MDM Recharge with Data Relationship Management (DRM)

Dears,


Many organizations struggle to provide master data for traditional business intelligence (BI) information, such as dimensional hierarchies and performance measures. While performance measures are not technically considered master data, they should be consistent and governed like master data. The traditional BI platform from products such as Oracle's Business Intelligence Enterprise Edition enable IT to control dimensional hierarchies and performance measures, but only for that (BI platform) vendor's reporting and analysis tools, and always downstream of operational systems. Increasingly, organizations will need to enable more business user control and accommodate rapidly changing requirements (such as alternate hierarchies and what if analysis). In addition, organizations will need master data portability where any application, not just the reporting and analytical tools, can access the master data for dimensional hierarchies and performance measures. A nascent market is developing for dimensional hierarchies, with products such as Oracle Hyperion Data Relationship Management (DRM), IBM Cognos Business Viewpoint, Microsoft's Master Data Management Services, Profisee's Maestro, and Kalido Master Data Management. These tools are not widely deployed, and most IT leaders are unaware of their functionality.

In an effort to learn about the experiences of early adopters, A leading Reach firm interviewed four customers using Oracle Hyperion DRM Product:

• Customer 1 is an electronic design automation firm.


• Customer 2 is a financial services company.


• Customer 3 is an energy services company.


• Customer 4 is a data storage company.

They have asked the following eight questions to each of these four anonymous customers. Their answers are provided below.

1. For what business problem is DRM meant to address?

• Customer 1. The original business problem we wanted to address was that we needed a central place to maintain a hierarchy, but in such way that we could distribute the maintenance over various places in the world (i.e., close to the source) so that people could only maintain their part of a hierarchy and with a set of business rules applied that would make sure people adhered to a set of corporate policies underlying that hierarchy.

• Customer 2. DRM was purchased several years ago to solve the business problem of inconsistent organizational hierarchies across business units. Numerous "alternate" hierarchies were maintained in each business unit using whatever tool (e.g., Excel, Access, etc.) they knew best. This led to many errors in their "alternate" hierarchies and many inconsistencies in their reporting to upper level management.

• Customer 3. Creating a single source of truth with respect to master data used in our internal and external financial reports.

• Customer 4. [Our] primary business problem is productivity loss due to resolving data discrepancies and inaccuracies in reporting, caused by misaligned, and multiple hierarchy inconsistencies throughout the enterprise.

Organizations face many valid reasons why different business entities need different dimensional or hierarchical organization of master data. In cases where no such support is provided by the tools, business units revert back to organizing hierarchies in silos using Excel, Access and so on. Providing the ability to govern the definition of hierarchies can bring the right balance between centralized control and business enablement.

2. How well does DRM resolve this business problem?

Customer 1. Very well. The initial deployment was for our sales hierarchy and we were able to distribute maintenance, while it enforces all rules of channel management. We have since extended it to many other hierarchies.

Customer 2. DRM solves this particular business problem extremely well. All business units have been very happy with the consistent organizational hierarchies and consistent reporting.

Customer 3. DRM along with our business processes has enabled us to be very successful.

Customer 4. DRM provides a foundation for an enterprise, business driven, single source of truth for hierarchies and reference data with effective management capabilities including change management, control and audit, and data governance.

While Oracle DRM has been an enabling technology to provide consistent organizational hierarchies, driving this consistency requires putting in place governance practices and organizational functions to deal with the ongoing life cycle and governance of the various hierarchies across the business. The governance and organizational structures for managing hierarchies and dimensions are very similar to those used in master data management for core entities. It requires strong business involvement from the various stakeholders to define and maintain the hierarchies.

3. Has DRM been applied to other business problems?

Customer 1. Most of our deployment deals with maintaining hierarchies, but we have in some cases extended the reach. We found, for example, that one hierarchy was a good basis for financial approvals (purchasing etc.), so we ended up not just maintaining the hierarchy itself but also all the approving positions for various purposes for each node so that we can send the hierarchy with all approvers for each level/node to the purchasing system as an approval hierarchy.

Customer 2. DRM has been used to solve various business problems. For example, the Legal Entity hierarchy was maintained manually and turnaround on the maintenance was several days. With DRM, turnaround is immediate. Also, the chart of accounts hierarchy was manually maintained in an Access database. With DRM, chart of account maintenance is ongoing DRM has also taken off in other various ways. Business units get very creative in their requests and we get very creative in helping the business units meet their ever changing hierarchy needs.

Customer 3 Sure. For creating derived and alternate hierarchies for our EPM [enterprise performance management] applications that are not available in the source system. In addition, we were able run some analytics on the master data as well.

Customer 4. DRM has been used to manage change of business master data across enterprise applications while consolidating and rationalizing structures across source systems. In addition, proliferation of corporate hierarchies are addressed by synchronizing alternative business views and providing alternative hierarchies to meet reporting objectives.

