PA's CRM expertise and research was featured in this FT Management Report.
Highlights include:
Chapter 5: Managing the change to customer relationship management - structural resources
"Phil Walker, head of CRM marketing and transformation at PA Consulting, also advised looking for quick answers to get started because most difficulty is experienced in struggling to know where to start. In particular, he would recommend looking at the customer base to get rid of loss makers and understand where money is being made. As an example, British Airways has built future plans around the realisation that, of its 35 million customers worldwide, just 60,000 Gold Club members accounted for 25% of profit."
The report also published two of PA's case studies. One case study was on a leading building society which was described as:
"The following case, implemented by PA Consulting is as near to a textbook scenario as is possible. It illustrates perfectly the various key issues in implementing CRM supporting systems into IT environments where there has already been a great deal of investment and where there is significant potential capability to be realised. It also illustrates an application of the CRM philosophy to improve the value to both customers and the business when they meet (in this case, at the front desk of a building society branch). Although CRM ought to revolutionise the relationship with the customer, it does not necessarily need to replace the channel through which the relationship is conducted but rather should aim to improve the relationship, however it is conducted."
The other case study, on a leading high street bank, was described as:
"The following case from within the files of PA Consulting illustrates the principle of achieving quick wins in order to get new systems up and running quickly, to help gain experience and to demonstrate to those who have to use it, how well the new idea can work."
The case study follows:
A LEADING HIGH STREET BANK
DEVELOPING A DATA WAREHOUSE USING A RAPID SYSTEMS DEVELOPMENT APPROACH
A leading UK high street bank required a major improvement in the quality of the information it provided to its debt analysts. The bank realised that high quality information would enable it to deliver a fast, accurate and comprehensive overview of its lending portfolio. PA developed a data warehouse that met all of the bank's requirements and enabled it to achieve significant improvements in its business in an accelerated timescale.
Understanding the commercial possibilities of having an accurate lending book
The bank needed to provide its debt analysts with an accurate, up-to-date view of its lending book to help them with portfolio analysis and the implementation of central/regional lending, risk and pricing strategies. Despite knowing what its requirements were in terms of objectives, the bank and its staff were largely unsure of their actual requirements in terms of system capabilities.
Designing the data warehouse
PA set about solving the problem by using its rapid systems development approach. PA developed a Management Information System which would enable the analysts to identify patterns and trends in the lending book by any criteria. The data warehouse was developed using techniques designed to establish the actual needs of the users as the project progressed. At the same time, it decided that the best way to proceed was by delivering frequent working solutions, or part-solutions, which it could demonstrate to the bank and on which it could then receive feedback.
Having seen something of the capabilities of the new system, the users were better able to identify further requirements, which could then be built into the final set-up. This process ensured that the users were kept fully informed throughout the project and that the final system was tailored to their specific needs.
An excerpt from Chapter 3: The difference CRM makes
PA Consulting Group addressed this issue in the 'Managing for customer value' survey. In answer to the question 'why manage for customer value', the report's authors offered a simple response. "There is clear evidence that by creating more value for your customers, you will increase the value of your customers, and ultimately the value you can create for shareholders." This is very important because CRM should not be viewed as a socially good work that burnishes the image but adds little to the bottom line. A CRM strategy will deliver a better and more profitable business by eliminating much of the wasteful 'damage limitation' costs that too many take for granted.
Figure 3.1: A virtuous circle of customer relationship value
Source: PA Consulting Group
The PA report goes on to explain that, "the logical stepping stones for achieving this virtuous circle are:
1. Value to customers: customers buy products and service from which they derive benefits through application. Customer value is the benefits less the costs.
2. Competitive differentiation: superior customer value is created when the value is greater than that attainable from competitors or substitutes.
3. Customer retention: customers who appreciate the superior value will repeat purchases and buy additional items.
4. Customer loyalty: customers commit to you, rationally and emotionally; they will seek you out, even pay a premium, and recommend you to others.
5. Value of customers: the 'best' customers want to work with you, and will become highly profitable over time, ie they will have a high 'lifetime value'.
6. Increased profitability: loyal customers mean reduced marketing and operating costs, together with increased purchases and increased price paid.
7. Sustainable growth: loyal customers fuel improved cash flow and profitable growth. Employees grow loyal, and advocates recruit more people like them.
8. Shareholder value: investors are attracted by the sustainable source of future returns, enabling the business to invest in creating even greater customer value.
"Therefore," the PA report continues, "the management of customer value, or rather the creation of superior customer value, is essential to the creation of superior shareholder value, and to the success of the business."
Published by Lloyds List Publishing (LLP).
