IBM Customer Relationship Management & PepBoys Strategy

Term paper On IBM Customer Relationship Management Strategies for Pep Boys Divya Mishra School of Management Purdue University Calumet Spoorthi Kothakapu School of Management Purdue University Calumet Long Tian School of Management Purdue University Calumet Xiaosi Wen Department of Accounting School of Management Purdue University Calumet December, 2010 Abstract Customer relationship management CRM is a significant and vital part of the business management today. It deals with relationship between the organization and its customers. Customers are the most important asset of any organization whether it is a global corporation consisting of thousands of employees and a multi-billion turnover, or a singular trader with a handful of regular customers. Customer relationship management helps the organizations to shift their focus from the product to the customers and understand what customers require and not what a company can make. Thus it helps the organizations to determine mutually satisfying objectives for the company as well for the customer i.e. making profit, reducing cost and providing satisfactory products and services to the customer. In this paper, we analyze Pep Boys’ successful implementation of Customer relationship management CRM. Pep Boys turned to the IBM Retail solution to attain the mutual goal of company’s growth and satisfied customers. The paper focuses on the problems of declining customer satisfaction and decreasing efficiency because of outdated retail store technology, faced by Pep Boys. The paper explains the ways through which CRM strategies of IBM helped Pep Boys in finding out the solutions to those problems. In the paper we have used the System thinking approach and have applied the Attractiveness Principle Archetype in our way of demonstration. The content of the paper is based upon the various research papers on Pep Boys, customer relationship management, system thinking; newspaper article, course book and personal experiences. Introduction Today, customer is considered as the god in the business world. They in charge of and is everything for organizations. It is easier than ever for the customers to compare products and with a click of the mouse switch companies. Nowadays every business organization tries to provide its customers with the finest product and service. As a result, customer relationships have become the most valued asset for companies. The satisfied customers and a sound relationship with them is the purpose of every business and non business organization. Every company plans strategies, products and services to find and retain the most profitable customer. Thus companies are implementing customer relationship management tools and information systems as an element of customer centric strategy to improve their services, productivity and customer satisfaction. This helps them to improve their chances of success in today’s competitive business environment. Customer relationship management (CRM) is an information technology based strategy aimed at identifying, targeting, acquiring and retaining the best mix of customers [Business dictionary .com)]. It uses information technology tools and software to create cross functional enterprise system that integrates and automates various customer serving processes in sales, marketing as well as customer services that interact with the customers. CRM consists of a family of software modules that enables a business and its employees to provide faster, efficient and consistent services to its customers. Case Background Pep Boys, the largest automotive aftermarket retailer in the United States turned to customer relationship management to improve their client focus by improving their services and support to the customers. The Pep Boys - Manny, Moe & Jack is a nation's leading automotive aftermarket retail and service chain. Pep Boys has 629 outlets and around 6500 services bays in 36 states and also in Puerto Rico. It also sells automated parts and accessories on its website www.pepboys.com.There are about 40 major brands and 120,000 parts available for sale through website. Brands include: American Racing, APC, manufacturer of appearance accessories such as gauges and carbon fiber hoods, etc. Pep Boys Auto employs more than 22,000 people at its various stores around USA. The prime objective of Pep Boys was to provide customers with a wide variety of automotive parts and automotive accessories. It differentiated itself from its competitors in providing exceptional customer products and services. They were also successful in their mission of customer satisfaction, but since some years they were losing their customer loyalty on the ground of outdated and aged retail store technology which resulted in loss of market share and decreased revenue. As a result, faced with the problem of eroding customer loyalty and declining market share, Pep Boys decided to transform the retail store systems to enhance their services and improve the customer shopping experience. Pep Boys required an integrated retail environment to help the company more focused and responsive on customer requirements. Pep Boys started their biggest marketing campaign to