Businesses Radically Rethinking How They View Customers, According to Andersen Consulting/Economist Intelligence Unit Study.

NEW YORK--(BUSINESS WIRE)--Oct. 13, 1998--

More Businesses to Organize Around Customer Segments,

Rather Than Product Lines or Geographical Regions

The next five years will see the world's major corporations increasingly organized around the types of customers they serve, rather than along product lines or geographic business units, according to a new global study published by Andersen Consulting in collaboration with the Economist Intelligence Unit.

While only 18 percent of businesses surveyed are currently organized around customer type, nearly 50 percent expect to be by 2002.

Indicative of the significant changes under way, 70 percent of businesses say they expect to change their approach to "customer relationship management" -- an organizational discipline that encompasses identifying, attracting and retaining the most valuable customers to sustain profitable growth -- during the next five years. Faced with increasingly unpredictable customers exercising greater freedom of choice, more major corporations will begin to create a clear customer relationship strategy, the study found. Businesses are shifting their attention from attracting new customers to retaining profitable ones. And, in some cases, they will "fire" unprofitable customers. Organizations are also introducing an integrated approach to managing customer relationships, as opposed to the current practice of parceling out responsibility across functional departments.

"Focusing on customer needs seems the most basic, fundamental tenet of business. Yet, major corporations are just now beginning to blend strategic thinking, management resources, front-line support and technology to better understand and serve more sophisticated buyers," said Dale Renner, global managing partner of Andersen Consulting's Customer Relationship Management practice. "In the wake of relentless cost-cutting, organizations are developing long-term customer relationships as a path to enhancing profitability. With one in two organizations planning to reorganize around customers by 2002, this shift is nothing short of revolutionary."

Major findings of the Managing Customer Relationships survey of 200 senior executives in North America, Europe and Asia, include:

-- The number of businesses citing "customer retention" as a

critically important measure in the next five years has jumped to

nearly 60%, as companies shift their focus from attracting new

customers to retaining their more profitable ones.

-- Companies are becoming more sophisticated at tracking customer

profitability. Nearly 50% said that customer profitability will

be a critical measure by 2002, up from 26% today. A greater

number will be measuring not only customer revenues, but also

when they pay, their service requirements, and whether they

generate special handling costs.

-- Companies will increase their empowerment of front-line employees

and create cross-functional links that integrate the front line

with other parts of the organization. While only 27% currently

report a high degree of integration between sales and IT

functions, 76% expect such collaboration to be common by 2002.

-- By 2002, 83 percent of companies expect to have customer data

warehouses, up from about 40 percent today.

-- More than 60% of businesses believe that "changing customer

demographics and needs" and the "pressure to customize" their

offerings in light of these changes, now have the most profound

influences on their business strategies.

-- This new sophisticated approach will be aided by the evolution in

interactive technology, specifically the soaring popularity of

the Internet. Companies predict their use of the Internet to

collect customer data will surge 430% by 2002.

"Not all customers are created equal. Companies are increasingly gathering more data to discern the differences among customers and shape their offerings based on the relative value these customers bring to the enterprise," Mr. Renner said. "Greater use of the Internet -- as well as electronic commerce in general -- along with anticipated increases in the use of focus groups, e-mail and call centers, will enable companies to zero in on ever-smaller customer segments - even down to the individual 'market of one' level."

Andersen Consulting, a pioneer in Customer Relationship Management, has approximately 4,500 professionals doing work in customer strategy, customer insight, sales, service and marketing effectiveness, call centers and electronic commerce. The firm has completed more than 300 Customer Relationship Management engagements in the past 12 months.

Andersen Consulting is a $6.6 billion global management and technology consulting organization whose mission is to help its clients change to be more successful. The organization works with clients from a wide range of industries to link their people, processes and technologies to their strategies. Andersen Consulting has 59,000 people in 46 countries. Visit its Web page at http://www.ac.com.

The Economist Intelligence Unit is a member of The Economist Group, the international communications and information firm and publisher of The Economist. For more than 50 years, the EIU has been a leading source of independent research information on global business and financial developments, economic and political trends, government regulations and management practices. Its home page is located at www.eiu.com.

The report, Managing Customer Relationships, is available The Economist Intelligence Unit, Tel: [phone] (United Kingdom) or [phone] (United States).