The difficulties and success of implementing CRM

The History of Toyota in Russia starts from the beginning of the 1990s when the first Toyota dealerships were established. In 1998 Toyota Motor opened its Moscow representative office, which was aimed to evaluate market situation and promote sales increase through dealership networks in major regions in Russia. Due to dynamic development of the automobile market in Russia, in 2001 it was announced to establish a national sales and marketing company OOO “Toyota Motor Russia” (TMR), which started its operations in April 2002. The company is a strategic base of the Toyota Motor Corporation in business development on the territory of the Russian Federation. In 2007 Toyota Motor Manufacturing Russia was launched in Saint Petersburg which is a manufacturing plant with capacity of over 50000 cars a year.

By April 2011 there were more than 60 dealerships all across Russia corresponding to strict rules and regulations developed by TMC and integrated in dealerships all over the world. All the dealerships are businesses owned by independent entrepreneurs.

Takeshi Isogaya, the president of Toyota Motor Russia, came to the company in 2009 and announced his major objective: “Toyota has to become â„-1 automobile brand in Russia”.

IT Challenge.

The complexity of gathering and analyzing the information about customers and their needs as well as dealers’ key working indicators meant that Toyota Motor Russia needed a highly efficient IT system to achieve its aim of becoming â„-1 brand in Russia.

Customer relationship management (CRM), being one part of the required system, has to be implemented into the operations of TMR and all the dealerships. CRM helps a company become focused on customer requirements and wishes and responsive to changes in aggregate patterns of customer behavior [1] .

The ability to know what your customer wants is the key to success of any business. The biggest problem in the way is that Toyota Motor does not communicate with the customers directly – their source of communication is a dealer. Due to different standards, as well as different types of software used by more than 60 dealerships in different regions of Russia TMR did not receive all the required information about the customers and their needs.

Operating on one of the fastest growing automobile markets in the world with the growing number of dealerships inside the country, Toyota Motor Russia needed to create a CRM system which will be used by dealerships. There were basically 2 biggest challenges on the implementation way: 1) to satisfy the needs of all dealerships in the new system 2) to integrate the new system into the dealerships

The difficulties and successes of actually implementing IT in the work place

Toyota experience

Russian automobile market is a very fast growing market and the company requires a highly efficient and well-modified system to suit all the requirements. Toyota Motor Corporation is a multi-national company with representatives all over the world. Through ages it has been working on different markets and by now Russian division has a huge legacy of experience behind them. IT part is not an exclusion.

Toyota has invested more than 10 billion dollars worldwide in the development of IT systems [2] , including CRM systems. One of the reasons of huge investments – is that Toyota operates in too many countries, and its systems have to be implemented across 27 countries and more than 60 facilities.

Almost each operating region implies separate sales and marketing company or even a manufacturing plant, which in its turn requires a suitable IT system. Factory IT systems and CAD are largely in-house developed for each facility. It is quite obvious that best-practices in Japan are not able to rollout to other parts of the world. A key bottleneck is regional supplier relationship (especially with dealer networks), which was especially important for high margin luxury vehicles that are made in small lots. Even with the same product, part numbers are created uniquely at each facility as a result of local Kaizen (constant development) activities.

Major CRM Systems

Siebel for Automotive

Chart â„-1. Current proprietary technologies at Toyota

During an appearance at the CIO forum 2009, Toyota President Watanabe-san said that he firmly believes IT will save his company, the enterprise and the nation from the recent recession, which represents one in a hundred years opportunity to change and thrive.

As a proof of his statement, Toyota being a truly global company uses a lot of applications, all modified to support their business. Chart 1 clearly shows most of them.

As we can see from the chart, Toyota uses Siebel for Automotive in their CRM. It is a software application crafted to make the automotive industry easier by focusing on, improving and monitoring industry areas such as of call centers, sales and services, and internet activity. CRM software has to help dealers increase sales, customer loyalty and achieve customer retention.

The developers of the software claim that the car companies and their relationship with their suppliers has been traditionally difficult, but armed with a proven CRM solution, like Siebel, the automotive industry can fight off lagging sales and build customer loyalty by targeting specific clients to boost leads and boost sales. Being extremely effective solution for car manufacturers and dealers, Siebel is also quite an expensive ($70/month per user). The CRM software enables dealers and manufacturers to monitor vehicle stock levels, to deliver reports for the most popular models, and to generate invoices for the used car exchange. These are the Siebel’s CRM system key features:

Sales management shares customer information between sales, service and parts departments

Vehicle management gives complete vehicle data along with sales, service and financial history, as well as dealer and license information and owner and contact information

Activity and e-mail management systems link e-mails with associated contacts, leads and opportunities

Service management increases customer loyalty by enabling consistent, personalized interaction across all customer touchpoints including, telephone, e-mail, Web, wireless devices and in-person meetings.

