CRM Toan Dien 1701

Featured Organization:
Brother International Corporation
Case Studies Analyzing the Return On Investment of Customer Relationship Management (CRM) Initiatives
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Vo l u m e S i x , N u m b e r 3 J u n e 2 0 0 2
Ti liu tham kho - www.marketingchienluoc.com
Report
Introduction and Company Profile . . . . . . . 4 Business Context, Mission and Driver, Strategy, Business Case . . . . . . . . 6 Business Transformation . . . . . . . . 8 Proceeding with SAP CRM . . . . . . . . . . . 11 CRM: Strategy, Defining Key Performance Indicators . . . . . . . . . . 13 Implementation . . . . . 15 Implementation Costs . . . . . . . . . . . . . . 16 Benefits . . . . . . . . . . . . 17 ROI . . . . . . . . . . . . . . . . 19 The Future . . . . . . . . . . 19 Lessons Learned . . . . . 21 About the ROI Report . . 22
The ROI Report is published by Hill|Holliday, 200 Clarendon Street, Boston, MA 02116. Copyright 2002, The ROI Report. Reproduction prohibited. For more information, please call 1-800-283-1SAP. Please refer to material No. 50 056 102.
Brother Pursues Fully Integrated CRM Strategy to Develop Customer Loyalty, Projected 129% ROI.
Benefits
Reduce Returns.
Each 0.25% reduction in returns
Saves More than $1.6 Million Per Year Consider Customers Lifetime Value (LTV)
not just transaction value.
Anticipate Customer Needs

for new product or software upgrades.
Maximize Customer Experience:

increase accessory sales & revenue growth.
Reduce Servicing Time

for end users, 40%; & dealers, 50%.
Consistently Improve Quality of Service.

Share knowledge across the organization through the Solution Database. Campaign to
Tightly Focused Target Groups

within hours.
At Peppers and Rogers Group, we believe that the goal of Customer Relationship Management (CRM) initiatives is the development of Learning Relationships with customers. CRM practitioners leverage deep understanding of individual customers to make their products or services increasingly smarter over time relative to each customers needs. Customers are hesitant to reinvent this relationship with another firm. Building these types of relationships require a company to make difficult changes in their firms. So why invest in CRM at all? Dr. Martha Rogers and I have always considered CRM to be, first and foremost, a solid financial concept. CRM builds on the axiom that it is more cost-effective to keep and grow an existing customer than to acquire a new one. We were honored to be asked by SAP and Hill Holliday to review the design and execution of this ROI Report. Our firm is often asked to conduct similar studies for clients. And we are pleased to report that the processes used to uncover the financial benefits and derive the financial formula for Brothers CRM initiative were fully-consistent with our own rigorous approach to measuring ROI. In fact, we think the final ROI calculation is probably conservative. This is due to the fact that most companies dont yet measure baseline customer lifetime value (LTV)the sum total of expected future profit flows from a customer. Effective CRM increases LTV. But without a baseline measure of LTV, we cant compare the changes from CRM to the baseline. So, we use existing metrics to measure the short-term impact of CRM. Despite this conservatism, Brother still reports ROI in excess of 100%. After learning about the Brother initiative, we are not surprised by this result. Brother addresses customer needs that extend beyond the product itself, assisting customers on issues of interoperability with other devices. In combination with the companys intelligent approach to collecting and storing the right customer data, Brother is positioning itself to be able to deliver "smarter" service than its competitors over time. Now that Brother has increased the percentage of the Kings that they can identify, they might gain further benefit from ranking customers according to their growth potential. This would help Brother allocate more resources to invest in such accounts, perhaps providing even more proactive and regular supportensuring that these customers continue to choose Brother as they grow. Brother is making huge steps towards becoming a trusted advisor to their customers. Many customers are willing to pay a premium for products and services where they can count on a company to "pick up the conversation where it last left off." As Brother continues to turn customer data into powerful business strategies, they assure themselves of continued CRM success! Sincerely
Don Peppers Founding Partner, Peppers and Rogers Group
20 Gl r Avenue No ak C 0 8 0 ove rw l, T 6 5
V 203.642.5121 F 2 3 6 2 5 2 0.4.16
w w w.to . m 1 1 co
Featured Organization:
Case Studies Analyzing the Return On Investment of Customer Relationship Management (CRM) Initiatives
E X E C U T I V E S U M M A RY
theROI
Vo l u m e S i x , N u m b e r 3 J u n e 2 0 0 2
Report
Introduction and Company Profile . . . . . . . 4 Business Context, Mission and Driver, Strategy, Business Case . . . . . . . . 6 Business Transformation . . . . . . . . 8 Proceeding with SAP CRM . . . . . . . . . . . 11 CRM: Strategy, Defining Key Performance Indicators . . . . . . . . . . 13 Implementation . . . . . 15 Implementation Costs . . . . . . . . . . . . . . 16 Benefits . . . . . . . . . . . . 17 ROI . . . . . . . . . . . . . . . . 19 The Future . . . . . . . . . . 19 Lessons Learned . . . . . 21 About the ROI Report . . 22
The ROI Report is published by Hill|Holliday, 200 Clarendon Street, Boston, MA 02116. Copyright 2002, The ROI Report. Reproduction prohibited. For more information, please call 1-800-283-1SAP. Please refer to material No. 50 056 102.
Brother Pursues Fully Integrated CRM Strategy to Develop Customer Loyalty, Projected 129% ROI.
Brother is a growing global brand, recognized worldwide for providing high quality value added products in the office and home. With the growth of the Small office and Home Office (SOHO) market as well as corporate cost cuttings, Brother has established itself as the value supplier. Brother International Corporation of USA (BIC, hereinafter referred to as Brother) generated approximately $1 billion in revenues for 2001, more than 70% coming from its Business Machine Group which sells office equipment such as printers, fax machines, Multi-function Devices (MFDs), and Ptouch Electronic Labeling Systems. Other businesses of Brother are personal and home products, and industrial machinery and solutions. The Business Machine Group operates in a hypercompetitive market with fragile margins. It is extremely sensitive to customer loyalty, and is therefore a major focus for CRM. Brother sells its information and document products predominantly thought retailers, resellers, and distributors, but takes sole responsibility for all after sale customer contacts. The National Service Division of Brother is organized to provide service to its Customers, and resellers as well as manage Brothers Parts Distribution, Return Center, and Customer Contact Centers. Information and document products nowadays have to offer a dazzling array of features, as well as interoperate with complementary products such as personal computers. Users who become frustrated with products that dont operate with their personal computers right out of the box will either call for help and/or return the product. The vulnerability is manifested by a high percentage of product returns in excess of 12% throughout the information and document products industry.
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E X E C U T I V E S U M M A RY c o n t i n u e d
Reduce returns. Each 0.25% reduction in returns saves more than $1.6 million per year. Enable viewing the lifetime value rather than just one time transaction value of a customer. Identify customers when they come close to needing a new product or need software upgrades. Maximize customer experience during each call, increasing accessory sales, revenue growth. Reduce time for servicing end users by 40%, $1.8 per customer call. Reduce times for servicing dealers by 50%, $3.5 per work order, and up to $10 per swap. Achieve consistent improved quality of service by spreading the knowledge that was in the customer service reps mind through the Solution Database. Lower database maintenance costs by business users as well as by MIS. Campaign to tightly focused target groups within hours. Eliminate multiple systems; use one common software solution to support the growth of the business and its processes. Identify and disseminate best practices. Brother had chosen SAP in 1994 as its ERP system to replace all other mission critical legacy systems. In 2000 Brother proceeded with mySAP.com as its CRM solution to continue with a fully integrated strategy. The new measure of business success going forward would be the Return on Relationship requiring the ability to turn customer data into business strategies and thereby customer relationships into equity. The National Service Divisions service center solution would be the gateway for realizing the strategy. Further reduction in returns and increased sales would be the end games. The ROI Report has projected the internal rate of return on the investment of $1.7 million by Brother International Corp. into CRM to generate an estimated ROI of 129%.
Introduction and Company Profile

