The CRM Conundrum

• Only costs of CRM programs

are known with any
certainty (and even these
can be wrong!)
• Benefits from CRM will only
be known with certainty
after a period of data
building, experimentation
and learning
Why discounted cash flow (DCF) calculations don’t
work for CRM 1

• Where CRM is a ‘bet the

business’ imperative or a
major, disruptive change in
business strategy, the risk of
failure is too great for
‘expected value’ decision
making. If a company must
become customer-centric
quickly, then this is no longer
one investment amongst
many – it is a ‘do or die’
situation.
Why DCF calculations don’t work for CRM 2

• When faced with discontinuous

futures, scenario planning may be a
better option than using ‘expected
value’. A CRM change programme that
costs, for example, $100 million, might
not generate one cent of incremental
cash (loses $100 million) but, on the
other hand, could transform the
business fundamentally and generate
$500 million (but nothing in between).
DCF might show the investment has
an expected value of $300 million but
that is a meaningless figure for the
Board; they either lose $100 million or
gain $500 million.
Why DCF calculations don’t work for CRM
3
• CRM’s impact on business
performance is almost always in
conjunction with, or mediated by,
other capabilities such as excellent
brand management, customer-
focused management and
employees, new product
development and organizational
responsiveness. If these capabilities
are not developed, the CRM
programme might fail initially.
However, over time it gathers so
much customer insight that the
business takes off.
CRM Payback is experienced in 2 stages

1. Immediate benefits from improved

operational performance
• Associated with single view of the
customer, data integration, channel
integration, standardized processes,
customer self-service.
• Operational improvements create new
CRM assets (databases, mining tools,
customer relationships) and capabilities
(data mining, database management,
interacting with customers).
2. Latent benefits from new CRM assets
• These improved CRM assets and
capabilities enable more ambitious
strategic CRM initiatives: bigger changes
to align the business to the needs of the
most attractive customers in the market.
Module
Risk Reduction through Experimentation

• Invest in a small-scale CRM

infrastructure, with
databases, tools and analysts
to learn about customers.
Experiment with personalized
offers to see how it works.
• If customers do not respond,
then do not exercise the
option to scale up to an
expensive CRM solution.
Benefits Dependency Network
 Alfred Chandler

‘Strategy before structure’

Why ‘Strategy before Structure’?

• Structure can both enable and

disable strategic action
• difficult to promote creativity in a
rule-bound bureaucracy
• bureaucracy is conducive to
obtaining compliance to standardized
business processes
• struggle to become customer-centric
in a functional organization where
specialists report upwards within
silos, but do not share customer
insight horizontally across silos.
• There is no single correct structure
that is suitable for all organizations.
Key Strategic goals in CRM-driven Organizations

• Acquisition of carefully
targeted customers or market
segments
• The retention and
development of strategically
significant customers or
market segments
• The continuous development
and delivery of competitively
superior value propositions to
the selected customers
Module
Conventional Management Structures

1. Functional organization
structure
2. Geographic organization
structure
3. Product, brand or category
organization structure
4. Market or customer-based
organization structure
5. Matrix organization
structure
Functional Structure

• Sales, marketing and service specialists

report to a functional head.
• Specialists: market analyst, market
researcher, campaign manager, events
manager, account manager, service
engineer and sales support specialist.
• Small to medium-sized businesses with
narrow product ranges tend to prefer
the functional organization.
• The three core CRM – sales, marketing
and service – may or may not
coordinate their efforts, and share their
customer knowledge by depositing it in
a common customer database.
Geographic Structure

• One or more of marketing, selling

and service functions organized on
territorial lines
• More common with selling and service
than marketing.
• When customers are geographically
dispersed and value face-to-face
contact with salespeople, there is a
clear benefit in salespeople also
being geographically dispersed.
• Where service needs to be delivered
at remote locations, service may
also be distributed geographically.
Product, Brand or Category Structure

• This structure is common in

companies that produce a
wide variety of products,
especially when they have
different marketing, sales or
service requirements.
• Examples: Procter and
Gamble, Unilever.
• Product or brand managers
responsible for developing
marketing strategy for their
products.
Market- or Customer-based organization structures

