1. CUSTOMER RELATIONSHIP MANAGEMENT
Lecture 6 (Week 8) – Managing CRM (1)
The Organization and CRM

2. Week 7 Topics
1. Strategic Goals 2. Customer Management Structures 3. Key Account Management

3. Customer Relationship Management
Customer – the focus of the organisation is the customer
Relationship – seek profitable long- term relationships with customers (weeks 2 – 6)
Management – plan, implement and integrate relevant functions and processes to facilitate above (weeks 7-12)

4. Overall Business Strategies
The previous topics covered in this unit considered consumer behaviour and the nature of relationships
However, management still needs to make a decision on whether it will pursue a mainly customer relationship strategy to advance organisational value
There are alternative generic business strategies organisations can choose to achieve organisation goals
The decision on which overall generic business strategy to follow depends on organisational resources and context factors such as the competitive and external environment

5. 3 Generic Business Strategies
• Operational Excellence
– Cost Leadership
• Product Leadership
– Differentiation
• Customer Intimacy
– Customer Knowledge

6. Which Generic Strategy?
Management needs to consider which of these generic strategies is most suitable for the organisation
Operational Excellence - competitive advantage in processes particularly if product/service is relatively homogeneous (lower prices, high margins)
Product Leadership - competitive advantage in delivering product/service value from differentiation (innovations, new delivery modes, new channels)
Customer Intimacy - competitive advantage in knowing and understanding customers and their needs and wants (customer behaviour, relationships)

7. Exercise – Join the Dots
1. Consider the strategic focus of each organisation below - Join the organisation with the relevant core discipline

8. Customer Intimacy Strategy
• Culture - Client and field driven
• Organisation - Entrepreneurial client teams, High customer-facing skills
• Core processes - Customer Acquisition, Development, Retention, Customer-driven solution development, Flexible, Responsive
• Management systems - Revenue, Profit, Share of Wallet, Lifetime value analysis, Rewards based on Customer Feedback, Customer Relationship management (CRM)

9. Strategic Goals – Customer-Centric Firms
• Acquisition of carefully targeted customers or market segments
• Retention and development of strategically significant customers or market segments
• Continuous development and delivery of competitively superior value propositions to the selected customers
• Driving competitive advantage through superior customer understanding, relationships and value

10. Customer-Centric vs Product-Centric Mindset
Outside-in (CC) Inside-out (PC)
Required
skills/assets
Customer value
perception
Customer
Channel Preference
Tailored
product/service
Assets/
skills
Products/
services
Distribution
channels
Markets/
customers

11. Organisational Culture
For proper implementation of CRM, organisational culture needs to be consistent with CRM
We can classify organisational culture on the axes of Internal/External focus and Stability/Flexibility

12. The Best Culture for CRM Success?
• Adhocracy
– Ad hoc organisations that morph according to opportunities – “tents rather than palaces”.
– Adhocracies foster
• Adaptability
• Flexibility
• Creativity
– Adhocracies are dynamic, entrepreneurial and creative workplaces, People takes risks, and are committed to experimentation and innovation

13. KPI’s – Customer Centric Firms
• Product - New products launched, Speed to market, Objective quality measures
• Production – Yield, Conformance to specification
• Sales - Sales revenue, Sales volume
• Marketing - Customer satisfaction, Customer retention, Share of wallet
Successful firms (blue) measure customer indicators

14. Strategy Before Structure
Organisational Structure can both enable and disable strategic action
difficult to promote creativity in a rule-bound bureaucracy
bureaucracy is conducive to obtaining compliance to standardised business processes
struggle to become customer-centric in a functional organization where specialists report upwards within silos, but do not share customer insight horizontally across silos.
Adoption of CRM as a strategy requires a re-thinking of organisational structure

15. General Organisational Structures
Wrong Side Up!!
Right Side Up !!
Customers
Frontline Operations
Executive
Management
Management
Executive
Frontline Operations
Customers

16. Changing Organisational Structures
• Hello – Customer Relationship Managers – Segment Managers – Flat Structures – Empowered Front-line – Category Managers
Goodbye
– Territory or Area Sales Managers
– Brand Managers alone
– Hierarchy
– Supervisor Approvals
– Product Managers alone

17. Eg. Alcoholic Beverage Industry
• From (Old Structure)
Sales reps for wine, spirit, beer, Multiple reps calling on one customer, Focus on the brand, Driven by “push” offers; “stack ‘em high and watch ‘em fly”
• To (New Structure)
One sales rep per customer, Reps cover all products, Focus on customer relationship, Driven by “pull” through the channel; helping customers to sell to consumers

