Case Detail

Case Summary

ROI for a Customer Relationship Management Initiative at GST

Case Number: 5-404-766, Year Published: 2006

HBS Number: KEL232

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Authors: Mark Jeffery; Robert J Sweeney; Robert J Davis

Key Concepts

Customer Relationship Management, ROI, CRM, IT Management, Return on Investment, Marketing, Churn, Sensitivity Analysis

Abstract

In this Return on Investment (ROI) for Customer Relationship Management (CRM) case scenario students must calculate the ROI for analytic CRM enabled by an enterprise data warehouse (EDW). The case is based upon a real-life consulting engagement with a major Fortune 100 telecommunications company. In this case the executive management team’s strategic objective is to grow the customer base by 5 percent annually by customer acquisition. The internal rate of return (IRR) calculated from the data given in the case is over 800 percent for one year, and sensitivity analysis shows this is a robust projection suggesting it should be funded without question. However, the strategy of the firm is customer acquisition in an environment of high customer churn. As a result of these dynamics, the revenues and net income of the firm are actually decreasing by hundreds of millions of dollars each year. A better solution would realize that the executive team has the incorrect strategic objective. Customer acquisition is the wrong approach in an environment of high customer churn and executives should focus on customer retention and cross-sell and up-sell to high value customers. The case discussion therefore takes students beyond CRM ROI to focuses on the key strategic concepts of customer relationship management.

Number of Pages: 22

Extended Case Information

Teaching Areas: Finance, Management, Marketing, Strategy, Technology

Teaching Note Available: Yes

Geographic: US

Industry: Technology

Organization Name: GST (disguised)

Organization Department: Executive Management

Organization Size: Medium

Decision Maker Position: CFO

Decision Maker Gender: Male

Year of Case: 2001