• Common when companies serve different

customers or customer groups with
different requirements or buying practices
• IBM has identified 14 different customer
groups.
• Managers
• Market managers, segment managers,
account managers.
• Role and responsibilities
• Develop expertise on market and
customer requirements
• Ensure organization creates and delivers
the right value proposition.
• Trend towards national, key or global
account management.
Matrix Structures

• Matrix often the preferred structure

when a company has several
different product lines serving
several different customer groups.
• Matrix variations include
• Market- or customer-based managers
on one side, and product managers on
the other
• Channel managers on one side, and
product managers on the other
• Geography on one side and industry
on the other.
• Cross-functional teams may be
prelude to matrix structure.
Virtual and Network Structures

• No longer a simple matter to

know where an organization’s
boundary lies
• The role of IT in a stable
corporate environment is to allow
senior management to control
information and decision making
• As environments become more
turbulent, and as companies
attempt to understand and forge
network relationships, the role of
IT has changed
Module
Role of IT in More turbulent Environments

• IT’s role is to provide information that

enables a company and its network
members to:
• Sense and respond rapidly to changes in
the business environment.
• Collaborate to develop and deliver
better customer value propositions.
• Enhance and share their learning about
customers.
• Improve their individual and joint cost
profiles.
• IT is a substitute for a more
formalized and centralized
organization structure linking
networked or virtual organizations.
IT’s influence on Organizational Design

• IT allows information to be shared

right across an organization …
• vertically, horizontally and laterally
…
• and outside an organization with
network members
• Structure is therefore no longer
tied to traditional vertical
reporting relationships
• IT therefore enables organizations
to adopt decentralized and
networked structures
What can an IT-enabled Organization do?

• An IT-enabled organization is able

to take any sales or service query
from any customer in any channel
and resolve it immediately.
• Among the preferred
characteristics of such a design
are:
• A customer interface that is consistent across
channels and easy to use whatever the
technology or device.
• A first point of contact that takes responsibility
for resolving the query.
• A back-end architecture that enables the contact
point to obtain relevant customer and product
information immediately
Traditional Personal Contact Patterns

1. Controlled contact pattern

• All contacts channelled through a single
point of contact.
2. Coordinated contact pattern
• Departments or individuals have direct
personal contacts with departments or
individuals on the other side.
• One department or person coordinates
contacts.
3. Stratified contact pattern
• Individuals and departments on both sides
manage their own contacts with their
equivalents on the other side.
• Stratified contact pattern, where
individuals and departments on both sides
of the dyad manage their own contacts
with their equivalents on the other side of
the dyad.
IT’s Influence on Contact Patterns

• IT, particularly web-

technologies, enables
many-to-many
communications between
contacts on the buyer’s
and seller’s sides
Module
Key Account Management (KAM) basics

• There is a major trend towards key account

management, national account
management, regional account
management and global account
management
• KAM is a structure that facilitates the
implementation of CRM at the level of the
business unit
• A key account is an account that is
strategically significant
• There are two ways to implement KAM
• a single dedicated person is responsible for
managing the relationship, or
• a key account team is assigned
• The team membership might be fully dedicated to
a single key account, or may work on several
accounts
Drivers of KAM

1. Greater concentration of
buying power
2. Globalization
3. Vendor reduction
programmes
4. Customer expectations
Benefits from KAM

1. Doing large amounts of business with a

few customers offers considerable
opportunities to improve efficiency and
effectiveness
2. Selling at a relationship level produces
disproportionately high volume, turnover
and profit
3. Repeat business can be considerably
cheaper to win than new business
4. Long-term relationships enable the use of
facilitating technologies such as extranet-
enabled portals, electronic data interchange
(EDI) and shared databases
5. Familiarity and trust reduce the need for
checking and make it easier to do business
A model of KAM development
Bow-tie structure for early KAM
Virtual Organization for Synergistic KAM
Team selling

• Form of selling associated with KAM

• Key account team might include
specialists that can sense and respond to
customer concerns over a variety of
issues
• engineers, logistics, research and
development, sales.
• Team selling may cross organizational
boundaries
• Representatives from two or more partnering
organizations can come together to pitch for
new business or service an established
customer.
• Partner relationship management
systems facilitate such arrangements by
making customer, project and product
information available to all partners