Analyze This
Get to know your customers better with CRM analytics software.
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As dot com high-fliers are brought back to earth by stock market gyrations, investors are getting more discerning. They're starting to look for revenue and earnings gain, not just dominant market share. In this competitive environment, companies need to know more than just how many customers they have. They need to put a value on their customers. Customer relationship management analytics solutions can help.

Information garnered from analyzing customer data can be used to determine such things as the value of a lifelong customer relationship and the average value per transaction. This information will help you set pricing and come up with customer retention and targeting strategies. You can also use analytics to figure out staffing needs for your call center, detect fraud and troubleshoot Web-site problems.

Analytics Evolution

CRM analytics solutions have come a long way in the last 20 years. In the early 1980s, companies started collecting customer information at various contact points, including in retail stores and when processing catalogue sales. Eventually, this ever-increasing amount of customer information went to data warehouses for storage, and the warehouses grew to several terabytes in size. But the information was often old when it was collected, and of only marginal use by the time companies' marketing departments could sort through and analyze it. These original analytics systems required a fair amount of technical expertise to operate.

Today, with the advent of the Internet and e-commerce, companies' analysis needs have changed, and a new class of CRM analytics software has emerged to meet these needs.

Companies now want to incorporate information from diverse sources, collected over separate time frames. Some departments might collect information on a weekly basis, while others may do so only monthly. Clickstream information has to be gathered in addition to data from call centers and brick-and-mortar stores. According to Bob Chatham, senior analyst at Forrester Research, Cambridge, Mass., the primary reason for the rise in CRM analytics is the growth in customer touch points and the trend toward customer self service.

The Internet is also speeding things up. Previous data warehouse and knowledge management tools took two to three years to develop, compared to four to 20 weeks for CRM analytics solutions, according to Vince Bowey, vice president of E.piphany, San Mateo, Calif., one of several CRM analytics vendors. Even after the data warehouse was operational, it could take four months or more to develop reports. By that time, market conditions had changed, Bowey says. CRM analytics tools, on the other hand, can provide some information in real time and complex, detailed reports within an hour.

The newer systems are also designed for the non-technical. They include wizards, intuitive interfaces, tool suites and even some intelligence to help marketing professionals with little technical expertise analyze increasingly complex customer information.

"Most of the previous systems were only for the very technical types, who don't talk to marketers. With this system, non-technical users can get answers to their questions right away," says Michael Fernandez, database manager for Chase Manhattan Bank, New York. Chase uses Digital Archeology's Discovery Suite for customer analytics.

Merger Mania

Several companies that provided the knowledge management and business intelligence tools of the past, such as IBM, NCR and Hyperion, are moving into the CRM analytics arena. There are several newer companies as well, including E.piphany, Digital Archeology, Customer Analytics and NetGenesis, to name a few.

Earlier this year, E.piphany bought Octane Software and RightPoint, enabling the company to combine real-time personalized offers and multi-channel sales, service and support. Other firms providing CRM analytics have also been aggressive in their acquisitions in an attempt to provide one-stop shopping solutions for their customers.

Most CRM analytics solutions are still evolving to the point where they can provide real-time data rather than batch processed information, according to Scott Nelson, vice president and research director for GartnerGroup, stamford, Conn. With the acquisitions, some of these firms can provide real-time data, which is becoming more critical as e-commerce continues to grow.

With real-time information, for example, a call center agent can immediately tailor an offer based on a customer's current preferences and purchase behavior. Such information also enables a call center agent to provide a higher level of service to a more valuable customer.

"Previously, there were two sides of a company--marketing and sales. Now they're blended. So analytics is no longer separated from taking action," Bowey says.

For example, automaker Nissan North America is using E.piphany's E.4 product to track all customer relationships. Visitors to the Nissan or Infiniti Web site can obtain all the information they want on the first visit. But the actual purchase of an automobile usually takes 120 days or more, according to Ted Ross, manager of customer loyalty and database marketing. So the company uses the E.piphany system to monitor clickstreams. On the second visit, the system will push out a query to ask if the consumer wants a brochure on the model the clickstream data shows he or she has been researching. On a later visit, the system will push out a similar query on pricing information.

The company can also analyze the information to alter its marketing, Bowie says. "If we discover that customers buying a certain product are single males, we know we're better off advertising in Gentleman's Quarterly rather than in Homes and Gardens."

New Guy on the Block

Since CRM analytics products are still evolving, new vendors will be entering the market as well.

One of the newest vendors is thinkAnalytics, Boston, which was expected to launch its thinkCRA CRM analytics product in June.

"Our product sits behind CRM solutions and provides extreme analytics," says Tim Jones, thinkAnalytics president and chief technical officer.

While traditional OLAP and other types of querying tools require the user to build categories (such as the 18 to 24 age group) then populate those categories, CRM analytics tools instead can define the information along "natural" categories rather than forced categories, according to Jones. For example, a company may discover from the use of CRM analytics that there are distinct preferences among the 18 to 30 (rather than 18 to 24) age group. So the company can target those customers differently.

"There are four essential pieces of information that you have to bring together to determine profitability--customer, loyalty, product value and marketing effectiveness," Jones says.

By bringing that information together, a company can determine not only who are the most profitable customers, but also which product might be the key to a profitable customer relationship, even if that product is not profitable by itself. Grocers have used a similar concept for years, selling turkeys below cost at Thanksgiving, for example, and making enough money on related food items to turn a profit for the entire sale.

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