Brother is a continually growing global brand, recognized worldwide for providing high quality value added products in the office and home. Brother International Corporation of USA (BIC, hereinafter referred to as Brother) the subject of this study, was established in 1954 and is the fully owned US subsidiary of Brother Industries, Ltd. of Nagoya, Japan. Brother in turn has several subsidiaries including those in Canada, Mexico, Brazil, Chile and Argentina. Brother recorded $1 billion in revenues, constituting 37% of Brother Industries total revenues of $2.7 billion for 2001. Brother Industries, Ltd. as a group consists of close to 60 subsidiaries worldwide. Hence Brothers top-level vision is summed by the Four Gs of Group, Global, Growth, and Green. Brother Industries started in 1928 by manufacturing sewing machines and is a world leader in sewing machines for home and industry, however sewing machines constitute a relatively small portion of the business nowadays. Brother Industries is now concentrated in four major areas consisting of the information and document business, the personal and home business, the machinery and solution business, and the retail and real estate business.
Reproduction Prohibited. Copyright 2002, The ROI Report.
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Fig. 1
BROTHER INTERNATIONAL CORP. USA AT A GLANCE

Sales:
$1 billion in 2001.
Businesses and products:

Information and document business producing office equipment including printers, fax machines, Multi-Function Devices (MFDs), and Ptouch Electronic Labeling Systems. Manufacture and sale of supplies for same; Personal and home products business producing sewing and embroidery machines; Machinery and solutions business producing industrial sewing machines and machine tool solutions serving chiefly apparel, automotive and IT industries.
Key Executives in CRM Initiative:

Terry Koike, President Dean Shulman, Sr. Vice President Charles H. Stadler, Vice President National Service Joy Applebaum, Director, National Service CRM Project Leader Dennis Upton, Chief Information Officer Tony Serignese, Director, MIS CRM Project Leader
Employees:
1,200 in Americas, of which approximately 200+ in National Service Organization.
Headquarters:
Bridgewater, New Jersey.
Operations:
American subsidiaries in Canada, Mexico, Brazil, Chile and Argentina. US R&D center in Tennessee. US Distribution Centers in California and Tennessee, US Customer Contact Centers in California and Tennessee.
Over 70% of all revenue is generated from the Business Machine Group which produces office equipment such as printers, fax machines, Multi-Function Devices, and Ptouch Electronic Labeling Systems, based on Brothers deep competency in printing technologies. The Business Machine Group operates in a hyper-competitive market with relatively fragile margins, and is extremely dependent on technological innovation in electronics for remaining competitive. Steady sale of supplies provides some stability for ongoing profits. Hyper-competition also means that the information and document business is extremely sensitive to fickle customer
loyalty, and is therefore a major focus for CRM and this study. Personal and home products include embroidery and sewing machines. Personal and home products share some similarities with the information and document business in terms of customer relationships and service. These products too have become more sophisticated and interdependent with advances in information technology.
production line and productivity. More recently with reduced product cycle times of the cus-
Its critical to have an end game for implementing CRM. One has to think ahead and ask How will we know we did better with CRM?
The machinery and solutions business may perhaps be considered as being the direct descendent of Brothers original sewing machine business. This business consists of highly sophisticated industrial sewing machines and machine tools serving industrial customers in the apparel, automotive and IT industries among others. In line with the general trend in manufacturing industries this business has redefined Terry Koike, President, Brother International Corporation itself as a solutions business focusing on the customers
tomers, the machine tools have evolved from being specialized to being general purpose and configurable in order to support flexible production cells and lines. Brother sells its product line through various dealers, resellers, retailers, office superstores, and distributors.
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Business Context, Mission and Driver, Strategy, Business Case

