Customer Relationship Management Strategy of Sony Corporation the Authors Perspective - Case Study Example

Relationship Management Strategy of Sony Corporation - the Perspective ID 19714 Order No. 282080 [Name] [University Name] [Course Name] [Supervisor] [Any other details] 21 March 2009 Table of Contents: Table of Figures: List of Figures Description & Word Hyperlink Figure 1 Balanced Scorecard strategic framework (Kaplan and Norton. 1996) Figure 2 The Strategic Framework of CRM (Payne and Frow. 2005) Figure 3 Process Model of Customer Knowledge Management (Bueren and Schierholz et al. 2004) Table of Tables: List of Tables Description & Word Hyperlink Table 1 Attributes of Sales Force Automation (Gray, Paul and Byun, Jongbok. 2001. pp4) Table 2 Attributes of Customer Service Automation (Gray, Paul and Byun, Jongbok. 2001. pp5) Introduction to CRM Strategic Framework: This is an attempt to present a strategy paper in which the theoretical perspective of CRM is built by the author and then positioned for Sony Corporation to ensure benefits like enhanced customer lifetime value, long term customer retention, return on customer, repeatable business from customers and increased shareholder value. This section presents the strategic framework of CRM that shall be applied to the case of Sony Corporation later in this paper. The most common understanding of Customer Relationship Management (CRM) that it comprises of technology based customer related solutions like the sales force & customer service automation system. A feasible generalized definition of CRM is that it is information enabled relationship marketing. This definition, however, doesn't de-link CRM with technology because information management in the modern business world is completely technology enabled. The expected output of CRM is development of positive relationship with key customers or customer segments that improves shareholder value of an organization. In the modern context, CRM is an effective methodology of IT enabled execution of relationship marketing strategies to develop long term & profitable relationships with customers. As per Kaplan and Norton (2000), no strategy is complete without a strategy map. Looking into CRM, the strategic framework of CRM need to be very clearly defined before the implementation begins. The strategic framework of CRM is not established as a standalone framework rather finds its roots deep into the organizational strategic framework starting from the board room. The business strategies of an organization form the foundation of customer strategies, whereby the former is formed at the CEO & board level comprising of business objectives comprising of strategies & directions pertaining to organization wide competencies and the latter is formed at the marketing department level that use the business strategies to target market segments & customers. The root of strategies can be established using the Balanced Scorecard mechanism developed by Kaplan & Norton as shown in Figure 1. Figure 1: Balanced Scorecard strategic framework (Kaplan and Norton. 1996) First of all, the organization needs to have clearly defined Vision & Mission statements pertaining to CRM. The next step is to define the strategic business goals of the organization that is in line with these statements. These goals should be focussed towards achieving unique positioning of the company in the markets & in the perspective of the customers. For example, some companies may like to establish an image that they offer low cost products & services whereas others may like to achieve an image of offering premium & high profile products & services at premium costs. Similarly, some companies may like to establish large market segments comprising of multi-domain areas whereas some may focus on thin market segments comprising of niche areas. Whatever be the positioning defined for the organization, the leadership team may like to establish corresponding CRM goals and then expand them into key CRM strategies & policies. For example, a company offering expensive premium services may like to hire expensive specialist resources to engage with customers whereas another company offering low cost services may like to hire low cost less experienced resources to engage with customers who are willing to learn & enhance their competencies. Once the goals are defined, the leadership team should focus on establishing CRM process maps & standard operating procedures to help the employees to align their thought process & expertise towards achievement of the CRM goals whereby any deviations or conflicts can be discovered by measuring the Key Performance Indicators (KPIs). The deployment of IT tools to support the leadership is carried out in such a way that the Business Strategies & Goals are effectively aligned with IT Strategies and together they deliver enhanced organizational performance. The Customer perspective of Balanced Score Card based strategic framework requires focus on Market & Account Share, Customer