direct Mail Coupons for Discounted Show Tickets “Betty Rogers” • 62, Female, Lives: Kansas City, Missouri, Distance: 30 miles • Total Rewards Level: Diamond • Plays: Progressive Slots • $/Bet: $1; $/day: $100 • $/Visit: $100, Visits/Year: 7 • Predicted Life-Time Value: High • Offers: Cash, Transportation, Free Meals, Free Lodging, Guaranteed Room Reservation, Valet Parking, Access to Harrah’s Diamond Club L. Mohan

  14. Use Customer Service as a Differentiator for Treating Customer Differently • Split Customers into Gold, Platinum and Diamond tiers based on estimated annual value • Greater levels of service to Platinum and Diamond tiers will induce customer aspiration to earn the higher-level card Example: Our best customers wanted service quickly – they didn’t want to wait in line to park their cars or eat in restaurants, or check in at the front desk. So we routed our customers into three different lines which created a visible differentiation in customer service. … It was essential for our customers to see the perks that others were getting. … Every experience in the casino was redesigned to drive customers to want to upgrade their card. L. Mohan

  15. Harrah’s IT Investment • Magnetic Card Readers:Harrah’s Total Rewards card readers are installed on all of the company’s 40,000- plus gaming machines. The readers capture a customer ID number from each card, and a small LCD screen flashes a personalized greeting along with the customer’s current tally of reward points. • Electronic Gaming Machines:All gaming machines are computerized and networked. Each machine captures transaction data and relays it to Harrah’s mainframe computers. • Onsite Transaction Systems:IBM-based transaction systems are located at each casino property; they store all casino, hotel, and dining transaction data. L. Mohan

  16. Harrah’s IT Investment • National Data Warehouse:A Unix-based data center in downtown Memphis links all of the casinos’ mainframe systems and customer data. Customer history and reward-point tallies are passed down from this database to the onsite mainframe systems - which, in turn, relay the data to the card readers. • Predictive Analysis Software: Developed by Harrah’s and software firm SAS, these programs produce nearly instantaneous customer profiles that allow the company to design and track marketing initiatives and their results. L. Mohan

  17. Best Data-Driven Marketing Will Fail If Customer Service is Third-Rate! 1. Measuring Customer Satisfaction is a MUST “Customers who said they were very happy with the Harrah’s experience increased their spending at Harrah’s by 24% per year … disappointed customers decreased their spending by 10% per year”. 2. Training of ALL Harrah’s Employees in a Certification Program To Deliver Excellent Service 3. Bonus Plan Rewards Hourly Workers for Achieving Improved Customer Satisfaction “If a property’s overall rating rose 3% or more, each employee could earn $ 75 to $ 200 … in 2002, Harrah’s paid $ 14.2M in bonuses to non-management employees”. L. Mohan

  18. Best Data-Driven Marketing Will Fail If Customer Service is Third-Rate! 4. Reward Depends on Everyone’s Performance “If the valet’s scores were low but the steak house receptionist’s were high, the receptionist would check on the valet.” 5. Bonus NOT Linked to Financial Performance of the Properties “ In 2002, one property had record-breaking financial results, but employees did not receive any bonus because their customer service scores were mediocre”. L. Mohan

  19. Food for Thought from Harrah’s Approach • Meeting budget at the expense of service is a very bad idea. If you’re not making your numbers, you don’t cut back on staff. • Human resource management is critical, especially in a service business “You can’t deliver great service if the turnover rate is high. The absenteeism rate will be high. The managers who ought to be thinking about the customers are instead dealing with scheduling, hiring and training. The customer ends up mangled.” L. Mohan

  20. The Harrah’s Lesson Harrah’s bet against industry wisdom, moved away from the glitz and spectacle; and, instead invested in a ground-breaking customer management strategy that has enabled the company to expand market share relatively cheaply in a business where most companies grow by building costly new properties. Competitors are trying to catch up. But Harrah’s has got a formidable lead. Its systems, reserves of data and marketing-led culture will not be easy to replicate. L. Mohan

  21. A Good Customer Data-Driven Strategy Is NOT Enough - Effective Execution is Key • Strategy must be championed at the highest level of the firm, not just within Marketing “If I had come in as head of marketing, none of this would have worked. I needed the authority to get things done right across the company” … G. Loveman, then COO of Harrah’s 2.People running day-to-day operations have to change their mindset and be customer-oriented “We have a process of quarterly reviews of what each property has done. My predecessor would ask: Did we build any new rooms? Did we finish the renovation of the hotel? Where is the hot dog stand? I never ask any of those questions. I never let them take me on a tour of the building. I ask: What has happened to $ 100 and above customers who live in adjoining zip codes … The whole company has become very focused on how we market”. 3. Institute systems with carrots and sticks to focus on customer service by linking employee rewards to customer satisfaction. L. Mohan