Dealer Daily in USA

As another example, in USA Toyota uses “The Dealer Daily” (Toyota’s application for car dealers, Dealer Management System (DMS)) which incorporates more than 120 business applications, such as CRM or Aftersales. Designed to improve communications between the automaker and its 1,100 Toyota and Lexus dealers, the Internet portal has increased dealer productivity by nearly 70%, according to Toyota. Because of the new system, dealers spend less time at their computers and more time selling vehicles. Toyota’s Dealer Daily is a large, Windows-based virtual private network (VPN) that links the dealers’ management systems to Toyota headquarters or to other business units around the clock. Dealer Daily lets dealers order parts, download sales and other company information, file warranty claims and manage financing and insurance for customers online, as well as all the customer profiles, saving millions in printing and distribution costs. And with the new system, dealers don’t have to waste time keying the same information into their systems and then into Toyota’s corporate communications system.

Moreover, Toyota recently added the capability for dealers to find out which vehicles it has in the production pipeline on USA manufacturing plants, and make changes such as switching a cloth interior to leather. Toyota has been trying to shorten order-to-deliver lead time to 1-2 weeks, and it requires the capability to search in real time what are the work-in-progress vehicles in the assembly line and hence to assign customer specific options to be added in the down stream process.

Now Toyota is trying to lay down, as a part of CRM, the foundation for Build-To-Order (BTO) capability especially at developing countries such as China and Russia where the sales network still have been under construction.

Lean CRM in Europe

A strategy that manages to cover both manufacturing and non-manufacturing environments was developed by Toyota in Europe and is called Lean CRM. It was created in response to the growing volume of customer information collected at the many touch-points during the customer lifecycle. It allows Toyota to sense changes in individual customers’ behavior and to respond in a way that increases customer satisfaction, which, as was stated above, is its primary goal. It has enabled Toyota to sell significantly more vehicles, with a shorter trade cycle and higher repurchase rate, and what is very important at significantly lower costs.

In accordance with the surveys a typical European customer will own a new vehicle for 3-8 to eight years before buying a new one. Toyota’s process guides how different touch-points over the customer lifecycle are delivered and how to employees should respond to customer-initiated touch-points and deliver Toyota-initiated ones. This process starts when the customer is just thinking of buying a new vehicle, with Toyota’s marketing. The marketing sends prospective buyers to the Toyota web site, where they can learn more and request further information. Requesting information is an example of “customer pull,” where Toyota responds directly to the customer. It is the first point at which the customer becomes known to Toyota, and it checks if Toyota already knows the customer. What the company already knows about the customer guides how future touch-points to that customer are delivered.

As Toyota guides the customer through the purchase process, the auto company uses what it knows about the customer to provide just the right information that Toyota leadership thinks will help him or her make the right choice. This is an example of “smart Toyota push.” In addition to more vehicle information, Toyota might send out a customized offer, maybe even a pre-approved credit offer if the customer’s credit record with Toyota is good. Statistical models are widely used to help identify which customers should have which information pushed to them. Where models are not available or not appropriate, simple data analyses or Toyota best practices are used, instead.

As the customer buys his or her new Toyota and enters the ownership lifecycle, Toyota uses every opportunity to sense customer pull and to respond to it-and to push exactly what it thinks the customer wants, exactly where it’s wanted, exactly when it’s wanted. It is this combination of pull and push that guides each customer step by step during the customer lifecycle and toward the customer’s next purchase. It is the backbone of the lifetime conversation between the customer and Toyota.

The heart of Toyota’s Lean CRM is “Customer DNA.” Just as real DNA influences how each individual develops, looks and responds to his or her environment, Customer DNA controls how each touch-point between the customer and Toyota during the customer lifecycle is carried out. It defines each touch-point-most likely a contact or a campaign-that a customer is likely to have with Toyota, whether initiated by the customer or by Toyota. The touch-point trigger, the touch-point delivery process, previous or subsequent touch-points, the roles and responsibilities involved and the business rules that control how the touch-point is executed are all contained within the touch-point definition. The touch-points appropriate to each customer-which make up that person’s Customer DNA-are assigned to them as soon as the customer is identified.

