Implementing a Customized CRM at Shanghai

Volkswagen

Teaching Note

Synopsis
SVW’s sliding market share in an increasingly competitive market environment forced the
automaker to develop a long-term plan to combat declining brand image and sales.
Management believed the strategic implementation of a customer relationship management
system could help them leverage SVW’s existing customer data, and use it to build a
sustainable competitive advantage. This data could be used as a platform to build a CRM
system, which would allow SVW to create strong brand management and a solid customer
relationship management strategy to invigorate their front-end business processes.

Conceptual Foundation & Teaching Objectives

This case engages in an understanding of how CRM can be used strategically to develop a
brand management and customer relationship strategy. China’s unique market
characteristics and SVW’s existing business structure force the service provider ‘Grey’, to
customize its GRM solution for its client in Shanghai. This case examines how a CRM is
customized, including the challenges of designing and implementing a CRM strategy for
SVW and the vision to build an ‘integrated plan’ by blending marketing and client
management techniques. SVW’s case also highlights how the organization is trying to build
a sustainable competitive advantage, by using its proprietary historical customer
information, to build its CRM system which they believe is an asset which cannot be
replicated by competitors.

The teaching objectives of the case are:

§ To provide students with an understanding of SVW’s business and marketing challenges

in China
§ To understand how CRM strategy and technology can impact a business’s front-end
processes
§ To explore the challenges and advantages of implementing a customized CRM system in
China

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§ To understand the strategy, processes and technologies involved in Grey’s CRM system
implementation at SVW
§ To understand the impact of the CRM technologies on SVW’s customer lifecycle and on
integrating customer management processes

Suggested Student Assignments

1. What were the key challenges with implementing a CRM system at SVW?

2. Review the impact of CRM on SVW’s overall customer strategy?

3. How were CRM tools used to create SVW’s CRM system?

4. Examine the impact of CRM applications from a customer lifecycle viewpoint?

5. Evaluate SVW’s CRM system and discuss how SVW could leverage relationships to
enhance sales?

6. As SVW’s CRM director, would you implement IBM’s CRM solution or Grey’s CRM
solution?

Potential Teaching Approach and Strategy

This case should be a foundation to understand challenges of a CRM implementation in

China and understand how market strategies have to be customized for the local market.
Teachers can use this case to highlight the advantages of applying a CRM system to a pure
auto manufacturer and study the impact of CRM technologies on traditional marketing and
sales processes in China. This case also reviews the transformation process discusses the
implications of building a CRM system which is successful by local standards. Finally, the
case teaches how Grey used SVW’s existing data is used to develop a brand management
and customer loyalty strategy.

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 Analysis

1. What were the key challenges with implementing a CRM system at SVW?

§ Market Factors

Heated auto competition in China put constant pressure on prices and margins, resulting in
SVW’s struggle to maintain market share. In addition, private car buyers were displacing
government and corporate customers as the largest consumer group and they wanted
better cars and better customer service at competitive prices. In Shanghai, auto competitors
such as GM had gained tremendous advantage over SVW by entering the market just before
the consumer boom began because they were able to recognize existing customer service
gaps and develop greater control over their dealerships right from the beginning. They
introduced sophisticated marketing techniques to their dealers. These competitive factors
put pressure on Grey to implement a CRM system which could optimize existing customer
relationships and gain new customers through a more integrated marketing and sales
effort.

§ Organizational challenges

SVW’s joint-venture with SAIC and existing dealer relationships became a liability as
competition increased in China’s automotive market. The joint-venture had prevented SVW
from developing direct linkages with its customers & dealers and made SVW less responsive
to market changes such as the changing customer profile. In addition, a lack of control over
dealerships from the onset made it harder for them to change existing dealer relationships
and change dealer attitude towards customers when market conditions required SVW to
exert more control over its sales processes and influence the end customer.

As a result of the joint-venture, SVW also inherited disparate and heterogeneous IT systems
which precluded a single view of the customer, resulting in a poor understanding of
customer preferences, higher costs, decreased responsiveness, and eroding brand equity.
They needed to align SVW closer to its dealers, sales & marketing and customers to create a
more integrated sales approach towards its customers and to improve implementation and
execution of the processes involved in serving customers.

