July 2001

CRM And The Customer-Driven Demand Chain

BY STEPHANIE LANGENFELD, E.PIPHANY

[ Go Right To: The Case For Internet Data Interchange (IDI) ]

Why the urgency for a customer-driven demand chain? The main impetus is the growing complexity of the marketing, sales and customer service environment. New channels such as the Web, b-to-b marketplaces, wireless, IVR and kiosks, and new global and e-commerce competitors, are increasing the complexity of managing customer relationships in the demand chain. Effectively managing these relationships can be a major challenge. Technologies like the Internet empower customers, enabling them to compare prices more easily and switch vendors. Business-to-business marketplaces aggregate products and threaten margins. In many industries, a complex, multi-tiered ecosystem of channel partners, such as distributors, wholesalers, VARs and resellers, "owns" the customer. A customer-driven demand chain helps lock-in b-to-b customers by proactively delivering custom products and services and personalized support at every touch point in every channel. A well-managed demand chain can balance channel-partner needs with direct customer relationships, reducing channel cannibalization and increasing revenue.

Information technology has a key role to play in optimizing the customer-driven demand chain. Using the Internet for universal connectivity and customer relationship management (CRM) technology to pull, consolidate and analyze data from both direct and indirect sales channels, enterprises can construct a single view of the customer and gain an intimate understanding of their own demand chain.

Such intelligence allows business managers to "see through" the channel to identify customer demand and analyze sales partner effectiveness. When connected via a shared CRM solution, manufacturers, distributors, resellers and retailers can more easily leverage end-customer data to collaborate in product development, sales, marketing and service initiatives -- and move functions to the channel partners best equipped to perform them. They can also interact more consistently with customers across channels and touch points, presenting a consistent face for the enterprise to improve sales, marketing and service satisfaction. Additionally, CRM can hasten the "insight to action" cycle to accelerate sales and help managers respond quickly to market shifts.

CRM IN THE CUSTOMER-DRIVEN DEMAND CHAIN
The CRM solution for a customer-driven demand chain consists of two parts: analytical applications for gathering and gaining business insight from information, and action-oriented applications such as campaign management, sales force automation, customer service and partner relationship management for managing customer interactions. Note that an integrated solution produces best results, as the analytical application feeds the other elements.

Analytics. Most companies start with extraction, transformation and loading (ETL) technology that aggregates data from the extended enterprise in a data mart or warehouse. If your company already has a data mart, the CRM solution should pull data from it. If you do not have a data mart, be sure the solution can access all relevant sources, such as transaction systems, ERP, the Web, sales force automation, the contact center, partner management or any system that stores customer and partner information. Some solutions are optimized for a single touch point, such as the Web or ERP, but not the contact center. With such systems, you may not know the customer well enough to make critical business decisions.

Using data mining, OLAP and other analytical techniques, the analytical solution should offer pre-packaged and custom reports for the business managers in marketing, sales, partner management and customer service. Report output will be based on business metrics such as quarterly sales and sales forecasts, marketing return on investment, sales by partners and market demand trends by product lines. When evaluating solutions, be sure to check the ease of use -- you don't want IT staffers running SQL queries every time a business manager needs a report. Also evaluate the degree of granularity. In the b-to-b space, companies must often deal with a small number of very important customers. You will want to drill down to a fine level of detail, such as the attributes that predict product interest for the top 10 companies to which to pitch a new marketing campaign.

Campaign management. Moving to action-oriented applications, campaign management uses offline business intelligence to analyze customer interactions, segment them and then execute multichannel marketing campaigns via e-mail, direct mail and through call-center contacts. A key feature for demand-chain optimization is synchronization: Unless you synchronize the campaign among all customer touch points, campaign management software may do more harm than good. A customer receiving a promotion via e-mail, for instance, may want to discuss it with a sales or customer service representative, who should be in the marketing loop at all times.

