The winning feature of the new methodology is seen as its emphasis on customer focus. ZFS proactively asks its customers what they want.
Customer feedback is intended to be used to inform all decision making.
Prior to the introduction of the framework, value propositions were organ- ized on product lines and the company delivered several individual prod- ucts. The catalyst for ZFS’s refocus was learning that customers do not just want a whole range of products, but require solutions that are pertinent to their lives and needs. Furthermore, this customer intelligence is not self- contained within Proposition Development, but is actively channelled to sales advisers, customer communications managers and other functions.
‘Traditionally, we operated product silos. Now we work across these silos to create solutions’, comments Malhotra.
Chapter 4
The multi-channel integration process
Business strategy
• Business vision
• Industry and competitive characteristics
Customer strategy
• Customer choice and customer characteristics
• Segment granularity
Information management process
Back-office applications Front-office
applications Analysis
tools IT
systems
Data repository
Integrated channel management
Sales force
Outlets
Telephony
Electronic commerce Direct marketing
Mobile commerce
VirtualPhysical
Shareholder results
• Employee value
• Customer value
• Shareholder value
• Cost reduction
Performance monitoring
• Standards
• Satisfaction measurement
• Results and KPIs Value
customer receives
• Value proposition
• Value assessment
Value organization receives
• Acquisition economics
• Retention economics Customer segment lifetime value analysis Strategy development
process:
Multi-channel integration process:
Performance assessment process:
Value creation process:
The strategy framework for CRM
The multi-channel integration process has a pivotal role to play in CRM as it takes the outputs of the business strategy and value cre- ation processes and translates them into value-adding interactions with customers. These include all pre-sales communications, the sales interaction, post-sales service and support with the customer.
This process involves making decisions about the most appropriate combination of channel participants and channel options through which to interact with your customer base, how to ensure the
customer experiences is highly positive within those channels and, where the customer interacts with more than one channel, how to obtain and present a ‘single unified view of the customer’. Put simply the multi-channel integration process is concerned with two key questions:
1. What are the best ways for us to get to customers and for customers to get to us?
2. What does a perfect or outstanding customer experience, deliverable at an affordable cost, look like?
Multi-channel integration involves all the contacts and interfaces between the customer and the organization supplying them. There are now a large number of channels through which customers and suppliers may interact in a variety of communications, sales and service situations. Integrating these channel participants and chan- nel options is the key to success. Many large organizations are now starting to think about implementing a multi-channel delivery capa- bility in an integrated way.
This chapter reviews the multi-channel integration process with the objective of providing an understanding of integrated channel management and the role of the six channel categories in the CRM strategy framework. In order to consider the optimal nature of the enterprise’s customer interface in a multi-channel environment the following issues are addressed in this chapter:
● the nature of channel participants and channel options
● the structure of industry channels
● the types of channel options and channel categories
● the channel strategies a business can select from
● the nature of the customer experience
● the development of an integrated multi-channel strategy.
Channel participants and channel options
Channel participants (or channel members) refer to the intermediaries such as wholesalers, retailers and value-added resellers (VARs) through which a supplier reaches its final customers. Channel options (or channel media) refer to the means by which the supplier (if selling
directly to the end customer), or its intermediaries, interacts with customers. Sales forces, retail branches, call centres and the Internet are examples of channel options. Collectively the term channel is used here to include both channel participants and channel options.
This multitude of channels creates enormous opportunities for improving the scope and strength of customer relationships but great challenges in managing the complexity of channels in a successful and cost-effective manner.
To establish a strong customer relationship, both supplier and cus- tomer must have ready and reliable communications, interactions and access to each other. Thus ensuring that effective and efficient two-way (and where appropriate, one-way) contact exists with the customer is a priority issue for successful CRM.
The development of electronic channels
Of particular importance is the recent development of electronic channels. In today’s environment costs within many traditional channels, such as in sales forces and branch networks, are increasing at an alarming rate. As a result, there is increasing pressure on organ- izations to move to electronic channels and seek to develop customer self-service strategies in order to reduce cost.
Many customers in both B2C and B2B sectors are now embracing self-service. Self-service enables customers to order products or ser- vices, seek information and solve problems at the time and place their needs dictate. This is made possible through a combination of personalized web sites and contact centres. Benefits to the customer can be identified through regular customer satisfaction tracking sur- veys. In B2C markets there are an increasing number of companies such as Amazon and CDnow that have successfully developed self- service models. Consumer markets, with relatively simple product offers, especially lend themselves to the use of Internet self-service.
