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Increase Profitability Through CRM

Decades ago, department store magnate John Wanamaker made the oft-echoed observation that half the money he spent on advertising was wasted, but he didn’t know which half. That can be said of many business initiatives, but with modern parallel analytical databases and CRM, it is becoming possible to know which half is the winner and which the loser.

Effective customer relationship management is driven by an analytical or business intelligence process that must be fed with internal, operational and, increasingly, external data sources. To be enterprise enabling, CRM must cut across management functions and operating activities to resolve or reduce problems such as high-value-customer churn. Poor integration of CRM strategies, policies, architecture, databases and technology standards or use of existing operational platforms can lead to inconsistent results.

CRM solutions must bring a broad range of analysis and modeling capability based on events or rules that drive the business. By saving and reusing these analysis steps as well as their results, managers gain understanding of actions already taken and those to be taken. Additionally, CRM must have a cross-channel view to understand the whole customer.

The criteria that differentiate companies lagging from those leading in CRM are:

· The ability to manage all aspects of a customer relationship.

· Regulating frequency and quantity of contacts and predetermining quality.

· Adding privacy features to the integrated customer database and managing permission.

· Personalizing of-ferings and messaging based on customer transactions, interactions, advice, surveys, queries and preferences.

To achieve these organizations must:

· Modify rules to optimize each customer communications stream.

· Integrate and manage across all channels.

· Capture learning based on all interactions and associated analytical models.

· Build two-way interactions to sell, service or learn the customer’s needs.

Instead of one-size-fits-all promotions and customer approaches, CRM allows for personalization to dramatically build customer loyalty, achieve operational and servicing goals and gain a sustainable competitive advantage.

Integrated capabilities. Companies gain the strategic and economic benefits associated with CRM by integrating their organizational capabilities into the added intelligence from CRM technologies to either confirm or change decision-making criteria.

One insurance company has documented a valid relationship between customers who purchased insurance polices and employment length. Another financial institution found that its most profitable customers were those with more than five financial products. Airlines are now correlating all mileage data to the financial data to identify their most profitable customers, rather than those with the most mileage.

Massively parallel processing and data warehousing can bring customer intimacy, operational efficiency and product superiority to new levels. Early investors in the financial services industry found swift ROIs, often much higher than for traditional technology investments. Most recouped their investments in one to four years, but the real issue was not the break-even point but transforming their competitive approach to their markets.

Once accomplished, these transformations could yield ROIs 50 times greater than normal ROI, on an entirely different order of magnitude from such traditional ways of building revenue as introducing new products or branches.

Gains were registered most quickly in sales and marketing, with profitability, debt management, distribution and risk management close behind. The common factor was the speed with which organizations were able to react to changes in the market. Time and again, superior information let them identify a market, enter and take market share — all before their competitors had understood what was happening.

Speed is of the essence. Windows of opportunity open and close all the time. All too often, firms see one, but by the time they’ve organized an approach to it, conditions have changed and expensive campaigns are launched without success. CRM information engines permit companies to recognize and move instantly to exploit changes in market conditions.

And because historical information offers a guide to future behavior, companies can build a high degree of prediction into their operations by capturing marketing conditions and people’s behavior and then correlating them to actions under specified conditions.

Detailed knowledge of each customer’s past behavior can be quickly turned into intelligence about how they will react to the competing offer. Armed with that knowledge, counteroffers tailored to the needs of each segment are presented.

The lesson of the early experiences of sophisticated CRM operations is simple: Those who don’t master the art of detailed information will be mastered by those who do.

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