§ Educating and Training Dealers/ Managing Dealerships

Dealers greatly influenced first-time buyers more and played an important role in
managing the relationship between SVW and its customers; however, SVW’s large
distribution network was not being leveraged in the sales process and SVW lacked any real
collaboration with the dealer community to create sustainable customer service benefits
from these existing dealer relationships. Also, dealer’s lack of training in sales and service
issues meant SVW needed to educate its huge network of 600 strong dealers throughout
SVW’s regional centres to bring their expertise on par with competitor’s dealerships.

Grey needed to provide training and education on how new CRM technologies would
enhance services and allow dealers could improve interactions with customer. Some SVW
dealerships even needed basic training on how to make a sales call, how to answer
customer enquiries and introduce standard responses to FAQ’s.

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§ SVW Marketing & Sales

Since most Chinese buyers had not developed any purchasing preference, they had few
loyalties for existing or new brands. SVW’s weak sales and marketing infrastructure in the
past meant that it had not managed to lock-in customer relationships therefore SVW faced
the challenge of competing with a host of new automotive suppliers without much
advantage of being a first-market entrant.

To remain competitive, it was critical to increase communication and contact between SVW
and its customers and create a unique experience at every stage of the lifecycle. In
Shanghai, dealers and SVW faced mounting pressured related to acquiring and retaining
customer and since the nature of the customer had changed dramatically in China,
therefore, tactical customer management strategies needed to be changed as well. To
respond to high customer expectations, SVW were finding they needed to use both
traditional and emerging channels to deliver more effective, efficient, and profitable
marketing, sales, and customer service.

2. Review the impact of CRM on SVW’s overall customer strategy?

Through existing data, Grey built a CRM infrastructure to be able to gather and analyze vital
data about SVW customers and share dynamic customer data with dealers. By tracking
customer behavior and linking that information to dealers, CRM helped SVW create direct
relationships through the management of information. Information sharing transformed
previously linear relationships into two-way relationships between as web-based channels
helped SVW to interact directly with dealers and customers [refer to Figure 1].

Historically, SVW’s customer management processes were seen as separate functions and
customer information was fragmented, which led to isolated customer views. In addition,
mass-market focus prevented SVW to respond to changing customer needs. However, Grey
transformed how SVW managed its client relationships by infusing relationship
management with technology and increasing customer touch-points. The new CRM system
was not about technology, but technology enabling the strategy to improve every stage of
the customer lifecycle including customer attraction, acquisition, retention and loyalty
management processes.

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 Figure 1: CRM’s Strategic Impact on SVW’s Business Relationship

SVW
Customers

Information
Sharing/
Web Based
Channel

SVW SVW
Dealers

Source: Case Writer

When CRM was viewed across SVW’s marketing, sales and customer service functions, there
were three main areas where it had realized efficiency:

§ Marketing Efficiency: Customer segmentation based on customer analytics

allowed SVW to segment valuable customers and respond with targeted
marketing programs (leading to lower expense-to-revenues ratios).

§ Back-end Efficiency: Automating customer management processes such as

customer inquiries processing through the call-centre, allowed greater
business volume and a larges sales base. Also, the Internet channels allowed
efficiency in customer servicing and sales management, leading to shorter
sales cycles.

§ Service –centre Efficiency: Call centres allowed SVW to provide

comprehensive customer information which would lower transaction
durations and reduce customer management costs.

Unlike SVW’s traditional CRM practices which captured disparate information, the new CRM
system focused on transforming SVW’s data into competitive customer information. The
use of technology in building and managing long-term and sustainable relationships formed
a mechanism for achieving customer intelligence. Technology enabled SVW to integrate
customer information collected from transactions and interactions throughout its demand
and supply chains and this would enable them to evolve towards the long-term analysis of
customer revenue generation.

3. How were CRM tools used to create SVW’s CRM system?

The aggregation of data including the traditional channels (road show, direct marketing)
merged with new touch points (Call centre, web online marketing) created a centralized
database, which had the effect of integrating SVW’s front-end processes (lead and prospect
management) with SVW’s back-end operations (marketing department). The data

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aggregation, consolidation and data mining capabilities helped improve accuracy of
customer information and led to uniformity of information.

Real-time data accessed through the CRM applications allowed bidirectional movement of
data from the CRM warehouse back into SVW’s core front-end systems including SVW
dealers, call-centre agents and its customer websites [refer to Figure 2]. Three basic CRM
applications were used to create a customized CRM system for SVW including a dealer
extranet, a call centre and consumer websites. Pooling existing data and centralizing it into
a single database led to better understanding of the customer and SVW was able to
segment the customer according to psychographics and demographics to build tactical
marketing plans. All the various CRM technologies have had the benefit of achieving
integration across channels and SVW business units because the customer lifecycle
processes had been tied together through information.