The National Service Division of Brother USA was formed in 1980 and has more than 200 employees most of whom are customer service agents working at customer contact centers. The charter of the division can be summarized as Customer Satisfaction. Deceptively simple as it may sound, defining customer satisfaction and defining the customer relationship took many years, and is a never-ending quest for Brother. The National Service Division is organized into four groups. These groups are King (Customer Service,) Queen (Technical Support,) Parts Distribution, and Returns. The King is the ultimate end user and is extremely demanding and must be serviced at all times. The Queen is the dealer/reseller who sells the ultimate end user Brother products and also needs to be supported.
CUSTOMER CALLS
Telephone Calls Answered 2000 1770 1545 1500 1400 1844
Fig. 2
1000 800
500
1996
1997
1998
1999
2000
Calls Per Units Sold 0.5 0.3 0.1 .28 Calls per unit sold are stable.
Source: Brother International
.43
.48
.48
.48
Brother recognized that it was time to focus on retaining and developing its customer base.
Having a Queen sell the end user meant that Brother had to consistently produce value-oriented product with high functionality.
Brother was committed to serving the right features to the right customers by providing the richest set of features when compared against competitors at every critical price point. Brother was always well known for being the best value provider in the information and document sector, especially appealing to small office and home office (SOHO) users, because these users tended to be more value conscious than corporate purchasing bureaucracies.
The SOHO market was a niche until the recession and corporate downsizing in 1991 created a boom of formerly employed workers who now became self-employed. Having a home office or being a consultant was no longer a stigma. Brother was perfectly positioned for this market segment and further established itself as the value supplier. Dean Shulman, Sr. Vice President explains, During difficult times even the
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richest Kings look to save money and enhance their bottom line, but most refuse to sacrifice quality. Brother products thrive in this type of market. This scenario was repeated after the Internet bubble burst in 2000, further strengthened by the trend for businesses to increasingly make use of flexible telecommuting type work practices. Brother, once again with its value philosophy was best positioned to penetrate medium to large businesses and corporations.
As the economy recovered after 1991, Brother recognized it was time to hold on to and to develop all these customers. It would be necessary to somehow view the lifetime value rather than just one time transaction value of a customer. Everybody knew that it was far less costly to keep an existing customer and sell them something else, but it wasnt clear who these customers actually were, or how they would continue to be Brother customers. The first step would have to be collect all the
Fig. 3
important information about the customers in one place. At the time it was very difficult and expensive to do the required type of data collection and database management. Brother
TOTAL CUSTOMER SATISFACTION
During difficult times, customers work to enhance their bottom line without sacrificing quality. Brother thrives in this environment.
Who is the Customer? What has Customer Purchased?
Has Customer had Service?
When has Customer Purchased? What were the Issues?
struggled for several years with the traditional warranty cards in the box approach, which yielded only marginal results. It was apparent that the customer information was in the hands of the Queen, the dealers, so Brother opted for a strategy strongly supporting the Queen. Brother assumed most of the burden from the retailers by taking responsibility for after sales related activities and calls. This worked well enough but still did not close the loop and answer the burning question for Brother, who was the King and what did the King think? In addition to the long-standing strategic marketing requirements above, additional factors conspired to make CRM a burning need for Brother in the new millennium. Information technology had become ubiquitous among non-technical users such as in the SOHO market. Information and document products increasingly had to interoperate with a great variety of personal computers,
Has Customer Called?
How is it Used?
Customer satisfaction is a continuous feedback process.

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operating systems, and application programs. Brothers products had become highly interdependent with, and indeed vulnerable to weaknesses in complementary products such as personal computers and applications. Users were becoming frustrated with products that wouldnt operate with their personal computers without significant configuring and troubleshooting effort on their part, even when Brother was not really at fault. In addition to heavy usage of automatic fax-back and e-mail systems, calls were avalanching into Brothers five cus-
tomer contact centers. Brother was spending millions annually on customer service and was not able to keep up with all the calls. The vulnerability was manifesting itself very painfully, in a high percentage of product returns, typically in excess of 12% throughout the information and document products industry.
Business Transformation
The immediately identified need was to do something to reduce the product returns. Brother had determined as far back as 1996, that simply answering more calls from the approximately 1.8 million distinct callers would address a significant portion of the product returns. Of the calls, only 46% were being answered, and those in turn were not being serviced using anything other than a rudimentary database. The database appliFig. 4
BROTHER KEY PERFORMANCE INDICATORS
Strategic Objective: Total Customer Satisfaction
Critical Success Factor: Error-free Order Processing
Critical Success Factor: Speed of Order Processing
General Performance Indicator: On time deliveries
General Performance Indicator: Volume accuracy
General Performance Indicator: Return Rate
General Performance Indicator: Sales order cycle time
Measurable Performance Indicator: Orders with Deliveries On Time (%)
Measurable Performance Indicator: Orders with Correct Volumes (%)
Measurable Performance Indicator: Returns Among Sales Order Lines (%)
Measurable Performance Indicator: Cycle Time Goods Issue
Measurable Performance Indicator: Cycle Time Invoicing
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BROTHER ENJOYS NEAR-ZERO EMPLOYEE TURNOVER IN SERVICE CENTERS

