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SUGI 29

Analytics

Paper 004-29

CRM Predictive Analytics: From Buzzwords to Business Value

Liz Roche Vice President & Director CRM Infusion Program liz.roche@metagroup.com

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Analytics

Customer Marketing Backlash Reaching Epic Proportions


? Technology, legislation and

Business Scenario

societal norms all indicate greater marketing sensitivity ? Pressure on outbound marketing to transform from intrusive and privacyinsensitive to targeted at the needs of a particular individual or segment ? Predictive analytics what are they?

Disenfranchised customers impact brand equity; apply EMM as part of a CRM strategy to enable better, not more, marketing
2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Analytics

Many CRM Systems Are Live Few Are Raging Successes


? CRM ROI based on applying

Technology Scenario

the right CRM treatment to the appropriate customer segment ? Marketing is part of CRM ? Delivering on these returns requires ? creation of value-based customer segments ? application of predictive models in real-time to optimize segments, offers, campaigns

Predictive analytics moves into the mainstream in support of CRM marketing initiatives
2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Analytics

Critical Issues
? Understanding the CRM

business system& where analytics (predictive or otherwise) fit ? Applying predictive model-based analytics to look for patterns ? Executing campaigns and real time decision Graphic Optional This is a sample for making general purposes A Journey of a thousand miles begins with a single step. Ancient Chinese Proverb
2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Analytics

Issue 1

Understanding the CRM Business System


The CRM End Game: Customer Lifecycle Management

? Understanding the

Customer Life Cycle Engage Service Cust. Pattern Fulfill Customer-Related Business Processes Channels & POIs Sales Mktg. Offer Service Operational CRM Technology Ecosystem Collaborative Analytical Transact

CRM end-game

? Pinpointing where

analytics (predictive or otherwise) fit


? Exploring

marketings role in post-modern CRM

CRM is not an IT project it is an iterative and continual transformation of people, process, and technology
2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Analytics

Pinpointing Where Analytics Fit in the CRM Technology Ecosystem


Operational CRM
3
Closed-Loop Processing (EAI Toolkits, Embedded/Mobile Agents)

Issue 1

Analytical CRM
3
Data Warehouse

2
Back Office
ERP

3
Order Mgmt.

Supply Chain Mgmt. Order Prom.

1-4

Legacy Systems

Front Office

4
Service Automation

1
Marketing Automation

1
Sales Automation

Customer Activity Data Mart

Customer Data Mart

Product Data Mart

1
Vertical Apps Category Mgmt. Marketing Automation Campaign Mgmt.

Mobile Office

4
Field Service

4
Mobile Sales (prod cfg)

Customer Interaction

Voice (IVR, ACD)

Conferencing Web Conf

E-Mail Resp. Mgmt.

Web Storefront

Direct Interaction

Collaborative CRM

Source: META Group, December 2003

CRM analytics are an integral part of the technology environment


2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Analytics

Cultivating the CRM Analytics Tree of Knowledge


? Derived knowledge ? Analytic models and PREDICT SCORE

Issue 1

Actionable ? Actual ? Additive

business rules are applied to information ? Feeds business processes to maximize business performance ? Captured information ? Represents activities and outcomes of points of interaction ? Chewing on bark? ? External data ? Rounds out customer information ? Adds flavor & richness to the customer soup

SEGMENT PROFILE ENGAGE TRANSACT FULFILL SERVICE

ASSOCIATE POSTAL

INDUSTRY

X-OGRAPHICS

Blend POI information with external data to yield consumable/actionable knowledge


2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Analytics

Leveraging Analytics at Customer Life-Cycle Intersections


Marketing
Engage Engage Transact Transact
Campaign Effectiveness Visitor Experience Predictive Modeling Backlog Reduction Consumption Maximization Production Imprvmt.

Issue 1

Point-of-Intersection Analytic Objectives Sales Service

Pipeline Improvement Support Planning Reputation Imprvmt. Qualification Interaction Performance Cost of Sales A/R Closure Distribution Effectiveness Support Plan Implementation Delivery Performance Fulfillment Perf. Response Perf.