One of the common challenges organization face is the need to manage and govern the changes in hierarchies. The main requirements that drive change management on hierarchies are:

• Slowly changing dimensions: the hierarchy definition evolves over time and organizations need to have a hierarchy management system that allows them to adapt the definition over time and also to version it. Versioning becomes essential when trying to compare analysis over dimensions at different dates.

• Diverse teams have diverse hierarchy definitions to meet their various reporting needs.

• What-if analysis and scenario planning also require the ability to create multiple hierarchies.

4. Which hierarchies are managed by DRM? For example, cost centers, sales territories.

• Customer 1. Cost center hierarchies, functional area hierarchy, sales hierarchy, sales territory hierarchy, work location, management organization, product hierarchy, financial approvals, chart of accounts, various mappings that create relationships between accounts, cost centers, sales channels and product lines.

• Customer 2. Accounts, organization, legal entity, currency and product. We also keep all other Essbase dimensions (scenario, calendar, year, etc.) in DRM as hierarchies for consistency of dimensions going into Essbase.

• Customer 3. Profit centers (Geo based and BU [business unit] based), cost centers, accounts, customers, products, company, legal entities and other ancillary hierarchies.

• Customer 4. Currently nine hierarchies are managed in DRM including: accounts, currency, external geography, fiscal calendar, product, scenario, product revenue classification group and category, and sales districts for professional services. We will be implementing hierarchies in DRM for cost center this year.

5. Can you describe how users interact with DRM to manage hierarchies?

• Customer 1. Users just browsing a hierarchy are using the Web viewer portion of DRM, which we expose in the BI portal. There are a couple of possible interactions for people editing a hierarchy. In most cases users use the DRM client to enter new nodes or modify existing ones, for example a cost center or an account manager, in a hierarchy. Once they are done, they can publish the updated hierarchy and this should trigger updates in various downstream systems, typically within minutes. For some hierarchies, nodes are automatically imported from another system and become available for mapping in DRM, in some cases by inserting them in a node that contains all new members to be mapped.

• Customer 2. Users have access to manage their own alternate hierarchies in DRM. They also have access to manage various required user-defined attributes on all hierarchies.

• Customer 3. The source for the hierarchies are SAP. We extract it from SAP and load into DRM on a monthly basis. Only the DRM team and a few select super users have read access to DRM at this point.

• Customer 4. Business users interact with DRM for the ongoing maintenance of the hierarchies and reference data. The business is actively involved with enriching the hierarchies and reference data in DRM. The business manages access control to the user base and controls security, as well as all aspects of data integrity DRM.

Hierarchy definition requires business expertise. The client answers above demonstrate that business users typically own the responsibility of maintaining or creating hierarchies. Business users administering hierarchies for their business area act as data stewards in master data management (MDM) or data quality improvement projects. This further enforces the governance and organization principles used in MDM to support hierarchy definition.

6. Do you seek to master hierarchy data in downstream systems ( i.e., business intelligence) or upstream systems (business applications)?

• Customer 1. We do both. All hierarchies go into the data warehouse and some of our OLAP [online analytical processing] cubes. Some also are fed back to transaction systems (SAP, several Web applications, planning/forecasting apps).

• Customer 2. We feed only downstream BI applications.

• Customer 3. At this point only the downstream systems.

• Customer 4. We have DRM master of hierarchy data for both upstream and downstream applications.

7. Who is the primary business sponsor of DRM?

• Customer 1. Mainly finance, mostly because finance is tasked with maintaining many of the corporate hierarchies.

• Customer 2. Primary business sponsor is financial planning and analysis group.

• Customer 3. Finance and accounting organization (financial reporting systems group).

• Customer 4. The primary business sponsor of DRM is a finance BI senior manager within corporate financial planning and analysis.

8. Is DRM used to manage performance measures as well dimensional hierarchies?

Customer 1. We currently only use DRM to create or edit dimensional hierarchies.

Customer 2. We do not use DRM to manage performance measures.

Customer 3. We maintain custom performance measures and align with hierarchies managed in DRM.

Customer 4. Currently, we are not using DRM to manage performance measures. We use DRM for standard dimension hierarchies with single parent-child relationship.


Miles
Organizations need to include governing dimensional hierarchies as part of their master data management initiative. This becomes more important as the need for multiple hierarchies increases. Part of the MDM strategy needs to reconcile the single, static hierarchy provided by most business applications with the multiple and often ungoverned hierarchies manifesting themselves in numerous downstream OLAP cubes. Look to leverage these types of tools for downstream and upstream applications. Try to position them as a change management solution in your organization that builds consistency between operational and analytical systems by maintaining relationship maps among the most complex web of data relationships.

