Holding The Customer

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March 2, 1998

Holding The Customer

Companies turn to data warehousing, automated call centers, Web sites, and integrated apps to keep customers smiling-and buying

By John Foley

growing number of companies are taking no chances when it comes to keeping customers happy and spending. They're using IT--data warehousing, automated call centers, Web sites, and packaged applications--to make the most of each customer interaction.

Take Fleet Financial Group. This week, the Boston company will flip the switch on a 1-terabyte data warehouse that will serve as a central repository for information about its 15 million customers. In coming weeks, Fleet also plans to add two data marts to help analyze its customer base, and to plan, execute, and track targeted sales promotions. "The opportunity to expand our relationship with customers is paramount," says Randy Grossman, a Fleet senior VP and director of customer-data management and analysis.

Howard Koenig

IT pioneers like Fleet, facing the multiple threat of global competition, deregulation, and the high cost of finding new customers, are pushing customer service to the top of their must-do lists. "Customer service is a key discriminator for winning and retaining clients," says Howard Koenig, VP of operations and service with payroll outsourcer Automatic Data Processing Inc. (ADP) in Roseland, N.J. "It's a key element of our growth strategy."

He's not alone. In an Inform ationWeek Research survey of more than 700 IT managers, respondents ranked "improving customer service" as their No. 1 business priority. In the same survey, a related area, "understanding customer needs," was ranked No. 4. And well they should, say Susan Fournier, Susan Dobscha, and David Glen Mick, three business-school professors. Writing in the most recent issue of the Harvard Business Review, they contend that customer satisfaction is at an all-time low: "Relationships between companies and consumers are troubled at best."

That's why companies are turning to a wide range of technologies, including call-center systems, data warehouses, interactive Web sites, and software for automating marketing campaigns. Hot new applications include software that handles sales-force automation, contact management, the help desk, and external service and support.

Companies investing in these "customer-relationship management systems" operate in a wide range of industries. In addition to Fleet in financi al services, there's automaker Toyota, which is automating its call centers. Payroll processor ADP is adding call-center applications and other customer-care software. Insurer Nationwide Mutual Insurance Co. is spending $32 million to provide sales-force automation and customer-support tools to its direct sales force and the nearly 5,000 independent agencies it works with.

Rising Market
Fueled by major users like these, the market for customer-relationship software is taking off. Though total sales of what market watcher Dataquest labels "customer service and support applications" were just $290 million last year, that marked annual growth of nearly 50%. Dataquest predicts compound average annual growth of 44% between now and 2000, to $1.7 billion. But the overall customer-management market--including sales-force automation, customer-interaction, and technical support software--could be much bigger. Forrester Research Inc. predicts sales to grow from $1 billion last year to $3.5 billion i n 2000.

That's gotten the attention of IT vendors, both customer-relationship specialists like Vantive and Clarify and generalists like Microsoft and IBM. All aim to provide integrated, end-to-end solutions. "We see this as an enormous opportunity," says P.J. Mitchell, IBM's VP of customer-management solutions.

Siebel Systems Inc., a specialist in sales-force automation software, is one of the fastest-growing software vendors anywhere. The San Mateo, Calif., company's revenue hit $119 million last year, three times what it was in the previous year. Big-name customers include BT, Cigna, and Marriott.

Other customer-management software vendors are doing well, too. Vantive's revenue grew last year by more than 80%, to $117 million. Both Clarify and Scopus Technology grew by nearly 60% last year, to $88 million and $66 million, respectively. That growth has Tom Siebel, chairman and CEO of Siebel Systems, predicting that the market for customer-management software will outpace the enterp rise resource management business in a few years.

Microsoft has taken notice. It has already partnered with about 30sales-force and customer-management application vendors, including Aurum, Onyx, Pivotal, Platinum Software, SalesLogix, SilkNet, Trilogy, and Versatility. "Customers generate 100% of your revenue; treat 'em like royalty," says Matt Ragen, Microsoft's group manager of customer-management markets.

Similarly, customer software has attracted back-office application providers (see story, " Software For The Hard Sell ").

