What’s your strategy when you’re one of the top automobile companies in the world? When it comes to BMW, it means using CRM to strengthen communication with your dealer and make it as easy as possible for potential customers to get all the buyer information they need. That’s the world of Ralf Caly, who directs CRM and e-Business for the BMW Group. In this edition of Inside Scoop, Caly talks to CRMGuru.com founder Bob Thompson about customer relationship management and what it means in the automotive industry in general and BMW, specifically.
This interview, which was recorded Dec. 22, 2005, was edited for clarity.
Bob Thompson
I’d like to welcome to our Inside Scoop program Ralf Caly of BMW. We’re going to be talking about the BMW Group’s CRM implementation. Glad to have you.
Ralf Caly
Thank you.
Bob Thompson
Let’s get started by telling our CRMGuru members a bit about your current position at BMW and what is it you’re responsible for in your CRM program.
Ralf Caly
I’m happy to do that, Bob. I’m the head of the CRM and e-Business Program, which is one out of six corporate initiatives encompassing the entire BMW Group, including the brands BMW, Mini and Rolls Royce.
Bob Thompson
How did you come to this very interesting position at BMW?
Ralf Caly
From the BMW perspective, I’m still a rather young kid on the block here. I joined BMW in January ’99. Before, I had responsibilities for several customer-facing assignments at Compaq Computer Germany and, finally, as director of customer service and member of the executive management team.
Bob Thompson
It’s interesting that you have the background in high-tech. How has the car business been different from high-tech, if you could contrast the two?
Ralf Caly
The computer industry, I think, is the fastest one you can imagine. So the speed of turns is different in IT and computers than it is in automotive. I won’t say automotive is slow, but it is definitely a different kind of speed. Now, in respect to CRM, that was surprising to me. It doesn’t differ, really. We’re talking about different products, different customer desires. But the expectation of customers and the way you can satisfy them—or how you try to do so—is actually the same.
Bob Thompson
Right. And cars are becoming more high technology all the time, with computers built in and all of that. But it seems like the products change incredibly rapidly in high-tech, as compared to cars, although they’ve certainly changed tremendously. But you still have dealer channels, and you still have, sometimes, very complex distribution approaches. Let’s talk about the term, “CRM”: customer relationship management. It seems to mean something a little bit different to everyone. I’m not sure that’s necessarily a bad thing. But before we take for granted what it means at BMW, could you please define what the term means there and, specifically, talk about who you mean by customers? Who are BMW customers?
Ralf Caly
I will answer the first question first. If you translate it literally, even at BMW, CRM translates as customer relationship management. If you ask who the customer is, it’s actually the person who drives our car, who’s sitting behind the steering wheel. However, it encompasses all those who are involved in the decision process, which, sometimes, is a completely different person, not always the driver. It could even be somebody who is in charge of purchasing company cars. So the customer is everybody who is involved in decision process of getting the car and driving it.
Bob Thompson
How do the dealers fit into your CRM philosophy?
Ralf Caly
The easiest answer is they are an absolutely essential part. We can get back to this later on in the interview. The simple message is: We have to make the dealers a part of the story, a part of the CRM exercise. If we cannot manage this, we definitely will fail.
Stakeholders
Bob Thompson
Yeah, the reason I’m asking about this is that as we were planning our editorial calendar for this next year, we realized that one of the things that has gotten too little coverage is the concept of stakeholders in CRM projects. It’s not just about the customer or customers or the end customer but everyone involved in the process: obviously, influencers to customers; the channel partners; and even, internally, employees. Everyone has to have some level of benefit and be served by these CRM strategies and systems in order for these projects to work right. Do you agree with that?
Ralf Caly
Yes, actually, I do. Interesting you say that because, usually, what jumps right to mind is that only a small number of people are involved in direct customer interaction and activity. However, if you finally think through it and look at all the processes that happen in an organization, even we, ourselves, have been surprised at how many people significantly influence the dialogue and interaction findings of customers, even if they don’t necessarily speak directly to him or her. It’s very important that you actually embrace and include all of those people—or at least, their processes—in this endeavor and make sure that they are part of it.
Bob Thompson
So you really have to take more of a systems type of view of it. Do you ever look back into the supply chain, as well, and look for integration points or other types of processes? Is that part of your thinking at BMW?
Ralf Caly
Now, that is important, but because we really talk only about B2C, it might be a bit off the mark. All relationship activities into the supply chain are handled separately in the program, so we are really focusing on sales and marketing into the customer area.
It gives you a chance to give a bit more abstract description of CRM with BMW. It’s important to understand that BMW’s success builds upon two major pillars, brand and product. Our CRM plays a key role in strengthening our superior brand management position in terms of enhanced loyalty and conquest performance, which answers your question.
