CRM around the world
By Judith Lamont
The worldwide market for customer relationship management (CRM) software and services continues to thrive, despite uncertainty in the business community overall and especially in IT. Gartner reported in April 2002 that the worldwide market for CRM services showed a healthy increase of more than 10% in 2001, to $22 billion. Future growth is expected to be even better, with a growth rate of 15% in 2002 and a projected market size of $47 billion by 2006.
Although the United States currently accounts for about 40% of the total, much of the increase in market size will be fueled by overseas growth. Those markets, including Western Europe, Latin America and Asia, are growing from a smaller base but with expected rates of 30% to 50% in some cases. Investment in CRM is proceeding even in regions marked by financial and political instability.
A typical pattern for the evolution of CRM in each country is adoption first by global companies that have used the technology in other geographical markets and are expanding into new ones. As CRM’s capability becomes more familiar to the business community, domestic companies begin to use it. Most of the CRM activity in the United States as well as overseas is occurring in large rather than midsize firms. According to AMR Research, CRM implementations are actually more successful in midsize organizations, but such firms are more cautious about adopting them than large enterprises.
Operational CRM, which includes such functions as sales force automation and call centers, has been implemented in most global companies or is scheduled to be put in place by the end of this year. A key focus is on integrating multiple channels such as Internet and call center touch points. Shell Oil Products , for example, implemented a CRM system from PeopleSoft for its European customers to provide a single point of contact and a single view of each customer for its customer service representatives. TIM, the leading mobile communications operator in Italy, used Siebel’s eCommunications software to obtain an integrated view of customers across channels including call centers, the Internet and retail stores.
Analytical CRM, which reveals purchasing patterns and identifies high-value customers, has not been as broadly implemented yet. However, the extensive data collected during operations has much greater value if it is converted into meaningful summaries that support strategic decision-making. Therefore, it is likely that analytical CRM initiatives will take off in coming years.
SWISS entices airline passengers
Swiss, the newly formed intercontinental airline in Switzerland, is building in CRM from the outset using E.piphany E.6 platform. Operating in about 60 countries, Swiss is defining its success in large part by its ability to attain high levels of customer service.
E.piphany’s E.6 platform had several features that made it particularly attractive to Swiss. Peter Baumgartner, Swiss’ general manager of Core Customer Marketing, cites its ability to perform real-time customer intelligence and its strong integration capabilities. Although the company is newly formed, it has travel histories from its predecessor companies, Swissair and Crossair, and wished to make use of that legacy data.
E.piphany’s E.6 is said to be unusual in combining operational and analytic CRM. Leading operational CRM companies such as Siebel and PeopleSoft have focused on collecting customer data, though now both have taken steps to add analytical capabilities. Business intelligence tools specialize in analyzing the data collected by operational systems. The E.6 platform serves both roles, providing a single view of each customer and integrating data from diverse systems, but also performing sophisticated analytics. It also is an end-to-end J2EE-based architecture that provides a common infrastructure for greater system-to-system interoperability and easy customization.
The use of Unicode in Epiphany’s E.6 platform is another feature that made the product a good match for an international firm such as Swiss. Unicode is a standard for encoding characters that allows use of multilingual text in a single database. Supported by leading database vendors such as Oracle, Sybase and Microsoft, the use of Unicode allows E.piphany’s clients to deploy a single CRM system in multiple countries and accommodate different languages. Without Unicode, users would have to deploy separate systems for each country, so obtaining an integrated view of customers throughout the world would be impossible to achieve within the CRM system.
“We have seen an increase in our business outside North America,” says Paul Rodwick, VP of Market Development and Strategy at E.piphany, “both in large firms and regional ones.” He notes that even when a single system is deployed globally, regional adaptations need to be carefully planned. At a minimum, the interface must be presented in the local language, but screen layout may require adjustment. “We had a team that developed a completely new layout in Japan,” Rodwick adds, “because the density of information is much greater in the Japanese character set.”
Although it is too soon to tell whether Swiss will achieve its goals, Baumgartner has been impressed by E.piphany’s process. The sales portion of the CRM implementation is in its final phase and training in its use took place over the summer; the marketing component and its associated training are scheduled for the fall.
CRM in the cards for Latin America
In Brazil, Redecard has been using the MicroStrategy Business Intelligence Platform to analyze transaction and customer data. Redecard is responsible for the capture and transmission of MasterCard, MasterCard Electronic, Maestro, Diners Club International and RedeShop credit and debit card transactions through more than 680,000 affiliated merchants in Brazil.