However, not all companies should or will move to full self-service models.
In B2B markets, for example, important interactions such as major sales are likely to be encouraged in face-to-face encounters while various more routine transactions are handled via the e-channel. By channelling low value and less complex transactions through elec- tronic routes, scarce resources, such as an account manager’s time, can be much better deployed. In B2B markets rarely does an electronic
channel fully support its own business case – it needs to be seen in the overall context of the full channel mix. For example, in online purchasing, business customers will generally want to speak to someone to purchase the services they require so the integration of call centre and web becomes essential. Also, the overall economics of individual channels needs be considered in the context of the eco- nomics of the overarching full channel mix. For example, reductions in head count for face-to-face sales support the investment for desk- based teams and the electronic channels.
However, as companies seek to introduce such cost savings, it is essential that there is not a significant reduction in customer value as the result of the introduction of a new channel. The dramatic decline of the technology stocks listed on stock exchanges at the start of this decade caused an increased focus on electronic channel solutions that address real customer needs and create significant customer value and are based on sound business models. Thus a more sophis- ticated approach to using electronic channels is emerging – one that seeks increases in customer satisfaction and increases in sales and profits, as well as reducing the cost of sale.
Reviewing industry channel structures
A review of the existing industry structure and its channel partici- pants, as well as likely future shifts in it, needs to be undertaken prior to addressing how multiple channels should best work together. While this review is typically undertaken as part of the strategy development process discussed in Chapter 2, it needs to now be considered at a more detailed level within the multi-channel integration process.
Channel participants
The existing industry channel structure needs to be reviewed and documented. This involves a study of the current channel partici- pants and their roles. There are a number of channel participants through which a company may seek to serve the final customer, some of which are illustrated in Figure 4.1. The channel structure that will be appropriate for any given organization will depend upon
which approach can best attract the final customers in the target segment, which in turn will depend upon the organization’s and inter- mediaries’ ability to create value relevant to those customers’ needs.
Of increasing importance in B2B markets is one type of intermedi- ary – ‘business partners’. In the IT sector, for example, such business partners range from being small niche operators or value added resellers (VARs) to large system integrators. A number of IT software suppliers have found their competencies lie more in software devel- opment than customer relationships and for this reason, or because of capacity problems and implementation weaknesses, have turned to this type of partner.
The choice regarding channel alternatives should be made follow- ing a determination of the value proposition relevant to the final cus- tomer in the desired segments that a company wishes to serve and may involve a combination of those shown above. Central to these decisions will be an analysis of the value of these customer segments to the organization, based on the economics of segments. This topic is discussed in Chapter 3.
Reviewing channel alternatives
In the context of rapid technological change, the role of channel participants should be subject to regular scrutiny as circumstances
Buyer (e.g. wholesaler)
Intermediary (e.g. distributor)
Intermediary (e.g. retailer)
Direct Intermediary
(e.g. broker/VAR)
Intermediary (e.g. retailer)
Buyer (e.g. wholesaler) Supplier
Consumer
Figure 4.1 Alternative industry structures in terms of channel participants
change and new opportunities present themselves. There is now an increasing recognition that for a firm to be successful it needs to cre- ate a demand chain that is more effective than that of its competitors.
Therefore it is demand chains or market networks that compete, rather than just companies. Thus the task that needs to be addressed is how to create superiority in what has been termed the value deliv- ery network.1
As well as considering target customers’ current buying behav- iours and motivations, it is important for a company also to consider how these might change over time, particularly with respect to the impact of developing technology. Over the last decade, the tradi- tional channel structures of many industries have been dismantled and reconfigured in response to new electronic technologies that have opened new paths to market.
In the future, organizations will develop new channel manage- ment teams who map channel coverage for new propositions and products as they come to market. Such teams will manage changes in the channel mix, based on consequent shifts in margins, as prod- ucts move through their life-cycle.
Understanding structural change – the role of intermediaries
Thus managers responsible for channel strategy need to understand both the nature of their industry channel structure now and how it is likely to alter in the future. Valuable insights into emerging trends within channel structures can be gained from understanding the pre- vious evolution of the industry channel structure as well as examin- ing the experiences of other sectors or other industries on a global basis. Of particular relevance are the opportunities and threats that result from two forms of structural change: disintermediation and reintermediation.