  22. Cigna HealthCare’s “IT Transformation” - A Case Example of Bad Execution 1999: Launch of Ambitious IT Project • Objective: An integrated system for enrollment, eligibility and claims processing • Consolidate and upgrade several antiquated (some dating back to 1982) back-end systems for claims processing and billing • Integrate them with glitzy new customer-facing systems on the front-end Benefits • Customer service reps will have a single unified view of members • Customers would get one bill • Medical claims proceed faster and more efficiently Project Cost : $ 1 Billion L. Mohan

  23. Cigna HealthCare’s “IT Transformation” - The Result Cigna CIO received the 20/20 Vision Award of CIO magazine January 2002: System went live • 3.5 M members moved from 15 legacy systems to new system in a matter of minutes • But migration did not go smoothly resulting in significant glitches in customer service Bottom-line: Fourth largest insurer lost 6% of its health-care membership in 2002 – from 13.3M to 12.5M Net loss of $445M in the first 9 months of 2002 Source: CIO Magazine, March 15, 2003 L. Mohan

  24. The CEO’s Confession At October 2002 Conference Call with Investors “Unfortunately we have not executed well on transformation. The cost is greater than anticipated, much of the economic and service benefits are yet to be realized, and transformational shortfalls have led to service shortfalls, which have led to lower new sales and (customer) retention” Comment by CIO of Another Health Insurance Company “CRM is a very important business solution. Our customers want better tools and capabilities and product options, and they’re driving us into this space. But there’s a heavy risk involved. How you connect CRM to the back office and bring customers on board makes all the difference. When you stumble, the very credibility of your company is at stake” L. Mohan

  25. The Roots of Failure 1. Late Start of “IT Transformation” Project • Cigna spent $7.6B between 1996 and 2001 from sales of noncore companies such as property and casualty insurance on stock buybacks • “What they should have been doing is investing a half or third of the money spent on repurchasing stock to improve IT systems” L. Mohan

  26. The Roots of Failure 2. Urgency to Implement New IT Systems • Sued by thousands of doctors nationwide about delays in payment for patient care - Cigna paid a $300,000 fine to the state of Georgia and signed a consent order promising to reform its claims processing system which was “the worst I’ve ever seen”, according to Georgia’s insurance commissioner • Cigna’s sales team, in order to win large lucrative employer accounts in an increasingly competitive environment, had promised that the new systems would provide improved customer service and would be up and running in early 2002 • Cigna’s management was under pressure to cut costs after posting disappointing second quarter results in 2002- Anxious for the new systems’ promised cost reductions and productivity gains to enable laying off 3,100 people and limit hires to 1,100 – a total reduction of 2000 positions. L. Mohan

  27. An Overview of the IT Project • Had to build an entire AS400 infrastructure from scratch to support the two main platforms for claims processing: Power MHS software which was already on a few AS400 computers and ProClaim software still running on IBM mainframes “We had to develop our own wrapper architecture to connect these two platforms and integrate claims eligibility on the front-end with banking and billing on the back-end. To do that we had to completely re-engineer the back-end systems” • Most of the architectural work done in-house but hired Cap Gemini Ernst & Young (CGEY) to help implement the change management and business processes involved • CGEY also worked with Cigna HealthCare to develop and implement new customer-facing applications – the CRM system L. Mohan

  28. Cigna’s CRM System Objectives: • Customer Self-Service: Enable members to enroll, check the status of their claims and benefits, and choose from different health-plans – all online • Unified View of Members to Customer Service Reps: Provide the reps a full history of the member’s interaction with the company when a member called with problems or questions Software: Bought Two Packages • Siebel software to handle call center functions • Computer Sciences package for claims processing L. Mohan

  29. Implementation Process • Began moving members to new systems in 2001 – but in relatively small numbers – 10,000 to 15,000 people at a time; “there were minor problems that were dealt with but nothing major”. • At the same time, began laying off customer service reps as part of a planned consolidation of 20 primary and specialty service centers into 9 regional centers Rationale: Expected new IT system to deliver huge gains in productivity from automated claims processing and customer service. Cost of Reorganization: $33M in severance for the 3,100 laid-off employees and $32M to build the new regional centers • January 2002: Moved 3.5M customers in one fell swoop – problems erupted immediately L. Mohan

  30. A Migration to Nowhere! - Customers Suddenly Had Trouble with Coverage • In one case, Cigna’s systems could not confirm health coverage for some new members for several weeks • Workers at another company effectively lost coverage when their membership information would not load properly into the new system • Cigna issued member ID cards with incorrect identifiers. - Prescription icons were missing Result: People could not get their prescriptions filled at their local drug stores Morgan Stanley analysts heard about these snafus in late January 2002 and promptly downgraded Cigna’s stock L. Mohan

