BI in CRM Customer Relations Management

BI CRM Objectives Measure and Manage customer lifetime value Key to sustain competitive marketplace value Need robust/integrated technology Employees to manage customer relations Senior management buy in essential Could form a BICC (communications center) Process solutions to enable in depth, rapid customer data gathering and analysis Exploit operational competencies to manage and grow customer value (historical, anticipated and network value) Integrate these values to create a quantifiable equation and understand components that drive CRM

Measure and Manage customer lifetime value

Key to sustain competitive marketplace value

Need robust/integrated technology

Employees to manage customer relations

Senior management buy in essential

Could form a BICC (communications center)

Process solutions to enable in depth, rapid customer data gathering and analysis

Exploit operational competencies to manage and grow customer value (historical, anticipated and network value)

Integrate these values to create a quantifiable equation and understand components that drive CRM

BI CRM Implications Old way : Manual searches and data entry Finding documents only by words occurring in the documents New way : Search web based on meanings and context rather than specific words Semantic web Text/data mining software can store large amounts of people/event info in TDWI facilities. Similar capacity to a research librarian or intel analyst Large data sets facilitate social network analysis or counter intel Stepping stone to communication machine to machine, symbiosis, then singularity

Old way : Manual searches and data entry

Finding documents only by words occurring in the documents

New way : Search web based on meanings and context rather than specific words

Semantic web

Text/data mining software can store large amounts of people/event info in TDWI facilities.

Similar capacity to a research librarian or intel analyst

Large data sets facilitate social network analysis or counter intel

Stepping stone to communication machine to machine, symbiosis, then singularity

Key to customer spending Measure lifecycle of long life customers Future spending evolution Improve relationship marketing decision making Marketing point of view Focus on new customer’s increasing /decreasing future spending from initial purchase info Taxonomical granularity Bayesian network classifiers to classify customer value and targeting in database Probability and statistic pattern learning algorithms AI/BI interface to maximize data collected

Measure lifecycle of long life customers

Future spending evolution

Improve relationship marketing decision making

Marketing point of view

Focus on new customer’s increasing /decreasing future spending from initial purchase info

Taxonomical granularity

Bayesian network classifiers to classify customer value and targeting in database

Probability and statistic pattern learning algorithms

AI/BI interface to maximize data collected

Customer Lifecycle AI allows for much more accurate BI in identifying the lifecycle of long life customers

AI allows for much more accurate BI in identifying the lifecycle of long life customers

AI/BI vs Customer Lifetime Value From a 2006 Oracle white paper Company looks to balance sheets Often ignore soft assets (customers) Most valuable asset Company’s culture vs customer relations unique, long term= sustainable advantage in the marketplace Most customers are poorly managed Key to acquiring and cultivating long term highly profitable customer relationships is: Understanding customer lifetime value

From a 2006 Oracle white paper

Company looks to balance sheets

Often ignore soft assets (customers)

Most valuable asset

Company’s culture vs customer relations

unique, long term= sustainable advantage in the marketplace

Most customers are poorly managed

Key to acquiring and cultivating long term highly profitable customer relationships is:

Understanding customer lifetime value

Understanding this relationship Quantifies and predicts profitability for customer segments, business units, products and services Measure and influence factors that affect customer value over time Relative costs and trade-offs to acquire, retain and grow specific customer segments Develop actionable programs to maximize profitability

Quantifies and predicts profitability for customer segments, business units, products and services

Measure and influence factors that affect customer value over time

Relative costs and trade-offs to acquire, retain and grow specific customer segments

Develop actionable programs to maximize profitability

Value of Customer Asset Value of individual transactions Frequency/recency of purchases Cost of service Need to generate rich database of customer needs and behavior Invest in BI SaaS, OSS, TWDI, cloud computing, text/data mining etc..

Value of individual transactions

Frequency/recency of purchases

Cost of service

Need to generate rich database of customer needs and behavior

Invest in BI SaaS, OSS, TWDI, cloud computing, text/data mining etc..