Brothers National Service Division has achieved what may be an unprecedented feat in the service center industry and has been doing so for many years since 1989. In the call center industry high employee turnover rates are the norm. At Brothers in-house customer contact centers the employee turnover rate is virtually nil even while growth has been moderate. Employees attribute this to Brother being a good company to work for with genuine concern for employees as evidenced by their benefits and working environment and continuous training. Furthermore the customer service job remains interesting with a wide variety of products being supported allowing the development of expertise and associated pride by the employees over time. Joy Applebaum, Director at National Service and the CRM Project Leader explains, that during the CRM project we realized that it was important to let them know what was happening. We did presentations and let our employees know that the management was not just trying to do something to them but there were business drivers and achieving total customer satisfaction was our common purpose. CRM functionality was presented to each group which increased their feedback, their buy-in, and got their ideas integrated.
Joy Applebaum, Director, National Service CRM Project Leader
cation was unable to keep up with the growing customer base, unable to refer to the service history of a caller, unable to place customer orders, and unable to provide essential information about inventory availability or the status of an order.
0.48 from 1998 onward even though call volume grew continuously throughout this time period. In other words, almost half of all units sold intrinsically result in a customer service call from the customer. (Fig.2) It was recognized that while reducing returns by answering more calls was crucial, and progress was being made, it was not necessarily the same as providing customer satisfaction. Brother started from the premise that a customer relationship supported by specifically associated core processes would be the foundation for customer satisfaction. CRM was defined as having one face to the customer regardless of the contact medium, and providing a complete customer history at the push of a button to everyone facing the customer. Total Customer Satisfaction was then formulated as a continuous information process as depicted in fig. 3, starting with information on who purchased what and when, continuing with how the product was being used, and whether the customer had contacted Brother and if so, what
the issues or service requests were. Only after coming full-circle as many times as necessary, would there be complete knowledge of the customer and total customer satisfaction, with any hope of keeping and growing a customer with Brother forever. Supporting the total customer satisfaction information loop would require a Business Warehouse. This could be partially populated by converting some of the existing data, however the final content requirements would not be known until at least some of the CRM processes were in place and generating data. Capturing irrelevant information would be worthless. Five process areas were identified as critical for generating data as well as providing service. These were, answering of a call through CRM, logging the call and retrieving the customer information, accessing and populating the solution database on an ongoing basis for consistent answers, e-mailing or faxing solutions, and finally maximizing customer experience to be able to sell acces-
Brother understood that a customer relationship supported by specific core processes would be the foundation for customer satisfaction.
The number of telephone calls answered was increased by 131% from 1996 to 2000, resulting in a steady decline that more than halved the total dollar value of returned items. In addition some information and a FAQ system was made available on the Internet. The apparent calls per unit sold went up from 0.28 in 1996 and stabilized at
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BROTHER KEY PERFORMANCE INDICATORS

King (customers) Service:
MEASURE CURRENT TARGET CHANGE
Fig. 5
Work order cycle time Outsourced employee turnover First Call Resolution Fax and Printer phone call time Unique callers answered Accessory sales ratio Uniformity or responses Training time Queen (retailers) Service Administrative:
MEASURE
5.3 minutes 90% 89% 7 minutes 64% 3 days
3.5 minutes 72% 94% 6.5 minutes 74% 2 days
40% 20 % points 5 % points 60% of calls by 10% 10% of all callers +1% of all calls Qualitative 400 hours/year
CURRENT
TARGET
CHANGE
Swap cycle time Work order cycle time Research time per problem Vendor inquiries to on-line help Outbound calls Uniformity or responses Queen (retailers) Service Tech Support:
MEASURE
20 minutes 7 minutes 0% 42 per day -
10 minutes 3.5 minutes 75% 6 per day -
50% 50% -20% 75% of total 85% Qualitative
CURRENT
TARGET
CHANGE
Research time per problem Incorrect referrals Dispatch efficiency Uniformity or responses Parts Department:
MEASURE
100% -
0% -
-20% Eliminate 75% Qualitative
CURRENT
TARGET
CHANGE
Customer order cycle time Returns Consumer inquiries Average talk time Service level (calls answered) Consumer Sales:
MEASURE
3.25 minutes -
3 minutes -
- 1 hour -10% -15% 8% +15%
CURRENT
TARGET
CHANGE
Accessory order ratio Callbacks Outbound mail and fax Kana response time Time assisting other customer contact centers Order entry
27% 29 hours -
30% 18 hours -
3% of calls -50% -30% 38% -75% 50%
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BROTHER WINS CUSTOMER SERVICE AWARD AND GETS CITED AMONG TOP 500 IT USERS
The National Service Division of Brother International USA was awarded the 2001 Brother Industries Presidents Award for striving to achieve true customer satisfaction and building long lasting customer relationships contributing to increasing market share. Brother was among the first to implement such a sophisticated CRM solution and their proactive strategy was recognized as being the potential benchmark target for other Brother group companies. Mr. Charles Stadler, Vice President of the National Service Division while accepting the award on behalf of the employees, stated Service jobs can be very difficult and often unrewarding, which makes me especially proud of the excellent job that has been done. Brother was also chosen as one of top 500 users of IT by Infoweek.
Proceeding with SAP CRM
fident it could take on any other SAP expansions including CRM without difficulty. Today this group supports over 900 SAP users, in excess of 300 being within CRM. Terry Koike, President of Brother International Corporation, recalls, In June of 1997 we implemented SAP for our business and the MIS staff, business people, and I spent many countless hours through the implementation period making it a success. Our drive has always been to have our business people become owners of the system and use it to continually improve the way they do business. To that end we are very proud of the CRM implementation as another example of our business people taking ownership of the system and working with our MIS staff to ensure that our system efforts reflect what we need to run our business as effectively as possible.
sories. The last of these was a distinct opportunity as Brothers products had a wide variety of optional accessories and supplies not being stocked by the retailers, and business could be expanded without competing with the retailers. Executing the identified processes well would result in: Shortened call times and efficiencies reducing call center costs; Customer base accumulation in the business information warehouse saving call time used for re-keying basic information and; Building a one-to-one relationship with the customer using the collected information together with email, fax, surveys, and demographic or other differentiating information. Based on an average 3-year product lifetime, it would be possible to identify customers when they came close to needing a new product. In Dean Shulmans words, There would be an opportunity to retain the Brother customer forever.
Brother had chosen SAP in 1994 as its ERP system to replace all other legacy systems for all its mission critical processes. After an arduous project lasting 25 months and utilizing all the energies of 10 Brother MIS SAP staff, plus over 20 different outside consultants and project managers, a less than smooth Go-Live was achieved for 600 R/3 users in mid 1997. Despite this difficult start, Brother stayed with the vision to integrate all its departments into one system and to continue to add any new functionality to the integrated system rather than create disparate systems over time. Brother was committed to a single integrated system philosophy having implemented 16 SAP bubbles to support the business. From 1998 to 2001, the same core Brother MIS team was able to expand SAP to cover the consumer sales and parts operations, perform a new SAP implementation in Mexico, as well as upgrading the versions of R/3 being used at subsidiaries in the US and Canada. All of these projects were achieved on time and under budget. By 2001 the Brother MIS team was con-
Brother had been introduced to the CRM concept in 1998 but SAP CRM was not deemed to have the required functionality at the time. The urgency of the need for CRM motivated looking at other vendors solutions however these were all bolt on and would undo many of the b enefits obtained from having one integrated system. They would also create new risks and be more costly to implement because MIS would have to re-learn much of what had been learned during the SAP implementations. Dennis Upton, CIO, Dean Shulman, Sr. Vice President recalls having to be patient, with a disciplined
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approach, future development could be done more economically. The appearance of mySAP prompted Brother to re-evaluate the feasibility of realizing its CRM needs along the originally envisioned integrated strategy. This time the technology was deemed sufficient so the decision was made in June 2000 to proceed with an ambitious project. Dean Shulman sums it by saying despite challenges, conceptually mySAP is a fully integrated solution to help you build a house with a solid foundation from brick and mortar and not of cards. R/3 is a solid foundation.
mySAP prompted Brother to re-evaluate the feasibility of realizing its CRM goals.
Having made some, even if painful progress in reducing product returns without using integrated CRM, Brother did not proceed with mySAP and CRM until management was completely clear about the business mandate and required process
transformations for doing so. Dean Shulman warns, Horror stories about CRM exist because people do not honestly ask the question, So what? Companies tend to implement existing processes rather than questioning their value. Its critical to have an end game for implementing CRM. Are we implementing CRM because its integrates the customer information well? Capturing more of the same unusable information would be worthless. Is it because we want to answer more customer calls? You can do that with just adding phone lines. How will we k now that we provided better customer satisfaction with CRM?
CRM-BW PRODUCTION ARCHITECTURE
Fig. 6
CRM Parts Operation (Dealers)
CRM Module Server
BIC SAP R/3 Production
Tech Support
Email
Fax
Product Registration SAP Business Warehouse
CRM Call Center Operation (Consumers)
Brother Mail Reporting
Interner Functionality www
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Fig. 7
CRM MODULES AT BROTHER
Online Product Registration registermybrother.com
Service Solutions ASC Search Swaps or Work Orders Accessory Sales Orders Parts Orders
Prospecting
Selling
Internet Self Service Personalized Web Site Real-Time Online Consumer Support
Retaining
Servicing
Solution Database Symptoms and Solutions Adaptive Learning Engine Attach Drawings, URLs, Videos
Interactive Intelligent Agent CTI Solution Database Email, Fax and Mail
CRM: Strategy, Defining Key Performance Indicators

