Accenture
surveyed more than 500 executives across six industries - communications, chemicals,
pharmaceuticals, electronics/high-tech, forest products and retail - to understand
which CRM capabilities would have the most impact and just how much impact they
contributed to the bottom line. The stunning results? CRM performance accounts
for anywhere from 28 to more than 60 percent of the variance in companies' return
on sales (ROS).
Accenture's Customer Relationship Management research team has published a series
of reports that will provide executives in these industries with in-depth information
and a foundation on which to base future investment decisions. Accenture can
help companies utilize these tools to assess their individual company performance
against their industry, and identify gaps and investments that reap high-impact
benefits for their CRM initiatives.
In addition, our cross-industry findings are providing surprising results that
will be of interest to any company, providing executives with valuable directional
information on how to improve CRM performance. The series of industry and cross-industry
reports will be released throughout 2000. Information on each report will be
posted on the Web site (www.CRMproject.com).
Let's take a look at the impactful findings from the communications industry,
our first industry study released.
Customer Relationship Management and the Communications Industry
By improving performance in high-impact CRM capabilities, a typical communications
company can add tens of millions - and even hundreds of millions - of dollars
to its bottom line. This is the major finding of our in-depth look at the Communications
industry.
In addition, the research identifies the small number of capabilities in marketing,
sales and service that drive the majority of that variance in ROS.
The 54 CRM capabilities studied in the areas of marketing, sales and service
range from sharing customer information and rewarding skilled staff to building
effective billing systems and pricing products to maximize return. The results
are surprising: only 12 specific capabilities within marketing, sales and service
differentiate the strongest performers. Investments in these capabilities have
a greater impact on business performance than others - which is contrary to
the commonly held view that all CRM capabilities are equally important.
Marketing: The Payoff of Planning and Execution
Accenture found that those companies that are able to improve their marketing
performance can add significant value to the bottom line. And, four out of 23
key marketing capabilities account for 54 percent of the potential ROS improvement
in moving from average to top-tier performance in marketing.
In the communications industry, the marketing function has traditionally been
underfunded and understaffed in comparison to other industries. At one large
communications company in the study, for example, Accenture found that the size
of the marketing staff was less than 20 percent of what a lean consumer company
would consider adequate. The skills of the understaffed unit did not compare
to even a mid-tier consumer company, and small budgets meant that some customer
segments received little or even no marketing support. One of the key marketing
capabilities identified in the study - executing effective marketing plans -
is especially difficult to perform well in this kind of environment.
In another case, the company spent less on marketing annually than the typical
food company would spend on sales materials for a single promotion. But, the
study found that "developing and executing an effective promotion strategy"
had a greater impact than other capabilities - such as advertising and branding
- that focus on communicating a company's value proposition. That is in line
with a Yankee Group report1 which determined that SBC has a higher
penetration of enhanced services - such as Caller ID, call waiting and voicemail
- than other Baby Bells because it has "focused less on overall brand advertising
and more on tactical, product-focused marketing of enhanced services."
According to the study, the ability to price products to maximize return is
one of the keys to marketing success, but that doesn't mean that price alone
is the determining factor. Typically, new entrants exploit consumers' price
sensitivity by underpricing competitors and stealing market share. In response,
many of the smartest communications companies are bundling products and services,
using complex pricing formulas to maximize returns and avoid pure price competition.
The AT&T Personal Network, for example, is a product that lets consumers build
a customized service package of long distance, wireless and internet components,
each with different pricing options, leading to an aggregated monthly service
fee reflecting cross-product discounts and incentives.
Another factor in the marketing area is the ability to use information technology
(IT) systems to allow sharing of customer information among channel partners.
One communications executive participating in the study noted that his company
keeps close track of channels and expects its extranet to be an important tool
in sharing customer intelligence. He's on the right track. The research estimates
that improving this capability from average to top-tier performance could contribute
another $25 million to return on sales for a typical $2 billion communications
business unit.
For their part, local and long distance companies face the daunting challenge
of integrating multiple customer databases to create a single customer profile.
In particular, creating a holistic view of a large business customer with complex
organizational hierarchies, geographic locations and custom-designed products
requires an enormous amount of integration. Wireless companies and new entrants
may have the advantage here, in that they are not saddled with legacy systems
and therefore have the flexibility to deploy cheaper storage facilities and
powerful data mining tools.
Skilled Salespeople Are the Key
In the area of sales, the Accenture study found that people are key. Four out
of 12 sales capabilities - the ability to develop sales skills, develop effective
sales plans, fairly compensate sales personnel, and attract the best talent
— account for 74 percent of the available ROS impact in moving from average
to top-tier performance. Note that three of those capabilities focus on attracting,
developing and retaining top people.
The research suggests that the nature of sales in the communications industry
has changed dramatically and can be expected to continue to change for some
time. Today's sales person must not only be proficient in traditional sales
skills; he or she must also be able to explain and sell increasingly complex,
bundled products and/or customized solutions.
The availability and the quality of training and mentoring to develop communications
and technical skills in sales personnel can be significant differentiating factors
among organizations. Although such training can be costly and time consuming,
high-performing organizations typically make it mandatory for sales people.