Figure 2: SVW’s Customized CRM System

Database
Server Analytic
(CRM Server
Database)

Web Application
Firewall server server

SVW HQ

Dealer
Database
Extranet Consumer
Website
Internet
Intranet
SVWSC
CAC
Dealers customers
Call
Centre
Source: Grey Worldwide

§ Dealer Extranet. The dealer extranet had the impact of updating any customer
information a dealer received in the CRM Data warehouse. The information was further
segmented into existing customers or prospective customers. The marketing
department sending either prospective customer information back to the dealers
through the dealer extranet, qualifying them as ‘hot leads’ then closely followed lead
management. Alternatively, updated information on existing customers would lead to
trigger marketing programs to build customer loyalty and focus on retaining these
customers.

§ Call centre. The call-centre’s inbound functionality was used to service customers,
update customer profiles and send updated information to the CRM data warehouse.
The call centre agents qualified SVW’s customers and developed interactions h them
which allowed SVW and Grey to develop a portfolio of customers to form a loyalty club

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 (VIP Club). This VIP Club was used to design specific promotional material, special
campaign management techniques to appeal to these customers and use events to
create customer loyalty and also use these events to create richer customer profiles for
VIP Club members. This information was also looped back into the CRM repository.
Knowledge management has led to more personalized and differentiated product
offerings based on customer knowledge. For example, if customers connect to SVW’s
call centre, the system is able to personalize interactions with inbound calling
customers and SVW is allowed to directly build a relationship with its customer,
without dealer involvement. In addition, every inbound customer contact through the
call-centre is now captured, whether received by email, fax letter or telephone. The
standardized collection of data into customer profiles is also key in building the
customer relationship. Also, this stored customer information will allow Grey and SVW
to know which customer has been a loyal one, because this information is captured in
the initial purchase and follow-up interactions with dealers. Analysis of the captured
data can also suggest the lifestyle customer and provide them with the big picture
perspective.

§ SVW Websites. An SVW website was launched as a branding channel and a platform
for online marketing. When SVW customers researched products through the Internet,
Grey began capturing their information about their choices and follow up by asking
dealers to perform specific tasks to follow those leads, such as taking the customer for a
test drive in a particular car model etc. In addition, pop up on web sites were used to
gather customer information and customers were given incentives to answer this
information.

Technology solutions played a key role in solving SVW’s front-end challenges as Grey
managed to unify data (centralized database) and present it in an accessible, timely way for
dealers (through the dealer network) and SVW (through the Internet environment) to
better communicate with its customers. By building a CRM platform, SVW had the
opportunity to build brand loyalty and sustainable relationships – which resulted from
personalized and consistent experience delivered to the customer.

4. Examine the impact of CRM applications from a customer lifecycle viewpoint?

Adopting a customer lifecycle strategy and incorporating CRM technologies would allow
SVW to develop customized strategies for each customer lifecycle stage.

Currently, SVW’s customer management processes revolved around stage one and two of a
total customer relationship management strategy [refer to Figure 3]; once purchases were
made, there was no follow up and repeat purchases were not managed. By means of
embedding the processes with enabling technologies, SVW had aligned the sales and
marketing department so customer data that was gathered could be centralized. Just as
SVW’s ability to track and analyze customers allowed them to recognize the source of leads,
(crucial to measuring the effectiveness of the sales channel and marketing mix) data mining
and analysis allowed SVW to improve marketing campaign management strategies and
customer segmentation strategies. This information would be key because SVW realized
that understanding Chinese consumers' requirements across the full life cycle of car
ownership was essential to deliver the right value proposition and build customer loyalty.

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For example, during the customer attraction stage, strong lead management processes were
important, such as creating awareness of SVW’s brand and expanding its customer base.
SVW’s brand websites were a marketing platform to create interest in SVW automobiles and
the call-centre provided support in sustaining this interest and expanding the customer
base. Just as SVW’s ability to track and analyze customers allowed them to recognize the
source of leads, (crucial to measuring the effectiveness of the sales channel and marketing
mix) data mining and analysis allowed SVW to improve marketing campaign management
strategies and customer segmentation strategies.

