Customer relationship management [Second edition] 9780273774952, 9780273774976, 9780273781073, 0273774956, 0273774972

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Second Edition

Customer Relationship

Management Ed Peelen Rob Beltman

‘CRM has gone through many changes and developments over the years. But a constant factor is the inspiration Ed Peelen provides by combining solid theoretical knowledge with practical examples and business applications.’ Hans Zijlstra, Head of Customer Insight, Air France-KLM ‘This book recognises the major shortcomings of most CRM books – that is, the focus on the tactical, systems approach to managing customers. This book establishes the need for CRM strategies not only to be developed, but to be consistently used as an aid to long-term organisational profitability.’ Dr John Oliver, Associate Professor, The Media School, Bournemouth University, UK ‘This book inspired me during the defining process … of our CRM implementation at PricewaterhouseCoopers in the Netherlands. The book kept me on track and saved me from operational pitfalls. This CRM “bible” provides vision in establishing the backbone of any company’s CRM programme.’ Gerard Struijf, Chairman PvKO (Platform for Customer-Centric Entrepreneurship), former Senior Manager CRM, PricewaterhouseCoopers, the Netherlands

Most businesses know that how they manage their relationships with their customers is vital to their success. Yet the field of Customer Relationship Management lacks proper academic coverage. Ed Peelen’s Customer Relationship Management is the only comprehensive academic text in English to cover the entire scope of CRM. This fully updated second edition cements its position as essential reading for anyone who wants to understand this continually evolving field. Addressing the strategic, organisational, commercial and technological aspects of CRM, Peelen brings a social psychology perspective, blending theory and practice to aid a full understanding of the subject. The book is geared towards advanced undergraduates and MBA students, but is ideal for anyone taking courses in Customer Relationship Management, Relationship Marketing, Direct Marketing or Database Management.

Rob Beltman is also a partner at ICSB.

www.pearson-books.com

Front cover image: © Getty Images

Ed Peelen is one of the founders and partners of ICSB, a consulting firm in marketing and strategy. He was Professor of Marketing at the Centre for Marketing and Supply Chain Management, and the Executive Management Development Centre at Nyenrode Business University, the Netherlands.

Part V Channels

but allocating more personal sales time and effort to it does nothing except make the relationship less profitable. Ultimately, strategic relationships are not determined by quantity, but by the quality of the relationship. Not by revenue, but by margin. Not by volume, but by added value. In sales there is always a need to allocate customers to different sales agents or sales teams (Zoltners and Lorimer, 2000). It is always a precarious topic that requires careful consideration by sales managers. It has a direct impact on the sales bonuses and the status of sales agents. At the same time, sales agents need to be deployed in areas that fit their skills and match the requirements of the organisation. A sales agent who excels in transactional sales would probably underperform in situations where a consultative sales approach is required. A cautious approach towards alterations in the allocation of accounts to sales agents or teams is always required, because they lead to discussions that may even go on to frustrate the buyer– supplier relationship. It is not unheard of for sales agents to play on customer ownership with the ultimate threat of moving to the competition and ‘taking customers with them’. Chances of that occurring are far higher in transactional sales and consultative sales situations than in strategic sales teams, where the sales agent will only be one member of the account team. Many an allocation is still based on geographical location of customers and type of product or customer segment. The geographical division is mostly appropriate in transactional sales situations, where agents need not specialise in certain types of products or customers. The focus is on efficient sales visiting and maintaining ‘sales pressure’ in an area. The minimisation of the distance between sales visits and the regional commitment of a sales agent can make the personal contact less expensive. Many organisations struggle these days because, especially in transactional sales, the personal visit is substituted by the use of other channels. This means fewer accounts in any given area are visited and the distances between visits increase, while ‘sales pressure’ drops. In more complex purchasing situations it is best to allocate sales agents who are aware of the specific needs and challenges of customers. Allocations by sector or by product/service type are more frequent and more appropriate. Combinations of both types of allocation (geographic and sector/product) are not uncommon.

14.3

the sales process Until recently, sales success was considered to depend solely on the sales agent. In some organisations, this is still the case. To a certain extent, sales is a profession that can be learned. However, the ability to sell, like entrepreneurship, was also seen as ‘part of a person’s DNA’ – either you had it or you did not. As a result, organisations were very dependent on their top sales agents. They became the ‘prima donnas’, the ‘top dogs’. They were traditionally hard to manage and control. Their processes were vague; their methods were ‘tricks of the trade’ – well-kept secrets shared only with their protégées. It was not uncommon in this situation to see top sales people leave to join the competitor and take the majority of ‘their’ customers with them, because the relationship with the sales agent was stronger than that with the organisation. Inevitably, this created an urge to increase the control and manageability of the sales force. The magic ‘black box’ of sales had to be opened. This led to a clear definition of sales processes, outlining the steps in the process of turning cold prospects into warm customer relationships. Lead generation, transactions, after sales activities and relationship building became scripted processes. This increased transparency is increasing control and allowing sales managers to direct their sales force better. The reliability of sales forecasts is improving as sales funnels are becoming clearer. The

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success of top sales people can be analysed and others can learn from best practices. These are ample justifications for the increased popularity of ‘sales process management’ (Belz and Bussmann, 2002), which is the key topic of this section. Research into the success factors explaining the results achieved by top sales agents confirm the importance of ‘sales process management’. The most successful sales agents are best characterised as capable process managers (Belz and Bussmann, 2002). They allocate their resources and time across several processes, making sure that: ●

not only is the ‘pipeline’ or sales funnel filled with enough leads and prospects, but it is also of sufficient quality to reach future sales targets;

●

sufficient time is being allocated to lead follow-up and deal-closing. They don’t just sow, they harvest as well!

●

furthermore, sales processes offer meaningful decision moments to increase the value creation in sales for both customers and organisations. A precondition is that the sales process matches the customers’ buying process. This seems somewhat self-evident, but not in business practice (Weele, 2002). When both processes are not synchronised and ‘mirrored’, it is highly likely that a product-push approach rather than a customeroriented approach will result. This in turn increases the likelihood that: – time and resources are allocated to leads that offer insufficient prospects of a successful transaction or relationship; – insufficient or incorrect insights are being gained into the customers’ demands; – a proposition is formulated that fails to meet customer requirements; – costly and time-consuming repairs have to be made in the sales process; – the sales process is terminated prematurely or finalised in a less than optimal manner for both customers and suppliers.

We have referred to the sales process several times now as a funnel or pipeline. This is often the way it is depicted by sales process management. The broad entrance to the funnel or pipeline shows leads and prospects that are being ‘fed into sales processes’. The much narrower exit shows transactions that have been realised. Conversion rates indicate the transition of relationships from one phase in the sales process to another. The challenge in sales process management is to increase the conversion rates to an optimal point, where the conversion time is just right and the right leads are successfully being guided through the funnel to the point of transaction. It is an optimisation, not a maximisation issue. The results must be compared to the effort expended and the investments made. Sales should be careful with the progression of leads to prospects and forcing transactions: there isn’t an infinite supply of leads and sometimes it is better to terminate a sales process than to force matters, thus keeping open the option for future revival of the relationship. The sales funnel can be constructed for several planning cycles. Sales and contribution prognoses can be made and compared to sales targets to identify issues. If sales are not keeping up with targets, an analysis can be made as to which part of the funnel should be improved upon to achieve which effect. Is the sales professional not getting enough leads to visit? Is the attention paid to ‘deal-closing’ too high, thus reducing the inflow of new leads and prospects? Should extra attention be paid to ‘harvesting’ and should ‘quick decision bonuses’ be used to speed up conversion? Should the sales agent be induced to ask for the order more quickly? Obviously, the sales process is different for the three types of sales approaches described earlier. Table 14.1 describes how the sales process can add value in each of the situations.

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crM illustration seven characteristics of a good sales process 1 It reflects the buying process of the customer 2 It is auto-correcting and self-learning

5 It contributes to increased performance of the average sales agent

3 It creates customer value in the process

6 It is saleable

4 It leads to efficiency improvements and optimal allocation of resources

7 It measures and establishes milestones objectively. Source: DeVincentis and Rackham (1998).

They are different processes by nature, each offering their own risks and complexity that have to be managed specifically. In a transactional setting we can see the possibilities to add value are marginal. It is appropriate to consider the replacement of personal sales in the sales process by ‘impersonal’ channels, such as the internet or telephone. These offer some degree of personalisation, without incurring all the costs of face-to-face contact. By offering self-service options, costs can be decreased and convenience increased. The success of the sales process is mostly determined by the capability of the sales agent to ‘open the door’. The sales process itself will be more standardised, straightforward and span a short period of time. It seems hard to imagine situations in which a process-based approach towards sales is not profitable (DeVincentis and Rackham, 1998). However, the deployment of a process-based approach in consultative sales is more difficult. The reason for this is still very much subject of debate. The fact that it requires tailoring to a customer’s needs is not an insurmountable barrier. A standard process of problem recognition to solution construction and implementation can be followed, even if the contents of each step require tailored customer responses. Arguments that table 14.1 Creation of added value in sales processes Sales process Purchasing process

Transactional

Consultative

Strategic

Need recognition

Needs are defined; little possibility to add value

Supplier can influence the strategic agenda

Evaluate options

Alternatives are understood; few possibilities to add value

Solution composition

Little consideration; few possibilities to add value

Purchasing

Sales agent can make the purchase easy and efficient, optimise conditions and reduce barriers Customer knows the product; few possibilities to add value

Sales agent can add value in the early stages of the sales process by defining appropriate solutions that meet customer requirements Sales agent can design and provide tailored solutions and inform customers about possibilities in markets Sales agent can provide buyer with advice and alleviate worries Sales agent can check up on purchasing configuration and maybe consult on matching products Sales agent can consult on usage issues and solve problems

Implementation

Sources: DeVincentis and Rackham (1998); Min (2005).

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Supplier can provide insight into potential gains and shortcomings Supplier can contribute resources to explore the pros and cons of an intensive relationship Supplier can determine conditions, targets and governance of the ‘joint activities’ as an equal partner Supplier can invest resources to solve issues in the short term

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bonus and reward schemes are leading to a lack of true consulting may be hindering the sales performance itself, but do not explain the difficulties encountered in adopting a process-based approach. Another explanation that is being brought to the table, which is the fact that consultative sales require multidisciplinary involvement, is also not sufficient and ultimately also untrue. There is no need for cross-functional involvement as consultative selling requires the sales agent to provide value during customer interaction and it is the customer–sales agent interface that is most dominant in determining success. The relationship with marketing, customer service representatives and product specialists is less important to the added value experienced. The problem is much rather the fact that current process descriptions are not offering any clear boundary for the sales process and setting milestones that are to be achieved (DeVincentis and Rackham, 1998). The consultative sales cycle may take months or even years, during which time the organisation has little or no idea what is really going on and what progress is being made. The process remains a black box, because phases are not clearly limited to certain timeframes or activities and milestones are not made ‘SMART’. The challenge is to develop the processes on an individual basis, with the aim being to break the process down into clear phases that together make up a constructive consultative process. At the end of each phase, a clear objective must be reached. The process can be synchronised with the customer’s buying or decision-making process. Every step of the sales process should also provide clear added value to the customer. The first step may be the creation of a team of individuals that will determine basic customer requirements. The second step could be a technical test of a product that the prospect will allow to take place and maybe even facilitate. The commitment from the prospect is clear and a positive test result will move the process to the next phase. Any doubt can be removed and the third phase may involve a detailed quote and contract signing. The fourth phase would be the implementation stage. Each phase is an event that takes place because the prospect has agreed to it and sees added value in it. The prospect is allowing the sales agent or sales team to come one step closer. In the case of strategic sales, it’s not the sales team, but the organisations becoming closer. The boundaries and distinction between functions, hierarchical levels and organisations will fade and are ultimately removed (see Goedkoop, 2004). The goal is to have one organisation’s resources deployed to create the required leverage for the other organisation’s success. It is not about the relationship between two organisations, but about direct relationships between different functions of two organisations. The walls between the buyer and supplier processes are broken down and will slowly disappear. This leads to efficiency gains, as well as boosting effectiveness as strategic goals become more aligned.

14.4

Managing the sales process the sales process and performance measures There are few processes within an organisation that have the same success rate as the sales processes (DeVincentis and Rackham, 1998). It would be unimaginable to see the production processes only reach a success rate of about 10 per cent in terms of good product output. In sales, that percentage is not uncommon, in fact it is very real possibility, leading to all the expenses and costs of failed order closing being charged back to the 10 per cent successful sales. Improving the conversion rates and lowering the costs of sales are hence an attractive prospect for sales managers. Figure 14.4 highlights an example of a typical sales funnel.

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Organisation

Consultative selling

Function A Function B

Accountmanager

Buyer

Purchasing manager

Function A Function B

Function A

Strategic selling

Function B

Function C

Figure 14.3 Strategic sales

The analysis of the sales funnel may shed more light on the situation at hand (Belz and Bussmann, 2002). Figure 14.4 shows a transactional setting. Important performance measurements are: ●

sales time: how much sales time agents are taking to complete a transaction; the time spent on suspects, leads and prospects who do not buy will have to be allocated to the customers who do buy.

●

cycle time: time that passes by from first contact with the suspect to the final contract phase.

●

conversion: in the example given there is a need for 30 leads in order to close a single deal. It is interesting to see what part of the funnel is especially showing ‘leakage’ and what the causes might be. It is not always clear cut that it is that one phase. Sometimes the root cause lies in overenthusiastic prospecting, resulting in low quality leads that cannot be converted successfully.

●

percentage of perfect orders: orders fulfilled completely and on time. This measures whether or not the sales agents are selling what the organisation can deliver.

In operationalising these measurements, we must be careful to ensure that they reflect what the customer wants and expects. It is pointless measuring fulfilment according to factory delivery targets if the customer has not asked for this target time nor considers it desirable. Another measurement would be the resources allocated to the sales system as a whole. Every investment in the sales system, especially in the transactional situation, will need to

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Alaska on market segments: Creating value Total Cost of Ownership

Telemarketing Lead info enrichment

Marketing database 225.000 -KvK -Comp profile -Comp database

Tool/letter/etc.

Profiling by marketing

Script

Marketing pull activities

Marketing supplies leads: Suspect

Telemarketing call

30 Lead

1/5

Quotation generator

Training

Tool

1st visit

2nd visit, if desired

1/2

Quotation

6

3

Prospect

Hot Prospect

Order

1/3

1

Sales Lead Time 10 weeks

Figure 14.4 A sales funnel

lead to increased ease of ordering (convenience) for customers or improvements in sales efficiency, lowering sales costs per order. Consultative sales involves other performance measures and costs are less of an issue, since there is added value in the process itself. The risks of underinvesting need to be managed; the company must allocate the right amount of attention to the prospect, in order to progress in the sales process. Sales should no longer be regarded as a cost factor, and be directed not only by the value extracted from the customer, but also by value provided to the customer. The measures used should reflect the appropriate need identification, quality of solutions provided, the negotiation of contracts and the implementation of solutions. In situations where a team of salespeople works together to consult customers, the individual sales targets should be substituted by team targets to prevent sub-optimisation. Using customer satisfaction as a measurement for success is flawed in this situation. It measures perceived value, not the value actually delivered. When considering harder metrics, such as concrete costs savings on the customer’s end, the reduction of total costs of ownership, or maybe even the increased business success on the revenue side, we are looking for measures that show tangible added value creation. In strategic sales, the measurements should make sure the resource allocation and investments made by both strategic partners are in balance. They also need to be in balance with their respective returns on the partnership. The short- and long-term benefits of the partnership need to be taken into account. It is recommended that evaluation milestones in the strategic sales process be set, where assessments of the division of risks, costs and revenues can be addressed.

instruments to improve sales performance In general we consider the following instruments to be available to sales managers in order to improve conversion in the sales funnel (DeVincentis and Rackham, 1998): ●

planning;

●

training and support (e.g. Figure 14.4 tools and scripts);

●

rewards system.

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A planning issue will arise if the sales agent has not taken care to the best of their ability to balance the quantity and quality of potential customers along the different phases of the sales process. If the sales agent has sown more than they can reap, for instance, leading to a large number of suspects and prospects who cannot be given the appropriate attention or follow-up. The consequence is that the sales cycle becomes longer and drop-out rates increase. Another sales agent, hard pressed for results this quarter, is spending all their time closing deals with hot prospects and depleting that category, not promoting any suspects to leads and leads to prospects. The next quarter, the sales will drop as the funnel ‘dries up’. Good planning also takes into account the quality, not just the quantity of sales contacts. The division of potential customers over segments should be monitored, so that the sales agents focus not just on the transactional customers, with whom they can quickly close the deal and to whom they can sell easily, but also on more complex sales, where sales cycles are longer and more demanding. The conversion and cycle time can be improved by training and providing sales support with instruments such as product presentations, scripts for call centres, templates for drafting proposals, expert systems to help in consulting etc. In transactional sales, the training efforts can be limited and support comes mainly from systems that help promote efficiency and automate a great deal of planning and scheduling. In complex sales, the investments in the knowledge and competencies of the sales agent need to be high. It is about building consulting skills as well as the ability to draft account plans, building cross-functional relationships and promoting strategic thinking. Since training-based knowledge and skills are unlikely to directly translate into new work-floor behaviour, coaching and assistance on the job are required. It is possible to support sales by removing certain types of activities that can be performed by others. Is lead generation really the responsibility of the sales department, or should marketing be held accountable and made responsible for that? In the latter case, it is recommended that clear agreements on the quality and quantity of leads to be generated be established. The advantage being that sales has more time available for ‘real sales’ instead of having to look for contacts. The third instrument is the rewards system. It can improve conversion and cycle time by offering appropriate incentives to sales agents. Sales people tend to be very target-oriented and are highly motivated by incentives and bonuses. None the less, the influence the rewards system has is overrated (Capon, 2001; DeVincentis and Rackham, 1998; Nuhaan and Dunnen, 2000). The reality is that by adjusting the rewards system, organisations can encourage sales people to work harder. The evidence that this leads to ‘smarter sales’ is very scarce. It is hard to change a routine, something that has become part of ‘a way of working’ using incentive systems. A more comprehensive change programme is required to achieve the desired changes to the sales process and achieve better value creation, shorter cycle times, higher conversion rations and better planning of sales processes. It must become clear which segments are of strategic importance and what sales approach is required to match those customers’ buying approach and reach the organisation’s financial goals. A shift from transactional to consultative selling will not happen by changing the rewards system in and by itself. The skill set of the sales people will need to be assessed and the allocation of sales people and teams will have to be reassessed. Training and support are crucial. Nevertheless the rewards system is an important ‘leverage’ available to an organisation to steer and promote desired behaviour. It does, however, require the appropriate measures to be used and fraud or negative side effects to be controlled. If activities are measured, for instance the number of visits effected, the risk of manipulation and of low-quality number-hunting are

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high. If results are measured, the sales agent has no choice but to discover an optimal path to that result, which will often prove to be the path fitting the customer’s buying approach. The measurement needs to take into account improvements in performance and not reward a base performance that requires little or no additional efforts. Appreciation should be shown for performance enhancement, both in terms of efficiency and effectiveness. It should be clear that sales agents should focus on the important, not just the urgent issues in sales processes. A more long-term perspective on sales results should prevail. In the bestconstructed rewards systems, sales agents see how they can influence the results through their own actions and it is recommended that sales people should be on board during the construction of rewards systems and alterations to it. It is important they know what is rewarded, but even more important they understand why and share that intrinsic motivation.

14.5

information technology and sales Information technology plays its part in all three sales situations we discuss in this chapter. Its main functional advantages are: ●

It informs sales people in the organisation who visits which customer, when and about what; if the organisation has allocated sales agents by product (group), it is quite possible several sales agents share the same account. They can align their efforts and activities, prevent mistakes or ensure they do not visit the customer all at once or within a short timeframe. They can also prevent direct competition with their own colleagues, which can happen if alternative products or formulas can cater to approximately the same need. Imagine a consulting firm offering interim services from a separate business unit. You do not want the consultant and the interim manager battling for the same project with the same customer.

●

Sales people gain insights into the contact history and transaction history of customers; thus they are able to prepare their sales visits effectively.

●

New sales people can be brought up to speed more quickly; they grasp the nature of the relationship and the agreements made with customers.

None the less, many sales people regard information technology as anything but positive. They fear an administrative burden when sales information needs to be registered. They anticipate having to do deskwork that will keep them from field sales activities. Another argument, never voiced too loudly, but always present, is the fear of ‘big brother’. The organisation can look over the sales agent’s shoulder and check up on their work. It feels like a loss of autonomy and the exposure of what they cherish as their ‘trick of the trade’. Another element contributing to these negative attitudes, especially in transactional sales situations, is that information technology leads to a loss of jobs. There is a fear of redundancy when computers are able to take over certain sales activities. Although this is not unimaginable, the basic reaction reflects a defensive attitude that is hardly businesslike and is unbecoming to any organisation that wants to provide value to customers and the business. Are there no other opportunities for the sales people to provide value than to perform tasks that could be automated? The reservations that many sales people have about information systems are to some degree justified. At the same time, we need to realise that no sales organisation can really function well without sales information systems at this point in time. Personal sales is just

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crM illustration improving sales productivity with information systems Putting the user first offers better perspectives for a successful introduction of sales information systems. By focusing on functionalities that match the sales activities and that improve the attitude towards the technology, the chances of adoption are increased and information sharing between sales agents and sales management will improve. Functions that match sales activities will be used more often. They allow for easy consultation of a contact history and for gaining insights into customer segments, using planning tools and product knowledge support. It is often difficult to integrate complaint management as a function. This feature hinders adoption and promotes a bad attitude towards the system.

The information is not to be shared across the organisation. Sales people tend to keep issues in the customer relationship to themselves. Differences in attitude towards technology occur between organisations, markets and sales people. The difference between the transactional sales person and the consultative salesperson are still dominant. The first group will be interested in the transactional data, while the second will really want to gain insight from the existing knowledge and use it to preconfigure an offering. They are more positive towards support given by customer profiling and product knowledge support. Source: Rigopoulus et al. (2009).

one of the channels through which customers engage in contact with the organisation and not even the only channel through which deals are being closed. The sales force has a direct interest in being involved in the broader use of information technology. It enables their lead generation, keeps them informed of customer activities across other channels, improves their efficiency and may also make the results of sales efforts more accountable. If they remain too reluctant to adopt information technology, other channels will dominate the choices made and personal sales is at risk of being left behind. If they are proactive, they can build a systems environment that integrates and safeguards the role of personal sales and that supports face-to-face contact in an optimal manner. It may also prevent management from selecting and applying a system for the wrong motives – a need for control over the sales force. A proactive attitude will lead to a sales information system that determines which information is relevant in sales processes and should be registered, thus avoiding the ‘register all data’ pitfall. Sales can look to limit the effort and search for infrastructure solutions that are more real-time and mobile, just like the sales force itself. They can complete registrations on the go, instead of spending their last part of a busy day completing visitation reports. In short: they can make sure technology supports the business by embracing it and fine-tuning it to the requirements of the sales force.

14.6

conclusion In many market situations, personal sales is a very important channel to initiate and build the commercial one-to-one relationship with prospects and customers. The challenge is to fit personal sales into a strategy where more different channels are used to stimulate the relationship development and boost sales. Personal sales is often regarded as costly. The costs, however, only become a factor when the sales process itself is straightforwardly transactional and little value is added by the sales agent. In these cases the sales agent may well

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feel threatened, especially since sales is becoming more professional. It is no longer ‘undefinable and mysterious’ and sales agents are no longer independent and in control. Sales is becoming focused on its role in creating value, not just communicating it or extracting it. The three different purchase situations we considered offer different potential to do so. The transactional, consultative and strategic sales approaches need to match the customer’s buying approach and make sense from the point of view of the organisation. The type of customers an organisation wants to cater to needs to be considered and a sales approach needs to be selected accordingly. The allocation of sales agents or sales teams needs to take the added value into account and look at skills and knowledge, not just geographic spread and contact pressure. The sales process can be specified for each of the sales approaches, even though the degree to which activities are specified will vary. Results per step in the sales process should be described and measured to allow continuous improvement. Sales process management should look for balance in terms of quality and quantity in each phase of the sales funnel and realise it is about optimisation, not maximisation of throughput. Instruments such as better planning, training, support materials and rewards systems can be deployed to improve sales process performance. The proactive adoption of information technology will help sales into the twenty-first century as a relevant and effective channel in customer relationship management. It will retain its value in the total channel mix and even experience boosts in efficiency and effectiveness, albeit in another role or function and generally less autonomous than sales in the old days.

case study secrets of success for going mobile: agrifirm wins the crM award Background Agrifirm is a cooperative in which more than 17,000 Dutch farmers and horticulturalists have combined their purchasing power. Agrifirm offers their customers maximum purchasing advantage on high quality products such as animal feed, seeds, fertilisers and pesticides. Agrifirm is the result of several mergers, the first of which occurred in 2002 when ACM in Meppel and Cavo-Latuco in Utrecht decided to join forces. The customer is at the heart of the business of Agrifirm (e.g. ‘how can we help our member farmers to increase their return per acre’). The organisation is not the supplier of commodity ‘ingredients’, but a meaningful and irreplaceable partner to farmers in several sub-sectors of the agricultural sector. Agrifirm’s dedication to its customers is reflected in the way they provide consult with their customers. It helps determine which additives or base ingredients a farmer should use to increase output. The feed mix is detailed according to the farmer’s preferences, and consultation takes place on the nature of the cattle and the quality and quantity of other feed products that a farmer is using, even if these are non-Agrifirm products. Agrifirm shares data on best practices, takes local circumstances (diseases, heavy rainfall or draught) into account and applies the knowledge in their consulting with customers. In 2005, a reorganisation took place. The goal was to obtain an organisation that could better meet the organisational goal: increasing customer success. At the same time Agrifirm was faced with the challenge of remaining competitive in a shrinking market and

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case study (continued) maintaining market leadership. As a part of its transformation, the sales organisation has matured. A CRM system was introduced that was first deployed in the internal sales department, before expanding the use to the field sales representatives. A sales organisation that was dependent on individual insights from independent experts has been transformed to a sales department that is managed on relevant market, customer and sales data.

the crM system The business environment in which Agrifirm operates is dominated by emotional values as well as business values. It is important to take this into account when automating the sales process. The CRM system now supports the information sharing capability across the organisation’s commercial processes. The information exchange was made more efficient and allows for anticipation of specific conditions involving individual customers or prospects. Improved information provision allows more accurate control over commercial activities. The segments that are most interesting and offer prospects that Agrifirm can add value for, can now be identified. Customers who are likely to defect or shift purchasing volumes elsewhere can be identified and the relationship can be restored.

the internal sales department first The internal sales department is responsible for all information requests and internal order taking. They have no face-to face-contact, but need to be aware of customer backgrounds none the less. They have functioned as front runners in CRM implementation and use the system as their central tool. In close cooperation with the data warehouse and knowledge base they are able to answer customer questions about products, deliveries, bills, complaints, prices, customer information and so on. All customer contact is logged and shared with the field sales organisation. They offer a chance to get all relevant customer data at a single glance and really make the work of the field sales representatives easier. The internal sales department is now able to proactively get in touch with customers for several parts of customer relationship management, alleviating the tasks that have to be performed by field sales.

crM and field sales To support sales Agrifirm has some 150 field sales representatives who visit customers across The Netherlands. They are general representatives, consultants and specialists. In the ‘pre-CRM era’ the representatives decided whom to visit based on handwritten listings of top-customers or pioneer-customers. The entrepreneurial spirit of the sales person and his commercial skill were the only requirements for turning prospects into customers. Nowadays, following implementation of CRM, insights gained from the system drive the efforts of representatives. The sales manager has worked with the representatives to segment the customer base and establish priorities. The estimation of the nature of the relationship and the commercial opportunities now drive the visits. The CRM system is being kept up-to-date with sales efforts made and the results they yielded. The data (originating from visiting reports) are used by sales managers to guide the sales representatives to higher efficiency and effectiveness and develop support tools. Individual targets are set that encompass the visits that are to be made, the number of leads to bring in, consults or quotes to send out, etc. The reigning corporate culture has been overthrown by the implementation of CRM. It is most noticeable in three areas:

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case study (continued) (a) being increasingly information-driven in all sales operations; (b) gaining insights into the visits, the frequency, the efficiency of customer and prospect contact; (c) field sales becoming responsible for the maintenance of customer information required to start up other processes (e.g. internal sales). Inevitably, resistance to the new approach and against the CRM system itself has occurred. The company dealt with it in a straightforward and down-to-earth manner. There were clear targets for feeding and using the system and strong leadership assured it worked! It helps that the advantages were clear from the start as the internal sales department had loaded valuable information into the system by adopting it early on. The field sales people got instant insight into markets and customers that they otherwise would not have had. Sales managers saw clear advantages in being able to control and improve the sales process. Individual sales reps saw benefits too. They received accurate information on turnover from their accounts. On a weekly basis, alerts were received informing them about order status for prospects and customers. They list customers who should have ordered last week based on their ordering profile, but didn’t. The sales reps are able to monitor and take action if required. The consulting programmes that the advisors run on their laptop computers, which help to optimise feed mixtures or plant protection and fertilising schemes, provide support for the sales force. The field sales has the support tools required to help customers, but is itself charged with determining which sales approach to use for which customer. On a monthly basis the sales representatives receive an overview of their customer visits (KPI report) that is compared to a norm-report that Agrifirm has established to achieve target revenues and profits. Coaching is provided to improve in designated areas. Field sales has been trained to work with information, use it appropriately and report it back into the CRM system. It has become a fixed part of sales training.

new channels As a direct result of the CRM approach to provide more added value to customers in the sales process, the introduction of several internet applications took place. The customer can find information that is relevant and required to manage their business more successfully. For instance: ●

mineral administration (minas online): information as to the quantities of minerals delivered (phosphor and kali), which is required to determine the legal room left for new deliveries;

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billing online: easily downloadable electronic bills that can be fed into management systems or accounting software that the entrepreneur is using;

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crop registration (tracking & tracing, HACCP): the farmer can register and monitor everything related to crop development: choice of crop varieties, size of crop deployment, fertilisation schemes, crop care programmes deployed, etc.

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feed online: insight in real time into deliveries made;

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GBM-online (GBM = Dutch abbreviation for crop protection products): insight into the products used and their components, which is important in HACCP processes, monitoring health hazards and food safety.

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case study (continued) These internet applications are an essential building block in the commercial processes of the organisation. The field sales reps use the applications to provide consultation and customers use them to gain information, look up things that they otherwise would have had to call for or wait until the next visit. The sales organisation and the customer are both using the applications to boost their performance.

conclusion The CRM system has been very satisfactorily deployed, with considerable success in the business. Some 300 employees are using it actively. They are members of internal sales and field sales teams from across several divisions. Even departments that do not have regular customer contact, such as the credit administration and R&D, are seeing the potential uses of the system and are enthusiastic about it. Undeniably, the CRM system is transforming the sales process and having implications even beyond the commercial functions of Agrifirm.

Questions 1 Describe the transformation the sales department of Agrifirm has gone through since the introduction of CRM. 2 What causes are there for resistance of sales agents towards CRM implementation? Please describe and explain these causes. 3 What are the benefits that sales people at Agrifirm can enjoy through CRM? 4 What ultimately decides whether or not the CRM approach gets adopted by sales agents and consultants of Agrifirm? Source: Ed Peelen, CRM Award, in: Wil Wurtz e.a. (red.), CRM in Nederland, CRM Association NL, Amsterdam, pp. 22–30 and 68–78.

Questions 1 Sales people often claim the deal gets closed because they have been able to create a personal preference or favour with the customer. Are they wrong or can this statement be correct? Please justify your answer. 2 Why is there a risk of transactional selling in leverage purchasing situations? 3 What are the main differences between the transactional, consultative and strategic sales approach? Illustrate each approach with one example. 4 What difficulties can be encountered if an organisation choses to develop a more consultative sales approach as a counter-reaction to increased commoditisation of its products? Use an example to illustrate your answer. 5 Figure 14.2 states that most sales organisations are in a sort of no-man’s land. What explanation can you provide? 6 Under which circumstances might the explicit detailing of sales processes become detrimental to sales success? 7 What are the main differences in performance measures that are used for each of the three sales approaches?

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8 Rewards systems are an instrument to steer sales performance into a desired reaction. Explain how rewards systems can lead sales people to display anything but the desired behaviour. Use an example to illustrate your answer. 9 What would it take to make sales play a proactive role in the development, deployment and usage of sales information systems? 10 Indicate whether you agree or disagree with the following statement: In transactional sales situations the personal sales agents will be obsolete ten years from now. Please explain your answer.

references Arnold, D., Birkinshaw, J. and Toulan, O. (2001) Can selling be globalized? The pitfalls of global account management, California Management Review, 44, 1, Autumn, 8–20. Belz, C. and Bussmann, W. (2002) Performance Selling: Successful salesmen create customer values, St Gallen: Thexis Publishing. Bund Jackson, B. (1985) Winning and Keeping Industrial Customers, New York: Lexington Books. Bunn, M. D. (1993) Taxonomy of buying decisions, Journal of Marketing, 57, 38–56. Capon, N. (2001) Key Account Management and Planning, New York: The Free Press. DeVincentis, J. and Rackham, N. (1998) Breadth of a salesman, The McKinsey Quarterly, 4, 32–43. Dixon, A.L., Spiro, R.L. and Jamil, M. (2001) Successful and unsuccessful sales calls: measuring salesperson attributions and behavioral intentions, Journal of Marketing, 65, July, 64–78. Goedkoop, M.F. (2004) Corporate account management, generating corporate value, PhD dissertation, Erasmus Universiteit, Rotterdam. Heiman, S.E. and Sanchez, D. (2004) The New Strategic Selling, London: Kogan Page. Honeycutt, E.D., Ford, J.B. and Simintiras, A.C. (2003) Sales Management: A global perspective, London: Routledge. Kraljic, P. (1983) Purchasing must become supply management, Harvard Business Review, September/ October, 109–17. Marshall, G.W., Goebel, D.J. and Moncrief, W.C. (2002) Hiring for success at the buyer–seller interface, Journal of Business Research, 56, 247–55. Nuhaan, L. and Dunnen, P. den (2000) Sales-balanced Scorecard, Alphen aan den Rijn: Samson. Piercy, N.F. and Lana, N. (2009) Strategic Customer Management, Oxford: Oxford University Press. Porter, S.S., Wiener, J.L. and Frankwick, G.L. (2002) The moderating effect of selling situation on the adaptive selling strategy–selling effectiveness relationship, Journal of Business Research, 56, 275–81. Rackham, N. and DeVincentis, J. (1998) Rethinking the Salesforce: Redefining selling to create and capture customer value, New York: McGraw-Hill. Rigopoulos, K., Peelen, E. and Bruggen, G. van (2009) Het verbeteren van de sales productiviteit met informatiesystemen, SalesExpert, 5, 1, 30–3. Storbacka, K., Sivula, P. and Kaario, K. (2001) Create Value with Strategic Accounts, Helsinki: Kauppakaari. Weele, Arjan J. van (2002) Purchasing and Supply Chain Management: Analysis, planning and practice, 3rd edn, London: Thomson Learning. Zoltners, A.A. and Lorimer, S.E. (2000) Sales territory alignment: an overlooked productivity tool, Journal of Personal Selling & Sales Management, 20, 3, 139–50.

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15

The online environment The central theme of this chapter is how CRM strategists can develop an on- and offline environment that supports the creation of long-term customer relationships. In Section 15.1 we focus on the development of the internet into a social network and the way it affects the relationships between organisations and customers. Subsequently, we will deal with the way it affects marketing and how one can develop relevant presences in the non-commercial context of the social web. In Section 15.3 we discuss the mobile revolution, taking the internet to wireless devices that are minicomputers or even products connected to the internet. Websites are an important virtual channel for many organisations and in Section 15.4 we look at their role and function in the multichannel environment. It has its place as a support platform for orientation, purchasing, after sales and just socialising. We conclude the chapter with an analysis of performance measures that can be used to assess our performance on the web. In this chapter we will address the following: ●

The evolution of the web and the influence it has had on marketing

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Marketing in the social web

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Mobile marketing

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Marketing in the commercial web

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Measuring online performance in terms of CRM contributions

PracTiTioner’s insighT The web is constantly and rapidly evolving. Bandwidth has increased, as has the capacity of processors, search functionalities have developed over time, user interfaces have improved, so the technological outlook for using the internet is very bright. It all seems as if there is no limit to the development of the virtual domain. Furthermore, everybody in modern society has discovered the internet in one way or the other and is using it, either extensively or only occasionally. The time in which organisations and institutions produced content is long gone. Consumers, individual users, are the ones creating content now. It has become very easy to do so, with modern-day devices. It seems, or so many say, that the internet is finally becoming what it was meant to become: a collection of spaces where people start up all kinds of activities and connect as human beings. Mobile technology is integrating

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Practitioner’s insight (continued) PracTiTioner’s insighT the internet in our everyday lives. It is no longer a parallel universe that we can refer to as a ‘second life’. It is significantly more often a part of real life. Organisations have to try and keep up. They are not yet much at ease in the virtual domain and need to re-evaluate their classical role patterns and power hierarchies. Up until now, the internet has often been adopted, but not very well integrated. The true impact of this virtual domain is only now becoming clear to many organisations.

