Using CRM to Meet Internet Challenge

In the early 1980s, database marketing brought three key concepts to the marketing world:

* Individual, addressable customers are the central focus of marketing;

* Customer data can be collected, analyzed and then used to drive marketing;

* Customer management should be long-term oriented.

The intervening years have brought these ideas to reality in countless corporations, proving their durability and power. The Internet revolution, sweeping across all areas of business, further extends these ideas and poses its own particular business challenges.

Internet Database Marketing Capabilities

When database marketers use Internet technology, data need to flow via the Internet to and from the marketing database. Traditional marketing database systems receive data from operational systems using tapes or other media. Conversely, when they send data back to operational systems, they use physical media. The Internet makes it faster, cheaper and easier to have data flowing through electronic connections. This has several immediate implications:

* Marketing-database updates can be more frequent — many companies now look to do daily or real-time database updates;

* Auditing and other data integrity controls need to be redesigned for an environment with many relatively small updates;

* The technology platform must be an online, 24/7 relational database environment;

* Capturing Internet activity at Web sites tends to generate very large data volumes. The aggregate size of the marketing database can, therefore, expand substantially. Since everything related to e-commerce is relatively new, industry standards have yet to be established regarding how long Web site activity data should be retained.

Marketers access the data using browser technology. Queries are issued; records are examined, and reports are viewed using the standard, ubiquitous Internet browser tools. This enables marketers to interact with the databases from wherever they are and whenever they choose. There is an increased need for data security controls to ensure that only authorized access takes place.

Internet marketing, most notably e-mail campaigns, needs to be supported through effective software tools. During the past several years, a number of campaign management software systems have come to market filling the need to define and extract a file rapidly for a marketing campaign. The market leaders in this category have incorporated more Internet campaign-specific capabilities.

Internet Database Business Issues

An exciting and challenging set of business issues emerges once the Internet database marketing capabilities are in place. Many of the opportunities today are referred to by the term customer relationship management. CRM systems attempt to apply the basic database marketing ideas to each interaction with the customer:

* Each customer is related to individually, rather than by anonymous operational rules. Whenever possible, interactions are personalized and reference the customer’s prior business relationship. Customer service levels and approaches are appropriate for the individual customer.

* Database facts drive the customer interactions. Using the Internet’s rapid communications capacity and high-speed database technology, marketing databases support operations — e.g., ordering, not just marketing. Recommender systems built on extensive database analyses are often deployed to make immediate, customer-specific buying suggestions.

* Marketers recognize that long-term customer retention is critical to business success. The quality of the customer relationship and its ultimate value are shaped by each interaction. To maximize customer lifetime value, marketers must view each interaction not as a stand-alone event but as part of a long-term relationship.

What is particularly new in today’s CRM systems is the extent to which marketing database information and analytical inferences are woven into a company’s transactional activities.

The word Internet reflects the historical intention of providing a technology to link together computer networks. Quite literally, today’s Internet is well on its way to making most computer systems into one large network. One of the big marketing implications is that, to an ever greater extent, all data sources can be linked together.

A company’s transactional data can be linked to demographic data and other cooperative databases using common identifier numbers. This potentially improves segmentation and targeting as they make use of significantly more information. Through dynamic linkages among data sources, the freshness of all data sources is maximized, thereby enhancing their value. Dynamic linkage also reduces the operational costs of doing large-scale, periodic data overlays. Having a much wider array of data sources increases the importance of having sophisticated analytical and segmentation systems.

In many areas of information technology, companies are finding that using application service providers is economically more efficient than developing, updating and maintaining inhouse systems. The Internet sharply reduces the data communications costs associated with outsourcing systems. At the same time, the increasing sophistication and specialization of today’s applications are often most efficiently handled by specialized outsourcing vendors. For marketing applications, these general information technology trends will be strengthened by the leading outsourcing vendors’ ability to dynamically link demographic and cooperative data sources.

The advent of the commercial Internet has increased public concern about the use of personal information. Several legislative and legal actions in the past year have already addressed these concerns, but there are a number of important implications that database marketers must address:

* Database marketing systems must be engineered to keep track of data sources and data uses. Companies need to know where their data come from — to show that it is legally obtained and has integrity — and how each element is being used — to show security and compliance with permitted uses. For most companies, this requires significant systems re-engineering.

* Access to and involvement of knowledgeable, specialized legal services is essential. Credit marketers have had this requirement for some time, but now, it applies to all database marketers.

* Participation in an industry-based standards setting is in everyone's best interests. The Direct Marketing Association has been very active on this front and deserves support of all database marketers for its efforts.

The Internet has taken database marketing to new levels of success and sophistication. Database marketing’s customer-centric, data-driven, long-term oriented approach to marketing readily makes use of the Internet’s capabilities to move data rapidly among different systems and users. We can expect that full implementation of the CRM business philosophy, along with associated systems tools, will further extend database marketing's power and reach.

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