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V o l u me S i x , N u m b e r 3 J u n e 2 0 0 2

theROI

Report

theROI

Report

Featur ed Organi zat i on:

Brother International

Corporat ion

Case Studies Analyzing

the Return On Investment of

Customer RelationshipManagement (CRM) Initiatives

Brother Pursues Fully Integrated

CRM Strategy to Develop Customer

Loyalty, Projected 129% ROI.

Benefits

Reduce Returns.Each 0.25% reduction in returns

Saves More than $1.6 Million Per Year

Consider Customers Lifetime Value (LTV)not just transaction value.

Ant icipate Customer Needsfor new product or software upgrades.

Maximize Cust omer Exper ience:increase accessory sales & revenue growth.

Reduce Servicing Timefor end users, 40%; & dea lers, 50%.

Consistently Improve Quality of Service.Share knowledge across the organization through

the Solution Database.

Campaign to

Tightly Focused Target Groupswithin hours.

The ROI Reportis published by Hill| Holliday,

200 Clarendon Street, Boston, MA 02116. Copyright

2002, The ROI Report. Reproduction prohibited.

For more informat ion, please call 1-800-283-1SAP.

Please refer to material No. 50 056 102.

Introduction andCompany Profi le . . . . . . . 4

Business Context, Mission

and Driver, St rategy,Business Case . . . . . . . . 6

BusinessTransformat ion . . . . . . . . 8

Proceeding wit hSAP CRM . . . . . . . . . . . 11

CRM: Strategy, Defining

Key PerformanceIndicators . . . . . . . . . . 13

Implementati on . . . . . 15

ImplementationCosts . . . . . . . . . . . . . . 16

Benef its . . . . . . . . . . . . 17

ROI . . . . . . . . . . . . . . . . 19The Future . . . . . . . . . . 19

Lessons Learned . . . . . 21

About t he ROI Report . . 22

Ti liu tham kho - www.marketingchienluoc.com

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20 Glover Avenue Norwalk,CT 06850 V 203.642.5121 F203.642.5126 w w w.1to1.com

At Peppers and Rogers Group, we believe that the goal of Customer

Relationship Management (CRM) initiatives is the development of Learning

Relationships with customers. CRM practitioners leverage deep understanding of

individual customers to make their products or services increasingly smarter overtime relative t o each customers needs. Customers are hesitant to reinvent this

relationship with another firm.

Building these types of relationships require a company to make difficult

changes in their firms. So why invest in CRM at all?

Dr. Martha Rogers and I have always considered CRM to be, first and fore-

most, a solid financial concept. CRM builds on the axiom that it is more cost-effective

to keep and grow an existing customer than to acquire a new one.

We were honored to be asked by SAP and Hill Holliday to review the design

and execution of this ROI Report. Our firm is often asked to conduct similar studies fo

clients. And we are pleased to report that the processes used to uncover the financial

benefits and derive the financial formula for Brothers CRM initiative were fully-consis-

tent with our own rigorous approach to measuring ROI.In fact, we think the final ROI calculation is probably conservative. This is due

to the fact t hat most companies dont yet measure baseline customer lifetime value

(LTV)the sum total of expected future profit flows from a customer. Effective CRM

increases LTV. But without a baseline measure of LTV, we cant compare the changes

from CRM to the baseline. So, we use existing metrics to measure the short-term

impact of CRM. Despite t his conservatism, Brother still reports ROI in excess of 100%

After learning about the Brother initiative, we are not surprised by this result.

Brother addresses customer needs that extend beyond the product itself, assisting cus

tomers on issues of interoperability with other devices. In combination with the compa-

nys intelligent approach to collecting and storing the right customer data, Brother is

positioning itself to be able to deliver "smarter" service than its competitors over time.

Now that Brother has increased the percentage of the Kings that they can

identify, they might gain further benefit from ranking customers according to t heir

growth potential. This would help Brother allocate more resources to invest in such

accounts, perhaps providing even more proactive and regular supportensuring that

these customers continue to choose Brother as they grow.

Brother is making huge steps towards becoming a trusted advisor to their cus

tomers. Many customers are willing to pay a premium for products and services where

they can count on a company to "pick up the conversation where it last left off." As

Brother continues to turn customer data into powerful business strategies, they assure

themselves of continued CRM success!

Sincerely

Don Peppers

Founding Partner, Peppers and Rogers Group


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Brother is a growing global brand, recognized worldwide for providing high quality

value added products in the office and home. With the growth of the Small office and

Home Office (SOHO) market as well as corporate cost cuttings, Brother has established

itself as the value supplier. Brother International Corporation of USA (BIC, hereinafter

referred to as Brother) generated approximately $1 billion in revenues for 2001, more

than 70% coming from its Business Machine Group which sells office equipment such

as printers, fax machines, Multi-function Devices (MFDs), and Ptouch Electronic

Labeling Systems. Other businesses of Brother are personal and home products, and

industrial machinery and solutions. The Business Machine Group operates in a hyper-

competitive market with fragile margins. It is extremely sensitive to customer loyalty,

and is therefore a major focus for CRM. Brother sells its information and document

products predominantly thought retailers, resellers, and distributors, but takes sole

responsibility for all after sale customer contacts. The National Service Division of

Brother is organized to provide service to its Customers, and resellers as well as manage

Brothers Parts Distribution, Return Center, and Customer Contact Centers.

Information and document products nowadays have to offer a dazzling array of features,

as well as interoperate with complementary products such as personal computers. Users who

become frustrated with products that dont operate with their personal computers right out

of the box will either call for help and/or return the product. The vulnerability is manifested

by a high percentage of product returns in excess of 12% throughout the information and

document products industry.

E X E C U T I V E S U M MA R Y

Brother Pursues Fully Integrated

CRM Strategy to Develop Customer

Loyalty, Projected 129% ROI.

V o l u me S i x , N u m b e r 3 J u n e 2 0 0 2

theROI

Report

theROI

Report

Featur ed Organi zat i on:


Corporat ion

Case Studies Analyzing

the Return On Investment of

Customer RelationshipManagement (CRM) Initiatives

The ROI Reportis published by Hill| Holliday,

200 Clarendon Street, Boston, MA 02116. Copyright

2002, The ROI Report. Reproduction prohibited.