The company selected MicroStrategy’s analytical software because it is totally Web-based, easy to access and easy to use, according to Victor Esteves, director of Business Intelligence at Redecard. “The quality of our decision-making has improved because we are spending less time gathering the supporting information,” he says, estimating that the company has cut research time by 30%. Moreover, the company can do things with the data that were not possible before.
Redecard is able to perform analyses of market segmentation and determine what types of customers should be targets for certain products, for example. Business intelligence analysts at Redecard then deliver that information to the people who need it, including those making operational decisions about purchasing merchandise and managing inventory. Also, they can make marketing campaigns selling a specific service to a specific client. “We can get exactly the right information to each person, and this helps direct their activities on a daily basis,” adds Esteves.
The company continues to expand the functionality of the system, and plans to add such capabilities as narrowcasting (sending out e-mail messages to targeted customers). According to Esteves, 18 million cardholders are using 38 million credit cards in Brazil. Although that number constitutes less than 10% of the adult population in Brazil, usage is expanding at about 20% per year. That translates into a significant opportunity for credit card companies and for the initiatives that support CRM activities.
Another MicroStrategy client in Latin America, Mexican grocery retailer Soriana, has established a loyalty program with cards that give points to customers for each transaction. Points can be exchanged for merchandise such as crystal and dinnerware in Soriana’s 109 stores and subsidiary retailers. The loyalty program was generating a significant amount of customer data, but Soriana needed more effective data management and analysis capabilities. In 2001, the company began analyzing the data to understand customer purchasing patterns. Market basket analyses are helping Soriana to determine promotion effectiveness and the impact of price changes on purchasing behavior. In addition, the system incorporates demographic information to assist in designing advertising programs.
“We see a huge shift into analytical CRM,” says Tom Villani, VP for Product Management in Field Programs at MicroStrategy. “Performing the right analyses can help retain the best customers, and also to convert the middle-tier customers to high lifetime-value customers,” Villani adds. As an example, he references Europe’s major telcos, nine out of 10 of which, he says, are using MicroStrategy software to get a handle on their customer data and call center operations. He also stresses the importance of developing a good data model.
“Each business is different,” Villani points out, “and one size doesn’t usually fit all.” In addition, he notes that MicroStrategy’s “portable” business intelligence modules can be run against the client’s existing data warehouses rather than require the data to be loaded into a new one associated with the analytical tool.
India’s intriguing opportunities
The CRM market in India is something of a paradox. IDC’s latest figures show a substantial drop in the market for CRM software between the first half of 2001 and the second half. Nevertheless, longer-term projections from IDC and others are strongly positive. India faces some obstacles achieving widespread deployment of CRM, including limited telephone services and in some cases, lack of customer databases. But as technology advances, the potential for using CRM to obtain a competitive edge will become more feasible. As in other parts of the world, the greatest interest in CRM comes from telecommunications, banking and financial services, insurance and pharmaceuticals.
SAS India, a wholly-owned subsidiary of the business intelligence firm SAS, has provided CRM solutions in India for Citibank, Standard Chartered Bank, and GE Capital, among others. Those companies fit the profile of global firms that have implemented CRM in other markets and are now expanding their coverage. However, domestic companies are also starting to recognize the value of CRM. Bharti Cellular, Hindustan Lever Ltd., Goodlass Nerolac Paints and Ravissant among others have implemented CRM systems from SAS India.
“The Indian market has become fiercely competitive,” says Gourish Hosangady, managing director for SAS India. “To retain their existing market share, companies have to adopt technologies that provide better customer service and match customer requirements.”
According to Hosangady, the CRM market in India is not clearly defined into operational and analytical CRM. Thus some firms believe that a CRM implementation is completed once the customer data is collected and accessible. Others, however, are getting the message about analytics. Hosangady cites the case of Bharti Cellular, the mobile division of Bharti Tele-Ventures, India’s leading private sector telecommunications service provider. Bharti Cellular reduced customer churn rates significantly in the post-paid subscriber segment after implementing SAS Customer Retention for Telecommunications. Standard Chartered Bank, the world’s leading emerging markets bank, is using SAS solutions in India to manage and optimize the profitability of all the products that constitute its retail portfolio. It also uses the information for driving product strategy, identifying cross-selling and upselling opportunities, and credit risk management.
Judith Lamont is a research analyst with Zentek Corp., e-mail email@example.com.