It was clear to Brothers management that the new measure of business success going forward would be the Return on Relationship requiring the ability to turn
customer data into business strategies and thereby customer relationships into equity. The National Service Divisions service center solution would be the gateway for realizing the strategy. Further reduction in returns and increased sales would be the end games. Eliminating multiple systems and using one common software solution to support the growth of the business and its processes was a prerequisite. It would be possible to
improve customer satisfaction by improving the procedures, processes and the information quality for the processes. Process productivity would benefit from not only streamlined processes but also by using best business practices. Process measurements would then be among the lead indicators for total customer satisfaction. The process improvements would feed into lowered transaction costs, in terms of
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REMEMBER THE ABCS
Fig. 8
A wareness
B usiness Process
C ompetence
S upport
Communications Business Vision What's Changing Impact to My Job
Knowledge Process Overviews Process Flows Scenarios
Skills Navigation Transactions Practices Structured On-the-Job Training
Point-of-Need Help Online Reference and How-To's Procedured Policies Job-Aids Help Desk
Brother communicated the vision and project to employees thoroughly from the start.
individual transactions with customers, as well as back-end transactions within internal processes. A common approach would be established across all of the National Service departments and Brother divisions. For example, the same customer number would be used for customer tracking, call tracking, customer history, machine swaps, repairs and parts tracking. The business warehouse would be instrumental by being the definitive repository of all the data collected and generated by all the processes. The business warehouse would also provide powerful reporting tools. For the first time Brother could become a real-time customer driven enterprise, and the customer as well as vendor relationships would be transformed to oneto-one relationships.
National Service was organized to directFortunately the overall quality of customer serly target the King, Queen, Parts Department, vice was high because Brothers National and Consumer Sales with dedicated cusSales Group enjoyed an unheard of turnover tomer service agent groups. The Queen, rate in the industry, approaching virtually being the dealers, had two groups supportzero. Therefore over time all of the customer ing them for administrative and technical service reps had become very knowledgesupport respectively. This grouping allowed able. Yet the rapid introduction of new prodfor further development of ucts and models meant that expertise by the customer a knowledge gap would be service representatives in created whenever a new each particular field. Charles product was released, which Stadler, Vice President of by definition would also be National Service says, the time when more callers When we started with an needed information about Internet and FAQ system, that particular product. The all the knowledge was still Solution Database was in the customer service reps therefore seen as very valumind. Therefore quality of able, and one of the first service depended largely on modules of CRM needing Tony Serignese, Director, MIS CRM Project Leader the particular customer serimplementation. vice rep answering a call.
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Call measures and targets were developed for each customer service group separately. (See fig. 5) The in-house customer contact centers were located in California, New Jersey, and Tennessee with outsourced call center operations located in Tennessee and in Montreal. Based on prior experiences the quality of outsourced customer contact centers was thought to be less than the in-house customer service centers. This was mainly because outsourced staff did not have the same motivation to accumulate the deep knowledge as Brothers own employees, and also because the employee turnover rate at
Before CRM, quality of service depended largely upon the particular customer service rep answering the call.
outsourced customer contact centers was as much as 90% annually. The cost advantage of outsourcing if any, was mainly due to the ease
of downsizing outsourced customer contact centers during periods of slow demand such as due to an economic slowdown or for seasonal variations. National Service opted for the best of both worlds by having a steady bulk of calls handled by the in-house customer contact centers, and having the variable amount handled by outsourced customer contact centers. One of the outsourced customer contact centers was furthermore colocated inside Brothers call center operation in Tennessee to be able to benefit from the same management practices as the in-house call center there.
IMPLEMENTATION TARGET DATES

September 2001 CRM Order Entry with Credit Card Validation
Fig. 9
Implementation
Based on the business requirements for King service, Queen service, the Parts Department, and Consumer Sales, flow charts and scope documents were developed for each. A critical success factor was the use of activities to document the whole relationship with the customer. The system and hardware were sized, and the SAP/MIS and ongoing resources were planned. Data migration from legacy systems was among the first tasks. R/3 contained customer master data plus material and pricing master data. Data containing some previous customer master data and customer transaction data as well as product registration information was converted from Lotus Notes. Information for the solutions database was converted from flat files and FAQ lists. Several levels of data were to be captured and stored in CRM and the Business Warehouse for company reporting require-
September 4, 2001 System "Live" Date
August 2001 Inbound Email Management July 2001 Solutions Database Internal Review
August 2001 Online Product Registration
June 2001 Data Loads
June 2001 Business Warehouse
June 15, 2001 Campaign Management May 2001 Production Hardware In Place, Software Loaded All Servers, BW and R/3 Connections Made January 2001 Business OrganizationCompleted
All target dates were met by not allowing scope creep.