15.1

The evolution of the web At the very start of the worldwide web, it was a ‘read-only’ medium. It has been designed as a part of the internet infrastructure, that was easily accessible and contained ‘webpages’ preceded by the prefix www and closed with a country identifier (.nl, .fr and .it for instance). In the 1990s it was best compared to phonebooks and actually the term ‘directories’, which is still used for websites that bundle other website addresses, was already in use at that time. Despite all the hyperlinks that existed, it was still scarcely productive to use the web itself as a commercial medium (Mika, 2007). Technological developments ended this passive use of the internet as bandwidth increases make it possible to distribute ever more bits and bytes. Films, sounds, animations and such became easier to up- and download. The processing capacity of computers increased and the user friendliness of interfaces was improved. It was no longer all text-based, but became more graphically advanced. The web was becoming increasingly used for communication purposes as web-forms and e-mail grew in popularity. The web was still very much about interactive brochures, giving websites the name ‘brochure ware’. However, technology continues to develop and the possibilities to create and share content are expanding. Web platforms are becoming available. Geocities and, later on, platforms such as Wordpress and Facebook allowed people to share their content, ideas, videos, status, mood or whatever they want to share with the click of a button. It later came to be called web 2.0, a ‘buzz word’ used to signal the end of one era of the web and the beginning of a second. In this new era, the web is more a place where like-minded people can meet and share comments, thoughts and opinions (Weber, 2007). The fact that this generation holds the future can be seen from the current day so-called Big Five: YouTube, Facebook, Twitter, LinkedIn and, for The Netherlands, Hyves. In other countries, Microsoft’s Live platform arguably takes fifth place. They draw millions of people to their websites on a daily basis. These people are not using the web to find commercial offerings, but rather to find and meet up with friends and to ‘connect’, not read. This social network environment is associated with (Weber, 2007): ●

Social tagging: jointly creating and managing structures that improve content discoverability. It’s not about what experts say things are, but how the crowd can freely choose to describe content in their own way.

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Blogs: online diaries where people express experiences and ideas or links to places they find interesting. Bloggers are also called local journalists, not hindered by any editorial limitations, they can report freely. They may make or break reputations.

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Podcasts: audio files that are downloadable or can be streamed in real time while online. They can be offered free or as a part of a content subscription. They used to be made to enable the distribution of ‘home-made radio shows’, but are finding applications in the field of education, official and unofficial guided audio tours (of museums and cities) and keynote summaries or alerts for conferences.

●

Wikis: These are ‘databases’ in which people choose to collaborate to provide good descriptions and/or definitions of things. The best known is the website Wikipedia, the internet encyclopaedia that helps to describe and illustrate any topic in the world. The scientific magazine Nature compared the quality of Wikipedia to that of the famous Encyclopaedia Britannica. For some topics, mostly highly specialist, Wikipedia is more elaborate and complete, but it is also wrong sometimes. Wikipedia has had to rectify and even withdraw articles from the database on several occasions. The corrections one can make, for example, to the description of a company could be an area of dispute between customers, special interest groups and the company itself. An oil company probably does not want oil spills, corruption charges or other ecological and ethical breaches cited on its Wikipedia page. However, since everyone can edit, the chances are this will happen. As long as information is true, it is permissible to include it.

●

Communities: Online communities go back to the very beginning of the internet. It was always the intention to bring people together, but the early years were primarily dominated by linking computers and content. However, there were already communities of scientists at the outset. Software companies were among the first to ask users to test programs. They were attracting the front runners and bringing them onboard. The first software user groups and communities were born, with beta testers who helped in producing better software. Not too long after that, anybody could build a webpage and a forum application where people could leave messages. Bulletin boards became popular meeting places. People started sharing information about their personal life (birth of a child, career change etc.), companies they liked or disliked, films they had seen, their hobbies and so on. Webster’s dictionary describes communities as a group of different individuals who live together in a certain place: a group of people with common characteristics or interests who live together in a larger society. Knexus translated this to the hybrid world of now, updating the offline connotation of Webster’s definition to ‘a group of people that, out of common interest and motivation, gather to interact with each other and derive value from that’. It is an expression of the fact that place is no longer really important and that it is more about the value of being a community member than about the characteristics of the people.

Successors to web 2.0 are already queuing up. Web 3.0 seems a logical next step, but what will it be all about? It has been referred to as the ‘semantic web’. It is a new set of semantic tools and technologies that will permit new ways of searching and interacting. They should be more organic and make use of ‘fuzzy logic’, rather than the structured and hierarchical structures of the web today. Current day HTML will be replaced by more ‘user friendly’ successors. Metadata and tagging are key to the semantic web, adding extra layers of information, such as facial identification for pictures, which is already allowing users of Google’s Picasa to search the internet for pictures of people, not by name or explicit tags that were user included, but by this layer of metadata. The goal of the semantic web would also be to limit search results and show less information, but more relevant information. The search for Frank Fox would not yield all the documents

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containing ‘Frank’ and ‘Fox’, but rather the few documents pointing to the person you are looking for. The ambiguity of the question is now posing problems. ‘Frank’ can be a name and a qualification. ‘Fox’ can be a surname, a television channel or an animal. By combining data and improving on the interpretation of it, a search such as ‘pictures of Paris’ should only yield a certain content type (pictures) relevant to the city of Paris, instead of all web pages including the word ‘pictures’ and at the same time a lot of content you were not looking for referring to Paris Hilton, which is a tricky one, by the way. Are you looking to go to the Hilton in Paris, or interested in the person Paris Hilton? Just to indicate the complex challenges the semantic web is facing. According to Mika (2007), the semantic web will even be able to answer questions such as ‘What music do I like?’. It shows that combinations of data that are stored in different locations, maybe somewhere in online profiles, visiting histories or through files on your local computer, are likely to be made. Think this is all too futuristic? Test Apple’s iPhone voice assistant Sirius and you will be amazed at how it already deals with many questions just like this one. The term web 4.0 has also been launched. It may seem like a hype to discover the future of the web and that might well be the case. None the less the image that is presented is worth noting here. Web 4.0 is about the emotional web. Through the increased availability of bandwidth, processing power, quality of the network and of user interfaces, the web should be able to stimulate more senses than it currently does. It may provoke more complex emotions when multimedia is not just video and audio (seeing and hearing), but also smelling, sensing (force feedback, virtual reality) and who knows, even taste. The web will be able to induce a more complete ‘experience’. This future may be hard to imagine from your computer or laptop sitting at home or at work, but the mobility of devices and the increased connectivity between devices all around us, make it quite feasible for devices to react to each other and to users. Imagine that some years from now, while browsing a web page when you’re on a train, the music playing in the background, the smell dispersed through the air conditioning unit and the visual impression showing on the screen of your tablet device might be synchronised to create one emerging experience. Thus, as the computer integrates with our lives, the internet becomes a more allencompassing place, where the virtual and the physical can intertwine. There are some devices that offer sublime platforms for this, because they are personal, always with us, and are also almost always on. Some years ago we were talking about chips, nano-robotics, being implanted into human bodies. Nowadays, everybody seems to have their mobile phone ‘implanted’, never far away. It helps people get in touch, find their way, play, entertain themselves with multimedia, take and share pictures, read, compare and shop, take medication in time, keep track of vital signs, always have the emergency services to hand, pay for purchases on the go etc. Owing to mobile devices, our lives today are very different; in many cases they are social life-lines we cannot do without. They add a dimension to our everyday lives, creating an augmented reality. The online and offline realities will reinforce each other (Pine et al., 2011). The contacts between the offline world and the virtual domain are currently still dominated by human intervention, even if it has become much simpler to connect to a specific part of the virtual world using QR codes and designated apps. However, these still need to be scanned and launched. Sensors will make this a lot easier, allowing interactions to be created whenever a person is nearby a certain location. This can be done by GPS or in some time by Galileo, the European alternative that is developed for these kinds of purposes, but near-field communication technologies are also an option. The best-known are infrared (requiring a straight line of sight between sender and receiver, which is not practical), Bluetooth and RFID.

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There are devices on the open market that allow people to measure their heart rate or brain activity. They can give out sensory information that can help create understanding of the emotional, not just the medical state of a person. Imagine that these applications measure a huge level of stress in a person waiting in line at a service desk. Could a virtual agent pick up on it and communicate to the person relevantly? Would that be seen as ‘extra service’, or as ‘the ultimate big brother’? Could limited sharing of sensory information lead to advice on how to sleep or rest better? Could it assist in the right administration of over-the-counter drugs? Could it help provide better advice on food choices made in the grocery store? What started out as mobile telecommunications, has taken less than 20 years to become integrated with internet technology and provide mobile virtual access. It is now on the verge of becoming a contextual services platform (see Figure 15.1) that takes into account: ●

task environment: what is somebody doing? What is their intended purpose?

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social context: who is around? What is somebody doing? What’s up?

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physiological context: what physical effort is being made? What actions is somebody trying to complete?

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mental context: what is somebody’s mood – their attitude?

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spatio-temporal context: is somebody moving or standing still? What is the speed of movement? How much time does somebody have to spare?

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environmental context: in what physical context is somebody located? Near what facilities or infrastructures?

Mobile technology not only provides a connection between the physical and the online (virtual) world, but also a connection between the commercial and the social world.

Environmental context

Spatiotemporal context

Mental context

Task context

Social context

Physiological context

Figure 15.1 The different contexts of mobile Source: van Geest (2011).

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Mobile technology is making online social activities have an effect on the real world. The physical encounters, the information shared about locations, activities etc. in real time are providing new opportunities.

15.2

Marketing on the social web The consequences of the social web on marketing The web will provide access to media that stimulate multiple senses and will be the centre of all kinds of activities that people want to engage in (Weber, 2007). Activities will vary from shopping to learning, communicating, playing and planning. It won’t be where our entire life takes place, but it will be an important ‘starting point’ or ‘platform’. The communicative power and the ability to connect people and devices are making the web the place from which access to all media and content can be offered. The web will have a function as an ‘aggregator’ as well as a ‘navigator’. Social functions and search engines help people find what they are looking for. The characteristics of the web are such that marketers can no longer just ‘broadcast’ their commercial messages. People are already indicating they are disgruntled about the way marketers pop-up and ambush them with messages that serve the sole purpose of selling their goods. They are actively preventing undesired mail messages from getting through, are registering their phone numbers with a ‘don’t-call-me register’. Other registers, such as for general (impersonal) direct mail, market research activities and door-todoor sales visits are in the making. People are zapping away from commercials or using recording devices such as Tivo to watch their favourite shows without the commercial breaks. In other words: there will soon be no channel left for marketers to push their message, unless customers choose to allow them to do so. Active and aggressive sales tactics should be avoided (Weber, 2007). An adjustment to our marketing approach is inevitable and seems to be taking place. Organisations cannot present themselves as the classic advertiser or salesmen. Unidirectional traffic is giving way to dialogues. The way in which others speak about the brand, the products and the organisations is becoming a decisive factor in installing trust and is becoming more important than advertising. The network of references, of recommendation, is starting to become a factor. Not just the experts that may approve of products and services, but also the regular users. Not everybody will be positive about the organisation’s performance, and new ways must be found to deal with this, because the experiences are being voiced in an open environment. In order to get attention, content is taking a central role. The need to provide interesting, engaging content and media that people will connect with, engage in and share with others, is quickly dominating the marketing approach. It creates inbound contact: customers interacting when something is of interest to them. While it releases some degree of control as to when and how communication takes place, it increases both relevancy and timing of marketing communication. Content can be developed, sponsored, co-created, user generated or facilitated. The key is to build on winning local initiatives and ideas, rather than rely on centralised and structured campaigns that are orchestrated top-down. The web offers a place for marketers where they can seek cooperation with customers in a fashion befitting the virtual environment. It offers plenty of opportunity to co-create.

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crM illustration The first internet President [Note: this article was written during the 2008 presidential campaign.] Obama is taking a different approach to his presidential election campaign. He uses the internet as a tool that allows a lot of civilians to donate a couple of dollars. So far, the many thousands who have donated in the region of $5, together have contributed to the hundreds of millions of dollars in campaign money. Not only do all these little drops contribute to an ocean of support money for the campaign, it also creates a huge base of Obama ambassadors. These people feel that for only a few dollars in campaign contributions, they become part of his success. Millions of ‘believers’ are loyal followers. In June 2008, the campaign contributions reached $250 million, from 1.8 million contributors, 80 per cent of which was internet-generated. How come the internet contributes so much? The Obama site has a special ‘online contact centre’ available which offers volunteers the possibility to Skypecall from their home computers to ask others to donate or to ask them to vote Obama. The site gives instructions on how to make the calls and contains scripts and a database with phone numbers that the volunteers can use. There are enormous numbers of volunteers logging on to Skype at the most convenient times for them and making calls on behalf of Obama and his team. Moreover, there are millions of people contributing through local initiatives spurred by the website. During the campaign it has already happened at several occasions that the campaign teams arrives at a local event,

only to find that volunteers had already taken care of a great number of activities, even without the head of campaigns knowing about it. It is really a grassroots movement that is maybe even uncontrollable topdown. The head of the campaign typically wants to be in charge in a regular presidential election campaign, but the Obama campaign was about sparking local initiatives and responsibility through the internet; less control and directions, more facilitating. Facebook has played its part too. Obama has taken on co-founder of Facebook Chris Hughes as an expert in interactive media. It turned out that the internet and other media were less about short and quick messages than one might suspect. When Obama’s favourite reverend was making awkward speeches, the team produced a 37-minute YouTube film. Some 5 million viewers watched it all and are proof that, if relevant, the modern-day person is able to handle something more than just a sound bite. The popularity of the video even meant that television stations were less reluctant to air longer (fragments of) speeches by Obama. And talking about video, Obama’s ‘friends’ produced a video entitled ‘Yes We Can’. The counter has reached 20 million hits so far. The way Obama is using the internet is quickly becoming a lesson in new marketing of which all marketers should take note. He is quickly becoming the first internet president in the world. Source: Fellinger (2008b).

The role of the social web in different stages of the relationship between customers and suppliers There are several ways to use the social web in marketing and relationship management. Some areas where it can contribute are: ●

general conversation about an organisation, its products, services and brands;

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the development phase, where the relationship can be engaged in and deepened;

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the orientation and selection phase, where potential buyers evaluate their supplier options and build brand preference;

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the transaction itself, where buying, trading, and value exchange take place;

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the after sales phase, where service is provided and customers provide feedback. We will now treat each of these uses in more depth.

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general conversations about the organisation (web care) Organisations are waking up to a reality where it is no longer just about conversations with customers, but also about conversations between customers. People talk. People share. And organisations should probably, if nothing else, listen to what is being said about them. They may, if they take a broader interest, also listen to what is being said about competitors. However, true customer-oriented organisations will care about what is being said about the value they can, could and should provide. They are interested in social groups that exist in the different social media and how relevant needs, wants and problems are discussed. Fortunately, the ‘ears’ of organisations are developing and there are good ‘snorkelling tools’ that can help ‘listen’ to what is being said on open social media (blogs, twitter, LinkedIn groups, Podcasts, videos etc.) about a certain topic or brand. Organisations can, in turn, engage in conversations. Once they find the places where customers are discussing topics that are relevant, web care can be provided. The term care seems to refer to an after sales activity, but it’s much more about ‘community relationship management’ than about online care linked to transactions. In general, a transparent approach is clearly to be preferred. Indicate who you are (use real names, even the name of the web care agent), inform relevantly without pushing, provide clear information or feedback. It is an activity that influences the general reputation and trust, but can also be aimed at helping individual customers (often when they fail to get through by using more traditional channels) and exceeding expectations (in terms of responsiveness, authenticity, commitment and responsiveness). An organisation famously good in this area is the triple-play cable provider UPC. There are several full-time employees who monitor what is being said about UPC on a constant basis. The employees join in on discussions, are open about who they are, whom they work for and what their intentions are. By contributing factual information, they stay out of the emotional discussions, but influence the opinion, the attitude and the nature of conversations in which people engage. They are able to make a positive impression. There are also opportunities to be found in blogs. These allow an organisation to voice an opinion or express a view. The number of blogs that are written on a daily basis is huge. Gartner reports it to be over 100 million in 2007 (Weber, 2007). Many blogs are linked, because bloggers follow each other and point to one another. One story can spread through a chain of blogs like wildfire, and the content is changed in this process (see Chapter 1). People express their own views, pass judgement and interpret. In considering whether it is interesting to blog about a brand or organisation, it should be noted that blogging is hard work. It is a continuous engagement that puts the blogger in the role of writer, editor, publisher, marketer and service representative. The blog is a diary that can be daily or weekly, but monthly is already low in terms of frequency of appearance. So a constant stream of new blogs needs to be thought up, written in a consistent journalistic style, include appropriate text, images, videos and links, be posted in a timely manner to the platform of the blogger and marketed through many third-party platforms. Reactions must be followed up. The rules are not written in stone (yet), but in general it is clear that: ●

it is not well regarded to reveal secrets (it is open communication);

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one writes about one’s specialism or area of expertise;

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the followers must be borne in mind and the commitment to them must be honoured;

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language rules are far stricter than in tweets: express yourself appropriately;

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think about the consequences and accept them, even if reactions are strong.

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Many blog initiatives are started in a whim and end up having no followers and no interaction. The role the blog is meant to fulfil is not being realised. Quitting might be the best option. However, if one is prepared to invest time, resources and effort, the meaning of blogs in social media can be great. There are opportunities to build a loyal following of people who share ideas, knowledge and relationships. It offers a podium for direct ‘customer engagement’ to the CEO or marketer, but many organisations also like to allow employees who are more operationally engaged to blog on behalf of the company. They require support, but can become a strong representative of how ‘up close and personal’ the company can get. Remember: social media are by definition not top-down.

Development phase: co-creation Engaging customers in an early stage of the development process of products, services or campaigns can be beneficial on several levels. There may be lower development costs, a higher success rate in introduction, better fine-tuning to customer needs and wants, lower stock levels, lower costs of marketing and less waste due to improved forecasting of future demand. At the same time, marketing intelligence is gained. Earlier, we discussed co-creation in considerable detail (see Chapter 11). We highlighted the importance of the question (as specific as can be), of the phasing of the development process and the decisions per phase relating to who is involved, in what way and with what ‘incentive’. We will not repeat ourselves, but rather give two examples of how this is supported by the web and social media. One example that has been widely quoted, but remains inspirational, is LEGO factory (see Figure 15.2). LEGO was enabling fans to make designs of houses, trains, whatever one could think of. Fans could upload their own design to the website. The LEGO community of fans could vote on the specific design and many others. Designs that were getting the most votes were declared winners and were being produced. The name and picture of the designer got to appear on the box and a 5 per cent commission on all sales generated on the item was granted. In turn, the winner relegated intellectual property rights and signed them over to LEGO. That was something the fans were doing without a second thought. It started in 2005. Within 6 months it was able to get a stunning 80,000 design uploads and 1.2 million in downloads. Three models that were most popular were taken into production. LEGO has since then developed a second generation platform. They were also setting up an eBay-like platform, where second-hand LEGO or entire LEGO projects could be traded or sold (Boswijk et al., 2011). Another example is GlaxoSmithKline (GSK). They engaged customers in the development process and introduction of a weight-loss product. Prior to introducing the product, they sponsored a community of women who wanted to lose weight. They used the discussions they were able to engage in to develop both the campaign and the packaging. They collected much more genuine information through the forum discussions in the community than they would have obtained from a focus group discussion with a limited number of potential customers (Weber, 2007).

orientation and selection phase in the buying process Organisations can activate people through the social web and get them to promote their brand and proposition. The referrers or recommenders, also called promoters, are commercially independent and therefore more trustworthy to other customers. They are able to influence potential buyers during very important stages of the buying process, for instance

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Figure 15.2 LEGO factory Source: LEGO Company Ltd.

the orientation on alternatives and the selection of preferred options. Marketing a product through word-of-mouth is quick and cheap. Viral campaigns can be used to spread the word. Viral campaigns are content-based and include the passing-on of content, be it altered or unaltered, to other people in the network. When marketers talk about something ‘going viral’, they mean that it has attained a level of multi-user networked spreading such that it takes on epidemic proportions. If one follows the theory of ‘six degrees of separation’, by which no single person on earth is more than six connections removed from any other, the force of going ‘viral’ becomes clear. Several aspects of viral campaigns have been studied. First, it is interesting to establish what factors influence the likelihood that someone will read a company’s invitation to a viral campaign, visit the corresponding landing page, actually participate and invite friends. It appears that for a company, ‘social need’ characteristics are more useful for identifying target groups for viral campaigns than product-related criteria. People’s social connectivity and perceived influence are more influential than their attitude towards the brand, the product or the product category (Goldenberg et al., 2010; Toubia et al., 2010). Thus the first ‘rule’ would be that tuning in to the social context is more important than the offering.

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Furthermore, for a viral campaign to be effective it is important that the recipients are interested in the topic and willing to pay attention and to listen. The extent to which the campaign evokes a positive emotional response influences their forwarding behaviour (Berger and Milkman, 2009), making positive interest the second ingredient of successful viral campaigns. For viral campaigns to be truly effective, the message will have to be passed on continually, so that it can acquire the epidemic proportions the marketer is hoping for. For this to happen, it is important that the transmitters are also well-connected people in the networks. Research showed that incentives are needed to get their participation (van der Lans et al., 2009). So finding and convincing the ‘hubs’, the ‘network influencers’ is the third rule, relating to the focus one needs to apply in viral marketing. Don’t just shoot the message out into the world, but make sure it lands with people who are most likely to spread it and make an impact. Good examples are by definition well known; everybody must have received them as a forwarded message from a friend one day. One worth noting is the campaign of Old Spice, the after shave you may associate with your father or grandfather. Not particularly geared towards the internet generation, one might say. We will elaborate on this example below. In this phase, prior to purchase, organisations may also stimulate customers to write reviews on products or services. This does not necessarily need to take place on the company’s website, but can also be on comparison sites or review sites, such as epinions. com or tripadvisor.com. Questions such as ‘Have you enjoyed your stay with us?’ are becoming increasingly common. As one hotel puts it: ‘Have you enjoyed your stay with us? Please leave a comment or tip on tripadvisor.com to help others find the perfect hotel in London.’ There are also organisations that post positive opinions on behalf of client organisations. These ‘buzz agents’ perform ‘undercover operations’ to boost the social

crM illustration old spice Old Spice is a rather ‘old’ brand of male grooming products currently manufactured by Procter & Gamble, who acquired the brand in 1990 from Shulton. In February 2010 there was a campaign that gave the brand a major boost. The campaign starred ‘The Most Interesting Man in the World 2.0’, Isaiah Mustafa, and focused on the theme ‘The Man Your Man Could Smell Like’. To date, the original advertisement has attracted 19 million viewings across all platforms. However, the real explosion came when the company started to make personalised videos for fans, random viewers and prominent bloggers alike in which the Old Spice Man had a personal message for the receiver. It became the most popular viral campaign of 2011. In The Netherlands, for instance, it was only a matter of days before the 180 personalised videos that were made had been viewed more than 6 million times (in

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a population of 16 million!) Some 22,500 people commented on it. Iain Tait of the agency RWW, said about this campaign: ‘We just brought a character to life using the social channels we all [social media geeks] use every day. But we’ve also taken a character people loved and created new episodic content in real time.’ Let’s face it, most viral videos are shocking, disturbing and mock their subject. There’s none of that here. Instead of trying to trick people into sharing content by creating something shocking or over-the-top or coasting along on an established viral theme and attaching a product to it, Old Spice first created a character that people – shock, horror – liked! They then went on to create an immersive experience of which people wanted to be a part. Source: Ehrlich (2010).

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reputation of organisations. However, comparison websites are getting better and better at filtering them, as they tend to use similar texts across multiple platforms and messages, post messages more quickly than ‘normal’ customers and often have a distinct ‘tone of voice’.

The transaction itself Although we have, to a certain extent, drawn a distinction between the social web and the commercial web, it would be wrong to conclude that social buying does not exist. Transactional processes are no longer the unique domain of the buyer–supplier interaction, nor can they be directed entirely by the organisation anymore. Let’s take Starbucks as an example. They have launched an app that allows people to send their Facebook friends a cup of coffee (facebook.com/applications/mystarbucks). It is a real cup of coffee, which you, as an identified user of the app are paying for, and which your friend can redeem through a barcode gift certificate, which can be printed. They can now also scan the gift certificate from a mobile device, so there is no need to print it. While providing the customer the service of sharing a remote cup of coffee with a friend, Starbucks is also learning who your best Facebook friends are. Facebook’s reach, with its millions of active accounts, is doing a lot for the Starbucks brand and customers are bringing in new customers (Fellinger, 2008a). In old marketing language, they are even paying for the full ‘sales promotion’ campaign! Earlier on, we discussed the phenomenon of the ‘long tail’ (see Chapter 11). This concept is equally relevant to the social web and buying within the social context of the web. The long tail is characterised by low volume articles, that can be an interestingly assorted category, provided stock is held elsewhere and enough demand can be generated through special interest platforms. As we said, Amazon.com is a perfect example of an organisation which makes the ‘long tail’ work. With their ever-increasing reference base of articles, their second-hand shop and many affiliates, they are a very large transactional platform indeed. However, the transactions in the long tail are being generated in a different way from the ‘regular assortment’ sales. Harry Potter products can be sold through mass marketing without much trouble, but for the true niche products, social interaction is a great source for sales. First, the products often reside with customers, because producers or editors have stopped providing them, so in order to make these products available, the store must be able to achieve a clear presence in specialised communities. Buyers and sellers can meet each other on these platforms, but often the transactions go through Amazon, because of their reliable fulfilment, the broader client base and offering they can generate as well as the relationship they have with their customers. The supplier is in this case not the supplier, but the facilitator of a consumer-to-consumer market (Anderson, 2006).

The after-sales phase Customers can also help each other after the transaction of a product or service has been completed. They can share experiences and guide other customers to the best supplier, but they can also provide each other with help and support in the resolution of questions and trouble-shooting. A good example is Hewlett Packard. Their products are often serviced by other customers who answer questions on the company’s forum. Research by De Ruyter has shown that in community-based servicing, over 60 per cent of the questions are resolved to the complete satisfaction of the person asking the question.

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crM illustration a business-to-business community: Philips is discovering Linkedin LinkedIn is often seen as a channel to promote oneself and maintain a public résumé, but businesses are discovering other uses as well. Philips is using LinkedIn as a tool to get in touch with a target customer group that is otherwise quite hard to reach. Raymond Clarijs is Philips’ head of online marketing for business-to-business and works out of the US. ‘Within our business-to-business market we saw the need for customers to increasingly share knowledge and get information from one another. One-to-one communication with the company is over. It’s even truer in our market than in business-to-consumer. Peer-to-peer communication has always been very popular in professional markets, but it has now moved online and that speeds everything up. Online

is a facilitator and accelerator of the same process that has been taking place offline.’ Philips is still investing in their corporate domain, the central website Philips.com. Clarijs: ‘But not everybody will visit that website. A lot of our stakeholders are not focused on lighting, but on design. We have to reach out to them, as they won’t come to us. So we have to go outside of our own domain. We had to make a choice: build a platform, or collaborate. We chose the latter.’ Philips has researched the possibilities of a social platform of their own. ‘We did some pilots, but that kind of platform works best for our core services. If you want to be more broad, LinkedIn is better.’ Source: Eilander (2010).

Through this type of communication, internal links and company communication can also be improved. A good example is KLM’s Blue Lab, where the board and the employees are cooperating to see how they can jointly improve on baggage handling, for instance.

The marketing approach on the social web Marketing in the social web (Weber, 2007) starts with mapping out those of your customers who matter most to you. Observing what the most influential places are and how they talk about you, should be a primary concern. It is a good idea to put together a list of core influencers (the top 30 or top 100) that you would like to have as referrers or promoters. As well as being customers, they might also be influencers who voice opinions. They can be recruited by playing on their entertainment needs, helping them meet others, teaching them new things and helping them increase and exhibit their social status (Algesheimer et al., 2005). Buying support is hardly ever a good idea: recruits that are bought are called ‘mercenaries’. They will sell their loyalty to the highest bidder. Recommendations should be achieved through genuine mutual value creation. It should be made clear what the social interaction will deliver the referrers. Promoting the initiative is necessary for it to become ‘viral’. A good approach is to tap into the 10 or 15 most popular search terms and try and link them to the content. Adword advertising can be used to draw attention to the blog, website or community. It is also a good idea to send out specific invitations to the customer database, announce initiatives on packaging, try and be present at locations where the customer group is (e.g., festivals and/or exhibitions). It is the search for and creative use of momentum that makes the difference. One should also determine which platforms are most suited for the marketing goals that are set. The differences between, for example, YouTube, Facebook, Twitter and LinkedIn may be subtle to the outsider, but the way they work and what they deliver (from visual

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impressions to engaged conversation or network enhancement) is very different. Instead of starting a proprietary platform that requires a lot of building up, investment and driving traffic, it may be better and easier to hook up with pre-existing platforms. If you manufacture ice skates, linking up with a group that is focused on the winter Olympics or the fan base of a professional ice skater may make more sense than starting your own ice skating community around the products itself. The product acquires a meaning in the experience, remember? Engaging the ‘members’ to participate is the next step. It should be about seeking dialogue with open-ended questions and simple requests. How would you like to improve to the product? How are you using our product? What is keeping you up at night? What are you most excited about? Such questions are simple and open, asking for ways the customers experience the product within a certain context. Optimisation is the penultimate step. The community should be kept alive with news, updates, engaging questions, interesting content, feedback on the results of customer participation, etc. The mistake many organisations make is to apply old thinking to new channels. They believe they have to create the content, manage news items, provide the entertainment and so on, but in the social web, you can get a little help from your friends! The final step is measuring the results. The social web needs to achieve a serious place within marketing and within the organisation as an engagement platform. Determine how it improves relationships, supports product launches, increases market share, revenues and profitability and changes brand attitudes. It is important to realise that the web tends to be more extreme than the offline world in terms of results. It’s more boom and bust, from hero to zero and back again!

15.3

Mobile marketing Mobile marketing is developing rapidly and is generally considered to have enormous potential as a dominant internet infrastructure. Research into this domain is still somewhat limited, but practical experience is growing fast. In this section we take the practical approach and consider business use of mobile marketing. The ultimate promise of mobile marketing is to integrate some form of the organisation’s presence into the everyday lives of its customers. With a mobile device, the organisation can enter their living space, their context, identify people and make wireless connections between several media that surround them. This offers the possibility of offering a more engaging and all-encompassing experience to the customer. Think about the London Marathon. Supporters could send personalised messages to digital billboards that showed up exactly in time for the runner to see. By playing matching music, the sensory experience can become even richer. And it’s an experience that can be watched back on a mobile website or on YouTube later on. Mobile marketing is not yet very mature. Many of the primary applications are directed at advertisements or stimulating transactions. Many companies consider themselves stateof-the-art once they have developed an app, but it is starting to become clear that mobile channels are especially effective in service provision. It capitalises on the strengths of mobile channels: the fact that they are an extension of a person’s personality. The lasting success of mobile applications is dependent on the relevance of the service. They are easy to obtain and try, but there are far fewer apps that find their way into a regular usage pattern

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of people. According to Forrester, the percentage of apps in use 12 months after download was reported to be lower than 5 per cent in 2011. The most popular services are news-related, social platform apps and financial services. The applications are available through other channels as well, but take on a new meaning in augmented reality: they combine virtual data with physical locations. The most technical advanced apps are found in the field of banking. They give real-time access to secure data, allowing people to consult their account, transfer money, receive alerts on changes in interest rates, pay their drinks at a bar or pay for the carwash. They are integrated with the CRM systems of the bank and with their primary back-office systems. Data synchronisation is an absolute must. Mobile services do not exist in isolation. The CRM strategy and multichannel approach should lead the development of the mobile channel. It is quite easy to get carried away when it comes to technological features and possibilities, but it should be more about supporting the customer experience. If one can use mobile channels to make payments on the go easier or safer, or help a patient remember to take their medicine, customer value is being created, but not all features and possibilities make sense on this platform. One should question what degree of maturity should be required and when. Can the bank launch an app that just shows account information, or must payment functionality be included right away? If the development takes longer and the launch of the app is pushed back to include that functionality, will the bank lose market share and damage its reputation? Can that be made up for if the introduction includes a feature to match pictures to account numbers or a feature that makes it easy to split a bill with friends (co-payment)? These are hard decisions, as timing and functionality have to match with consumer desires and the capabilities of the organisation. The price that can be charged for mobile services is also influenced by prices of other mobile services, many of which are free or very cheap. This means many organisations develop alternative pricing models (see Chapter 11). The development costs are rising as apps have to be developed for several platforms (Apple iOS, Android, Blackberry), making it more important to find a viable revenue model. Advertising models, which are quite common in digital channels in order to make services available for free, are not well accepted on mobile devices. In a 2012 survey, some 70 per cent of respondents in the United States indicated that they did not want to allow advertisers to use the mobile channel to approach them.

15.4

Marketing on the commercial web The web is becoming increasingly social, but that does not mean it is becoming less commercial. The functions are complementary and websites will continue to be an important factor in the marketing, sales and service of products, services and experiences that are offered by organisations. The organisation’s website is a platform that it owns on which it can more effectively manage the way it is presented and the way it wants to interface with customers. We now move on to address:

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traffic building, by which we mean drawing visitors to the website;

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engaging the visitor through a high-quality visiting experience;

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completing transactions;

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retention of visitors and customers.

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Traffic building The parallel between the internet and a highway has often been drawn. It is called the information super highway. If that metaphor is applied, then obviously an organisation would like to direct as much traffic as possible to the store or location that is somewhere out there in the super-connected road infrastructure of the web. It should be noted, however, that the quality of the visitors should matter to an organisation. The last thing an organisation wants is for accessibility to suffer because a huge, but commercially uninteresting crowd is blocking the driveway. The tools to build traffic are plentiful and constantly developing. We will discuss: 1 search engines; 2 opportunities in social networks; 3 banners and links; 4 portals and comparison sites. Here we will only address the online means of communicating URLs, as offline means, such as radio and television commercials or on packaging, flyers, direct mail messages, brochures and billboards, are hardly revolutionary. Despite being responsible for up to 60 or 70 per cent of online traffic for some companies, such methods all seem to suffer a huge loss in response because almost no direct action is possible; instead, a channel change has to occur.

search engines An effective way to increase traffic to a website is to establish a presence in search engines. They search the web for content relevant to the user’s request and therefore offer a possibility to be present at the right time, in the right place. It’s a matter of relevancy, not just of volume. To the relationship-oriented marketer, building traffic will be about finding and offering the things (content in the form of information, video, music, podcasts etc.) customers are searching for, based on the insights that the marketer has. The top spots on the search lists are much prized and fought over in the same way as shelf space is in the supermarket. Only the top items get clicked frequently, with a huge drop off once you get below the top 10. There are two ways of appearing in prominent spots with a search engine. The first is called ‘organic search’ and relates to searching website content and rating that content based on relevancy. The second is ‘search engine advertising’, which means the spot has been paid for and is presented as an advertisement rather than a normal search result. In organic search, although calculations and ratings of search engines vary and are increasingly complex, the three basic components that increase the search engine position of a website are: text build-up, indexation and popularity. Text is important because search engines are (at least for the moment) text-based and define the relevancy of a page by the occurrence of the right text. Indexation indicates the way and form in which the contents can be indexed and popularity is assessed on how many pages link to a certain site. Text is an important factor, not just in terms of the contents of a page or blog, but also the metatags. These are tags that a company gives a website to help search engines index it. Search engines also look at page titles, headings, alternative text for images (image tags and description) and text links. One could say that in order to get the text-based part of organic searches right, a company must not only speak the language of the customer (use the same terms and wording), but also understand their mind. They

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need to consider not what they want to offer, but rather what the customer is searching for. Internal brainstorming may help, but learning from external research (Google’s most popular words, asking customers through research) is more likely to yield results. Indexation is required for a search engine to find your page. If you go to Google and type in ‘site:[yourwebsitename]’ it shows all pages from that site which are indexed. It is important, because you may want to control the points of entry to your site and avoid people entering the site at odd places. Generally, we don’t like to let customers into our store through the back doors either, as hospitality and experience will suffer as a consequence. Making sure those pages do not get indexed requires active blocking on the organisation’s side. The last step in improving organic search is increasing popularity. This requires active linking from other sites, blogs, tweets, Facebook postings and many other platforms to your own. Link exchange programs have been set up to help with this, but be careful: the goal is not to get as much traffic as you can, but to get the right customers and provide them with the right experience. Relevance should remain key. It is rewarded as well because Google, for instance, also assesses popularity based on how often a link is clicked on and how long the visitor typically stays on that website. The second way of getting to the top of the search results is paid advertising. Often these are clearly identifiable. Google places advertisements, which they call Adwords, on the top right corner. The costs of Adwords are related to the number of views or clicks, depending on the search engine. They may even be combined, with a lower fee per view and a higher fee per click. The costs of search engine marketing or advertising is increasing (Olsthoorn, 2005). In some cases it may be possible to relate banners to search results. Banners are a more graphic display of advertising than Adwords, which are purely text-based.

opportunities within social networks The importance of social networks in building website traffic is increasing. Predictions are that the social networks will take over search engine traffic. It is rather like getting a recommendation on which websites to visit, rather than searching for it yourself. With websites or rather ‘social platforms’ such as Facebook becoming the dominant place where people spend their online time, it becomes easier to navigate your way to a supplier from there. It is also often a place where the purchasing process begins, talking about ‘cool products’ with friends or deciding to go and buy that concert ticket or read that book your friend is recommending. It is a place to check opinions of friends and get feedback. Messages on social platforms are short, but often hyper-connected: they are able to influence the movement of groups of people much better than a classic hyperlink sitting on a webpage waiting for someone to click it.