For more informat ion, please call 1-800-283-1SAP.

Please refer to material No. 50 056 102.

Introduction andCompany Profi le . . . . . . . 4

Business Context, Mission

and Driver, St rategy,Business Case . . . . . . . . 6

BusinessTransformat ion . . . . . . . . 8

Proceeding wit hSAP CRM . . . . . . . . . . . 11

CRM: Strategy, Defining

Key PerformanceIndicators . . . . . . . . . . 13

Implementati on . . . . . 15

ImplementationCosts . . . . . . . . . . . . . . 16

Benef its . . . . . . . . . . . . 17

ROI . . . . . . . . . . . . . . . . 19The Future . . . . . . . . . . 19

Lessons Learned . . . . . 21

About t he ROI Report . . 22


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Int roduct ion andCompany Profi le

Brother is a continually growing globa

brand, recognized worldwide for providing

high quality value added products in the

office and home.

Brother International Corporation o

USA (BIC, hereinafter referred to as Brother

the subject of this study, was established in

1954 and is the fully owned US subsidiary

of Brother Industries, Ltd. of Nagoya, Japan

Brother in turn has several subsidiaries

including those in Canada, Mexico, Brazil

Chile and Argentina. Brother recorded $1 bil-

lion in revenues, constituting 37% of Brother

Industries total revenues of $2.7 billion fo

2001. Brother Industries, Ltd. as a group

consists of close to 60 subsidiaries world-

wide. Hence Brothers top-level vision is

summed by the Four Gs of Group, Global

Growth, and Green.

Brother Industries started in 1928 by

manufacturing sewing machines and is a world

leader in sewing machines for home and indus-

try, however sewing machines constitute a rel-

atively small portion of the business nowadays

Brother Industries is now concentrated in four

major areas consisting of the information and

document business, the personal and home

business, the machinery and solution busi-

ness, and the retail and real estate business

4 Reproduction Prohibited. Copyright 2002, The ROI Report.


Corporat ion

theROIReporttheROIReport

Reduce returns. Each 0.25% reduction in returns savesmore than $1.6 million per year.

Enable viewing the lifetime value rather than just one time

transaction value of a customer.

Identify customers when they come close to needing a new

product or need software upgrades.

Maximize customer experience during each call, increasing

accessory sales, revenue growth.

Reduce time for servicing end users by 40%, $1.8 per

customer call.

Reduce times for servicing dealers by 50%, $3.5 per work

order, and up to $10 per swap.

Achieve consistent improved quality of service by spreading

the knowledge that was in the customer service reps mind

through the Solution Database.

Lower database maintenance costs by business users as well

as by MIS.

Campaign to tightly focused target groups within hours.

Eliminate multiple systems; use one common software

solution to support the growth of the business and its

processes. Identify and disseminate best practices.

Brother had chosen SAP in 1994 as its ERP system to replace all other mis-

sion critical legacy systems. In 2000 Brother proceeded with mySAP.com as its

CRM solution to continue with a fully integrated strategy. The new measure of

business success going forward would be the Return on Relationship requiring

the ability to turn customer data into business strategies and thereby customer rela-

tionships into equity. The National Service Divisions service center solution would

be the gateway for realizing the strategy. Further reduction in returns and increased

sales would be the end games. The ROI Reporthas projected the internal rate of return

on the investment of $1.7 million by Brother International Corp. into CRM to gen-

erate an estimated ROI of 129%.

E X E C U T I V E S U M MA R Y cont inued


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Over 70% of all revenue is generated

from the Business Machine Group which

produces office equipment such as print-

ers, fax machines, Multi-Function Devices,

and Ptouch Electronic Labeling Systems,

based on Brothers deep competency in

printing technologies. The Business

Machine Group operates in a hyper-com-

petitive market with relatively fragile mar-

gins, and is extremely depend ent on

technological innovation in electronics for

remaining competitive. Steady sale of sup-

plies provides some stability for ongoing

profits. Hyper-competition also means that

the information and document business

is extremely sensitive to fickle customer

loyalty, and is therefore a major focus for

CRM and this study.

Personal and home products include

embroidery and sewing machines. Personal

and home products share some similarities

with the information and document business

in terms of customer relationships and service.

These products too have become more sophis-

ticated and interdependent with advances in

information technology.

The machinery and solutions business

may perhaps be considered as being the

direct descendent of Brothers original sewing

machine business. This business consists of

highly sophisticated indus-

trial sewing machines and

machine tools serving indus-

trial customers in the appar-

el, automotive and IT

industries among others. In

line with the general trend in

manufacturing industries

this business has redefined

itself as a solutions business

focusing on the customers

production line and productivity. More recent-

ly with reduced product cycle times of the cus

tomers, the machine tools have evolved from

being specialized to being general purpose and

configurable in order to support flexible pro-

duction cells and lines.

Brother sells its product line through

various dealers, resellers, retailers, office

superstores, and distributors.

Reproduction Prohibited. Copyright 2002, The ROI Report. 5


Corporat ion


BROTHER INTERNATIONAL CORP. USA AT A GLANCE Fig.

Sales:

$1 billion in 2001.Employees:

1,200 in Americas, of which approximately

200+ in National Service Organization.

Headquarters:Bridgewater, New Jersey.

Operations:American subsidiaries in Canada, Mexico,

Brazil, Chile and Argentina. US R&D center in

Tennessee. US Dist ribution Centers in

California and Tennessee, US Customer

Contact Centers in Calif ornia and Tennessee.

Businesses and products:

Information and document business producingoffice equipment including printers, fax

machines, Mult i-Function Devices (M FDs), and

Ptouch Electronic Labeling Systems.

Manufacture and sale of supplies for same;

Personal and home products business producing

sewing and embroidery machines; Machinery

and solutions business producing industrial

sewing machines and machine tool solutions

serving chiefly apparel, automotive and IT

industries.

