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Analytical CRM
CRM is a new paradigm for gearing all activities of a firm to customer needs to identify suitable marketing opportunities and to mine the profit potential of a customer over the long term. Analyzing customer relationships from a lifetime perspective is critical for success for an organisation. The problem of developing customer base resides in the following :
- Widening the relationship with customers by acquiring new and profitable customers.
- Lengthening the relationship with customers by targeting existing resources and strengthening the foundation of those relationships.
- Deepening the relationship with customers by transforming minor customers into highly profitable ones. An additional step is increasing the share of sales revenue (and hence the share of wallet), or recognizing cross-selling or up-selling opportunities with current customers and making the right offers. Achieving these tasks involves extensively analyzing the customer data. This type of analysis is one of the major purposes of Analytical CRM. To widen the customer relationships, the firm should consider the factors like :
- the kind of customers to be acquired
- the kind of customers who will drive the growth in future and
- the type of new customers, who are likely to be interested in the firm‘s products.
To lengthen the customer relationships, a firm needs to answer following questions:
- Which customers in particular it want to keep?
- Which customers will drive most of the profits?
- Which customers might switch to the competitors and why?
- Which customers are dissatisfied with the services and products of the firm?
The changed market situation means that knowledge about the value of a customer or a customer segment is decisive for the company's success. Once the firm has this knowledge, this can be used to allocate resources more efficiently to the most desirable
customers and to re-engineer the unprofitable ones. Customer information must be kept consistent throughout, and it must be available across all the touch points where the company interacts with its customers. Decisions about how to develop a relationship with customers should be reflected in all interactions and planning with customers. Analytical CRM is a consistent suite of analytical applications that help the firm to measure, predict, and optimize customer relationships. To address these business issues, analytical CRM includes a sound analytical infrastructure that allows to gather all the relevant information about customers and organise it consistently. Thus, a 360- degree view of customers can be achieved, which then forms the basis for wide-ranging analytical methods that help to measure and build truly interactive, mutually beneficial, and profitable relationships. Mastering the following is key for a successful analytical CRM solution:
- Capturing all relevant customer information from different sources, channels, and touch- points and then integrating it into a customer knowledge base with a 360° view.
- Applying a comprehensive set of analytical methods to measure and optimize customer relationships and answering all relevant business questions.
- Deploying analytical results to improve the CRM processes, interactions with customers, and business planning with customers.
- Integrating customer value with shareholder value and strategic enterprise
management.
4.1.1. Benefits of Analytical CRM
Analytical CRM can make a considerable contribution toward providing the answers to numerous questions and thereby support a whole range of business decisions. The analytical capabilities allow a firm to identify new trends in the markets and then to channel the investments in these markets. They also help you gain further insights into customer needs and preferences by identifying patterns to :
- Acquire new profitable customers.
- Improve the firm‘s relationships with existing customers by addressing their
way of recording what it learns and perhaps even its own customer information system. The disparate interests of departments make it difficult to pull together customer knowledge in one common format and place. Customer information and knowledge also inspire a high level of politics and passion. The salesperson with valuable customer information on index cards, the service department with valuable information on what customers thinks about new products, the marketing department with highly detailed customer attitudes and behavior from focus groups and surveys - all have some reason to keep control of what they know about customers. Senior general managers, however, generally prefer to make customer knowledge an organizational resource and therein lies the conflict. Another factor making the management of customer knowledge difficult is the fact that there are several different types, each of which must be managed with a different approach. The first type is data-derived customer knowledge that originates in transaction systems. We typically think of this type of knowledge as involving consumers, but it can also be about business customers.
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Managing this stuff involves several S's:
Strategy : Defining what information is really important and what customer behavior really counts. Standards : Ensuring that "customer" and other related terms mean the same thing throughout the organization. Systems : Allotting sufficient processing power to process all the data. Statistics : Turning data into knowledge through statistical processing. Smart people : Finding smart people to structure and interpret the analysis of customer data.
Five Ss of managing customer data Strategy Standards Systems Smart people Statistics
Another type of customer knowledge is tacit--unstructured, difficult-to- express knowledge that we observe or sense about our customers. The voice of the market never speaks clearly, and we often have to intuit messages from customers at the sub- rational level. Every good salesperson tries to elicit some tacit knowledge from a customer in the form of body language, facial expressions or other "vibes." Some market research experts now argue that customer opinions about products and marketing messages can best be understood in tacit forms of expression. Tacit customer knowledge can be just as important to sales and marketing functions as the other types of customer knowledge. The good aspect about tacit knowledge is that much of it can be converted through various means to explicit human knowledge and thus made more permanent and transferable. The bad thing is that
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Building effective communications & Creating loyalty i. Generating customer insight
Customer insight is an understanding of consumer behaviour that has the potential to drive mutual benefit. It is the bedrock of any customer-facing organisation and drives long-term growth in shareholder value. Most of the value that shareholders assign to companies is based on expectations of returns beyond the period for which forecasts exist. A business‘s pipeline of future cash is driven by improvingreturns on equity, sustaining growth, reducing uncertainty, accelerating future cash and extending time horizons. Customer insight enables superior business performance against these criteria by creating the basis for compelling differentiation, relentless innovation, the development of strong brands and relationships, faster market penetration and development of the best portfolio of product options. Most retailers acknowledge that information about consumers is critical to success, but their ways of working are often internally focused, and don‘t focus on the need for real insight as the primary means of generating demand long term. This lack of recognition of the importance of generating real consumer insight often stems from current business success, or from a focus on local markets disguising the need for consumer insight. However, retailers need to address this. A failure to generate and make use of consumer insight in day-to-day operations will lead to lower shareholder value. ii. Segmenting customers
Customer segmentation is a basic marketing technique and is at the heart of retailers‘ marketing strategy and is essential to the way that successful retailers run their business. It is used to drive the profitability of the business by understanding
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Efficient processes : Processes must provide a clear implementation approach for the initiative and be continuously reviewed to deliver strategy and measure results.
Momentum : Momentum and energy are needed in order to speedily convert an idea into a value-add application that keeps the organisation ahead of the competition. Devolved decision-making and step-by-step implementation creates momentum and dispels uncertainty and anxiety. Effective communications : Effective communication channels ensure that roles and responsibilities are clearly defined, enabling multi-functional teams to leverage expertise and cross-fertilise ideas. iv. Building effective communications
A retailer‘s wide range of produce, typically targeted towards a wide range of audiences, makes effective marketing communications both extremely complicated and vital for success. The retail environment is continually adapting to changing customer demands, market variables and competitor activities. As a result product and service offerings, and pricing and promotional strategies, must be constantly adapted. However, these changes must be effectively communicated, both internally and externally, for them to be successfully implemented and accepted by customers. v. Creating loyalty
Retailing is all about serving customers - but the very convenience of shopping in physical stores can mean that customers come and go, while the retailer has limited knowledge of the relationship with them. In the current competitive climate, retailers need to develop a long-term relationship with their customers, and create a satisfying shopping experience that keeps them coming back. New retail channels and technologies can offer cost-effective means to track and enhance customer relationships, both emotional and financial. Any business can reap all these benefits only through efficient and effective
management of customer data.