Bob Thompson
Let’s do a little time travel here. Take us back to the early days of the CRM program at BMW. What was the vision then, and how has it changed?
Ralf Caly
The first approach into CRM was launched in 1999. I think that was the same at many other companies. It was mainly driven out of the IT community leveraging the new CRM applications and the call-in capabilities for enhanced business processes. As an initial pilot, a specific CRM business process model and system platform were introduced to our German subsidiary. However, we consistently shifted the program sponsorship more and more to central marketing. Doing this, we maintained the cross-functional and cross-divisional character of the program. So, if you like, the program was shifted from IT to a business perspective. And the regional scope was extended beyond Germany to all BMW group regions and markets.
Bob Thompson
Why was that shift made? You said it was common, and I certainly agree with that. But what did you discover as the program was unfolding that required that shift?
Ralf Caly
Now, IT was, as I said, the cradle of CRM at BMW. However, if you look into CRM, it’s definitely more than an application and a screen. It gets much deeper into the mindset and the way you do business. It’s even reflected to some extent in the vision. At BMW, we described it as, “BMW Group sets the benchmark for premium CRM in the automotive industry, as it does with premium brands and premium products.” You won’t hear any word about applications or systems in this vision, for sure. The vision did not change; however, we changed the approach to get there from IT-driven to business-driven and from central alignment to a development procedure, which incorporates market and customer requirements.
Bob Thompson
The last time we talked, you mentioned that you had spent, I believe, three years in the United States with a CRM development center. Can you comment on that? What was the reason for that and what did you learn?
Ralf Caly
While we were working in Germany on the CRM business model and the system platform, we figured out that the environment here is not necessarily the one that is best suited to creating leading-edge CRM capabilities, because it has a lot to do with culture. By the way, we mentioned the dealership before. It’s very important that even the incorporation—the integration of dealership activities—is easily done. Those who are familiar with the automotive situation here in Germany know that our dealers are really fighting a heavy, heavy battle in terms of profitability and similar areas, while in the U.S., dealers are much more, let’s say, stronger in their ability to invest and simply to develop further in new areas.
The customer-oriented culture of the U.S. markets, in combination with this ideal dealer landscape, allowed us to test things in terms of field integration that are simply not possible in Germany in those days and drove us into the U.S. That leads me to the results. We used the U.S. as a kind of laboratory to figure out what concepts worked best to integrate dealers into this share of activities of BMW group.
Bob Thompson
I want to focus a bit on the results and benefits, and since we talked earlier about stakeholders, maybe we can look at it from several different points of view. Just to get started in that sort of line of questioning, what is the current status of the CRM implementation? Which countries and which user groups are currently implemented?
Ralf Caly
Currently we focus very much on the program in Europe, and we are in a process of introducing CRM to eight European markets from now to the end of 2007.
Bob Thompson
Is the European market Germany, specifically, or some other country?
Ralf Caly
Actually, no. We are talking about a lot of markets other than Germany. It is Italy, the Netherlands, Austria, Switzerland, Belgium, France, the U.K. and Spain.
Bob Thompson
These are implemented today?
Ralf Caly
We are just in the process of doing that. We are implemented in Italy and in the Netherlands.
Bob Thompson
I see.
Ralf Caly
We will follow up with the other markets throughout the next year.
The U.S. market
Bob Thompson
At what point will you go to the U.S. market?
Ralf Caly
The U.S. market had already developed a business model and even a system platform of its own, before headquarters started to take over the central activity. There is no need for immediate action in the U.S., because they are well equipped to handle their business—and their business results reflect this impressively. We currently are focusing on Europe. Nevertheless, in the long term, it’s clearly BMW’s strategy to incorporate or even to migrate the all markets on one common group platform.
Bob Thompson
What technology are you using for your implementation in Europe?
Ralf Caly
In Europe, we are working on Siebel 7.7. What we figured out is Siebel definitely fulfills the expectations we had for the application. Nevertheless, we had to adjust it significantly to our business model and needs. We are finally targeted to use Siebel as the BMW group CRM platform; however, we need to consider that in our 30-plus markets, there are definitely different sizes and profiles. So we have one or two other suppliers who provide solutions, especially to smaller or less complex markets.
Bob Thompson
I see. Do you have any concern about the acquisition trend in the CRM technology market, which, of course, includes Oracle planning to acquire Siebel early next year?
Ralf Caly
No, we don’t, especially in that case. One clear reason is that Oracle and BMW have a long-term partnership, anyway. And the fact that Oracle definitely needs to continue with Siebel—who will still be, from my perspective, the market leader in CRM applications for quite a while—gives us some insurance for our investment. Our talks continue with products from Siebel and Oracle.