Key Executives in CRM Initiative:

Terry Koike, PresidentDean Shulman, Sr. Vice President

Charles H. Stadler, Vice President

National Service

Joy Applebaum, Director, National Service

CRM Project Leader

Dennis Upton, Chief Information Officer

Tony Serignese, Director, MIS

CRM Project Leader

Terry Koike, President, Brother International Corporation

I t s cr i t i cal to have an end gamefor implementing CRM.

One has to think ahead and ask

How wi l l w e knowwe d id bet ter wi t h CRM?


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Corporat ion


Business Context,Mission and Driver,St rategy, BusinessCase

The National Service Division of Brother

USA was formed in 1980 and has more than

200 employees most of whom are customer

service agents working at customer contact

centers. The charter of the division can be

summarized as Customer Satisfaction.

Deceptively simple as it may sound, defin-

ing customer satisfaction and defining the

customer relationship took many years, and

is a never-ending quest for Brother. The

National Service Division is organized into

four groups. These groups are King

(Customer Service,) Queen (Technical

Support,) Parts Distribution, and Returns.

The King is the ultimate end user and is

extremely demanding and must be serviced

at all times. The Queen is the dealer/reseller

who sells the ultimate end user Brother

products and also needs to be supported.

Having a Queen sell the end user meant

that Brother had to consistently produce

value-oriented product with high functionality.

Brother was committed to serving the right

features to the right customers by providing the

richest set of features when compared against

competitors at every critical price point. Brother

was always well known for being the best value

provider in the information and document

sector, especially appealing to small office and

home office (SOHO) users, because these

users tended to be more value conscious than

corporate purchasing bureaucracies.

The SOHO market was a niche unti

the recession and corporate downsizing in

1991 created a boom of formerly employed

workers who now became self-employed

Having a home office or being a consultant

was no longer a stigma. Brother was per-

fectly positioned for this market segmen

and further established itself as the value

supplier. Dean Shulman, Sr. Vice President

explains, During difficult times even the

CUSTOMER CALLS Fig. 2

0

500

1000

1500

2000

1996 1997 1998 1999 2000

800

1400

1545

17701844

Telephone Call s Answered

0.1

0.3

0.5

.28 .43 .48 .48 .48

Calls Per U nits Sold

Calls per unit sold are stable.

Source: Brother Internat ional

Brot her recognized that i twas t ime to focus on

retaining and developing i t s

customer base.


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Corporat ion


richest Kings look to save money and

enhance their bottom line, but most refuse

to sacrifice quality. Brother products thrivein this type of market. This scenario was

repeated after the Internet bubble burst in

2000, further strengthened by the trend for

businesses to increasingly make use of flex-

ible telecommuting type work practices.

Brother, once again with its value philosophy

was best positioned to penetrate medium to

large businesses and corporations.

As the economy recovered after 1991,

Brother recognized it was time to hold on

to and to develop all these customers. Itwould be necessary to somehow view the

lifetime value rather than just one time

transaction value of a customer. Everybody

knew that it was far less costly to keep an

existing customer and sell them something

else, but it wasnt clear who these cus-

tomers actually were, or how they would

continue to be Brother customers. The

first step would have to be collect all the

important information about the customers

in one place.

At the time it was very difficult and

expensive to do the required type of data

collection and database management. Brother

struggled for several years with the tradi-

tional warranty cards in the box approach

which yielded only marginal results. It was

apparent that the customer information was

in the hands of the Queen, the dealers, so

Brother opted for a strategy strongly sup-

porting the Queen. Brother assumed mos

of the burden from the retailers by taking

responsibility for after sales related activi-

ties and calls. This worked well enough bu

still did not close the loop and answer the

burning question for Brother, who was the

King and what did the King think?

In addition to the long-standing strate-

gic marketing requirements above, additiona

factors conspired to make CRM a burning

need for Brother in the new millennium

Information technology had become ubiq-

uitous among non-technical users such as in

the SOHO market. Information and docu-

ment products increasingly had to interoperate

with a great variety of personal computers

TOTAL CUSTOMER SATISFACTION Fig. 3

Who is

the Customer?

What has

Customer

Purchased?

When has

Customer

Purchased?

How is it

Used?Has Customer

Called?

What were

the Issues?

Has Customer

had Service?

Customer satisfaction is a continuous feedback process.


Dur ing d i f f i cu l t t imes,customers work to enhance their

bot tom l ine wi t hout sacr i f ic ing

qual i ty. Brother thr ives in th is

environment.


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operating systems, and application programs.

Brothers products had become highly inter-

dependent with, and indeed vulnerable toweaknesses in complementary products such

as personal computers and applications.

Users were becoming frustrated with

products that wouldnt operate with their

personal computers without significant con-

figuring and troubleshooting effort on their

part, even when Brother was not really at

fault. In addition to heavy usage of auto-

matic fax-back and e-mail systems, calls

were avalanching into Brothers five cus-

tomer contact centers. Brother was spend-

ing millions annually on customer service

and was not able to keep up with all thecalls. The vulnerability was manifesting

itself very painfully, in a high percentage

of product returns, typically in excess of

12% throughout the information and doc-

ument products industry.

BusinessTransformation

The immediately identified need was to

do something to reduce the product returns

Brother had determined as far back as 1996

that simply answering more calls from the

approximately 1.8 million distinct callers

would address a significant portion of the

product returns. Of the calls, only 46% were

being answered, and those in turn were no

being serviced using anything other than a

rudimentary database. The database appli-



Corporat ion


BROTHER KEY PERFORMANCE INDICATORS Fig. 4


Critical Success Factor:

Error-free Order Processing

Critical Success Factor:

Speed of Order Processing

Strategic Object ive:

Total Customer Sat is fac t ion

General Performance

Indicator:

On time deliveries

Measurable

Performance Indicator:

Orders withDeliveries On Time (%)

Measurable


Orders withCorrect Volumes (%)

General Performance

Indicator:

Volume accuracy

General Performance

Indicator:

Sales order cycle time

Measurable


Cycle Time Goods Issue

Measurable


Cycle Time Invoicing

General Performance

Indicator:

