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Increasing the Value of CRM
Attendees of the NCR Teradata user conference got the inside scoop on how British Airways and others are integrating data to streamline costs.
For the rest of the December 2002 issue of CRM magazine please click here
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At the recent NCR Teradata user conference in Las Vegas, all the buzz was around the benefits of data integration. Teradata customer British Airways, one of many companies integrating its disparate data sources in a single warehouse, presented it success story--of eliminating thousands of dollars of cost for maintaining separate data warehouses and data marts--to an attentive crowd. The airline completed the first stage of the integration effort, which started in July 2001, in April 2002. The entire project is expected to take two to three years, according to Robert Thorne, head of customer information for eBA, the airline's online division. "The analysis to support business change is demonstrably easier from a single warehouse," Thorne said during the presentation. Marketing based on a broad set of data provides the airline with a lower cost of sales, and quicker reaction to changed priorities. Before this initiative, for example, when marketing, sales, and other departments had disconnected warehouses, British Airways had a single initial listed price for seats, based on expected bookings. A prospective passenger could receive one quote two weeks before a flight. If bookings didn't keep up with expectations, he could get a lower price a week later, and a still lower price eight days later, and so on. If bookings tracked as expected, there was no discount. That pricing scheme hurt not only the airline's revenues, it also confused customers. Now, using the single, integrated warehouse, with historical trends for different flights, the airline offers different pricing for different flights, without the daily price fluctuations of the earlier system. Although there are CRM benefits from an integrated warehouse, there are also challenges in getting the full value out of the investment, Thorne cautioned. Older data warehouses need to be decommissioned, otherwise users will continue to access the older, familiar warehouse, rather than the new, integrated one. The continued existence of old databases will also lead to continued duplication of data, limiting cost-savings.
British Airway's experience is a solid example of a consolidation trend that many companies are following as they attempt to get more value out of CRM efforts, according to experts who spoke at the NCR Teradata conference. The airline used the CRM information to drive changes in the way the company operates, however most companies don't do that, said Martha Rogers, a partner with consultancy Peppers & Rogers, in Norwalk, CT. Although most companies collect data, and perhaps use it to offer targeted discounts, etc., they don't usually use it to change how they run their business. Another problem, Rogers said, is that many companies make decisions based on only a small amount of data from a customer who shops with them and with competitors. "A lot of companies measure only what it is easy for them to measure," Rogers said. For example, a consumer may have a checking account with one bank, but mortgage, credit card, trust, and other accounts with other financial institutions. By treating him like a "small" customer, the bank could be losing potential revenue. Other companies may have the necessary data, but have yet to integrate the data warehouse systems, said Jill Dyche, a partner with Baseline Consulting Group, in Sherman Oaks, CA. In the bank example, the customer might have all of the accounts at one financial institution, but different departments wouldn't know. So a teller could refuse to waive a fee of a low-value checking customer, without realizing that he's a high-value customer in other areas of the bank. "Data analysis is not CRM," Dyche said. "Companies need to know how to treat customers and how to differentiate treatment." Some companies, however, are successfully integrating data from different areas, said Dyche, who added that CRM failure rates are declining. In fact, many companies are succeeding by treating customers differently based on the channel they use (call center, Web, etc.), according to Dyche. Dyche expects enterprise resource-planning vendors like SAP to become bigger players in the CRM market. She also expects companies to move to a best-of-breed mentality, using one vendor for the data warehouse and others for specific CRM applications. "The honeymoon is over with CRM," Rogers said. "It's not that the technology has failed--where there have been successes they've been spectacular. Companies need to use the metrics to drive the decisions that they make."
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