Real-time personalization. When customers are on the Web site or interacting with a customer service representative, they are providing information the company can use to improve service and boost revenues. Real-time personalization technologies will proactively recommend a product or service that fits the customer's needs exactly -- especially important in b-to-b, where customers in long-term, high-volume relationships expect personalized service.

A real-time analytical engine will work in real-time, analyzing Web clicks or sales rep interactions and matching them with past purchasing history to make product recommendations -- such as a new router that fits the customer's IT infrastructure, an open purchasing order and previous price preferences. With real-time personalization, manufacturers and suppliers could collaborate to present jointly constructed campaigns to end-customers. Manufacturers would gain deep insight into previously unattainable end-customer product interests from their responses.

Customer service. Business-to-business customers expect a high level of customer service. Meeting their needs requires a customer service application that is aware of all inbound and outbound events, communications and transactions. Each touch point, whether e-mail, the Web, voice or fax, should be armed with the customer's complete story, providing the same personalized level of service whether customers are talking to a contact center representative or using a self-service option.

Sales force automation. Many sales force automation (SFA) systems focus on sales management metrics, helping managers manage the sales reps. Such systems are only as good as the data entered by the sales reps; unless SFA truly helps the reps make more sales, it is unlikely they will use it. For an optimized, customer-driven demand chain, the SFA solution should give reps immediate access to relevant customer information, such as order history, recent service calls and problems and the real-time personalization technology mentioned earlier. Also consider how sales reps will use the system -- a wireless connection to a PDA, for instance, can greatly increase sales productivity.

Partner relationship management. In our increasingly complex ecosystem of channel partners, partner relationship management (PRM) software is crucial to an optimized demand chain. A base level of functionality helps manufacturers understand partner behavior and define rules of engagement, but the future is partner collaboration. By sharing information and managing workflow, PRM can help trading partners collectively target customers, coordinate and collaborate on marketing campaigns, and define the most promising customer segments.

GETTING IT DONE
With the benefits so clear, using CRM to create a customer-driven demand chain might seem like a "must-have" solution. A common objection, however, is the complexity of so many applications working together. This objection can be overcome by realizing that the entire solution does not need to be deployed at once.

Most companies start with analytics, the key to understanding the technology's benefits and discovering demand-chain opportunities. An example comes from one of the world's largest professional service firms: a company that uses CRM analytics to understand its top 200 clients. Real-world benefits include increased availability of performance data and strategic insight, faster account decisions due to better data access and business insight, more proactive marketing and improved troubleshooting and account monitoring.

Some companies find it makes sense to deploy other elements first, such as a customer service solution, when building a new contact center, or real-time personalization on an e-commerce site. A major auto manufacturer, for instance, uses real-time personalization to speed up the sales cycle by presenting the most appropriate offer to Web-based buyers. Leads are then routed to dealers, prioritized by "affinity to buy" scoring performed by the personalization engine.

Whatever CRM applications you deploy, it pays to get the business managers involved early. Once they see the value of increased access to customer data or the value of immediate business insight that accompanies detailed analytical reporting, their buy-in will help push the project forward. Additionally, their input is needed to help IT understand the critical sources and locations of customer and partner data. Partner buy-in also is a must. This can be problematic due to "channel conflict," the fear of giving manufacturers access to partners' customers. The antidote is convincing partners that in return for sharing, they will receive valuable insight and best practices for increased sales success. History has shown that channel partners will favor manufacturers that are dedicated to providing such support.

For all the reasons mentioned, using CRM to optimize a customer-driven demand chain can be a boon for manufacturers, channel partners and customers alike -- as well as for IT executives whose job, increasingly, is to create business value.

Stephanie Langenfeld is director of business-to-business marketing programs at E.piphany, a San Mateo, California-based provider of intelligent customer interaction software for business-to-business and business-to-consumer companies.

