An Investigation into Customer Retention at SAP SE: A Report

This report provides a comprehensive analysis of customer retention within SAP SE, a leading multinational company offering cloud-based services. It begins with an executive summary and introduces the company background, including its business offerings in enterprise application software, and its global presence. The report highlights the challenges SAP SE faces in customer retention, including issues like product-market fit, lack of features, and poor customer service. It examines various risk factors affecting the business, such as global economic and political instability. The study emphasizes the importance of customer retention, discusses relevant factors, and analyzes SAP SE's existing strategies. Finally, the report offers specific recommendations to improve customer loyalty and increase repeat purchases, aiming to address gaps in the company's current approach and ensure long-term success in the market.

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2CUSTOMER RETENTION IN SAP SE
Executive Summary
This report has elaborated on presenting a brief discussion about the business process of SAP
SE Organisation, a multinational organisation offering cloud based services to its clients, in
terms its customer retention process and why it is lagging behind in terms of repeat
purchases. It has examined the customer retention strategies of SAP SE. It is at present a
market leader in providing enterprise application software and helps companies of all sizes to
achieve their best operation. The report has highlighted the business offerings of the company
along with the various risk factors affecting the business currently. It has further critically
examined the importance of customer retention and the relation of different factors and
conditions that influence the level of customer retention of a company. Lastly, several
recommendations are made in order to fill in the present gap of the company in terms of
customer loyalty and retention and it is expected that following the recommendations can
help it in ensuring high rate of repeat purchases from the parts of its loyal customers.

3CUSTOMER RETENTION IN SAP SE
Table of Contents
1. Introduction.........................................................................................................................2
2. Discussion...........................................................................................................................2
2.1. Company Background.................................................................................................2
2.2. Business Offerings.......................................................................................................3
2.3. Background of the issue..............................................................................................4
2.4. Various Risk Factors...................................................................................................5
2.5. Customer Retention.....................................................................................................6
2.6. Analysis of the factor and conditions that influence the company..............................6
2.7. Existing customer retention strategies of the company.............................................10
3. Recommendations.............................................................................................................11
4. Conclusion........................................................................................................................11
5. References:........................................................................................................................11

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1. Introduction
Consumers in the modern era expect access to data in real time with significant
increase in accuracy. This means that companies have to focus not only on developing a
unified brand image but offering amazing customer experience across all the platforms (Cai
and Zhu 2015). Globalisation has led to fierce competition in the market and developing a
customer centric approach is one of the key criteria of success for the companies in the
market. In such an environment, customer retention has become more important than any
other key performance indicator. There are several new and unique challenges that stand in
the path of improving the level of customer retention (Yin and Kaynak 2015). This report
shall elaborate on discussing about the issue of customer retention in SAP SE. It has aimed to
examine the customer retention strategies of SAP SE which is one of the multinational
company offering cloud based services to their clients. SAP SE is market leader in providing
enterprise application software and helps companies of all sizes to achieve their best
operation. The company has capitalised on the market dynamics to gain competitive
advantage in the market.
2. Discussion
2.1. Company Background
SAP SE is known for their enterprise software and business models for improving the
efficiency of operations and customer relation. It stands for Systems, Applications and Data
in the process of Data processing (Berg and Kilambi 2014). It was founded in the year 1972
in Germany and now, has expanded all over the world. The company has its headquarters in
Baden-Württemberg in Germany (Seethamraju 2015). The company has its operations in
more than 180 countries and provides services to companies like Microsoft. At present, the
company is expanded to the different territories in America, Asia Pacific Japan, China,

