PHILIPS CONSUMER ELECTRONICS

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PHILIPS CONSUMER ELECTRONICS SAP® Solution Helps Philips CE Put the Customer at the Heart of Its Business Philips Consumer Electronics (Philips CE) is forging a profitable future by integrating customer-facing processes and tailoring service to individual customer requirements. The company chose the mySAP" Customer Relationship Management (mySAP CRM) solution to help it realize these goals. By adopting a holistic, long-term approach to building and developing customer service, Philips CE is helping to increase brand loyalty and maximize the lifetime value of each customer.

Greater knowledge of customer buying habits is set to raise campaign response rates and generate an additional ¬2.7 million in revenue through 2007. Revenue from online orders has already grown and is expected to contribute an additional ¬5.4 million to the bottom line during the same time frame. cmySAP CRM enables us to deliver the optimal shopping experience for customers, d says Alexander Bakkeren, director of global CRM, customer service, and e-business at Philips Consumer Electronics, cwhile growing revenues, building lifelong brand loyalty, and lowering the cost of sale. d By automating the entire order process from customer inquiry through to delivery, Philips CE also expects to reduce operating overhead by ¬4.4 million.

Philips CE is using the analytical ... more. less.

func- tionality of mySAP CRM to learn more about its clients 9 needs and preferences; this knowledge will maximize cross-selling and up-selling opportunities as the company continues to refocus its business around the customer. cmySAP CRM enables us to deliver the optimal shopping experience for customers while growing revenues, building lifelong brand loyalty, and lowering the cost of sale. d Alexander Bakkeren, Director of Global CRM, Customer Service, and E-Business, Philips Consumer Electronics SAP Customer Success Story Consumer Products 3 Electronics Summary Faced with increasingly stiff competition, Philips Consumer Electronics decided to better understand its customers and use that knowledge to grow sales 3 while at the same time cutting costs and increasing efficiency. To accomplish its goals, the company turned to the mySAP" Customer Relationship Management (mySAP CRM) solution. Web Site www.store.philips.com Key Challenges " Increased competition, greater customer choice, and lower margins " Declining brand loyalty " High operating costs Project Objectives " Learn more about individual customer buying habits and meet them with the right products at the right price " Reduce cost of sale through online customer interactions " Grow brand loyalty by building lifelong, profitable relationships with customers Solutions and Services mySAP CRM Why SAP® Solution " mySAP CRM offers best functionality, scalability, and long-term value for money " Expanding existing SAP® software would maximize ROI while minimizing total cost of ownership " Broad functionality of mySAP CRM can provide foundation for all future CRM initiatives AT A GLANCE Implementation Highlight mySAP CRM implemented by Philips Consumer Electronics 9 technical teams, with assistance from SAP Consulting Key Benefits " ¬2.7 million in extra sales expected through improved customer targeting " Online ordering expected to generate additional sales of ¬5.4 million through 2007 " ¬5.8 million anticipated savings by automating order processes " Lower IT support and mainte- nance costs expected to save ¬2.4 million " 26% internal rate of return anticipated through 2007 " Rapid uptake on Web-based ordering from company 9s business customers Implementation Partner SAP Consulting Existing Environment SAP R/3® software, functionality now available in the mySAP ERP solution Database Oracle Growing Sales in a Competitive Market The world 9s third-largest global consumer electronics player, Philips CE accounts for more than 30% of the revenues of its parent company, Netherlands-based Royal Philips Electronics N.V. In spite of the universally recognized reputation for innovation and product excellence that has made Philips CE a leader in both the business and consumer sectors, by 2002 the company needed to adjust to an increasingly aggressive market in Europe and North America. Although analysts indicate that online consumer electronics sales in the United States alone grew by 24% in 2003, new competitors and ever more demanding customers with a wider choice of products contributed to shrinking profits at Philips CE and impacted the company 9s bottom line. Product quality and brand image were becoming less important as differentiators in the face of falling prices. Philips CE needed to adjust to the new business environment by lowering overhead, at the same time becoming agile enough to sustain a competitive advantage. Better Customer Service at Lower Cost The company recognized that strengthening customer relation- ships was a critical first step in learning about the customers 9 buying patterns and service needs. Greater knowledge of cus- tomers would enable Philips CE to reinforce its strong brand values and also to provide the market intelligence necessary for developing and delivering the right products at the right time and price. Philips CE also wanted to give both business and residential customers multiple ways of interacting with the company, allowing them to buy products in the ways that best suited them. At the same time, cutting the cost of doing business across all channels was critical to keeping margins up and operating more efficiently. SAP® Solution Offers Scalability, Integration, and Lower TCO Philips CE chose the Internet as the starting point in its effort to present a single face to its customers. The company began looking for a solution that would replace the heterogeneous landscape of front-end systems and customer-facing processes. The company had already selected SAP® software for its back- office processes in 1996 and had consolidated its decentralized, fragmented technology landscape into a single, integrated, centrally managed platform. After evaluating a number of options for its global customer relationship management (CRM) program, Philips CE decided to standardize on mySAP CRM. The company was confident that this solution would offer the best functionality and business fit while delivering a healthy return on investment. Becoming SAP-centric would also help facilitate the company 9s enterprise-wide drive towards a single, integrated IT architecture and standardized applications. cExpanding our use of SAP soft- ware would maximize functionality and achieve the lowest possible cost of ownership, d says Jan Boll, chief information officer at Philips CE. cWe always consider SAP software for all new projects and, if it fits with our business requirements, we go with the SAP solution. d Anticipating Large Reductions in IT Support Costs Philips CE 