Acquisition, Retention, Satisfaction and Profitability. Peppers and Rogers (2005) suggest that customers are even scarcer than capital and hence return on customer should be incorporated as a part of the customer relationship strategy by measuring customer equity and customer life time value. They further added that the customer strategy should possess mechanisms to test the customer equity in order to create a balance between cost of customer acquisition and retention efforts. The growth of current profit & customer equity result in value creation, which has an optimum value that is the return on customer. Figure 2 presents the strategic framework of CRM. The objectives of value creation process are two fold - the value that customer receives and the lifetime value that organization receives. In nutshell, the customer should receive superior experience pertaining to products & services of the organization and the organization should achieve customer acquisition, customer retention and repetitive business thus overall resulting in customer lifetime value. Figure 2: The Strategic Framework of CRM (Payne and Frow. 2005) Technology plays a crucial role in supporting the CRM framework given that a number of customer engagement deliverables are technology enabled. The underlying backend data repository systems are mostly IT systems with analysis tools like Business Intelligence & OLAP systems, front office & back office applications and voice communication systems. The customer facing systems comprise of components like sales forces, outlets, telephony, direct marketing, electronic commerce, mobile commerce etc. that engage with the customer using different mechanisms offering different customer experiences but the data is finally captured in a central integrated system termed as "integrated channel management". The shareholders see value through their interface with the integrated channel management whereas the customers see value through their respective personalized interfacing with the organization. Ballard Kirsten (2008) argues that CRM strategising in an organization requires an effective transition from the product centric strategies to customer centric strategies. In this process, the organization needs to develop strategies that can tangibly achieve customer loyalty & lifetime value that can directly increase the revenues of the organization. Transition to customer centric strategies requires complete change management within organization that is powered by: Changing thought process from market segmentation to customer segmentation Mechanisms to capture & preserve customer data & information Effective IT strategies for customer data management, Basic philosophy shift from sell products to serve customers Business orientation shift from transaction based to customer based Product positioning strategic changes to reflect product benefits that meet individual customer needs Organization structure change from product management to customer relationship management Focus shift from product brand equity to customer equity & lifetime value Customer portfolio management rather than product portfolio management Customer data enhanced to customer knowledge Marchand and Meadows (2006) present a three step alignment towards customer orientation: Step 1: Determining what customer orientation means for the business Step 2: Determine what information is needed to achieve customer satisfaction in the business Step 3: Determine how effectively the people need to use IT to interact with customers Customer Relationship Management - the practical Perspective This section presents the practical perspective of CRM that shall be applied to the case of Sony Corporation later in this paper. Hogg (2007) argues that three perspectives need to co-exist in order to make CRM strategies successful in an organization - Commitment, People and Technology. He argues that CRM cannot be even thought of unless the organization is ready with the cultural environment & commitment necessary for CRM. It should not be looked at merely as the coherent management of contacts & interactions with the customers. The organization need to be ready with a customer centric approach and the various offerings that shall delight the customers. Hence, the people interfacing with the customers again need to be competent & wise in their on-the-spot decision making when interacting with the customers. Marchand and Meadows (2006) argue that customer orientation begins with people orientation toward customers and then positioning the products/services mix for the appropriate customers through appropriate channel mix. People & cultural commitment need to gel seamlessly in order to prevent loss of opportunities when interacting with the customers. If these two factors are intact, then the organization can make effective use of technology that is deployed to quickly provide the required data & information whenever required. The information can be anything useful while dealing with the customers - name, title, addresses, past trading & other transactions, future opportunities, etc. This part of the CRM framework is called Customer Knowledge Management that essentially feeds timely information to carry out various customer facing activities by the people. Bueren and Schierholz et al. (2004) present the following framework of customer knowledge management: Figure 3: Process Model of Customer Knowledge Management (Bueren and Schierholz et al. 2004) This system collects customer data from all touch points and deposit into a central repository of data pool which can be leveraged for better campaign & lead management, better offer & contract management, better order processing, better compliant & service management, internal accounting, production/delivery tracking and management reporting. The knowledge managed herewith is about the customers, from the customers, for the customers. Gibbert and Leibold et al. (2002) present five styles of customer knowledge management - customer knowledge captured as producer & customer (a term coined as prosumer by Alvin Toffler in 1980), team based co-learning, mutual innovation, communities of creation and joint intellectual property. This knowledge cannot be built as a one time activity but is a continuous population process. Marchand and Meadows (2006) propose four step process of knowledge building - knowledge for operational support, knowledge for process support, knowledge for innovation support and knowledge for management support. The knowledge thus captured takes a six step process to achieve maturity - Integrity Formality Control Transparency Sharing Proactiveness. Thus the planning should not consider usage of CRM after the deployment process is completed rather the usage & deployment should be planned hand in hand. This is because the usage procedures result in further deployment of CRM and vice versa. The knowledge need to be captured includes external as well as internal information - like customer requirements, location, preferences, etc. (external) and supply chain, product availability, and delivery process & timeline (internal) [Parvatiyar and Sheth (2002)]. Mithas and Krishnan et al. (2005) conducted a theoretical modelling of customer satisfaction as a result of CRM and discovered that CRM contributes to customer satisfaction only if the customer knowledge is seamlessly integrated with supply chain management & product development & management of the organization. From customer perspective, the service delivery & product improvements are key factors which can happen by using customer knowledge to improve supply chain efficiency & product quality. From this point onwards, the author shall focus on CRM implementation strategy keeping in view its applicability for Sony Corporation. Sun, Baohong (2006) presents seven steps of implementation planning for CRM as presented below: (1) Increase of Communication channels with customers and designing the overall integrated communication structure using integrated framework of IT and Telecom solutions (2) Developing innovative Customer Relationship programs (3) Developing product & service packaging strategies with flexible pricing structure with adequate tailoring guidelines suiting customer needs (4) Evolution of a system that can view deeply into customer demands and invoke cross-selling (5) Adaptive learning of customer preference after capturing relevant data (6) Integrating marketing, supply chain, product management & operations management (7) Developing short term & long term profit implications and dynamic marketing interventions The CRM has two most practical implementations in the world - Sales Force Automation and Customer Service Automation. The primary attributes of Sales Force Automation and Customer Service Automation are presented below: Attributes of Sales Force Automation S.No. Attribute Comment 1 Contact Management Information regarding contact details of the customers 2 Activity Management Calendaring and Scheduling of sales activities for individuals of the sales team 3 Communication Management Electronic communication mechanisms with customer - E-Mail, Electronic fax, Extranet, etc. 4 Forecasting & hypothecations Projections of future sales targets and goals 5 Opportunity Management Management of potential leads pertaining to new customers 6 Document & Reports Management Customer related documentation and management reporting 7 Sales Analysis Analysis of sales data and comparison with the forecasts 8 Product Configuration Carry out on-line product configurations & packaging against ordering such that the supply chain can be instructed accordingly 9 Marketing information Up to date information on product serial numbers, product identification, detailed specifications, information on influencing buying decisions, information on competition, etc. 10 Marketing Campaign Facilities to package products & special deals, develop & launch marketing campaigns, customer interactions during campaigns, rewards & discounts, etc. Table 1: Attributes of Sales Force Automation (Gray, Paul and Byun, Jongbok. 