overcome the losses and to improve their market share. This campaign gave a strong lift in buzz, but for not more than 6 months. There were gains, but not very impressive. Figure 1 illustrates the market share of Pep Boys in last 3 years. In order to maintain its market leadership, improve business and elevate customer services and satisfaction to next level, Pep Boys turned to IBM. With the help of IBM Business Partner 360Commerce, Pep Boys were able to create a scalable, open retail infrastructure based on IBM Store Integration Framework that integrated people, processes, information and data to boost customer service. Pep Boys transformed and set up its foundational technical base with the involvement of IBM to a focus on connectivity and reuse. Figure 1 Pep Boys Market Share [2] 1.2 Problem Pep Boys were trying to increase employee efficiency and performance and boost customer satisfaction and loyalty. To improve customer shopping experience, Pep Boys wanted to revolutionize its store system, which was outdated. In order to build up a single view of customer and available inventory, Pep Boys planned to develop an integrated retail environment that could easily connect its incongruent systems. Pep Boys were using an outdated check-out Point-of-Sale (POS) technology, which was no longer supported by the vendors. This technology does not support the either the Debit cards or the coupons and at the same time. And also the customer, who was purchasing the auto parts and gets their vehicles serviced at the store, was required to stand in two separate lines, one at the cash register and another at service desk. Whenever a customer needed to return any product, the employee at the desk had to go through diverse systems to match customer’s receipt and sales transaction. Sometimes the store checkout system used to fail in the middle of a transaction, which was a major disruption for the business and finally ended up in unsatisfied customers. Thus the company was looking for a solution that was low on risk, easy to learn for the employees, easy to implement and time-saving. The other problem faced by the company was regarding handling budget information. They were using Excel Spreadsheets for budgeting, planning and financial reporting, which was made by the Accounts Department then were sent to the area director for review and then back to company headquarters for more changes. Thus, creating, reviewing and collecting data was an administrative overhead. Pep Boys had come up with a solution called Adaptive Planning, which tasks more efficiently than spreadsheets, and also allows better collaboration among users. 3 Pep Boys Implementation of IBM solution and strategies Pep Boys turned to IBM to improve its retail environment from a customer’s standpoint. “Pep Boys was ahead of its competitors in terms of recognizing the importance of service to the customer, and the need to be able to respond with systems that provided the right information in real time,” says Jan Jackman, general manager, Retail on Demand (Lynn Behnke Linda May Patterson, 2006). Pep Boys began their IT transformation by replacing their aged POS Check-out environment with the IBM open-POS solution. The IBM open-POS solution is a next generation tools build on Java technology based on 360Commerce software running on IBM Store integration Framework (SIF). 3.1 IBM Store Integration Frameworks The IBM Store Integration Framework (SIF) is based on Service Oriented Architecture (SOA). SOA focuses on what the company is doing instead of how company is doing it. Service Oriented Architecture (SOA) is a business-centric IT architectural approach that supports integrating your business as linked, repeatable business tasks, or services. With the Smart SOA approach, you can find value at every stage of the SOA continuum, from departmental projects to enterprise-wide initiatives. (IBM website) [4] IBM Store Integration Framework provides a comprehensive, customizable solution for overhauling retail information technology environments to help transform the customer experience, empower employees, and improve store operations (IBM Draft Document 2006).SIF can be used throughout the store and at various customer touch points by increasing integration of data, processes and people. “It is a service oriented architecture that leverages open and industry standards to allow Pep Boys to reuse components and applications, helping to reduce the time it takes to deploy new service touch points as well as reduce total cost of ownership,” says Jackman. SIF connected Pep Boys’ POS environment and 360Commerce software. (IBM Draft document 2006) SIF technology is used to connect the existing POS systems with the innovative technologies/devices such as wireless in-store kiosks, handheld Web tablets, smart shopping carts and personal digital assistants (PDAs). These devices are handy in creating the dynamic real time business processes throughout the store. Fig IBM on demand operating environment for retail (Lynn Behnke Linda May Patterson, 2006) SIF is compatible with most of the major retail Operating Systems like Microsoft® Windows, Solaris™, HP-UX, and the IBM 4690Operating System. The capabilities of SIF include: ,[object Object]