5CUSTOMER RETENTION IN SAP SE
Taiwan, Hong Kong, Macau, Middle and Eastern Europe, Middle East and Africa. According
to Bahssas, AlBar and Hoque (2015), the company is known for excellent leadership in the
ERP (Enterprise Resource Planning) software (Altamony et al. 2015). The organisation offers
advanced analytics, machine learning and internet of things services to improve the
organisational process and customer services. The main purpose of the company is helping
the world too run better and to improve the lives of the people (Cai and Zhu 2015). The
company achieve this by means of providing different solutions that would help the
customers to deal with the everyday challenges of current world in order to be successful.
The software companies in the modern industry is forced by the change in the global
market. Disruptive innovation affects the industry and the companies within it are forced to
change to remain competitive in the market (Ekman, Thilenius and Windahl 2014). This
means that the software companies need to grow at a fast pace and use continuous innovation
to disrupt the market. This has made it difficult for the software companies to manage their
growth effectively (Bahssas, AlBar and Hoque 2015). SAP SE wants to maintain their
competitive advantage which is the reason that they have been developing support systems
for further enhancing the experiences of the consumers. The next generation support includes
Artificial intelligence features such as real time support and incident solution matching for
automating the support experience for the customers. This shows that the company has
always been trying provide better quality services to their consumers. The ordinary shares of
the company are listed on the Frankfurt Stock Exchange.
2.2. Business Offerings
As it is already mentioned that SAP is the market leader in the field of enterprise
application software and it helps the other companies of all sizes and all the industries to run
at their best. About 77% of the transaction revenue of the world touches an SAP system
(Schreyer et al. 2019). The machine learning, IoT (Internet of Things) and the advanced and

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modern analytics technologies are helping to turn the businesses of its customers into
intelligent enterprises (Cai and Zhu 2015). With the same, there is an end-to-end suite of
services and applications of the company that enables its customers to operate in profitable
manner and adapt continuously while making a notable difference (Ekman, Thilenius and
Windahl 2014). Along with a global network of customers of SAP and huge number of
partners, thought leaders and employees present all around the world, SAP is helping the
entire world to run in better manner and improve the lives of the people. There is a SAP
CRM module of SAP. It stands for SAP Customer Relationship Management. It is to mention
that SAP CRM module is one of the best tools that is provided by SAP and is very helpful in
supporting the customer related processes end to end. The major concept of the SAP CRM is
management and maintenance of relationship with the customers by the company (Soltani
and Navimipour 2015). It deals with customer acquisition and to its final termination. It
enables the companies to gain a 360 degree over their respective customers and different
functions like accounts receivable, delivery, fulfilment, decision making and different
functions. It is further integrated with the other SAP modules like PLM (Product Life Cycle
Management), SCM (Supply Chain Management), SRM (Supplier Relationship
Management) and with the different modules (Khodakarami and Chan 2014). The main aim
of this CRM is to ensure good relationship with the existing customers and attract the new
customers, effective communication with the company customers, analysing the partners,
vendors and customers of the company and increasing the company sales and increasing the
products (Cai and Zhu 2015).
2.3. Background of the issue
Customer churn is one of the common problems for the software companies in the
global market. It is one of the biggest de-motivator for the companies working in a highly
competitive environment. However, in order to gain knowledge on the various reasons due to

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which consumers leave, general insights based on data is required. The first reason which
results in churn is bad fit which means that product does not fulfil the needs of the consumers
(Klein and Jakopin 2014). It can be seen that majority of the companies leaving the services
of the company is due to bad fit of the software provided. The lack of latest functionality and
new features is another reason that the consumers leave and new feature arises. Moreover, the
most crucial point is that the customer is unable to derive desired outcome from the service
provided. This presents the need to evaluate the strategies implemented by SAP SE for
understanding the strategies to be implemented for success in the industry (Ekman, Thilenius
and Windahl 2014). With the same, the lack of proper skills and training for providing the
services that are required for the customer satisfaction is also one of the key drivers of the
same. Lastly, the other reason behind role ambiguity is that the employees did not know how
their performance would be rewarded and evaluated. For achieving a role clarity, Hsu, Chang
and Hsieh (2015) have claimed that the usage of four tools- competence, communication,
confidence and feedback. They have focused on the idea that employees require accurate data
and information regarding their roles, frequent and specific communication from the
managers regarding what they were expected to complete, or to do and the current
information about the customer expectations, services and products.
2.4. Various Risk Factors
As SAP is an international company, the global political and economic environment
influence the business to a great extent. The level of uncertainty in the global economy, the
political and social instability and the financial markets that are caused by the state conflicts,
wars, international hostilities and civil unrest can result in disruptions of the business
operations of SAP or might have a negative influence on the overall business of the company,
the cash flows and the financial position of it in the market (Van de Ridder et al. 2015). It is
to note that as a global brand, SAP SE is influenced by huge number of external factors that