2001. pp4) Attributes of Customer Service Automation S.No. Attribute Comment 1 Call Center Management Receiving customer calls without delays, routing the calls to appropriate service personnel, answer the customer queries effectively, track the calls for quality improvements, capture customer feedback on-line, etc. 2 Field Service Management Understanding the customer problem accurately, allocation, scheduling and despatching of right people with right spares, logging of materials, time & expenses of every service order, search of solutions that are already proven and view & analyze customer history 3 Helpdesk Management Try to find out solution to the problem on-line by searching the existing knowledge base, initiation, modification and tracking of problem reports, provision of new versions, updates & patches. Table 2: Attributes of Customer Service Automation (Gray, Paul and Byun, Jongbok. 2001. pp5) Having established the strategic and practical framework of CRM with the help of various literatures, we hereby try to develop a strategic framework of CRM from marketing perspective and establish long term gains for Sony Corporation from next section onwards. Competencies & Customer Focus of Sony Corporation We first analyze the following competencies of Sony Corporation in order to establish the strategic framework of Sony: Capability to build niche products & markets: Sony is known for their enormous capability to build niche products and niche markets. Their key strength in this competency is "innovation" in their product development strategies & designs that help them creating entirely new kind of products that can be targeted in niche markets not easy for the competition to enter. Some of the past unique product innovations of Sony has been Walkman & Play Station that resulted in entirely new niche markets. Play Station is still a market completely dominated by Sony because of the unique product engineering applied to the devices sold in the markets. Clarity of Target Market Segments: Sony is very clear about the target market segments and they develop their products & services for such target markets only. An excellent example is the "style" innovation of Sony latest Pocket Style VAIO P that is expected to create a new niche segment for Sony as the most preferred device for applications like Internet usage, word processing, multi-media & entertainment, messaging, Internet based telephony, etc. [Prokaza, Julian. 2009]. This device has been designed to be positioned for people using laptops as a style icon and for entertainment. Innovative marketing & sales practices: Sony carries out in-depth understanding of the buying behaviour, choices & passion of their consumers such that they are able to design their advertisements reflecting the choice, emotions & passion of their consumers. In this way, they re able to push the Sony brand deep into the mindsets of their customers intelligently mapped with their preferences. This demonstrates the commendable brand building capability of Sony. Moreover, Sony does not believe in conducting open ended marketing campaigns. They carry out measurement of effectiveness of each campaign and then carry out enhancements as necessary. Sony also practices innovative retailing strategy evident from their concept of Sony World & Sony Style showrooms where all the products of Sony are displayed prominently and adequate stocks are maintained to meet the demands. [Paynich, Vitisia. 2006] Sony practices product uniqueness that is achieved by virtue of huge investments in Innovation and R&D to develop superior quality products. Hence, Sony believes in keeping the prices of the products substantially higher than the competition and hardly leaves any room for bargaining for the customers that are convinced to buy Sony branded products thus demonstrating that they are only interested in premium customers that appreciate long term value of products & services. [Sony Corporation 2005. pp25] Customer Relationship Management initiatives of Sony Corporation In this section we analyze some of the CRM initiatives by Sony Corporation. Given that Sony believes in acquiring & retaining premium customers, they possess a sound CRM foundation on mySAP CRM and Contact Centers powered by HP & Cisco products. They carry intensive campaigns specifically during holidays for selected customers through electronic & physical mailers presenting promotional offers, product highlights, shipping details, free gifts against premium purchases, etc. They capture customer needs on the CRM software and quickly respond to that information. Also, they possess effective integration with backend supply chain management (SAP based) to ensure timely deliveries against all orders. The mySAP CRM platform is used by Sony almost globally to design & conduct marketing campaigns that includes planning, content development, customer identification, market segmentation and communications. Sony's global corporate directive