Making Use of Analytics

Analysis is an increasingly important part of CRM, yet it's misunderstood by many executives, according to Gartner analysts at a recent Gartner BI conference. Companies often fall short in their analysis attempts because they're unsure how to start, how to determine what should be measured, or whether or not data mining is required. Part of the problem is that the growing number of automated channels provides exponentially more data. The data is growing faster than the ability to analyze it--and the ability to analyze it is growing nearly twice as fast as the ability to use that analysis to aid CRM efforts. "What is needed is a bottom-up approach to analytics, which begins by identifying the desired decision and then works back to the analysis that will drive the decision and the decision that will drive the analysis," said Gareth Herschel, an analyst at the conference. Herschel recommends that companies look first at analysis that helps with reporting on various areas of profitability (e.g., customers, products, channels) before adding management analytics, then predictive analytics. The top of what Herschel calls the hierarchy of CRM analysis comprises surveys, customer experience management tools, and focus groups. A small amount of customers (25 percent) will continue to account for more than 75 percent of business profitability, according to Herschel. Therefore, businesses should consider the different types of customer value, which should influence the corporate strategy and tactics used for managing customer relationships. If the business strategy is more focused on current customer values, the company should focus on the value of the existing relationship and on market value (total spending in a specific category), according to Lee Geishecker, an analyst at Gartner. If the focus is on the future the company should look at the future or lifetime value of the customer. Yet current means different things to different industries. In communications, for example, it means the last month, but in financial services, current could mean several years. Balancing the company's short-term needs (profits) with long-term needs (a satisfied customer base) requires an understanding of the customer value--current or long term, balanced with the value the customer sees in the company, Herschel says. "CRM analytics do not tell businesses what actions to take. CRM analytics can provide better information to help the business make decisions more intelligently. However, analysis without context is just more data. Data only becomes useful when placed in context." Therefore, customer strategies must be defined before the analyses so that the correct analysis can be done to support the strategy. When using Web analytics, Bill Glassman, a Gartner analyst, recommends that Web-analytic CRM functions be adopted in harmony with other CRM solutions where possible. "Focus first on optimizing the Web channel, and then identify areas where cross-channel CRM functions can be implemented," Glassman says. For those with integrated systems, Glassman recommends using Web-analytic tools as a preprocessing stage for Web data before linking it with the data warehouse. Companies should also document ROI expectations and actual results before significantly increasing their investments in Web-analytic tools. However, most companies will have their Web-analytics separate from other data analysis, according to Glassman. He predicts that fewer than half of Global 2000 businesses will integrate Web-analytic data with CRM or business intelligence systems by 2007.