[ Return To The July 2001 Table Of Contents ]

BY PETER J. WEYMAN

"Put it in writing and send it to me." When businesses were simpler and smaller than they are today and when most traded only locally, the written word helped assure certainty and accuracy in business interactions. However, with time, many once-small businesses have evolved into large corporations trading products and services around the globe, with multiple functional organizations and elaborate cross-functional business processes. In today's fast-paced global business environment, certainty and accuracy are every bit as important, yet the convention of organizing information into documents and sending them to other involved parties has not kept pace with corporate change.

Can the business promise of a ubiquitous Internet -- seamless integration and perfect, instant document transmission -- be realized? Or is modern business, for all its investment in information technology, doomed to deal with the inaccuracies and vagaries of business documents forever? How long will companies have to live with missing and incorrectly written or read data, human error and transportation delays and losses?

Companies that rely on Internet Data Interchange (IDI) are able to bypass the historical problems associated with document exchange. To understand IDI and its benefits, however, it is important to look back at the factors that prompted its evolution.

The Road To Paper Hell
The role of documents in business has always been that of organizing information relevant to a transaction in a permanent, unambiguous and irrefutable manner. Documents capture information that companies either store for later retrieval or transmit to other external or internal parties such as trading partners or other corporate departments.

Organized information is generally stored in a form suitable for storage and retrieval or transmission, usually a printed-paper document. Companies of varying sizes may use different methods to create documents, and the amount and type of information to be stored or transmitted also varies widely by industry. (Some industries are subject to government regulations that require specific documentation practices, for example.) The amount and type of information to be stored may also depend on the value or complexity of the transaction being documented.

The Human Factor
Manual intervention and human processing deal with differences between companies. At a chemical company, for instance, an order entry clerk or salesperson might convert a purchase order line item for 30 kilograms of "NaCl, rgnt." into a sales order line item for 66 pounds of reagent grade sodium chloride. While processing this order, a shipping clerk might ship and create a line item on a freight waybill for one 50-pound container of the chemical (the company's standard product). In a separate action, a 16-pound special order container is created and shipped. The company's accounts receivable department then sends two invoices to the ordering company referencing the original purchase order.

On the receiving end, the clerk at the loading dock receives two shipments, neither of which matches the original purchase order paperwork, and the accounts payable department receives invoices which do not match either.

Granted, not all of the events in this composite example are likely to occur in the processing of a single order. We can all relate, however, to examples where a customer's order doesn't exactly match the product inventory, or a vendor's shipment doesn't line up with exactly what is on the purchasing documents, or a back order means that more than one invoice will need to be processed.

Conveying The Information
When businesses are small, with a limited trading range and a limited number of trading partners, information related to a transaction is generally conveyed personally. When that is not feasible, companies can rely on their postal services to extend their reach, although they can also expect a corresponding delay in message delivery.

The need for quicker transactions helped bring about overnight courier and package delivery services that promised to substantially reduce this delay, for a price. In some cases, such as those in which an original document must be transmitted, the cost is unavoidable.

The fax machine helped companies once again realize quick delivery of information without the high costs associated with overnight delivery or the delays of postal services. Once fax machines became widely used, companies found a facsimile of the document would suffice for most transactions, and no longer sent confirming copies by mail or courier.

Processing The Information
Along with the evolution of communication, the evolution of computing is important. Computers entered the mainstream business scene in the late 1950s and early 1960s, automating information processing. The role of business documents evolved in response to this, and they became input to and output from computer automated processing steps. However, manual intervention and human processing are still required.

For example, a data entry clerk enters information from invoices, purchase orders and shipping documents into an accounts payable system, which outputs a paper check -- yet another document to be transmitted.

The intermingling of human and automated document processing is error prone and inefficient, because documents are transmitted far more slowly than they can be processed. Eliminating paper and human processing of documents means connecting computers together directly. First attempts to connect computers directly involved highly customized and expensive computer software ("middleware") and dedicated communication equipment. These were practical for only the largest companies and required the same solution to be used by the two companies.

