The Lean CRM-Toyota Story: You Can Have a Strategy That Works in Manufacturing and Marketing Environments

Posted by Graham Hill on April 10, 2006

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You can hardly pick up a business newspaper today without reading of the demise of the big Detroit automakers at the hands of Toyota. But what exactly is behind this success? A large part of the answer is Toyota's obsession with its customers. Toyota's internal sales and marketing bible, The Toyota Way in Sales and Marketing, makes it patently clear to all staff that totally satisfied customers is the source of its success.

Everything Toyota does is done with this in mind. But in what may be surprising to those who believe a manufacturing strategy doesn't work in a customer-centric environment, I would argue that a good measure of Toyota's success is a strategy that manages to straddle both manufacturing and nonmanufacturing environments. It's one called Lean CRM, which was developed by Toyota in Europe, 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. It has enabled Toyota to sell significantly more vehicles, with a shorter trade cycle and higher repurchase rate, at significantly lower costs. Customer pull A typical European customer will own a new vehicle for three to eight years before replacing it. 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 about buying a new vehicle, with Toyota's marketing. The marketing guides 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 triggers a check to see if Toyota already knows the customer. What the company already knows about the customer guides how future touch-points to that customer are delivered. Toyota push 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 itand 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. Customer DNA 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-pointmost likely a contact or a campaignthat 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 touchpoints, 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 customerwhich make up that person's Customer DNAare 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 followup. 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 touchpoints 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 touchpoints will be there along with the pre-existing touch-points. So much for the theory, but does it actually work? More sales, more often, at lower cost 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 nontarget 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.