Banners and links Online advertising is a classic way of attracting attention, and as we have said repeatedly: it always begins with old habits and new technology. So it’s not strange to see billboards (called banners) pop up on the web. They mostly support brand awareness and recognition, but with a click through rate of 0.5 to 1 per cent, they are not really traffic builders in and by themselves. Conversion can be increased by using animations, teasing (not too much text, but rather a puzzle), bright colours (attracting the eyes) and including a clear call to action (what does clicking do for the user? Click&win? Awesome preview?). Most of the time text-based content works better than banners. Advertorials, or sponsored links, are also part of the paid traffic building toolbox. They work well because they

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are avoided less. People intuitively tend to try and avoid banners and read around them. Sponsored links are seen and, if relevant, clicked on, but up to six times less often than nonsponsored links.

Portals and comparison websites The way people spend their time on the internet tends to follow a pattern, often starting at a certain generic website, offering access to a broad range of services, search possibilities and free news items. These are referred to as portals. In the light of traffic building activities, it is quite important to be present on portals that are relevant in terms of branding and topic or theme and have high volumes of high-quality traffic. A portal-deal, that is the commercial exchange of space on a portal against something else, is often paired with an ‘affiliate program’. The portal and the website affiliate themselves as brands and may share revenues generated through the portal site. It becomes a form of ‘shop in shop’. Imagine a portal on Hollywood films affiliating themselves with Amazon.com or Play.com. Banners can be used both on the portal’s point of entry as well as during relevant searches, in order to attract the portal’s visitors to the affiliate shop. It often has the (almost unlimited) potential to add store locations, where sometimes the available assortment is highly targeted to the niche audience that is reached. Comparison sites in particular make it easier for prospective buyers to get an overview of what is offered where, at what price and with what features or terms. It is not just price, but also quality, availability, delivery time, shipping costs and complex product features that can be compared. The goal of the organisations that submit their offerings for comparison is to compare best for the target segments for which they are aiming. The comparison websites are mostly independent and make money from advertisements and commissions. Before the widespread use of social media, it was sometimes questioned whether comparisons were ‘honestly’ made. Nowadays, most comparison sites do not want to take the chance of being exposed for manipulating comparisons. Since comparison sites often ask their visitors to rate the suppliers and review the products or services purchased, comparisons can be made on quality of service and fulfilment as well.

offering an engaging experience It would be a pity to attract a lot of visitors without being able to retain their interest when they visit. When the internet was beginning, trust was an important issue. The relatively new environment required clear presentation of recognisable elements. Tangible elements in the design, including quality seals or certificates, were highly important. Offline points of sale or collection were also much appreciated (to prove the company actually ‘existed’), to invest in offline communication (‘real world’), possibilities to pay upon delivery, the brand and information regarding the delivery process. It was also necessary to watch loading speeds and keep the total page size limited. Bandwidth was still an issue and the initial enthusiasm for little games and animations was substituted with a ‘back to basics’ approach. This is important again in mobile channels, because the bandwidth of mobile internet networks is still somewhat limited. However, as soon as fixed infrastructures or Wifi are used, bandwidth ceases to be a major issue and working with videos, games, animations and complex graphic features or music can once again make the visiting experience more engaging. With the touch screen navigation offered by mobile devices and tablets, design is again becoming key and these channels offer rich, brand-enhancing possibilities.

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If we are to offer an engaging, positive experience to our customers and potential customers, we need to take into consideration: ●

customer expectations;

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content;

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design and usability;

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personalisation;

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payment and fulfilment.

customer expectations The quality of a visit is influenced in particular by pre-existing expectations (Verhagen and Broere, 2005). Websites should offer an easy route to the expected content, with no detours or unnecessary clicks. There is no need for distraction or entertainment per se. If such is the goal of the website, it is of course appropriate, but if a visitor just wants contact details of a local dealership, their way of getting the information should be as direct as possible. Of course, most organisations strive to exceed expectations, and do, particularly in the age of the social web, with customers talking up experiences they found surprisingly positive. It is, however, becoming increasingly difficult to make a website on its own an experience worth talking about. Maybe content, rather than the website’s lay-out and functionality, is more important nowadays.

content Most websites nowadays are not just filled with content created by the organisation that owns the website. Third-party content, including user-generated content, is much more widespread. Take the example of an online home electronics retailer. There are product descriptions of a supplier and evaluations by customers, but through inserted widgets, the company can also show blogs by home cinema enthusiasts or articles from relevant media. Or maybe just the weather today or a Google maps add-in to allow people to navigate to the nearest store location. Opportunities for two-way communication are enhanced, with the potential to ask questions through structured forms, forum applications, virtual agents and live chats. References to other platforms, such as Twitter and Facebook or LinkedIn are easy to make and not just individual features, but rather capable of enhancing the other communication options between the organisation, its visitors and other stakeholders. In general, the optimal solution is to have multiple content platforms, instead of just one. The positive effect on search engine ratings is clear, but it also allows organisations to welcome visitors in a more relevant and tailored way. The content becomes, in a sense, the bait with which one catches the fish, and it’s best to tailor that bait to the type of fish one wants to catch.

Design and usability The quality of a visit also depends on the degree to which the visitor is able to use the interactive system, the website, in order to effectively, comfortably and efficiently complete the desired task. That is what is called ‘usability’. The interaction between man and machine is key and design is an important aspect of usability, although designers might often argue it’s the other way around: usability is a part of design. Design has two meanings in this context. The first is the artistic ideal to express oneself, while the second is an engineering ideal to solve the problems encountered by users. The latter is dominant in website design.

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The goal of a team of website designers is to design an interface that has all the features to allow people to perform a certain task, making it as intuitive as possible to find and use these features, while ensuring that these features will also provide them with long-term benefits. They will also try to limit design-related errors and install design-specific elements that provide people with a satisfying user experience (Wiklund, 1994, in Swinkels, 2001). The principles of product design and website design are not much different. It will quickly prove to be unsuccessful if a website requires a user to adapt to the design or, even worse, force the user or manipulate them to any extent. It is necessary to realise that website visitors typically have a very short attention span. The time spent on webpages shows us that whenever the content does not seem appropriate or the page isn’t sufficiently attractive and engaging, the visitor leaves the website. The tolerance for long loading times is declining and the willingness to learn how a website works is hardly ever present. Simple, solid designs work best, as Google has shown with its very basic search engine lay-out. Compare it to Yahoo! and see which site is more likely to make you use it directly and come back again because of the efficiency of its interface. The ultimate design seems to be restricting the number of functionalities combined on one page, making the learning curve quick and limiting the number of possible errors.

Personalisation Websites offer access to content that is stored elsewhere. If optimal use is made of this feature, the content that is loaded onto a website can be completely tuned to the personal needs and characteristics of the visitor, customer or user. This is called personalisation, but we can distinguish between two kinds of personalisation: ‘moment-to-moment’ marketing and ‘one-to-one’ marketing. The moment-to-moment aspect plays into the actual, current needs of a customer when they purchase a printer on a website, for instance. On the check-out page the appropriate ink cartridge may be offered. It is real-time marketing where content is made relevant by the current context. In ‘one-to-one’ marketing the organisation may be able to use pre-existing knowledge about the customer’s preference for a certain brand and tailor the offering to that. One-to-one is more demanding in terms of matching profile data, website contents and product offerings. Data from different sources need to be integrated into one profile; combing data from social media, product, transaction and marketing databases. Matching records requires ‘business rules’ that determine which customer is entitled to which offer relating to which brand and which campaign content.

Payment and fulfilment The fact that the internet provides global access does not make every e-commerce website a global store. The unlimited possibilities of a borderless virtual space are still subject to the international laws of trade and require a website to be able to handle payments in different shapes and forms and to be able to deliver on promise.

Payments Not all websites will have ‘completing online transactions’ as their goal, but it may be offered when and where customers expect it to. With the democratisation of online payment, where more people trust and use it, as well as the rise in popularity of micropayments (amounts varying from a couple of euros to a couple of pence), payment options have increased. The options, if one does not develop a proprietary payment platform, are: ●

credit card companies;

●

banks;

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internet service providers (billing the account of subscription holders);

●

PC-suppliers;

●

telecommunications providers;

●

payment services companies (such as PayPal).

The decision as to which payment system is adopted has to be taken and requires the careful consideration of several aspects, such as safety and ease of use. If a user is required to download and install new software to complete the purchase, it will have a negative effect on the interaction. Transaction costs are also an issue, as some platforms of payment methods (the major credit card companies for instance) may charge a fee per transaction that makes micropayments almost impossible to accept. There is no one single online payment platform or standard. Most payments in businessto-business markets are made in traditional ways (payment-on-delivery, separate billing) and consumer markets show widespread adoption of credit card payments, payment-ondelivery or direct e-banking. The latter requires some explanation. Rather than giving out permission for the supplier to withdraw a certain amount from their chequeing account, the customer logs into the online banking system and makes the transfer in real time. The Dutch banks have developed iDEAL to this end. It is a banking standard that integrates the payment process into a website’s shopping experience. At the time of payment, the customer chooses iDEAL as a payment method and selects the bank. A window is opened through a secure connection, loading that bank’s online banking environment. The customer is required to provide the same secure information as always and a single money transfer is completed. After the transfer, the customer is guided back to the supplier’s website, where an order payment confirmation is given and the shopping experience can continue. Choosing a payment method involves choosing when the organisation wishes a customer to pay and when customers would like to pay. It’s not always a simple ‘equal crossing’ (payment and receipt of product occur at the same time). The three basic options are: ●

Pre-paid: the purchaser pays the amount due with a pre-charged account or e-wallet prior to the purchase being completed.

●

Pay now: a direct payment that is made from a chequeing account or credit card.

●

Post-paid: the transfer of money is completed after the product has been shipped and even received. Examples are payment on delivery, separate billing and credit card payments for as far as they include incremental payments or ‘buy now, pay later’ constructions.

The importance of the choice is demonstrated by Dutch online bookstore Bol.com, whose main reason for online success in its early years was the option of payment on receipt of goods. It showed supplier trust in the customer and equally removed the ‘online payment is not safe’ barrier voiced by many potential customers.

Fulfilment The proof of the pudding is in the eating, and so it is for many online purchases, customers are anxious to receive the goods they have purchased. The promise is put to the test. Distribution has a significant influence on online customer satisfaction and the likelihood that they will return. To increase customer confidence, it may be wise to enable the tracking and tracing of packages. FedEx was the first company to introduce a tracking system for packages in transit. The customer is issued with a shipment number when trusting FedEx with a package. On

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the FedEx website the customer can track the progress of the package every time the package’s barcode (or that of the batch to which it belongs) is scanned at a warehouse, during the loading process or on delivery. The distribution of digital products would appear far less complex, as the product can be downloaded directly from a secure server, but products that can be downloaded can also be multiplied very easily. Preventing theft and fraud become important matters. Furthermore, if a customer has purchased a virus scanner application online and the PC gets stolen or damaged, how can they reclaim a copy from the online store? There is certainly more to distributing digital products than meets the eye. However, the situation with physical products will always be trickier. Delivery can never be as fast and efficient as the internet in the pre-purchase and purchasing stages. Furthermore, distribution costs need to be controlled. If people from around the globe are ordering, will free shipping still apply on all orders? Are there risks in shipping products to countries where the product may be subject to certain age limitations or other legal constraints? These aspects can make the difference between being able to sell products with relatively low margins at a profit or at a loss. The situations differ for luxury watches or high-end audio equipment and bargain-priced DVDs or groceries. Direct distribution costs have increased by 100 per cent in the fast-moving consumer goods category (van der Laan, 2000). Customers used to come by, make their choice and pay. With online grocery shopping, the customer is being served in all those aspects. The costs can only be carried if there is ample demand, a clearly limited assortment, clear areas of delivery and time zones. It has a huge impact on the supplier’s logistical system. Table 15.1 highlights the logistical costs in different distribution scenarios. To permit a comparison, the costs of traditional retail have been included. The numbers are the costs per activity as a percentage of the transaction value. The table shows the costs for online groceries to be about twice as high as those for traditional retailing, the costs of home ordering and (warehouse) order picking being the main reasons for this. However, the returns policy is also a matter of concern. This is a legal and relational precondition, so that customers can turn down or complain about faulty delivery. Table 15.1 Example of cost structures in the grocery industry

Activity Warehouse overheads Reception and storage in warehouse Warehouse order picking Transport to store Store overheads Reception and storage in store Shelf replenishment Order processing Order picking in store Point of sales costs Transport to home Returns Customer service Total

Traditional retail

Online purchase and collect at store

Online purchase and collect from warehouse

Online purchase and delivery from satellite warehouse

1.20 0.5 2.20 0.90 2.40 1.50 3.00 1.20 1.20 0.90 15.00

1.20 0.5 2.20 0.90 2.40 1.50 3.00 3.20 5.00 1.20 5.00 2.00 1.90 30.00

4.50 0.5 7.50 3.00 1.20 8.50 1.80 2.50 29.50

6.00 0.5 7.50 0.80 3.40 1.50 5.50 2.30 3.00 30.50

Source: Cost/profit Analysis, Marketing & Logistics (in van der Laan, 2000), ShelfLife Publishing, bv.

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retention It may seem like the internet is all about ‘quick business’ and ‘hit-and-run’ tactics, but that is not true. Most people have a limited number of sites they visit frequently, including only a number of platforms through which they purchase regularly. Commitment and relationship building matter just as much in the online environment, maybe even more. ‘Today, loyal shoppers visit their favourite sites far more frequently than they would any brick-and-mortar store’ (van der Schans, 2001). It pays to build awareness and preference over competing websites. Peppers and Rogers (2001) have distinguished four basic functionalities in their approach to one-to-one marketing. The functionalities, which together support relationship building and improve retention, are (see Figure 15.3): ●

Identify: identify customers based on their identity data.

●

Differentiate: gain insight into differences between customers based on analysis of customer data.

●

Interact: engage in a dialogue with the customer based on the knowledge available.

●

Customise: customise the offering, the products, services, information and pricing based on the interaction.

The ‘identification stage’ is mostly about recognising customers and protecting their privacy. The best platforms are able to use unique identification that is integrated on- and offline. They may even be able to assess whether or not someone is online in their role of employee or private person. It is a sign that the organisation recognises the need for separation of roles and is committed to providing high levels of privacy protection and strong data protection. This level of identification often involves an indication that the customer is appropriately ‘logged-in’. This is shown through a personalised welcome message or the appearance of a personal profile, made up from pre-loaded data, on the website. In the ‘differentiation phase’ the organisation takes it one step further and builds on the customer knowledge it has unlocked with identification. A sub-division is made of the customer base into smaller groups with particular preferences or characteristics. It allows for the further configuration of a website and the tailoring of contents to the individual customer. Which banners, which offers, which content should be proposed to customers who share this profile? It is still a rather generic level on which the website experience is adapted, hence differentiation, rather than customisation. The next step is the true interaction with the customer. It may not truly be an interaction until the moment the customer engages in a purchase or a service interaction. The main characteristic of internet interactions is still ‘the customer controls the conversation’, even though with call-me-now and live chat functionality, organisations can reach out. The goal until then is to limit the number of clicks. Amazon has its patented ‘One-click’ system for this. Effective tactics to increase the likeliness to purchase include availability check (is the item in stock or on backorder?), deferred payment options, track and trace possibilities on orders, etc. The most advanced sites will use real-time interaction suggestions about other relevant products or make combined offers. Customisation occurs when the website starts to adapt to the individual customer. The first sign is a complete order history that is made available, along with their preferred payment method and order collection details. It is about tailored fulfilment. Higher levels of online customisation can be achieved if the customer can influence the offering by tailoring

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Identify

++

+

0

Differentiate

Interact

Customise

Group Linkages Online/Offline data integration

Differentiated customer service Matching engine Golden questions

Real-time online support Alternative means of push communications

Integration offline/online stores Automatic replenishment Personalised products

Strong data protection 3rd-party privacy protections

Pre-filling of data Detailed customer profiling

Drip irrigation questioning Online order tracking One-click Community sense

Partner integration Personalised wish lists Online product configuration

Disclose privacy policy Recognise returning visitors Registration

Customer preference collection Site organised by need

Ease of return Search engine functionality Effective e-service response

Customised web experience Multiple billing/ shipping options Order history

Figure 15.3 Functionality of transactional websites in the context of one-to-one marketing

the product or service itself. The ‘supreme quality level’ is reached when the supplier can deliver the customised products and even provide replenishment of a stock of customised goods or just-in-time provision of a customised service. Examples in real life are a grocery store that replenishes the refrigerator based on the customer’s predetermined preferences and according to a previously agreed stock level. However, one can also imagine an online vintners that keeps the collection a customer purchases in their own warehouse (professional facilities and space are offered) and sells or buys bottles of wine fitting the customer’s budget and collection profile.

15.5

Measuring results Using the internet as an important network in buyer–supplier interaction requires measurement. How else would an organisation assess: ●

the effectiveness of measures directed at stimulating, facilitating, realising online transactions?

●

the degree to which online contacts are reinforcing the customer relationship?

Forrester (1999) has given an overview of data that are used when evaluating e-commerce websites. They present an overview that is predominantly geared towards

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answering the first question, relating to transactions. They address four sub-questions in their assessment: 1 Who is the customer? ‘customer identity’. 2 What has the customer bought? ‘transaction’. 3 How did the system react? ‘system throughput’. 4 Where did visitors come from and where did they go? ‘basic traffic’. Table 15.2 highlights which data are registered, where they can be collected and what they are used for. Since the appearance of Forrester’s overview, a lot has happened. The e-commerce part of their framework is still very much relevant, but relationship and social media metrics have been introduced since. Furthermore, the success of internet analysis is not in the collection or the analysis of data, but in the effective application of the knowledge acquired in the process (Greenberg, 2011). Within an organisation which aims to build relationships with customers, every discipline has its part to play. Top management should know how big a part internet plays in terms of revenue contribution, both directly and indirectly. Marketers should focus on the effectiveness of content in driving traffic and sales, in the effectiveness of the site in engaging customers in interaction. The contact centre needs to assess the possibilities to provide better, faster and cheaper service through online interactions, but also see the risks of huge amounts of traffic being driven to the website, where they might get confused about information and pick up the phone. IT needs to consider what levels of traffic the servers can handle and how traffic can be managed. The channels are interrelated and should be managed and measured as such. Table 15.2 Internet analysis Measure

Origin of data, for example:

Use of data, for example:

Name and address E-mail address Facebook profile LinkedIn profile Demographic data

Selections Campaigns, mailings Personalised profiles ID Segmentation

Purchase history

Transaction database Newsletter registration Facebook LinkedIn Purchased data 3rd parties, questionnaires Transaction database

Transactions

Purchase history Payments

Transaction database Cash book

Customer valuation Segmentation Managing bad debts Cross selling and up selling Retention Effectiveness of marketing activities

System performance

Error reports Interrupted connections Capacity: how many visitors can you handle simultaneously

Server log files Network packed sniffer

Localise bottlenecks in system Capacity planning Waiting times

Basic traffic

Number of visitors Page visits Entry pages, exit pages Search terms used Visitor origin

Server log files Analytics software

Search engine optimisation Website structure and navigation Optimising banner advertising Traffic stimulation Identify origin

Customer identity

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15.6

conclusion The evolution of the web is showing no signs of stopping. It is becoming the centre point of our media landscape, integrating many technologically advanced possibilities to interact with customers and for customers to interact with each other. The biggest change is not technological, but social. The internet has become a place where people interact, create and share. Within this virtual society, which is no longer a parallel universe but a part of our everyday lives, people and organisations interface differently. They are able to be informed more broadly, quickly and relevantly all at the same time. They are able to communicate more personally and extensively than ever before. They are able to get organised themselves and create, produce and contribute. Marketers need to adapt. The changes are not just reaching across the online world, but influence offline marketing as well. It’s not just a world of threats, but also of infinite possibilities. We have distinguished, for argument’s sake, between the social web and the commercial web. The social web is a part of online interaction where the organisation is clearly ‘a guest’, allowed to listen in, sometimes contribute and participate, but it does not ‘own’ anything: not the conversation (which belongs to the community), not the customer (who interacts in a broader context as a person) and not even the brand (which is what the community makes it). The commercial web is safer, more controlled. There is a sender, who owns a platform and directs the interaction, to some extent at least. The social web is exciting. It offers the possibility to engage customers around a brand, creating ‘viral’ campaigns that stimulate the broad proliferation of the marketing message. Customers can contribute and co-create a product or service, consult potential buyers and service other users of a product in the after sales phase. The commercial web offers the challenge of getting more traffic to the website, catering to their expectations and, if appropriate, supporting their buying process with payment and fulfilment. Customer-oriented organisations will invest in relevant content to draw appropriate customers to their website. They will invest in usability, removing barriers in design and making the interaction intuitive and pleasant. They will, moreover, invest in payment options and fulfilment that put the customer at the centre. Using pre-existing knowledge that assists in identification, differentiation, interaction and customisation is highly effective in creating more personalised online customer experiences.

case sTuDies albert heijn: where off- and online meet each other Appie was voted winner of the ‘Best Mobile Application’ category in the 2010 Accenture Innovation Awards. Appie is a well-known iPhone app that helps to build customer loyalty. With Appie a shopper can make a shopping list, find recipes, promotions and order online. The shopping list will present the products in a way that matches the way you walk through your store. Ingredients from a recipe can be put directly on the shopping list. Products that have been bought before can be remembered and promotions can be highlighted. In the store products can be scanned to add them or remove them from the list.

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case studies (continued) Consumers can also share their shopping list with other people. When they put a product on the list, others can see this as well. So households can avoid buying the product twice. Also they can twitter and place messages on Facebook walls; what do they like or dislike. A link with Albert.nl, Albert Heijn’s home delivery service has also been created recently. The customer can choose to pick up their order or have it delivered. The payment process had to be safely organised before this functionality could be added. The supermarket chain, later than Tesco, also started to offer free Wifi in their stores, the reason for this experiment being that in a number of Albert Heijn stores there is no mobile internet available. To be able to use the mobile shopping aid, Appie, connection to the internet is necessary. Source: Emerce.nl, 12 November 2009, 20 July 2010, 9 August 2011, 4 January 2012.

harry Potter: a magic brand In the book World Wide Rave there is a description of how a ‘Conversation Manager’ can make optimal use of the leverage effect. Imagine you are a marketing director of Universal Studios (one of the most famous amusement parks in the world). It has recently been decided to invest in some spectacular new attractions around the theme ‘Harry Potter’. It is your job to tell the world this wonderful message and to increase the number of park visitors. A traditional marketer would start a big television campaign, post billboards in prime locations and hire an exclusive PR agency to work on the media. Cindy Gordon, vice president of new media, decided to follow the ‘conversation manager’ approach. The Harry Potter brand is an emotionally loaded brand, with millions of fans around the world. People were queuing in book stores in more than 200 countries the day the latest book was published. J.K. Rowling’s books have been published in more than 65 languages; in total more than 325 million books have been sold. To spread the message of ‘The wizarding world of Harry Potter’ across the world, the Universal Studios team approached a number of known fans of the student-wizard. Together with J.K. Rowling, Universal Studios’ team selected seven Harry Potter die-hard fans. These seven people were invited on a secret webcast on 31 May 2007, at midnight. The place of the webcast was the film set, the office of Perkamentus. Loyal visitors of the Universal Studios park were all e-mailed about this webcast. Even more importantly, however, the seven fans immediately started to post the news of the webinar on different Harry Potter forums and blogs. By the following day, fans all over the world had received the spectacular news. Also, the traditional press picked up on the news very quickly. Universal Studios estimates that some weeks later approximately 350 million people were aware of their plans. Seven people distributing some exclusive news were able to reach 350 million people! The budget for this action was very small. Fans were extremely enthusiastic about the way of announcing the news. Reading the news in the New York Times, would not have produced this positive wave. Source: van Belleghem (2010).

Questions 1 Explore in what sequence Albert Heijn extended the functionality of its mobile app. Argue why they have chosen this path. 2 In your opinion, what is the role of such a mobile application within the integrated social media strategy of Albert Heijn or a comparable supermarket? 3 What factors influenced the success of the Harry Potter social media campaign?

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QuesTions 1 Look for illustrations of web 2.0, web 3.0 and web 4.0. 2 In viral marketing campaigns organisations can use films that will be edited by customers. They can give the video their own ‘look and feel’. What is an advantage and what is a disadvantage of consumers editing the original film? 3 For an organisation of your choice, describe how they can involve consumers in the marketing of products or services during different phases of the relationship. (a) Describe in what way co-creation can take form during the orientation, selection, buying and after sales phase. (b) Also show how organisations can reward relations for their contribution. 4 People might express themselves more extremely on the web, in a positive or a negative way. What advice would you give organisations on the way they should deal with critics? Give four tips and provide reasons. 5 How could a producer of consumer durables best start a user community around its product? 6 In what way can traffic to a website be generated? For a supplier of your choice, describe the methods they apply to generate traffic. 7 Visit of a website of your choice and evaluate the design of the website. What recommendations do you have for improving the design? 8 Why do the logistical costs of online transactions for the first and third distribution forms in Table 15.1 (from the warehouse and from the satellite) hardly differ from the second distribution form (delivery from the store)? 9 Visit a website of your choice and try to see to what extent it is personalised. 10 For an organisation implementing a customer intimacy value discipline, what are the most important performance indicators on a website?

references Algesheimer, R., Dholakia, U.M. and Herrmann, A. (2005) The social influence of brand community: evidence from European car clubs, Journal of Marketing, July, 19–34. Anderson, C. (2006) The Long Tail: Why the future of business is selling less of more, Hyperion, New York. Berger, J.A. and Milkman, K.L. (2009) What makes online content viral?, 25 December, working paper. Available at: SSRN: http://ssrn.com/abstract=1528077 or http://dx.doi.org/10.2139/ ssrn.1528077. Belleghem, S. van (2012) The Conversation Manager: The power of the modern consumer, the end of the traditional advertiser, London: Kogan Page. Boswijk, A., Peelen, E. and Olthof, S. (2011) Economie van experiences, 3rd edn, Amsterdam: Pearson Education. Bügel, M. (2002) Klantenloyaliteit, over ongelijke behandeling in het digitale tijdperk, Amsterdam: Pearson Education.

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Part V Channels Ehrlich, B. (2010) The Old Spice social media campaign by the numbers, Mashable.com. Eilander, E. (2004) E-mail marketing testen werkt, Tijdschrift voor Marketing, May, 32–5. Eilander, E. (2005) Gevecht om zoekmachinemarketing-euro, Tijdschrift voor Marketing, May, 46–8. Eilander, E. (2010) Zakelijke community: Philips ontdekt LinkedIn, Tijdschrift voor Marketing, 44, 11, 29–31. Emerce.nl (2009) 12 November. Emerce.nl, Starkenburg, J. (ed.) (2010) 20 July. Emerce.nl, Boogert, E. (ed.) (2011) 9 August. Emerce.nl, Libbenga, J. (2012) 4 January. Fellinger, S. (2008a) Fellingers favorieten, Tijdschrift voor Marketing, 42, 11, 8. Fellinger, S. (2008b) Obama, de eerste internet-president, Tijdschrift voor Marketing, 42, 7/8, 10. Fellinger, S. (2008c) Fellingers Favorieten, de A is van App, Tijdschrift voor Marketing, September, 42, 9, 8. Forrester (1999) IT View Report, September. van Geest, Y. (2011) TedxBrainport2012 Eindhoven; http://www.youtube.com/watch?v=yTtL-iAXJxo. Godin, S. ( 2008) Tribes, London: Piatkus Books. Goldenberg, J., Han, S., Lehmann, D.R. and Hong, J.W. (2009) The role of hubs in the adaptation process, Journal of Marketing, 73, March, 1–13. Greenberg, P. (2010) CRM at the Speed of Light, 4th edn, New York: McGraw-Hill. Grewal, D., Iyer, G.R. and Levy, M. (2004) Internet retailing: enablers, limiters and market consequences, Journal of Business Research, 57, 703–13. Haarman, J. and Peelen, E. (2000) Improving the accessibility of web sites by a higher ranking in search engines, Proceedings EMAC Conference, Rotterdam. Harris, L.C. and Goode, M.M.H. (2004) The four levels of loyalty and the pivotal role of trust: a study of online service dynamics, Journal of Retailing, 80, 139–58. Laan, J.W. van der (2000) The future of on-line food retailing, Food Personality, January. Lans, R.van der, Bruggen, G. van, Eliashberg, J. and Wierenga, B. (2009) A viral model for predicting the spread of electronic word of mouth, Journal of Marketing Science, 29, 2, March, 348–65. Marketing International (2003) Hoe ontwikkelt het internetgebruik zich binnen Europa, Marketing International, 38, 3, March, 16. Mika, P. (2007) Social Networks and the Semantic Web, New York: Springer Verlag. Niks, W., Plasmeijer, P. and Peelen, E. (2000) E-commerce, transactiemodel voor internet, Alphen a/d Rijn: Samsom. Olsthoorn, P. (2005) Hoe zwaar inzetten op interactief?, Tijdschrift voor Marketing, April, 57–9. Park, Y.-H. and Fader, P.S. (2004) Modeling Browsing Behavior at Multiple Websites, Marketing Science, 23, 3, 280–303. Peppers, D. and Rogers. M. (2000) One-to-One Manager: Real world lessons in customer relationship management, Oxford: Capstone Publishing. Pine, J., Korn, K.C. and Gilmore, J.H. (2011) Infinite Possibilities, San Francisco, CA: Berret-Koehler Publishers. Punselie, R. and Bugter, B. (2004) Web-communicatie, Utrecht/Zutphen: Thieme-Meulenhoff. Schans, W.M. van der (2001) Consumentengoederen en merkcommunicatie op internet, Rotterdam: Erasmus Universiteit. Srinivasan, R. and Moorman, C. (2005) Strategic firm commitments and rewards for customer relationship management in online retailing, Journal of Marketing, 69, October, 193–200.

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Chapter 15 The online environment Swinkels, H. (2001) Web Usability bij de Nederlandse e-tailers, een onderzoek naar de bruikbaarheid van vijftien Nederlandse e-tailers, Rotterdam: Erasmus Universiteit. Toubia, O., Stephen, A.T. and Freud, A. (2010) Identifying active members in viral campaigns. Available at http://sites.google.com/a/andrewstephen.net/andrew/researc/papers/Toubia_ Stephen_Freud_viralmarketing_nov2010.pdf. Verhagen, T. and Broere, F. (2005) Een effectief ingerichte webwinkel: het koopproces centraal, Tijdschrift voor Marketing, September, 28–31. Weber, L. (2007) Marketing to the social web, how digital customer communities build your business, Hoboken, NJ: John Wiley & Sons. Wiklund, M.E. (1994) Usability in Practice: How companies develop user friendly products, Boston, MA: AP Professional. Wilde, E. de and Brenk. M. van (2002) Down to earth, e-commercestrategieën na de hype, Amsterdam: Pearson Education. Zhang, J. and Krishnamurthi. L. (2004) Customizing promotions in online stores, Marketing Science, 23, 4, 561–78.

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16

Contact centre management Contact centres face a huge challenge. What started out as the ‘place’ where all telephone contacts were dealt with, has grown into a ‘hub’ where all contacts between an organisation and its relationships are managed through a variety of different channels. Internet and telephone have converged and are facilitating phone calls and electronic messages. The contact centre has become a sort of flight control centre, directing messages, communicating and maintaining contact and hopefully building relationships. In essence, the contact centre of the future reflects the transformation of the organisation from a product orientation to a customer orientation. It is becoming the ‘enterprise relationship centre’ and is responsible for, to quote van Moorst (2004), ‘making sure an organisation can look its customers straight in the eye’. This chapter will deal with the management aspects of the contact centre. We focus first on telephone interactions, then move on to consider the management of other channels. It reflects the growth path of contact centres, but also is reflective of the present-day balance in activities for most contact centres. Section 16.1 describes the contact centres as such. In Section 16.2 we determine what service levels to offer customers and prospects for the telephone and discuss how these can be realised. Section 16.3 looks at the capacity planning that is crucial to the availability and responsiveness of the contact centre. After that, we move on to the topic of quality of contact (in Section 16.4). The scope is broadened in Section 16.5 to include different channels and in Section 16.6 we discuss the so-called ‘Key Performance Indicators’ that allow us to manage and control the call centre performance. In this chapter we will address the following questions: ●

The description and evolution of contact centres

●

Quality and performance management in contact centres

●

Managing the transition from a call centre to an ‘enterprise relationship centre’

PraCtitioner’s insight The computer is switched on and three windows are opened. At this time you are chatting through MSN with some people you know, e-mailing is like writing letters . . . too slow. The white cap of the iPod is clearly identifiable in one ear and the mobile phone is within reach. A friend just sent you a link to a nice online video.

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Practitioner’s insight (continued) It’s a short description of communication behaviour and computer usage by today’s youth, and it is changing very quickly. Platforms for social communication are adopted quickly, mobile communication is the default and short messages in signs, specific abbreviations and images are more popular than voice conversations or e-mail. How far along are we, as organisations, to tune into this world of infinite communication options? Are we able to use the channels that will engage them? We might do well to think of the youngsters as the front-runners, because their communication behaviour is increasingly copied forward, to older generations. Parents ask their children how to use an iPhone, grandparents use their grandchildren to learn about online banking or safe browsing.

16.1

Contact centres described At the very start, call centres were a ‘place’ where a large number of employees were dealing with the in- and outbound calls with prospects and customers covering topics of varying nature. They have been spurred by CTI or Computer Telephone Integration, making it possible to integrate the functionality of the telecommunications network with data, computer applications, databases, speech technology and other media (van Moorst et al., 2007). Thanks to CTI it is possible to recognise customers who are waiting on hold, to pull up customer records at the beginning of conversations and select phone numbers and dial them automatically in outbound calling. The growth and integration of telecommunications and internet traffic in all its shapes and forms (sms, mms, MSN, e-mail, fax) are leading to a transformation of the traditional call centre to a (multimedia) contact centre. This centre, which may or may not be located at one physical place, deals with in- and outbound calls, chat sessions, e-mail messages, fax and regular mail correspondence. It provides information, service and can help market or sell (see Figure 16.1). When the channels are integrated and a conscious process to engage customers has started, the maturity of contact centres is increasing. They are no longer the operational departments that handle contact and are regarded as a cost factor, but have become ‘enterprise relationship centres’ or ‘value centres’. In this book we will retain the term ‘contact centre’, regardless of the maturity level. The contact centre consists of four basic elements, as can be seen in Figure 16.2. Of these four elements, people (manpower) are the most important. They determine the quality of the contact to a great degree. As contact centres are becoming more complete ‘enterprise relationship centres’ the complexity is increasing. The agents, a name that is

CrM definitions Enterprise relationship centre: The integration of a multimedia contact centre with marketing and sales within an organisation, which puts the customer experience at the centre of all efforts. Source: vanM oorst(2004) .