Cost of a Customer Hardest most expensive sale is first one Initial cost of customer and profit generated vs long term potential

Hardest most expensive sale is first one

Initial cost of customer and profit generated vs long term potential

2 Key Components 1) Transaction Value (from historical data) Can be generated from similarly segmented customer groups 2) Network value- customer referals

1) Transaction Value (from historical data)

Can be generated from similarly segmented customer groups

2) Network value- customer referals

Lifetime Value Equation

Transaction Value Historical customer behavior: most important information Understanding how the customer interacts with channels and consumes goods and services TODAY is key to FUTURE activity

Historical customer behavior: most important information

Understanding how the customer interacts with channels and consumes goods and services TODAY is key to FUTURE activity

3 Key Variables Frequency/recency Transaction size Customer churn rate (loss/attrition is greatest cost to companies in lost rev and to reacquire)

Frequency/recency

Transaction size

Customer churn rate (loss/attrition is greatest cost to companies in lost rev and to reacquire)

Evolving Habits Customers mature, buying habits change Increase in value if hey are measured and managed appropriately Tremendous cross selling/upselling potential Can reduce churn rate by satisfaction

Customers mature, buying habits change

Increase in value if hey are measured and managed appropriately

Tremendous cross selling/upselling potential

Can reduce churn rate by satisfaction

Network Value Large customers can provide a feed or avenue to tap into their customers

Large customers can provide a feed or avenue to tap into their customers

Acquisition/Retention Costs Acquisition costs= tot acquisition expense divided by tot new customers Vary by segment Marketing cost, material/collateral, sales, channel and resource, discount and rebate Failure to manage will lead to rapid failure Need AI/BI to manage effectively (Pets.com)

Acquisition costs= tot acquisition expense divided by tot new customers

Vary by segment

Marketing cost, material/collateral, sales, channel and resource, discount and rebate

Failure to manage will lead to rapid failure

Need AI/BI to manage effectively

(Pets.com)

Aligning Operations Build customer centric operations Maximize customer lifetime value Organization and operations Erode profits with poor distributions or product development w/o customer in mind Data mining would provide info to do this right

Build customer centric operations

Maximize customer lifetime value

Organization and operations

Erode profits with poor distributions or product development w/o customer in mind

Data mining would provide info to do this right

3 Elements of Success Integrate channel systems Marketing and incentive programs Product design strategies

Integrate channel systems

Marketing and incentive programs

Product design strategies

Integrating Channels Balance customer preferences with costs of service Coordinate multiple channels in the customer interaction process Call center integration to improve sales and service Roll of each channel to be clearly defined and measured and managed Value of each subsequent customer interaction will increase to both parties

Balance customer preferences with costs of service

Coordinate multiple channels in the customer interaction process

Call center integration to improve sales and service

Roll of each channel to be clearly defined and measured and managed

Value of each subsequent customer interaction will increase to both parties

Multichannel strategy works! JC Penny proved it. 1999 internet shoppers spent $121/yr Retail only $194/yr Catalog only $242/yr Integrated with all three, over $1000/yr

JC Penny proved it.

1999 internet shoppers spent $121/yr

Retail only $194/yr

Catalog only $242/yr

Integrated with all three, over $1000/yr

JC PENNY

JC Penny results By integrating channel operations to share customer information with all departments, store and catalog profits soared 83% in the third quarter 2003 year over year Has been key to JC Penny’s continued success

By integrating channel operations to share customer information with all departments, store and catalog profits soared 83% in the third quarter 2003 year over year

Has been key to JC Penny’s continued success

Customer incentive programs DRIVES REVENUE Invest heavily in marketing efforts (incentives, branding, discounts) Can be a significant profit drain When armed with in depth, reliable BI on revenue per customer, judicious, targeted use can increase profit per customer Create tiered customer investment programs to match current and potential return generated by the customer

DRIVES REVENUE

Invest heavily in marketing efforts (incentives, branding, discounts)

Can be a significant profit drain

When armed with in depth, reliable BI on revenue per customer, judicious, targeted use can increase profit per customer