Moreover, leaders of MDM initiatives can enable a wide variety of data managed as hierarchies. The customer references highlighted above are a testament to the neutrality of tools like DRM to facilitate hierarchies from multiple data management subject areas. Although all the business sponsors mentioned above were associated with the finance department, that doesn't mean the scope of the project needs to be limited to just finance. Notice how most of the references above included hierarchies such as cost centers, chart of accounts and fiscal calendars; but they also included customers, products, legal entities, sale channels and so on.

Unfortunately, based on the customer experiences outlined above, it doesn't appear that organizations have extended the idea of analytical MDM to include governing performance measures. While there is a clear need to ensure organizations have a consistent and reliable set of performance measures available to all business applications, there doesn't appear to be a technical solution to this problem yet. Customers indicated this could be possible with DRM, but it isn't a clear application of DRM and not something they were considering in the near term. This means most performance measures will continue to be defined within the BI platform semantic layer and performance management applications for the near future.

Its time to Recharge your MDM

Loving P&C
DC*

Hitachi Consulting ( HCC ) Customer & Channel Solutions (CCS) Practice

HCC CCS Leaders

Dave Sheridan


Vice President, Oracle CRM Practice Leader

dsheridan@hitachiconsulting.com
----------------------------------------------------------
Dinesh Chandrasekar

Practice Director CRM & MDM CoE

mailto:dinesh.chandrasekar@hitachiconsulting.com


------------------------------------------------------------
Mychal Manie

Director, Specialized Services - Oracle CRM Practice

mmanie@hitachiconsulting.com
-----------------------------------------------------------

Mitch Glaser

Senior Manager, Consulting Services Oracle CRM Practice

mglaser@hitachiconsulting.com

---------------------------------------------------------------
Susan Tweedy


Director of Business Development, National Oracle Alliance Director and CRM Sales Leader

stweedy@hitachiconsulting.com

----------------------------------------------------------------------------

Loving P&C
DC*

Building the “Customer Responsive” Company with Responsive CRM

Dears,

In the customer-driven age there are no secrets. Compared with just 10 years ago, information is plentiful and easily accessible online, and customers can learn more about an organization or a product in one day than previously was possible in a year both the positive and the negative.

Most organizations intend to put their best foot forward. They understand how important it is to present the very best the organization has to offer to their customers. And in many cases, this happens. However, when organizations fail to meet or exceed customer expectations, alternatives are only a Web search away. The ability for marketers to present offers has exploded with the advent of new channels and new media. Offers arrive on cell phones, are posted on street corners and airports, are interspersed within movies and television shows, presented on every Web search – and everything is sponsored. Media is pervasive and customers are immersed in opportunities to find new alternatives to products and services that don’t live up to expectations. In the customer-drive age, however, even the best organizations can falter and the stakes are high. Customers can easily discern when a business engages in poor service behaviors, including:

• Inconsistency:

When a customer receives different answers from different parts of the organization, it creates a red flag. This could be as innocuous as posting the wrong store hours on the Web. Or it could be more significant – health benefits told to be available from one regional call center that differ from another, resulting in a costly and potentially dangerous decision for a patient.

• “Spin”:

With the wealth of information now available on the Web, customers are wary of being “sold.” Gone are the days when the lack of public knowledge about a product or service could mask design shortcomings. In today’s market, the proverbial “used car salesman” is a dying breed or is already a memory. In many cases, customers will know more than the salesperson. Before they even speak with the organization, they are likely to fully understand the product or service – what options are available, what colors it comes in, whether it can be used in their neighborhood and coexist with their existing equipment, whether it can be upgraded, extended or traded in, and what price to expect. If the organization does not extend the dialogue from this new benchmark, customers are likely to be dissatisfied.

• Poor memory:

Customers expect to be remembered. No matter what an organization provides – be it a mobile phone, a consulting service or even a government benefit –customers expect their information to be current and consistent across any access point. Information entered in their Web account will map to what a call center agent knows. When they inquire about additional products or services, their profile will be known – what they’ve purchased and when, how much they paid and what discount they received, how they prefer delivery and how they prefer to shop. Any one of a hundred pieces of information that customers have provided will be expected to be immediately referenced, understood and used in their next transaction. These factors can often be the trigger for poor customer satisfaction, resulting in low loyalty and high churn.

Responsive CRM is the Key

The key to solving these challenges is establishing a highly accurate, deeply knowledgeable and completely consistent dialogue with customers over time – a concept that’s easy to understand,

yet difficult to accomplish without the right tools. Success in today’s business environment requires that answers to customer inquiries are consistent no matter where or when they contact an Organization: Offers for products and services are relevant and targeted to the needs of the customer, and perhaps most importantly, that buying history, profile information, project requirements and other critical customer information never need to be repeated. The difficulty in meeting these challenges rests less on the identification of the problem and more on the implementation. Without the right set of tools, organizations will struggle to make their customer experience more consistent, more information-rich and more relevant. The key to building the customer-driven enterprise is to empower everyone in the organization to make the right decision and provide the right answers, and enable organizations to be more responsive when new opportunities appear, or when old conditions change.