The capability to sense out of stock merchandise and product.

The ability to help employees to serve customer faster.

The ability to increase the online shopping experience of customer by providing self-service technology.

The ability to capture inventory information and store flow.The main components of SIF are: IBM WebSphere Remote Server for Retail provides the core components for SIF including WebSphere Application Server, WebSphere MQ, DB2 and Tivoli middleware (Lynn Behnke Linda May Patterson, 2006). These components can be used to increase the pace of deployment process. 3.2 IBM WebSphere Remote Servers (WRS) for Retail WRS is a key component of SIF, helps in managing retail stores and other retail environment more cost efficiently. With the help of WRS an employee can easily access customer, product and sales information. IBM Adaptive Planning Solution Adaptive Planning is the worldwide leader in on-demand budgeting, forecasting, and reporting solutions. An alternative to inefficient, Excel-based processes, our next generation web-based software is powerful yet easy to use, extremely affordable, and deploys in just days [adaptive planning website]. Benefits of Adaptive planning to Pep Boys: ,[object Object]

It avoided the Excel based planning issues.

It helped Pep Boys in forecasting the budget more frequently.

It helped Pep Boys in decision making process in budgeting and finances.

The impact of IBM support on Pep BoysIn 2003, Pep Boys realized that their POS and service work order system did not have the right architecture and right applications. To overcome this problem Pep Boys adopted the SOA to drive its business goals. In order to implement this they first set up the foundational technical base for SOA by making use of the existing systems like IBM IMS™ and older Java™ technology. Their main aim was to improve the connectivity and reuse of POS. For the next phase, they composed the existing retail processes such as invoicing/billing. These capabilities of SOA allowed employees to have enriched and more industrious customer interactions. The POS screens were modified in such a way that the sales reps could up-sell new functionality. At the same time, Pep Boys created and was able to use a single view of the customer for various in-store activities. Within a period of one year, Pep Boys implemented the solution provided by the IBM. All the 593 stores of the company started using and running the new servers, registers, scanning devices and applications provided by IBM. Pep Boys solution consisted of Software such as IBM WebSphere Business Integration Server Foundation, IBM DB2 Express, etc, Hardware such as IBM SurePOS™ 300 - running IBM Retail Environment for SUSE Linux operating system, IBM eServer xSeries® server, and 360Commerce application such as 360 Point-of-Sale, 360Store Back Office, and 360Store Inventory Management. Figure Pep Boys’ business challenge The advantages of this solution were: ,[object Object]

Response timely to customer needs, enabled by solution ease-of-use

Enhanced employee productivity

Cut down the costs of employee training

Flexibility to incorporate additional technology as business goals evolve

The objective of Pep Boys was to attain the mutual goal of improvising the retail store technology in order to fulfill the needs of its customers to the fullest, retain them for a long time period and improve their shopping experience. The goals of the company were high-quality, improved employee productivity, name-brands, low prices, convenience and un-matched service for customers. “By connecting all of the solution components, Store Integration Framework enables Pep Boys to become a true On Demand Business,” says Jackman

The IBM solution resulted in the faultless integration of information and data at the retail stores of Pep Boys. With the technological support of IBM, Pep Boys was able to speed its operations and improve the customer shopping experience by offering the right information at the right time, in real time. Pep Boys adopted the store integration framework of IBM which provided them a platform on which it could easily expand its IT infrastructure. With the help of IBM and 360Commerce solutions, Pep Boys received the immediate benefits like faster checkout, ease of use and low cost of training. The benefits finally led to an improved shopping experience of the customer and enhanced employee productivity at the same time. The implementation of the IBM strategy and innovative technology at the retail store provided Pep Boys with the additional opportunity to incorporate additional functionality, such as digital media and radio frequency identification (RFID) technology. Mike Elmore, CIO, Pep Boys said that “With the added stability and efficiency of this new solution from IBM and 360Commerce, we have improved our daily operations and our customer service, as well as our ability to develop systems and grow our company”.

Analyzing the case by Systems Thinking Approach

2.1 Introduction to Systems Thinking Approach

2057400125730The general methodological approach used for this study is called systems thinking approach. “Don’t miss the forest for the trees.” This common figure of speech encapsulates the essence of systems thinking: when we think in terms of systems, all we’re doing is looking at the whole forest, and not just the trees.