The very pace of technological change poses enormous challenges for salespeople
who are trying to stay current. One communications sales executive said it will
be next to impossible for a company to stay up to speed on required knowledge
and training for its sales force. "Instead, salespeople must be more proactive
in self-learning and self-education, reading everything and talking to as many
people as possible to stay on par with what their customers are learning." As
a result, this company has replaced much of their traditional training classes
and facilities with guidelines, coaching and time allocated for self-development.
Core training is limited to practical skill building.
Technology can be used to take up the slack. Web-enabled training tools that
combine intranets and extranets can store detailed product information and deliver
it to sales reps with easy-to-use interfaces so sales reps always have the latest
information at their fingertips. Computer-based training and business simulators
not only instill basic skills, they also help develop desired behaviors and
sharpen critical thinking skills through realistic on-the-job scenarios that
salespeople work through, along with online coaching and feedback.
But even a company with a thoroughly up-to-speed sales staff will simply be
reacting to customers unless they have a proactive sales plan. The research
found that effective sales plans begin with solid customer intelligence. Without
a customer database with detailed account profiles, field reports on account
attrition and growth potential that allows them to look at customers holistically,
a company is essentially flying blind.
Customer Service:
Focus on Billing Systems, People and Measurement
The customer service area presents the communications industry with some of
its most tempting opportunities for achieving breakthrough differentiation and
competitive advantage. The study found that just three out of 19 key customer
service capabilities — an effective billing system, attracting the best
talent, and measuring customer service effectiveness — account for 43 percent
of the available ROS impact of moving from average to top-tier performer in
customer service.
Historically, regulation and minimal competition encouraged communications companies
to look inward in search of process efficiencies to fuel margin rather than
looking outward for market share. Even though the business arena has undergone
tectonic change, the inward looking mindset still prevails at many communications
companies' service organizations. The net result is a customer service environment
struggling to meet the needs of an increasingly complex marketplace and at the
same time retain and grow its embedded customer base.
One of the most effective ways a communications company can stand out in this
arena is through its billing statement. On the surface, billing sounds deceptively
simple. For customers, unfortunately, telephone bills are anything but. Some
bills are so complex that the average customer cannot comprehend, much less
contest or question, their contents. As a consequence, billing drives a substantial
number of customer questions and complaints. By some measures, 30 percent of
calls to customer service centers are related to billing. Indeed, Ameritech's
decision to overhaul its billing format for customers received front-page treatment
in the Chicago Tribune newspaper.
The Accenture study identified three factors that compose a large part of effective
billing: the ability to generate accurate bills, the extent to which billing
applications are integrated across all customers and products to produce a single
unified statement, and the ability to offer customers online access to their
bills.
Billing is widely discussed but regularly under-funded in most communications
organizations. Nevertheless, the return on this investment can be very high.
In addition to meeting customers' needs, a good, flexible billing system enables
the creation of optimal pricing structures, as well as rapid responses to competitors'
pricing and promotions.
For example, Australia's Telstra overhauled its billing systems and services
in 1996. According to a recent Economist Intelligence Unit/Accenture report2,
the company's FLEXCAB billing system has the unique ability to consolidate all
customer information so that it can offer a one-to-one billing product. Telstra's
billing consultants can tailor bills to a customer's precise billing requirements.
Some companies, for instance, want to consolidate site accounts, while others
prefer their bill broken down into business units. In addition, whenever a new
product is offered, changes can be made in one place only without tying up multiple
resources across multiple systems.
Another benefit of Telstra's advanced billing capability is a more efficient
data mining and warehousing capability. Customers are assigned a single code
number, which is used to track all historical and current data. With a holistic
view of the customer, Telstra is in a better position to develop new products,
pricing strategies and sales plans that target its best customers. One senior
executive at Telstra said, "It's through billing that telcos interact with their
customers. It plays a key role in defining and differentiating our products."
Superior Customer Relationship Management:
Taking the Next Step
It is important to recognize that effective CRM capabilities are not developed
overnight. In any industry, a successful CRM effort requires the support of
the entire enterprise, not just the marketing, sales and service organizations.
It requires commitment and changes in behavior across the company. And, it requires
a concerted effort that combines the right strategy with the process, technology,
and human performance programs needed to implement the vision.
In addition, each company is unique - which means that executives should begin
by systematically developing a thorough understanding of their company's specific
situation. This can be done using a three-step process:
1) Conduct self-assessment
Assess the company's current CRM performance and the potential value of improvements
based on ROS impact, using the insights from this CRM Capabilities Study. This
self-assessment allows the company to compare its performance to that of other
companies.
2) Confirm the areas of large opportunity
For the largest areas of opportunity, companies should determine the specific
performance issues and potential solutions.
3) Prioritize CRM programs
Prioritize current and future investments and allocate resources based on expected
financial impact. Develop an action plan for moving forward. Focus and engage
the organization around the CRM program.
Accenture's research series shows that many companies are working in earnest
to exploit CRM capabilities. At the same time, however, it shows that many more
need to rethink their investments in marketing, sales and service to ensure
they are getting the most for their money. Those companies that keep a sharp
focus on developing the highest-impact CRM capabilities will greatly increase
their chances of prevailing in a highly competitive world.
Footnotes
1
Yankee Group, "Technologically Advanced Family," 1998
2 "Managing Customer Relationships: Lessons from the Leaders," The Economist
Intelligence Unit in cooperation with Accenture, 1998.