CRM continues to play an integral role in the evolution of the customer-driven enterprise. Yet to enable organizations to transform their customer relationships and markedly increase organizational performance, CRM must do more than it ever has before. To survive and thrive in today’s “flat,” media-rich, global business environment, CRM must provide new capabilities to the organization and ensure that CRM investments have the highest possible return in the shortest possible time.

Empower Users


To transform an organization into a customer driven enterprise, CRM users must come first.Frontline customer-facing employees – including salespeople, business development, marketing, customer service and support, partner managers and even accounts receivable – need to have a flexible, role-based CRM application that maps to their individual needs. Their CRM tool must provide real-time insight at the moment of customer interaction. The user interface must be simple to learn and easy to use. Customer intelligence should be embedded at the users’ fingertips, woven into the fabric of each interaction. Finding information should be as easy as using popular Web search engines. And most importantly, all business processes should be clearly and simply exposed

to the user. It should be plainly evident what the organization expects from each customer transaction, and it should be easy for users to accomplish the task. By providing the best possible tools to the people who interact directly with customers, it is possible to unleash employees to do their best for their customers – and for the organization as a whole.

Enable CRM Responsiveness

The core of a Responsive CRM system is the ability to respond quickly. It is not enough for a CRM system to provide a platform for launching new customer initiatives. CRM must enable an organization to be agile and adaptable as market, competitive or regulatory conditions change. The benefit of choosing a responsive CRM platform is that changes can not only be made quickly, but also provide a net improvement in the customer experience. This includes both the ability to change business processes on the fly and to ensure that customer information is consistent across divisions and departments even while processes, teams and customer segments are changing. Organizations need to ensure that the specific requirements of their industry – from government to telecommunications to oil and gas – are cost-effectively captured inside the CRM application as requirements change. And as technologies change, the organization can capitalize on new business models such as software as a service and grid computing to increase reaction times and provide new financial options.

Success in Customer Driven Age

Succeeding in the customer-driven age requires a new set of goals and a new set of tools. The pressure to increase performance as the global economy has become more interconnected and “flat” has accelerated the demands on organizations and the customers they serve. To succeed in this new business environment, organizations must put the customer at the center to transform the relationships that power growth. Responsive CRM Makes that Difference

Loving P&C


DC*

Brand Relationship Management (BRM) in the New Decade

Dears,

Brand Relationship Management is not simply a single idea or process. Rather, it is a completely new approach to brand management that extends traditional revenue management into the realm of customer-centric revenue management, and then across both product and customer lifecycles. The successful brands of the Third Millennium must rethink their strategies and processes and ultimately enhance the value of their relationships with customers.

In a fiercely competitive and dynamic global marketplace, brands more than ever are facing new challenges and threats to their expansion and even survival. As markets become more and more commoditized, brand managers struggle to create differentiated value for consumers and ultimately for shareholders. The penalty for failing to create this differentiated value has been both harsh and immediate. In some markets, generic or distributor house brands have captured an 80 percent share of sales volumes.

Rising Customer Expectations

Customer expectations have risen steadily over the last three decades. Customers continue to become more sophisticated and more interested in innovative products and customized services. At the same time, they are becoming more unpredictable in their tastes and needs. Customers continue to expect and demand more "value" from brands. Without this perceived value, they are unwilling to pay a premium price. Customers who receive exceptional service from one supplier (regardless of industry) will tend to be dissatisfied with lower levels of service from other suppliers. Examples of brands that successfully deliver extra value and service include:

o Dell, with individually specified computers delivered to customers in two days.

o Toyota, with individually specified cars delivered to customers in 10 days.

o Standard Life Bank, which guarantees mortgage acceptance within nine minutes.

Heightened competition has given customers tremendous freedom of choice — a freedom they have been increasingly willing to exercise.

Brand Relationship Management Is the Next Evolution of Brand Management

Earlier decades of brand management focused on generating trial and high share of requirements (i.e., the product's market share for a specific consumer). This concept was known as brand loyalty. If a brand had a high share of requirements, then its brand equity was high. It is important to recognize that high share of requirements (often mistaken for loyalty) is transient. If the sole focus of a brand is on high share of requirements, the brand is highly vulnerable.

The relationship a brand develops with its customers clearly represents great value. Figure illustrates the effect of the Brand Relationship Program on the perception, attitude and declared behavior of 4,000 consumers towards their regular dairy brands. The survey has revealed that even consumers showing a high share of requirements could enhance their already very positive perception of that brand through an effective brand relationship program. Consider that 74 percent of consumers felt such a program represented a good means of gathering objective and reliable information about the brand.