System Thinking is considered as a mindset for understanding how things work. This approach focuses on how the target things interact with the other elements in the system of which it is a part, it can be considered as a set of elements that interact to produce behavior (Senge, Peter M, 1990) 8. The concept of system thinking has been used in the business and management for decades. It has helped the organizations to improvise and organize the production process and rationalize the decision making process. System thinking approach is also incorporated into the planning strategies. (Stephan E. Brown, M.A., Daniel C. Lerch). It is an angle of view which going beyond the surface of events, to looking for patterns of behavior, to seeking underlying systemic interrelationships which are responsible for the patterns of behavior and the events. Those interrelationships bring in the patterns of behavior and events we perceive when we go beyond the linear cause-effect reasoning paradigm to study patterns of behavior and then, to discover the systemic interrelationships among the parts of systems [9]. Through this process, we have developed a much more comprehensive understanding of the nature of the way things operate. If we get an operational understanding of the target system, it may guide us to work with the system rather than against it. One of the major benefits of system thinking is its ability to deal with unpredictable consequence, since the interaction of all the elements is simply discovered during the analysis (Gharajedaghi, Jamshid, 1999). [10]

2.2 Steps of applying System Thinking

2.21 Process of System Thinking

First, let us look at the process of thinking in our mind. The process is illustrated in the following figure:

Figure 4 “Thinking” processes (Richmond, Barry, 2001) [11]Figure 4 presents a map of the activities that comprise “thinking:” ·constructing (a mental model), which is divided into two sub-activities: selecting and representing; ·simulating in order to draw conclusions. When we are dealing with a real world business case, the first thing in analysis is to decide the elements involved in our “system”. Similarly, the first sub-activity under constructing, which is called selecting answers the question: What should I include in my mental model? Secondly, we must think up the way we use to express the problem explicitly. Likewise, the second sub-activity representing answers the question: How should I represent what I include? These are the two fundamental questions that must be answered in constructing any mental model. The “wire” connects Represented Elements in the Mental Model to simulating suggests that simulating cannot present until a mental model is formed—which is to say, the selecting and representing activities have been preformed. Simulating yields conclusions which help us to make decisions. Notice that, as Figure 4 indicates, simulation outcomes have another significant effect in the thinking process. They give feedback to the selecting and representing activities (also notice that the “wires” running from Simulation Outcomes to the two activities). Simulation outcomes that are shown to have been error are a signal to go back to the drawing board (Richmond, Barry, 2001). [12] ,[object Object],Figure 5 System Thinking process (Richmond, Barry, 2001). 2.22 Apply System Thinking in Pep Boys outdated check-out Point-of-Sale (POS) technology: 1. Identify elements IBM provided Customer Relationship Management (CRM) software divided the participants of this Customer Relationship Management case into three groups. In order to illustrate System Thinking Approach explicitly, following groups are assigned as elements: Figure 6 List of groups in CRM software 2. Draw casual loops: After identify what elements are in our “system”, the next step is draw “causal loop diagrams” to translate complex data into simple, and seek for explanations of not only what was happening, but also why (Checkland, Peter ,1981)[13] ( Peter David Stroh, 2000)[14]. The “why” that System Thinking explains is usually a set of non-obvious interdependencies between factors such as: ·Quantitative variables (ex: revenue growth) and those qualitative ones (ex: how people think) ·Corresponding actions taken by the business organization and its customers or competitors ·Different parts in the business organization ·The short- and long-term consequences of managerial decisions (Braun, William, 2002) [15] In Pep Boys case, we draw the loop. The following figure shows the interaction of those groups: CRMCompanies (Pep Boys)CustomerPayment & Customer InfoAccess comparison of companies & productsCustomer interactionProducts & ServicesFeedback & RevenueIdentify &TargetCustomer Value(Base) Data of sales, marketing & service professionalsPayment & FeedbackSuppliers PartnersLoop 1Loop 2Loop 3Loop 4Loop 5 Figure 7 Causal loop diagrams for Pep Boys Our reasoning is demonstrated here: In CRM and Company (Pep Boys) loop (Here refers as Loop 1), CRM is considered as base in this circuit, it provides data of sales, marketing and service professional to Company (Pep Boys), while Company (Pep Boys) pays and gives feedback to CRM; Companies (Pep Boys)CRM(Base) Data of sales, marketing & service professionalsPayment & Feedback Figure 8 Loop 1 In Company (Pep Boys) and Customers loop (Here refers as Loop 2), Company (Pep Boys) provides products and services to Customers, while Customers give feedback and revenue to Company (Pep Boys). Through this process, the two elements build customer relationship; Companies (Pep Boys)CustomerProducts & ServicesFeedback&RevenueIdentify &TargetCustomer Value Figure 9 Loop 2 In Customers and CRM loop (Here refers as Loop 3), Customers’ payment leaves information to CRM, while CRM gives Customers the access to comparison of companies and products; Payment & Customer InformationCRMCustomerAccess comparison of companies & products Figure 10 Loop 3 In Company (Pep Boys)’s own circuit (Here refers as Loop 4), it describes the relationship among Company (Pep Boys), its suppliers and partners, such as IBM, Oracle and Good Year. Companies (Pep Boys)Suppliers & Partners Figure 11 Loop 4 In Customers’ own circuit (Here refers as Loop 5), customers also have interactions between themselves. For example, they communicate each other via phone, email, fax, text messages and Internet to share their satisfactions about the customer service in different companies. CustomerCustomer interaction Figure 12 Loop 5 2.3 For the one regarding budget information handling: Pep Boys adopted the solution called Adaptive Planning. This part is not our major point in the paper. ,[object Object],3.1 Why using System Archetypes? How it works? System Archetypes include two or more reinforcing or balancing loops, or some combination of both. Each archetype includes at least two feedback loops and tends to be a “classic story”, so it is also referred as “classic system stories”, “generic structures” and “templates”. They facilitate rapid understanding and diagramming of a system. By applying them habitually, you will learn to quot;
seequot;
structure when you hear one of these classic stories. Figure the construction of a working hypothesis The archetypes can help the researchers quickly construct a working hypothesis about the cause of the patterns observed. Each archetype has a characteristic theme, story line, patterns of behavior over time, structure or feedback loop diagram (sometimes called a template), mental models and effective interventions. These basic structures occur frequently and are present in many everyday situations, from the individual to the international level. 3.2 Advantages of the archetypes: Make Systems Thinking visible Recur frequently so that are well understood Are easily transferable. Shift focus from blame to inquiry. Naturally promote Systems Thinking when used in a group setting. Another advantage for applying System Archetypes rapidly is it builds a simple and engaging way to communicate about systems to others who may have no Systems Thinking background. They are easy to understand. Working with classic stories helps people shift their thinking to a more systemic perspective. The classic stories are also an easy means of transferring learning about systemic issues from one situation to another. 3.3 Archetype Family Tree: Archetype Family Tree [16] The family tree is designed to show how the archetypes are connected to one another. In Pep Boys case, we are more concerning about “Growth”; also, Pep Boys tended to create an infrastructure based on IBM store integration framework which is scalable to enhance customer service, processes and data. There is more than one limit in this case and we can't address all of them equally. CRM enhances Pep Boys’ operational capabilities; increased capabilities increase core competencies; increased core competencies result better performance; better performance brings more revenue which could afford using CRM. According to the archetype family tree, Attractiveness Principle is going to be applied in our paper. 3.4 Attractiveness Principle Archetype Attractiveness Principle Archetype deals with more complex situation than Limits to Growth Archetype, and it is essentially a Limit to Growth Systems Archetype with multiple limits, all of which cannot be addressed equally. ,[object Object]

