SJ is the major passenger rail operator in Sweden. It is government-owned. In May 2007, the operator launched a major CRM initiative, including a business-to-consumer customer program called SJ Prio. This marked the beginning of an extensive change in company culture. During 2008, its trains made 110,000 journeys every day to some 220 destinations. It services some 2.4 million customers every year and employs 4,000 people. It made € 0.9 billion in net sales and a profit of € 65 million in 2008.
SJ took the decision to pursue a new CRM initiative in response to the coming deregulation of the Swedish railway in 2010. This deregulation will increase competition among the operators. SJ carried out customer surveys and focus groups, and noted strong demand from customers for a more personalized, differentiated relationship, and highly competitive product and price offers. SJ discovered that much of its revenue came from a small group of individuals, but it had no idea who they were. SJ needed to develop a relationship with its most profitable customers before its future competitors did.
SJ wanted to differentiate itself so that it would stand out from competitors after deregulation. It realized the best way to do this was via its customer service, and created new business goals to achieve this goal. SJ started its SJ Prio CRM initiative in May 2007, in response to its new business goals.
The goals included making SJ more profitable, modern and customer-centric. Other aims were to increase revenue via upsell and cross-sell opportunities, by increasing the customer life cycle, by recruiting and maintaining the right customers, and by improving customer satisfaction.
The operator designed its SJ Prio loyalty program to utilize customer insights. By doing this, SJ could reward preferred customer behaviors, increase and differentiate its services, and provide attractive, targeted offers.
SJ decided to focus on three key areas:
- Getting organizational buy-in for the CRM initiative on all levels
- Gaining customer insights to start building relationships with key customers
- Measuring and managing customer expectations
Managing and Improving the Customer Experience
To ensure a focus on the customer experience, SJ Prio offers travelers three levels of membership:
- White: This is the entry level and offers benefits such as ticketless travel using the SJ Prio card, a free daily newspaper with overnight stays at Scandic Hotels, and special offers by e-mail.
- Gray: This is the intermediate level and offers include free tea and coffee on the train, free cinema on the night train and certain InterCity trains in addition to the white-level benefits.
- Black: This is the highest membership level and includes access to the SJ Lounge in Stockholm and Göteborg, and free Internet on trains in addition to all the other level benefits.
This enables SJ to deliver the right types of rational and emotional benefits (the customer experience) to the right members in each segment.
SJ designed the offerings and associated communication to add value and brand recognition. To drive this, SJ built a new-members service function into its day-to-day business. The membership program involves a segmentation model that allows for a clear value differentiation of services and offers. SJ carries out regular customer surveys and focus groups to monitor its performance and to ensure that SJ Prio is improving the customer experience.
The successful realization of the CRM initiative required a change in corporate culture and how SJ carried out its operations. Customers and products had to become the center of all the operator's decisions and activities. This required the launch of SJ's biggest-ever internal communication activity. Clear customer feedback allowed staff to think "customers," while top management helped to get the right resources in place.
Jan Olson, SJ's senior vice president of business development, initiated the project and appointed Claes Lindholtz as leader of the CRM initiative. Other members of the board and CEO, Jan Forsberg, were also convinced that SJ had to take this route. These executives controlled the project's budget and funding.
Senior vice presidents clearly demonstrated commitment to the CRM strategy. They engaged in "road shows" to communicate the SJ Prio initiative to staff. At the same time, managers from the main business functions worked together to re-engineer organizational roles and responsibilities. SJ trained all front-line employees to incorporate SJ's new values into their daily interactions with customers.
External project managers ran the project and reported to a steering committee of SJ executives. About 20 members of the SJ staff took part in the development phase of the project, but this rose to 35 during the launch phase. The launch team initially included a team leader (senior consultant), and leaders for the internal launch (SJ staff), external launch (SJ staff) and process redesign (consultant). Several more staff members joined the team to manage the practicalities of the launch.
Redesign of CRM Processes
SJ redesigned processes that impact the customer experience to achieve service excellence and high customer value. Several members of the project team had experience from very similar voice-of-the-customer initiatives in other companies, and SJ also used focus groups to guide the redesign.
The project team used defined business values and customer insights through multiple touchpoints to guide the redesign. Customer and business values helped establish objectives for each process in areas such as sales, customer support, communication and onboard processes. SJ also created new cross-functional CRM processes.
SJ focused on providing front-line management and front-line staff with support. The operator established internal channels for questions and issues relating to SJ Prio. SJ now has formal processes to provide guidelines, feedback and information to onboard, sales and middle managers. Senior SJ management has to maintain relationships with five to 10 top SJ Prio members to provide continuous feedback to high-level SJ management.
Use of Customer Insights on All Levels
SJ wanted to use its customer data to maximize customer insight on all levels for itself and customers, as this would drive greater revenue. Therefore, it used customer insight and feedback to drive product development and performance measurement.
By measuring performance, SJ was able to tell whether it had attracted the most important customers to the SJ Prio program. For example, SJ compares average revenue per journey for members and nonmembers. SJ has also used insight about which departures are most popular with members and assessed its ability to influence their behavior. SJ ran a number of campaigns that used various incentives, such as points or price cuts for members to change to earlier or later train departures or to change from second to first class.