  31. Call Centers Besieged by Calls - No Help However! • Lay offs resulted in not enough call center reps to handle the load - people waited on hold, and waited… • No help when they did reach someone, since the newly hired reps had not been adequately trained on the CRM system “You can have the best system in the world, but if you have people with relatively little tenure, you’re not going to get the best service.” Cigna has since hired back a number of reps it laid off! L. Mohan

  32. Cigna’s Mis-Steps in Execution Converting data from back-end systems to CRM systems is NOT 1-2-3 - Data has to be cleaned and filtered in order to be understandable to customer service reps taking calls and members seeking information online “When you take data from the back-office system that was built to process claims and expose that data to the front-end, it starts looking funny – for example, compressing the 9-digit zip code to 8 to save space on disks and transferring that data as is to the front-end makes your company look awkward.” 2. Rush to go live resulted in the Cigna team not having “time to do a very thorough volume testing or end-to-end testing.” L. Mohan

  33. Cigna’s Mis-Steps in Execution 3. CIO of Cigna Corp., the parent company, blames the IT staff of Cigna HealthCare and the system integration consultants. “The business divisions had autonomy, and you can’t second-guess the people on the ground every day. The business unit was working with a name-brand systems integrator and they were not knocking on the door saying, Don’t go live, don’t go live. Can you truly expect the corporate CIO to have more visibility into the day-to-day workings of what’s going on in that project than the people in charge of it? Big Issue:Corporate Governance of IT in a multi-division organization “At the end of the day, you have to strike the right balance between central IT authority and strong functional guidance that’s aligned with the business L. Mohan

  34. Post-Mortem Changes at Cigna CIO of Cigna HealthCare business unit and IT manager in charge of transformation were let go. Brought in more experienced managers to monitor the project Slowed down the pace of migration and shored up those processes around the conversion of customer data Instituted more thorough testing practices Moved 20 experienced application developers into the project Relying less on its systems integrator and more on in-house IT staff to manage the project Project cost well over $1 Billion budget L. Mohan

  35. Cigna Recovered from the IT Disaster! • July 2002: Cigna was able to move additional members to the new IT systems without major incident • Jan 2003: Successfully migrated another 700,000 members • Launched, an online portal where Cigna members can look up their benefits, check on the status of their claims, retrieve health info and talk to nurses online • Able to cut another 3,900 positions as part of a streamlining of Cigna’s sales force and medical management team – New IT systems have enabled that downsizing by eliminating duplication in claims processing and billing • Customer satisfaction surveys conducted by Cigna in late 2003 show that 83% are satisfied with the service they get compared to 58% earlier in the year L. Mohan

  36. Lessons from Cigna Failure 1. Keep the project management in-house - Even if you hire a consultant to implement your IT integration project. Have experienced project managers to monitor every stage of the process. 2. Test, and retest, in a real environment and end-to-end before going live - Take your time moving data from the legacy systems to the new platforms, and do it in bite-size chunks so that you can fix glitches as you go. 3. Make sure your back-end data is cleansed and filtered for front-end use - When it comes to data migration, take nothing for granted. L. Mohan

  37. Lessons from Cigna Failure 4. Bring in a focus group of customers - After you've tested the system with your sales, marketing and customer service reps, go back and redesign the front end so that customers can actually use it. 5. Train and retrain the customer service reps on the new systems 6. Don't expect productivity gains for months after the new platforms go live - Don't make business decisions based on anticipated projected savings or gains. Wait to see if they materialize. L. Mohan

  38. CRM – Hot Area for IT SpendingBut… A Big Challenge to Implement • CRM involves a radical cultural shift that reshapes a company’s sales, marketing, and customer service • Unfortunately, it doesn’t occur magically once the software is booted up • Too often, companies see CRM as software, when it is merely an enabler, a tool in their tool kit The Big Hurdle: Change Management • 87% of respondents in a recent survey conducted by online resource center, CRM Forum, pinned the failure of their CRM programs on the lack of adequate change management L. Mohan

  39. Learning from Failure - Case of BMC Software Succeeded the third time after two failed attempts What Went Wrong? • No Customer Strategy- CRM focused on performing processes faster • Top Management Involvement- Not much! • No Efforts to Get Buy-In from Employees- Believed that software would sell itself • No Attention Paid to Required Organizational Changes L. Mohan

