Provide top-notch service
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- Ira Newton
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1 Case Studies, G. Herschel Research Note 2 December 2002 PepsiAmericas Uncaps a Key to Customer Satisfaction Enabling customer-contact employees to develop sustained relationships with customers reduced costly order returns, increased sales and made PepsiAmericas' corporate culture more customer-centric. Core Topics Customer Relationship Management: Business Strategies, Technologies and Apps. for Customer Service and Support; Creating Business Value for CRM Key Issue What is a CRM strategy, and how does it relate to and integrate with other enterprise business strategies, processes and operations? PepsiAmericas, headquartered in Minneapolis, is Pepsi-Cola's second largest bottler and the third-largest bottler of soft drinks in the world. It operates plants in 18 U.S. states and nine countries in Central Europe and the Caribbean, serving 117 million people with 15,400 employees. It produces and distributes 380 million cases of beverages a year to grocery stores, markets, institutions and restaurants, and generates $3.2 billion in revenue. In 2000, PepsiAmericas then the fourth largest Pepsi-Cola bottler merged with Whitman Pepsi General (then No. 2) to become Pepsi's second largest anchor bottler. Pepsi-Cola holds a 36.7 percent equity position in PepsiAmericas, which is traded on the New York Stock Exchange. Problem: PepsiAmericas' conventional delivery process was causing excessive returns (large "haulbacks") that left customers without the correct product; customer requests for "less Diet Pepsi, and more SoBe juices" were proving difficult to satisfy. Large haulbacks transferred costs throughout the entire fulfillment value chain. Moreover, the focus of drivers was on delivery, not sales or customer relationships. The delivery forecast model was based on delivery agents' projections, which were often inaccurate. Achievement of strategic corporate needs such as visibility of pricing, invoicing and discounting trends proved to be problematic, because essential data was stored in disparate systems that couldn't communicate well with each other. Objective: To address these problems, PepsiAmericas aimed to fulfill the following general objectives: Ensure accurate deliveries Provide top-notch service Gartner Entire contents 2002 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.
2 Nurture customer relationships Approach: In conjunction with a retail industry consultant, PepsiAmericas developed a new customer relationship management (CRM) strategy to re-engineer its key customer business processes to advance its corporate vision. The result of that process was a four-phase plan: Phase 1: Perform planning and get-ready actions, including completion of the project charter, database development and system testing. Phase 2: Conduct pilot testing, with the first contact center becoming operational and software refinement conducted based on pilot experiences to better support promotions and analysis of return on investment (ROI). Phase 3: Enable additional contact centers to become operational and further improvement of call quality and processes. Phase 4: Expand initiatives to use additional customer selfservice channels, the Web, and fax. CRM Vision PepsiAmericas' mission statement is to "deliver top-line growth and superior customer service through improved selling and delivery methods, enabled by standard processes and proven technology." Achieving that mission required all members of the enterprise's customer interaction value chain to fulfill the objectives via a CRM strategy. CRM-enhanced objectives included the following: Deliveries: Customers should receive the order they want, when they want it, and expect that the order is accurately priced, packed and delivered. Service: Customers should count on speaking with contactcenter agents who know their account history and have access to all necessary information even if it falls outside of the typical purview of data in customer-facing systems. Relationships: Customers should be educated by PepsiAmericas' employees about new products, specials, promotions and discounts so they can, in turn, satisfy the beverage needs of their own customers. In addition, because of Pepsi-Cola's strategic acquisitions of other beverage companies and brands, and continual fierce competition in the soft-drink market, PepsiAmericas' CRM vision had to provide efficient support for a growing number of product lines, which is expected to top 250 in December
3 CRM Strategy In developing a CRM strategy to meet its vision, PepsiAmericas acknowledged that each of its three customer segments had different service, delivery and relationship needs. Therefore, rather than create a blanket CRM strategy, PepsiAmericas assessed the types of interactions and processes that would provide the greatest value to each segment. This evaluation resulted in a tiered CRM strategy that included the following actions: Create a pre-sell environment. Account managers visited from five to 20 large and small customers per day for traditional, live sales calls. Along with taking orders, the account managers also discussed new product releases, promotions and merchandising tie-ins. This helped to fulfill the goal of hawking additional product lines and pushing more-profitable products. Pinpoint customer wants. During the pre-sell stage, account managers ascertained exactly what the customer wanted not what they thought the customer wanted. By doing so, the aim was to reduce costly returns while increasing customer satisfaction. For on-premises customers, implement an outbound contact center to call customers each day to confirm standing orders and make changes as needed. Customer Experience Customer-facing processes were designed with customer satisfaction as the guiding objective. For example, the Tel-Sell process arose from on-premises customers who said, "I order the same thing every week. Give me a validation call the day before and I'll say 'yes' or 'no.'" The project incorporated the following types of customer feedback into CRM planning efforts: Information collected from daily delivery interactions Customer surveys for needs assessment PepsiAmericas' process to educate customers called Onboarding about the company's new corporate direction. This program unearthed an unexpected benefit customer education. PepsiAmericas discovered that many customers didn't know exactly what products they had in their store. Although Onboarding's primary goal had been to educate customers on future ordering, delivery and service processes, the company ultimately improved retail 2 December