Return Rate

Measurable


Returns AmongSales Order Lines ( %)


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Corporat ion


BROTHER KEY PERFORMANCE INDICATORS Fig. 5

King ( customers) Service:

MEASURE CURRENT TARGET CHANGE

Work order cycle t ime 5.3 minutes 3.5 minutes 40%

Outsourced employee turnover 90% 72% 20 % points

First Call Resolution 89% 94% 5 % points

Fax and Printer phone call time 7 minutes 6.5 minutes 60% of calls by 10%

Unique callers answered 64% 74% 10% of all callers

Accessory sales ratio - - + 1% of all calls

Uniformity or responses - - Qualitative

Training time 3 days 2 days 400 hours/ year

Queen (retai lers) Service Administ rat ive:


Swap cycle t ime 20 minutes 10 minutes 50%Work order cycle t ime 7 minutes 3.5 minutes 50%

Research time per problem - - -20%

Vendor inquiries to on-line help 0% 75% 75% of total

Outbound calls 42 per day 6 per day 85%


Queen (retai lers) Service Tech Suppor t:


Research time per problem - - -20%

Incorrect referrals 100% 0% Eliminate

Dispatch efficiency - - 75%


Parts Department :


Customer order cycle t ime - - - 1 hour

Returns - - -10%

Consumer inquiries - - -15%

Average talk t ime 3.25 minutes 3 minutes 8%

Service level (calls answered) - - + 15%

Consumer Sales:


Accessory order ratio 27% 30% 3% of calls

Callbacks - - -50%Outbound mail and fax - - -30%

Kana response time 29 hours 18 hours 38%

Time assisting other customer contact centers - - -75%

Order entry - - 50%


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sories. The last of these was a distinct oppor-

tunity as Brothers products had a wide vari-

ety of optional accessories and supplies not

being stocked by the retailers, and business

could be expanded without competing with

the retailers.

Executing the identified processes well

would result in: Shortened call times and

efficiencies reducing call center costs;

Customer base accumulation in the busi-

ness information warehouse saving call time

used for re-keying basic information and;

Building a one-to-one relationship with the

customer using the collected information

together with email, fax, surveys, and demo-

graphic or other differentiating information.

Based on an average 3-year product lifetime,

it would be possible to identify customers

when they came close to needing a new prod-

uct. In Dean Shulmans words, There would

be an opportunity to retain the Brother cus-

tomer forever.

Proceedingwith SAP CRM

Brother had chosen SAP in

1994 as its ERP system to

replace all other legacy sys-

tems for all its mission crit-

ical processes. After an

arduous project lasting 25

months and utilizing all the

energies of 10 Brother MIS

SAP staff, plus over 20 dif-

ferent outside consultants

and project managers, a less

than smooth Go-Live was

achieved for 600 R/3 users

in mid 1997. Despite this difficult start,

Brother stayed with the vision to integrate all

its departments into one system and to con-

tinue to add any new functionality to the

integrated system rather than create dis-

parate systems over time. Brother was com-

mitted to a single integrated system philosophy

having implemented 16 SAP bubbles to

support the business.

From 1998 to 2001, the

same core Brother MIS team

was able to expand SAP to

cover the consumer sales

and parts operations, per-

form a new SAP imple-

mentation in Mexico, as well

as upgrading the versions

of R/3 being used at sub-

sidiaries in th e US and

Canada. All of these projects

were achieved on time and

under budget. By 2001 the

Brother MIS team was con-

fident it could take on any other SAP expan-

sions including CRM without difficulty. Today

this group supports over 900 SAP users, inexcess of 300 being within CRM.

Terry Koike, President of Brother

International Corporation, recalls, In June

of 1997 we implemented SAP for our busi-

ness and the MIS staff, business people, and

I spent many countless hours through the

implementation period making it a success

Our drive has always been to have our busi

ness people become owners of the system

and use it to continually improve the way

they do business. To that end we are very

proud of the CRM implementation as anoth-

er example of our business people taking

ownership of the system and working with

our MIS staff to ensure that our system efforts

reflect what we need to run our business as

effectively as possible.

Brother had been introduced to the

CRM concept in 1998 but SAP CRM was no

deemed to have the required functionality a

the time. The urgency of the need for CRM

motivated looking at other vendors solu-

tions however these were

all bolt on and would undo

many of the benefits

obtained from having one

integrated system. They

would also create new risks

and be more costly to imple-

ment because MIS would

have to re-learn much o

what had been learned dur-

ing the SAP implementa-

tions. Dennis Upton, CIO

recalls having to be patient

with a disciplined



Corporat ion


Dean Shulman,Sr. Vice President

BROTHER WINS CUSTOMER SERVICE AWARDAND GETS CITED AMONG TOP 500 IT USERS

The National Service Division of Brother International

USA was awarded the 2001 Brother Industries Presidents

Award for striving to achieve true customer satisfaction and

building long lasting customer relationships contributing to

increasing market share. Brother was among the first to

implement such a sophisticated CRM solution and their

proactive strategy was recognized as being the potential

benchmark target for other Brother group companies. Mr.

Charles Stadler, Vice President of the National Service

Division while accepting the award on behalf of the employ-

ees, stated Service jobs can be very difficult and often

unrewarding, which makes me especially proud of the excel-

lent job that has been done. Brother was also chosen as

one of top 500 users of IT by Infoweek.


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approach, future development could be done

more economically.

The appearance of mySAP prompted

Brother to re-evaluate the feasibility of real-

izing its CRM needs along the originally

envisioned integrated strategy. This time the

technology was deemed sufficient so the

decision was made in June 2000 to proceed

with an ambitious project. Dean Shulman

sums it by saying despite challenges, con-

ceptually mySAP is a fully integrated solution

to help you build a house with a solid foun-

dation from brick and mortar and not of

cards. R/3 is a solid foundation.