Toyota implements the touch-points through the Unica Affinium campaign management system (CMS). Using an industrial-strength CMS like Affinium is the only way to manage the variability of customers, the different touch-points and their implementation.

A regular process automatically reviews what is known about each customer and decides whether a touch-point should be triggered. If more than one touch-point is appropriate at the same time, it also decides which one has priority and what happens to the other. For example, an update of customers who have had recent service from a dealer will trigger the review process. For those who were due to be sent an inspection reminder but had the inspection recently, the reminder will be cancelled. And the mileage at the last inspection will be used to calculate when the next reminder should be sent out.

Similarly, if the customer requests information about a new model, the request will automatically trigger a review process to identify the best touch-point and which touch-points should be triggered as a follow-up.

As Toyota introduces brand new touch-points, such as a new Customer Driver Club, all Toyota has to do to update the Customer DNA is to define the touch-points associated with the Club, how they interact with existing touch-points and the membership rules for the club and then enter that data into Affinium. The next time a review is triggered, the new touch-points will be there along with the pre-existing touch-points.

The Lean CRM approach outlined here has been developed in close cooperation with one of Toyota’s European sales companies and its dealers. It has been piloted in touch-points during the customer lifecycle. It has enabled Toyota to sell significantly more vehicles, with a shorter trade cycle and higher repurchase rate, at significantly lower cost. A comparison of a recent before and after marketing campaign showed a 70 percent reduction of non-target customers being mailed, an 80 percent reduction in campaign costs, a 50 percent reduction in campaign development time and a 60 percent increase in campaign ROI. Over the next few years, Toyota’s Lean CRM will contribute between $5 million and $10 million (in U.S. dollars) of additional contribution each year to the sales company.

Despite the reservations that some have about applying lean principles developed in manufacturing to sales and marketing, Toyota has shown clearly that Lean CRM does deliver significant benefits for customers and for itself. For Toyota, it is an inextricable part of its long-term drive toward total customer satisfaction.

e-Toyota Business

Another CRM tool is Toyota’s comprehensive Japanese-language information network service GAZOO.com which provides its 4.9 million members with information on new cars, used cars, and related services, such as online shopping, and a wide range of other information through a web site and information terminals. The name “Gazoo” originates from the Japanese word gazo meaning images. Gazoo was established as a membership Internet service linking Toyota, its national dealer network and Gazoo members. The system meets increasingly diverse customer needs. Furthermore, Toyota is using new content such as Gazoo Racing and Gazoomura to further add to its content line-up

In fiscal 2008 another project was started etoyota.net, a website where customized pages can be automatically created to meet specific customer needs.

In addition to this in April 2008, they launched Toyota Metapolis, an original three-dimensional virtual city that also serves as a new information media source aimed to inspire new interest in cars and propose new ways for people to enjoy their vehicles through the Internet

Moreover, as part of GAZOO mobility services, in the telematics field they launched a “G-BOOK”, an information service for onboard terminals in the cars. At present, Toyota is introducing upgraded versions of the G-BOOK system: G-BOOK ALPHA and G-Link for Lexus vehicles. Toyota also offers the theft detection service, the vehicle tracking service, the operator support service and so on as standard to enhance services aiming to provide safety, security and comfort for G-BOOK and G-Link users in their lifestyle using automobiles. With G-BOOK mX announced in April 2007, Toyota started offering services that allow drivers to use more convenient navigation systems such as “Map-on-Demand” – the world’s first technology for automatically updating map data. Also, Toyota has further strengthened its ties with Gazoo and G-BOOK and has for example allowed map information searched on a blog on GAZOO.com to be used on G-BOOK, further maturing as a comprehensive telematics service. In Japan,Toyota is seeking to promote the use of the G-BOOK by equipping all Crown models with the G-BOOK and increasing the number of car navigation system models that are compatible with the G-BOOK. Toyota has also licensed its G-BOOK technology to certain other competitors in Japan. Toyota is applying the technology and experience it has accumulated in Japan to regions outside Japan. G-BOOK services have been available in China since March 2009, and Toyota was planning to commence its unique telematics services in the United States in August 2009.