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Figure 16.1 Possible contacts Source: Huijnen (1997).

Figure 16.2 Elements of a contact centre Source: Belloni Business Consultancy Contact Centers.

given to people working in direct contact with the customers, need different skills and competencies to complete their tasks. They will, for instance, need sales skills to complete their communication skills. They need to be able to handle different systems and have sufficient product and customer knowledge to perform their wide array of tasks. It is necessary to recruit according to the complexity of this job and to provide sufficient training. The type of management and leadership and even the culture within the contact centre will have to change to fit the new ambitions and tasks. In the early maturity stages, contact centres are often run like factories, based on productivity standards closely related to the process. As a more mature contact centre evolves, the shift towards a more result-oriented approach seems appropriate. The telecommunications module comprises the telephone switchboard, the systems for routing the calls to the proper persons and voice response systems (see Chapter 18). The organisation of rescue and relief operations during emergencies is also considered to be part of this element of the contact centre; this involves the organisation of temporary solutions for emergency situations in which the switchboard is out of operation due to computer failures, fire and the like. The choice can be made to have the contacts handled by an external

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contact centre or to relocate this operation to another location where a substitute contact centre can be set up within a short period of time. The information technology component (see Chapter 18) must make it possible to: ●

see who is called when contacting outbound and automatically dialling the number;

●

identify incoming traffic and route it to different agents;

●

gain access to required information at the right time and place;

●

organise the fulfilment: the automatic electronic generation and issuing of documents such as order confirmations, appointment confirmations etc.;

●

manage the workflow: manage processes and issue status updates (for example, what is the status of an order? Is it received, cleared, in processing or in shipment?);

●

generate management information on the productivity of the agents (employees), the number of calls completed, the turnover they realised, average call time etc.;

●

record and distribute quality measurements;

●

provide the back office with information on order processing and the like;

●

provide electronic training programmes;

●

support control activities involving the information system.

Process management focuses on the management of the contact cycle. Important points requiring attention include capacity planning and quality management. The first must ensure that a contact centre can handle the volume of calls; the subject of the second is the quality of the contact. In this part of the book dealing with operational CRM, we concentrate on process management – technology and manpower are a given.

16.2

Determining the service level What determines the quality of the contact? The service level in the contact centre is first and foremost determined by the ability of the customer to actually reach an agent and, more generally, the contact centre’s ability to provide a swift response to incoming messages.

availability The quality of the contact is, to a great extent, dependent on the organisation’s availability by telephone. This would appear to be a simple concept, but, on closer examination, it has more facets than one would think at first glance. It is more than simply the percentage of telephone calls that are answered within y seconds. First, it may be desirable to be able to distinguish between customer groups, for which different levels of service are created. Then, attention needs to be paid to callers who get a busy signal and cannot reach the contact centre at all and to those callers who decide not to wait and break the connection prematurely (call abandon). Calls falling into this latter category are referred to as ‘lost calls’. In general, callers decide right after the establishment of the ‘technical’ connection whether they will wait or not. Should they decide to wait, then the chance is high that they will remain until the end. Finally, the average response time provides an incomplete picture. If we use a graph to indicate which frequency results in a certain response time, we will usually discover a skewed distribution. A small percentage of callers have to wait much longer than the average amount of time.

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PraCtitioner’s insight For a service level of 80 per cent answered within 20 seconds, roughly 30 per cent of the callers will end up in the queue, the longest waiting time will be approximately 3 minutes and the average response speed will lie between 10 and 15 seconds. Source: Cleveland and Mayben (1999).1

Quality In addition to availability, the service level is naturally also dependent on the quality of the contact itself. Critical points involved in determining and measuring the level of quality are: ●

Are customer needs and wishes being interpreted correctly?

●

Are details being noted correctly?

●

Are customers not being angered or frustrated?

●

Is the customer prevented from having to call back? Is initiative taken by the organisation?

●

Are opportunities being captured to connect with the customer on a more personal level and is valuable feedback being picked up?

●

Has the transaction been completed, the question been adequately answered or the complaint resolved?

An insufficient level of quality has consequences for productivity. Agents have to cope with customer irritation, and lose time, energy and the motivation to do their job. Furthermore, staff turnover and absenteeism increase as a result. The impact of different aspects of the telephone conversation on customer satisfaction is shown in Figure 16.3. Only a limited number of aspects have a positive influence on the caller’s level of satisfaction. How polite the agent is does matter, yet this has only a slight influence on satisfaction. Their product knowledge, friendliness and ability to offer ‘real’ solutions allow agents to exercise a great deal of influence on the level of satisfaction. Aspects which could be considered ‘hygiene’ factors and which must be of high quality can be found in the lower right quadrant. This involves availability, following up on promises, putting customers through and customer recognition.

CrM definitions What is a high-quality telephone conversation?

●

The caller is satisfied. The data have been input correctly.

●

The conversation was necessary.

●

The agent gave the right answers.

●

The caller received the correct information.

●

The agent received all the necessary and useful information.

●

The caller is not put through a countless number of times.

●

1

330

The calculation follows the Erlang C formula, available at www.erlang.com/calculator/erlc/.

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Chapter 16 Contact centre management

CrM illustration (continued) ●

The caller is not rushed.

●

The caller has the feeling that the conversation was effective.

●

The contact centre has completed its task.

●

Unsolicited information from the customer has been noted and recorded.

●

The caller does not feel it is necessary to enquire, check or to call back.

●

Other employees can correctly process the customer’s order.

●

The agent is proud of their work.

●

The caller did not get a busy signal.

●

The caller did not have to wait too long in the queue.

Source: Cleveland and Mayben (1999).

Figure 16.3 Impact of quality on satisfaction Source: Call Centre Magazine, 5 (1999).

Determining the service level The desired service level will have to derive from the strategy. With customer intimacy, the quality level of the contact should be higher than that found with operational excellence. By translating customer intimacy into service requirements for the contact centre, just as much attention must dedicated to ensuring that customer intimacy is not seen as a synonym for servitude. Customer orientation and customer friendliness are desirable, yet must not deteriorate into altruism and self-sacrifice. Commercial skills must guarantee that fulfilling customers’ wishes is profitable and satisfying for both parties. Determining the desired level of service also requires weighing costs and returns against one another. Service has its price!

331

332

96

97

40

42

31 32

Source: Cleveland and Mayben (1999).

89

93

38

39

29

30

74

83

35

36

27

28

45 62

33 34

25 26

Contacts answered < 20 sec. (%)

Scheduled personnel (: 1.3)

Active agents

0.5

1.0

1.5

2.0

3.5

6.5

26 12.5

% lost contacts (estimate)

table 16.1 Analysis of the increasing marginal return

0.15

0.30

0.45

0.60

1.05

1.95

7.80 3.75

% calls permanently lost

10.1

10.2

10.3

10.4

10.7

11.2

14.6 12.2

Hrs lines are in use

200

199

199

199

198

196

184 193

Answered calls

4,443

4,437

4,430

4,423

4,403

4,363

4,103 4,293

Gross turnover/ average call ($22.25)

312

302

293

283

273

263

244 254

Labour costs ($)

152

152

154

156

160

167

218 182

Line costs free number/ 15 min.

3,980

3,982

3,984

3,985

3,971

3,933

3,641 3,847

Net turnover

(2)

(2)

(1)

14

38

85

0 206

Increasing marginal return

Chapter 16 Contact centre management

Table 16.1 illustrates how an optimal service level may be determined for a contact centre whose task it is to take orders by telephone. The optimisation decision concentrates in this case on the determination of the number of agents to be deployed for the completion of a given number of incoming telephone calls. How many direct and indirect individuals (columns 2 and 3) must be scheduled to answer the calls (column 7)? Which service level will then be reached? Or how many calls will be answered within the norm of 20 seconds? How many callers abandon? How many of these quitters try again later and which portion have we ‘lost for good’ (columns 3 to 5)? Next, the turnover that may result from the customer contacts may be determined (column 8). This return may be used to offset the contact centre costs which are linked to the workforce size and the use of the telephone lines (columns 9 and 10) in order to determine the net turnover. Finally, the ‘increasing marginal return’ of the use of an extra agent in the contact centre is calculated in the last column: how much extra net turnover is earned through the use of an extra agent? It appears that the optimum is achieved with 29 agents and that, after this amount, the additional costs are no longer offset by the growth in net turnover.

16.3

Capacity planning Realising the desired level of availability is dependent on capacity planning. At any given moment of the day, the right number of agents should be available to handle the telephone contacts. In contact centres where incoming as well as outgoing telephone calls are processed, the work pressure is more or less manageable. Outgoing calls may be conducted at times when there is very little incoming call traffic. None the less, we must also realise that the timing of the outbound calls is of importance for their effectiveness. For example, an agreement has been made with a customer that they will be called back at a certain time and the chance of reaching a prospect is higher at certain times of the day than at others. The result is that capacity planning remains necessary. The number of staff needed will have to be deduced by predicting the number of calls.

Prediction of number of telephone calls In predicting the number of telephone calls, long-term patterns are usually translated into half-hour periods. Figure 16.4 illustrates how the number of telephone calls can be predicted for a half-hour block of time. To do this, a step-by-step breakdown takes place for the aggregated prognosis. In this way, the annual forecast is translated step-by-step into a half-hour prediction. Fluctuations in the call traffic for certain seasons, weeks and days are also taken into account. Figure 16.4 gives an explanation of the calculation concerned. There are contact centres that base their capacity planning on sales forecasts. On the basis of the average transaction amount, the expected turnover can be converted into the number of transactions to be completed. Next, it will be determined how many telephone calls are necessary to be able to complete this number of transactions. This number is multiplied by the average call duration and the completion time required in determining the final contact centre capacity. In predicting the necessary capacity, the influence of campaigns on the work pressure of the contact centre must also be factored into the equation (Bontebal et al., 2001). Which activities have been planned at which times? How much response is expected? Campaigns may cause trend breaks in the size and composition of the call traffic. If this is not taken into account, it can lead to a drop in the level of service and a loss of turnover. In order to be

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Figure 16.4 Capacity planning Source: Cleveland and Mayben (1999).

able to accurately estimate the influence of these marketing activities, good communication between marketing departments and the contact centre is a top priority. The most preferred situation is that in which the activities calendar is created in consultation between the two. If marketing determines the calendar contents unilaterally, an unnecessarily high number of peaks in the call traffic may occur. The opposite situation is no more desirable, in which the contact centre and the post room (fulfilment) call the shots. The optimum activity calendar will be one that is born out of weighing commercial against operational interests. With regard to modifications in the calendar, discussions will also have to take place regularly and in a timely manner. In order to be able to make an accurate prediction of the call traffic, the organisation will then have to develop insight into the response percentages to marketing activities. Which response is achieved from a similar mailing at a similar time? How many people call in reply to a direct response advertisement or commercial? What will be the effect of a marketing activity incentive?

Predicting staffing needs In order to calculate the staffing requirement, Erlang developed a much-used yet difficult C-formula back in 1917 (Cleveland and Mayben, 1999). Given the fact that Erlang C is built into many software packages for workforce management, the complexity is no longer

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a problem. In order to calculate the minimum staffing figure, four parameters must be filled in: 1 average conversation time in seconds; 2 average completion time in seconds; 3 number of calls; 4 desired service level in seconds (number of seconds within which the call should be handled). In Table 16.2, the staffing needs have been calculated using the Erlang C formula for an inbound contact centre with the following parameter scores: ●

average conversation time: 180 seconds.

●

average completion time: 30 seconds.

●

number of calls per half hour: 250.

●

desired service level in seconds: 20.

The computer program indicates in this case that the optimum workforce size is 34 agents. This calculation is based on the assumption that the unanswered ‘calls’ wait and do not hang up. This assumption, which lies at the basis of the Erlang C formula, generally results in an overestimation: the actual number of telephone calls to be handled is lower owing to the lost calls. In determining this optimum, the law of diminishing returns applies. table 16.2 Erlang C for inbound contact centres Contact centre for incoming telephone calls Average conversation time in seconds: 180 Average completion time in seconds: 30

No. of calls per half hour: 250 Service level in seconds: 20

No. of agents required

P(0)

ASA

DLYDLY

Q1

Q2

SL

OCC

TKLD

30 31 32 33 34 35 36 37 38 39 40 41 42

83% 65% 51% 39% 29% 22% 16% 11% 8% 6% 4% 3% 2%

209 75 38 21 13 8 5 3 2 1 1 1 0

252 115 74 55 43 36 31 27 24 21 19 18 16

29 10 5 3 2 1 1 0 0 0 0 0 0

35 16 10 8 6 5 4 4 3 3 3 2 2

24% 45% 61% 73% 82% 88% 92% 95% 97% 98% 99% 99% 100%

97% 94% 91% 88% 86% 83% 81% 79% 77% 75% 73% 71% 69%

54.0 35.4 30.2 28.0 26.8 26.1 25.7 25.4 25.3 25.2 25.1 25.1 25.0

P(0) probability of a waiting time longer than 0 seconds ASA average speed of answer for a call DLYDLY average delay for all of the calls that are not answered immediately Q1 average number of calls in the queue (all calls are included in the calculation, even those calls which do not end up in the queue; the designation is misleading as a result) Q2 average number of calls in the queue when all the agents are occupied or when there is a queue SL service level, in this case the percentage of calls that must be answered within a certain number of seconds OCC percentage of agents that are working on the processing of the calls (call and completion time) TKLD the line occupancy rate in hours (conversation time + ASA) × no. of calls per hour Source: Cleveland and Mayben (1999).

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Increasing the number of logged-in agents has a diminishing effect on the service level. Each time an agent is added, there will be an increase in the percentage of callers that are handled within 20 seconds, but each time this increase gets smaller, which is why achieving a top service level places demands on the personnel budget. An alternative to the Erlang C formula for predicting staffing needs is simulation. A computer program can be developed in which call traffic spread out over the day, the week and the month can be simulated. Variations can be built into the call duration as well as the probability that callers in the queue will abandon the call and call back. The service and cost levels can be calculated for various staffing levels in the contact centre, thus allowing the optimum workforce size to be determined. In predicting staffing requirements, special attention must be placed on the effect of lengthy calls and peak traffic on the service level. A disorganised effect can be the result, and may extend over a longer period of time. Completion activities can come under pressure and the quality of the contact can decrease. The influence of the workforce size on the line occupancy rate will also have to be reviewed. The more agents that are deployed for a certain ‘call load’, the more the line occupancy will decrease. The opposite also applies: if fewer agents are available to handle a certain call load, the occupancy of the lines will increase because the answer speed has increased. If the supplier provides customers and prospects with the opportunity to call free of charge, its line costs will rise.

routing The effectiveness and the quality of the call traffic increase if the calls take place between the right people. The regular customer will speak to their regular contact person or, if they are either absent or unavailable, to their replacement (the fallback scenario or the secondline back-up). The French-speaking customer will be assigned to someone who speaks their language. The person interested in a specific product will be put through to the product specialist and the person filing a claim will be helped quickly and appropriately. To do this, the call traffic will have to be routed. The first- and second-line agents will have to be specified in the system for the different types of contacts and customers. The effect of this ‘skill-based routing’ on the necessary workforce size most not be overlooked.

16.4

Managing contact satisfaction Once the contact centre’s availability has been taken care of, the focus can be shifted to conducting an efficient and effective dialogue with prospects and customers. Figure 16.2 contains the previously mentioned elements from the customer contact which determine satisfaction.

e-mail The challenge presented by inbound e-mail remains fully understanding the question the customer is asking. The mail message can be vague or broadly formulated, which makes it hard to provide exact answers. E-mail suffers from this problem more than regular mail, because of the perceived speed of communication. A letter, which may take several days to arrive and which requires the effort of posting, provides a better incentive to take the time to be precise in describing the issue. One can imagine that a request for clarification of the

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issue in response to an e-mail is not the answer the customer was hoping for. It leads to communication back and forth and can make e-mail quite an expensive communications channel, of which it is hard to manage the quality. There are several options available for escaping the deadlock of e-mailing back and forth, and they don’t involve making it hard to e-mail or completely closing off the channel by hiding e-mail addresses and eliminating them from customer communication. Automatic e-mail response systems can be used in combination with so-called dynamic content management systems. They can make answers that have been given previously visible and allow agents to quickly mail complete messages or components of messages that they or a colleague have used before. It speeds up the creation of e-mail messages and improves the consistency of the answers provided. The knowledge bank of answers can in turn be used to improve the self-service ability of customers. Another answer to the problem of vague questions asked through e-mail is to work with contact forms, structuring the issue with drop-down menus and additional or background questions. This way the e-mail is structured in a standard format, allowing agents to quickly scan the message and get a more complete view of the problem. In the case of a more standardised formulation of inbound e-mails, it is also easier to provide more standardised responses. The responses can be predefined to a certain degree. They may contain predefined links to direct a customer to appropriate answer pages or locations where further conversation can take place. The conversation can be channelled towards appropriate and available content. Outbound e-mail has been discovered in recent years as an effective marketing communications tool. The initial enthusiasm led to mailbox cluttering: spam messages and junk mail have taken on enormous proportions in a matter of years. Having gained some experience in direct marketing, the different regulating bodies in the Western world were quick to take action and tighten the regimes for outbound e-mailing (see Chapter 5: it is mostly opt-in based). The current day practice is that a clear opt-in must be proposed, so permission needs to be given by customers to allow a company to approach them by e-mail. At the same time it must be clear in any and all communication how the recipient can unsubscribe and have their address removed from the sender’s list (opt-out). The enthusiasm described here was mostly on the advertiser or marketer’s side. The financial advantage of e-mail is huge, with low production costs and virtually no shipping costs, along with the potential to tailor the offering to the customer and to generate direct response. If it isn’t the perfect marketing communications tool, it’s coming pretty close! The messages can be finetuned according to the customer’s indicated interests or the insights the organisation has about a given customer segment. The messages can contain links to other content, websites, communication platforms etc. The possibility of the contact becoming two-way is quite real, although many uses of outbound e-mail marketing are still very much directed at ‘flyering’ or sending out the corporate brochure or newsletter. Let’s just say it’s old behaviour on new channels.

PraCtitioner’s insight ten e-mailing tips 1 Stop sending general information. 2 Use sophisticated, clean databases. Don’t use a blunderbuss approach. Make sure you have opt-in addresses: people who don’t mind being approached with commercial messages.

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Practitioner’s insight (continued) 3 Produce concise, tailored reports. 4 Approach your potential customer intelligently; don’t push your product too hard. The customer is no fool. 5 Try starting a one-on-one dialogue with the customer. 6 Create reports. Keep track of how often you have approached a customer, in which stage of contact you are at the moment; don’t send the same e-mail twice. 7 Notify the recipient. Provide information on the reasons why they have received the e-mail. 8 State the sender’s name on the e-mail. 9 Indicate clearly what the recipient must do in order to stop future e-mails. 10 Always send to personal e-mail addresses. Never send to sales@... nl, [email protected] etc. Source: Vlam (2003).

Chat A chat session can have several significant advantages over e-mail in terms of engaging in contact with a relationship. Questions can be formulated in a brief manner and in ‘speaking language’. An answer can be given in a matter of seconds, making the potential for interaction greater as a result. It is quite quick to ask for an elaboration on an answer that is not quite understood, so that a ‘first time fix’ is easier to achieve. It is also easier to refer to content, such as an article or product on the website and guide a customer through the buying process, for instance. Many anticipate that chat sessions will thrive as a communications tool in the years to come, but they pose a problem to organisations in terms of capacity planning. Manual chat sessions are quite time-consuming for employees and can be quite expensive. The spare capacity required for timely responses to questions is quite large and sometimes hard to plan. One solution is the use of so-called ‘chat bots’ – software robots that can chat with customers. They rely on a knowledge base and a logic engine that enables them to present responses through a series of expert rules. As long as relatively simple conversations are presented to the chat bot, it will cope beautifully. The first chat bots were straight ‘question-and-answer’ bots. They had no relevant conversational memories. Nowadays, the conversation can go deeper than one question. If you were to ask Anna, the IKEA chat bot, about opening times, she would ask you for which store location. You would, for instance, answer ‘Milton Keynes’ and she would kindly show you the page with all the opening hours of the Milton Keynes branch of IKEA. If you then ask for directions, she will remember that you were looking for Milton Keynes earlier and provide you with the appropriate directions. The fact that IKEA has given its chat bot a name reflects the perceived personal nature of chatting. Many chat bots have names and faces. It has proved to have a positive influence on the customer experience. There are over 1,000 chat bots currently in operation worldwide, according to the website chatbots.org, which aims to maintain a complete directory per country and area of expertise or application of the chat bot.

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telephone call One of the most important negative influences on satisfaction appears to be the call charges. This raises the question of which costs can be charged to customers and prospects for their use of the contact centre? Should the customer be able to call at the expense of the supplier, or should they be charged a fee? Research has shown that, in principle, customers are prepared to pay a price for after sales service by telephone which goes beyond the call charges themselves, provided they receive proper assistance quickly from a capable individual. It is worth the money to customers to reduce waiting time and to prevent a situation in which they are repeatedly put through to the wrong person. There is a general preference for services in which a fixed price is charged per call rather than a variable charge. One other point of particular interest is the use of ICT (information and communication technology) in the dialogue with customers. To what extent can voice response (VRS) and voice recognition systems be used? The following statement made by a contact centre manager offers something to go on: ‘The efficiency of telephone contact is determinative for the pleasantness of the conversation and the costs. Any technology that may aid in this is welcome.’ In other words, for customers the telephone is primarily a communication channel which can be used efficiently to obtain an answer to a specific question. Voice processing systems help to increase this efficiency and convenience, particularly when it comes to answering frequently asked questions. A good conversation is characterised by a certain structure. The two parties identify themselves and determine the goal of the conversation. Several remarks may be made to positively influence the tone of the conversation from the outset. Next, information may be gained so that a solution can be devised and communicated. Finally, the conversation will be completed and follow-up appointments may be made. The satisfaction with the conversation being conducted is further influenced by the agent’s conversation and listening skills, the directly accessible customer and product knowledge and the time the agent has available. The agent’s competency is a determining factor in the quality of the conversation. Are they capable of uncovering the question behind the question? Someone who calls a financial services company and asks for the interest rate does so for a reason. It can be interesting to determine the motive behind the call and to use it to deepen the conversation, providing a recommendation if desired, or making a product offer. The computer can aid the agent in conducting this conversation. It may contain information about favourable cross-sell opportunities, complaints which have arisen in the past, certain characteristics specific to that customer, an indication of the preference not to

CrM illustration the supporter . . .

the opponent . . .

Voice response systems are a generally accepted tool. Some target groups will not always want or be able to make use of VRS, such as the elderly or foreigners. The barrier to communicating via a VRS may even be lower than that for personal communication, because people can remain anonymous.

Voice response systems are irritation tests for customers . . . Using agents can contribute to a 40 per cent increase in turnover. Source: Second National Call Centre Congress (1999).

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receive mailings, newsletters and the like. Sales arguments or the status of an order can be called up. However, these same screens may also hinder the agent in conducting the conversation. This may be the case if the conversation is set out in scripts from which the agent may not deviate. On the one hand, these texts may have already proven themselves and can benefit productivity, on the other hand, they may prevent the employee from getting a feel for the customer’s unique situation. The human element of the contact then suffers and this can have a significant impact on a CRM strategy in particular. Agents’ competency in conducting a particular conversation is naturally dependent upon their previous education, training, attitude and motivation. In order to achieve an optimal match between customers and agents, many companies divide the contact centre into sections, each staffed by specialised employees. The adverse effects of this segmentation on the capacity planning, productivity and availability of the contact centre are considered to be outweighed by the advantages. Agents specialised in certain customers, products or customer questions are capable of raising the quality of the customer contact and thereby developing the relationship and increasing turnover. In a financial services company for example, the relationship managers may opt for customers from a segment with which they feel they have the most affinity. Advanced (voice) recording techniques make it possible to structurally monitor agents’ performances, both quantitatively as well as qualitatively, and to analyse, compare, combine and process research data simply and in any manner desired to create insightful and valuable management reports. Insight is gained into the quality and the productivity of individual employees and of the contact centre as a whole. Thanks to these data, management can support and guide its personnel in a more targeted manner. Some advanced monitoring techniques even make it possible to register an agent’s entire screen behaviour. Within many contact centres, the quality of the contact moment is still evaluated personally. This is done by logging in and listening in on an agent or through the recording of conversations on tape. Standard evaluation criteria are used to grade the contact. Afterwards, the team leader, mentor or coach will evaluate the agent’s contact. Agents are evaluated on the basis of the following aspects: ●

the result of the conversation – customer satisfaction level;

●

the use of guidelines;

●

telephone conduct;

●

executing cross- and up-sell activities;

●

structure and content of the conversation;

●

attitude towards the customer;

●

providing the correct information.

in general Managing customer satisfaction and the quality of the communication with customers cannot be done without addressing the issue of privacy. Is it really wise to call customers at times when we know that they are at home, but will probably be annoyed about us calling? Is the e-mail we are sending really what the customer is looking for at this point in time, or do we regard the opt-in that was given as a right to harass them at any given time with a junk mail message? In a general sense, an organisation engaged in a CRM strategy will process more inbound than outbound contact. When it engages in outbound contact, it’s often about service calls intended to welcome a new customer or find out about the

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satisfaction level with the repairman who just fixed a problem. It’s not about cold prospecting. Outbound calling is more likely to be agreed to because it is a call back request, rather than a deliberate action to push a marketing or sales message.

16.5

Key performance indicators The availability and the quality of the contact centre can be measured through the use of key performance indicators. The following were identified by Cleveland and Mayben (1999) and are updated here:

16.6

●

Average value of a call (for turnover-generating contact centres), to be calculated as the total turnover divided by the number of calls.

●

Customer satisfaction.

●

First-time resolution or ‘first-time-fix’ rate. What percentage of questions are answered in one single on-going interaction? It is a performance indicator that was initially used for phone calls, but can be used for chat sessions and other media alike. Working with this metric can lead to several complications. First, not all topics can lead to a first-time resolution, perhaps because the customer needs time to reflect upon an offer or a proposed solution. Furthermore, the measurement issue at hand is: how do you make sure that somebody who has called twice in the same week was not helped according to the ‘first-time-fix’ standard twice instead of taking two interactions to solve one problem? And if you introduce this metric, what incentive is given to employees to close tickets and request and consider them ‘fixed’ before the customer thinks so too?

●

Availability and response time.

●

Percentage of abandonment: the number of people who hang up, callers who get the busy signal.

●

Costs per call: the total costs for the contact centre during a specific period divided by the total number of calls; the development of insight into the factors which influence the level of costs.

●

Errors and work that must be redone. Using the database, it can be determined how often customers must call back, how many problems remain unsolved, and how many errors are made during data entry.

●

Forecast call load versus the actual situation.

●

Scheduled personnel versus practice.

●

Schedule discipline.

●

Average handling time (AHT): the sum of the average conversation time and the average completion time.

Managing the development of contact centres Transforming the contact centre into an ‘enterprise relationship centre’ is definitely not without its challenges. We will now address some of them.

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Management, leadership and employee profile Contact centres used to be referred to as ‘calling factories’. Not a flattering term, but one that reflects a style of management and a way of managing their performance that was by any definition somewhat Taylorian. It is also in stark contrast to the role we would like to give contact centres as ‘enterprise relationship centres’. The industrial way of managing a call centre by measuring its ‘production’ (number of calls handled, waiting time, call duration, etc.) will have to give way to other styles of leadership and management. The value of employees changes. A dominant focus on cost control and efficiency is no longer sufficient. There must be a broader perspective on the added value of customer contact. The days in which the employee base was completely refreshed every two to five years (with employee churn rates of 20 per cent up to 50 per cent!) have to be over. It is detrimental to all investments made in training, skill building and acquisition of unique knowledge on products and customers. Thus, it is probably a primary requirement to make working in call centres more attractive and to offer the prospect of a career, not just outside, but also inside the contact centre. If more room is created to express oneself and engage in customer interaction, without having to stick to pre-scripted messages, the employee motivation and quality of contact will improve. In this new context, the agent should not be directed by technology, but rather supported by it. It’s a transition that is only feasible if management and leadership are changed to allow some breathing room. The strong calculative control over capacity, processes and stringent quality parameters should be complemented, but evidently not replaced entirely. It should be feasible to include elements relating to the attention the customer is given, hospitality, customer experience, effectiveness (as opposed to focusing solely on efficiency), sales results etc. It also requires investment in competencies and skills, empowerment (self-control to a certain degree) and the creation of learning teams. More leadership and less management is required!

PraCtitioner’s insight specialist or generalist agents The call to opt for specialist or generalist agents has many consequences. The choice should not be made on gut feeling, but rather depend on the factors listed below. ●

●

●

●

The effects on the productivity of contact execution. How many of the questions is one agent able to answer? How much transfer of knowledge is required before another person can take over the customer’s case? Agents’ ability to work across several channels. Often agents are restricted to channels, because of good oral skills or their ability to write good letters or e-mails. The positive effects of changing perspectives in providing a challenging and motivating workplace for employees. The possibility to create a stable work package and workload for employees by planning capacity according to channel traffic.

Specialism can be created around different dimensions: channel specialism (web-care, e-mail, telephone inbound or outbound); topic (invoices and billing, technical service, information requests); or even customer group (SMEs, consumers, large key accounts, international, trade relations).

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Customer experience management The attention that is being paid to the customer experience is noticeable in many areas: the experience economy, the value proposition and the way we think about the marketing of services. Within contact centres the topic has been placed high on the management agenda too, maybe even higher than anywhere else. Management is feeling the urgency because of a growing number of channels, privacy issues, data synchronisation issues and the fact that customers are quite outspoken about their preferences. Customer satisfaction with contact centres is suffering as a consequence. The one centre that was supposed to facilitate customer contact is often seen as a barrier, using interactive voice response systems and menus filled with choices, infinite putting-through and holding-the-line, after which reiteration of the problem or questions has to take place, only to find out that fulfilment is not reliable. By paying attention to the customer experience of the different touch-points and their journey across different touch-points (see Chapter 13) the situation is starting to change. The ideal thing would be to engage customers and truly reach out to them, connect with them and offer an experience that is memorable, unique, clearly linked to the brand and associated with the provider of the experience, but that may be a long way from current-day practice.

Knowledge management and content management (van Moorst, 2004) Knowledge management is supposed to contribute significantly to an organisation’s ability to properly identify customers, capitalise on the information that it has on them, use information about products, services and issues therewith and ultimately provide faster, better feedback in customer contact. The knowledge that is inherently present in the heads of employees, in manuals and other information resources, must be gathered and structured. It must be kept up-to-date, so that it retains its relevance and validity. The structure should be clear and provide a good overview of available knowledge to the employees, customers and partners. The disclosure of knowledge is a speciality field. It is often underestimated how much time, attention and intelligence are required to disclose the broad knowledge of an organisation in a way that allows the various users, both skilled and unskilled, to work with it. It is largely about content management: the collection, creation, publication, indexation, actualisation and distribution of content is key, but must be supported by a knowledge management system when it comes to finding solutions. It is advisable to place responsibility for this activity with the contact centre and not with specialist units outside the contact centre. The users must be in control, because they experience the problems and are ultimately also creating knowledge in cooperation with the customer. They know whether the answers in the knowledge management system are satisfactory, or if something is missing. They are able to apply knowledge that has become available quickly. Placing it outside the contact centre would require more coordination and constant marketing of knowledge resources.

outsourcing The last taboo in the contact centre world might be the word ‘outsourcing’ (van Moorst et al., 2007). Customers are the core of the organisation, the reason for its existence. How could any self-respecting organisation outsource that? But with the increasing complexity of contact centres, the maturing of this environment is also proving more difficult and

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more costly. The core competencies required to be able to manage all the aspects of the contact centre are not always present within one organisation. With the increased complexity one could argue it is becoming a specialist area that can be outsourced to a third party. Outsourcing does not mean losing control, but rather entrusting the infrastructural aspects and operational execution to a specialist. It is a valid choice that warrants a closer look than many are willing to give it, given the taboo.

16.7

Conclusion The contact centre is the (virtual) place where (all) traffic across multiple channels involving direct customer dialogues, both inbound and outbound, is being managed and handled. It ensures that the organisation can see eye to eye with its customers. The dialogue with prospects and relationships of the organisation is conducted in an effective and at the same time efficient way through a combination of channels, dependent on telecommunications and computer networks. There is a balance between technology and human resources. The technology will need to provide efficiency, ease of use, reliability, information about products and customers and allow for low costs and high productivity. Employees, especially when a CRM strategy is followed, are required to bring the human touch to conversations and be present at the moments that matter most. They will need to be supported, rather than directed, by technology. The quality of the contact centre is greatly dependent on its accessibility and responsiveness. Professional capacity management will take care of the right availability of employees to handle the traffic flows at different times. Forecasting is an important aspect, as is having fall back scenarios in case of emergencies. Quality is determined mostly by the quality of contact. In telephone contact it would be about the ability of agents to really listen and respond appropriately. The key questions that need to be answered in order to assess the broader quality of the contact centre are: ●

Do they have the right communication skills and access to the right knowledge?

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Are they empowered to solve issues for customers the first time around?

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Is their relationship with the back office solid and are they trained enough to handle complex issues?

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Are new channels being explored and developed?

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Is the handling of e-mail swift and correct, with attention being paid to knowledge management?

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Are chat sessions a productive addition to the channel mix in the contact centre?

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Is there a learning relationship so that more and more skills are being developed in the contact centre, allowing employees to grow and develop themselves within the contact centre, rather than elsewhere in the organisation?

If the answer to most questions is ‘no’, the chances are that the maturity of the contact centre is low and the agent is actually just a receptionist, taking calls and making call-back notes or passing on cases to specialists in the back office. A position that is not sustainable in the long term, given the expectations of customers and the progress being made in other contact centres.

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Case stuDy Zappos Zappos is a benchmark in service. This e-commerce up-and-coming organisation that started off selling shoes, complemented their assortment with clothes, accessories, electronics and so on and was sold to Amazon for a little less than $1 billion. They are well known for their 365-day return policy. If the shoes are not worn, you can return them any time up to 365 days after purchase. You don’t even pay shipping to return or exchange the shoes. By simply going back to Zappos.com and logging into your account, you can easily print out a return label for UPS or USPS. Another great feature that sets Zappos apart from the crowd is their user surveys and reviews. When you find a shoe you’re considering purchasing, it certainly helps to know that 85 per cent of the people surveyed believed it to ‘feel a half size smaller than marked’, or whether or not it felt ‘true to width’, and Zappos provides this information through their user surveys. When explaining Zappos.com’s almost obsessive dedication to customer service, the e-tailers’ employees always seem to turn to real-life tales. ‘That’s the Tony pizza story …’ began Jane Judd, senior manager of the customer loyalty team, talking about a time when CEO Tony Hsieh asked his Skechers reps to call in after-hours to test his staffers and find out if they would track down late-night pizza places in their area. (They did, coming up with the names and phone numbers of the three closest options.) ‘One of the craziest stories,’ said Jerry Tidmore, who manages Zappos’ help-desk concierge service, ‘was that a guest checked in to the Mandalay Bay hotel [in nearby Las Vegas] and forgot her shoes.’ According to Tidmore, the guest called Zappos, where she had originally purchased the style, looking for a replacement, but they didn’t have any in stock. So the company found a pair in the right size at the mall, bought them and delivered them to the hotel – all for free. Such anecdotes are a testament to the company’s central tenet, which is written right under the Zappos logo on the website: ‘Powered by Service’. And while most customers don’t call the company looking for pizza, Zappos takes its commitment to service seriously – sacrificing short-term profits for it, investing a minimum of four weeks’ training for each employee and operating a 24-hour warehouse that is admittedly not cost-efficient. The goal, Hsieh said, is to make Zappos’ customers very happy – and that leads to big cost savings elsewhere. ‘We let our customers do the marketing for us’, he said. What emerged was a plan to put customer service first. The company’s 342-person, round-the-clock customer loyalty team in Henderson, Nevada, answers 5,000 calls a day, though that number grows significantly during the November and December busy season. They also answer 1,200 e-mails a week and monitor Twitter and social networking sites for mentions of Zappos, which they use to proactively reach out to potential shoppers. Judd also oversees a resource desk team, which handles more complex requests such as getting the actual measurement of a heel or checking a colour, as well as Spanish-language and Canadian teams. She said call-centre employees are given no time limits for their calls and are encouraged to ‘use their personal, emotional connection on every call’. For example, she said they might ask about the dog barking in the background or send flowers to a bride. To achieve that level of interaction, Zappos has made training a priority – for the entire company. Rachel Brown manages the Pipeline team, Zappos’ in-house training programme, which has grown strongly.