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are really tough to predict and beyond the influence and control of the company. As already
mentioned that SAP SE is now present in over 180 different countries all around the world.
Businesses in these nations is subject to many risks that are inherent to the international
business operations. Among others, these risks comprise of the possible tax constraints that
are impeding the business operation in different nations, the different changes in terms of
standards of accounting and the tax laws (Westerman, Bonnet and McAfee 2014). However,
these are not limited to these and might also overlap among the different tax regimes
measures. Any of such events are likely to limit down the potential of SAP to reach its targets
as they have negative impact on the business operations, profit, cash flows and financial
position of the business.
2.5. Customer Retention
According to Degli Esposti (2014), the concept of customer retention can be defined
as the actions and activities that the organisations and companies take for reducing the total
of number of customer defections. It is one of the most worthy investments that a company
can make. After all, customer loyalty is worth of much more than a new customer for a
business. Boosting the rate of customer retention increases the rates of repeat purchases and
at the same time, cultivate more resilient customer and company relationships (Westerman,
Bonnet and McAfee 2014). It is to note that the rate of customer retention in SAP is basically
calculated by the percentage of the lost customers versus the prevailing customers over an
annual period. As per Spiess et al. (2014), a successful customer retentions begins with the
first contact that a company has with a customer and it continuous throughout the whole life
by means of different business marketing elements such as loyalty programs, organising
campaigns for the new customers and the existing ones and providing different trade
promotion discounts (Ekman, Thilenius and Windahl 2014). An organisation’s ability of
attracting and retaining new customers is not just linked to the products or services provided

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by the company but in fact, it is very strongly related to the different ways in which the
services and products of the company services its current customers and the reputation that it
creates across and within the marketplace. According the market survey, about 68% of the
defection takes place because of the attitude of indifference on the part of the service
providers (Newton, Nowak and Kelkar 2018). In the industries such as the mobile
technology, software, banking and utility etc. the customers are given with the choice of
shuffling the companies down and switch to the new selling company or the service provider.
2.6. Analysis of the factor and conditions that influence the company
According to Stark (2015), there are some common reasons for why companies lose
customers. About 68% of the customers turn away by an attitude of indifference on the part
of the service provider. Another 14% customers leave the company as they are dissatisfied
with the company products and services. Again, about 9% of the customer are lured away
because of the existing competition and 5% of them are influenced by their friends and
relatives (Hussain, AI Nasser and Hussain 2015). Below are some of the factors and
conditions that influence SAP:

Behaviours and Skills related to Service Quality and Customer Retention- () have
claimed that the need for customer contact personnel for taking the responsibility,
thinking for themselves and responding well to the pressure from the customers.
Kang, Alejandro and Groza (2015) have further focused on the importance of support
and training in “communication, performance management, team building, coaching
and empowerment” for the managers and the front line workers. Knox and Van Oest
(2014) too in this context have claimed that the companies that have exhibited these
attitudes and policies have not only experienced higher level of customer retention
and profits, but also, a good increase in the level of employee loyalty as well as a
reduction in the job turnover.