The paper objective was to bring into light the relationship between information technology and the Customer relationship management. The paper explained how the implementation of Information system by an organization improves the employee efficiency and productivity and enhances customer satisfaction resulting in an improved the relationship between the company and its customers. The primary objective of the paper was to provide comprehensive coverage and understanding of the impacts of information systems of consumer behavior as well as the impact of information systems on organizational behavior, development, and management in organizations. The objective of the paper was elaborated by the example of the problems faced by Pep Boys, a leader in the automotive service industry, in their retail stores. The paper focused on the problems faced by the Pep Boys in increasing the employee productivity and efficiency of employees and boosting the customer shopping experience. It brought into light the challenges of decreasing customer’s satisfaction and declining customer loyalty on Pep Boys due to the use of outdated and aged technology at the retail store. The paper discussed the solutions and the strategies of customer Relationship management CRM provided by IBM to Pep Boys to improve the store technology. In the paper our team implemented the system thinking approach to demonstrate the problems. The concept of system thinking has been used in the business and management for decades. It has helped the organizations to improvise and organize the production process and rationalize the decision making process. System thinking approach is also incorporated into the planning strategies. The character of system thinking makes it very easy to solve complex problems and the recurring problems that had been made more complex and tangled by the previous attempts to solve them. This was the case with the Pep Boys. They had the outdated store checkout system which used to fail in the middle of the business transaction and made it difficult to provide additional functionality in store. And all previous attempts were not totally successful in removing the problem. We also applied the attractiveness principal of system archetype to analyze the problem. This approach was used to demonstrate how the Pep Boys faced with the dilemma and difficulty to improve its overall employee efficiency and productivity and customer satisfaction adopted the IBM information technology capabilities and achieved the goal. The IBM solution resulted in the faultless integration of information and data at the retail stores of Pep Boys. With the technological support of IBM, Pep Boys was able to speed its operations and improve the customer shopping experience by offering the right information at the right time, in real time. The implementation of the IBM strategy and innovative technology at the retail store provided Pep Boys with the additional opportunity to incorporate additional functionality. Thus the customer relationship management strategies and solutions of IBM helped Pep Boys to increase the lifetime value of the customers, and accelerate the organization’s ability to amplify employee productivity and efficiency resulting in increased revenue and low cost. References Brandweek “Pep Boys Jump-Starts the Brand”, Retrieved November 15, 2010 from http://www.brandweek.com/bw/content_display/news-and-features/direct/e3i8c9ded7f2bccee0a7af59a3cca7ba035 Braun, William, the System Modeling Workbook, 2002 Checkland, Peter, Systems Thinking, Systems Practice, 1981 Definition of, “SOA Service Oriented Architecture”, Retrieved November 15, 2010 from http://www-01.ibm.com/software/solutions/soa/ Gharajedaghi, Jamshid, Systems Thinking: Managing Chaos and Complexity, Burlington, MA: Butterworth-Heinemann, 1999 IBM case study, “Pep Boys revs up customer service with an IBM and 360Commerce retail solution” IBM Case study, “Pep Boys revs up customer service with an IBM and Oracle Retail solution.” IBM Redbook Publication “Enabling the On Demand Store with IBM Store Integration Framework” Retrieved November 14, 2010 from http://www.redbooks.ibm.com/abstracts/sg246698.html ,[object Object],O’ Brien, James A. Management Information Systems 9ed, 2009 Peter David Stroh, Leveraging Change: The Power of System Thinking in Action, 2000 Press release by IBM “Client Demand for Better Performance at Lower Cost Accelerates the Movement to IBM DB2 Database Software” Retrieved November 15, 2010 from http://www-03.ibm.com/press/us/en/pressrelease/31710.wss#release Richmond, Barry, an Introduction to Systems Thinking, High Performance Systems, Inc, 2001 Richmond, Barry, Systems Thinking: Four Key Questions, High Performance Systems, Inc, 1991 ,[object Object]

Sandy Carter, “How CIOs can drive growth, business flexibility and innovation in a flex-pon-sive* company”, 2007

IBM Customer Relationship Management & PepBoys Strategy

IBM Customer Relationship Management & PepBoys Strategy

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IBM Customer Relationship Management & PepBoys Strategy