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ments. A custom screen for position throughout differdata gather ing was ent phases depending on designed. Custom enhancethe focus and more daily ments consisting of ABAP tasks had to be taken over by programs, Ztables, and user existing staff to allow the exits within CRM were writsuper users to take part in ten. SAP consultants were system development. used on a part time basis Management commitment over a period of six months. and continuous communiThe length of time spent cation was critical. on site by external consultants was staggered as one Brother was able to impleCharles H. Stadler, Vice President National Service week at Brother and two ment all of the planned weeks off-site. One SAP CRM functions on time and consultant was matched within budget. Tony with each Brother developer and super user Serignese, Director of MIS and the MIS CRM at the start of the project. The staggered Project Leader explains, Staying focused on-site presence and using the buddy syson the initial scope of the project was a crittem optimized the knowledge transfer from ical success factor. the SAP consultants while building the competency of Brothers own MIS. Brother insisted on veteran consultants for the project. All SAP consultants were released before starting to roll out the system in June 2001, and Brother took over the entire proIMPLEMENTATION COSTS ject thereafter. The technical team consisted of veterans from previous R/3 projects. Project Costs The ability of the MIS staff to provide technical support for the software from the out4% set was a significant credibility enhancer 20% and critical success factor. Dennis Upton, CIO recalls, We were definitely able to leverage the knowledge gained during R/3 implementations into the CRM extension.
Implementation Costs
The major headings to be budgeted and controlled were added hardware costs ($400,000), added software costs ($550,000), external consulting fees ($700,000), and MIS staff plus super users outside training costs ($77,000), totaling just over 1.7 million dollars. Brother already had R/3 licenses and was able to convert these into mySAP.com licenses while adding 10% more users and Internet transactions for a total of 950 licensed users. Software license maintenance costs would remain 17% of the original R/3 license costs, estimated at $94,000 annually. The same MIS SAP core team that had implemented and was supporting numerous R/3 modules would continue to also support the new structure including CRM. This was made possible by Brothers approach of using external consultants as mentors for Brothers own development staff and rapidly achieving self-sufficiency. Likewise training costs were kept minimal
Fig. 10
41%
Hardware Software Consulting Outside Training
400,000 550,000 700,000 77,000
35%
A critical success factor for the implementation was the acceptance by the endusers of job reassignments to match the new processes and functions, as well as to absorb the impact of development and transition. There were changes in the project team com-
Total $1,727,000
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ANALYSIS THROUGH THE CAMPAIGN PHASES

Planning/Targeting Marketing Analysis Market Potential Analysis Portfolio Analysis Competitor Analysis Sales Analysis Target Group Modeling Planned Costs/Revenues Analysis Success Measurement Lead Generation Response Rate Cost Benefit Channel Efficiency Execution Monitoring Key Performance Indicators Actual Costs/Revenues Alerts/Thresholds
Fig. 11
Planning/Targeting
Consolidation of nine separate legacy databases into one integrated database is the enabler for almost everything else. The benefits of lower database maintenance costs, by business users as well as by MIS accrue immediately, and are compounded as the customer base grows over time. Over a million customer records have been created thus far and some 6,000 are being added daily. One of the most visible new processes enabled by CRM is campaign management. Brother was among the first companies in the US to link CRM and Business Warehouse for the purpose of campaign management. The old campaign process required consolidation of several downloaded files followed by data scrubbing to eliminate duplicate or bad records. Further data integrity reviews were done to eliminate records missing required fields. Multiple customer lists constituted a maintenance nightmare when removing customers from email or other mailing lists. The process required several
Execution Analysis
by investing to train the super users who would in turn be trainers for users internally. The total additional operating costs would therefore consist mainly of software maintenance costs and would be about $94,000 annually.
Benefits
Brother can be expected to benefit from CRM in tangible financial terms, as well as in longer-term operational and strategic ways. Unfortunately being in a hyper-competitive
industry, many of the operational benefits could be rapidly neutralized rather than setting Brother apart. Although the same operational benefits have potentially the highest returns on investment, they can also be viewed as the price of being allowed to do any business at all in the hyper-competitive information and document products industry. As for the strategic benefits, they are highly sensitive to managements execution and could be somewhat speculative also due to the high rate of technological change. Nevertheless, operational changes are what drive financial results in the short term.
We were definitely able to leverage the knowledge gained during the SAP R/3 implementation into the CRM extension.
days to a week of effort for every campaign but can now be accomplished within hours. The new campaign process can generate tightly focused target groups for campaigning and identify the effectiveness of a cam-
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paign processed from CRM. Ad hoc scenarios can be performed for estimating campaign size. Data integrity is assured thanks to the CRM data entry points where inputs are validated during entry. Duplicate records are eliminated using the search logic within CRM. Reports are generated with information on quantities of products sold as a result of a particular campaign. The simplified CRM campaign tools provided allow super users to create and execute campaigns without any MIS help or intervention. Multiple sales campaigns have been conducted and sales increased soon after implementation. On the service center operations side
Brother expects to benefit from CRM in tangible financial terms, as well as in longer-term strategic and operational ways.
system. Over a six week period, this was increased to more than 20% as more customer records existed in the system. This measure alone is an indicator of improving customer service levels. Some 170,000 products have been registered and some 23,000 inbound mails have been received for processing into CRM thus far. On average the customer service agents achieved pre implementation talk times in less than 3 weeks. A significant reduction of 40% in work order cycle time for servicing the King (end users) is expected. This translates to approximately a $1.80 reduction in cost per customer call processed. Likewise a 50%
Fig. 12
some 30,000 calls are being logged weekly into CRM. Approximately three months of call data was transferred into CRM from the legacy systems. In the beginning, less than 2% of all calls were from customers in the
CAMPAIGN MANAGEMENT IN CRM