9s technical teams 3 assisted by SAP Consulting 3 implemented the mySAP CRM solution, integrated it with the company 9s SAP back-office software, and decommissioned the multiple, disparate front-office applications. Replacing third- party legacy systems with standard, integrated SAP applications will also lead to considerably lower IT support and maintenance costs. In fact, Philips CE expects to cut system management overhead by ¬2.4 million through 2007. Benchmarking to Establish Best Practices The Internet sales capabilities of mySAP CRM were implemented to manage the entire online sales cycle. Philips CE piloted and tested the new initiatives at every stage to ensure ease of adoption and user-friendly operation. The company gathered customer survey feedback from its distributors and channel partners and incorporated this information into the main rollout. Philips CE also benchmarked its online order entry processes against larger competitors to ensure it was using market-leading, best-practice procedures. Philips CE positioned the new online ordering capabilities 3 both within the company and to customers 3 as a value-added service rather than just a technology change. Designing the Ultimate Shopping Experience cOur goal was to design the ultimate shopping solution for all our customers 3 large retailers, small independent shops, residential customers who choose to buy direct from us, even our employees, d says Bakkeren. cThis meant developing four different Web shop models with a variety of product mixes and prices. The ready-to-run, Java-based Web shop templates built into mySAP CRM Internet sales functions gave our designers the flexibility to adapt the storefront for each target audience. d One-Stop Self-Service with End-to-End Automation The mySAP CRM Internet sales capabilities allow Philips CE customers to place orders using self-service functionality via a portal interface. Customers can track each stage of the order process online, from order confirmation to final delivery. During ordering, customers can check the availability, price, and delivery time for each item and evaluate different product combinations and options. Answers to frequently asked questions such as ques- tions about product features, trading terms, and the company 9s returns policy are also posted online 3 customers can find this information quickly and easily whenever they need it. Improved Productivity of Sales Teams In addition to its targeted ¬5.8 million in cost savings, Philips CE has seen 3 due to automation and customer self-service 3 increased productivity in its sales teams and other customer- facing employees. Sales agents are now spending less time on time-consuming transactional tasks, such as placing client orders, and focusing more on helping customers with highly specific requirements to find the right product from the Philips CE portfolio. Business-to-Business Sales Take Off After Go-Live Even before the end of the pilot implementation, Philips CE 9s business customers reacted positively to being able to place orders online. In the first three weeks after go-live, the company 9s busi- ness customers were using the online store to place orders at a rate three times higher than usual. Nine months after imple- mentation, Philips CE 9s business customers had already placed orders totaling almost ¬1 million. From Customer Contact to Sales Opportunity Customer service agents who handle online orders from Philips CE 9s residential customers use the interaction center capabilities of mySAP CRM to manage all contacts with the customer. Incoming calls are automatically routed to the first available agent, which ensures the shortest possible response time. The mySAP CRM interaction center provides agents with access to each customer 9s profile, which contains full details about the client and a complete history of purchases made and all previous interactions with Philips CE. Customer queries can be handled by any agent and most issues are resolved in a single call. Philips CE also plans to use the mySAP CRM interaction center to collect information about consumers 9 spending habits. The company will use the data to compile a comprehensive portfolio of each client 9s needs and preferences and develop highly target- ed campaigns. By taking a personalized approach to marketing, Philips CE hopes to increase response rates for campaigns, enabling the company to contribute an additional ¬2.7 million to its bottom line by 2007. Adopting a one-on-one marketing strategy will also reduce the budget wastage caused by poorly targeted campaigns. Philips CE hopes that its investment in mySAP CRM will help it realize an internal rate of return of 26% through 2007. Towards Lifelong Customer Loyalty Philips CE plans to continue leveraging mySAP CRM to cultivate closer relationships and grow sales with business customers in Europe and North America. The SAP built-in analytical and reporting tools will give Philips CE a greater understanding of how each customer group uses the different sales channels, enabling the company to accurately pinpoint the value of business generated online. cmySAP CRM enables us to understand more about each customer 9s value to us, as well as the value we bring to our customer, d says Bakkeren. cCultivating a base of satisfied and loyal customers was an important first step in replacing a one-time interaction with a long-term, profitable relationship. The mySAP CRM solution will enable us to maximize every customer-facing touch point and help us grow customer value. At the same time, we will continue to lower overhead by improv- ing the efficiency of all sales-related processes. d cmySAP CRM enables us to understand more about each customer 9s value to us, as well as the value we bring to our customer. d Alexander Bakkeren, Director of Global CRM, Customer Service, and E-Business, Philips Consumer Electronics www.sap.com/contactsap 50 074 808 (05/06) © 2005 by SAP AG. All rights reserved. SAP, R/3, mySAP, mySAP.com, xApps, xApp, and other SAP products and services mentioned her e- in as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countrie s all over the world. All other product and service names mentioned are the trademarks of their respective companies. Data contained in th is document serves informational purposes only. National product specifications may vary. Printed on environmentally friendly paper. These materials are subject to change without notice. These materials are provided by SAP AG and its affiliated companies ( cSAP Group d) for informational purposes only, without representation or warranty of any kind, and SAP Group shall not be liable for errors o r omissions with respect to the materials. The only warranties for SAP Group products and services are those that are set forth in the express w arranty state- ments accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warrant y.

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