19. Conventional Organisational Structures
1. Functional - Sales, marketing and service specialists report to a functional head 2. Geographic – Organises sales marketing and service on territorial lines 3. Product, brand or category – common in companies that produce a wide variety of products, typically has more product or brand focus 4. Market or customer-based – structure based on markets, segments or customers 5. Matrix – preferred when company has several different product lines serving several different customer groups

20. Disadvantages - Conventional Structures
• Functional – 3 core customer functions - sales,marketing and service –may not co-ordinate and share customer knowledge
Geographic - May be many different customer types with different buying criteria.
Products may be diverse and salespersons develop neither customer nor product-expertise
Product/Brand - Different product managers might call on the same customer on the same day with impression of lack of coordination and disregard for customer’s time.
Customers may also experience varying levels of service from the different brand - or product-managers.

21. Category Management at Kraft
Quality
R & D
Customer
Category
Managers
Operations
Finance
Engineering
Marketing
Information
Category
Sales
Director
Category
Planner
Supply
Chain
Specialist
Process
Team
Leader
Category
Business
Director
Customer
Business
Manager
Materials
Manager
Finance
Consumer
Promotion
Retail
Sales
Manager
Space
Management
Specialist
Plant
Manager
Brand
Manager
Sales
Information
Specialist
PROCESS TEAMS
(dedicated to each
product category)
CATEGORY TEAMS
(dedicated to each
product category)
CUSTOMER TEAMS
(dedicated to each
major customer)
Source: George, Michael, Anthony Freeling & David Court “Reinventing the Marketing Organization”
McKinsey Quarterly, No 4, 1994

22. Matrix Structures Matrix variations include:
Customer managers
Matrix variations include:
Market- or customer-based managers on one side, and product managers on the other
Channel managers on one side, and product managers on the other
Geography on one side and industry on the other
Cross-functional teams may be a prelude to a matrix structure 1 2 3 4 5 A B
Product
managers C D

23. Structures - Extreme Turbulence
Previously business environments were stable.
Today: Characterised by Immense volatility
Deregulation
Global competition
New technologies providing new routes to market
New national market-economies
Highly demanding and well-educated customers
Structures need to allow organisations to sense and respond to change with great speed
Advances in Information Technology (IT) have been key in providing potential new flexible structures

24. IT’s Influence - Organizational Design
IT is now a substitute for a more formalized and centralized organization structure
Advances in IT have enabled organizations to adopt decentralized and virtually networked structures
IT allows information to be shared right across an organization…..vertically, horizontally and laterally and outside an organization with network members.
Structure is therefore no longer tied to traditional vertical reporting relationships
This flexibility is a key component essential for proper implementation of CRM

25. Role of IT – CRM
The role of IT which is consistent with CRM is to provide information that enables a company and its network members to:
Sense and respond rapidly to changes in the business environment
Collaborate to develop and deliver better customer value propositions
Enhance and share their learning about customers
Improve their individual and joint cost profiles

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

27. Drivers of KAM Greater concentration of buying power Globalisation
Vendor reduction programs
Customer expectations

28. Benefits from KAM
Doing large amounts of business with a few customers offers considerable opportunities to improve efficiency and effectiveness
Selling at a relationship level produces disproportionately high volume, turnover and profit.
Repeat business can be considerably cheaper to win than new business
Long-term relationships enable the use of facilitating technologies such as extranet-enabled portals, EDI and shared databases
Familiarity and trust reduce the need for checking and make it easier to do business

29. A Model of KAM Development
Complex
Synergistic - KAM
Partnership - KAM
Level of involvement
with customers
Simple
Mid - KAM
Early - KAM
Pre - KAM
Transactional Collaborative
Nature of customer relationship

30. Bow- tie Structure for Early- KAM
Marketing
Marketing
Logistics
Logistics
Main Contact
Key
Account
Mgr
Operations
Operations
Finance
Finance
Selling company
Buying company

31. Diamond for Partnership-KAM
R&D
R&D
Admin
Admin
Operations
Operations
Key Act. Mgr
Main contact
Outbound logistics
Inbound logistics
Board
Board
Selling company
Buying company

32. Virtual Organization for Synergistic-KAM
Operations
focus team
Finance
focus team
R&D
focus team
Quality
focus team
Market research
focus team
Main contact
Key
Acc. Mgr
Joint board
meetings
Selling company
Buying company