While accuracy, speed and efficiency improves, this limits the trading range to only the largest customers and suppliers of only the largest companies, and requires companies to maintain two processes -- an automated process for dealing with a few companies, and a paper-centric process for all others. Further, the expense and complexity of the system limits the ability on both sides to change or adapt processes. These systems, in effect, become governors of the relationship between the two companies.

Electronic Data Interchange (EDI) systems provided standardization, which expanded the trading range. However, the expense and level of technical sophistication required to implement EDI limits its use to high-volume customers and suppliers.

Companies that implement EDI must still implement parallel paper systems to deal with customers and suppliers who cannot or will not implement EDI. To realize optimum cost savings and ROI from an EDI implementation, it must be adopted by all of a company's business trading partners. Because EDI systems are expensive and difficult to implement, however, this has not happened. EDI systems are also notoriously difficult to update or change once implemented.

The Role Of The Web
In the past few years, the Internet and World Wide Web as means to deliver electronic mail document content have become pervasive, although the document delivery technology has been designed for delivery and presentation to a human user.

The business promise of a ubiquitous Internet -- seamless integration and perfect, instantaneous document transmission between the computer-automated business process systems of trading partners -- remains largely unfulfilled.

In order for this to occur, the industry as a whole must evolve from presentation-oriented content representation and delivery to integration-oriented content representation and delivery. Ubiquity is not the only consideration, however.

The Importance Of Security
Security is another important concern, with a variety of key factors to ensure a viable and safe business communication mechanism as follows:

• Authentication -- proof that an entity is who it claims to be.
• Authorization -- proof that an entity has permission to communicate.
• Non-repudiation -- tying an entity and its communications together.
• Privacy -- ensuring that documents are not intercepted.
• Integrity -- ensuring that documents are not altered in transit.

A final consideration is that information must be accompanied by a description of what the data represent, which permits automation of interpretation, data entry and delivery processes that formerly required manual intervention or expensive "data matching" middleware.

The Case For IDI
IDI is the solution to faster, more cost-effective, accurate and secure communications between and among companies. In the past five years, the Internet has become a pervasive communications mechanism, and every company has Internet connectivity and e-mail, and most have a Web site that conveys information to customers, suppliers and shareholders or prospective investors.

As the Internet becomes pervasive, an industry has sprung up, and this industry has made a tremendous investment, on a global scale, to put into place a highly capable infrastructure to transmit documents between a company's Web site and an individual using a Web browser. In addition to supporting the Web, this infrastructure is available to implement effective IDI.

The presentation-oriented HTML document description language has evolved to become the integration-oriented XML document description language that describes data in transit. This means that companies do not need to agree in advance on the format and content of each transmission. Applications that receive electronic documents represented in XML are able to automatically extract relevant data. For example, information that leaves one company's purchasing system in the form of line items on a purchase order can automatically become line items on another company's sales order or invoice.

Recently, digital certificate technology has matured, and it is now possible to integrate digital signatures with transmitted documents. Today's generation of Internet browsers and e-mail include digital certificate/digital signature features, and applications and Web sites are able to nonrefutably identify themselves with digital certificate technology. A side benefit of using this technology is that documents are encrypted while being transmitted, so unauthorized parties cannot intercept them, and the contents of the document are verified for accuracy on the receiving side, eliminating the possibility of error during document transmission.

IDI systems eliminate the barriers of cost and complexity that have hampered adoption of EDI systems by using existing Internet infrastructure to which every company has access. This means that the likelihood that customers and suppliers can adopt and use an IDI system is greater, and this, in turn, means the eventual elimination of dual processes for automatic and manual document processing.

Peter J. Weyman is an independent consultant. He has 23 years of general and engineering management experience in the computer software and hardware industry. He is particularly well-versed in the latest developments in e-commerce, e-procurement, supply chain management and Internet information interchange.

[ Return To The July 2001 Table Of Contents ]