In addition, they are also launching e-CRB (Customer Relationship Building), a state-of-the-art CRM (Customer Relationship Management) network system that helps cultivate long-term relationships with customers by providing information about the new vehicles, accepting requests for brochures and estimates and notifying customers when it is time for maintenance by keeping track of the vehicle’s maintenance history and mileage. In addition, e-CRB offers an advanced operation system that can be utilized comprehensively at dealers including with respect to new and used vehicles and services. Toyota is currently promoting e-CRB in countries including China, Thailand and Australia (those regions have been chosen as start-ups for this system), where steady progress has been made as the service-in rate (the number of vehicles being serviced in relation to a whole) has increased.

Major problems on the implementation way

Customer Relationship Management has to be an integral part of Dealer Management System. Before implementing any new CRM into its DMS system in any company the company’s management has to clearly understand what is designed to:

Help manufacturers in production of cars satisfying customer demands

Analyze car buyers’ purchasing decisions.

Identify drivers’ usage and needs through auto dealer CRM.

Integrate the sales, service and finance activity of current customers.

It is quite clear that Toyota Motor Russia management did not have the dilemma of whether to invest into a new system or not, but rather faced the problem of HOW to do it. The potential payoffs for the industry are enormous. In general, good CRM system may drive out bad sales and marketing efforts and, according to David Nathanson, director of retail automotive operations for PricewaterhouseCoopers, those expenditures can reach 30 percent of the cost of a new car.

The automobile business is a very diversified and complicated business. However its major aim is to sell cars and parts, therefore customer satisfaction is one of the major sources. It is known, that Henry Ford offered his Model T in “any color you want, as long as it’s black.” Today, the automotive industry is under pressure to take a far different approach to satisfy a customer.

Moreover, to implement the new system the company has to understand possible problems on the implementation way taking into consideration international experience.

First of all, when choosing a CRM service provider, the customer should be aware of few key issues, such as the creation date of the software, database scheme of the CRM used, and of course the cost of the software, which is one of the key indicators.

Furthermore, despite the industry’s size, there are few CRM software suites tailored specifically to meet its needs. This problem is epically serious in Russia where IT service industry is on a development stage and most of the population cannot speak or understand English (thus the dealership system has to be in Russian). For example, In USA the vendors that provide back-end dealer management systems, such as Reynolds & Reynolds and ADP, are only slowing adding CRM modules, and although companies like Siebel (which is used by Toyota) and E.piphany have some automotive clientele, there is no definitive package. The same situation can be seen in Russia, where “1C” vendor of computer systems has only started to create specific product for automotive sphere, which still has to be tailored to meet the requirements.

As it was stated above, until recently, the automotive industry’s distribution systems distanced the auto manufacturers from the end customer. Traditionally, the customer for any manufacturer, such as Toyota, Ford or GM was the dealer, and the situation remains in Russia. As we all know national marketing campaigns are run by manufacturers (or their directly owned representative offices), but their job was to keep the dealer happy. The created system of operations between manufacturers and dealers was depriving manufacturers of all responsibility for customer contact, so they were losing a big piece of control of the channel.

Another problem to be solved in Russia is that customer preferences play a very small role in the manufacturing of the cars. Due to the fact that Toyota has only one model (Toyota Camry) produced in Russia out of 12, and all the rest outside Russia (Japan, UK, France, etc.), the order-delivery period might take up to half a year. In Japan, for example, this problem was solved with the help of Lean manufacturing, or rather Lean IT. In Russia the situation is different: the manufacturers produce the cars and ship them off – and it’s the dealer’s responsibility to sell them. A good example of non-meeting the customer needs would be the Toyota Camry, firstly imported from Japan, sold in Russia without heated seats, what is absolutely unsuitable for Russian customer, taking into consideration its severe climate.

All in all, to achieve the goal of “the car that CRM built” requires two major steps for the industry:

1) Increasing the flexibility of the manufacturing process

2) Improving the integration between manufacturers and dealers.

The challenge will be to put together the view of the customer with a view of the enterprise inventory. In order to make this system work, the manufacture need to be able to see where every single car they have in inventory is: on a dealer site/on a truck/ at a distribution center/in the factory/in the production sequence.

Some experts say that the future belongs to built-to-order (BTO) cars. Sooner or later, manufacturers won’t be able to afford doing business any other way, except for this. BTO will probably be future, because car producers have to get rid of huge stocks. The expenditures of keeping stocks in Russia are very high due to: 1) high interest rates; 2) and the fact the order-delivery process might take to half a year force distributor and dealerships keep huge stocks (dealers also worry about the impact of having to stock an increasing variety of cars to keep up with increasing calls for customization).