It is important to recognize that "real" loyalty is a more complex concept than share of requirements. Both preference and attitudes must be factored in.

Not all customers of a brand are likely to develop a relationship with that brand. Research conducted by majors across different product categories has shown that a certain level of affinity with a brand is required before a customer may be willing to enter an intimate relationship with that specific brand. And the level of affinity a consumer is likely to develop is highly correlated to category involvement and brand sensitivity.

Amazon.com is an example of a company that has increased its affinity with each customer by providing greater, value-added services. Amazon introduced sophisticated information technology (i.e., collaborative filtering) to expand its service offerings to include CDs, DVDs and other lower ticket consumer durables. The company is now adding auction services and broadening its scope. Amazon understands that its relationship to the customer is critical in developing its brand.

Brand Relationship Management: Linking the Brand and the Customer Together

The relationship between a customer and a brand is an exchange relationship. Consumers enter into a relationship on the basis of expected equity and the desire to increase the predictability of exchange outcomes .The length and strength of the customer relationship is a result of the relative value the customer perceives in the brand; in other words, the implied utility associated with the product features, the tangible value of these features, and the intangible value the consumer assigns to the brand name. The utility is a function of the capacity of the brand to consistently deliver an experience in alignment with the customer's expected equity. Consequently, it reflects the convergences of the customer's perceptions and expectations.

Brand Relationship Management's Journey

BRM is a journey, not a destination. It requires a long-term focus to create and manage a relationship with the customer in which the joint exchange is profitable to both the customer and the firm. The steps to manage this journey are outlined below:

Step 1: Actionable Insight

Provide in-depth actionable insight of customer preferences, behaviors and value drivers, and continuously capture, maintain, and apply this insight across the entire customer relationship cycle.

o Identify the key value drivers that contribute to brand preference.

o Measure the utility that consumers attach to the brand.

Analyze the customer's buying patterns and identify the factors that influence brand switching

o Analyze the way actual choices reflect consumer preferences and situational constraints.

o Develop predictive scoring engines.

o Develop for each customer a market response profile, measuring the propensity to respond to various marketing stimuli (e.g., TV, direct mail).

Step 2: Actionable Segments

Group target customers into actionable segments based on profitability, usage characteristics, and/or common needs.

Step 3: Value Propositions

Define offers and corresponding value propositions that meet the identified needs. Reconcile the value of the customer to the value of the brand, and understand tradeoffs in revenue management versus customer relationship management.

Step 4: Develop a Relationship

Develop a relationship with the customer. Create mechanisms that can generate positive interactions between the customer and the firm. These mechanisms should strive for customer satisfaction, loyalty growth, consumer demand increase and lifetime customer ownership.

Step 5: Measure the ROI

Measure the ROI of the implementation of a BRM strategy:

o Define the economic framework.

o Develop a spending allocation model based upon the Life Time Value of a customer.

o Elaborate upon different investment scenarios (based on internal and external resources).

The successful brands of the Third Millennium are working hard to rethink their strategies and processes to enhance the value of their relationships with their customers and, therefore, become the brand of preference. These brands are striving to develop brand loyalty by targeting customers who:

o Perceive the differentiating and discriminating added value of the brand.

o Make their choices by preference.

o Are ready to reward the brand for providing unique value to them by paying a premium and/or by investing time in the relationship.

Some industries display incredible ingenuity to give their brands the definitive ownership of the relationship with their customers. Consider domestic appliance brands that are developing on-line-controlled appliances a washing machine's wash cycles can now be downloaded from the Internet and a digital cooker can receive instructions by mobile phone. What does it mean for a food brand when the freezer has online links with supermarkets and automatically places orders when food supplies run out? In the next few years, BRM will become a discipline driving fundamental change at leading organizations. Developing a long-term relationship with customers is not only a question of marketing, but it is also a question of vision, strategy, major process change and technology. It is a question of business transformation that will be the key to stability in an increasingly dynamic market.

Relationship brands are working hard to understand smaller and smaller groups of customers in greater detail and, with the help of technology, will soon make the "market of one" concept a reality.

Loving P&C


DC*

"Smart" CRM Strategies 4 Smart Customers.

Dears,


This article offers a "strategic approach" to thinking about CRM in the hope that it will help firms realize the true benefits of this fundamentally revolutionary and vital business technology.

Smart Markets

Strategy is essentially a matter of aligning business practice and process to the demands of the environment. Perhaps the most important implication of the information age for business is the emergence of information-intensive or "smart" markets, which are markets, defined by frequent turnovers in the general stock of knowledge or information embodied in products and services and possessed by firms and consumers. In contrast to traditional "dumb" markets - which are static, fixed, and basically information-poor - smart markets are dynamic, turbulent, and information-rich.