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Case study (continued) The first week of training includes everything from how to work the phones to special seminars on Zappos’ culture and core values. Seminars on customer service and in-depth call-centre training start in week two, and employees who will stay in the call centre get another three weeks of training on the phones. The goal, Brown said, is to tell the new employees to ‘forget about all your other jobs, especially if it’s another call centre’, she said. ‘We have to restart the engine the Zappos way.’ All of this requires investment. Training doesn’t come cheap, even though, as Judd pointed out, the company-wide requirements mean that during the holiday rush staff members from every department can help out (including Hsieh, who, Judd said, worked three hours in the call centre last year). ‘The training and education, the free shipping both ways, the surprise [shipping] upgrades, that’s very expensive. Our warehouse is 24/7, which is purposely less [cost] efficient, but faster,’ Hsieh said. ‘Our whole point of view is [to look at it] as our marketing costs, but they all have extra costs.’ It’s a smart strategy, said Karen Leland, president of Sterling Consulting Group in Sausalito, California, and co-author of Customer Service for Dummies and Customer Service in an Instant. ‘It costs five times more to get a new customer than to retain an old one,’ Leland said. ‘Anytime you have to spend marketing dollars, the financial benefit is high to retaining an existing customer.’ In fact, Leland has her own Zappos story. A recent purchase of red patent peep-toe pumps she ordered from Zappos didn’t fit, and she exchanged them for the right size – a transaction she said the company has mastered. ‘They made it easy when there was a problem. And the true measure of a company is how they handle it when things go wrong,’ Leland said. ‘They made a loyal customer out of me. A shoe is just a shoe, but they’re adding value to the shoe through the service.’

Questions 1 Zappos’ return policy may put the company at risk. How come the business case for this policy is none the less positive? Please provide arguments to support your answer. 2 Zappos customer contact department is situated next to the CEO’s office. Those are expensive square metres. How do you evaluate that choice? 3 Please indicate in your own words what the critical success factors of Zappos’ service strategy are. Sources: Press Centre Zappos, available at: about.zappos.com/press-center/media-coverage/zappos-milestonecustomer-service,Emerce.nl (2011, 2012).

Questions 1 What type of message traffic between customer and supplier do you consider to be particularly suitable for processing in the contact centre? Explain your answer. 2 Do you consider a contact centre belonging to a company that implements a CRM strategy to be more of a cost centre than a profit centre? Explain your answer. 3 Under what circumstances would you choose outsourcing for the contact centre?

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4 Name four reasons for the growth in the size and complexity of the work performed in contact centres. 5 What are the five subjects to which a contact centre manager at an organisation that employs a CRM strategy must pay special attention in order to be able to conduct an efficient and effective dialogue with customers? Substantiate your answer. 6 The quality of capacity planning is a direct influence on the contact centre’s availability. What are your recommendations to a contact centre manager who is unable to make an accurate prediction of the size and composition of the in- and outbound message traffic via the telephone and the internet? 7 Contact a number of different service providers in a specific market and compare the quality of their contact centres. 8 Name five measures that you could take to improve the quality of telephone contact. 9 In which sorts of real-life situations do you consider the chance for a successful application of a semi-automatic e-mail answering function to be high? Give four examples. 10 If too many companies send unsolicited e-mails to companies and consumers, this effective communication tool can gain an unfavourable reputation and its efficiency can suffer as a result. What can you do as a commercial company to prevent this from occurring with your customers? Illustrate your answer.

references Bontebal, S., Oudhoorn, C. and Peelen, E. (2001) Vermijd de dolgedraaide direct-marketing klok, Customer Base, 1, 26–8. Brink, M.V. van den (1999) De opzet, implementatie en organisatie van een call center, Amersfoort: F&G Publishing. Broos, L.C.P. (2002) Analytische CRM versus anti-spam wetgeving, Beyond Mapping, Marketing and Datawarehousing, December, 10–11. Cleveland, B. and Mayben, J. (1999) Call center management, in volle vaart vooruit, F&G Publishing, Amersfoort. Elias, D.E. and Panbakker, H.E. (2000) KwaliTijd, onderzoek naar quality management en quality management tools in het call center, Breukelen: Nyenrode University/KPN. Emerce.nl (2010, 2011, 2012) Zappos. Hendrickx, H. (2000) CRM systemen, Utrecht: Cap Gemini/E&Y. Huijnen, R.L.M.E. (1997) Het starten van een call center; een multidisciplinair proces, Nijmegen: Nijmegen Business School. Moorst, A. van (2004) Strategische sourcing van customer care, Woerden: BBP. Moorst, A. van et al. (2007) Customer Management, Amsterdam: Tote-M Business Architects. Nippa, M. (1999) Call center strategierecht organisieren, Harvard Business Manager, 6, 86–93. Vlam, P. (2003) Marketing of spam?, Emerce, March, 60–1. Young, C. (2004) On the other side of the phone line, Philippine Daily Inquirer, 9 June. Zappos (2012) Press Center Zappos, about.zappos.com/press-center/media-coverage/ zappos-milestone-customer-service.

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Part VI

CRM systems and their implementation Customer–supplier relationships are as old as the hills; however, we have IT to thank for relationship management coming within reach of organisations which serve many millions of customers. Technology makes it possible for individual customers to be recognised and known, for them to be able to interact with the organisation on an individual basis, and allows them to rely on customised solutions. In principle, the deployment of personnel and costs can be kept within limits. However, we are not there yet; many companies still have a long way to go. Strategic questions have not yet been answered, leading to vagueness about the goals companies hope to attain with this technology. As a result, investments in IT are improperly guided; situations can arise where technology takes a leading role instead of being used as a tool to help achieve the organisation’s goal. Embedding the applications in the organisation fails to run smoothly. The project management for innovative multifunctional CRM projects is already complex, and is now suffering from inadequate guidance. In addition, organisations are often product-oriented and not prepared to think and act in a customer-oriented way. Aspects such as strategy and organisation have been covered extensively in the previous parts of this book. This part focuses on CRM systems (Chapter 17). Insight is first offered into the different sub-systems that can support CRM strategy and processes. The front and so-called mid-offices are discussed; special attention is paid to the contact centre, the website, the campaign management and content management systems and the data warehouse. We then proceed to examine the implementation of CRM systems in Chapter 18. The road map used to develop CRM systems is discussed, based on the strategy. The rules of good project management are also set out. The book concludes in Chapter 19 with a glance into the future.

Chapter

17

CRM systems Insight into the most important CRM systems is indispensable in order to identify and use the opportunities offered by information technology. The utilisation of technology will also have to be customised under all circumstances to suit the strategy and the organisation on the one hand (Part II), and the relationship policy to be implemented on the other (Part IV). This chapter briefly discusses the most important elements in the CRM system. The final section looks in particular at the suppliers of CRM software packages that form part of such a system. In this chapter we will address the following: ●

the CRM systems that exist

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the contact centre

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the internet and websites

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data warehouse and a datamart

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campaign management systems

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content management systems

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how to select a CRM architecture and package

PRaCtitioneR’s insight A CRM system that does not make use of IT is practically unthinkable in this day and age. As soon as organisations and (larger groups of) customers are required to maintain contact with one another on a variety of levels, hope to be quickly available to one another and would like to supply customisation to one another, IT will start to play an important role. It will support or take over entire contact processes through different channels. It will contribute to the maintenance, analysis and availability of customer data. The possibilities are numerous. Thanks to voice recognition and voice response systems, the computer is able to conduct telephone conversations. Automatic e-mail response systems can ensure that customised responses will be sent to questions submitted. Campaign management systems are capable of developing, broadcasting and evaluating hundreds of campaigns in a single day. Thousands, if not millions, of people can be reached in a period of 24 hours without a direct human contribution being necessary.

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17.1

an overview of CRM systems Customer relationship management has been practised since the abolition of economic selfsufficiency and the arrival of the division of labour. The role of information and communication technology (ICT) is to bring CRM within reach of a larger group of organisations and customers. The development of relationships with customers in situations in which it was previously impossible organisationally and economically is now conceivable. Thanks to the technology, even large groups of low-spending customers are personally recognised and known; and they, in turn, conduct a dialogue with, receive customisation from, and, to a certain extent, develop a relationship with the supplier. The technology can also prove its value even for parties who had already been practising CRM. CRM systems make it possible for the members of decision-making units for both parties to easily find one another and remain informed about the communication between them. Salespersons or account managers can maintain their customer and visit profiles in the system and use them for planning and evaluating their work. The placement of orders can be simplified, to the extent that this had not already been arranged, when an enterprise resource planning (ERP) system was implemented; this is another system that can also facilitate order entry. CRM systems can prove their usefulness even in markets where there is no contact with the end user because distributors are used. The system offers suppliers and intermediaries the possibility of collectively developing a clear customer profile and creating and implementing a customised, mutually beneficial relationship strategy. The realisation of this is naturally dependent upon the trust and the relationship that the supplier and distributor have in and with one another. Mutual distrust usually prevents both parties from wanting to share their customer knowledge with one another. The primary task of CRM systems consists in supporting or performing the activities involved in customer contact processes. Customer contact processes may involve exchange of information, placement of orders, invoicing, payment, provision of service and so forth. They consist of the contacts and, to a certain extent, the actions arising from these contacts. An accurate definition of the different processes is an important point of departure for CRM implementation; if this is lacking, it is difficult to programme and automate. The CRM system supports the employees during their contacts with customers; in the case of self-service and customer–machine or machine– machine interaction, the customer contact is also fully taken over by the system. The secondary task relates to facilitating the primary task, and involves providing customer information and management information, among other information. It involves data which can be used to improve the efficiency and effectiveness of the customer processes. A variety of CRM sub-systems have been developed for the performance of these primary and secondary functions in the front and back offices and linking activities between the two. An important characteristic of the systems that support the front office is that customer data must be easily retrievable and modifiable. For example, within several seconds, insight needs to be gained into who the person is on the other end of the telephone line. In order to follow up the contacts appropriately, the so-called fulfilment, there are back-office systems. They register what someone buys and can relate it to their purchasing history and to product availability. Back-office data are required in order to be able to serve a customer in the front office. The link between back- and front-office systems can be realised in different ways. A very popular one is the service-oriented architecture that operates as a middle layer. It connects front-office applications, manages the flow of data that needs to be synchronised and

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commands the interaction with back-office systems. The term middleware is often used for these applications. Figure 17.1 shows an illustration of a CRM system where the front and back office are linked by middleware.

the front office ●

The sales force automation or the sales information system that supports the salesperson or account manager during face-to-face sales and relationship management activities.

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The partner management system which is geared towards providing support to the intermediaries (distributors) in the joint approach to the end-user market.

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The contact centre, where incoming and outgoing traffic by telephone, fax and the internet (e-mail) takes place; even the written correspondence with customers may be (partially) handled here.

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Internet, including the website and applications on social media.

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The kiosks; examples would be information pillars (points of information) or point-ofpay terminals where customers can help themselves on location.

Figure 17.1 CrM system

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Middleware ●

The data warehouse or the datamart, in which data originating from different sources are compiled to obtain a clear and better customer profile.

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The campaign management system that produces the analysis, planning, execution and management of marketing communication campaigns being implemented through different channels.

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The knowledge management system.

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The content management system which ensures that data from different sources can be published through different channels using a consistent design.

the back office ●

This usually involves the so-called legacy systems which are generally older and have a longer lifespan. These systems are designed for the management of transactions or products; an example would be the separate systems in which car, health and life insurances and mortgages are maintained.

Every system, be it front-, mid- or back-office, is built up out of a number of layers. At the lowest infrastructural level we find the hardware, the operating system and the network. Computers need to communicate with each other and allow the different functional areas within an organisation to perform their part in servicing a customer. They need to facilitate interaction between salespeople, agents in the contact centre, the department of finance where they manage debtors and warehousing where orders are being prepared and released. At several points in the network there will be data repositories, databases with product data, transaction data and customer data. There are applications, pieces of software that support certain processes to construct commercial offerings, support marketing campaign management, direct calls to the right agent, arrange for fulfilment, construct calling lists etc. Databases and application software together are referred to as CRM software. It is a formidable challenge in and by itself for an organisation to have a solid network to build all the desired functionality into and have it support the business in the right way. Insufficient attention to one of the aspects of the system will, without a doubt, lead to problems during implementation. This can lead to a network failing to provide enough support to the application or a situation in which the data required to actually provide support to the customer process are missing. This chapter only examines several typical CRM sub-systems, namely the contact centre, the website, the data warehouse, the campaign and content management systems. The CRM module partner management is covered briefly in the following box. For a more detailed description, please see the literature available on information systems.

CRM illustration Partner relationship management Customer relationship management is an accepted term within organisations and the realisation continues to grow that entering into and developing relationships with individual customers is a necessity to

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survive. While the emphasis in CRM lies on companies’ own processes, culture, organisation and direct customers, a new opportunity has revealed itself: the indirect channel.

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CRM illustration (continued) Partner relationship management (PRM) is the continuous and systematic entering into and development of relationships with partners in the indirect channel in order to achieve and retain mutual advantages. IT organisations, financial institutions and telecom companies that offer complex products and services online have an increasing need for partners. They know the products and services, how to reach customers and can supply added value to customers as well as the organisation. In the IT sector alone, 60 per cent of the sales go through the indirect channel. The partners, however, experience difficulties in the area of communication with and getting information from their supplying partner. They see an extensive website where information and materials that they require in order to sell their supplier’s products cannot be found. In addition, marketing managers still have a bad feeling about the indirect channel due to a lack of insight. Lack of insight into the partners’ processes, or feedback on generated leads and success, or lack thereof, of marketing campaigns are likely to

17.2

mean that investments are made in the wrong area and in the wrong partner. In short, the relationship between organisations and partners is not optimal, while it is precisely this channel that offers so many possibilities. In 1999, Hewlett Packard demonstrated that special programmes and projects had increased partners’ profitability considerably. This was due to better and more efficient inventory management, lower administrative costs, automatic stocking, process simplification, better forecasting and demandgenerating activities. There are already many tools available on the market to support PRM (campaign management, sales force automation, e-commerce etc.): as a separate module or integrated into a total solution. As a standalone, PRM can supply high added value for the indirect channel. However, it can also be included in a larger whole, often under the name CRM . . . Source: Stuurman (2000).

the contact centre Systems for the contact centre need to be able to support all in- and outbound traffic from different channels. Consider mail, fax, e-mail, text messaging and even chat functionality. Modern systems are able to handle voice, image and data. There is no need to actually operate via a telephone network. Nowadays, all the traffic can be handled by data connections over the internet. Contact centres and their systems have gone multi-media, which is one of the main reasons we no longer refer to them as ‘call centres’. The communication traffic on this complex infrastructure needs to be handled relatively easily. ‘Routing’ is a much used term and describes the process of handling inbound communication and guiding it to somewhere appropriate action can be taken. Often this will be an available agent who is knowledgeable about the topic or is designated to serve a certain customer type. Databases can automatically bring up customer data for the agent to browse through and use. In outbound contacting the systems may include automatic diallers for customer phone numbers or mail handling systems for quick replies. The systems generally give a lot of feedback about call handling times, number of contacts per agent, average waiting time etc. It is easy to spot opportunities to improve routing or resource allocation. We now go on to consider the required infrastructure, traffic management, communication, databases and management support of the contact centre. The text which follows is based on research and publications by van den Brink, 1990, van den Broek, 1998, van Moorst, 2004 and van Moorst et al., 2007.

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infrastructure At the infrastructural level, the challenge that we had to face some years ago was called CTI or Computer Telephone Integration (CTI). Thanks to CTI it was possible to reserve agents’ time for the important parts of contact management and have computers take over parts where less value could be added by a human being or where data needed to be shared quickly. The benefit was mainly in cost savings on the organisational side, but customers could see benefits such as a reduced waiting time and an increased chance of being put through to the right agent immediately. CTI has spurred a great deal of new applications, such as (van den Broek, 1998): ●

On-screen dialling: telephone calls are initiated and monitored by the computer. As a result, the calling process is accelerated and supported.

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Intelligent routing: calls are transferred to the right person or department. Repeated transfers are kept to a minimum.

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Call-based data selection: the caller’s relevant information appears on the agent’s screen at the moment the telephone is answered, or even before that point. The agent, for example, no longer has to ask customers to identify themselves.

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Voice and data call association: this provides for the simultaneous transfer of telephone calls between agents in the call centre, as well as the corresponding data.

However, CTI is at risk of being caught up by technological developments before ever achieving maturity. Contact centres are seeing their traffic, even telephone conversations, move to a data-based infrastructure, with Voice-Over-IP (VOIP) gaining in popularity due to lower costs and more direct computer integration. Contact centres are becoming multimedia contact hubs, making the need for integration a lot more urgent. The way a phone call is prepared and conducted is different from an e-mail. The same goes for the registration of images and sound. The future will have to bring simpler solutions. Contact centres will adopt IP technology as their backbone and there seems to be convergence on a system of speech interactions through Voice XML. It is a first step to open-sourcing in the contact centre world. At the time of writing, Voice XML is not yet fully developed in terms of functionality. The ultimate goal will probably be to be able to ‘read’ and direct choice data as any other data type and to be able to distil information from it accordingly (van Moorst, 2004; van Moorst et al., 2007).

traffic management In order to manage traffic in contact centres, a lot of systems have been developed, of which we provide an overview here (van Moorst et al., 2007):

automated outbound-dialling The computer is used to select the numbers to call and then make the connection. With preview dialling, the agent chooses a telephone number from the list on the screen and then manually calls via the keyboard. Power dialling means that the system calls at the time the agent is available. Predictive dialling is an anticipatory system; before a call is terminated, it initiates a new call, ensuring that agents are constantly operational. Blended forms of the methods named above are possible. They are commonly referred to as ‘progressive dialling’.

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automatic call distribution (aCD) This application is typical of CTI and takes calls to route them to the appropriate employee. The ACD takes care of welcoming messages in menus, menu options, the texts that are spoken when redirection occurs, emergency texts and waiting time reports. With the assistance of call line identification, the ACD can help determine who is calling and allocate the call to a certain agent based on the type of question, the customer data and the agent’s call load. Messages are given to agents to allow them to start the dialogue right away. If available, user identification has taken place and the customer profile appears on the screen of the agent taking the call. It is possible to manage overflows, so that when one group of agents is busy, another group or even a third-party contact centre is immediately called in to assist. The ACD can register incoming calls, waiting times, average duration of a call and the number of calls lost (because the customer hung up). In multichannel environments a ‘coordinator’ is needed to manage and direct the channels through which agents are responding to messages. This coordinator has the job of maintaining service levels while also establishing priorities. This means that e-mails and calls or incoming chat messages are given the appropriate attention and are handled according to their respective priorities.

interactive voice response systems (iVR) In IVR systems the digitalisation of speech is the focal point of attention. It is possible to answer telephone calls automatically. It is used in processing transactions, in small customer surveys and in order to provide information about the completion of certain transactions, such as the phone line system operated by many banks to allow customers to transfer funds or get information on their current account balance. More often than not, it is a system, not a person, that guides the customer through the process. They are therefore also helpful in enabling customer self-service.

supporting the contact centre Specifically for the contact centre we can also consider: ●

A scripting tool. While conducting the dialogue, the agent is ‘supported’ by a supply of standard texts that they can read aloud. This way, the goal of treating customers and prospects in a consistent manner can be achieved and balanced texts can be used. The disadvantages are that it is less motivating for agents and that the dialogue conducted with the customer is less natural.

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(Semi-)automatic e-mail answering. When the call is being supported by a script, the written internet contact can be processed to some degree to categorise the possible answers and already create some sort of format or pre-formulated reply to this kind of question. The agent only needs to personalise the response and so can speed up the handling process.

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Results of marketing analysis. The results of a cross-sell analysis can be entered into an inbound marketing tool that shows tips on the agents’ screen. It provides them with an appropriate follow-up to the customers’ demands or the data the organisation has on the customer. It can also work the other way around, where products and services are listed for which the customer should not be approached. It might be that similar customers have responded poorly to that offer or that, owing to certain features, the customer does not qualify. The tools may also include marketing variables, such as segment information and customer life-time value classifications.

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Workflow management system. This is a system that helps to set out activities in answer to customers’ questions. It also provides insight into the status of the underlying work processes, so that the operator can see whether the requested information has already been sent and, if so, when.

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Knowledge management. Contact centres that have a helpdesk function can construct a database where all the frequently asked questions and all the specialist knowledge of the organisation is collected around questions that customers may ask. The solution and the problem need to be described and it should be clear to helpdesk employees what the procedure for dealing with that kind of problem is. If the problems turn out to be too complex, they can be referred to a second line or second level expert. It’s tricky to find the right balance. It’s a trade-off between having experts contribute to the knowledge management system and allowing agents to deal with problems in the first line and aggravating a problem that may be too complex for the agent to begin with.

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Documentation information systems (DIS) or content management systems. These make it possible to digitally scan and store written information. In this way, agents gain simple and up-to-date insight into brochures and other mailings that have been sent to customers and that might lead to questions.

the database A database is required primarily to record customer data, so that customers can be identified and their contact history known. Additionally, it is useful to gain insight into data from transactional systems: What has the customer purchased and during which stage was the transaction completed? Is the customer creditworthy? Product information, knowledge of marketing activities and media preferences are also important if the agent is to develop customer contacts to the customer’s satisfaction. Call centres will often have their own datamart at their disposal (see Section 17.4) for the registration of contact history. For insights into the transaction data they can have a real-time connection with the back-office system. Data on customer profiles can be copied to the datamart from a data warehouse where such data are processed and stored.

Management support Contact centre management is supported in many ways. There are many statistics available when it comes to managing the waiting time, the number of calls that were turned away, the number of times a customer is put through and the like. The data can be analysed to great depth, even filtering per call reason, agent, medium and time of day. There is also a large offering on the market to help monitor call quality. Calls can be recorded and replayed at a later time, but there are already smart solutions that analyse the voice intensity in real time and give a signal on the team leader’s dashboard if a call is getting out of hand.

17.3

the internet (web 2.0) The internet cannot be described in a static way. It has been evolving rapidly ever since its first creation. In terms of technology, the driving forces are processors, storage capacity and network carrying capacities etc. It has now made it possible to publish a multi-gigabyte

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CRM illustration Mash ups Mash ups originated in the music industry and are all about mixing several songs that together are better than the sum of the parts. On the web, the principle is just the same. The possibilities to combine two or more online applications to offer increased value to the visitors are unlimited. If a central website is enriched with local content, such as maps or local weather conditions, value is being added. Google has introduced a toolkit with search functions, chat options, maps, calendars and functions to plan meetings, and Microsoft and Yahoo! are introducing similar tools.

They often use the programming language of XML. Thanks to publicly available APIs (application programming interfaces), the programs developed by third parties are quite easily integrated in other platforms and applications. Mash ups are boosting the development of the web in a huge way. The costs to develop websites with interactive features are declining, while quality is improved. Source: Laudon and Traver (2008).

film to the web from a home computer or even from a mobile device in a matter of minutes. Interaction is swift, without lag and can be rich in the sense that not only images and data, but also real-time video can be shared. Many people now have wireless access to the internet through smart phones and we are living in a screen society, where a device with a screen and internet connectivity is never too far away (Laudon and Traver, 2008).

the essence of the internet The internet is a worldwide network of computers, each of which may independently consist of different computers, terminals and other equipment such as mobile telephones and digital personal assistants which users can use to gain access to programs, data and information. The computers and the aforementioned peripheral equipment can communicate with one another and thus make use of a common communication protocol; in other words, they speak the same language. The protocol used on the internet is Transmission Control/Internet Protocol (TCP/IP). The TCP in TCP/IP is responsible for splitting the message into separate packages with unique numbers which are then regrouped into the appropriate sequence again upon receipt so that they form a logical message. These packages may actually take different paths along the internet and can reach their final destination independently of one another and at different times. Each package traces out the best route and in this way avoids as much ‘congestion’ as possible. This differs from the telephone network where exclusive capacity is reserved for the transmission of data or the sound from the sender to the receiver before a connection is made. The method used for splitting leads to a better utilisation of the available transmission capacity. Messages can only be sent if the servers on the internet have a unique address; this is the IP address (a 32-bit number). Because the numerical display of the IP address is difficult to remember, names such as Marriott, Hilton etc. may be linked to these addresses. A domain name server makes sure that the IP address 128.193.73.60, for example, is linked to Hilton. The internet uses a specific language HyperText Markup Language (HTML) which is continuously being developed to include more functionality. eXtensible Markup

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Language (XML) is also used. Hypertext is a way to draw up pages with links to other pages and content, such as third-party information, films, animations and so on. HTML puts the emphasis on the ‘look and feel’ of the way data is presented on a webpage. XML places more emphasis on describing data and information. It takes on more information on document version, origin and destination, but also contents are more flexibly consultable. Web browsers are ultimately necessary to ‘decode’ and present the pages on the internet. However, they also offer additional functionality, such as integration with e-mail functionality or newsgroups. The browser market has seen intense battles being fought over market share. Netscape Navigator was the dominant player some 15 years ago, but lost ground to Microsoft Internet Explorer, which is in turn now losing some ground to Google’s Chrome and Apple’s Safari. Search engines are also incredibly important in finding information. The most widely used search engine is Google.

intranet, extranet and internal computer networks The intranet is a computer network that is based on the same technology as the internet, but it is protected and thus accessible only to those within an organisation who have authorisation to use it. An example of this is the closed system in a hotel that allows guests to view their bill electronically via the television. An extranet is designed also to grant access to external parties to the computer network such as customers and suppliers so that their activities can be better coordinated with one another. For instance, tour operators and travel agencies may be able to gain access to the reservation system of a hotel or an airline company. In general, a different language is used on intra- and extranets and the internet from those used within an organisation’s internal computer networks. These latter are usually older and have been constructed with a goal in mind other than that of communicating with customers. They are used for administrative purposes, for example, or to plan production. In many of these systems, it is even difficult to identify or recognise customers; it is only the transactions that are registered. In order to be able to support the total contact cycle so that, in addition to information exchange, transactions can also be completed, payments made, and goods and services supplied, a link from the internet to these internal computer systems is also desirable. How can potential hotel guests get information on the availability of rooms otherwise? And how else can reservations be processed, loyalty programmes maintained and check-out procedures simplified? In addition to compatibility problems, safety considerations may be one reason to forgo integrating the two systems. It may be undesirable to grant ‘strangers’ access to the internal systems on which the planning and control of the organisation depend. In order to obtain an acceptable integration level, a ‘mid-office’ with data warehouses and datamarts can be created (see Section 17.4), in which data are registered and structured which can be crucial to the communication and support of the interface between the customer and the organisation. Data may be available on the services of the organisation, prices, available capacity and stocks, completion of the transaction, customer profile with data on customer identification, purchase history, satisfaction and complaints, payment behaviour etc.

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security The security issue is a two-sided one. First, not only does the stored data require protection, but the transport of the data must also be protected. The internet is an open system that provides people with information from a distance. This same technology, which lies at the base of the internet, can also be used and abused by hackers. Control over access starts with verifying the authenticity of visitors. They will be granted access provided they can supply the customer number, the password, and/ or the IP address. Different authorisation methods can be used simultaneously. One or more firewalls can be placed between the internal computer network and the internet. A visit to the website, or to certain sections of it, can be made conditional upon pre-specified IP addresses. However, more advanced screening methods can be used to arrange access. Coding or encrypting techniques can be used to protect the transmission of messages. Digital signatures may play a role in the verification of someone’s identity. Traffic involving payments in particular must be protected.

software applications Many new applications surface on the web and fuel the development of what we call web 2.0. A brief overview (Laudon and Traver, 2008) follows: ●

Instant messaging: which presents one of the fastest growing forms of communication. It consists of the real-time, line-by-line, sending of messages between one sender and one receiver.

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Intelligent agents: so-called bots or software bots, who filter information about a certain topic and present it in a list. The results can be ranked according to certain criteria, often used to make price or feature comparisons.

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Online forums: where people can communicate with each other.

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Streaming media: such as music or video or large files that are sent in small packages, but presented in a continuous flow.

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Cookie technology: which stores information about the users in a small text file on the computer and can be consulted by the website to tailor the user experience to user preferences that are registered or visiting history. The web designer determines the contents of the text files.

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Blogs: referred to as the ‘killer apps’ of the web 2.0 because of their enormous popularity. A blog is like a journal or diary entry for which a particular provider offers a template and platform (e.g. Wordpress) that is used by many bloggers. They write short stories or contribute interesting views. It has made web publishing easy, flexible, real-time and open to anyone, even with very limited HTML knowledge.

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RSS or Really Simple Syndication: a set of XML-programs which ensure that digital content, in the form of text, blogs and podcasts are automatically ‘announced’ over the worldwide web and noticed by everyone and anything following the RSS feed. It improves discoverability of valuable information.

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Podcasts: audio presentations, very much like a radio broadcast without the fixed airing time. They are stored as audio files and can be downloaded to a person’s computer or streamed online.

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17.4

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Wikis: web applications that allow users easily to add information or alter existing information on a website. They enable the collective writing of documents and pages. They are mainly open-source platforms that rely on relational database technology.

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New music and video services: the increase in bandwidth makes it very feasible to post videos, animations, complete slideshows and photo collections.

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Internet telephone and television: the internet is quickly replacing traditional infrastructures for television and telephone and becoming the dominant carrying infrastructure for digital television and Voice-Over-IP.

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Video conferencing: used to arrange remote meetings, but even more widely used to connect friends and relatives who live abroad.

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Widgets: content applications or functionalities that can be added to other platforms, such as a ‘weather-widget’ that can be added to the desktop of a user, but also on a blog or webpage. The widget on a desktop may also have a real-time online connection to synchronise information.

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Gadgets: mini-widgets such as a calendar or clock. They are not really information heavy and can draw upon system information instead of content services.

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M-commerce: mobile equipment with built-in computer features such as speech recognition, imaging capabilities, data and video support are quickly becoming powerful tools in orienting, choosing, buying and using goods and services.

Data warehouses and datamarts Data can be stored and collected in different areas within an organisation. The data architecture will describe where and how the data is stored, while the data model describes what data are stored, what meaning the data have and how they are used in processes. The role for customer data integration is to ensure a clear, complete and integrated view of customers created by accurately integrating data from several sources. Different ways of achieving this kind of linkage were discussed earlier (see Chapter 6). For the purpose of analysis, which is the subject of this section, the role of data warehouses and datamarts is most relevant. There are several definitions of a data warehouse in circulation. The following description may be inferred from the definitions cited by Jonker (1997): A data warehouse is an isolated environment, ●

destined for the support of management information systems/executive information systems/decision support systems, without placing an additional burden on the operational systems;

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that contains data that make it possible to gain a clear, topic-oriented view of the organisation’s history;

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in which users can obtain access to information in a quick and useful manner which allows them to better support their decisions.

In the mid-1970s, the need began to arise among managers to extract additional information from the existing computer systems (Jonker, 1997). This appeared to be a desire that could not be met in the short term by the IT available at the time. Given the database

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CRM definitions SQL or Structured Query Language is the standard programming language that is used to approach relational databases.

structure, it was difficult to use the computer for answering ad hoc questions. This required the development of complex software by specialists. The mainframe also put up barriers. Incorporating these programs occupied a great deal of time and disturbed operational systems upon which primary company processes depended. The completion of ‘tasks’ in batches by the mainframe also appeared to be less suitable for another reason. This led to too much time being wasted in finding and restoring errors in the software intended to answer the ad hoc questions. The need arose for a retrieval system (Jonker, 1997): ●

which could store large amounts of data which related to a certain period;

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which could answer complex ad hoc questions relatively quickly;

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which did not result in a disturbance of the operational processes.

This demand led to the development of relational databases and SQL. With the arrival of the PC, many of these files were stored and maintained locally. However, this solution quickly proved to be limited. Analysing large quantities of data was very time consuming, and SQL appeared to be a laborious solution for answering complex questions. It also appeared to be difficult to maintain data at various locations and to maintain a clear definition of data. Many data fields were left incomplete or were not kept up-to-date, and different definitions and methods of calculation for certain variables such as profit began to circulate. The consequence was that people formulated additional wishes which the ideal retrieval system was supposed to satisfy, namely: ●

the computer system must be able to keep up with the growing quantity of data and increasing number of users;

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the data stored in the retrieval system must be a concise presentation of the concepts used within the company;

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the design of the database must be adapted to the usage;

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the querying of the database must be made relatively easy, enabling it to be done by a non-specialised computer user.

These are wishes that a data warehouse can fulfil. Data in a data warehouse originates, for the most part, from operational systems that are usually set up as OLTP (online transaction processing) systems. These OLTP systems are primarily designed to process and store many smaller transactions. The design of the databases in OLTP systems is targeted to the rapid processing of small transactions so that the response time of the operational systems is as short as possible. The data warehouse, on the other hand, consists of one or more computer systems which are able not only to quickly answer questions that require large quantities of data but also to store data efficiently (Jonker, 1997). A distinction can be made with data warehouses that are more or less centrally maintained and the degree to which they are updated. The name datamart is used for databases

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Figure 17.2 Four types of data warehouses Source: Jonker (1997).

which are built locally for a particular function. In contrast to the ‘real’ data warehouses, these may be installed in a shorter period of time and less expensively. The investments vary greatly and are dependent on the size of the (customer) database and the quantity of data to be recorded, among other factors, as displayed in Figure 17.2. A direct link with an existing database is chosen if a certain department would like to consult a single operational system on a regular basis for questions that are not too extensive and complex. An online/active data warehouse is continuously being supplemented with the newest data. Over the course of just one day, the company is capable of discovering trends and responding to them. In order to prevent the connected operational systems from being interpreted in a specific way in each datamart, it is preferable to feed the datamarts from a central data warehouse. This way the view of the data remains clear and thus also the degree to which they can be maintained. The application of CRM often requires a data warehouse to be set up, as well as several datamarts. Usually a separate datamart or data warehouse is installed for the contact centre in which supplementation with the newest data occurs once every 24 hours, for example. For marketing purposes, a data warehouse is kept with data on customer identification and further profiling, and a separate active datamart is used for the website.

answering questions from the data warehouse Queries are created for answering questions. A query is a question which consists of a combination of choices and criteria as these have been compiled by a user, the objective of which is to search for and find data in a database. For example, customers who have purchased products X, Y, Z more than three months and less than two years ago in the regions A and B. In answering these questions, OLAP, or online analytical processing, is often used. This is the generic name for a generation of end-user tools, usually operating under Windows, which make it possible to compile complex queries easily and to run them on a database that is usually maintained on another platform. Normally, the database is implemented in the form of a

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data warehouse and thus contains large quantities of historical data. It involves a read-only application so that changes cannot be entered into the files. An OLAP tool can be used, for instance, to gain insight into the turnover, the profit contribution and the communication frequency of customers from different segments during a variety of periods of time. These indicators may easily be broken down in various ways. The breakdown can be adjusted repeatedly in order to expand the insight into the customer database step by step. The results can be presented in a variety of ways: in simple tables, or in pie charts, graphs, radar graphics etc. In addition to OLAP tools, software which supports statistical or data-mining analyses may be used to answer questions. This topic was discussed in some detail earlier (see Chapter 7).

17.5

Campaign management systems origin Back in the old days of direct marketing, campaign management referred to the planning and execution of a single marketing campaign, which made use of the telephone and/or the postal services. The preparation time for this type of campaign amounted to several weeks if not months. Nowadays, within the framework of CRM, campaign management encompasses the multitude of campaigns that are planned and executed through different channels so that a continuous marketing communication flow is created. Sometimes these campaigns are devised in the morning and executed that very afternoon. By continuously measuring the effect of every contact (customer touchpoint) and making adjustments, the dialogue can be continually refined. This puts the organisation in a better position to market its goods and services and develop relationships with the right customers. The goal of campaign management is to interact with prospects and customers at the right moment, with the right offering and the right message communicated through the right channels.

