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Why Are CRM and Analytics Intrinsically Connected?

Written By: Predrag Jakovljevic
Published On: August 16 2005

Why Are CRM and Analytics Intrinsically Connected?

As its name suggests, customer relationship management (CRM) focuses on building enterprise profitability through the service and management of customer behavior and processes. It centers on the collection and analyses of customer-derived information to exploit this knowledge to better meet customer needs and business objectives. The APICS Dictionary describes CRM as a marketing philosophy where information is analyzed to provide marketing and sales with the necessary information to service customers' existing and potential needs. Thus, along with account management, catalog, and order entry, major commercial CRM software application areas include customer service and support (CSS), call centers, sales force automation (SFA), and marketing automation (MA). Of these, that latter two areas, SFA and MA best illustrate the interconnection between CRM and analytics.

With each new advance in technology, especially the proliferation of self-service channels like the Internet and wireless application protocol (WAP) phones, more elements of the customer service relationship is being managed electronically. Organizations are therefore looking for ways to personalize on-line experiences through tools such as help desk software, e-mail organizers, and Web development applications. For more information on other aspects of CRM, see CRM is Busting Out of Its Britches: Operational, Analytical, and Collaborative CRM Is Born.

Many CRM software vendors focused their first marketing modules to generate and convey leads to the sales force. SFA thus refers to the application of technology that enables selling through all channels, including field sales, telesales, selling partners, Web selling, and retail. The goal is to integrate technology with optimal processes providing continuous improvement in sales effectiveness, as well as providing balance and optimization to each enterprise sales channel.

But, while SFA was designed to equip a sales force to close deals, it typically does not influence customer adoption, which is the tenet at the heart of CRM. SFA is about acquiring new customers, but the CRM is also concerned with identifying, servicing, retaining, and increasing profitable customer relationships. The technologies that CRM harnesses should enable greater customer insight, increase customer access, create more effective interactions with customers and trading partners, and be integrated throughout customer channels and back-office enterprise functions

Thus to enable an organization to become more customer-centric, marketing departments must lead by example and improve the management of their operations, including better allocation of marketing resources with the highest value opportunities. This feat is only possible through the improved orchestration of the marketing function—marketing automation (MA). MA eventually leads to customer relationship optimization by applying customer insight and intelligence to plan the execution of customer interactions.

Building a better understanding of customer preferences to better serve their needs and increase their loyalty is certainly the motto for the new generation of MA systems. MA involves analyzing and automating the marketing process through information technology (IT) tools to allocate marketing resources to activities, channels, and media that will best meet customer needs while delivering profitability to the company. Its functional components include customer data cleansing, analysis tools, and campaign management systems. MA also enables new metrics, such as customer profitability, lifetime value, and wallet share to supplement the traditional metrics of market share and penetration.

All of these tools focus on determining what an enterprise's strategy should be during each customer interaction and these interactions fall within the following three categories: outbound campaigns, event-triggered interactions, and inbound interactions. For example, target marketing focuses marketing activities specifically on those people who are most likely to buy a company's products and services. Data gathered on people who use the Internet enables companies to identify and focus on more likely candidates. Retention efficiency is a measurement of how well a company creates repeat customers. Marketing cost analysis is the study and evaluation of the relative profitability or costs of different marketing operations in terms of customers, marketing units, commodities, territories, or marketing activities. Cost accounting is also typically used.

These tools are used to replace or enhance human intelligence by scanning through massive storehouses of data to discover meaningful new correlations, patterns and trends by using pattern recognition technologies and statistics. Likewise, predictive analytics drills even deeper. It is a statistical method that includes all analytics to predict the probable future outcome of an event and falls under data mining, a class of database applications that look for hidden patterns and support decision-making by forecasting the outcomes of different scenarios.

Ultimately, given the depth of information MA processes can pull out, MA is an integral part of a sound CRM strategy that can help drive organizational alignment through its analysis of markets, customers, and segments. For example, it can help guide marketing campaigns and identify segments of the customer base that is likely to cancel their subscription. For more info, see Marketing Automation: Coming of Age Slowly.

Campaign Management

Once patterns and trends are discerned, the next step is to apply what has been learned. Overall, basic campaign management provides capabilities such as planning campaigns targeted at segmented audiences; keeping a history of all the campaigns that have been run; tracking and analyzing the response to various products and target segments; and executing and tracking responses, which help in generating leads for sales.

Campaign management and e-mail marketing functions were among the first modules for CRM vendors to include in their product offerings. Siebel Systems, E.piphany, Pivotal (now part of chinadotcom/CDC), DoubleClick, and Aprimo are some of the providers of such functionality. By using a campaign management tool, marketers can design multilayered marketing campaigns filtered by customer segments, and use the contact center capability to reach their target through multiple channels such as phone, portals, e-mail, direct mail, and personal digital assistant (PDA). Another functional category that falls within this realm and is also widely provided for is electronic marketing, which offers a web-accessible, enterprise resource that manages and delivers essential information to marketing's customers, both internal (sales, customer support, etc.) and external (prospects, media, partners, etc.). Integrated content management and customization have added value to the basic features of e-mail marketing by avoiding the pitfalls of traditional mass marketing.