Create tiered customer investment programs to match current and potential return generated by the customer

Product Design Strategies Meet needs of customers Distribution channel system Dell computer customization UPS/Dell repair facility at SDF Levi Strauss individual design Engenders customer loyalty

Meet needs of customers

Distribution channel system

Dell computer customization

UPS/Dell repair facility at SDF

Levi Strauss individual design

Engenders customer loyalty

Role of Technology Key factor to measure/manage lifetime value Captures and stores customer interactions across all company touchpoints Establishes more insightful customer segmentation schemes Facilitates a more effective dialogue and experience for each relationship

Key factor to measure/manage lifetime value

Captures and stores customer interactions across all company touchpoints

Establishes more insightful customer segmentation schemes

Facilitates a more effective dialogue and experience for each relationship

Tech Role Con’t CRM Tech facilitates gathering and analysis for profiling and planning (AI/BI interface) This is done two ways: 1) Resources that interact with customers gather important customer transaction, preference and profile data through data capture fields and processes 2) Analytical engines such as pattern learning algorithms and probability and statistics formulas (AI), segment and identify and analyze trends, customer behavior and preferences Use to upsell/cross sell, better serve, profit Meet customer needs

CRM Tech facilitates gathering and analysis for profiling and planning (AI/BI interface)

This is done two ways:

1) Resources that interact with customers gather important customer transaction, preference and profile data through data capture fields and processes

2) Analytical engines such as pattern learning algorithms and probability and statistics formulas (AI), segment and identify and analyze trends, customer behavior and preferences

Use to upsell/cross sell, better serve, profit

Meet customer needs

CRM Solution Each channel has a defined roll All channels are seamlessly integrated Can measure and manage all channel resources based on fact-based real time reporting

Each channel has a defined roll

All channels are seamlessly integrated

Can measure and manage all channel resources based on fact-based real time reporting

Customer Management Extract true value from customer Must build process and culture to continuously monitor and manage this critical success factor FedEx’s focus

Extract true value from customer

Must build process and culture to continuously monitor and manage this critical success factor

FedEx’s focus

4 groups of customers Stable customers= very high value Growing shippers= high value 6 month elapsed shipping=medium Seasonal=low value

Stable customers= very high value

Growing shippers= high value

6 month elapsed shipping=medium

Seasonal=low value

Stable Customers 3 times the lifetime value of average customer Marketing initiatives to retain this segment Adopt unique marketing techniques for each segment to increase efficiency and effectiveness

3 times the lifetime value of average customer

Marketing initiatives to retain this segment

Adopt unique marketing techniques for each segment to increase efficiency and effectiveness

Senior Management Must have buy in from very top Mandate to monitor customer value Build customer centric culture Management, decision making and business strategy rigorously supported by fact based analysis Use clear definitions for business, customer and product strategy Use processes to facilitate customer management through related metrics (retain customers, customer acquisition investments)

Must have buy in from very top

Mandate to monitor customer value

Build customer centric culture

Management, decision making and business strategy rigorously supported by fact based analysis

Use clear definitions for business, customer and product strategy

Use processes to facilitate customer management through related metrics (retain customers, customer acquisition investments)

(Conclusion) CRM BI Measure and Manage customer lifetime value Key to sustain competitive marketplace value Need robust/integrated technology Employees to manage customer relations Senior management buy in essential Could form a BICC (communications center) Process solutions to enable in depth, rapid customer data gathering and analysis Exploit operational competencies to manage and grow customer value (historical, anticipated and network value) Integrate these values to create a quantifiable equation and understand components that drive CRM

Measure and Manage customer lifetime value

Key to sustain competitive marketplace value

Need robust/integrated technology

Employees to manage customer relations

Senior management buy in essential

Could form a BICC (communications center)

Process solutions to enable in depth, rapid customer data gathering and analysis

Exploit operational competencies to manage and grow customer value (historical, anticipated and network value)

Integrate these values to create a quantifiable equation and understand components that drive CRM