It is in the context of smart markets that CRM should be viewed. Smart markets are based on smart products, which are product and service offerings that have intelligence or computational ability built into them and can adapt or respond to changes in the environment as they interact with customers. Smart markets are also characterized by smart consumers - consumers who, from the standpoint of the firm, are continually "speaking" (they are not mute or "dumb"); and, in so doing, educate or teach the firm about who they are and what they want. In such an environment, competition is less about who has the best products and more about which firm can spend the most time interacting with (and therefore learning from) its customers.

Customers as Assets

The essence of smart markets - and therefore the imperative behind CRM initiatives - is that the customer is the "new asset" of the organization. This approach shifts the focus away from the product and toward the customer as the key asset or source of wealth generation. The company of the future is likely to be organized around customer managers (CM) rather than product managers who will have bottom-line profit-and-loss responsibility for a set of customer targets. In addition, the CM will be charged with developing and delivering a set of offerings to chosen customers. Consistent with this responsibility, the CM will act as a team leader who coordinates the activities of a variety of marketing-mix professionals or specialists (in pricing, advertising, forecasting, etc.) who will be necessary to develop and implement customer plans, which specify specific strategic objectives with respect to designated customer targets.

Identifying the customer as an asset means that the focus of attention shifts away from the offerings and that the customer, not the product, is viewed as the real generator of wealth for the company. The source of competitive advantage is seen less in terms of unique or superior products and more with respect to having special relationships with customers. Consequently, both performance measures and organizational structure become aligned around customers as opposed to particular products or services.

The concept of customer share is the total share of a customer's purchases in a broadly defined product category - such as Visa's "share of wallet," Levi's "share of closet," or Coke's "share of stomach."

The Customer Information File: The Organizing Framework for CRM Decisions

The organizing principle, as well as the raw material from which a firm measures and evaluates its customer assets, is the customer information file (CIF). It is the data collected and processed as part (increasingly) of every customer transaction or interaction. As a practical matter, this is what it means for the customer to be the asset, since the foundation of relationship marketing is continual communication (the exchange of information between a firm and its customers). CRM activities are based on an understanding of both the structure and strategies that are the result of a well-designed CIF.

The CIF can be thought of as a single virtual database that captures all relevant information about a firm's customers. The database is described as virtual since, while operating as though it were an integrated single source housed in one location, it may comprise several isolated databases stored in separate places throughout an organization. the CIF are individual customers - both actual as well as potential - and not segments. The data and nature of CIF is of 3 vital characters

o {C} Customer characteristics: Typically (though not exclusively) composed of demographic data, this is information about customers (who they are) that is independent of the firm's relationship with the customer.

o {R} Response to firm decisions: Perception and preference (e.g., product attribute importance weights) and other marketing-mix response data (price sensitivity, sources of information, channel shopping behavior), this is information about customers (when, where, how, and why they buy) that is based on some (perhaps limited) level of interaction between the firm and its customers.

o {P} Purchase history: Data on what products customers have purchased, as well as the revenues, costs, and profits associated with these purchases. This is information that is based on the firm's actual transactions with its customers.

'Smart' CRM Strategies

With the strategic objectives in place, how does the organization use its CIF asset to craft a set of actual strategies? Observations of leading best-practice firms have identified a series of generic smart or information-intensive strategies:

o Mass customization, or personalization, takes advantage of developments in flexible manufacturing and/or operations that enable firms to tailor or customize individual offerings at little additional marginal cost.

o Yield management, or revenue management, builds on flexible or discriminatory pricing to take advantage of customers' heterogeneous price sensitivity with respect to time (as well as the technical and legal ability to price discriminate) in order to maximize the total return to a fixed asset - particularly where the marginal cost of providing an additional unit is low and the product/service in question is not inventoried.

o Capture the customer, also known as customer intimacy, affinity marketing, or relationship management, the capture-the-customer strategy is, as its ultimate objective, to realize as high a share as possible of a customer's total (lifetime) purchases in a given (often expanding) set of product categories. Stated another way, its objective is to increase the value of the customer to the enterprise by increasing the value of the enterprise to the customer. The capture-the-customer approach relies heavily on interactive communications and capitalizes on the firm's ability to use the information collected and processed from previous encounters with a customer to influence subsequent encounters and transactions.

o Event-oriented prospecting, a particular and increasingly important version of the more general capture-the-customer strategy, is the event-oriented prospecting (EOP) approach. EOP is based around a firm's ability to store and process lifecycle-related and other situational information about its customers that might trigger a purchase incident. The goal is to anticipate the customer's lifecycle or other situational needs and to time the interaction in such a way that the firm appears with a solution just when the problem arises - creating the appearance of literally reading the customer's mind.

Given a desired level of risk, the CM's next task is to construct what is called the "efficient set" of customers. In other words, given the mean and variance of cash flows associated with each customer, the user of a CIF can choose the best combination or portfolio of customers to hold, where the expected return from a portfolio of customers is a weighted average of returns from each customer.