Marketing and Campaign Planning Target Group Selection
Planning Budgeting Monitoring What
Campaigns
Modeling Profiling Who
When
Selecting
Telephone
Web
Mobile
Email
Success Management (e.g. ROI) SAP BW Third Party Data Profiles
Campaign Execution/Activity Management
Campaign Analysis
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reduction in work order Each 0.25% reduction in cycle times for servicing the returns, results in savings of Queen (dealers) is expectmore than $1.6 million for ed. This translates to approxthe first year and every year imately $3.50 cost savings thereafter. Brother achieved per work order, and up to a 7% reduction continuously $10 per call in the case of over the five-year period swaps. When asked about from 1996 to 2000, and it progress on some of these is clear that there is still measures, Joy Applebaum, room at the bottom. Director at National Service and CRM Project Leader, Dennis Upton, Chief Information Officer realistically states we are on track yet we probably wont realize the full benefits of the new The ROI Report has projected the interprocesses and system for another 6 months. nal rate of return on the investment of Considering that this would still add up to less $1,727,000 by Brother International Corp. than a year, the speed of return on investment USA into CRM to generate an ROI of at least is evident. Additional call center related ben129% in the most conservative scenario. efits include the ability to report on perforSensitivity analysis shows that the time to mance of distinct call handling groups down break even in all scenarios is about 2 years. to the level of individuals requiring addi-
ed in this exercise. Contributions due to transaction efficiencies were ignored for this exercise because they are highly sensitive to multiple assumptions and some of them are already included in the reduction of returns. In reality these benefits could be an order of magnitude larger, and have even greater strategic value for the business. Also significantly, sales growth in general as well as sales growth directly attributable to CRM was assumed to be zero, because of the hypercompetitive nature of the business.
ROI
Customers say I applaud you for designing a system that maintains the history of your customer.
tional coaching. This can also be used to identify and disseminate best practices. Even the most modest reduction in returns attributable to CRM is sufficient to justify Brothers decision to invest in CRM.
The largest portion of the CRM benefits is obtainable from reductions in returns, which are easily measurable and impact cash flow directly. Benefits attributable to R/3 and initiatives other than CRM were exclud-
The Future
A significant number of additional CRM functions are planned for implementation on top of the basic functionality already in place. As these go live the activities will become more focused on fully using CRM in an integrated fashion to fulfill the original vision for total customer satisfaction. In the longer term, management can leverage the strategic impact of CRM. This will be possible once all the information being generated by the processes is condensed and analyzed to seek larger trends and shifts in the market for Brother to proactively take advantage of.
BUILDING CUSTOMER TRUST

Most customers are positive however there are some who are sensitive about giving the personal information required to create a business partner in CRM. Some might say Why do you need this information? I only want pricing. When the customer service representative explains that this is to better serve the customer in the future if they were to ever call again and that they won't have to repeat the information, most customers feel comfortable. Already the sales areas are reporting a 50% find on business partners that they don't have to create. Some customer reactions have been "You have all that information in there? Cool, computers, way to go!" "I applaud you for designing your system to maintain the history of your customers.""Oh, you already know who I am!""You have me by my phone number?" Starting with the first call, a relationship and the trust that goes with it are being built.
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Then CRM will become a part of higher-level strategy processes within the company. For the immediate future, Brother has planned a detailed time line till the end of 2002. In the second quarter of 2002 catalog and content management tools within CRM will be put into use; Business-to-Consumer and Business-to-Business Internet sites using the CRM product catalog (e-selling) will be
developed; Telesales and telemarketing will be implemented; Marketing planning and customer segmentation will be enhanced; Customer self-service will be encouraged by web enabling the solutions database and; Outbound e-mail functionality will be expanded to other CRM applications. In the third quarter of 2002 call center scripting will be implemented; Cross-sell-
ing and product proposals will be initiated; Inbound e-mail management will be expanded to other product lines and; web based lead generation will be integrated into the CRM Activity Monitor. In the fourth quarter of 2002 work order processing will be fully implemented and the opportunity management functionality will be expanded within sales force automation.
Fig. 13
CRM COMPONENTS
Retention Management Tiered Servicing
Internet Sales
Internet Customer Self Service Field Sales
Customer Development Prospecting Service Center Retaining Sales Management and Support Servicing Selling
Field Service
Customer Interaction Center
Business Partner Collaboration
Marketing Analysis Product Brand Management
Telesales
Telemarketing Internet Marketing
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Lessons Learned
Brother had a solid vision for total customer satisfaction in pursuing CRM. The lessons learned can be summarized as follows. 1. Know your King and Queen. Although you may think you know who your customers are, take a closer look to see if there is a Queen (e.g. dealers) and other
3. Identify core processes that will use CRM and deliver total customer satisfaction. Without the processes, CRM is just another database and is no guarantee for delivering value alone. 4. Low turnover at the same time as cost effectiveness in customer contact centers is possible by investing in long term training and tools including CRM and solution databases which help service agents to provide a high quality service to the customers while keeping them challenged and motivated. 5. Monitor data flows across BW and CRM linkage points. Identify the potential data flow points of failure and develop processes to monitor data flow on a daily basis. Avoid record duplication and ensure consistency of the information. 6. Avoid scope creep. Brother stayed focused on the originally planned feature set during implementation, and relegated any additional requirements that were time intensive to future implementation. This was the most critical success factor for bringing in the project on time and under budget. 7. Call Center doesnt have to be the first part implemented within CRM. Brother chose to implement a business information warehouse and campaign management capabilities first which yielded immediate benefits and learning, followed by call center implementation that required a longer time frame. 8. Mix outsourcing with in-house call-centers and keep enough flexibility to
adjust when demand fluctuates. Keeping a large percentage of the call-centers in house ensures high quality service and long-term learning, which results in more satisfied customers as well as lowered training costs.
PROACTIVE CUSTOMER SERVICE