4 customers' product and inventory knowledge, which in turn benefited PepsiAmericas' sales execution. Organizational Collaboration To ensure that employees and customers bought into its new CRM strategy, PepsiAmericas launched two parallel initiatives, which generated employee involvement and commitment through three key areas: Awareness Gained through internal "town hall" meetings Training Instituted for the new roles of account managers and Tel-Sell agents Validation Obtained through business process simulation exercises with all employees in the value chain, which ensured that processes and skills were in place for full deployment PepsiAmericas maintained overall employee satisfaction by redeploying employees to jobs that better matched their personality and interests. For example, drivers that had strong sales skills moved to account management roles, while drivers who enjoyed delivery focused on that task. The project achieved customer collaboration through the Onboarding educational process, which featured site visits to make customers aware of the new process and introduce them to their primary relationship manager. CRM Processes PepsiAmericas established processes to effectively manage the entire customer life cycle, including the following: Tel-Sell customer contact center agents call on-premises customers to take orders, update data, and review and confirm delivery schedules. These agents could fulfill multiple service demands via one channel. Agents, using PC screen pop-ups, initiate approximately 130 customer calls per agent per day. Agents have a "360-degree view" of the customer, which enables them to complete any necessary actions prior to calling the customer. This eliminates most surprises during customer interactions. Customer concerns that arise from these calls are forwarded to a local resolution manager, who accesses the 360-degree customer view and case details for problem resolution. Technology 2 December
5 Already in place before this CRM project were PeopleSoft applications such as financials, inventory and production management. This CRM initiative also needed to link a customerfacing call center with those back-office functions. New technology deployed by PepsiAmericas included the following: PeopleSoft's Interaction Manager application, which enabled a 360-degree customer view. Visibility of recent order history. An on-screen view of a customer's average order per product and the last six orders placed provides Tel-Sell agents with a key talking point to use with customers. Agents discovered that customers sometimes never knew that they had ordered certain products. Interaction tracking. Visibility of prior call, order and delivery history will determine whether Tel-Sell agents initiate a promotional call with a customer that recently complained about the to-be-promoted product. PepsiAmericas integrated this capability with PeopleSoft's Support and Order Management application. Application functionality for receivables, pricing and promotions, inventory, order entry, delivery/order history and issue resolution. Computer telephony integration for the daily generation of call lists in the contact center, which helped to tighten the link between the supply chain management (SCM) system and the support application in the contact center. Web architecture to support internal and external customers. Ease-of-application customization. Note 1 Project Timeline Project Charter Completed: Sept Development Databases Installed: Four weeks later Development: Six weeks System Testing: Four weeks Pilot Contact Center "Go Live": Feb Additional Contact Centers "Go Live": April 2002 Order management and billing applications, which were integrated with SCM and financial systems (see Note 1). Metrics PepsiAmericas developed customer-centric metrics to gauge the initiative s success and tracked them by their ability to balance extra costs (for front-end technology and organizational expenses of a new contact center and the sales team) with savings from efficiencies in routing, delivery and reduced returns. Specific metrics included: Time to place an order Time to receive an order Time to resolve customer concerns Customer's ease in accessing information 2 December
6 Reduced "lost" or incorrect orders The amount of new business realized Agent productivity Customer satisfaction, including total complaints Other metrics tracked the data needed to understand the ROI of this particular initiative: The decrease in overall delivery costs More-efficient routing processes, measured by the reduction in daily delivery truck volume Optimization of package mix (a 20-ounce bottles vs. a 12- ounce can) PepsiAmericas anticipates an ROI analysis by year-end Results: PepsiAmericas' pre-sell/tel-sell process has realized tangible customer and business benefits, including: Improved resolution of customer concerns via first-call resolution in the contact center A one-to-one marketing technique to communicate with customers about their individual needs and preferences Increased knowledge among Pepsi Americas' employees about customers' concerns regarding products, prices, promotions, merchandising and discounts, thus creating a new sales channel Reduced operating expenses by improving process efficiencies Reduced large haulbacks Increased sales volume The Tel-Sell contact centers have become a critical supporting pillar of organizational change at PepsiAmericas by providing the following benefits: Enterprise access to complete customer information, regardless of user location Seamless integration across the enterprise to share data and processes more easily Flexibility to add location-based business rules for contact centers that support multiple sales regions, each with their own pricing and discounting schemes. Critical Success Factors/Lessons Learned: 2 December
7 Strong executive sponsorship was essential to success. A well-defined project scope, time frame and costs enabled the project team to set realistic expectations for executive management, cross-enterprise employees and customers. Integration between customer-facing systems, financials and SCM was necessary to support comprehensive business process re-engineering. A well-developed business process flow was essential. Dynamic call lists, a 360-degree customer view and comprehensive order creation and issue creation and tracking processes were critical to support re-engineered processes. Computer telephony integration (CTI) support for inbound and outbound calling is vital for agent productivity. Because PepsiAmericas anticipated complexity with CTI, it was caught off guard by the challenges of integrating the various components of the new CRM architecture and enabling them to work together. Many architectural components PC configuration to the Web, application and database servers needed optimization. In retrospect, PepsiAmericas felt it could've met this challenge in two ways: Implement earlier process and technology change management More effectively manage expectations in the trade-off between quick order entry vs. true CRM A key organizational challenge arose. PepsiAmericas was shifting from a business model run at multiple local market levels to one with a centralized set of standard processes, rules and procedures. This change required the company to dedicate attention and resources to managing this model shift. Acronym Key CRM CTI ROI SCM Customer relationship management Computer-telephony integration Return on investment Supply chain management Bottom Line: In tackling delivery problems to enhance customer service, PepsiAmericas mounted a CRM campaign to streamline its customer-contact business processes while enhancing customer relationships. Key actions included creating a pre-sell product awareness environment, ascertaining customers' actual product desires, and initiating calls to customers to confirm orders and resolve outstanding problems. 2 December
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