Good Luck

Loving P&C


DC*

CRM Power shift: Customer Information is No more the “redheaded stepchild”

Dears,

The nature of CRM is changing. Every ongoing relationship exhibits a dynamic that directs the nature of its priorities and expectations, as well as the roles played by the respective parties. Interactions between the parties will ebb and flow with shifts in this power dynamic. The power is clearly shifting to the customer.

Customers have unprecedented access to information and choice today, which provides them with a great deal of leverage in the relationship. Choices exist among a variety of sales and distribution channels, fixed and variable pricing scenarios, specialty and commodity product classes, new and pre-owned, with or without bundled services, domestic or international sourcing, online exchanges, barter, salvage and more. And this applies to virtually any product or service, at any level of the business-to-business or business-to-consumer demand chain. With choice comes power. Even in the most subtle negotiation, having options translates into the ability to gain leverage; in the give and take of customer relationships, negotiation is constant.

So, the customer drives the demand chain. Forward-thinking organizations that creatively adapt to this reality will enjoy the greatest success. And yet, with some notable exceptions, too few organizations have driven appropriate emphasis on the customer into their operational DNA, and customer intelligence is still not a generally recognized application niche. Have the technology and application vendors failed to deliver a core capability? Have end-user organizations failed to sufficiently define the need? Is there a shortage of supply or too little demand? The Research believes that a new revolution bringing performance management principles to customer intelligence is brewing. There are significant issues and business forces at play within the most customer-aware organizations, which suggest a coming paradigm shift.

There is ample evidence of the business value derived from paying closer attention to an organizations existing customer base. Studies have repeatedly shown that, when compared to acquiring new customers, cost of sales is lower, revenue per transaction tends to be higher, and profitability is greater with sales to existing customers. This is true whether an organization is engaged in B2B or B2C commerce. The demand chain leverage that can be delivered through the creative application of customer intelligence is indisputable.

Integrated Customer Information Management

Many organizations have neglected to address integrated information management with respect to the customer. Doing so requires solving many challenges, beginning with reaching agreement on what or who qualifies as a uniquely defined “customer” and how to go about arbitrating disagreements within the enterprise. There are notable exceptions, typically within certain industry verticals, such as the consumer financial services industry and with direct marketing organizations. Still, in contrast to the typical information management priorities with respect to transactions, capital assets, supply chain movement, and financials, customer information most often is treated as the redheaded stepchild. Typically, even office supply inventory is managed more carefully than customer information.

In this context, data stewardship is an important new role definition with respect to the customer. Under the auspices of the single accountable party described below, customer data quality is an important responsibility .Many organizations are creating the steward role to take on the task of sorting out systems across the enterprise with inconsistently defined customer identification strategies, schema and performance metrics. The steward is empowered to drive collaboration and compromise in order to untangle confused cross-functional customer intelligence vehicles, poorly defined customer profitability and lifetime value metrics, and suboptimal customer interaction performance management initiatives.

Accountability To The Customer

Today’s business climate has an audible undertone of accountability. Legislative and regulatory scrutiny has gotten the attention of the business community. Compliance urgency is couched in many well-turned phrases: process visibility, documentation requirements, senior management attestation, financial transparency and others. The emphasis is always placed on complying with and answering to regulatory bodies. The Research believes these priorities are badly misplaced. Accountability only to “the man” directs the energies of the organization toward developing proficiencies that apply nowhere else. This is like training a Salesforce to sell against a single competitor. Energies are better spent on building organizational accountability to the customer, addressing repeatable customer focused issues that not only ensure compliance but further translate into competitive advantage.

Accountability to the customer suggests that the issue of ownership must first be addressed. Who “owns” the customer and sets the customer centric strategic agenda? Who holds budget accountability and has ultimate ROI responsibility? Marketing, sales and service are most often fingered for isolated failures and successes, but none functions alone. Each of these functional groups is an intended beneficiary of component operational CRM technology, and all of them are customer-facing and responsible for influencing and responding to links in the demand chain. Still, in the face of this, it is rare to find a single, named responsible party “ a chief CRM officer”, if you will let alone a clear set of objectives aimed at accountability to and for the customer across these business functions. Market leaders are addressing this today.

Assessing Customer Value

Commitment and accountability to the customer has a very important dimension that leading customer centric organizations have long since addressed, and that is the measurement of customer value and profitability. This conceptually straightforward metric is often, in practice, insurmountably difficult to calculate. As outlined above, the first hurdle is reaching agreement on precisely who the customer is and accounting for that across various enterprise systems. That nontrivial matter aside, allocation of relevant financial information can be a daunting task, but not an impossible one. Fully allocated financials at the individual customer level are not the norm. It is most common in an industrial products or B2B setting. Regardless of the business model, though, an important feature of initiating this kind of customer-level financial evaluation is that statutory profit and loss precision is not the goal customer value assessment is. As part of a customer accountability initiative, it’s more important to establish a process and instill an urgency in the organization. Precision will come over time.

