CRM Analytics: Opportunities and Challenges

CRM analytics is branching across organizations to help drive customer retention and growth, especially in the financial services, retail, and telecommunications industries, according to "What's Hot In CRM Analytics," a presentation today by Frost & Sullivan. The market's CAGR is expected to be 13 percent from 2005 to 2008, moving from software license revenues of $553 million to $911 million. Also, the market is becoming increasingly vertical, with companies demanding solutions that fit their business. "[Analytics] has certainly been a growth area in the CRM marketplace," said Fred Landis, Frost & Sullivan research director, during the presentation. Ashwin Iyer, research analyst at the consultancy, said, "Each industry...looks for fast and high-impact levers to drive [revenue] growth. This presents an opportunity, as well as a challenge, for companies to transfer that data into profits." Following is Landis's break out of the leading growth industries: Financial services: An average bank offers 20 products, but each customer only has two or three. As a result, "wallet share growth via cross-sell initiatives is huge," Iyer said. "Most financial services organizations look for this application of analytics to enhance profitability." The credit card industry, meanwhile, is looking for selective customer acquisition, targeting specific customers who will be profitable without resulting in debt. Telecommunications : This industry faces the pain point of customer churn, especially in the wireless space. Reducing customer attrition is the most prominent goal here, followed by an attempt by land-based companies to sell additional services to customers beyond the fixed line. "They have a customer base and want to grow revenue per customer, so they want to cross-sell higher margin services," Iyer said. Retail: "[This] industry is categorized by a wide gap of available customer data and actionable insight," he said. Many retailers implement loyalty programs that result in "reasonable gains, but don't translate into bottom line gains of significant consequence." Sales follow a 30-70 rule, in which 30 percent of the customers generate 70 percent of the profit. Retailers must focus more heavily on top shoppers--the same is true for the travel and hospitality vertical. CRM analytics market challenges for both end-user organizations and vendors include the cost and complexity of systems integration. Companies need to remember that clean data is essential, especially when it exists in different silos. Next come cultural challenges. For an analytics system to be worthwhile, it has to be placed in the context of how the business user would apply the application, and function for sales, marketing, and service. "It's not a siloed initiative. It calls for cross-organizational buy-in," Iyer said. Landis sees more BI vendors offering prepackaged solutions targeted to individual departments in the organization, not just power users. "There's a lot of vendors coming to the party in the analytics world, and many of them are looking at their customer base and doing their own cross-selling and upselling. They know where the data is in their organization and it makes it easy for them to [provide analytics] for them. Those who succeed will understand how to mine that data and take it from all the different silos within the organization." Related articles BI Tools to Manage Real-Time Response SPSS Highlights Customers' Future Needs Understand, predict, act--predictive analytics helps companies realize how to see customers' value both now and in the long term.

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