CRM definitions Four types of campaigns 1 Single shot campaign (one-step approach). The most traditional contact strategy; this involves a campaign in which the intended effect is achieved in a single contact; the activity is usually planned and prepared months in advance. 2 Wave campaign. This involves a multiple-step approach in which a direct mailing might be followed up by a telephone campaign, for example. 3 Triggered campaign. In this type of campaign, the time schedule is not determined by the marketer but is made dependent upon the customer’s behaviour. For example, someone will receive a message 60 days before the expiration of their telephone subscription or will receive an offer within a few minutes of clicking on to a certain site. 4 Longitudinal campaign (communication calendar). This campaign takes place over time and its goal might be to acquaint the customer with the supplier and thereby develop a relationship. An example would be the communication calendar that a company creates to encourage new customers to ‘cross-buy’ during the first two years and discover the supplier’s range of products.

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Functionality of campaign management systems Campaign management systems (see Figure 17.3) are developed to achieve the interaction goal. Data warehouse tools such as OLAP only satisfy part of this requirement. They help provide an answer to a selection question, but do not support the entire contact cycle. They help find an answer to the question of whom should be approached for a specific campaign. Campaign management systems, on the other hand, are characterised by the following functionalities: ●

Opportunity identification: the identification of contact opportunities on the basis of events involving the supplier, the customer or those occurring in the environment.

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Relationship planning: indicating how the relationship with customers should be further developed in terms of the communication.

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Campaign management: the selection of contacts, the development and the implementation of the campaign.

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Customer interaction: supporting the contacts that follow the sent messages.

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Measuring and evaluating: what are the effects of the campaign and do they satisfy the goals?

Within the framework of opportunity identification an analysis is performed to determine whom should be approached at a certain time with a certain marketing communication message. Are the (potentially) most profitable customers the ones to be approached? Are certain events involving the customer to be played upon; will customers who are going to move be approached with a mortgage offer, for example? Or is the introduction of a new product the occasion for the contact? For example, a new model of a certain car has just become available, and the manufacturer would like to give the owners of the current model (provided it is two years old or more) the first opportunity to see it when it is presented in the showroom.

Figure 17.3 Campaign management system

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Or perhaps a cruise line would like to make a special offer to regular customers who live less than 50 miles from the harbour for a cruise set to sail next week which is not yet fully booked. The relationship planning function demonstrates many similarities with opportunity identification. Contact opportunities are now also placed within the context of relationship planning. It will be determined when is the opportune time to approach a customer with the particular offer. The cruise line wants to exclude customers who have already taken a trip in the previous two months. The salesperson who is involved in negotiations might consider it desirable that no further offers for comparable or different types of products be sent to the prospect during the period concerned. And the organisation that has created a communication calendar to reinforce and perpetuate the relationship with the customer during the first two years prefers only to deviate from this within certain limits. The campaign is designed within the framework of campaign management. Ready-made templates are used to generate the campaign. The system supports the development of different types of campaign, varying from the ‘single shot’ to the ‘wave’ and to the ‘longitudinal’. The progress of the contact cycle can be shown in an easily created tree structure. This tree indicates who will receive a reminder, which channels will be used to receive the response and how all this will be followed up. Selections can be entered and the company can determine how many people satisfy the criteria. Using certain instructions, arrangements can be made so that people who satisfy certain criteria are selected real-time for a certain period. In order to prevent a person or organisation from receiving more than one communication message at a certain time, rules can be established for prioritisation and exclusion. These rules indicate which campaign is considered to be important, which can be sent in a specific situation and which cannot. In addition, customers who have indicated that they do not wish to receive any information from the supplier or those with a history of defaulting on payments can be excluded. The addition of several control addresses may prove useful for being able to monitor the execution of the campaign. For each of the selected groups, it will be specified which communication message they will receive. It is also determined how the response will be measured. The goal of the customer interaction functionality is to initiate and support the contacts which follow the communication message. The system can arrange for the recipients of the message to be called or to arrange for those recipients who are interested to contact the call centre themselves, on their own initiative, and ensure that they speak with an agent who is well informed about the campaign and the fact that the caller has been approached. The results of a campaign are continuously measured thanks to the measuring and evaluation functionality. In this way, a good insight can be gained into the progress of the campaign. The actual results can be measured against the goals at various times throughout the campaign. For example, the response and conversion1 for different channels can be illustrated. It is also possible to compare several campaigns with one another to determine their effectiveness. Which campaign generates the most traffic and which has the highest conversion ratio?

input for campaign management The link between data warehouses, data mining and the campaign management system forms an important point of interest. Opportunities, selections and the like become apparent from the customer data and the analyses performed on these data. Suppliers of CRM systems use terms such as predictive marketing to indicate their datamining tools in this area. 1

Conversion is the number of respondents who end up placing an order, for instance.

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selection of a campaign management system Campaign management systems are sold on the market by various suppliers. Whereas one system might be adept at generating campaigns on the web ‘real-time’, another may be more capable of supporting processes in the call centre. Functionality and prices vary. In selecting a system and a supplier, the following elements should be taken into consideration (Verduin, 1999): ●

Functionality of the system: – – – –

17.6

Can the system support different types of campaigns? How does the system support different aspects of the campaign management? How does the system link up to the data warehouse and the customer touchpoints? How does the system link up to the back office?

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User friendliness: how much training is necessary to use the system and how much time is needed to develop and send a campaign?

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Market position of the supplier: does the supplier belong to the category of companies which will still be around five or ten years down the line?

Content management system Content management is interesting for companies with a great deal of content (Dekker and Hiemstra, 2002). Publishers have large quantities of information that they would like to distribute and reuse on the basis of target groups and perhaps even of personal needs. Since the 1980s, they have invested in data structures. Even production companies such as Philips or Sony have large quantities of content with instruction manuals, background information on artists and so forth. Nowadays, they would also like to publish this documentation via different media. A content management system makes it possible for web publishers to maintain their websites easily and in a structured manner. Finally, it offers advantages to those companies that wish to manage all data and documents in a structured way, organisation-wide and make this information available through different channels. Business plans, brochures, sales texts, reports and annual reports are very accessible as a result of ‘enterprise content management’. The functions that a content management system should fulfil are (Dekker and Hiemstra, 2002): ●

Authoring: adding and changing content in an automated digital environment.

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Workflow management: management of the steps that are taken between authoring and publishing. For example: who has to have viewed and approved a certain block of information before it may be published, and which blocks of information will be published on one page or in one brochure?

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Storage: placement of content in a digital warehouse.

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Publishing: publication of the content. This usually occurs in HTML websites, but PDF documents, WAP pages etc. are also becoming more common.

A content management system makes it possible for data from different sources to be combined, while the publications are made consistent in appearance. To achieve this, a strict separation between content and design is ensured.

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In order to ensure careful management of the data, management procedures and authorisations must be established. Old versions of documents must be saved in order to be able to trace unwanted changes and reverse them. Metadata will have to be automatically retained during the input of new data. Content managers will have to be able to implement changes without having knowledge of internet technology. The application will have to support cooperation between several people in different departments at different geographical locations.

17.7

selecting CRM software package(s) Developments in the market for CRM systems occur rapidly. The application software is further developed and geared towards market demands, all at high speed. We see a further concentration occurring in the market. Players, particularly local ones, disappear, are taken over and continue together. The market leader with the most expensive applications witnesses its share of the market decrease in favour of suppliers of less expensive applications. Mediumsized and smaller businesses have also shifted to making investments in CRM systems and are opting for less expensive solutions with fewer functionalities. The number of Application Service Providers (ASP) is growing. They are offering organisations, mainly small and medium enterprises (SME) a chance to outsource systems. One good example is Salesforce.com. The company charges a fee for granting access to their systems, which they host and update on a regular basis. The advantage is that the SME is not making any investments in hardware and software or the management thereof, which is often not something an internal IT department can handle. Starting up is easy and takes only a little preparation. The system is omni-accessible and flexible. However, the management of data is transferred into a third party’s hands, the options to tailor the software to the company’s needs are limited and integration with the back-office systems may be trickier than with owned and managed solutions. CRM software can be divided into five categories (Gartner Research, 2004, 2005, 2008, 2011; Hardeveld, 2001): 1 Suppliers of integrated ERP applications, such as SAP and Oracle. Initially, most of the ERP suppliers built a module themselves in order to offer CRM functionality, but in the past few years, several companies have stopped doing this and have either acquired a CRM package or started to collaborate. 2 Suppliers of CRM suites, such as Oracle (previously Siebel). These are systems that support most CRM functionalities; they enable the building of a total solution. 3 CRM frameworks (Pegasystems, for example). These, in contrast to the suite, offer more freedom to the organisation in building its application. Frameworks offer the room to design unique, distinctive processes, an important consideration for some organisations. 4 Best of breed. Companies go in search of the best application software for different CRM functionalities. The systems used for the contact centre may be different from those used for the data warehouse, campaign management system and website. The systems used in contact centres may vary from those used in data warehousing. The website and campaign management system may not be part of the same platform. Organisations striving for best in class performance in each individual area face a huge challenge to integrate application and data. 5 Building own applications (with help from IBM, Oracle, Sun etc.). The advantages to companies who choose to build a CRM application themselves are that they obtain

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PRaCtitioneR’s insight the details . . . Other than logistical processes, for example, marketing, sales and relationship management processes are generally not thought out and designed beforehand, but instead evolve over time. Every employee adds their own contribution over the course of time, and interprets activities in their own way. The result is that there is often a lack of concrete processes which can be monitored and managed, but rather an interplay of daily activities. In order to provide support to these in daily practice, it is important to know not only what the package does but also how it does what it does. A generic example is the creation of selections . . . Think of a situation in which a quotation must be produced. This always requires the registration of many data. Often ten or more screens must be brought up and filled in first, and it is often unclear how the filled-in data ultimately come together in the quotation. If the decision is made afterwards to grant a discount, this can be a good way to test the accessibility of the package functions. Source: Koenders (2001).

customisation and avoid the substantial investment in suppliers’ own systems. There are, of course, disadvantages as well. What originally seems inexpensive can become expensive in the end as a company wishing to develop applications itself can also find itself having to make many investments. It also appears to be difficult to keep up with the speed of development achieved by suppliers in the market, and the risk arises that companies will trail behind competitors who use the ready-made systems. Growth areas of the market are the players aimed at SMEs, such as Microsoft Dynamics or Salesforce.com. Also, the market share of integrated suites offering ERP and CRM is increasing, the reason being the focus the market places on process integration and the strong need to coordinate front- and back-office processes in a reliable way. The suppliers of CRM suites that are not all encompassing in the sense that they lack ERP integration will suffer, but best-of-breed applications are performing better than one might expect. Apparently, the choice of generic platforms that span ERP and CRM is not preventing a part of the market from working with particular specialists in some areas. These aspects have to be included in the selection of CRM software, as such, the continuity of a firm plays a major role. Will the company exist in five years’ time and will it be able to support the system and to deliver updates? However, a preference for one of the CRM categories has to be indicated. When selecting CRM software, there is a lot of support available in the market; for all vendors and system integrators it is a way of getting in contact with potential leads for their services and products. Many selection criteria have been formulated. Elements that you will find in many lists relate to functionality in marketing and sales (including reporting, document management, workflow processing, customer intelligence, web-enabled functions, compatibility, system configuration, security, system implementation, system support and pricing).

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17.8

Conclusion Developing relationships with a large number of different customers can only be achieved if information and communication technology are used. Different systems have been developed to support and implement CRM. In the front office, we first encounter the technology required for the call or contact centre and the website. Possibilities exist to orchestrate the telephone or written contacts from one central location. Systems are put in place to ensure the timely establishment of the right connections, making (customer) data available and processing changes in this data. They can even take over parts of the communication process from people who then have more time for the truly important contact moments. In order to supply the front office with customer data, the creation of middleware is necessary. Part of these data must actually come from the back office, which is usually set up to be able to handle the processing of large quantities of similar tasks in batches. Many of these legacy systems are organised to focus on products or functions and not on customers. In order to supply the front area with the necessary customer information, data are compiled from several different sources through customer data integration. The campaign management system allows for the planning to the sending of messages to customers and prospects; as well as taking care of the follow-up and evaluation of the campaign. The content management system can support the management of the digital content to be presented through a diversity of outlets and channels.

Case stuDY Canada Post delivers on its CRM strategy Background ‘Canada Post Corp. (CPC), a Canadian Crown enterprise, is Canada’s national postal service provider. With 66,000 employees, it is also the country’s fourth largest employer. It serves 30 million residential customers and more than 1 million commercial customers, delivers more than 10 billion pieces of mail annually, and maintains relationships with more than 24,000 retail sales points for CPC products and services. ‘CPC recognised that its future depended on having customer processes and support systems in place . . . ’ with customer expectations rising and the on-going emergence of the internet. ‘To demonstrate its commitment to change, CPC launched an enterprise-wide business transformation initiative to redesign all processes and employ innovative technological solutions to create customer and employee value.’ In the new situation ‘every process must add value for the customer, the employee or the corporation’. ‘Each process was reviewed to ensure that it was customer-focused, process-driven, self-service-oriented and could withstand the scrutiny of measurement with assigned accountability. ‘In the past, customers’ experiences with CPC were often complicated and frustrating. A customer could call three or four times about the same issue and receive different

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Case study (continued) responses from call centre agents. Customers can now take control, tracking their own parcels and placing online orders, as well as having 24/7 ability to satisfy their postal needs. ‘The new system has also improved the internal employee experience. The former systems were standalone and didn’t integrate customer and call information. Now, when a customer calls, there is a history of the cases related to the customer, and the system can reference frequently asked questions [FAQs] from the CPC solutions database. These provide an integrated view of the customer – from prospect to the placement of orders and accounts receivable.’

Realisation ‘CPC implemented the new system through extensive change management that involved process and organisational redesign . . . Change was communicated through traditional methods, and through a network of “readiness teams”, using leadership coaches, area project managers and local implementation coordinators. Implementation involved two years of process design and system stabilisation. This included a team of CPC employees plus systems integrators from SAP, Accenture, EDS, and interactive voice response telephony suppliers . . . People readiness was addressed through more than 50,000 participants-days of learning delivered to employees during the implementation year . . . Externally, a take-to-market team made advance contact with many of CPC’s largest customers and communicated changes directly to some 145,000 commercial customers. For post-launch fixes and stabilisation activities, customerfacing issues were treated as the first priority.’ Using the built-in processes defined by its application provider SAP, CPC changed its business processes to leverage what it believed to be the best practice inherent in the software. Package tracing, rate calculations, service standards and an online business centre were redesigned to be technology-enabled by SAP modules, such as case management, order-taking, internet sales and internet service. Each of these provides CPC with the functionality to enable the transformation, as well as the integration of back- and front-end processes. The internet service application provides customer-service agents and delivery supervisor with details of customer transactions (including enquiries, complaints, claims and orders) from a single screen. It provides customers with online access to a comprehensive solutions database for self-service query resolution. Internet sales integrates processes with mySAP Retail Online Store to provide customers with online access products. These processes are tightly linked with the back-office SAP R/3 system to provide a single customer view and a single face to the customer. Six customer databases were combined into one, as were three case management databases. Since all parts of the enterprise now have a single view of each customer’s activities, every interaction is more productive. CPC also launched a business warehouse reporting functionality from CRM. The ability to analyse the information from sales and customer cases enables proactive responses to customers’ needs and change processes to better serve customers. CPC deployed technology in a phased programme plan. In launching the CRM initiative, the first three components were as follows:

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A new CPC website . . . It quickly climbed to a position as Canada’s most visited website.

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Electronic shipping tools: enhancing and combining two existing online tools, these are available to commercial customers in both desktop and web-based versions that enable them to place orders directly and create all shipping documents.

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Case study (continued) New telephone tools: CPC deployed mySAP CRM to nine contact centres that handle 5 million calls annually across numerous time zones. Using SAP Phone, CPC supports queuing for customer inquiries and enables fax, e-mail and voice-back options for customers and supply agents.

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‘Implementing the CPC systems required some 400 individuals. As it configured and integrated the components, the team replaced more than 80 legacy systems.’ In a little more than two years the implementation was realised. ‘The most significant technical implementation challenges included understanding the fully integrated back-end and CRM processes from an organisational perspective and testing.’

Conclusion ‘CPC’s CRM programme supports the way the enterprise wants to operate . . . It supports its strategic priority for customer-centricity and operational excellence . . . It defined its vision, strategy and business processes choosing an enterprise resource planning/CRM application suite. More importantly, CPC has achieved its business goals by defining and using a CRM strategy as the core of its overall business strategy.’

Questions 1 Why is process redesign so important for CPC’s success? 2 Describe the way CPC redefined its processes. Illustrate your answer with three examples. 3 Analyse the CRM systems that are in place at CPC. In what way do they enable the processes? Source: Eisenfeld (2002), Gartner, Inc.

Questions 1 Voice processing has its proponents as well as its opponents. Both sides are capable of shedding light on the pros and the cons from the perspective of the customers as well as the supplier. (a) Name two advantages of voice processing for the customer as well as the supplier. (b) Name two disadvantages of voice processing for the customer as well as the supplier. 2 Think of four technical measures which could be used to shorten the access time for customers calling a call centre. 3 Indicate three differences between the internet and a closed computer network for a company. 4 Name three methods which could be used to protect critical company data while still facilitating the interaction between customer and supplier on the internet as much as possible. 5 What is the difference between a data warehouse and a datamart? 6 What are the reasons for setting up separate datamarts for call centres and for websites? Substantiate your answer.

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7 What are the objections to giving visitors to a website direct access to the legacy systems? 8 Think of three recommendations designed to improve the security of your critical business systems in a multichannel environment. 9 In the text, references were made to a cruise line. Customers of a cruise line have a large number of ‘customer touchpoints’ with the carrier. (a) Name 15 of these touchpoints. (b) Create a possible campaign for each contact point. 10 Name five reasons why the implementation of a campaign management system can fail. Substantiate your answer.

References Brink, M.V. van den (1999) De opzet, implementatie en organisatie van een call center, Amersfoort: F&G Publishing. Broek, R. van den (1998) Call centers en databasemarketing, Woerden Beerens Business Press. Collins, K. (2011) Hype Cycle for CRM Marketing Applications, July, Gartner Research. Davis, J. et al. (2012) The Gartner Customer Relationship Management 2012 Vendor Guide, Research Note, 29 November, Gartner Inc. Dekker, H. and Hiemstra, F. (2002) Content management, Emerce, September/October, 62–6. Eisenfeld, B. (2002) Case Studies, CS-16-7100, Research Note, 12 July 2002, Gartner Inc. Fuller, F. (2000) Getting Started with Electronic Commerce, Fort Worth, TX: The Dryden Press. Gartner Research (2003) Overview of CRM Trends, February. Gartner Research (2004) Gartner Business Intelligence Summit, Royal Lancaster Hotel, London. Jonker, J. (1997) Datawarehousing en daarna, Deventer: Kluwer BedrijfsInformatie. Koenders, C. (2001) CRM-pakketten, steeds meer me-too’s?, Tijdschrift voor Marketing, April, 16–20. Laudon, K.C. and Traver, C.G. (2008) E-commerce 2008. Business, technology, society, 4th edn, Harlow: Pearson Education International. Moorst, A.M. van (2004) Strategische outsourcing van Customer Care, Woerden: BBP. Moorst, A.M. van, et al. (2007) Customer Management, Amsterdam: Tote-M Business Architects. Stuurman, B. (2000) PRM zorgt voor grip op het indirecte kanaal, CustomerBase, 6, 29–32. Sybrandy, A. (2003) Nieuwe contact center technieken, de hype voorbij?, Beyond, Mapping, Marketing and Datawarehousing, 8, 1, March, 17–19. Turban, E., King, D., Lee, J. and Viehland, D. (2006) Electronic Commerce: A managerial perspective, 4th edn, Upper Saddle River, NJ: Pearson Prentice Hall. Verduin, R. (1999) Customer Relationship Management, Deventer: Samson. Watson, R.T., Berthon, P., Pitt, L.F. and Zinkhan, G.M. (2000) Electronic Commerce: The strategic perspective, Fort Worth, TX: Dryden Press.

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Implementation of CRM systems In this chapter we will highlight the phased build-up of CRM competencies. First, however, we look at the potential pitfalls in CRM implementations, causes of failure that have been identified as such (Section 18.1). Subsequently we provide a way for organisation to assess their current CRM capabilities (Section 18.2); they can determine whether or not the preconditions for CRM success are there and the organisation is ready for a CRM implementation. Depending on the CRM vision and strategy, a roadmap can be constructed showing how the organisation can increase its capabilities in several increments (Section 18.3). CRM project management is discussed in Section 18.4. It’s a classic approach towards the subject, whereas more flexible ways of achieving project results, such as Agile and Scrum, are presented in Section 18.5. The execution of a special type of CRM programme, namely international or multinational and multidivisional CRM programmes, is discussed in Section 18.6. In this chapter we will address the following questions: ●

Factors influencing success and failure in CRM

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How to implement CRM and how to form a customer-centric organisation using a stepby-step approach, based on project management

PRaCtItIoneR’s InsIght Even in the first decade of the 21st century, CRM projects were not leading to the desired financial results and the chances of a CRM project being prematurely terminated were quite high. Companies were struggling with CRM and did not know what functionalities they required or in what order these needed to be built. This situation was a direct consequence of the fact that the early years of CRM were selling a dream. By implementing CRM, organisations would be able to become customer intimate. However, we have learned much since then, and the first CRM successes have definitely been seen. The idea has taken hold that CRM needs to be given time and that it is much more realistic to speak of a programme and an on-going process than to speak of a project. We realise that not everyone looks for the same thing from CRM. There are degrees and variations and every organisation will need to explore to what degree CRM fits their specific context. What does CRM mean to an organisation as a system and as a strategy? An assessment can determine how long the road is that the organisation will need to travel to achieve its desired competency level. A growth path for building CRM competencies in a coherent and structured way will need to be constructed.

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18.1

Reasons for disappointing results CRM is about strategy, organisation, marketing and IT. It touches on so many facets of an organisation that it requires comprehensive changes which have far-reaching consequences and high investments. Thus it should not be surprising that there are many ways in which a CRM programme can fail. Studies conducted by Wurtz et al. (2007) and Gentle (2002) revealed the following causes of the disappointing results obtained with CRM:

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Lack of strategy. There was no real purpose or goal to CRM and ‘the business’, meaning commercially and operationally committed employees, was not in the ‘driving seat’.

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Lack of a business case with clear objectives. It was unclear what the company hoped to achieve with the CRM project and whether this would produce a positive ‘bottom line’ result. The relationship between the efforts and the result was unclear.

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The organisation was not ready for CRM. Various pre-conditions had not been satisfied; the integration of the front and the back office was still lacking or the quality of the customer data was still insufficient.

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Poor data quality led to a failure to customise the dialogue being conducted through the different channels to the relationship, and discouraged agents left behind in the call centres.

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The scope of the project was too broad. The company wanted too much at once.

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There was a lack of active sponsorship from top management.

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The project was IT-driven and the focus on technology was too strong.

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Insufficient attention was paid to change management. After the implementation of the CRM system the company was not finished; a relationship-oriented organisation had still not been created.

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Customers and others involved in relationships with the company did not react positively to the system: it was incorrectly assumed that customers would want a relationship and appreciate the new possibilities for contact.

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The misconception that CRM could be contracted out to system integrators. The problem was shifted outside the company with the idea that a third party could offer a ready-made solution. CRM is, however, too company-specific to place entirely in the hands of others.

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An international approach to CRM resulted in additional complexity and was difficult to justify business-wise. Head office imposed the choice of a system on the organisation, and dictated the speed with which the projects must be realised.

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A bureaucratic approach to project management: this led to too much focus being placed on the writing of project plans and reports, leaving too little attention for the ‘real’ thing.

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Resistance from the IT department. The organisation of horizontal processes around customers had consequences for the functionally oriented IT department.

an initial exploration with CRM and how companies handle this CRM is a container concept that anyone can interpret in the manner which best suits their situation. One person may apply it to the website, while for another it may involve the campaign management system and a third person may be concerned with one-to-one marketing.

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Vision and strategy (8)

Organisation (5) Marketing Customer Knowledge (8)

Individualised proposition (6)

Relationship policy (6)

Multichannel communication (5)

Metrics (5)

Figure 18.1 CRM assessment

Giving CRM a clear meaning is an initial action that will determine its success. In addition, it is recommended the organisation should stop and consider the manner in which it currently deals with customers. What is the customer knowledge? How is this used during customer contacts? Is a conscious effort being made to develop the relationship with good customers? Is customisation being supplied? How customer-oriented is the organisation? Various assessment processes have been developed to help organisations get a first impression of how they might design CRM. They highlight the organisation’s position and offer important input to determine the gaps in where an organisation believes it should be in order to realise its vision and strategy. One of the most elaborate assessments has been developed by the Dutch CRM award jury (see Peelen et al., 2001). Figure 18.1 illustrates the summary results from an assessment of an organisation which is in the process of adopting and developing a CRM strategy. The scores shown are averages calculated using the scores from individual answers to numerous questions asked during the assessment. The answers to these questions provided a detailed picture of the organisation’s strategy so far, along with insight into which aspects were in need of further attention. The organisation’s score of 8 out of a maximum of 10 points shows that it has formulated a clear CRM strategy. Its top management are fully aware of what they would like to achieve with CRM, but have not yet achieved it. The organisation has a low score on customer value experience (score 5 out of 10); one can question whether or not the top management’s commitment, the way in which CRM is communicated, the customer focus of employees and the collaboration between functional departments is really geared towards meeting the customers’ needs better. Their marketing also shows scope for improvement. There is a low degree of customisation of the offering (score 6) which is subsequently limited to standard products and services. Selectively building relationships with customers is not given enough attention. Insights relating to customer value (both actual and potential) or customer interests are not used to formulate a relationship policy. The only effort made in the area of relationship policy is a communication calendar for new customers in the first six months following their first transaction. It has been given a low score too (score 6). Differentiation between segments is lacking and there is not much being done to build a relationship beyond the

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acquisition phase. Subsequently, there is no real on-going dialogue across the different communication channels (score 5). The customer contact cycle is not completely facilitated by technology. The website does not allow for transactions, references to the contact centre are ‘hidden’ to prevent costly interactions and the agents in the contact centre are working with several systems that do not give them a clear view of the customer. The insights in the transaction history are incomplete and hindering cross-sales opportunities. It won’t be very surprising to see this organisation show negative CRM performance metrics.

18.3

the CRM road map the range of CRM Implementing CRM for the example given in the previous paragraph could be quite an ordeal. There is huge untapped potential, many projects to be defined to improve communication, for instance. Improving the contact centre’s access to customer information would probably be a very good project goal, as would training agents to deal with this information. However, at the same time the rewards structure for employees would probably require a change. The internet channel may also see different projects initiated such as enriching the content on the website by including third-party knowledge, developing an ordering module, integrating the web with the back-office etc. And we are not even getting in to the subject of social presence yet. Projects in the area of customer management are also abundant: improving retention, reducing churn and improving the identification and capitalisation on cross-sell opportunities or introducing a loyal customer programme, for instance. Customer knowledge is quite well developed, but as soon as it needs to be processed and used, new projects are bound to emerge. Facilitating these projects cannot be done without touching on technology. The CRM software will need to interface with the internet and with other contact centre applications. Metrics will also be introduced to improve the CRM results that the projects were intended for in the first place. The organisation will embark upon a learning journey as to which projects yield good results and how it can even further capitalise on capabilities. A more differentiated approach towards customers will mean the value proposition will also have to change, otherwise fulfilment will lag behind, keeping CRM from achieving return on investment. In Figure 18.2 the domain of the projects is illustrated. They are projects contributing to the transformation of a product oriented towards a more customer-centric organisation.

the CRM vision Formulating and disseminating a vision of CRM is crucial to avoiding getting lost in this expansive field. A vision will reflect the organisation’s ambition: how will it ultimately deal with customers? It reflects the final situation that the organisation strives to achieve and to which it is committed, due in part to its pattern of values and norms. It may involve a vision of an investment fund to make financial markets accessible for private individuals with limited knowledge and the ability to invest. It may be its ambition to support customers and guide them in the way they prefer in the management of their capital. By being the best

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Figure 18.2 Overview of CRM projects

listener among the service providers, it can utilise its expertise to help private customers become stronger in a turbulent financial climate.

CRM strategy The realisation of a CRM vision requires a strategy that provides an indication of what are the concrete goals and how these are going to be realised. The choice of strategy provides a direction to the CRM functionalities that a company would like to develop. An organisation with operational excellence that invests in CRM systems will not supply customisation nor will it expend any effort in developing customer knowledge. Its customer strategy will also demonstrate more characteristics of transactional rather than relationship marketing. The contacts will have to be efficient yet effective; self-service solutions are therefore likely to be encouraged. Concrete (financial) objectives constitute part of the strategy. The careful specification of these objectives can contribute towards the success of a CRM project. This requires the organisation to establish a clear link between the efforts and the results to be achieved. A compulsion arises to search for possibilities which allow benefits to be derived from CRM during interaction with prospects and customers. The company which employs an operational excellence strategy will have to specify in concrete terms how the costs of order processing, resolving complaints and the like should decline over time. The desired revenues which are to be generated from cross-selling and the increase in turnover per customer will also have to be specified. During the CRM project, it will have to be monitored whether the efforts yield the desired results for the costs budgeted for this purpose.

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Figure 18.3 depicts the effect of the choice of an operational excellence strategy in global terms for the different CRM sub-topics and the results to be achieved by them. If the circle is unshaded, the importance of the topic is limited. If the circle is lightly coloured, this means that the importance of that topic is of medium significance. Darkly coloured circles on the other hand indicate areas of special interest relevant for CRM.

start at the beginning Figure 18.3 is showing that many different projects can be defined. The million dollar question (sometimes quite literally!) is with what project to begin. In which order should the capabilities and building blocks of CRM be developed? Please note that not all building blocks need to be perfected all at once in the first phase. If an initial project on customer knowledge is geared towards achieving the end position, without the relationship strategy, proposition and communication channels to capitalise on the knowledge investment, the advantages will not outweigh the cost and return on investment will not be achieved. As a ground rule it is wise to focus on the operational primary processes involved in acquisition, delivery and after sales first. These are relationship management activities that are important to the organisation. The projects need to be defined with the customer need as a starting point and should be supported by technology. If we go back to our example, the possibility to order online, through the website, is a clear project that is defined inside out and supported with technology. It is also a primary

Figure 18.3 Relevance of CRM projects in the context of operational excellence Degree of shading equates to level of significance: unshaded = limited significance; light shading = medium significance; dark shading = special significance.

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functionality that is missing and that can directly show the added value of catering to customers’ needs through different channels. Research into organisations that are successful in CRM has shown that their starting point is often an area of ‘pain’, where they experience trouble. They are losing out on revenue due to the lack of online ordering capabilities. The front and back offices are not cooperating as they should, meaning that sales and fulfilment are not aligned. Solving such issues, famous bottlenecks, can unlock great energy and lead to support for the CRM strategy among operations and management alike. Just to make the contrast clear, however, such an effect should not be expected from focusing on a cross-sell project for an organisation in a growth market with a low market penetration for its primary offering. The scope of the projects should not become too large as this can result in a riskier situation. Not only does the chance of a successful outcome consequently decrease, but the degree to which a failure is acceptable is also reduced: there is too much at stake. The business case will have to demonstrate that the CRM project involved in this process will lead to positive results within a predetermined period of time. Appropriate to the CRM strategy will be an indication of how the project will ultimately pay for itself. What is the profit that will be obtained by developing the order functionality on the website and how much additional turnover will we realise in this way? How will other channels be cannibalised? What is the reduction in costs to sales for these transactions? In budgeting, it is important to review all the costs: those involved in the network, the application software and the data as well as the expenses related to supplier support and possible system integrators. It should be clear how the project will achieve ROI and not in any manner, but in a way fitting the CRM strategy. Is profitability increased through reduced churn? Are efficiency gains leading to the potential to serve a certain customer group more profitably? Which investments are required to develop a certain functionality of the CRM software and what will the return on capabilities be? It’s important to cover all the different expenses that can be expected: investments in the network, the application software, the database, training, consulting and systems integration. Usually, initial CRM projects will lead to a reduction in costs. It becomes less expensive to develop a catalogue, to reproduce it and to distribute it. The costs of the call centre may be reduced through the introduction of self-service concepts. Customers are assisted by voice processing systems or search for the answer to their question on the internet in a ‘frequently asked questions’ section. During a second phase, the justification of projects is supplied by an increase in turnover. The acquisition and relationship management processes are defined and supported by ICT and can now be further optimised. Customer data can be used in approaching prospects in a more targeted way with offers, and cross-sell initiatives can also be geared towards customers’ desires with a greater degree of accuracy.

Phased expansion If the base level of the primary process has been reached, one can start contemplating the phased development of competencies. If the basic level of operational excellence is achieved, customer intimacy can be introduced and increased (see Chapter 3). It is possible to strive for further optimisation of the primary processes, such as attracting, retaining and developing customer relationships by capitalising on customer knowledge. Retention and cross-sell projects can be initiated in the contact centre. A further personalisation of the value proposition can be considered or the website can be enhanced in cooperation with third parties who can improve content and functionality. But it’s easy to get lost in all the things that

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‘could be done’ and lose sight of what ‘should be done’. The CRM vision and strategy need to direct the efforts and must be used to prioritise projects. There must be a careful consideration of the balancing of customer knowledge, the value proposition, the relationship policy and communication. Performance measurement and management needs to indicate where the current bottlenecks are. Is success being held back due to lack of customer insights, or due to channel issues? Are the capabilities developed properly and functioning well? The balanced scorecard was introduced as a useful tool to keep track of the integrated performance of CRM. From the customer’s point of view, the focus will initially be on increasing customer satisfaction, and later on improving commitment. Attention shifts from satisfaction with the transaction to the bond between supplier and customer. During this same time span, the company will transform itself from a product-oriented organisation into one in which the customer is central. The market is no longer divided up into products but into market segments and ultimately even customer groups. And, the one-way communication makes room for a dialogue conducted through various channels. Business units no longer communicate independently with the customer, but gear their activities to one another.

embedding in the organisation Achieving the relevant objectives is dependent upon the proper embedding of CRM in the organisation. CRM has far-reaching effects for the organisation. Ultimately, the structure and the position of many managers change. Horizontal connections between departments and business units are created in order to arrive at a customer-oriented organisation. The IT department comes to fulfil a more infrastructural function and will integrally support the business processes. Knowledge of individual customers must be built up and exploited. Experiments are employed to find the most effective and efficient relationship strategies. Resistance to setbacks must be built up to prevent the slightest disappointment resulting in a detour from the chosen path, which can lead to the impression that the efforts made were fruitless. The necessary long-term management commitment may originate from steering committees (Gentle, 2002). An important aspect is that the involvement in CRM on the part of

table 18.1 Objectives of the CRM process within the four perspectives of the balanced scorecard Current situation

Medium term

Long term

Financial perspective

Turnover

Cumulative turnover over total period of custom

Customer perspective

Average customer satisfaction Primarily one-way; from business unit Customer knowledge distributed within organisation Product-oriented

Individual customer satisfaction Communication attuned between business units Shared customer information Market-oriented

Life-time value (profit contribution of the customer during period of custom) Individual customer commitment Dialogue conducted through multi-channels Integrated customer knowledge; everyone has the same image of the customer Customer-oriented

Market is divided up into product groups

Market segments are identified

Individual customers and customer groups are identified

Process: communication Learning and growing: customer knowledge Learning and growing: organisation (1) Learning and growing: organisation (2)

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this senior management concerns the entire process and not just the individual projects. They must be convinced of the importance, magnitude and reach of CRM and must be committed to it. They have a long-term orientation and overview, recognise the importance of a healthy business case, but equally realise that a delay or short-term loss cannot be allowed to endanger the overarching objective. Within the steering committee, individual members can take responsibility for the specific areas within CRM. One could focus on the financial aspects, for example, while the other sets their sights on the communication and development of the channels, and still another concentrates on the customer or the implementation of the CRM systems after a careful definition of processes has taken place. It is common for the members of steering committees to find that their time is limited. This problem may be overcome via core teams. In these teams, professionals with authorisation operate from the top; they have responsibility for developing the organisation’s CRM competency. A division of labour can now also take place by which one person will concentrate on customer knowledge, and others on change management, external communication and the systems.