is to strengthen customer relationship marketing by virtue of direct communication with customers and capture the "voices of customers" to quickly respond to their needs. They carry out business intelligence analytics and data mining of customer information to analyze the effectiveness of the campaigns and carry out improvements. The customers are services through consolidated customer care facilities where the CRM & IP Call Center systems are integrated to ensure most appropriate support and quick turn around time for customers (SAP AG. 2004. pp1-2; HP. 2004. pp4). Suggested CRM Strategy for Sony - the author's perspective In this section, the author shall apply the strategic & practical framework of CRM built in this paper to Sony Corporation. The author recommends that the first strategy that Sony should focus on is the heritage of its brand in order to identify the reasons that made it so special & successful in the modern world. The author suggests that the communication going out to customers should be as per the guidelines of senior marketing team of Sony who have been in the organization for many years and understand the heritage of Sony brand very well. The team should ensure that all communications to customers should reflect the key attributes of Sony brand thus ensuring that any brand extension in the form of product branding (like Walkman, Play Station, Vaio, etc.) do not overcome the equity of the parent brand. Time may come when the brands Walkman & Play Station may become synonymous to the product itself letting people forget that they were actually made by Sony. [Aaker, David A. 2004] The second strategy that Sony should focus on clear definition that Sony is special and hence is meant for the customers that are special (means those who can pay higher prices for premium quality). Hence, the customer database pertaining to old as well as new customers should be populated based on certain attributes like their "choice for quality at good prices" and not "the cheapest available product that serves the purpose". Such information may be collected through market surveys and shall allow Sony to carry out targeted campaigning on the right customers thus effectively utilizing time, efforts & money thus building quality sensitive (& not price sensitive) loyal customers. These customers should not only be targeted to make money but also to establish a sound foundation of "word of mouth" leveraging their own social networking capabilities. The third strategy that Sony should focus on is long term customer retention & customer lifetime value. For this purpose, Sony may consider two types of goals - Transactional Goals & Relational Goals. Transaction goals may be focussed on getting the best business out of customers & serving their support needs, thus building a sound return on customer framework as introduced in the literature review. Relational goals should be targeted to "keep in touch" with customers, develop an emotional bonding, allow them to possess deep & structural ties with Sony, and develop & nurture the trust of customers on Sony. This shall develop what is defined as customer equity in literature review. In the forth strategy it is proposed that Sony should adopt localization strategies when engaging with customers because they appear too Japanese in their approach. Most of the advertisements possess Japanese faces that are shown globally. Hence, in emerging markets where Sony is not yet preferred they may be perceived as something too good and expensive from Japan that can be purchased when one has extra money. Sony should design the campaigns in such a way that they deeply indulge into the localized needs of the region thus getting perceived as essential commodities with high quality & premium prices. [Aaker, David A. 2004] The fifth strategy proposed is that Sony should have more effective portfolio for branding by finding out the local needs of a region and mapping the products as per those needs. This also needs tremendous efforts in spreading awareness among customers specifically in emerging markets. In this process, Sony should strictly assess and mitigate the risk of visible negatives in the branding when communicating with the customers. The relevance need to be maintained very effectively especially with respect to local needs of the customers of a region. [Aaker, David A. 2004] As a sixth strategy, Sony should establish an effective framework of cross selling keeping in view the risk of adverse selection which means acquisition of non-profitable customers that may respond faster to cross selling campaigns but only waste time & cost of campaign. One of the strategies can be to carry out cross selling campaigns for customers that have purchased expensive products to push cheaper products and not the vice versa. Example, a customer that has purchased Sony DVD players is expected to respond faster to campaigns of Sony DVDs but the vice versa may not be fruitful. [Cao, Young and Gruca, Thomas S. 2005] In the seventh