Bob Thompson
Getting back to the benefits that we were talking about earlier, the composition is changed. It’s gone from being IT-driven to being more business-driven. You’ve gone through a fairly lengthy development cycle, learning what it is you’re planning to do. Now you have an initial implementation and some rollouts in progress, correct? So what have been the early results of the program? Let’s start from the point of view of the company. What does the company gain from this project?
Ralf Caly
If you look at the expectation from top management, it definitely goes toward increased loyalty and conquest and especially focuses on efficiency improvement. It’s rather easy to measure that, and we do it by recording KPIs. It’s already obvious, for instance, from shortened process times and by even better customer knowledge. The accuracy of the data is something we could measure already by the enhancement and improvements we’ve seen. Now, in contrast, CRM-related effects or loyalty and conquest cannot be determined separately without taking a closer look at facts. Is it model attractiveness, for instance, or technical liability or even simply price policy?
When we discussed the business case of CRM in our company, we defined a formula that assigns a certain share of loyalty and conquest effect to CRM, and we support this by a set of operational KPIs that are aligned with markets and directly reflected in their CRM process performance.
Bob Thompson
How difficult was it to come up with these metrics to measure what was happening?
Ralf Caly
The simple answer is it’s very difficult, as you can imagine. Actually, it’s almost impossible, in my eyes, to create an exact one-to-one causality between a certain CRM activity and the fact of the allover loyalty and conquest.
I’ll give you a typical example. If you have a real problem with the technical reliability of your cars, the best CRM program can only actually reduce the loss of customers. It definitely will not improve or will not enlarge numbers of customers. You see? It has always to be valued or validated in context with other effects.
Bob Thompson
Right.
Ralf Caly
That was something that we definitely took some time to argue about and, actually, to even convince our executives that there are limits to measuring in CRM. But this combination, as I said, of certain impacts in a clear KPI model—I might call it cockpit, where you can always check the performance on certain indicators—was accepted, finally.
Bob Thompson
So the company has seen some improvements, and there is some support to the brand; although, obviously, the car, itself—how it’s marketed, priced, the quality of that product—is extremely important. I know this from some personal experience. My wife and I both bought cars recently and did a trade-in, and it’s always kind of unnerving to go to the dealer. You’ve talked about the dealers in the United States and said some nice things, but many people have had difficult experiences shopping for cars, whether new or used. So let’s talk about the dealers, in terms of what they get out of that or what the company has received, as well, in terms of dealer relationships. What’s in it for them to work with the BMW CRM program?
Ralf Caly
That is one of the key questions we have to answer. We have to provide a value proposition for the dealership, so that they buy into it. If you look at a real vision, you think about a bidirectional exchange about customer information. And, especially in dealing with lead information, it’s very interesting—just given the higher penetration of Internet users by customers, especially BMW customers. More than 80 percent of our first car buyers spend more than one hour on the web before they enter the dealer’s store. So you can imagine the level of information they already have. It’s interesting that some of them—actually a lot of them—leave a real footprint, and they allow the information they left with us on the web site to be forwarded to our dealers so that the dealers can work with them on exactly the level of information they desire and deserve.
Can you imagine that when you configure a car, a specific one, in the future, you enter a BMW store and the salesperson welcomes you and says, “Hello, Bob, I have your configuration here. I figured that you wanted to ask two or three questions, and I’ve prepared the answers for you.” How would you react?
Bob Thompson
Well, as the buyer, I would think that would be positive, that they’re more prepared.
Ralf Caly
So you see, we have a lot of ideas on how we can really integrate the dealers in a real interactive process, and at the end of the day, the thing that motivates dealers best is additional sales. But I think, with this package, we really can show that we have increased business for them right on hand.
Bob Thompson
Do they believe that? A lot of this is about psychology. What people believe is true is what is, in fact, true in their minds. Do dealers feel like this is a step forward? Or is there still some experience and some selling that you need to do with them?
Ralf Caly
We usually talk about “the dealer.” However, it’s not such a homogeneous crowd. There are the mind setters. There are for-runners with them, and those are the guys you have to convince and you have to pilot with. They stand up, for instance, in a dealer forum and, as peers, explain what they experience and, especially, what the advantage is. You would be surprised at the effect. It’s much easier to convince a dealership with arguments from their own colleagues and peers, rather than selling a program they are quite skeptical about.
Bob Thompson
Yeah. “I’m from headquarters, and I’m here to help.” Right? That doesn’t go down so well, does it?
Ralf Caly
We never use that one.
Bob Thompson
Well, let me give you a little bit of advice. Don’t try it. It’s been tried in the United States and elsewhere, and, actually, the approach that you described is something I’ve heard many times, that getting the true floor leaders—whether it’s employees or, in this case, dealers—that’s a very good way to go. You’ve had these dealers stand up in meetings, as you described, and talk to their peers about why they think this is a good idea? Has that happened, already?