The next stage was crucial since customer acquisition required strong prospect
management processes and meant converting potential leads into long-term customers.
Analyzing data helped build customer segmentations and dealers could adopt service levels
according to customer loyalty. Dealers played a key role during the customer acquisition
and retention stage; the dealer extranet system allowed SVW’s marketing and sales
department to route leads to the best resource and relevant dealer for follow up and action.
Dealers received customer information through the web-based system which was already
profiled by the call centre. Dealers could simply update the system and close the customer
information loop with any new customer information they gathered.

Capabilities for capturing and mining relevant data would enable SVW to measure, predict,
plan, and optimize customer relationships with greater effectiveness. Incomplete
information often led to redundant or even conflicting messages being sent to the
consumer. Given more integrated customer information, the marketing department could
better track campaign effectiveness and develop knowledge on customer needs,
motivations and behaviour over relationship lifetimes. The RFM model, for example, was
specifically designed to leverage database information and apply customer knowledge such
as customer frequency in purchasing a particular SVW brand and a customer’s monetary
value to the company over time.

The end result was that applying basic CRM technologies had created greater customer
value and the front-end processes were modified to become more customer-centric because
SVW and dealers had access to reliable data to deliver efficient customer service.

Figure 4: Customer Strategy Integrated through CRM Applications

SVW - GRM Trust

Repeat
Customers

Lifetime
Customer customer
Customer Customer retention & value
attraction acquisition loyalty management

One-time purchase

Stage 1 Stage 3 Stage 4 Value

Interest Conversion Loyalty
Need Action/ Maintenance
Experience

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 CRM Application’s Impact on Processes of Each Customer Management Stage

Analyze
§ Create how CRM
interest in enhanced
§ IdentifySVW’s capabilities
customers across touch
§ Integrate the sales§ and service
Develop value
knowledge
chain?
SVW automobiles and route to best points to create on customer needs,
through its brand resource, either centralized database motivations and
websites dealer or call centre system behaviour over
§ Expand customer § Provide dealers with § Segment customers relationship lifetime
base through leads through dealer through the § Apply customer
solicitation by call extranet centralized database knowledge to
centre agents § Capture customer § Choose service level improve
§ Advertise brand details/ update by customer performance Apply
through banners in profile through call segments and differentiated
local portals (i.e.) centre channels service levels,
§ Use call centre to § Gather information § Provide customized provide
verify existing on prospects/ brand experience to personalized offers
customer improve information fit each profile and create cross-sell
information and quality and § Track campaign up-sell opportunities
standardize it disseminate leads to effectiveness
appropriate channels

Source: Case Writer

5. Evaluate SVW’s CRM system and discuss how SVW could leverage
relationships to enhance sales?

CRM was a long-term engagement and so far SVW only had a basic CRM system to manage
the process of building valuable customer relationships. The critical part was the next
phase and real benefits would only occur when SVW could regain customer loyalty and
leverage its long –term customers, encouraging repeat purchases and capture lifetime
relationships. If SVW’s marketing department could actually identify high net worth clients
and leverage those relationships, it would help them to increase sales growth. The key
factor was that SVW needed to continue to manage the customer base as an asset and
increase its value over time, with the objective of driving sales efficiency and maximizing
return per interaction by making the right offer to the right customer at the right time with
a more rigorous, quantitative understanding of individual customers in the long-run. This
required SVW to establish tighter collaboration with dealers to enhance lead generation,
build transaction data, further empower dealers and create tighter CRM integration
throughout SVW’s business units.

Optimize Lead Generation Process

Grey needed to build on SVW’s existing mass-marketing efforts by adding a more integrated
marketing approach: blending customer relationship management with marketing
management. One of the objectives was to generate more ‘qualified’ leads for dealers and to
augment this effort by optimizing marketing processes such as campaign management,
product promotion strategy and advertising. For example, based on its existing CRM system
using internal data collected from SVW’s database, SVW could segment customers into
needs based groups and mail promotional campaigns to prospective and current customers
to better determine their reasons and motivations for purchasing SVW brands.

Enhance Loyalty

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The next step was to enhance loyalty – which was characterized by repurchase rates. Over
time, SVW would need to aggregate customer data into profiles so that customer
information would show purchase history and service interaction records. This transaction
data would enable SVW to develop individual marketing packages for each of its customer
segmentations. In addition, SVW needed better interaction with its dealers by notifying
them of specific campaigns and promotional material for them to follow-up with the
customers.