18.4

CRM project management The separate projects can ultimately be professionally managed. It might seem to be a redundant statement, but experience has taught us that the contrary is true. Various initiatives even receive the label ‘project’ without a project organisation being set up or a project being defined, planned or evaluated. In other projects, those involved work strictly according to the handbooks, in which the procedures seem more important than the people who must do the work (van Putten and Peelen, 2001). The successful completion of a project is dependent upon various factors. A good project description is desirable, one which includes the assignment and the objectives to be realised. The project description should not be exhaustive or become too long; in practice this often leads to reduced usability, lack of interest in the document and, as a consequence, a greater chance of the project’s detailed description not being implemented at all. The objectives should also preferably be SMART (specific, measurable, actionable, realistic, timely). Project descriptions in which the selection and implementation of the software package are central are never going to win first prize in a beauty contest (Gentle, 2002)! In these types of project, the focus is usually on subjects which are unlikely to affect the success of the project. Additionally, the outcome of these projects is predictable; none of the standard packages will satisfy all of the wishes and demands and thus a solution remains forthcoming for the time being. What is important, however, is to realise that the project result is dependent on the degree to which the company is capable of defining processes from the customer’s standpoint which are supported and improved by the use of information communication technology and which bring the realisation of the strategy one step closer. The business case will have to be developed from this angle in the project description. In addition, the nature of the project will have to be identified. Is this a project that can be characterised as ‘business as usual’, or is it a complex and innovative one (van Putten and Peelen, 2001)? If the latter is the case, then a careful risk analysis is all the more important. By recognising risks promptly, they can be more easily managed or it can be determined beforehand that the project should not be started at all. Another danger with innovative

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PRaCtItIoneR’s InsIght Processes consist of a succession of activities which logically follow one another (Davenport, 1993). Following the identification of an incoming telephone call thanks to caller ID, for example, someone will have to determine whether the customer can be found in the customer database. If they are included in the database, then it can be determined to which segment they belong and the telephone call can be routed to the responsible agent in the call centre. If the customer is not to be found in the database, then the call will have to be assigned to another agent who is capable of handling the input of the personal details in the customer database. If the caller ID has been blocked, then the call will have to be sent to an agent who first will ask the caller to identify themselves. Flowcharts can be used to describe the processes in differing degrees of detail. On the most detailed level, the process descriptions are input for programmers. The example described here is characterised by a relatively high degree of detail. On an abstract level, it is the organisation and recognition of different contact processes that are involved, and the value that these can represent to customers. This involves a major challenge, all the more so because marketing processes are described less accurately than are production and logistical processes, for example. Various marketing activities are not even viewed as processes. Data for various officials, for example, are seldom approached from a process perspective. They are viewed as information and not as incoming data (input) which should be evaluated in terms of quality, stored and protected and which must prove their value in throughput processes.

projects is that it is difficult to define the project beforehand. Many aspects are new and cannot be described in advance. Insights regarding the objectives can change along the way, but the ideas on the project feasibility can also change as well as those regarding the quantity of work involved in the project. The scope of the project may then change as a result and represent a major risk to the project’s chances of success. Furthermore, the chance of a positive outcome is determined to a considerable degree by the people who are involved in the project. The inability to find qualified and motivated people who can work together in a team is reason enough to prevent a project from being started. Characteristic of many CRM projects is that people from more than one discipline must act in concert with one another. There are many situations in which IT professionals, marketers, salespeople and account managers, database specialists and/or call-centre managers will have to work together to complete a project successfully. There is no room for bias and communication barriers will have to be overcome. Those involved will have to learn to speak one another’s language even if that requires effort. As was previously indicated, embedding the project in the organisation represents another point of particular interest. The project must have the aforementioned sponsor at the upper level of management who is convinced of the importance of the project and is responsible for the final result. In the event they appear to have insufficient time available for the project, they must provide a solution beforehand. They will have to delegate a suitable substitute who has the responsibility, and sense of responsibility, and with whom direct contact is maintained. At the same time, there must be sufficient budget available in order to perform the various project activities. In addition to the purchase of the application software, the adaptation of the network, the integration of the systems and training for the staff, room will also have to be made to perform a pilot run of the system before the final rollout, and time and money

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will have to be provided for the evaluation phase so that people can learn from this project for the future. Financial means will also have to be made available in order to feed the system with data. A campaign management tool without customer data is, after all, not very useful. There is a tendency in practice not to appoint enough means for the data aspect. It is also recommended that a pilot is organised in which the project can be tested out in a live environment over a period of several months by a selected group of users (Gentle, 2002). The goal here is to validate the business case and to increase user acceptance. Opponents of a pilot resist this because a shadow system is maintained during such a period which places an additional burden on staff and is accompanied by extra costs. The advantage, however, is that there is a better chance that a complex and innovative project will be completed successfully. System integration issues should preferably be kept separate from the pilot. These issues should not even be an integral part of the first phase of CRM implementation, so it is especially important to separate them from the pilot. Proper preparation for ‘going live’ with the project is crucial. The users must be trained and the data migration must be arranged. There is nothing worse than a user who does not know how the system works, let alone one who is confronted with a non-functional application. Finally, the last phase of the project management must not be skipped. The project will have to be evaluated and lessons will have to be learned from it for the future. After completion of the project, the company must consider how and when the realisation can be raised to an even higher plane so that customer data and channels can be optimally exploited and realised. It can be considered whether changes in the organisation are desirable with a view to transforming the company from a product-oriented to a relationshiporiented enterprise. In the following overview we summarise the aspects and elements that should together make up a complete CRM project plan.

CRM definitions Elements to include in the project plan: ● ● ●

● ●

●

Project title Management summary Project definition: description of the project in exact words, translating the strategy to the project goals and placing the project within its organisational context Composition of steering committee and project group Business case: calculation of project expenses and expected returns (both cost savings as well as revenue effects) Planning activities: often describing the project phases along the lines of designing, testing, piloting, training, implementation across the organisation

●

Description of all activities

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Deliverables of the project: what are the tangible and intangible results of the project

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Risk analysis and fall-back scenarios: what to do if the project takes longer, costs more or does not reach desired outcomes Budgeting

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18.5

a different approach to CRM project management The development and implementation of CRM systems is not necessarily a linear process. The principles and methods relating to software selection, development and implementation have evolved over the past decades and a more flexible process has become popular, appropriately named Agile. Agile is a name used for a set of practices that has, in fact, been in existence for quite some time, but only really developed some popularity since 2001. An informal gathering of software developers produced a manifesto for better software development, called the Manifesto for Agile Software Development (Beck et al., 2001). It states that good software is produced by: 1 people and interactions rather than processes and tools; 2 software that works intuitively and correctly, rather than hefty manuals to explain or troubleshoot; 3 collaboration with customers who use the software, rather than contract negotiations; 4 dealing with change, rather than sticking to a plan. The manifesto is not entirely revolutionary, as the ideas underpinning Agile were voiced in the 1990s as a reaction to the traditional cascading methods, that are characterised by a ‘stop-and-go’ or ‘develop and release’ approach. Agile tries to reduce risks and improve results by developing and implementing IT solutions in iterations, smaller projects that are also called ‘time boxes’. The miniature project is worked on in close cooperation with the future users and comprises planning, analysis, design, testing and documentation. However, the small scale makes the projects less complex, more flexible, more manageable and generally a lot faster. Project priorities are re-evaluated after each increment or ‘time box’, meaning there is a lot of control on what is to be delivered, when and how. The results of Agile projects are measured by deliverability, not by process. The working prototype or product is the ultimate metric, not the amount of resources, time nor the degree to which the process was documented. Agile projects include a lot less documentation then traditional IT development and implementation methods. The critique, therefore, is that it is undisciplined and unstructured. A special method of Agile development and implementation is Scrum. The term originates from rugby, where the scrum is a situation in which players are gathered in a group and the ball is tossed into the middle. The team needs to try to push the ball forward holding each other’s shoulders and keeping the ball contained within the group. It is a metaphor for teamwork, communication, resourcefulness and direction. The origins of Scrum can be found in a 1986 article in the Harvard Business Review, outlining the benefits of multifunctional teams in innovation processes (Takeuchi and Nonaka, 1986). Although it sparked an idea, the method was not developed until 1995 by Schwaber and Sutherland. It aims to: 1 increase team effectiveness; 2 guard the team’s progress; 3 resolve barriers and blockages; 4 safeguard project progress; 5 map and manage risks. Scrum uses a structure based on ‘stories’, which are the projects that have to be realised. The stories are prepared and presented in a Scrum room, which can be seen as the war room

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or situation room that is well known from crisis management. The room is owned and used by the Scrum team. It is important to have a dedicated room. Scrum projects are typically busy and can be noisy, so trying to work on something other than the Scrum project would be difficult to do in the same room. The Scrum room needs to have a lot of wall space. The walls are the project map and contain the projects and tasks that need to be completed, their status, the issues that are encountered etc. The Scrum room needs to be well equipped with stationery that allows teams to write down ideas and questions, make comments, and /or alter the status of tasks and so on. There is one central Scrum board that contains the essential project parts. The people working together in a Scrum project have different roles. The Scrum master is often the lead-developer (if working with third parties, this will be on the vendor side). The product owner is the lead-user and definitely from the client side. It is debatable whether or not the product owner should be part of the team. As a key principle of Agile and Scrum is working with, instead of for a user or client, one could argue that the product owner should be on board. However, an alternative argument is that the product owner does not need to be ‘au fait’ with all the work that is being done by the ‘sprint teams’. Sprint teams are the multifunctional mini-teams completing the individual parts of the project – the ‘stories’. Stories tell the teams what should be accomplished. They are userbased and describe a clear deliverable, such as: As a contact centre agent, immediately after the caller has been identified, I want to be able to see that customer’s last three purchases on my primary screen.

The story is user-based to permit a results focus. It’s up to the Scrum team to attach specific tasks to the story, to take it from a vague concept, to a detailed story, to something that is ‘ready to sprint’. ‘Ready to sprint’ means that the story has been understood and translated into tasks such as ‘build wireframe’ or ‘define business rules’ and ‘develop icons’. The Scrum team is supported by a project leader, focusing on the availability of facilities and resources: room, computers, money, stationery etc. The Scrum team can check in with stakeholders at regular intervals, but also flexibly. Stakeholders can walk into the Scrum room and get an update or attend a daily Scrum meeting. The daily meetings are collective (entire Scrum team) and last about 20 minutes, are held standing up and should contain a quick rundown on: ●

Which stories are in development?

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Which are ready to sprint and which team will sprint with them?

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How are the current sprints coming along and what is required to complete them?

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What are the open ends?

Documentation is built up during the sprints. The Scrum board will typically contain room for these elements: ●

Stories and tasks status area: Which tasks are in stock? Which stories are being worked on and which have been completed?

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Burn down chart: A tool comparing work outstanding against time available. The daily sprints are used to compare what remains to be done with the time available and identify issues in terms of capacity and planning.

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Evaluation and learning: every task or sprint offers opportunities to learn. What aspects received too little attention? What could have been handled better? And especially, how can what has been learned be used in subsequent tasks, stories or Scrum projects?

The items that are finished are documented. The stories are kept in a product ‘backlog’ as soon as they reach the status ‘ready to sprint’. The sprints and their progress are kept in a sprint backlog. The end results are working increments of the software. It is not surprising that, owing to the vendor–client and multifunctional team aspects of Agile development, and in particular the Scrum method, they are becoming increasingly popular methods of working in CRM. Very often, the processes of the client organisation are in development as it tries to discover how best to focus its organisation around customers. An approach whereby projects, rather than being outlined for years to come, focus on small, incremental steps that can be relatively quickly implemented, makes sense for CRM. Especially since CRM programmes are no longer approached as a ‘leap of faith’, but have to prove their worth quickly. CRM is especially suited to Scrum’s multifunctional way of working because it brings different disciplines, such as the different channel managers, or the marketers, sales people and information specialists together (Aydin et al., 2005).

18.6

International or cross-division projects (gentle, 2002) expectations versus reality In large organisations with activities in different countries and divisions, there is a good chance that the head office will ‘adopt’ CRM and pursue a standardised approach across the business units. ‘Standardised’ does not necessarily refer to the project management being linear, it may very well be an Agile project. It refers to developing ‘the same CRM systems and capabilities across the entire organisation’. The general idea is that this type of centralised approach has many advantages. It offers prospects for a professional approach. The best staff members are charged with the CRM task and they will have a sufficient budget at their disposal. Cost savings seem feasible through the centralisation of the purchase of CRM systems and by preventing the wheel from being reinvented at different locations within the organisation. By sharing best practices with one another, better performances can be achieved, more quickly and at a lower cost. IT divisions, as champions of standards, are generally also proponents of a centralised approach. The actual practice of international and/or cross-division projects doesn’t normally reflect these initial expectations. The national organisations and separate divisions do not necessarily embrace the initiative. Their perception is that their local reality is being neglected. Their customers set specific demands which are not supported by the system. Their company division differs significantly from the others and thus deserves a different approach. The system with which they now work satisfies these requirements and they have the impression that the new one will probably perform worse rather than better. For them, being forced to adhere to centralised standards feels like a punishment. Whether the response from the national organisations and divisions described here is justified is usually not even relevant. Their perception determines their level of cooperation with the head office initiative, and a perception that ‘everything that comes from head office should be viewed with suspicion’ is the subjective reality.

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It must be recognised that, in various situations, the implicit (assumed) economies of synergy and scale of a central approach are also lacking. The cumulative quantity discount of the system supplier appears to offer hope; however, this ultimately proves disappointing. If we compare this discount with the sum of the individual price reductions from the systems purchased locally, then the latter is often higher than the former. Additionally, the costs of hardware and software usually amount to only 50 per cent of the total costs involved in CRM projects and many more hidden costs emerge. Coordinating all the activities appears to be more difficult than was expected and is accompanied by the requisite travel. It is also difficult to learn from mistakes. The political interests are great on all levels with a standardised approach; mistakes are more likely to be hidden or camouflaged than with local projects because the failure of even a part of a prestigious project presents major difficulties. Even if the central approach leads to a satisfactory solution, the negative consequences for flexibility will have to be recognised. Changes and renewal are not easy to implement quickly. Signals are received more slowly and less adequately; people do not realise that there is a need in certain segments of the organisation to change in order better to address the customer’s needs, nor are they capable of estimating the importance of the desire for innovation.

When should a standardised approach be taken? In overseeing the risks of the standardised approach, the question arises as to whether it is even useful in certain company and market situations. The answer is heavily dependent upon the degree to which cross-border or cross-division activities are being undertaken by the organisation: ●

Are there corporate clients who maintain a relationship on a central level and acquire products from different national organisations and divisions?

●

Are cross-border or cross-division services being performed? This is the case with express couriers such as DHL; they collect a package in country A and deliver it in country B; telecom companies that set up international connections; and banks that transfer funds from one country to another.

If either of these questions can be answered in the affirmative, then an integral system is desired on a transactional level and a standardised approach to CRM can be legitimate.

CRM illustration one company, one database. the economist group integrates thirty databases into one system: View360 Four-fifths of the readership database of the Economist (circulation 830,000) is located outside of England; one-third of this segment lives in the United States. In spite of this, the numerous possibilities that the enormous database offers for the cross- and up-selling of the different products and services of The Economist Group remains unutilised. Cause? The five business

units employed more than 30 incompatible databases with different criteria and platforms.The solution? One customer view, or one coherent picture of all the customer segments that works globally and unites all the data sources in the form of a customer data solution. To accomplish this, View360 was developed, a system that supports cross- and up-sell marketing activities,

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CRM illustration (continued) simplifies the integration process by collecting customer data from multiple sources and reprocessing these for sales and marketing purposes. The integration of all the group’s customer data and channels was not achieved without a struggle, however. Everyone had to be convinced to share data with others and all the international data had to be moulded together with different (address) structures to form one whole. However, the result has proven that the efforts were worthwhile. The group now has access to a consolidated database,

with details on 4.5 million (opt-in) customers with purchase histories of up to 12 years. The data are used for activities such as prospecting, analyses, campaign selections, optimisation of the advertisement offering and direct mail activities, and successfully. The turnover rate for data collection was drastically reduced, the number of orders rose, customer activity increased and office costs dropped by 45 per cent. Source: Marketing Direct (2002).

Other arguments for a standardised approach should be viewed with suspicion, as has been shown above. Only the advantages offered by standardised international reporting deserve any attention. It is a considerable advantage for everyone to report in the same manner on their financial results, customer satisfaction, processes and innovations. The possibility of formulating norms and assigning meaning to the results presented increases significantly. Comparisons between divisions and national organisations become possible. The situation in country A may be very similar to that in country B several years prior and as such, it is easier to evaluate developments in that area more accurately. The fact is that this represents only a secondary benefit of a standardised CRM system, and can never serve as the reason to implement this type of approach. The choice of a uniform approach will have to be dependent upon a consideration of the pros and cons on a transactional/ operational level.

areas of particular interest in managing these types of projects The successful management of international and/or cross-division CRM projects requires attention to the relationship between head office and local units. It is important to prevent users from getting the impression that the system is being forced upon them. Obtaining their acceptance is a project in itself for which the time and means must be made available. Users deserve to be able to participate and have a say and must be involved in all stages of the standardised project, not only during implementation. Members must be recruited from the specific countries and business units which are to become part of the project team. The final team will have to consist of members who have international experience and who are capable of assessing the situation in different countries. The requirements for the system will have to be determined collectively and agreement will also have to be reached collectively when it comes to the selection of the package and the solution. Investments in meetings should also not be avoided. A sensitive issue in the relationship between head office and the units involves access to local data. This is seen as an undesirable invasion of privacy to which there is a great deal of resistance. The fact that head office will have access to information on customer churn, lead times, complaints etc. is viewed as a wholly undesirable attempt at interference which may well prove to have a counterproductive effect. Insisting on access to these data will have to be avoided as long as it remains a sensitive issue. There is a very good

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chance that it will have negative consequences for the commitment to a project, whereas it does not necessarily have to be crucial to its realisation. There are, after all, other workable solutions. Furthermore, the success of these comprehensive projects is dependent to a great extent on the restriction of their complexity. Requests for separate versions in a specific language and/or separate functionalities will have to be examined with caution. This usually implies higher costs than were originally expected, and, in the beginning, simplicity is crucial to success. It is only in situations in which implementation is otherwise not possible that these requests should be honoured: for example, if a translation is indispensable to those in the front office for the interaction with customers; or if the agents do not understand English (the language used by the software package), and thus cannot work with the application. The initial architecture should also be kept as simple as possible. Knowledge of the specific situation is required to evaluate whether a central, mixed or decentralised architecture is preferred. Whatever the case, any situation should be prevented wherein the chosen solution becomes too risky, or delays the progress of the project and becomes a source of irritation during the development and initial phase of operation. Finally, the actual implementation and use of the CRM system will have to be adapted to local circumstances. The training will have to be provided in the local language and the first-line helpdesk will have to be able to assist users in their native tongue. For more complex questions that are referred to the second line, this is not a precondition, however.

18.7

Conclusion Many CRM projects continue to fail. They do not produce the desired result; management struggles with the possibilities offered by CRM. In order to put an end to this pessimistic situation, a careful CRM change and implementation project is essential. Companies will have to base their reasoning on the strategy and not the packages. An assessment of the current situation in comparison with what is desired from a strategic standpoint will have to provide insight into the direction CRM development will take with regard to the different areas of focus such as customer knowledge, the channels and the communication, the relationship strategy, the organisation and the culture etc. Long-term commitment will have to be obtained within the organisation for this path of change and development. Senior management will have to take responsibility; because their time is so limited, they will have to delegate and appoint authorised professionals. Projects will then have to be defined. The focus should not lie on the package selection. It is more important to focus attention on the processes, the manner in which these can be supported and improved with the use of ICT and how they will help realise the strategic objectives. A proper manning of the projects, good budgeting, timely involvement of the users and the like should all lead to a smoother implementation of the systems. Finally, caution is called for in situations in which a standardised approach of crossborder or cross-division projects has been adopted. Potential economies of scale and synergy may be missing, while the additional costs of coordination are higher and increased resistance must be overcome.

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Case study shell and CRM: one database for 20 million customers Interview by Peter olsthoorn with Ruud van Munster, european Loyalty and CRM Manager for shell ‘Using overly expensive IT-driven CRM projects, other companies paved the way for Shell,’ is one of the opening remarks made during an interview with Ruud van Munster, Shell’s European Loyalty and CRM Manager. The oil company has learned from its failures and has chosen not to implement CRM on a Europe-wide scale, but instead to take a step-by-step approach.

a country-by-country basis Shell has elected to expand its CRM programme on a country-by-country basis and is currently (2004) active in nine out of seventeen targeted countries. Munster: ‘We first want to prove that something works on a small scale before we invest in something huge. There are too many CRM failures in the world. There are already too many projects in which the IT focus is too strong. Companies stare at huge CRM systems with abundant possibilities for which they have no sound application. If you do not know how to use them to create customer and company value and just climb aboard the CRM train, you will not succeed.’ According to van Munster, too many companies have also implemented a call centre without first formulating a proper business case. ‘In our organisation IT follows and we only install a call centre if we are convinced it will improve sales. We spend as little as possible on operations. Besides, a European CRM system is not necessary in our organisation since there are only a few customers that fill up their cars across the border and those that do are normally less brand loyal.’ Shell currently maintains its own Shell (Club) Smart programme in thirteen countries and a ‘coalition programme’ in four countries: Air Miles in the Netherlands, Happy Days in Belgium, Thrumf in Norway and Smiles in France. The fuel card that can be used to pay for the fuel can also be seen as a loyalty programme and is in use in the Scandinavian countries. Shell has created a three-layered CRM organisation: ●

A loyalty competency centre in Hungary with IT and CRM knowledge. Van Munster: ‘Hungary is known for the quality of its IT people, in addition to being one of the most successful countries for the Shell loyalty programme.’

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A European team of CRM experts; each of the team members has strategic responsibility for a cluster of countries. The local loyalty and CRM groups in the countries, who implement the programmes and have succeeded in creating value.

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Van Munster: ‘Centralisation has absolutely paid off. It was here that we developed our standard building blocks that we can apply to the countries. A few years ago we needed one year per country to implement a programme; now we do it in three months.’ If it is up to van Munster, CRM applications will be further simplified and standardised in 2004, making implementation easier for local CRM teams. ‘Practical efficiency is the goal. Perhaps it will become possible at some point to produce a single European or even global catalogue instead of national versions, and the articles can be sourced at lower cost.’

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Case study (continued) Facts Is this approach typical for a follower? No, if we ask van Munster. ‘You have to find out what does and what does not work on a step-by-step basis. You have to remain pragmatic. We sell fuel and cannot innovate CRM theory.’ At present, Shell has a database of 20 million customers in Europe. This database is filled country by country and is currently operational in seventeen countries. The relation and transaction data are known and it is possible to identify customers and send them correspondence or products. It is possible to look into the database to find out how active they are, how frequently they cash in their loyalty points, determine their fuel purchasing behaviour and evaluate the value that they represent. Van Munster likes facts: ‘Not many consumers will admit that loyalty points influence their choice of a fuel brand, but practice has proven otherwise. I attach more value to information I get from the database than to the results obtained through traditional market research. There is a difference between what consumers say and what they actually do.’

shell actions Crucial within Shell is the accountability for a campaign. Control groups are used, for example, to show the value of a campaign. ‘In France we noticed a significant difference in customer revenue. Campaigns pay off and add approximately 10 percentage points. We had campaigns with a 50 to 60 per cent response rate, which is extremely high. The road warriors in particular, the group that drives a lot and buys plenty of petrol, responds quite well. They love to reach the individual target we communicated to them.’ The example here is England where key customers received eight to ten e-mails during the summer with the offer of increasing their loyalty points by buying additional litres of fuel. ‘They saw it as a game and took on the challenge.’ E-mail has become a favourite, although Shell will continue to send physical mailings as well. ‘In three hours’ time you can invent and create an e-mail campaign; in a regular direct mail process this will take much longer. I do not want to abandon traditional direct mail, as it is part of the multichannel approach and complements the other channels, but the internet is gaining ground.’

Intranet In England, the entire CRM operation, including the call centre, is outsourced to Carlson. Shell’s competence centre, however, remains in charge and manages the relationship with Carlson. The future of outsourcing depends on several factors. ‘In England, Shell has made good progress with CRM, the wages are high and there is a wide range of service providers. But taking on the challenge in-house also has its advantages as has been proven in Hungary, a country with 2.2 million cars and 2 million Smart customers in Shell’s database. Smart customers can cash their points in at McDonald’s and this makes the loyalty programme attractive for many. Success depends to a large extent on the efforts and spirit of the local organisation,’ according to van Munster. Crucial to the organisation of CRM is the communication between the three layers and it is here that the web is useful. Shell has a European portal, an intranet, which functions simultaneously as a knowledge base, a communication vehicle and the beginning of e-mail campaigns. Van Munster: ‘Nearly everything we know about the 20 million customers may be traced on the intranet. Target groups in the seventeen countries and the success of campaigns are described in detail. If Turkey wants to copy a British campaign, they first read everything on the intranet and then get together for a face-to-face meeting to further

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Case study (continued) develop the campaign. Each country has access to the available information. But only the local people have permission to access relationship data. ‘This online tool is for us the basis for guiding CRM. You can do as much with it as you want. You can select customers for your campaign, based upon their life-time value or transaction profile and you can approach them whenever you want.’

Conclusion The CRM targets differ per country and are defined using terms such as retention, reactivation and share of wallet. Van Munster: ‘If we realise a retention rate of 68 per cent in the experimental group for the high value customers and 58 per cent in the control group, you can say that CRM is a success.’

Questions 1 What are key factors determining the success of Shell’s CRM approach? 2 How would you formulate Shell’s vision and strategy towards CRM? 3 Reconstruct Shell’s CRM road map. 4 Formulate Shell’s CRM business case(s). 5 How useful will a standardised global CRM approach be for Shell? Why? Source: Olsthoorn (2004).

QuestIons 1 Describe step by step how a CRM change and implementation project could be designed. 2 Why do so many CRM projects fail? Name ten reasons and explain your answer. 3 CRM systems can be employed for companies which implement an operational excellence strategy. In this case, the demands placed on the CRM system are different from those found in companies which implement a customer intimacy strategy. Indicate the differences between the two in the various areas of CRM, namely customer knowledge, channels and communication, the relationship strategy and the supply of customisation. 4 A comparison of the strategic ambitions and the current situation should provide insight into the direction the development of CRM will take. Indicate how these can differ for companies involved in business-to-business and business-to-consumer sectors with direct or indirect distribution. Provide more detail using four company and market situations. 5 Obtaining a long-term commitment from top management for CRM projects is vital. Formulate the so-called ‘elevator pitch’ for a company of your choice. (This is the situation in which you are standing next to the CEO in the lift and have one minute to make your case for the topic and see that it gets put on the agenda.) 6 Defining processes represents an important part of CRM projects. On an aggregated level, provide an indication of the processes that you would like to define within an energy distribution company. 7 Explain how you would evaluate the following method of approach. In order to increase the chance of success of the CRM project in the contact centre, users (agents) are asked about

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their specific preferences. On the basis of their answers, the demands are then determined for the system. In your answer, describe the pros and cons of this method of approach. 8 Name several criteria that a good CRM project description must satisfy. Explain your answer. 9 Under what circumstances is it profitable to approach CRM projects in a cross-border and/or cross-division manner? Explain your answer. 10 How can you increase the local acceptance of a standard CRM package that will be implemented throughout the entire organisation in different countries and divisions? Explain your answer.

References Aydin, M.N., Harmsen, F., Slooten K. van and Stegwee, R.A. (2005) On the adaptation of an agile information systems development method, Journal of Database Management, Special Issue on Agile Analysis, Design, and Implementation, 16, 4, 20–4. Beck, K. Beedle, M. and Bennekum, A. van (2001) Manifesto for Agile Software Development. Available at: http://www.agilemanifesto.org/. Berger, R. (2002) CRM moet worden opgevolgd door CMR: customer managed relationships, Tijdschrift voor Marketing, December, 18–20. Boulding, W., Staelin, R., Ehret, M. and Johnston, W.J. (2005) A customer relationship management roadmap: what is known, potential pitfalls and where to go, Journal of Marketing, 69, October, 155–66. Davenport, T.H. (1993) Process Innovation: Reengineering work through information technology, Boston, MA: Harvard Business School Press. Gentle, M. (2002) The CRM Project Management Handbook: Building realistic expectations and managing risk, London: Kogan Page. Marketing Direct (2002) One company, one database. The Economist Group integrates thirty databases into one system: View360, Marketing Direct, November. Olsthoorn, P. (2004) De CRM van Shell, een database voor 20 miljoen klanten, Tijdschrift voor Marketing, April, 43–8. Peelen, E., Montfort, K. van, Beltman, R. and Klerkx, A. (2009) An empirical study into the foundations of CRM Success, Journal of Strategic Marketing, 17, 6, December, 449–67. Putten, W. van and Peelen, E. (2001) Kluwer Project Management Workshop, Breukelen: Nyenrode Business Universiteit. Takeuchi, H. and Nonaka, I. (1986) The new new product development game, Harvard Business Review, January, 137–46. Wurtz, W., Putter, T., Cirkel, M. and Rigterink, K. (eds) (2007) CRM in Nederland, Trento: CRM Association.

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19

The future The future is uncertain. Extrapolating from past trends what the future is likely to hold for CRM is unreliable if there are too many changes taking place in the environment. We start paving the road to the future the moment we take a step towards it and acquire experience. On the basis of our findings with CRM, however, we can also make several pronouncements on the continuation of the CRM journey. In this chapter we will address the following: ●

factors influencing the future of CRM

●

the image of an uncertain, but alluring future

PRACTITIONER’S INSIGHT CRM has climbed out of the post-hype depression; the experience that many organisations have with CRM is more positive than some years ago. The doubts as to whether CRM is here to stay are gone. CRM does not have to be abandoned and locked away with the other great ideas whose time just hasn’t come. The ideas of the early 1980s, when dreaming of mutually beneficial relationships with customers based on dialogue, have become a reality and are proving to deliver tangible results. The insights into the possibilities are being built through ‘experimenting-on-the-job’. We are discovering the added value of new systems, of certain new approaches towards implementation and change management and the way they support our overall strategy. Most of all, however, we are discovering that truly engaging the customer and letting go of the dominance of our own products and service to find the value in customer experiences, pays off.

19.1

Factors which influence the future of CRM The continuation of the ‘journey’ is influenced primarily by the factors noted under the following sub-headings.

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Technological progress Technology is sometimes referred to as if it were an autonomous factor of progress. It is hard to make inventions go away, as long as no superior substitutes are available. It has been the case for gunpowder, the steam engine and electricity as well as for the (mobile) internet and the (mobile) phone. Internet technology and telecommunications have merged. Until recently, their application has been geared towards supporting certain processes and methods of working, but we are now seeing them put to new creative uses every day. As a tool that gives people the ability to act upon their needs and desires, the technological infrastructure is giving rise to a new order, socially and economically. However, it’s not just internet and telecommunications technology that is merging. Several technologies have converged and are being applied in a more integrated manner. Let’s take biotechnology, making it possible to read DNA and storing the profile on a USB storage device or ‘in the clouds’. It is a development known as ‘singularity’. The convergence of several areas of science and technology means that CRM too will become more multifaceted. The application of neuroscience, for instance, shows promising prospects for really getting ‘inside the customer’s head’ and learning about emotional drivers. New identification techniques may become available, rendering obsolete awkward ways of recognising customers by their address, date of birth or account number. The expectation is that these developments will follow Moore’s law and therefore will show a year-on-year multiplication of the possibilities with a factor two at equal price. An exponential growth in technological possibilities is likely to occur.

Changes in human behaviour in their role as consumers Consumers are becoming ever more critical and outspoken. Many organisations view this as a threat, whereas they might have to think about embracing it. Customers’ determination to voice their opinions more clearly is being fuelled by social media. They make it very easy for customers to find information, and compare and review products and services as well as organisations. They have a low-cost way of reaching out to large audiences and their messages are trusted more than those transmitted through official media and advertising campaigns. They can get help from friends or complete strangers with whom they happen to share an interest. They can trade, share and create together. The social group interaction is pushing the commercial bilateral relationship to the background. It’s no longer one-to-one, but rather many-to-many. The customer is no longer being lured in by enticing stories carefully crafted by marketers and advertising agencies. They are less gullible and more knowledgeable about the options available in the open marketplace. They close themselves off to commercial messages and consult with people in the social network, who have no direct interest in the buying process. The role of social contact is, and will become, more important than ever before in the early stages of a decision process than are contacts with a supplier or service provider. The new reality is that customers demand transparency, authenticity and honesty from their corporate counterparts. They are more aware of the value of information given and expect a company to be careful in dealing with their personal data. They want to be involved and taken seriously and are often willing to actively play their part in the development and delivery of a more customised proposition. Paradoxically, customers are not more demanding when it comes to product quality. It is increasingly acceptable that a product needs updating, upgrading or even tweaking and fixing, as long as the supplier’s responsiveness is up to their high standards and expectations. The value lies in the interaction and in the experience, not in the product itself.

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These are developments that take place in light of a broader social movement. Societies are changing and people are changing their behaviour within them as people and as consumers. Differences between countries aside, a broad tendency towards more egalitarian relationships is appearing globally. The state, the Church, the employer, the family and school are less able to dictate what we should do and how we should think. As freedom increases to show individuality, classic role patterns are broken and a new sense of selfdirection emerges. We can make our own choices, be who we want to be and give our life a meaning. We can choose the groups to which we belong and want to contribute, be it in school, at work, in sports or hobbies, holidays and many other areas. There is a shift in what people value as important. We are seeking for ways to improve our lives that take up less personal, natural and social resources. It’s no longer all about material wealth, but often more about wellbeing. This too, is a sign that the value lies not in the product, but in the customer. We will be increasingly interested in non-material aspects of life and less interested in ‘stuff’, which by its sole possession is not delivering as great a satisfaction as in the 1960s or 1970s, when owning a washing machine or television set was a sign of having ‘got somewhere’ in life. Of course, this remains very much an indication of having achieved a higher level of wealth in Western economies, which have traditionally been more object-oriented and capitalist. Maslow’s hierarchy of needs1 seems to dictate that the need for a better quality of life and self-realisation is dominating the need for a second house or third car. Reon Brand (in: Boswijk et al., 2011) distinguishes between six social values and aspirations: 1 need for an own identity: an individual lifestyle and expression; 2 exploration and self-development; 3 belonging: developing and maintaining relationships and networks; 4 fun: experiencing joy and happiness; 5 protection: for oneself, loved ones and the environment; 6 harmony: finding meaning, purpose, balance and satisfaction.

Changing market order Technological developments, along with globalisation, are leading to major changes in our market order. Value chains are becoming value networks that are no longer created with the producer at the heart, but with the consumer or user. The world in which the end-user or customer is experiencing the product or services, is dictating the partners that are involved in the value network. The user can configure a combination of products and services that together meet their individual needs for a positive and valuable experience. It is not a given that every trade is a trade of goods or services against money. Social trading is taking up a more significant place in the market. It is requiring traditional organisations with a significant influence on the value network to adapt their business model; different types of partnerships will have to be admitted and actively sought and the control in the partner relationships will need to be different. More flexible partnerships are required to meet the 1

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Maslow’s hierarchy of needs is often portrayed in the shape of a pyramid with the largest, most fundamental levels of needs at the base (food, water, sleep etc.) and the need for self-actualisation (morality, creativity etc.) at the top. In between these two levels lie: safety (of self, family etc.); love/belonging (friendship, family) and esteem (self-esteem, respect of and for others etc.).

Chapter 19 The future

individual needs and demands of customers. Global players with perfect propositions will deal with local players who can customise and communicate with the customer through infrastructural parties who are able to service platforms and connections between all those involved. The changing composition of the value network means that cooperation in one area may be very complementary while conflicting in others. However, value networks are by nature not competing against each other, but rather competing for optimum value delivery. In these dynamic and complex surroundings, organisations will probably have to reinvent themselves from the ground up. Closed organisations, whic protect their resources as a precious source of competitive advantage, will have to open up. Organisations taking an insideout approach to seduce customers to their offering and try to close the deal in one-on-one interaction will see that increasingly their approach is failing. Organisations that operate within the social domain where people experience life can use products and services to give meaning to people’s life and become part of it. However, in the social domain they need to adapt to the ethics of people. Right and wrong are determined more by people than by what constitutes ‘good business practice’ or what is permitted by law. The relationship with the right customers must be sought and developed, if customers give their permission. It requires the organisation to engage in dialogue with customers, show their socially committed side and help when help is required, not when the company wants to sell something. It is intrinsically more about helping the customer to buy than it is about selling. Obviously, an honest value exchange must take place and the efforts made on both the organisation’s side as well as on the customer’s side must be compensated by a certain price or benefit. All this brings new challenges for CRM at time when many organisations have not yet dealt with the old challenges. In consequence, many projects relating to the internet or social media are allocated to departments other than CRM and remain largely unconnected. This is a fundamental mistake and a flaw that may hinder CRM success in the future. CRM is not associated with these new and innovative projects and is unjustly branded ‘Old School’. It is being associated with the implementation and optimisation of classical processes, inside-out selling and supporting the one-on-one relationships in contact centres, not the complex networked relationships of the social web. This situation should and can be prevented if CRM is approached as a fundamental business strategy, not front-office automation, and the key question that remains answered is ‘How will we, as an organisation, create and derive value from meaningful interactions with our customer base?’, making it then impossible to treat internet and social media as anything less than a CRM-related challenge! To get to grips with the future of CRM, an overview of our current state and several future directions for CRM are presented here.