Having made some, even if painful

progress in reducing product returns with-

out using integrated CRM, Brother did not

proceed with mySAP and CRM until man-

agement was completely clear about the

business mandate and required process

transformations for doing so. Dean Shulman

warns, Horror stories about CRM exis

because people do not honestly ask the ques-tion, So what? Companies tend to imple-

ment existing processes rather th an

questioning their value. Its critical to have an

end game for implementing CRM. Are we

implementing CRM because its integrates

the customer information well? Capturing

more of the same unusable information

would be worthless. Is it because we wan

to answer more customer calls? You can do

that with just adding phone lines. How wil

we k now that we provided better customer

satisfaction with CRM?



Corporat ion


CRM- BW PRODUCTION ARCHITECTURE Fig. 6

CRM PartsOperation

(Dealers)

CRMModule

Server

BIC SAP R/ 3

Production

EmailTech Support Fax Product Registration

Brother Mail

Interner Functionality www

SAP BusinessWarehouse

Reporting

CRM Call CenterOperation

(Consumers)


mySAP prompted Bro therto r e -evalua te the f easib i l i t y o f

rea l izing i t s CRM goa ls .


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CRM: Strategy,Defining Key

PerformanceIndicators

It was clear to Brothers management

that the new measure of business success

going forward would be th e Return on

Relationship requiring the ability to turn

customer data into business strategies and

thereby customer relationships into equity.

The National Service Divisions service cen-

ter solution would be the gateway for realiz-

ing the strategy. Further reduction in returns

and increased sales would be the end games.

Eliminating multiple systems and using

one common software solution to support

the growth of the business and its processes

was a prerequisite. It would be possible to

improve customer satisfaction by improving

the procedures, processes and the informa-

tion quality for the processes. Process pro-

ductivity would benefit from not only

streamlined processes but also by using bes

business practices. Process measurements

would then be among the lead indicators for

total customer satisfaction.

The process improvements would feed

into lowered transaction costs, in terms of



Corporat ion


CRM MODULES AT BROTHER Fig. 7

Selling

ServicingRetaining

Prospecting

Online ProductRegistration

registermybrother.com

Internet Self ServicePersonalized

Web SiteReal-Time Online

Consumer Support

InteractiveIntelligent Agent

CTISolution Dat abaseEmail, Fax and Mail

Solution D atabaseSymptoms and

SolutionsAdaptive Learning

EngineAtt ach Drawings,

URLs, Videos

Service SolutionsASC Search

Swaps or Work OrdersAccessory Sales

Orders

Parts Orders



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individual transactions with customers, as

well as back-end transactions within internal

processes. A common approach would be

established across all of the National Service

departments and Brother divisions. For exam-

ple, the same customer number would be

used for customer tracking, call tracking,

customer history, machine swaps, repairs

and parts tracking.

The business warehouse would be

instrumental by being the definitive repos-

itory of all the data collected and generated

by all the processes. The business ware-

house would also provide powerful report-

ing tools. For the first time Brother could

become a real-time customer driven enter-

prise, and the customer as well as vendor

relationships would be transformed to one-

to-one relationships.

National Service was organized to direct-

ly target the King, Queen, Parts Department,

and Consumer Sales with dedicated cus-

tomer service agent groups. The Queen,

being the dealers, had two groups support-

ing them for administrative and technical

support respectively. This grouping allowed

for further development of

expertise by the customer

service representatives in

each particular field. Charles

Stadler, Vice President of

National Service says,

When we started with an

Internet and FAQ system,

all the knowledge was still

in the customer service reps

mind. Therefore quality of

service depended largely on

the particular customer ser-

vice rep answering a call.

Fortunately the overall quality of customer ser-

vice was high because Brothers Nationa

Sales Group enjoyed an unheard of turnover

rate in the industry, approaching virtually

zero. Therefore over time all of the customer

service reps had become very knowledge-

able. Yet the rapid introduction of new prod-

ucts and models meant tha

a knowledge gap would be

created whenever a new

product was released, which

by definition would also be

the time when more callers

needed information abou

that particular product. The

Solution Datab ase wa

therefore seen as very valu-

able, and one of the firs

modules of CRM needing

implementation.



Corporat ion


REMEMBER THE ABCS Fig. 8

CommunicationsBusiness VisionWhat's ChangingImpact t o My Job

KnowledgeProcess OverviewsProcess FlowsScenarios

SkillsNavigationTransactionsPracticesStructured On-the-JobTraining

Point-of-Need HelpOnlineReference and How-To'sProceduredPoliciesJob-AidsHelp Desk

A wareness B usiness Process C ompetence S upport

Brother communicated the vision and project to employees thoroughly from the start.


Tony Serignese, Director, MISCRM Project Leader


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Call measures and targets were devel-

oped for each customer service group sepa-

rately. (See fig. 5) The in-house customercontact centers were located in California,

New Jersey, and Tennessee with outsourced call

center operations located in Tennessee and

in Montreal. Based on prior experiences the

quality of outsourced customer contact cen-

ters was thought to be less than the in-house

customer service centers. This was mainly

because outsourced staff did not have the

same motivation to accumulate the deep

knowledge as Brothers own employees, and

also because the employee turnover rate at

outsourced customer contact centers was as

much as 90% annually. The cost advantage of

outsourcing if any, was mainly due to the ease

of downsizing outsourced customer contac

centers during periods of slow demand such

as due to an economic slowdown or for sea-sonal variations. National Service opted for

the best of both worlds by having a steady

bulk of calls handled by the in-house cus-

tomer contact centers, and having the vari-

able amount handled by outsourced customer

contact centers. One of the outsourced cus-

tomer contact centers was furthermore co-

located inside Brothers call center operation

in Tennessee to be able to benefit from the

same management practices as the in-house

call center there.

Implementation

Based on the business requirements for

King service, Queen service, the Parts

Department, and Consumer Sales, flow charts

and scope documents were developed for

each. A critical success factor was the use o

activities to document the whole relation-

ship with the customer. The system and hard-

ware were sized, and the SAP/MIS and

ongoing resources were planned. Data migra-

tion from legacy systems was among the firs

tasks. R/3 contained customer master data

plus material and pricing master data. Data

containing some previous customer master

data and customer transaction data as well as

product registration information was con-

verted from Lotus Notes. Information for

the solutions database was converted from fla

files and FAQ lists.

