Proper Measurements Lead to Improved CRM
There is no single definition of CRM analysis, Gartner analyst Gareth Herschel told those attending the Gartner BI Summit in Chicago Tuesday. Instead, a company has to determine what measures drive customer satisfaction in the firm's specific business. "Consider whether improving operational processes will be more cost-effectively delivered by the implementation of new operational tools or by more-insightful use of the established tools," Herschel said.
Herschel recommended that firms identify the smallest number of performance metrics that explain the business level being measured. Though there's no formal guideline, most research suggests five to 12 metrics should be enough, with additional roll-up and drill-down metrics for different levels of the enterprise.
Organizations need to determine whether their measurements of success reflect the organization's true objectives or just the activities it performs to try to reach those objectives. Even in areas that companies would be expected to measure success, like marketing, these measurements are often lacking, according to Herschel. Though most marketing organizations recognize the need to measure campaigns to determine ROI and to justify the marketing department's budget, many don't measure campaigns because data collection processes are inadequate or they're not sure what to measure. "A phased strategy for developing customer value insight should identify what analysis, what new insights and what incremental business benefit will be captured at each stage," Herschel said.
For CRM analytics, Herschel recommended measuring how the customer experience is driven across the enterprise. Companies should mine data of all customer experiences rather than using the more common customer surveys to determine customer satisfaction. "Identify the aspect of analytics that is likely to drive competitive differentiation," Herschel said. "It may be tight integration with the associated operational system, or it may be integration with external data sources or a proprietary analytical capability, such as a particular data-mining algorithm or performance management framework."
He recommended combining customer satisfaction data with operational data. If the information is used correctly, there can be significant benefits, Herchel said. He pointed to the example of British Telecom, which spent more than $200 million on CRM systems earlier in the decade and enjoyed savings of more than $300 million--as well as a 10 percent reduction in customer dissatisfaction, a 22 percent decrease in small business dissatisfaction and a 40 percent increase in customers that would recommend BT to others. Standalone customer satisfaction survey data provides insight, but doesn't always identify the root cause of a failure," Herschel said. "BT Retail's capability to compare operational data with customer surveys ensured that customer feedback could be taken to a more action-oriented level."
However, in looking for systems to measure different metrics, companies will have to be resigned to the fact that there is no one-stop shop solution. Herschel cautioned that no single vendor hits the sweet spot of providing service analytics, sales analytics, customer value analytics, Web analytics, and marketing performance management. "The vendor market is fragmented and will remain so," Herschel said. "The ability of any vendor to provide all forms of analysis, even at a basic level, will prohibit any possibility for the IT organization to establish a single standard. Instead, enterprises will focus on delivering a portfolio of analytical tools, based wherever possible on established standards."
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