Ralf Caly
Yes, they are actually doing so. You know, of course, a lot of things influence whether dealers buy into something, even if they like the idea, even if they’re convinced. For instance, when sales figures are going down; focus changes. When I left the U.S., we were just in the process of discussing with them how to continue, and I can tell you how the investment went: Those who we piloted with belong to the most successful dealerships they have in the country.
Bob Thompson
Very quickly, internally, with the employees of BMW who are involved in this process, what’s their reaction been to CRM projects?
Ralf Caly
That leads me to discussing a challenge of CRM, because -especially at BMW, and I think it’s typical for other automotive companies; we are strictly organized vertically. CRM always, in my eyes, is, and has to be, horizontal, which means it’s a cross-functional endeavor. In other words, you have to drill holes into the silo walls to enable and ensure a very professional and proper information exchange about customers and customers’ wishes and to enable every customer-facing individual to have all the information on hand to serve the customer best. This is one of the biggest challenges we have: to convince the employees that they share knowledge. As you can guess, salespersons see customer knowledge as their personal assets.
Bob Thompson
Right.
Ralf Caly
And they are not necessarily willing to share. That is something we have to work on very consistently. When I said in the beginning, “CRM is not a matter of screens and applications; it’s a matter of mindset,” that’s proof of it.
Bob Thompson
So there’s creating the right mindset with the employees. Can you share a specific example of how you dealt with that issue? Did you do training? What, specifically, did you try to do to deal with it?
Ralf Caly
At the end of the day, the recipe is simple: Make concerned individuals into involved individuals. We even had some less successful attempts—what I call “central ideas”—and we changed it to a quite extensive approach that included the experts—I call them CRM ambassadors—from all the entities and organizations, including the key markets, in our development and introduction process. You can guess, of course, that sometimes this is a quite cumbersome and time-consuming process, but when I see the result now, the writing’s clear. At the end, it definitely justifies the efforts.
Bob Thompson
I remember the last time we talked. You used a phrase, “introduce and establish,” and you made a point of saying—you used that phrase, “not implement”—in describing how CRM programs are introduced into BMW. Why do you say that? Why is “implementation” not the right word?
Ralf Caly
My opinion is if you use the term, “implement,” you create some kind of perceptional life with any other IT project. You have a clear deadline when it is finished, and when you switch on a system, it’s going to work. I think you cannot switch on CRM simply, and that’s the reason why I saying, “You have to introduce it.” In other words, if it ends on the screens and it doesn’t find its way into the minds, it simply fails. So it’s difficult for me to define a finish line for CRM introduction. Yes, you can define the line when the system is ready, when you can switch on the application and you have a certain version on the screen. But the education process and continuing this cross-functional, cross-divisional exchange of information, I don’t think it has a real finish line, because you have to stay on that persistently. It’s a real leadership process that doesn’t end.
Bob Thompson
You put it so well. It isn’t something that has a defined finish line, although it appears that the starting point, in a formal way, was back some five or six years ago. Let’s take a look at the next five years. What is your vision for how this project will be adopted within BMW?
Ralf Caly
We touched on it already. We have no doubt that all our CRM enhancement won’t pay off and won’t work if we are not successful in integrating our dealer organization. I’m sure you noticed that when I talked about the program, we are focusing very much on our markets and hosts and so on. But retail is only part of the pilot in the U.S. There’s one clear reason: While we consider the retail process in all our development activities, we want to ensure process, system and even mindset stability here on our own wholesale level first. In other words, let’s do our homework first, before we dive operationally into our dealer landscape. This is the major goal I have ahead of us, and then to make the dealers part of the story. It starts next year (2006), and we have some real gateways in front of us in June, where we want to make our first endeavors here and activities in this area in Europe.
Bob Thompson
Well, best wishes with all of that, and congratulations on what you’ve accomplished so far! It sounds like it’s been an arduous journey. It’s certainly been filled with challenges and changes over the last few years. It’s just an observation from talking with many, many people over the last few years: It seems that one of the defining characteristics of successful CRM programs is that, especially for bigger companies, is there is someone like yourself who sticks with it, has perseverance and is willing to really persevere through some challenging times.
Ralf Caly
Thank you. If somebody asked me, “Do you have some advice for someone who is embarking on—I guess you called it the CRM journey?” I believe three things are important:
- The biggest asset you need is endurance.
- Convince your bosses that CRM is definitely not made for quick wins.
- Here’s what I mentioned even before, that you cannot simply implement CRM with a definite finish line. You have to introduce it, and you have to figure out if there is a finish line—if there is one—later on.
Bob Thompson
That’s great advice. Ralf, thank you so much for being on Inside Scoop. It’s been very enlightening, and we appreciate your time.
Ralf Caly
Thank you for the opportunity. I close with a quote from a good colleague of mine who said, “If we are not customer-driven, our cars won’t be, either.”