SJ is able to enhance its offerings with insight-based offers and campaigns throughout the customer life cycle. The data also allows SJ to improve its ability to meet and manage customer expectations, and to adapt its services in response to customer requirements.
Technology Choices Played Important Role
SJ also faced the challenge of selecting the right CRM application for its SJ Prio program.
The operator evaluated several vendors and was looking for a system that was both scalable and operational "off the shelf." It also needed to integrate with more than 10 existing operational IT applications at SJ, resulting in about 50 interfaces. These included:
- Two mission-critical booking systems for long-distance and regional travel
- Onboard systems in the trains to enable customers to collect and redeem points
- SJ sales ticket machines at the stations
- SJ's website for seamless registration of new members, members' portal and ticket purchase
- Multiple sales applications serving sales and service staff and SJ's external website
- The finance system
- External partner systems such as credit card companies and hotels for members to collect and redeem points
- Internal key statistical and analysis information systems
SJ chose Siebel 7.8 from Oracle with Loyalty as the core module. It also has the "travel service base," which includes Marketing, Analytics, E-Mail Marketing and Loyalty modules. This provides customer insight to all front-line staff in real time, along with analytics capabilities.
SJ detailed its overall requirements between December 2005 and May 2006. Accenture carried out coding until the end of October 2006. Testing and training was finished by January 2007, and the system became operational in February 2007. SJ developed all other systems and interfaces in parallel with this.
All data required to run the SJ Prio program resides within the Siebel system. The system combines data from the operational systems with member data collected at the time of member registration. There are also several sales systems and onboard systems used at customer contact points. Some 50 interfaces manage the availability of operational SJ Prio data throughout the organization. Most of them are batch-based, but many are also real-time. The sales and onboard systems can capture and display member information, campaigns, pricing in terms money or points.
The Siebel system is used by approximately 40 SJ staff. Some 1,000 ticket agents and call center staff have access to Siebel through SJ's sales and distribution system. Campaign management is handled mainly by just three employees.
Use of Metrics to Prioritize Daily Activities
SJ has guided its implementation of its CRM strategy using clear metrics, systematic measurement and reporting at all levels of the organization. SJ uses data analysis, quantitative and qualitative research, analytical CRM and different surveys on a regular basis. Its main key performance indicators (KPIs) are:
- Member revenue share of total SJ revenue
- Average revenue per member and nonmembers per month and per year
- Trends for development of average revenue for members and nonmembers
- Campaign results, such as increased revenue and reduced distribution costs
- Number of members in various segments
- Penetration of key segments
- Net promoter score for members and nonmembers
- Customer satisfaction index for members and nonmembers
- Future purchase intentions
- Overall experiences in different touchpoints
- SJ Prio has 470,000 members and more than 80% penetration in its main target groups. This compares well with SJ's original data, but penetration was faster than expected.
- SJ Prio has 15% market share for all trips over 100 kilometers (km), and 90% market share for train trips under 100 km.
- There has been a substantial increase in average revenue from members, and the numbers continue to rise, allowing SJ to achieve payback on its initiative within two years.
- About a quarter of SJ's revenue comes from SJ Prio members.
- Some 32% of customers say they will increase their travel by train due to SJ Prio.
- SJ's key business functions are now using the customer insights that the SJ Prio initiative has generated to monitor revenue and profitability for the various products, yield and revenue management, strategic pricing, sales and marketing and product development.
- SJ Prio won the Swedish Golden Relationship Award for best CRM realization and the Swedish Golden Key Award for best CRM initiative of 2008.
- SJ Academy, a service school for front-line staff, was established, and more than 3,500 employees have undergone customer service training.
- SJ redesigned its key processes, such as sales at contact centers and onboard bistros to secure high customer value realization and a leadership position.
- Allocating operational ownership to specific teams. The organizational structure is the key to the success of SJ Prio. The initiative involved directors, managers, team leaders, and supervisors across all divisions of SJ.
- Using a top-down governance structure. This method for gaining buy-in was to ensure that commitment and change came from the top. For example, senior vice presidents undertook an eight-week road show to explain the SJ Prio initiative to employees.
- Creating a training program for all staff. Training was rolled out to the whole organization and included specialized coaching, depending on function and level.
- Continuously measuring and reporting KPIs. This provided evidence that SJ Prio was proving successful and allowed the operator to prioritize its daily activities.
- Implement your CRM initiative in steps. Take a long-term perspective and approach development in steps, from change management and financial perspectives.
- Gain commitment from senior managers. Development and execution of CRM requires commitment, courage and clear presence from the top management. It is crucial that the project sponsor is committed and has the necessary influence to handle any internal conflicts.
- Act on the customer feedback you gather. This will help you demonstrate value to customers, and will promote a customer-oriented culture so that both you and your customers benefit from the initiative.
- Demonstrate results at all levels. Regular reporting of KPIs at all levels in the organization will show how successful your project is, while encouraging participation in your initiative.
- Engage a network of key vendors and advisors. The participation of strong vendors and advisors is key to securing leading-edge knowledge and helping realize your CRM initiatives.
© 2009 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.