19.2

The journey continues CRM is becoming more crystal clear At the time of writing, 2012, many are fully aware that CRM is not just a system, but also a strategy, entailing many organisational consequences. The insight into the exact nature of this strategy has been developed over time. The belief has actually decreased that, by investing in the right customer relationships, profits will come over time. The number of cases in which organisations have been able to reach a return on customer investments in the long run is limited. We are increasingly convinced that customer commitment should

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not be exaggerated. Customers are easily seduced by competitive offerings, switch easily and show little concern for pre-existing relationships. We are, as yet, not fully clear on why customers fail to commit for a longer period of time. Too often we seek the cause within the customer and believe they are disloyal by nature, without closely analysing our behaviour as an organisation, our offering and the way we have been servicing the customer’s needs. Many a CRM project has not been without problems, but has contributed to increased expectations with customers. As the company promised a more customer-centric approach, service delivery was halted due to implementation problems. Also the actual needs of customers were often misunderstood, the organisation tended to force itself onto the customer and showed little empathy or was too preoccupied with achieving its own targets and benefits. It has led to an increasingly large part of the consumer base ‘turning organisations away’ and developing a preference for self-service and companies that are uncomplicated and manage to deliver on promise. We see no-frills companies achieve success because they promise nothing more than the bare product and manage to deliver and even sometimes positively surprise the customer on a consistent basis. Because organisations are having such a hard time looking at relationships from their own point of view as well as that of the customer, the future prospects for customer–supplier relationships are not too optimistic. CRM strategies will have to give even more priority to realising short-term results that are at least attributable to CRM and achievable. The goal may be to improve sales or to boost the relationship with the customer. Customers should be viewed as assets in which organisations invest when they show a promising return.

The end of dominance of operational CRM The number of organisations with an operational CRM programme is increasing. Processes have been redefined from the customer’s point of view, systems have been implemented and integrated to support all touchpoints of an organisation. They are able to identify contact opportunities, make contact in a relevant way, have an on-going dialogue and register data, take proper action in following up the contact and evaluating the effects of the contact. In personal sales this is often already a cycle that is mastered quite well by many organisations. The telephone often has a closed contact cycle and even on the internet (and not only in mobile applications), the ‘closed loop’ is becoming a reality. Customers are no longer ‘lost’ halfway through a process. Partners are increasingly being involved in communications networks. There are initiatives to develop applications and implement them so that not only intermediaries and agents, but also consultants, wholesalers and even customers themselves have better access to customer data and company resources. However, the integration of channels is by no means complete. The continuous developments in channels are making it an area that is hard to keep up with. Integrating channels requires a very open architecture and an even more open spirit towards how customers would like to interact with the organisation.

Customer intelligence is on track The main challenges that organisations faced in the area of customer intelligence have been met by the front-runners. They have identified the need for customer knowledge as a critical resource to marketing optimisation. The importance of a subject such as data quality is seen and placed in the right strategic context. Data mining seems to be experiencing a comeback

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too. The overload of customer information makes it almost a prerequisite to success to distil insights instead of collecting data. The user-friendliness of data-mining tools is increasing and an increasing number of data warehouses are managed so well that the data processing incurs fewer risks. There is good-quality, clean data with a well-managed process to allow the organisation to make active use of it. Add to this an accurate description of the problem at hand and all the elements for successful analysis are present. Nowadays, there are even modules available that allow the direct insertion of results from cross-sell or retention analysis into the marketing campaign management software. There is an increasingly large user base of customer intelligence within organisations. Marketers and front-line employees are being joined by strategic planners, who explore the potential to construct the ideal customer and product portfolios of the future and construct growth scenarios. When databases are completed with competitor information and general data on the external environment, customer intelligence systems may become more complete market intelligence and eventually, business intelligence systems.

The new challenge Now that the basic operational CRM system has taken, albeit somewhat rudimentary, shape in most organisations, and customer intelligence is increasingly performing well, more attention can be paid to the way we communicate. In a relatively short timeframe, a lot of new ways of communicating with customers have appeared. Moreover, a lot of these communication channels are even powering consumer-to-consumer interaction and are consumer-controlled. This is a new reality with which organisations have trouble dealing. It requires investments in new channels and the willingness to experiment with them. The development of social interaction requires special attention. It is not acceptable to develop a blog, Facebook page, community platform or viral campaign as an unconnected and ad hoc initiative. A social media strategy that is derived straight from the CRM strategy should be at the basis of any social activities the organisation chooses to launch. A roadmap should indicate what steps need to be taken in order to implement the strategy, but with a keen eye on the results achieved. By its very nature, the social strategy cannot be directed in the same way as a direct-mail campaign. It’s about trying to facilitate, not direct, the way in which customers want to engage with the brand. The company can try and lead the way, but must be very responsive to the customers’ needs as they become clearer. At the same time we wonder how we can take advantage of the benefits of the mobile internet. The fact that time, space and matter, the three fundamental components of the universe, are becoming our own building blocks is fascinating. It opens up a world of infinite possibilities as we are able to switch to alternate realities where time is of no importance, where space is unlimited and matter is virtual. What service possibilities arise to enhance brand value and brand engagement on an individual basis? Because of social media, we need to do more than adapt our communication towards customers. We need to fundamentally re-evaluate our value proposition. We must be responsive to the rules of engagement in the social networks and cannot just be ‘commercially driven’ on that stage. The challenge is therefore to develop social CRM to a level where it is connecting an organisation with the social context of its (potential) customer base and allowing it to create value beyond a mere ‘goods for money’ exchange. The social CRM strategy will need to be an integral part of existing customer relationships. There may be more deeply engaging and more shallow relationships with different customer groups. Furthermore, the organisation

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needs not only to adapt to that, but also to explore possibilities to reinforce the bond it has with the community as well as with the individual customer in bilateral relationships. An on-going exploration into the required off- and online availability will need to take place and the presence in the virtual realm as well as in the real world will need to be integrated, in order to facilitate the customer experience. There is still a lot of room for improvement, which is attainable by looking at sensory stimulation, making use of combinations between the virtual and physical through mobile and digital technology, etc.

A new culture During the hype period of CRM and e-commerce, the saying was that the customer would be in command. However, in reality, the customer was not. It has taken some time, but it appears there is a ‘revival’ of this principle and a changing role of buyer and supplier is taking shape. It’s not so much about a reversal of control as it is about cooperation and collaboration. Co-creation, or collaboration, is the new magic word for the time being, since it is probably a hyped word too. ‘Lead customers’ are being actively involved in new product development, and these are the customers who have product requirements that will probably attract other customers over time and therefore are showing organisations how to shape the value proposition of the future. Highly satisfied customers are being engaged to act as ambassadors or promoters for the brand and encourage other customers to buy. Experienced customers are being called to help other customers, the ‘newbies’, get to grips with the product or service. They are acting as a service agent solving many after-sales questions. The introduction of many self-service applications is allowing customers to take over roles and responsibilities that traditionally resided within the organisation. They can track and trace orders, look at the financial sheets, change their address and communication preferences, etc. Traditional walls between the organisation and the customer are being broken down and the distinction between a customer and an employee may even become hard to make. This process is not just the consequence of a more mobile and active customer, but also of the search that many organisations have engaged in. They have sought to improve the customer experience and asked themselves the question of how customer processes can be matched to the surroundings the customer is operating in. How can they explore and go beyond the boundaries of the customer’s own experience and expectations? They realise that they have to provide access to their company resources and let customers compose their own value propositions, rather than to think for the customer. They are learning about customer preferences in this way and building customer knowledge. They are more open to value creation with a network of partners that may even include competitors, for as long as customers are seeing their needs catered to. Take the example of an insurer who needs to assist a customer who has broken down with a car along the highway. Instead of the financial pay-out the insurer could make, they turn the experience into something of value to the customer by providing a customised solution in collaboration with a car repair shop, car rental company and maybe even a telecom operator. There is a complete mobility solution for the insured person, while all parties involved are expanding their market reach, value proposition or quality. They ultimately end up achieving more for the customer at lower costs. This requires a different business culture, where we don’t compete against other businesses, but compete in value networks that are ever-changing in composition. The classic buyer–supplier relationship is fading and the organisation is moving from a customer focus in the bilateral sense of the word to a more holistic customer experience focus, where experience gives meaning to life and to relationships (Boswijk et al., 2012).

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19.3

Conclusion It would be arrogant and foolish to claim to know where the road will take us. It is, in a sense, not so much about the final destination as it is about the continuing journey that keeps on urging organisations to stay in tune with the needs and wants of their customer base. What provides value will change over the years. The value appeared to be, and probably was, in the product many years ago. Later on it was in services and nowadays we are beginning to understand that value is actually much more a matter of how the customer experiences the interactions, not just the products and services. How we communicate value is also changing. New possibilities arise to interact with customers and to learn from them. We have struggled for many years to come to grips with bilateral dialoguing with customers, only to find out that the social conversations taking place on open platforms are dominating the way value is created and communicated. Likewise we are continuously building our knowledge not only of what customers want but how they want it. The challenge of actually acquiring customer data and properly registering it is making way for the challenge of analysing it and gaining insights. The challenge now is to expand customer intelligence from a context limited to contact and purchasing histories to one that understands emotional, social and contextual, as well as financial, data. The ultimate goal of complete ‘customer intimacy’ or ‘an economy of experiences’ may never be reached, because it is much like a horizon: it shifts as you move towards it. What we may consider mediocre relationship management nowadays is beyond anything we could have dreamt of in the 1980s! Thus it becomes a learning journey, but one that should be embarked upon with care. Experimenting and innovating are prerequisites to success, but so is demonstrating value creation and achieving tangible results in the process. CRM has moved beyond the phase of being a ‘leap of faith’ and is now very much accountable for its contribution to the life-time value of the customer base and organisational growth. A balance between vision, strategy, culture and capabilities must be preserved. It prevents us from dreaming about a future, without ever truly committing to it. It keeps us safe from many frustrations or conflicts, because it creates a sense of direction.

QUESTIONS 1 Ever since 2005 successes have been reported by organisations. There seems to be an end in sight to the period where failures were reported. What explanation do you have for this upturn or change in CRM fortunes? 2 Collect several examples (three or four) from your own personal experience as a consumer or business customer of organisations that in your eyes are performing very well in the area of CRM. 3 What areas will attract most attention in the next few years of CRM? Please illustrate and explain your answer. 4 How do organisations have to adapt their strategy, organisation and commercial approach in order to meet the changing needs of customers? Please illustrate your answer. 5 How can we deal with uncertainty about the future in our CRM strategy and roadmap?

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References Boswijk, A., Peelen, E. and Olthof, S. (2011) Economy of Experiences, Bilthoven: The European Centre for the Experience Economy. Boulding, W., Staelin, R., Ehret, M. and Johnston, W.J. (2005) A customer relationship management roadmap: what is known, potential pitfalls and where to go, Journal of Marketing, 69, October, 155–66. Payne, A. and Frow, P. (2005) A strategic framework for customer relationship management, Journal of Marketing, 69, October, 167–76. Peelen, E., Montfort, K. van, Beltman, R. and Klerkx, A. (2009) An empirical study into the foundations of CRM Success, Journal of Strategic Marketing, 17, 6, 449–67. Reichheld, F.F. (1995) The Loyalty Effect, New York: The Free Press. Tissen, R., Andriessen, D. and Deprez, F.L. (1998) Value Based Knowledge Management, Amsterdam: Addison-Wesley.

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Index ‘A’ customers 74–5 access to end-users 209 accessibility of organisations 261 account managers and account teams 52, 74–8 adaptive customisation 217–18 address changes 235 ‘adventurous young’ customers, service profile for 233–4 advertising online 312–13 ‘agents’ in direct contact with customers skills needed by 327–8 specialist or generalist 342 ‘aggregation’ function 215, 301 Agile process 386 Agrifirm (case study) 291–4 airlines 222, 224, 257–9, 267 Albert Heijn (case study) 322 allocation algorithms (dividing capacity between market segments) 224 Alpe d’HuZes (case study) 158–9 Amazon 53–4, 206, 214–15, 221, 262, 307, 318 analytics-driven organisations 101 Android tablets and smartphones 207 ANWB breakdown assistance 236 Apple 51, 205, 207 Safari 360 application service providers (ASPs) 369 apps 309–10 Arndt, J. 4 ASCI database 60–1 Ashridge mission model 70 association rules 143 automated outbound-dialling 356 automatic call distribution (ACD) 357 ‘B’ customers 74–5 back-office functions 39, 54, 269, 352, 354 Bagozzi, R.P. 4 balanced scorecard 80–3, 188, 382 Bales, R.F. 10 Bang & Olufsen 51 banking services 26–7, 189, 233, 236, 259, 264, 267, 310, 316 Barabási, A.L. 23 Barnes, J.G. 59

Bayesian analysis 171–2 Bel, E.J. van 104 belonging, sense of 20 ‘below-the-line’ communication channels 255, 262 ‘best-of-breed’ software 369 beta testing 211 Blattberg, G. 180 blogs 297, 303–4, 361 ‘blow-ins’ 61 Bol.com bookstore 262, 316 Bonoma, T.V. 148–9 Boswijk, A. 259–60 bots 338, 361 Brand, Reon 397 branding 25–6 browsers 360 Bruce, L. 256–7 Bruhn, M. 4–5, 149 bundling for pricing purposes 220 business strategy 36, 49 buzz agents 306–7 ‘C’ customers 74–6 C-formula (Erlang) 334–5 C. Fun Parks 43–5 call centres 124, 342, 358 call charges 340 campaign management 365–8, 371 for different types of campaign 365 input to 367–8 selection of a system for 368 Canada Post (case study) 371–3 capacity planning for a contact centre 333–8, 344 car manufacturers 58–9, 210 Carglass (case study) 197–8, 236 case-based reasoning 143 Center Parcs 113–14 ‘certainty seeker’ customers, service profile for 233–4 ‘champions’ 69 chat bots 338 chat sessions 338–9 ChemStation 217 chi-squared automated interaction direction (CHAID) analysis 153–5

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Index chi-squared test 193 churn see customer churn; employee churn classification and regression trees (CART) analysis 155–6 Cleveland, B. 341 close relationships 8–9 cluster analysis 103, 149–51 co-creation 205–15, 402 applications of 212–13 examples of 304 principles of 208–12 techniques and instruments for 211–12 collaborative customisation 217–18 collateral trust obligations (case study) 26–7 commercial web, marketing on 310–21 commercials 233 commitment 12–15, 69 definition of 12 forms of 12–13 social context of 15 communication calendars 244 communication channels governing law on 111 preferences for 106 communication with a customer 38, 70, 76–8 history of 106 communication plans 243–6 community relationship management 303 comparison websites 313 competition in the marketplace 57–8 competitive advantage 59, 205–6 complaints from customers 60, 106, 190, 259, 267 completeness of data 120 ‘complex’ sales 279–81, 288 computer-telephone integration (CTI) 327, 356 confidence levels 193 congruence 77 conservatively-minded customers 263 ‘consultative’ sales 279–88 contact centres 251, 254, 259, 261, 266, 270–3, 320, 326–44, 355–8 aspects of quality 344 capacity planning for 333–8, 344 determination of service level 331–3 key performance indicators 341 management of contact satisfaction 336–41 managing the development of 341–4 support systems for 357–8 ‘contact moments’ 243–6 content management systems 368–71 continuity in a relationship 5, 7, 17–18 control addresses 120 control groups 191–3

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conversations about organisations 303 structure of and satisfaction with 339–40 see also telephone calls conversion rates in the sales process 285–6 cookie technology 361 Cooper, Alan 104 core competencies 205 corporate culture 68, 72–3 correctness of data 120 cosmetic customisation 216–18 critical success factors 82, 188–90 interrelations between 190 CRM strategy analysis questions for 138 context of 56–9 as distinct from CRM systems 63 nature of 50–6 rewards for success in 59–62 cross-functional project teams 196 cross-over points in channel management 271 cross-sell probabilities 171–3 cross-selling in a convenience store (case study) 174–6 definition of 167 economic significance of 169 over time and within the product range 167–8 time between transactions 169, 171 cross-selling analysis 161–2, 167–74 cross-tables 169 crowd sourcing 206–7 culture 68, 71–3 customer acquisition 181 effectiveness of 97 policy for 232–3 targeting of 230 versus customer retention 186–7, 230 customer asset management 201, 230–2 customer base, quality of 233, 246, 269 customer-centric organisations 36–7, 41, 47, 50 customer churn 61, 63, 114–17, 241, 269 customer contact processes 352 customer data integration (CDI) 130–1 customer experience 259–62, 343 customer identification 118–22, 131, 318 ‘customer intimacy’ strategy 51–7, 63, 84, 107, 331, 403 ‘customer journey’ model (Boswijk) 259–63 customer knowledge 37–8, 43, 135–6, 144, 400–1 at Center Parcs (case study) 113–14 data overload 123 derivation from data 101–7

Index value of 91–8, 112–13 within different types of organisation 100–1 customer lifetime value see lifetime value of a customer; net present value of a customer relationship customer managers 52 customer ownership 74 customer participation in product develop-ment 208–12 continuous feedback from 212 customer performance 182 customer pyramid 74, 231, 281 customer relationship management (CRM) building blocks of 36–9, 47, 112 case study (C. Fun Parks) 43–5 choice of strategy for 379–80 definitions of 33–6 disappointing performance of 43, 349, 375–6, 391, 400 embedding of 382–4 future prospects for 396–403 and information technology 351–2 initial projects of 380–1 international or cross-division projects 388–91 key principles of 100 as a long-term strategy 86 operational programmes of 400 optimal implementation and execution of 188–9 organisational forms of 76 phased expansion of 381–2 preliminary assessment for 376–8 project management 383–8 project planning 385 proportion of projects that are successful 41, 69 range of 378 return on investment in 60–1 ‘road-map’ for 378–83, 401 selection of software for 369–70 technocratic approach to 1 use of the term 40, 353 vision of 378–9 see also CRM strategy customer retention 40, 61, 161–7, 174, 186–7, 230, 318 versus customer acquisition 230 customer satisfaction 69, 287, 331, 339–43 return on investment in 59–60 customer–supplier relationships classification of 6–8 different views of 3 phases in 4

customer value 106 calculation of 180–5, 197 and customer selection 281–2 effect of marketing activities on 179–85 influence of data quality on 98 for large accounts 184 non-economic 185 for small accounts 183 customisation 53, 70, 204–7, 225, 318–19 of CRM 102 see also mass customisation ‘DART’ principles 208–10 data analysis 135–41 data as distinct from information and knowledge 93 utilised as an asset 98–101 data maintenance 125–6 data management 100–1 data mining 136–7, 140–4, 400–1 data protection 108–11 data quality 131 cost of 94–5 definition of 119–21 earnings derived from 97–8 waste resulting from deficiencies in 95–6 data sources 126–30 external 127–30 internal 126–7 data warehouses 362–5; see also marketing data warehouses database architecture 122 database management 100, 107, 112 database managers 122 database marketing, organisations oriented towards 100 databases 117–18, 126, 358, 363–4 expansion of 122–4 external 130 use of 78, 91, 94, 102, 106 Datavision Technologies Corporation 218–19 decision trees 143, 187–8 deep-selling 168 defensive strategy 55–6 Dell Computers 50, 205, 262 demand curves 223 de-marketing 233 ‘democratisation’ of production 215 dependence in a relationship 7 designers, role of 212 Devicentis, J. 280 dialogue with customers 208–9 Dickens, Charles 220

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Index differentiation between customers 57, 222–3, 264–5, 318 ‘dilution’ of market segments 224 direct marketing (DM) 97, 152, 186 discounts 220, 371 discriminant analysis 151 distribution channels and costs 316–17 division of labour 78 divorce 240 documentation information systems (DIS) 358 Dodd, P.S. 25–8 Dwyer, F.R. 16–17 dynamic content management systems 337 dynamic pricing 220 easyJet 50 e-commerce 214–15, 219, 319–20 economies of scale in production 216 Economist Group 389–90 Edison, Thomas 51 efficiency marketing 71 80:40 rule 214 e-mail 336–8 embedding of CRM in the organisation 382–4 emotions and emotional intelligence 10–11, 72 empathy 16, 72, 76–7 ‘Empathy Map’ 238–9 employee churn 342 employee satisfaction 79–80 engaging experiences online 313–14 enterprise relationship centres 326–7, 341–2 enterprise resource planning (ERP) 269, 352, 369 Erlang, A.K. 334–5 European football 132–3 ‘events’, categorisation of 104–5 evolutionary computation (EC) 142–3 expectations of customers 314 experiments and experimental settings 190–3 eXtensible Markup Language (XML) 359–60 external validity of an experiment 191–3 Facebook 107, 123, 261, 297, 307, 312 facial recognition technology 107 favour as an aspect of the sales process 280 FedEx 316–17 Fiat 213 financial management 80 ‘first-time fix’ rate 341 fixed data 124 Foa, U.G. and E.B. 9, 15 Ford Motors 50 formula managers 270 Fornell, C. 59

408

Forrester Research 310, 319–20 Fournier, S. 84 fragmentised analytics organisations 100 front-office systems 353 Frow, P. 34 future prospects for CRM 396–403 fuzzy logic 298 ‘gadgets’ 362 Galileo positioning system 299 Garbarino, E. 8 Gartner Group 34 Gates, Bill 27 Gentle, M. 376 geographic information systems (GIS) 128–9 Geyskens, I. 11 Gillette razorblades 219 Gilmore, J.H. 216 GlaxoSmithKline (GSK) 304 global financial crisis (since 2008) 41 Godin, S. 112 Google 107, 214–15, 312, 360 Chrome 360 Earth 255–6 Picasa 298 grocery industry, cost structure of 317 Grönroos, Christian 4 group formation 24–6 growth paths 54–5 Gummesson, Evert 4 Gupta, S. 62 Hagel, J. 54, 107 Håkansson, H. 5 happiness, forms of 11 ‘hard’ criteria 79 hedonistic post-materialism 129 Heskett, J.L. 79 Hewlett Packard 307, 355 Hinds, R.A. 5 honesty 11 Horovitz, J. 73 human behaviour, change in 397–8 Hunt, S.D. 11 hypertext 359–60 Hypertext Markup Language (HTML) 359–60 IBM 73–4, 210, 213 ‘ideal’ customers, over-reliance on 230 iDEAL standard 316 identification errors in data 95–6 IKEA 260, 338

Index incentives for customers participating in co-creation 211 for staff 79, 272, 281–2, 288–9 individual customers, allocation of income and expenses to 179–80 individualised value propositions 37, 201, 203, 207, 216–25 industrial revolution 40 ‘influencers’ 306, 308; see also opinion leaders information as distinct from data and knowledge 93 information gain chart 164–5 information policy 111–12 information superhighway 311 information systems 290 information technology (IT) 38–9, 43, 78, 211 and CRM 351–2 and sales performance 289–91 infrastructure for CRM 356 ING Bank 267 innovation phasing and organisation of 211 see also user innovation ‘Innovation Wheel’ of multichannel strategy 257–8, 268, 271 instant messaging 361 insurance industry 59–60, 402 Intel 51 intelligent agents 361 intelligent data systems 121–2 interaction patterns 24–5 interaction process analysis 10 interactive voice response (IVR) systems 357 intermediaries between customer and supplier 58–9 internal validity of an experiment 191–3 International Marketing and Purchasing Group 5 internet analysis 319–20 internet data 141 Internet Explorer 360 internet forms 123–4 internet resources 20, 33, 38, 54, 105, 107, 209, 219–21, 225, 254, 296–9, 358–62 internet security 361 internet telephone and television 362 interpersonal relationships 5–6 IP (Internet Protocol) addresses 359, 361 iPhones 298 iPods 205 iTunes 214 Johnson, M.P. 12 Johnson, M.S. 8 Jonker, J. 362

K-means analysis 150–1 Kahneman, D. 260 Kaplan, R.S. 80–1 Keiningham, T.L. 14 King, Stephen 220 KLM Blue Lab 308 Knexus 298 knowledge as distinct from data and information 93 knowledge management 195–6, 343, 358 Kozinets, R.V. 25 KPN Telecoms 273–4 Kraljic, P. 278 Krishnan, M.S. 219 Krugman, Paul 27 Kumar, V. 62 ‘labelling’ of customers 281 Lacoste brand 233 lead customers 207, 211, 402 lead generation 288 leadership of change 69 learning organisations 193–6 ‘legacy’ systems 39 LEGO Factory 210, 304–5 ‘Lego-lisation’ of products 204 leisure industry 55 ‘leverage’ situations 281, 288 Levitt, T. 4 life events 235–40 context of 236–8 impact of 235–6 link with relationship policy 239–40 lifetime value of a customer 52, 56, 63, 69, 74, 79, 81, 124, 179–90, 230, 233 limitations as a measure 182 related to marketing effort 185–90 LinkedIn 308 Linux software 207 list brokers 123 location of customers 255–6 logistics service providers (case study) 246–8 ‘long tail’ distribution strategy 213–15 drivers of 215 on the social web 307 ‘lookalikes’ 130 love 8 ‘low involvement’ products 74 ‘loyal loss-generators’ 186 loyalty 18, 25, 57–8, 61–2 definition of 13 Loyalty Profiles (company) 185 Lutron Electronics Company 218

409

Index M-commerce 362 McDonald’s 50 McKenna, Regis 35 management reporting 178 market order, change in 397–8 market research 102–3, 209 organisations driven by 100 marketing, definition of 4 marketing analysis, results of 357 marketing data warehouses 126 marketing service concepts 152, 157 marketing strategy 43 mash ups 359 Maslow, A. 398 mass customisation 216–19 mass individualisation 204–7 mass marketing 179 mass media 255, 262 mass production 216 matchcodes 121 ‘maturity’ of an organisation 101 Mayben, J. 341 ‘member-get-member’ promotions 189–90, 246 mental models 194 Mercedes 51 ‘mercenaries’ 308 Meta Group 33 metadata 139 metrics, use of 272 Microsoft Internet Explorer 360 middleware 353–4, 371 Mika, P. 298 mission 69–71 mobile marketing 309–10 mobile technology 266, 296–7, 300–1 Moore’s Law 397 Moorman, C. 11 Moorst, A. van 326–9 moral commitment 12 Morgan, N. 60 Morgan, R.M. 11 ‘motivaction’ 127–9 motivation of participants in co-creation 211; see also incentives multichannel management 253–7, 269–72 avoidace of unhealthy competition between channels 272 organisation of 269–70 performance measurement for 271–2 multichannel strategy 190, 255–73 adaptation of 257–62 benefiting from 257 business case for 268–9

410

combination of channels in 256, 262–6 customers’ use of channel mix 272–3 goal of 255 integration of 266–8 lack of progress with 273 needs, hierarchy of 398 ‘negative’ customers 263 net present value (NPV) of a customer relationship 5, 69–70, 179 net promoter score (NPS) 14, 59–60 Netherlands, the 96, 106 Netscape Navigator 360 networks 19–26 neural networks 141–2 new products 51 niche products and niche markets 215, 307 Nike 51, 205, 219, 225–7, 256 Nocera, Joseph 27 Nordic school of relationship marketing 4 Norton, D.P. 80–1 Obama, Barack 302 offensive strategy 55–6 offering to a customer 201 Old Spice 306 Oliver, R.L. 13 one-to-one marketing 84, 315, 318–19 online analytical processing (OLAP) 364–5 online communities 19, 298 online forums 361 online transmission processing (OCTP) systems 363 open-source software 207 operational excellence 50–5, 63, 331, 380 opinion leaders 25; see also ‘influencers’ opportunity identification 366 optimal allocation of resources 186–9 optimal service level for a contact centre 332–3 organisational change 68–9 organisational structure 73–6 origin-and-destination matrix 163 Osterwalder, A. 238–9 outflow analysis 163 outsourcing 343–4 Panak, J. 73 Pareto-optimal business rules 171–2 Paris Miki 217 ‘parking’ of customers 244 partnership relationship management (PRM) 354 ‘passers-by’ 61 Payne, A. 34

Index Peacock, P.R. 141–2 Peelen, E. 17, 69, 77–8, 81, 96, 100, 263 penetration probabilities 172–3 people, importance of 76–8 Peppers, D. 318 performance measures for contact centres 341 in a multichannel environment 271–2 for the sales process 285–7 permission marketing 112 personal commitment 12 Personal Data Protection Act 108–11 personal selling 251, 277–8, 290 personalisation 315 ‘personas’ 104, 151–2 Philips (company) 242–3, 308 Pigneur, Y. 238–9 piloting of CRM 385 Pine, B.J.H. 216 planning issues in sales process management 288 podcasts 298, 361 Poeisz, T.B.C. 5 portals 313 ‘positive’ customers 263 postcode segmentation 127–8 power distribution between customer and supplier 7 Prahalad, C.K. 204, 208, 219 precision pricing 119–21, 225 predicting the number of telephone calls and staffing needs 333–6 price elasticity, measurement of 221 price premia 219 price sensitivity 221–3 price tailoring 221 pricing policy 219–25 prioritisation 201, 268 privacy policy 107–8, 113 problem formulation for purposes of analysis 137–9 process-based approach to sales 284–5 Procter & Gamble 212–13 product development techniques 212 product leadership 51, 53, 55 productivity in sales processes 290 profile errors in data 96 profiling 124–30, 151–2, 157 profits, ‘unfair’ 60 purchase opportunities 245 purchasing situations 278–81, 291 queries 364 ‘quitters’ amongst customers 165–6

Raaij, W.F. 5 Rackham, N. 280 Ramaswamy, V. 208 random sampling 139 Rayport, J.F. 107 real-time marketing 35 Really Simple Syndication (RSS) 361 recent frequency monetary value (RFM) model 152–4 reciprocity in a relationship 8–9 recommendations from customers 14, 59–60, 215, 269 Redeman, E. 96 registration on websites 123–4 Rego, L.L. 60 Reichheld, Frederick 14, 40, 59–62 Reinartz, W. 62 relational databases 363 relational marketing 4–5 relationship data on customers 118, 131 relationship development, influence of marketing communication on 246 relationship life-cycle 17, 201, 240 relationship marketing 40, 70 optimal allocation of resources to 186–7 ‘premature death’ of 84, 86 relationship-oriented organisations characteristics of 69–71 culture of 72–3 current state of development of 83–5 quality of 78 relationship planning 367 relationship policy 201, 229, 233–46 for different market segments 233–5 for different relationship phases 240–3 and life events 235–40 translated into contact moments 243–6 relationships in general dynamics of 15–19 nature of 5 phases in development of 16–18 primary and secondary 5 repeat customers 62 research questions 137–9 resource allocation to different phases in the customer relationship 187–8 to relationship marketing activities 186–7 response gain charts 156–7 revenue management 222–4 reward systems see incentives

411

Index risks from involving customers in co-creation processes 210 in multichannel organisation 270 perceived as being associated with certain products and services 263 from precision pricing policy 221, 225 Ritz Carlton 52 Robeco Direct 103, 244 Rogers, M. 318 Rooy, Pieter de 55 Roubini, Nouriel 27 Rowe, W.G. 59 rule extraction algorithm technique (REAT) 168 sales performance improvement of 287–9 and information technology 289–91 sales process management 283, 291 sales processes 282–90 desirable characteristics in 283–4 and information systems 290 management of 285–9 value added in 284 Salesforce.com 369–70 salespeople 19, 195, 277–82, 288–91 allocation of customers to 282, 291 and information technology 290 rewards for 281–2, 288–9 roles and functions of 278–81 threats to jobs of 290–1 training of 288 Schans, W.M. van 318 scripting tools 357 Scrum methodology 386–8 search engines 311–12, 360 segmentation of markets 106, 127–9, 147–57 behavioural 152 criteria for 148–9 goal of 152 research on 152–7 techniques of 149–51 with a view to non-customers 231–2 self-analysis 20 ‘semantic web’ 298–9 semi-automatic e-mail answering 357 service-oriented architecture (SOA) 39 service profiles for different categories of customer 233–5, 246 service–profit chain 79–80 ServQual measurement 5 Shapiro, B.P. 148–9 shared vision 195

412

‘share-of-wallet’ calculations 127 Shell (case study) 392–4 Shiller, Robert 27 simulation for purposes of capacity planning 336 Sinha, R.K. 25 situated experience 20 Smart cars 219 ‘SMART’ objectives 383 Smith, John 68 SNS Bank 144–5 social competency 76–7 social CRM 35, 401 social exchange theory 8 social groups 303, 397–8 social identification 25 social media 19–21, 26, 123, 206, 255, 261, 397, 401 social network analysis (SNA) 22–4 social networks 19–22, 26, 209, 251, 297–8, 312 social position of an individual 19 social practices theory 20 social psychology 16 Social Readjustment Rating Scale 235–6 social web 301–9, 321 consequences for marketing 301 marketing approach on 308–9 role in customer–supplier relationships 302–8 socialisation 19–22 Socioconsult compass 127–9 sociograms 23 ‘soft’ criteria 79–80 SOS International 236 specialist service providers 205 Starbucks 63–4, 307 statistical techniques 140 ‘stayers’ amongst customers 165–6 Steenkamp, J.E.B.M. 11 steering committees for CRM 382–3 ‘strategic’ sales 279–81, 285–7 stratified random sampling 139 streaming media 361 Street, R. 256–7 stress caused by life events 237 Strogatz, S.H. 23 Structured Query Language (SQL) 363 Suit Supply 219 supermarkets 7 Swatch 51 ‘switching costs’ for customers 69 systems approach to innovative co-creation 212 T-Mobile 166–7 t-tests 193

Index team learning 195 technological progress 397–8 technology, role of 205 telecom providers 264, 266 telephone calls 329–40 predicting the number of 333–4 quality of 329–31 routing of 336 Thompson, S.A. 25 360-degree view of a customer 131 threshold curve method of capacity allocation 224 Tolboom, M. 13 top management, role of 71, 136, 320 ‘touch points’ 262, 267, 343 Toyota 54 tracking and tracing of customers 271 traffic building 311–13 traffic management 356–8 training needs 288 transaction history of a customer 106 transaction marketing 4–5 ‘transactional’ sales 279–81, 284–8 Transmission Control/Internet Protocol (TCP/IP) 359 transparency of sales processes 210, 282–3 transparent customisation 216–18 Treacy, M. 49–50 trust 11–12, 15, 69, 352, 280 definition of 11 see also collateral trust obligations Twitter 261 tyre manufacture 204 ‘unbundling’ of an organisation 54 unconditionally positive attitudes 77 underground economy 215 uniform product codes 220 UPC (company) 303 user-generated content (UGC) 206 user innovation 207 validation sets 140, 165 ‘value disciplines’ 49–54 value perception 119 van den Berg, Sander 166–7 variable data 124

Verbeke, W. 246 vertical integration 205 video conferencing 362 viral campaigns 305–6, 321 visualisation 140–1 voice-over IP (VOIP) 356 voice recognition and voice response systems 339, 352–5 Voice XML 356 waiting times 261–2, 329–30 Wal-Mart 50 Watts, D.J. 23, 25–8 ‘weak ties’ 23 Web 2.0 technology 297, 361 Web 3.0 and 4.0 technology 297–8 web browsers 360 web care 303 Weber, M. 209–10 webmining 141 websites 296, 310, 314–17 content of 314 design and usability of 314–15 and fulfilment 316–17 and payment systems 315–16 and personalisation 315 Webster, F.E. Jr 4 Webster’s Dictionary 298 ‘Welcome’ calls 189, 244 widgets 362 Wiersema, F. 49–50 Wikipedia 206, 215, 298 wikis 298, 361 Wilson, H. 256–7, 264 Wolfs, Gerard 102 Wordpress 297 workflow management 358, 368 worldwide web 296 evolution of 297–301, 321 see also commercial web; social web Wunderman, Lester 52 Wurtz, W. 376 YouTube 206, 261 Zappos (case study) 345–6 Zeithaml, V.A. 5

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