Several levels of data were to be cap-

tured and stored in CRM and the Busines

Warehouse for company reporting require-



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IMPLEMENTATION TARGET DATES Fig. 9

January 2001Business OrganizationCompleted

May 2001

Production Hardware In Place,Software Loaded All Servers,BW and R/ 3 Connections Made

June 2001Business Warehouse

June 15, 2001Campaign Management

August 2001Inbound Email

Management

July 2001Solutions Database

Internal Review

September 2001CRM Order Entrywith Credit Card ValidationSeptember 4, 2001

System "Live" Date

August 2001Online Product Registration

June 2001Data Loads

All target dates were met by not allowing scope creep.


Before CRM, qua l i t y o f serv icedepended la r ge ly uponthe par t ic u la r customer serv ice rep

answer ing the ca l l .


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ments. A custom screen for

data gather ing was

designed. Custom enhance-ments consisting of ABAP

programs, Ztables, and user

exits within CRM were writ-

ten. SAP consultants were

used on a part time basis

over a period of six months.

The length of time spent

on site by external consul-

tants was staggered as one

week at Brother and two

weeks off-site. One SAP

consultant was matched

with each Brother developer and super user

at the start of the project. The staggered

on-site presence and using the buddy sys-

tem optimized the knowledge transfer from

the SAP consultants while building the

competency of Brothers own MIS. Brother

insisted on veteran consultants for the pro-

ject. All SAP consultants were released

before starting to roll out the system in June

2001, and Brother took over the entire pro-

ject thereafter. The technical team consist-

ed of veterans from previous R/ 3 projects.

The ability of the MIS staff to provide tech-

nical support for the software from the out-

set was a significant credibility enhancer

and critical success factor. Dennis Upton,

CIO recalls, We were definitely able to

leverage the knowledge gained during R/3

implementations into the CRM extension.

A critical success factor for the imple-

mentation was the acceptance by the end-

users of job reassignments to match the new

processes and functions, as well as to absorb

the impact of development and transition.

There were changes in the project team com-

position throughout differ-

ent phases depending on

the focus and more dailytasks had to be taken over by

existing staff to allow the

super users to take part in

system development.

Management commitment

and continuous communi-

cation was critical.

Brother was able to imple-

ment all of the planned

CRM functions on time and

within budget. Tony

Serignese, Director of MIS and the MIS CRM

Project Leader explains, Staying focused

on the initial scope of the project was a crit-

ical success factor.

Implementat ion Costs

The major headings to be budgeted andcontrolled were added hardware costs

($400,000), added software costs ($550,000)

external consulting fees ($700,000), and

MIS staff plus super users outside training

costs ($77,000), totaling just over 1.7 mil-

lion dollars. Brother already had R/3 licens-

es and was able to convert these into

mySAP.com licenses while adding 10% more

users and Internet transactions for a tota

of 950 licensed users. Software license main-

tenance costs would remain 17% of the orig-

inal R/3 license costs, estimated at $94,000

annually. The same MIS SAP core team that

had implemented and was supporting numer-

ous R/3 modules would continue to also

support the new structure including CRM

This was made possible by Brothers

approach of using external consultants as

mentors for Brothers own development staf

and rapidly achieving self-sufficiency

Likewise training costs were kept minima



Corporat ion


IMPLEMENTATION COSTS Fig. 10

Hardware

Software

Consulting

Outside Training

400,000

550,000

700,000

77,000

35%

20%

4%

41%

Total $1,727,000

Project Costs


Charles H. Stadler, VicePresident National Service


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by investing to train the super users who

would in turn be trainers for users inter-

nally. The total additional operating costs

would therefore consist mainly of software

maintenance costs and would be about

$94,000 annually.

Benefits

Brother can be expected to benefit from

CRM in tangible financial terms, as well as

in longer-term operational and strategic ways.

Unfortunately being in a hyper-competitive

industry, many of the operational benefits

could be rapidly neutralized rather than set-

ting Brother apart. Although the same oper-

ational benefits have potentially the highest

returns on investment, they can also be

viewed as the price of being allowed to do any

business at all in the hyper-competitive infor-

mation and document products industry. As

for the strategic benefits, they are highly sen-

sitive to managements execution and could

be somewhat speculative also due to the

high rate of technological change.

Nevertheless, operational changes are

what drive financial results in the short term.

Consolidation of nine separate legacy databases

into one integrated database is the enabler

for almost everything else. The benefits olower database maintenance costs, by business

users as well as by MIS accrue immediately

and are compounded as the customer base

grows over time. Over a million customer

records have been created thus far and some

6,000 are being added daily.

One of the most visible new processes

enabled by CRM is campaign management

Brother was among the first companies in

the US to link CRM and Business Warehouse

for the purpose of campaign management

The old campaign process required consol-

idation of several downloaded files followed

by data scrubbing to eliminate duplicate or

bad records. Further data integrity reviews

were done to eliminate records missing

required fields. Multiple customer lists con-

stituted a maintenance nightmare when

removing customers from email or other

mailing lists. The process required severa

days to a week of effort for every campaign

but can now be accomplished within hours

The new campaign process can generate

tightly focused target groups for campaign-

ing and identify the effectiveness of a cam-



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ANALYSIS THROUGH THE CAMPAIGN PHASES Fig. 11

Planning/ Targeting

Execution

Analysis

Planning/ Targeting

Marketing AnalysisMarket Potential AnalysisPortfolio AnalysisCompetitor AnalysisSales AnalysisTarget Group Modeli ngPlanned Costs/ Revenues

Execution

MonitoringKey Performance IndicatorsActual Costs/ RevenuesAlerts/ Thresholds

Analysis

Success M easurementLead Generation

Response RateCost BenefitChannel Efficiency


We were de f in i te ly ab leto leverage the knowledge

ga ined du r ing t he SAP R / 3

imp lementa t ion in to the

CRM extension.