Marketing analytics adds a new dimension to basic campaign management. With marketing analytics, marketers can conduct customer behavioral analysis and understand key issues such as propensity to buy. Traditional CRM vendors such as Pivotal, PeopleSoft (now part of Oracle), and Siebel have been offering marketing analytics mostly through former acquisitions. Marketing analytics is also offered by other pure MA players such as Chordiant, E.piphany, SAS Institute, and Unica.

Marketing Resource Management

Given the importance of intelligence on customer behavior and patterns, it is no wonder that the newest tool—and the latest buzzword—is market resource management (MRM). Pioneered by Aprimo, MRM is designed to improve the use of marketing resources, which is crucial for marketing departments facing shrinking budgets and greater accountability. Through workflow capabilities, tasks can be assigned and alerts can be triggered to better manage knowledge and comply with marketing best practices.

Yet whether a buzzword and the idea it encompasses lasts, is never guaranteed. Inevitably, tighter control over projected budgets, planning, and execution combined with a myriad of functions in campaign and lead management modules have pushed the limits of MA, and vendors such as Aprimo and Unica are now referring to their products as enterprise marketing management (EMM) solutions.

However, the general appeal of MRM comes from MA and its ability to tailor marketing campaigns, track their effectiveness, control marketing costs, and perform better-targeted, finer-grained, multi-stage campaigns. Nonetheless, in the early 2000s, many MA point solution providers faced pessimistic investors and the diminished appetites of global corporations for technology. Consequently, the budding market of MA point solution providers has felt the brunt of this slowdown. They have yet to create a market awareness of their true value proposition and their situation is further compounded because marketing departments are slower to IT. These applications have also often been perceived either as a luxury (a nice-to-have but not show-stopping) application or, enterprises valuing the proposition may be more inclined to obtain it as a part of a broader CRM suite or from an ERP provider, rather than as a point solution.

Not surprisingly, MA-only providers are disappearing with only a few (and possibly endangered) providers like Unica, Aprimo, MarketSwitch, and MarketSoft remaining. The diminished life expectancy of independent CRM point solutions providers—and the importance of their solutions—is highlighted by a number of acquisitions and mergers. Annuncio was acquired by PeopleSoft (which itself, is now a part of Oracle) (see PeopleSoft Annuncio-es Continuation of Its Shopping Spree). MarketFirst was acquired by Pivotal as was Protagona by DoubleClick; Point Information Systems by S1 Corporation; DataSage by Vignette Corporation; Prime Response by Chordiant; and Blue Martini Software by Multi-Channel Holdings. Similarly Kana and Broadbase merged (see The Mid-Market Is Consolidating, Lo and Behold).

Supply Chain and Analytics Are Not Strangers Either

Lately, large business intelligence (BI) vendors have also been targeting vertical industries with prepackaged analytics and data models, especially in the supply chain management (SCM) and CRM areas via deep trend analysis capabilities in supplier performance, cross-selling opportunities, customer retention, fraud detection, demand creation, risk, and quality management. Currently, BI suites should enable users to access and present key business measures about the sales and customer service, as well as the supply chain and financials etc. From this, users should be able to create calculations and ratios to derive key performance indicators (KPI) and metrics.

For example, SAS Institutes is approaching this market in a couple of ways. It has enhanced its demand management module, High Performance Forecasting to allow consumer packaged goods (CPG) manufacturers to predict the needs and demands at different stores and locations in short time frames. (see SAS: Striving to Maintain Leadership series, especially Part Two.) It has also acquired Marketmax, a former provider of retail intelligence and merchandizing applications, which will give SAS' solutions a more complete view of demand/supply chain. Marketmax's retail optimization solution will be linked to the SAS Value Chain Analytics. (see Retail Market Dynamics for Software Vendors).

The amount of information generated by enterprises will only increase in the future, especially with the growing prominence of radio frequency identification (RFID) tags. Companies supplying retail industry giants such as Wal-Mart and Target are pushing their suppliers to use the technology. This coupled with the expected decline in the price of RFID tags, means the necessity for marketing departments to have analytical capabilities will be even more pressing. (See RFID—A New Technology Set to Explode?).

User Recommendations

The connect and benefits of analytic tools in CRM is notable, to say the least. The need for enterprises to maintain a competitive edge will continue to drive the development of analytics, which will undoubtedly remain a strong fixture in CRM. Because of the importance of business intelligence, enterprises need to seriously access their needs in the industry and evaluate the solutions offered by their current software provider. One must also be cautious and not assume that generic analytical tools built into the enterprise system will meet the needs of deep analytical processes. Enterprises must assess their information delivery strategy and determine what information—from both structured database sources and unstructured sources— needs to go where.

Likewise, users also need to research vendors claims of vertical expertise to ensure that the necessary structural changes to the software code are made to handle specific business processes. Even the mini-verticals within a vertical will have particular processes. Adding industry specific terminology or implementing a particular report style is not enough and will not give enterprises the type of in-depth analyses they may need.

 
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