Users like Fleet are spurring this growth. Fleet wants to cross-sell from its product portfolio to persuade its more than 15 million customers--many of whom use only one of its many services--to buy multiple services.

This week, Fleet is launching a customer data warehouse running Informix's Extended Parallel Server database on a cluster of Sun Microsystems servers. A data mart for advanced analysis, based on applicati ons from SAS Institute Inc., will connect to the warehouse. Fleet is adding a second data mart, based on Exchange Applications' ValEX marketing-campaign management software.

Fleet is paying $38 million for all that gear, plus as much as $18 million a year for staffing and managing the new customer environment. Yet top management expects a 130% return on investment within five years, says Grossman, who adds, "Behind this is a very disciplined business case."

That case extends to Fleet's call center, where it's spending an additional $10 million on software, including Scopus Technology's SupportTeam, and hardware to support increasing call volumes. "We've built an industrial-strength infrastructure," says Ann Christensen, a Fleet senior VP and director of telephone banking.

While few companies have all the pieces of the customer-service puzzle, an integrated environment is the goal. "You need a common architecture that will impact all your customer-facing applications," says analyst P atricia Seybold.

That's exactly ADP's aim. The company will spend $30 million this year on IT infrastructure for improving customer service, including call-center applications, a new data warehouse, and sales-force automation software.

ADP receives 80 million calls a year from businesses that use its outsourcing services. To keep these calls coming, ADP is rolling out Clarify's ClearSupport customer-support software in 45 call centers. It's part of an ADP-wide effort to improve customer service. "We've improved client retention, which translates into bottom-line results," says Koenig.

With help from systems integrator Cambridge Technology Partners, ADP is deploying Clarify on Windows NT servers in its call centers, as well as on 8,000 NT workstations used by customer-service reps. ADP is also building a data warehouse to track customer satisfaction and warn of customers at risk of defecting. Next, the company plans to roll out sales-force automation software to 4,000 salespeople and give customers greater access to ADP systems via the Web.

Toyota Motor Sales USA is also working toward a unified customer front. Last year, this sales subsidiary formed a committee, the New Era Business Strategy Team, to confront customer-management. Among the team's objectives: a customer-relationship management strategy for the entire company, a one-to-one marketing strategy, and world-class call centers. "The IS department is related to every one of these," says Carole Pedriana, national IT manager and the team's technology leader.

Toyota USA will spend $18 million over the next three years on a customer database, Clarify's call-center applications, and network infrastruc- ture. The goal: more repeat business from existing customers as the carmaker strives to sell 1.5 million vehicles in 2000, compared with 1.2 million last year. "Customer loyalty is our objective," says Pedriana.

Credit-card company Visa International considers its phone-support operations so strategic that it shuns the term call center. It prefers information center. "`Call center' implies high volume, high turnover," says Rosi Allen, head of Visa's Information Center in London, which provides phone support to card-issuing banks in 22 countries.

Visa has two projects under way to improve customer support. The first, to be completed this month, involves deploying Scopus' SupportTeam applications, providing centralized management of customer inquiries and problem resolution. The second, a knowledge-management system from Inference Corp., will help Visa marshall internal resources more effectively. "Our vision is to develop world-class customer service," says John Brooker, Visa's senior VP of customer service. "We see it as a way to differen- tiate ourselves from our competitors."

Web sites are increasingly being included in customer-management strategies. Siebel, Clarify, and others provide Web links to their applications, while some vendors have introduced products for Web-based customer service and communications. Northern Telecom last week introduced a response server that integrates Web site E-mail with call-center operations, automatically responding to common inquiries and routing others to support staff (see story, " Call-Center Web Links ").

National Semiconductor Corp. now treats its Web site as a key customer-service platform. The Santa Clara, Calif., electronics maker estimates that one-quarter of the world's electronic design engineers visit its Web site monthly. "It's more convenient than calling a distributor's sales person and begging them to give you a part," says Phil Gibson, National Semiconductor's director of interactive marketing.

None of this comes cheap. Tom Siebel says it costs as much as $25,000 per user for everythingneeded to implement a full-fledged customer-interaction environment. "Multiply that by 10,000 users," he says, "and it's serious money." Sure, it's expensive--until you consider the alternatives.