Further Empower Dealers

Up to now, SVW was pushing lead and prospect information to dealers and receiving their
feedback on customers. However, enhanced customer management tools such as portal
applications would provide dealers access to real-time information and would help them
make quicker, more informed and more strategic decisions. A variety of CRM tools could
assist dealers in making real-time decisions based on automated, yet specific,
recommendations generated by the collective information within the CRM system. An
upgraded system could allow dealers to incorporate end-customer information and history
into sales processes and provide a single, comprehensive view into all the information
relevant to sales accounts. The portal would also be a platform for SVW to collaborate
closely with dealers by:

§ Enacting best practices across the dealer network

§ Providing dealers with a more comprehensive information exchange system
§ Connecting with SVW’s legacy systems to share service and warranty information

Further Integrate CRM

SVW needed to focus on generating efficiencies through further optimizing its CRM
processes. Its CRM system would need to become more sophisticated by allowing more
real-time integration of data across the organization and an increase in the ability of all CRM
tools to access that data. SVW needed CRM functionality to be embedded in its core
business applications such as dealer management, after-sales management and marketing
management so that effective decisions could be made enterprise-wide across all customer
servicing business units.

6. As SVW’s CRM director, would you implement IBM’s off-the-shelf CRM solution
or Grey’s customized CRM solution? Why?

Advantages Disadvantages

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Grey § Grey’s CRM system was customized
specifically to SVW’s business
needs
§ Its CRM applications were selected
on a needs basis and were applied
phase by phase
§ Grey’s CRM system did not threaten
dealers and was adequate to
facilitate effective communication
between SVW and its dealer
network
§ The CRM system was simple to use
by all value-chain parties involved
in the implementation
§ Cost effective business process
adjustments
§ SVW dealers comfortable with
Grey’s level of technology
§ Flexible CRM solution
IBM § Automotive focused solution
§ Fully integrates front-end and back-
end to provide total connectivity
§ IBM solutions were catered to
customer lifecycle stages
§ Enterprise-wide customer data
sharing platforms
§ Supported marketing functions
across multiple channels
§ Grey’s CRM system did not create
tight integration across the service
and sales channels
§ The information was still push-
based, i.e. certain channels pushed
information to other resources,
therefore, it was not a truly
interactive platform
§ Its CRM system would not be able
to manage highly individualized
customer treatment initiatives until
another few years
§ IBM’s solution did not account for
China’s market idiosyncrasies
§ The solution required total
integration of back-end and front-
end processes
§ Changes cannot be made easily and
without huge financial
considerations
§ Complex and comprehensive CRM
objectives
§ Highly automated and rigid
solution
§ SVW dealers would feel threatened
by the complexity of IBM’s
technology

Source: Case Writer

The IBM solution offered a highly integrated infrastructure suited to customer and vehicle
information gathering. It provided completely integrated front and back office functionality
to ensure connectivity with distributors, dealers, and consumers. However, these vertical
solutions were premium-priced and did not necessarily represent premium benefits for
SVW because it did not have the organizational infrastructure to leverage the full range of
IBM’s CRM package. For example, the key problem with providing integrated CRM at SVW’s
customer facing operations was its general lack of IT architecture and generally low IT
application environment. CRM services and an integrated, standardized set of company-
wide applications and benchmarks did not exist so it would be difficult to benefit from
IBM’s comprehensive CRM technologies when the organization’s technical infrastructure
was inadequate to absorb all of IBM’s CRM capabilities.

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In contrast, Grey’s customized CRM applications would be applied according to SVW’s
market and business needs. SVW’s immediate needs suggested that sophisticated
technology and a large implementation budget were not necessarily pre-requisites for
successful IT implementations. Also, the customized approach would in fact contribute to
SVW’s competitive advantage, as it built a CRM infrastructure that could not be readily
copied by its competitors. Grey’s phase-by-phase implementation suited SVW’s corporate
culture because it was not a technically savvy organization and the front-line operators who
might be intimidated by the scale of technologies they needed to adopt could resist any
major change. However, by phasing in technology implementation, SVW could upgrade
technical capabilities gradually to ease SVW into adopting CRM. The simplicity of applying
basic CRM applications and option of upgrading to IBM’s CRM solution at a latter stage
made Grey’s CRM solution a better fit to SVW’s current CRM needs.

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