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paign processed from CRM. Ad hoc scenar-

ios can be performed for estimating cam-

paign size. Data integrity is assured thanks tothe CRM data entry points where inputs are

validated during entry. Duplicate records are

eliminated using the search logic within

CRM. Reports are generated with informa-

tion on quantities of products sold as a result

of a particular campaign. The simplified

CRM campaign tools provided allow super

users to create and execute campaigns with-

out any MIS help or intervention. Multiple

sales campaigns have been conducted and

sales increased soon after implementation.

On the service center operations side

some 30,000 calls are being logged weekly

into CRM. Approximately three months of

call data was transferred into CRM from the

legacy systems. In the beginning, less than

2% of all calls were from customers in the

system. Over a six week period, this was

increased to more than 20% as more cus-

tomer records existed in the system. Thismeasure alone is an indicator of improving

customer service levels. Some 170,000 prod-

ucts have been registered and some 23,000

inbound mails have been received for pro-

cessing into CRM thus far.

On average the customer service agents

achieved pre implementation talk times in less

than 3 weeks. A significant reduction of 40%

in work order cycle time for servicing the

King (end users) is expected. This translates

to approximately a $1.80 reduction in cost per

customer call processed. Likewise a 50%



Corporat ion


CAMPAIGN MANAGEMENT IN CRM Fig. 12

Campaigns

What When Who

Planning

Budgeting

Monitoring

Modeling

Profiling

Selecting

Telephone Web Mobile Email Success Management (e.g. ROI)

Third Party Dat a

Profiles

SAP BW

Marketing and Campaign Planning

Campaign Execution/ Activity Management

Target Group Selection

Campaign Analysis


Brot her expects to benef i t

f rom CRM in t ang ib le

f inanc ia l te rms, as we l l as

in longer-te rm st ra teg ic and

opera t iona l ways.


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reduction in work order

cycle times for servicing the

Queen (dealers) is expect-ed. This translates to approx-

imately $3.50 cost savings

per work order, and up to

$10 per call in the case of

swaps. When asked about

progress on some of these

measures, Joy Applebaum,

Director at National Service

and CRM Project Leader,

realistically states we are

on track yet we probably

wont realize the full benefits of the new

processes and system for another 6 months.

Considering that this would still add up to less

than a year, the speed of return on investment

is evident. Additional call center related ben-

efits include the ability to report on perfor-

mance of distinct call handling groups down

to the level of individuals requiring addi-

tional coaching. This can also be used to

identify and disseminate best practices.

Even the most modest reduction in

returns attributable to CRM is sufficient to

justify Brothers decision to invest in CRM.

Each 0.25% reduction in

returns, results in savings of

more than $1.6 million forthe first year and every year

thereafter. Brother achieved

a 7% reduction continuously

over the five-year period

from 1996 to 2000, and it

is clear that there is still

room at the bottom.

ROI

The ROI Reporthas projected the inter-

nal rate of return on the investment of

$1,727,000 by Brother International Corp.

USA into CRM to generate an ROI of at least

129% in the most conservative scenario.

Sensitivity analysis shows that the time to

break even in all scenarios is about 2 years.

The largest portion of the CRM benefits

is obtainable from reductions in returns,

which are easily measurable and impact cash

flow directly. Benefits attributable to R/3

and initiatives other than CRM were exclud-

ed in this exercise. Contributions due to

transaction efficiencies were ignored for this

exercise because they are highly sensitiveto multiple assumptions and some of them

are already included in th e reduction o

returns. In reality these benefits could be an

order of magnitude larger, and have even

greater strategic value for the business. Also

significantly, sales growth in general as wel

as sales growth directly attributable to CRM

was assumed to be zero, because of the hyper-

competitive nature of the business.

The Future

A significant number of additional CRM

functions are planned for implementation

on top of the basic functionality already in

place. As these go live the activities will

become more focused on fully using CRM

in an integrated fashion to fulfill the origi-

nal vision for total customer satisfaction. In the

longer term, management can leverage the

strategic impact of CRM. This will be possi-

ble once all the information being generated

by the processes is condensed and analyzed

to seek larger trends and shifts in the marke

for Brother to proactively take advantage of



Corporat ion


Dennis Upton, ChiefInformation Officer

Customers say I app laud you fo r des ign ing a

system tha t ma in ta ins

the h is to ry o f your customer .

BUILDING CUSTOMER TRUST

Most customers are positive however there are some who are sensitive about giving the

personal information required to create a business partner in CRM. Some might say Why do

you need this information? I only want pricing. When the customer service representative

explains that this is t o better serve the customer in t he future if they were to ever call again

and that they won't have to repeat the information, most customers feel comfortable. Already

the sales areas are reporting a 50% find on business partners that they don't have to create.

Some customer reactions have been "You have all that informat ion in there? Cool, comput-

ers, way to go!" "I applaud you for designing your system to maintain the history of your

customers.""Oh, you already know who I am!""You have me by my phone number?"

Starting wit h the first call, a relationship and the trust that goes with it are being built.


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Then CRM will become a part of higher-level

strategy processes within the company. For the

immediate future, Brother has planned adetailed time line till the end of 2002.

In the second quarter of 2002 catalog and

content management tools within CRM will

be put into use; Business-to-Consumer and

Business-to-Business Internet sites using

the CRM product catalog (e-selling) will be

developed; Telesales and telemarketing will

be implemented; Marketing planning and

customer segmentation will be enhanced;Customer self-service will be encouraged by

web enabling the solutions database and;

Outbound e-mail functionality will be expand-

ed to other CRM applications.

In the third quarter of 2002 call center

scripting will be implemented; Cross-sell-

ing and product proposals will be initiated

Inbound e-mail management will be expand-

ed to other product lines and; web basedlead generation will be integrated into the

CRM Activity Monitor.

In the fourth quarter of 2002 work order

processing will be fully implemented and

the opportunity management functionality wil

be expanded within sales force automation



Corporat ion


CRM COMPONENTS Fig. 13

InternetSales

InternetCustomer

SelfService

FieldSales

FieldService

CustomerInteraction

Center

BusinessPartner

Collaboration

Telesales

TelemarketingInternet

Marketing

ProductBrand

Management

MarketingAnalysis

SalesManagement

andSupport

ServiceCenter

CustomerDevelopment

TieredServicing

RetentionManagement

Selling

Servicing

Prospecting

Retaining



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Lessons Learned

Brother had a solid vision for total cus-tomer satisfaction in pursuing CRM. The

lessons learned can be summarized as follows.