  40. The Third Time - BMC did it Right! • Project Headed by VP of Sales for North America - Supported by Manager of Marketing Programs • Defined the CRM program’s requirements with the help of 175 employees, who served as the early champions • Communicated the benefits to employees • Showed how the CRM system would help the sales force to achieve its targets • Rolled out the CRM program in stages to capitalize on early wins - also, reduced risk of any problems affecting the entire company L. Mohan

  41. Murphy’s Law for Data The Data You HAVE Is NOT The Data You WANT Is NOT The Data You NEED Data problems are more difficult to solve than hardware and software problems. L. Mohan

  42. Gaps in MIS Data - An Old Problem Citibank “We found … that management … didn’t even have a good profile of its market and customers. It didn’t really know in summary form what (its position was) with respect to discrete market segments … There was very little account profitability and not even market segment profitability information.” General Electric “Information on orders, sales and margins … are of maximum value when tied to … meaningful market segments. And segment-based data are of limited use to finance, hence the common misalignment problem between finance and marketing.” L. Mohan

  43. A More Serious Problem . . .Data That is NOT Available • “Soft” Data relating to ... • Customer’s Buying Process • Reasons for Infrequent Purchase • Reasons for Defection • Quality of Customer Support • Who Should Collect This Data ? • People at the Customer’s Touch-Points . . . Field Sales, Telesales, Service, Call Centers, Storefront, . . . L. Mohan

  44. How to Get Soft Customer Data ? 1. Careful design of the form to collect data • Keep It Simple • Minimize Text Data • Use Check Boxes, Rating Scales 2. Train the Data Providers 3. Motivate the Data Providers • To get good quality data L. Mohan

  45. Data Management Issues • Development of Relevant and Clear Data Definitions and Coding Standards • Streamline Procedures for Data Collection and Flow : • Eliminate unnecessary paperwork • Ensure timeliness of data • Assign responsibility and authority to a specific individual: The Data Administrator • A demanding job for which appropriate rewards must be given L. Mohan

  46. Data Quality: The Cornerstone of CRM Inaccurate and low-quality data costs US businesses $611 B each year in bad mailings and staff overhead alone… More injurious than the unnecessary printing, postage and staffing costs is the slow but steady erosion of an organization’s credibility among customers and suppliers as well as its inability to make sound decisions based on accurate information. Mission Statement of Cullen/Frost Bankers (an $8 B financial holding company in San Antonio,Texas) More than 98% of our company’s assets and those of our customers are managed by data and information – and less than 2% are in the form of cold hard cash. Just as we are careful and meticulous in managing cash and negotiables, we have a duty and obligation to exercise a high degree of care with the data that is the basis for customer relations and decision-making. Source: The Data Warehousing Institute Report, 2001 L. Mohan

  47. Data Cleansing- A Must When Creating the CIF The Problem: CIF requires data from a disparate set of databases, located in various parts ofthe enterprise containing data of varying ages collected from various sources and channels, and stored in a multitude of different architectures and platforms Ex: Shell Exploration and Production took 7 months to map data from 27 data sources in a 450 GB data warehouse, using a tool from Kalido Ltd. Every system has its own internal set of codes. Going back and cleansing the data in those host systems wasn’t an option. It would have taken too much time and been too expensive. Corporate politics was not too bad because no single business unit lost control of its data. And now they all contribute to a greater understanding of the company as a whole. Once the concept was proved, we had pressure from the top to integrate other applications as well. They could see themselves what information they could now get and how powerful it is. Source: Computerworld, Apr. 15,2002 L. Mohan

  48. “Cleaning House” – An Action Plan • Determine which types of information must be captured Form a data mapping committee – but keep it small or risk never reaching agreement • Find mapping software that can harvest data from different sources such as legacy applications, PC files, HTML files, unstructured data sources and enterprise-wide systems (ERP) • Start with a high payoff project inside a business unit that is a big revenue generator for the company - you will get the cost justification for the buy-in from the top • Create an ongoing process for data hygiene - to keep the data clean. L. Mohan

  49. Extracting, Transforming & Cleansing Customer Data- 80% of Firms Underestimate Time & Resources* Example: Problem: Poor quality of customer master data in the ERP system of a manufacturer - a subset of large customers was labeled with an incorrect industry classification code. Result: Overlooked in market segmentation analysis performed by the Marketing dept. - this customer segment received no promotions, which would have generated an estimated $ 5M in revenue within one year. Good data quality does not drive value in and of itself but it is the means to achieve high-value benefits. Although data quality maintenance is not the front-facing functional module in a CRM project, it is a necessity to get value from the CRM investment. * Source: Gartner Viewpoint, Nov.29, 2001 L. Mohan

  50. The Politics of Data- Most Vexing Problem Information = Power Who has access to What Data ? The politics of competition within the company is a real obstacle to developing a common, shared CRM database. L. Mohan