By having a complete view of the end user Brother can proactively plan and execute software upgrades for its information and document products which have to interoperate with a great variety of personal computers, operating systems, and application programs. Often times when a major operating system or office application vendor releases a new version of their products, Brother also has to make available software upgrades for compatibility or to take advantage of all of the latest software features. Using CRM it is now possible to inform individual users by e-mail and point them to the latest drivers etc. applicable for the particular Brother products they own. This proactive approach maximizes the benefits for the end users and their experience with Brother while also saving them from potential software aggravations later.
In the longer term, management can leverage the strategic impact of CRM.
essential players who will also determine if the customer is satisfied by your products. CRM may turn out to be the solution for filling service and support gaps where your Queen cant do so. 2. Know where your product ends, or doesnt end. Brothers information and document products are highly interdependent with other IT products such as personal computers and operating systems. Therefore customer service inevitably forays into solving system problems that are not necessarily contained only in Brothers own product. While solving a problem caused by an operating system vendor may not be the most cost effective use of your CRM system, not solving the problem may mean you losing your customer.
9. An Experienced development team is a golden asset. Brothers developers had all been with the company for at least 5 years and were experienced in the business processes and several SAP implementations. 10. Focus training by using outside consultants as top-level trainers and advisors to the MIS staff and super users who in turn can lead and train the other users.
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About the ROI Report

This publication is a periodic report on the implementation of enterprise-wide client server applications, such as R/3 and CRM from SAP R/3. The ROI Report is written for senior managers of Fortune1000 organizations around the world. The report is published by Hill|Holliday, a Boston-based communications consultancy that combines rigorous business analysis and marketing expertise with powerful creative and integrated communications across all media to build brands, create customer relationships and drive sales.
Authors
Ali Pirnar is a researcher at the Massachusetts Institute of Technologys Intelligent Engineering Systems Laboratory and Director of Technology Strategy for the System Design&Management, and Leaders for Manufacturing groups. He researches strategy and innovation in the software industry and has consulting experience including benchmarking, reengineering, business and product development spanning the high-tech, telecommunications, finance, oil, construction, and professional services industries. Mr. Pirnar has an SM in Management of Technology, and an SM in Technology and Policy from Sloan School of Management and School of Engineering at MIT. Linda Plazonja is a consultant and founding partner of The ROI Report. Her professional practice focuses on change management, organizational dynamics and project management. Ms. Plazonja has a Bachelor of Arts from the University of Connecticut and a MSW from the Simmons Graduate School of Social Work. Robert Scalea is Executive Vice President of Marketing Sciences at Hill|Holliday, and is a founding partner of The ROI Report. Mr. Scalea is a graduate of the Massachusetts Institute of Technology. He performed post-graduate studies at the Pasteur Institute, University of Paris.
ROI Methodology
The ROI Report interviewed Brother International Corporation executives, managers, and users about their implementation of SAP R/3 and CRM. In addition, Brothers internal financial reports, planning documents, and other materials were reviewed. A literature search also was conducted to obtain additional information and to identify key issues. The ROI calculation was based on a model that evaluated the projected impact and benefits. Working capital carrying costs were analyzed and valued at the estimated inventory carrying costs and Brothers cost of capital. Financial projections for future years were based upon The ROI Reports analysis of internal company documents and comparative industry analyses. The investment analysis included the estimated cost of both external and internal Brother implementation expenses. The ROI was calculated by determining the Internal Rate of Return (IRR) using the time-value-basis of money. The IRR method was chosen because it is felt to be the most conservative approach.
For More Information

The telephone number for The ROI Report is 800283-1SAP. The electronic mail address is SAP.COM. We look forward to hearing and reading your comments on how we can make The ROI Report more valuable to you.
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Featured Organization:

Brother International Corporation

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Anticipate Customer Needs

Maximize Customer Experience:

Reduce Servicing Time

Consistently Improve Quality of Service.

Tightly Focused Target Groups

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Don Peppers Founding Partner, Peppers and Rogers Group

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Brother International Corporation

Introduction and Company Profile

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Brother International Corporation

BROTHER INTERNATIONAL CORP. USA AT A GLANCE

Businesses and products:

Key Executives in CRM Initiative:

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Brother International Corporation

Business Context, Mission and Driver, Strategy, Business Case

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Brother International Corporation

TOTAL CUSTOMER SATISFACTION

Who is the Customer? What has Customer Purchased?

Has Customer had Service?

When has Customer Purchased? What were the Issues?

Has Customer Called?

Customer satisfaction is a continuous feedback process.

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Brother International Corporation

BROTHER KEY PERFORMANCE INDICATORS

Strategic Objective: Total Customer Satisfaction

Critical Success Factor: Error-free Order Processing

Critical Success Factor: Speed of Order Processing

General Performance Indicator: On time deliveries

General Performance Indicator: Volume accuracy

General Performance Indicator: Return Rate

General Performance Indicator: Sales order cycle time

Measurable Performance Indicator: Orders with Deliveries On Time (%)

Measurable Performance Indicator: Orders with Correct Volumes (%)

Measurable Performance Indicator: Returns Among Sales Order Lines (%)

Measurable Performance Indicator: Cycle Time Goods Issue

Measurable Performance Indicator: Cycle Time Invoicing

Source: Brother International

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Brother International Corporation

BROTHER ENJOYS NEAR-ZERO EMPLOYEE TURNOVER IN SERVICE CENTERS

Joy Applebaum, Director, National Service CRM Project Leader

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Brother International Corporation

BROTHER KEY PERFORMANCE INDICATORS

5.3 minutes 90% 89% 7 minutes 64% 3 days

3.5 minutes 72% 94% 6.5 minutes 74% 2 days

20 minutes 7 minutes 0% 42 per day -