10CUSTOMER RETENTION IN SAP SE
Role ambiguity is yet another factor that is affecting SAP SE customer
retention level. It is to note that, Zhou et al. (2015) have defined that role ambiguity is
a situation where employees of the company were not certain regarding what their
supervisors and managers actually expected from them and the way of satisfying
those expectations. With the same, the lack of proper skills and training for providing
the services that are required for the customer satisfaction is also one of the key
drivers of the same (Westerman, Bonnet and McAfee 2014). Lastly, the other reason
behind role ambiguity is that the employees did not know how their performance
would be rewarded and evaluated. For achieving a role clarity, Cullen et al. (2014)
have claimed that the usage of four tools- competence, communication, confidence
and feedback should be ensured. They have focused on the idea that employees
require accurate data and information regarding their roles, frequent and specific
communication from the managers regarding what they were expected to complete, or
to do and the current information about the customer expectations, services and
products.
Royle and Laing (2014) in this context have also claimed that feedback and
training in the areas of interpersonal skills and technical knowledge skills can help in
increasing the confidence of the employees as well as their competence and they can
provide them with greater level of clarity regarding their roles. Bedwell, Fiore and
Sales (2014) have also noted that the vitality of giving feedbacks to the employees
have a major role to face on their interactive skills as productive feedbacks are likely
to encourage the employees to perform better and to ensure better customer
relationship.

Management of Customer Grievances- As per Gregoire, Salle and Tripp (2015),
customer grievances comes up in the form of complaints. Complaint is regarded as the

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“expression of dissatisfaction made by the customer when the fulfilment of the
expectations does not occur” (Westerman, Bonnet and McAfee 2014). These
complaints can be in the form of blessing for the company as for their effective
management of grievances. This further ensures that the firm is trying to improve the
level of its products and services as well as its capability of retention for retaining the
loyal customers is increasing (Tao, Karande and Arndt 2015). It is to note that the
main grievances are the result of some factors and they include
a. Poor communication among the customers and the assignment service
provider
b. Shortage of enough information from the parts of the assignment service
provider and the customers
c. Poor customer service
d. Overpricing of the products and services
e. Delivery of improper and wrong information
There are certain times when the companies become least bothered regarding the
increase in effective management of customer grievances. They then absolutely no
option of recording the feedback of the customers and in this way, it creates a gap in
between the product and the service that is provided (Westerman, Bonnet and McAfee
2014). In this regard, the companies must try to conduct extensive market research
prior to launching any new product in the market and understanding the expectation
for the customer about the product (Jared, Chen and Woodside 2017) In this way, the
company can set a benchmark and attaining the same will help the company in
satisfying its customers. According to Porter and Kramer (2019), ineffective
management of the customer grievance by SAP SE can result in decrease in its
capability of customer retaining. Effective management of the same by the company

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is likely to help it in reducing the number of service failures, gaining competitive
advantage over its competitors and most importantly, retaining the customer base and
creating loyal customer base (Kale 2014). It is also to mention that creation of set of
loyal customer base further will help SAP SE in generating revenue and
understanding the demand of the goods and services. According to Shijie, Lingfang
and Depeng (2014), if a customer complaint about any of the company’s product or
service, then it is a good chance for the company to retain that specific customer by
effectively managing their grievances (Soltani and Navimipour 2015).

Customer Satisfaction, which is directly related to customer retention- According
to several researchers, there is a strong relationship in between customer retention and
the level of services that they experience from the company (Westerman, Bonnet and
McAfee 2014). It is to note that there are a total of six factors that are imperative to
the improvement of retention level in a company and they are- 1) customer focused
culture, 2) the senior management commitment, 3) the retention information system,
4) empowerment of the front line employees for taking actions that give immediate
customer satisfaction, 5) incentive systems on the basis of customer retention and
lastly, 6) continuous training and development. It is to note that at SAP, the customer
relationship extends far beyond the sale (Ekman, Thilenius and Windahl 2014). The
company is committed towards ensuring that its customers are successful with the
technology that it provides.
2.7. Existing customer retention strategies of the company
It is to note that SAP deliver the intelligent enterprise by means of focusing on a total
of three key business outcomes and they are- reimagining the end-to-end customer experience
right from prediction of the customer demands to designing of the products that are based on
the unique requirements and needs of the customers (Westerman, Bonnet and McAfee 2014).