1. Know your Ki ng and Queen.

Although you may think you know who your

customers are, take a closer look to see if

there is a Queen (e.g. dealers) and other

essential players who will also determine if

the customer is satisfied by your products.

CRM may turn out to be the solution for fill-

ing service and support gaps where your

Queen cant do so.

2. Know where your product

ends, or doesnt end. Brothers informa-

tion and document products are highly inter-

dependent with other IT products such as

personal computers and operating systems.

Therefore customer service inevitably for-

ays into solving system problems that are

not necessarily contained only in Brothers

own product. While solving a problem caused

by an operating system vendor may not be the

most cost effective use of your CRM system,

not solving the problem may mean you los-

ing your customer.

3. Identif y core processes that

will use CRM and deliver total customer sat-

isfaction. Without the processes, CRM is justanother database and is no guarantee for

delivering value alone.

4. Low t urnover at the same time as

cost effectiveness in customer contact centers

is possible by investing in long term training

and tools including CRM and solution data-

bases which help service agents to provide a

high quality service to the customers while

keeping them challenged and motivated.

5. Monit or data f lows across BW

and CRM linkage points. Identify the poten-

tial data flow points of failure and develop

processes to monitor data flow on a daily

basis. Avoid record duplication and ensure

consistency of the information.

6. Avoid scope creep. Brother

stayed focused on the originally planned

feature set during implementation, and rel-

egated any additional requirements that

were time intensive to future implementa-

tion. This was the most critical success fac-

tor for bringing in the project on time and

under budget.

7. Call Center doesnt have to be

the first part implemented within CRM.

Brother chose to implement a business infor-

mation warehouse and campaign manage-

ment capabilities first which yielded

immediate benefits and learning, followed

by call center implementation that required

a longer time frame.

8. Mi x outsourci ng with in-house

call-centers and keep enough flexibility to

adjust when demand fluctuates. Keeping a

large percentage of the call-centers in house

ensures high quality service and long-termlearning, which results in more satisfied cus-

tomers as well as lowered training costs

9. An Experienced development

team is a golden asset. Brothers developers

had all been with the company for at least 5

years and were experienced in the business

processes and several SAP implementations

10. Focus tr aining by using outside

consultants as top-level trainers and advisors

to the MIS staff and super users who in turn

can lead and train the other users.



Corporat ion


In the longer te rm,management can leverage the

s t ra teg ic im pact o f CRM .

PROACTIVE CUSTOMER SERVICE

By having a complete view of the end

user Brother can proactively plan and

execute software upgrades for its infor-

mation and document products which

have to interoperate with a great varietyof personal computers, operating sys-

tems, and application programs. Often

times when a major operating system or

office application vendor releases a new

version of their products, Brother also has

to make available software upgrades for

compatibility or to take advantage of all

of the latest software features. Using

CRM it is now possible to inform individ-

ual users by e-mail and point them to the

latest drivers etc. applicable for the par-

ticular Brother products they own. This

proactive approach maximizes the bene-

fit s for the end users and their experience

with Brother while also saving them from

potential software aggravations later.


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About the ROI Report

This publication is a periodic report on the imple-mentation of enterprise-wide client server applications,

such as R/ 3 and CRM from SAP R/ 3. The ROI Report

is written for senior managers of Fortune1000 orga-

nizations around the world. The report is published

by Hill| Holliday, a Boston-based communications con-

sultancy that combines rigorous business analysis and

marketing expertise with powerful creative and inte-

grated communications across all media to build brands,

create customer relationships and drive sales.

ROI Methodology

The ROI Reportinterviewed Brother International

Corporation executives, managers, and users about

their implementation of SAP R/ 3 and CRM. In addi-

tion, Brothers internal financial reports, planning

documents, and other materials were reviewed. A lit -

erature search also was conducted to obtain addit ional

information and to identify key issues. The ROI cal-

culation was based on a model that evaluated the

projected impact and benefits. Working capital car-

rying costs were analyzed and valued at the estimated

inventory carrying costs and Brothers cost of capital.

Financial projections for future years were based upon

The ROI Reports analysis of internal company doc-

uments and comparative industry analyses. The

investment analysis included the estimated cost of both

external and internal Brother implementation expens-

es. The ROI was calculated by determining the InternalRate of Return (IRR) using the t ime-value-basis of

money. The IRR method was chosen because it is felt

to be the most conservative approach.

Authors

Ali Pirnar is a researcher at the MassachusettsInstitute of Technologys Intelligent Engineering Systems

Laboratory and Director of Technology Strategy for

the System Design&Management, and Leaders fo

Manufacturing groups. He researches strategy and

innovation in the software industry and has consulting

experience including benchmarking, reengineering, busi-

ness and product development spanning the high-tech

telecommunications, finance, oil, construction, and pro-

fessional services industries. Mr. Pirnar has an SM

in Management of Technology, and an SM in Technology

and Policy from Sloan School of Management and

School of Engineering at MIT.

Linda Plazonja is a consultant and founding part-

ner of The ROI Report. Her professional practice

focuses on change management, organizational dynam-

ics and project management. Ms. Plazonja has a

Bachelor of Arts from the University of Connecticut

and a MSW from the Simmons Graduate School of

Social Work.

Robert Scalea is Executive Vice President of

Marketing Sciences at Hill| Holliday, and is a found-

ing partner of The ROI Report. Mr. Scalea is a graduate

of the Massachusett s Institute of Technology. He per-

formed post-graduate studies at the Pasteur Institute

University of Paris.

For More InformationThe telephone number for The ROI Reportis 800-

283-1SAP. The electronic mail address is SAP.COM

We look forward to hearing and reading your com-

ments on how we can make The ROI Reportmore

valuable to you.



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