Transcript Bounded Rationality

Welcome
Competing on products?
Common customer service complaints
“I entered my account number and the agent still asks me for it.”
“I hate being transferred from one person to another.”
“It is frustrating to sit on hold for minutes on end.”
“Why can’t everybody know my issue? This is the 10th time I have
call about the same problem. Don’t they value my business?”
“I might not get a timely answer if I email. I’d rather call.”
“How come when I go to the web site I get a different answer than
when I call into your call centre?”
“I just want to talk to a live person rather than enter 1, 2, or 3 on my
touchtone phone.”
Avoid information silos
There is often a lack of integration between channels. Sales and Customer Service
Agents had little visibility into the Web channel, and Web sites sometimes had little
correlation with what was available
Web, Email, Wireless
• 24x7
• Visual
Call Centre
• Convenient
• Immediate
Field Sales
Customers
• Hands-on
• Consultative
Resellers
• Local
• Multivendor
Source: Gartner Group
Understanding your customer in
the context of CRM
Visibility Across All Channels…
Geographies
Web & Email
Products
/Services
Call Centre
CUSTOMERS
Customer
Information
Legacy /
Back office
Field Sales
Best
Practices
Partner/Agent
…Drives Service Delivery Across All Business Units
CRM Model
Scope of CRM today
Lead Tracking &
Sales Management
Customer
Service
Management
Contact
Management
Campaign
Management
Customer Database
“single view
of customer”
Workflow &
Fulfilment
Integration with
Product Engines
(Transactions)
Telemarketing
Marketing
Encyclopaedia
Integrated sales, marketing and service across all channels and all
products
Economics of customer retention
“Winning back a lost customer can cost up to 50-100 times as much as keeping a
current one satisfied.”
Rob Yanker, Partner, McKinsey & Company
Understanding your customer is key to retention…..
Know your customer common
business processes
Obtain Customer
Feedback
Initiate Request
Phone
Customer
Email
Web
Identify Customer
Identify Request
Route to Best
resource
Technology
Agent skills
Agent availability
Customer attributes
Screen pop
Customer History
Call Center
Agent
Capture Customer
Details / Update Profile
Complete Task
Cross-sell /
Up-sell Offer
Understanding your customer –
 Business strategy & roadmap
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Customer segmentation
Multi-channel strategy
Business processes
Skills & culture
Technology
Student Solution Components
• Major Functions
• Student Recruiting
• Admissions
• Financial Aid
• Course Management
• Enrollment
• Student Finance
• Academic Records
• Academic Progression
• Research
• Graduation
• Institutional Research
Purdue University
University
Fiscal Affairs
School of
Technology
Undergraduate
Studies
Academic Affairs
Provost
School of
Agriculture
BS Agribusiness
Management
Enrollment
Management
Admissions
Registrar
Graduate
Studies
Admissions
Financial Aid
Registrar
Student Affairs
External
Business
Alliances
MS Aquatic
Entomology
School of
Education
Purdue
North Central
Purdue Calumet
Financial Aid
Academic
Advising
External
Recruitment
Sources
University
Human Resources
Admissions
Student Affairs
Organization Specific
Calendars
Rules
Fee Assessment
Reporting
One Trusted Source of Data
“What do we know about
Carolyn Lee?”
Recruiting/Student Applications
Carolyn
Lee
Self Service Applications
Administrative Applications
“How do we contact
Carolyn Lee?”
Student Solution Demonstration
Apply Hold
Prospect Inquiry
Student
Recruitment
John Purdue
Prospective
Student
Online
Invoice
Postcard
Email
Invitation
Admissions
Application
Admission Decision
Financial Aid
Processing
Self Service
Enrollment
Faculty
Special
Permission
John Purdue
Admitted Student
Financial Aid
Disbursement
Online Payment
Faculty Grading
Cultivate the Entire Relationship
Service &
Retention
Alumni & Life
Long Learners
Student
Services
Identify
Markets
Prospect
Generation
Student
Student
Aid
Enrollments
Recruiting
Cultivate
Inquirers
Application
& Admissions
Admission &
Enrollment
Oracle CRM Recruitment
 Events Planning, Execution &
Registration
 List Management
 Campaign Planning
 Communications Management (ad hoc,
automated, recurring, event triggered,
high volume mass mailing) -- via email,
fax, print, web and third party
fulfillment houses
 360 Degree View of the Person
 Single Database – One Platform
Implementing CRM
Is it a strategic pain point?
Where does it hurt?
What specific processes are annoying
customers?
Examine the customer relationship cycle;
usually a few small problems that
undermine performance.
Do we need perfect real time data?
Is it worth spending money on real time
data if we do not need it?
A CRM solution: strategic benefits
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Most companies have decided to focus their efforts on multiproduct relationships with profitable customer segments. Many
are developing relationship strategies to identify, attract, grow
and retain profitable customer segments - and hence will be
targeting your most profitable customers.
Choose service levels by customer segment and channel. CRM
will help enable different parts of the organisation to understand
and communicate the “value” of each customer and hence the
treatment strategy.