However CRM management is the right tool to make build-to-order system more manageable for dealers than the current “guess-order-sell” approach to inventory. Dealers can have fewer varieties of vehicles and more customization. The key factor will be identifying and eliminating options nobody wants to buy, because consumers buy on a narrow range of features. Nowadays manufacturers try to do everything for everybody, and of course it is inefficient. A way out of having a needless variety of features is to increase communication: dealerships have to gather information for the producers of what a customer want and build it for him. Moreover, in communication process manufacturers cannot simply dismiss the dealer channel. First of all the dealer network is already a living organism owned by individual entrepreneurs.

Nevertheless another problem might arise: small dealers will have implementation problem because the technology is not cheap, and they really don’t have the critical mass of customers. But the situation can be changed if OEMs decide to adopt these systems on a massive scale and distribute it to all of their dealers.

Another problem is the fact that on average, interaction between an auto company and a customer occurs 1.5 times per year. That simply does not provide enough data to answer such crucial questions as, what car to produce? A good CRM starts with a simple premise: The most important part of the database isn’t the base; it’s the data so to gain the information necessary to embrace the customer, relationship programs must be based on two principles:

• First, they cannot wait until the first purchase is consummated to begin to understand consumer interests, concerns, desires and habits. The key to unlocking value is to recognize that different customers follow different purchase paths. Effective CRM systems must dive deep into the purchase decision before the purchase is made. This can be called purchase-cycle intimacy.

• Second, because different customers follow different ownership paths, effective CRM systems must link deeply and broadly to the individual’s ownership experience – the consumer’s relationship with the car throughout the ownership cycle.

Acting on these two principles requires companies to bring otherwise separate technology programs together in complementary ways. For example, Internet-enabled communication systems (such as Gazoo) make it increasingly possible to capture valuable insights about consumers in the middle of the purchase process. Online activity at home or in the office represents another vital opportunity to achieve purchase-cycle intimacy. The bursting of the e-commerce bubble should not obscure the fact that some 70 percent of consumers in the United States use the Internet at some point during the automotive purchase process.

CRM in the automotive industry can help the manufacturer to integrate customer relationship and marketing, by taking the information you collect through automotive CRM software programs and using it to develop a marketing campaign through the use of marketing automation software. With this approach, they can use automotive CRM tool to more effectively target potential customers and automate direct mail, email and other marketing efforts.

Start of implementation.

In 2009 when Mr. Isogaya-son came to post of the president of Toyota Motor Russia, had already some start-ups and some work on CRM in progress.

One of the first steps was the integration by “MicroTest” of an analytical system CRM OLAP based on Cognos Business Intelligence for Customer Relationship department in OOO Toyota Motor Russia.

MIcroTest started cooperation with TMR in 2005 and created the budgeting system based on Cognos Enterprise Planning, which was coveting the whole budgeting cycle of TMR. The same year the implementation of the analytical system based on Cognos Business Intelligence began, which was aimed at efficiency increase of key indicators, such as logistics, marketing and sales planning. By now specialist have finished the major project, provided the integration of the Cognos System with ERP system Microsoft Dynamics AX, with dealer portal and other sources containing marketing information.

The project on creation of an analytical system for the Customer Relations Department – CRM OLAP was started in august 2006 and was aimed at provision the following:

The delivery of consolidated data from diversified sources in one system

Avoidance of additional hand input of the information into reports

The ability to prepare unspecified reports

The ability to make analysis of the information about the customer relationships

During the process, for the analysis of the customer contacts as well as results of the marketing projects 2 data bases were created. In order to storage the data, formerly delivered to Toyota Motor in different formatted Excel Files, the new data importing system was created, which can be used as autonomous solution in the future. As it was mentioned before, the CRM solution is based on OLAP system of Cognos Business Intelligence, data storage is implemented on the Oracle products, and for data uploading Microsoft SQL Data base management system is used.

The overall project of creating a system for Customer Relationship Department in Toyota Motor Russia was amplitudinous and quite difficult: the system delivery dates as well as start of operations in the new system were strictly stipulated.

Although the implementation of the first CRM solution was very successful and now working very well, it covered only half of the work. Despite the fact that the dealerships were now uploading information through a specified page, they still had to enter it twice, because the system they were working for the internal needs was different, and consequently the information and business results differed from dealer to dealer.

Using the best Toyota experience, the first part is already successfully implemented. Now Takeshi Isogaya, being a president of Toyota Motor Russia has to decide whether to continue implementation of a system with a local vendor, or to use one of the systems already developed by his colleagues in other regions.