strategy, the author recommends that Sony should localize the technology framework of CRM (mySAP and HP/Cisco contact centres) by hiring people that understand the local cultures & markets very well. This strategy shall help Sony in reducing the risk of appearing too Japanese in their approach and forming better emotional bonds with the customers. In the eighth strategy, the author recommends that Sony should implement an internal knowledge framework pertaining to the local markets such that the customer engagement strategies can be executed with the help of local customer information and sales history. The sales forecasting & targeting should also be carried out on the basis of local data although learning from other regions can be used to find out means of expanding the revenues. In the ninth strategy, the author recommends that Sony should implement and manage an effective balanced score card strategic framework to measure the effectiveness of internal business processes based on customer needs and financial targets such that internal learning & growth can be enhanced. The above nine strategies are presented from the author's own perspective based on the understanding of the strategic & practical framework of CRM and the understanding about Sony's competencies & focus as revealed from the relevant research conducted. Conclusion: In this strategy paper, the author has attempted to build a sound strategic and practical framework of Customer Relationship Management which is then applied to the case of Sony Corporation. Using the theoretical framework build with the help of Literature Review, the author has presented nine strategic points for the CRM strategy of Sony Corporation that is based on the strategic & practical understanding of CRM and information collected about Sony Corporation. Reference List: Aaker, David A. (2004). Leveraging the Corporate Brand. California Management Review. Vol. 46. No. 3. pp2-12. Ballard, Kirsten. (2008). Building a strong Customer-Centric strategy to enable CRM and develop customer Loyalty. Applied Information Management Program, University of Oregon. pp46-47. Bueren, Adrian and Schierholz, Ragnar et al. (2004). Customer Knowledge Management - Improving performance of Customer Relationship Management with Knowledge Management. Institute of Information Management. University of St. Gallen. pp4-6. Cao, Young and Gruca, Thomas S. (2005). Reducing Adverse Selection through Customer Relationship Management. Journal of Marketing. Vol. 69. pp219-229. Gibbert, Michael and Leibold, Marius et al. (2002). Five Styles of Customer Knowledge Management and how smart companies put them in action. University of St. Gallen. pp7-11. Gray, Paul and Byun, Jongbok. (2001). Customer Relationship Management. Centre for Research on Information Technology and Organizations. University of California. pp4-5. Hogg, Jonathan Sellwood. (2007). Customer Relationship Management Case Study. The Chartered Institute of Marketing, U.K. pp1-2. Kaplan, Robert S. and Norton, David P. (1996). Linking the Balanced Scorecard to Strategy. California Management Review. Vol.39. No.1. pp53-69. Kaplan, Robert S. and Norton, David P. (2000). Having trouble with your strategy - Then map it. On Point. Harvard Business Review. pp2-4. Marchand, Don and Meadows, Rebecca. (2006). Customer Relationship Management - Challenging the Myth - focus on people not the technology. Perspective for Managers. IMD International. No. 131. pp1-4. Mithas, Sunil and Krishnan, M.S. et al. (2005). Why do Customer Relationship Management applications affect Customer Satisfaction. Journal of Marketing. Vol. 69. pp206-207. Parvatiyar, Atul and Sheth, Jagdish N. (2002). Customer Relationship Management - Emerging Practice, Process and Discipline. Journal of Economic and Social Research. Vol. 3. No.2. pp4-8. Paynich, Vitisia. (2006). Sony Success. Electronic Retailer Magazine. Retrieved on 11 March 2009. Available at http://www.electronicretailermag.com/info/0406_sony.html. Pan European Contact Center brings Sony closer to Customers. HP Success Story. HP. 2004. pp4 Payne, Adrian and Frow, Pennie. (2005). A Strategic Framework for Customer Relationship Management. Journal of Marketing. Vol. 69. pp167-176. Peppers, Don and Rogers, Martha. (2005). Return on Customer - Creating the maximum value from your scarcest resource. An open letter to Wall Street. Carlson Marketing Group. pp12-13. Prokaza, Julian. Hands on with the Sony Vaio P Series. Mobile Computer. 2009. Retrieved on 20 March 2009. Available at http://www.mobilecomputermag.co.uk/200901081191/hands-on-with-the-sony-vaio-p-series-a-900-netbook.html R&D Strategies and Selection of Key Technological Fields. Sony Corporation 2005. pp25. Sony of Canada taps mySAP CRM to launch holiday marketing campaigns. SAP customer success story. SAP AG. 2004. pp1-2. Sun, Baohong (2006). Technology Innovation and Implications for Customer Relationship Management. Marketing Science. Vol. 25. No. 6. pp594-597. 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