Enable a sales led organisation & culture to be implemented.
The CRM solutions include sophisticated sales tools and sales
management information to assist sales people
Streamlined administrative processes. CRM is likely to reduce
levels of central support, manual administration, error correction
and time taken to serve a customer. Save money..
Avoid costly “data clean-up” and re-work programmes. By
improving the quality and consistency of information recorded
and used there will be far less need to invest in these type of
activities.
RM coming of age
1978:
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Airline deregulation in the U.S.
1985:
1992:
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People Express vs. American Airlines
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Edelman Award: RM for AA $1.4 billion in 3 years
virtually every airline has implemented RM
National Car Rental (vs. GM)
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Edelman Award: RM for SNCF
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AA: $1 billion incremental revenues from RM
Marriott Int’l RM: 4.7% increase in room revenue
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1997:
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1999:
2000-01:
2003:
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Deregulation Europe: telecom, media, energy …
e-distribution supports dynamic pricing & profiling
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Dell, Amazon & Coca Cola experiment dynamic pricing
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RM spans wide range of industries …
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RM Evolution
HealthCare/
Hospitals
Telco/ISP
Insurance/
banking
Sports
Parks
Cruise lines
Entertainment
Car rental
Airlines
1980
Rail
Transp.
Hotels
1985
1990
Freight,
Cargo
Energy
Tour
Operators
Media
1995
Manufact.
2000
Retailers
Revenue Management
Strategies & tactics for
OPTIMIZING PROFITS
based on
DYNAMIC PRICE
SETTING
INVENTORY
CONTROL
under real-time, disaggregate updating of
DEMAND FORECASTS
The RM Challenge
Arrivals of
high paying
customers…
Closer to
departure!
Arrivals of
low paying
customers
…Earlier!
Overbooking metrics
 Service level based:
 P(denial) =0.05
 E[#denials]=2
 Etc.
 Cost based: assign a cost to each and
optimise
Overbooking cost (airlines):
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Direct compensation cost
Provision cost of hotel/meal
Reaccom cost (another flight/airline)
Ill-will cost (~ “lifetime customer value”)
Industries
Overbooking
 Airlines
 Hotels
 Car rentals
 Education
 Manufacturing
 Media
No Overbooking
 Restaurants
 Movies, shows
 Events
 Resort hotels
 Cruise lines
...Decisions Are Not Always
“Rational”
Tickets; $7.95
Tickets; $6.95
$1.00 Discount
for Children &
Seniors
$1.00 Extra
for Middle Aged
People
Price Perception Issues are
Complex...
More Acceptable
Pricing
Product-Based
Open
Discretionary
Discounts and
Promotions
Rewards
Less Acceptable
Pricing
Customer-Based
Hidden
Imposed
Surcharges
Penalties
CRM
RM
 “Attract & retain
customers”
 maximize profit from
each customer
 Segment by customer
LTV
 Price/availability= fct. of
forecasted customer
LTV to the organization
 Ignores capacity issues
and opportunity costs
(displacement)
 Wealth of data
 “generate revenue”
 maximize profit from
available assets
 Segment by customer
WTP
 Price/availability = fct.
of forecasted demand &
available supply
 Ignores customer value
issues and long term
revenues
 Quantifiable value
Maximize long-term profits
CRM & RM
Variables to track
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Actual win or loss
Number of days played
Credit history
Length of stay at hotel
Individual spending preferences
Demographics
Psychographic profiles
Theoretical Revenue
 Theoretical =
(total amount wagered) X
(house advantage)
100$ hand x 10 hours x 100 Hands/hour
x .01 (house adv. 49/51) = $1,000
Can you track every single person???
 Not always
 Difficult in table games
 Theoretical =
(total amount wagered) X
(house advantage)
Where..
Total amount wagered = estimated
average bet x estimated time played
Future estimates…
 ADT = Average Daily Theoretical
Revenue
 Assumes that this level is constant
 Multiply by estimated # of days of
future trip to gain value
 Combined with CRM data on
consumption of food and beverage,
entertainment, pshychographics, etc
Rooms, a scarce resource
 Heads in beds: make money on
gaming
 Comp. Rooms: traditionally a fixed
number of rooms given to big
gamblers
 Used averages to cost out, did not
dynamically look at “opportunity cost”
ReInvestment amount
% of the ADT
ADT $1,000
Reinvestment amount = 30%
= $300
Total value of the room, F&B,
Entertainment, etc. must be less than the
 Room 200, F&B 100, Ent. 80..more than
ADT x reinvest.
 Ergo…try and sell room..
 Sophisticated applications use dynamic
pricing to asses opportunity costs..
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Requirements
 RM – Yield management like the
airlines..
 Player tracking systems..Use cards
like Harras, to register all activity and
psychographic profiles
 POS resturants, theaters, spas, retail
stores, entertainment, etc…
 CRM integrates all of the above!!
 Statistical analysis and optimization
applications.