Transact Transact

Fulfill Fulfill

Fulfill Fulfill

Service Service

Service Service

Engage Engage

Churn Reduction Usage Improvement Complementary Customer Profiling Offering Awareness

Satisfaction Improvement Customer Flagging

Customer life-cycle intersection analytics is not just for marketing it is integral to process performance
2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Analytics

Issue 1

Integrating Analytic Solutions


? Balanced-scorecard

analytics focus on Strategic Macroanalytics strategic macroanalytic Quarterly Monthly decision cycles DW Weekly ? Realtime recommendation Decision Disconnect Daily ODS analytics focus on tactical Hourly microanalytic decision Continuously cycles Tactical Microanalytics ? Be cautious of vendor 1999 2000 2003 2005 solutions that promote disconnected analytical architectures Balance information velocity against decision cycles unite decoupled analytic architectures
2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

Information Velocity Mitosis

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Analytics

Issue 2

Applying Predictive Model-based Analytics for Customer Pattern Discovery


Customer Pattern Time Over Money Engage
? Sales: Lead management ? Marketing: Campaigns ? Service: Cross-sell/up-sell ? Sales: Order taking ? Marketing: Bundle promo ? Service: Order confirms

Direct Mail Customer Interaction Center

Transact

? Sales: Sat. monitoring ? Marketing: Promotions ? Service: Order satisfaction

Fulfill

Electronic Billing & Confirms

Service

? Sales: Account management ? Marketing: Cross-sell/up-sell ? Service: Issue resolution

Financial Advisor

Given outbound constraints, every interaction must be considered a marketing opportunity


2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Segmentation is About Clustering Customers And Developing Treatments


? Begin to identify distinct

Issue 2

Tracking Customer Behavior

patterns of buying behavior beyond simple demographics ? Group customers based on common buying patterns, preferences, value, etc. ? Focus on most profitable customer segments

Recognize exit barriers will be different for different types of customers


2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Analytics

Issue 2

The CRM Formula: Customer Patterns


? Customer Pattern = Segment + Treatment ? Segment ? Segment = explicit + inferred information about customers (e.g., grouping similar characteristics) ? Input comes from demographics, psychographics, and other things needed to group by common characteristics ? Treatment ? A treatment is the path through ETFS that an organization chooses to enable for its customers ? Input comes from a customers ETFS preference, technology affinity, and lifetime value and scorecard metrics
2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Analytics

Understanding Data Needs for Predictive Analytics


On-Site Data Off-Site Data E-Mail Data CIC Data

Issue 2

Profile
Collect Model

Segmentation Data Demographic Data Psychographic Data Transaction Data

Aggregate & Preprocess

Privacy Policies

Adapt & Realign


Reporting Apps

Webhouse Warehouse

Targeted Content

Store

Analyze

E-Commerce Apps Marketing Apps Service Apps

Categorize

Line -of-Business Data, Customer Interaction Center Data, Third-Party Data Providers

Well-managed profile data adds to customer intelligence; mismanagement leads to alienation


2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Analytics

Issue 2

Stratifying Customer Behavior Modeling


Customer Acquisition & Growth Model

High
ROCR

Future Loyalty Low High

Competitor Company

Customer Retention Model

Upgrade

Keep

Let Go

Actively Retain

Low

Low

High Future Profit

Based on Past

Based on Future

Enterprise CRM applications that do not continuously stratify customer behavior are deadend streets
2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Executing Campaigns and Real Time Decision Making


? Defining realtime ? Defining the Enterprise Marketing

Issue 3

Management (EMM) technology portfolio ? Handicapping the vendor landscape

2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Analytics

Issue 3

Defining Real-Time
Business Process Cycle Clock

REACT TRANSACT INTERACT

Contextual
Real-time Real-time

Arbitrary

a relative degree of latency that ensures the delivery or a relative degree of latency that ensures the delivery or availability of fresh data representing a current business availability of fresh data representing a current business state state

Near Real-Time a degree of latency that ensures data delivery/availability Near Real-Time a degree of latency that ensures data delivery/availability of data fresh enough (or current within an established of data fresh enough (or current within an established degree of certainty) for the individual or process using it. degree of certainty) for the individual or process using it.

Enterprises should define real-time relative to business event integrity, not absolute time
2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Creating the Enterprise Marketing Management Technology Portfolio


? If customer interaction is

Issue 3

not exploited in righttime, the opportunity likely lost


? Right-time does not

necessarily equal Realtime ? Dynamism is key ? EMM technology portfolio ensures right approach ? EMM processes are

involved in planning, executing, monitoring, and managing an organizations marketing efforts


2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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Analytics

Defining Enterprise Marketing Portfolio Management (EMM)


? EMM is a component of

Issue 2

the CRM technology ecosystem, with a footprint in operational, analytical, and collaborative CRM. ? Campaign Mgmt -- right offer to be made to the right customer at the right time ? Operations Mgmt automates workflow, resources, analytics of marketing department ? Lead Mgmt - qualifying leads; converting to opportunities

Process
Customer Centricity

Technology

Campaign Management

Operations Management

Lead Management

People

2003 META Group, Inc., Stamford, CT-USA, +1 (203) 973-6700, metagroup.com

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