Direct marketers certainly understand this. The most basic of predictive segmentation models are those that measure and differentiate on the basis of the FM (frequency and monetary) value of each customer. Organizations deploy such models with a variety of metrics fulfilling the monetary metric, including spending in the last transaction, total spending within a given historical time frame, or net present value of predicted lifetime spending. The models will function in any case. The important thing is that metrics are applied consistently and fairly.

Call to Action

It is clearly impossible to address the customer accountability issue without proper information management. At the same time, business issues are what drive the information requirements of a performance improvement strategy, reflecting the priorities of the organization. Every organization must therefore challenge itself to critically evaluate its commitment to its customers and establish more customer centric strategic priorities. A solid performance management platform for customer intelligence will drive the organization toward new, actionable business insight, will enhance its customers experiences, and will inevitably keep the regulatory hounds at bay.

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CRM tools no panacea

Dears,

Sales people knocked themselves out last year with a record number of representatives hitting their quotas, but that is still not good enough. The research shows that while individual reps did better, companies’ overall win rates -- the actual sales wins from forecasted deals -- were flat in 2010, compared with the previous year. In fact, the 2010 win rate of 44 percent of all forecasted deals is the lowest percentage. The data shows that while reps may be working harder, sales teams are not necessarily working smarter. Companies continue to deploy new CRM tools, but they often do not have the processes in place to maximize the benefits of this software.

The most popular CRM tool cited in the survey continues to be sales collaboration software, with 62.9 percent of companies surveyed currently using this software and another 9.4 percent reporting plans to install it in 2011. The Field research shows that both direct and inside sales groups are increasingly using these tools to connect with customers and conduct virtual selling. Meanwhile, the data shows that while companies are deploying analytical tools, such deployments still trail collaboration tools. For example, 11 percent of the survey base said they had deployed sales analytics or forecasting tools with another 3.3 percent saying they planned to do so this year.

CRM tools no panacea

Yet sales managers still need to reckon with the decline in win rates. A company’s sales forecast and win rates are the result of managers and reps working together to determine which deals are viable. If the forecasts are not accurate, but reps are meeting quotas, then the problem sits primarily in the process. Without formal processes that are supported by the right CRM tools, companies will be hard-pressed to get those win rates up.

Beyond the lower win rate in 2010, there was an increase in the number of deals tagged as “no decision,’’ meaning more targeted deals were left languishing when compared with previous years. If companies look to their sales processes, they might not like what they see. More than half of the companies surveyed had loosely defined processes or no formal processes at all. Field research shows that 40 percent of companies report having an “informal’’ process when it comes to sales, meaning there may be a process but no one is monitoring or enforcing it.

About 16 percent consider their process “random,’’ meaning reps can craft their own methods. Nearly one-fourth of the respondents said they have a formal process with which they must comply. In this scenario the process is periodically assessed. Finally, about 20 percent report working with a dynamic process, which is really the ultimate goal. In a dynamic environment, salespeople are required to follow a formal process that is continually monitored and modified as needed.

Without formal and dynamic processes, even the best CRM software tools and analytics will deliver limited results. Something as basic as different usage of sales terminology can mess up forecasting. For example, sales and marketing people may have different views on what makes a “qualified lead.’’ If the data going into forecasting tools isn’t consistent, then sales teams will not realize the intended benefits.

For managers, it is a tall order to get formal and dynamic processes in place, and chances are they will have even less time to do so. Sales managers can expect to feel additional pressures in 2011. The findings shows managers, on average, will have an additional .5 rep added to their teams this year as the manager-to-sales rep ratio increases from 6 to 1 to 6.44 to 1. Additionally, the report shows reps are working from increasingly far-flung geographic network, taxing a manager’s ability to mentor and coach his staff. What’s more, sales managers, while expected to mentor and train their growing and dispersed teams, are actually getting less mentoring and training for themselves. In 2009, about 40 percent of companies surveyed said their management training programs needed improvement. Last year, that percentage jumped to 49.1 percent.

The findings also revealed some interesting benchmarking points around social CRM. They include:

-Among respondents 11 percent have determined social media is “mission critical’’ to their operations while another 20 percent consider it “very important.’’

- More business-to-consumer operations have reported concrete successes with social CRM than their peers in the business-to-business space.

From buying a car or choosing where to sit in a movie theatre to deciding on a vacation destination, decision making is everywhere. The consumer today has wide variety of choices and if companies do not have strong processes or processes that don’t go well with the CRM would definitely bring down the value of a CRM Tool. As the title reads CRM is not a magic portion yet it can do miracles if you have right portion of processes, people and technology in place. If you can dream it, You can do It.

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