CRM Predictive Analytics: From Buzzwords to Business Value

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1 CRM Predictive Analytics: From Buzzwords to Business Value Liz Roche Vice President & Director CRM Infusion Program

2 Customer Marketing Backlash Reaching Epic Proportions Technology, legislation and 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? Business Scenario Disenfranchised customers impact brand equity; apply EMM as part of a CRM strategy to enable better, not more, marketing 2

3 Many CRM Systems Are Live Few Are Raging Successes CRM ROI based on applying 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 Technology Scenario Predictive analytics moves into the mainstream in support of CRM marketing initiatives 3

4 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 making This is a sample for general purposes A Journey of a thousand miles begins with a single step. Ancient Chinese Proverb 4

5 Understanding the CRM Business System The CRM End Game: Customer Lifecycle Management Issue 1 Understanding the CRM end-game Pinpointing where analytics (predictive or otherwise) fit Exploring marketing s role in post-modern CRM Service Customer-Related Business Processes Channels & POIs Sales Mktg. Customer Life Cycle Service Engage Cust. Pattern Fulfill Transact CRM Technology Ecosystem Collaborative Analytical Offer Operational CRM is not an IT project it is an iterative and continual transformation of people, process, and technology 5

6 Back Office Front Office Mobile Office Issue 1 Pinpointing Where Analytics Fit in the CRM Technology Ecosystem ERP Order Mgmt. Service Automation Operational CRM 2 3 Supply Chain Mgmt. Order Prom. Marketing Automation Field Service Legacy Systems Sales Automation Mobile Sales (prod cfg) Closed-Loop Processing (EAI Toolkits, Embedded/Mobile Agents) Analytical CRM Customer Activity Data Mart Vertical Apps Category Mgmt. Data Warehouse Customer Data Mart Marketing Automation Campaign Mgmt. Product Data Mart Customer Interaction Voice (IVR, ACD) Conferencing Web Conf Resp. Mgmt. Web Storefront Direct Interaction Collaborative CRM CRM analytics are an integral part of the technology environment Source: META Group, December

7 Actionable Actual Additive Cultivating the CRM Analytics Tree of Knowledge Issue 1 Derived knowledge Analytic models and 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 Blend POI information with external data to yield consumable/actionable knowledge SCORE PROFILE ASSOCIATE POSTAL PREDICT ENGAGE TRANSACT FULFILL SERVICE SEGMENT INDUSTRY X -OGRAPHICS 7

8 Leveraging Analytics at Customer Life-Cycle Intersections Issue 1 Point-of-Intersection Analytic Objectives Marketing Sales Service Engage Transact Transact Fulfill Campaign Effectiveness Visitor Experience Predictive Modeling Backlog Reduction Pipeline Improvement Qualification Interaction Performance Cost of Sales Support Planning Reputation Imprvmt. Support Plan Implementation Delivery Performance Fulfill Service Consumption Maximization Production Imprvmt. A/R Closure Distribution Effectiveness Fulfillment Perf. Response Perf. Service Engage Churn Reduction Complementary Offering Awareness Usage Improvement Customer Profiling Satisfaction Improvement Customer Flagging Customer life-cycle intersection analytics is not just for marketing it is integral to process performance 8

9 Issue 1 Integrating Analytic Solutions Balanced-scorecard analytics focus on strategic macroanalytic decision cycles Realtime recommendation analytics focus on tactical microanalytic decision cycles Be cautious of vendor solutions that promote disconnected analytical architectures Quarterly Monthly Weekly Daily Hourly Continuously Information Velocity Mitosis Strategic Macroanalytics Decision Disconnect Tactical Microanalytics Balance information velocity against decision cycles unite decoupled analytic architectures DW ODS 9

10 Applying Predictive Model-based Analytics for Customer Pattern Discovery Service Fulfill Transact Engage Sales: Lead management Marketing: Campaigns Service:Cross-sell/up-sell Sales: Order taking Marketing: Bundle promo Service: Order confirms Sales: Sat. monitoring Marketing: Promotions Service: Order satisfaction Sales: Account management Marketing: Cross-sell/up-sell Service: Issue resolution Customer Pattern Time Over Money E T F S E T F S Direct Mail E T F S Customer Interaction Center E T F S Electronic Billing & Confirms Financial Advisor Issue 2 Given outbound constraints, every interaction must be considered a marketing opportunity 10

11 Segmentation is About Clustering Customers And Developing Treatments Begin to identify distinct patterns of buying behavior beyond simple demographics Group customers based on common buying patterns, preferences, value, etc. Focus on most profitable customer segments Tracking Customer Behavior Issue 2 Recognize exit barriers will be different for different types of customers 11

12 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 customer s ETFS preference, technology affinity, and lifetime value and scorecard metrics 12

13 Understanding Data Needs for Predictive Analytics On-Site Data Off-Site Data Data CIC Data Aggregate & Preprocess Collect Profile Privacy Policies Model Segmentation Data Demographic Data Psychographic Data Transaction Data Adapt & Realign Reporting Apps Issue 2 Webhouse Warehouse Store Categorize Analyze Targeted Content E-Commerce Apps Marketing Apps Line-of-Business Data, Customer Interaction Center Data, Third-Party Data Providers Service Apps Well-managed profile data adds to customer intelligence; mismanagement leads to alienation 13

14 Stratifying Customer Behavior Modeling Customer Acquisition & Growth Model CompetitorCompany High High Customer Retention Model Upgrade Keep Issue 2 Future Loyalty ROCR Low Low Let Go Actively Retain Low High Future Profit Based on Past Based on Future Enterprise CRM applications that do not continuously stratify customer behavior are deadend streets 14

15 Executing Campaigns and Real Time Decision Making Issue 3 Defining realtime Defining the Enterprise Marketing Management (EMM) technology portfolio Handicapping the vendor landscape 15

16 Issue 3 Defining Real-Time Business Process Cycle Clock REACT TRANSACT INTERACT Contextual Arbitrary Real-time a relative degree of of latency that that ensures the the delivery or or availability of of fresh fresh data data representing a current business state state Near Near Real-Time a degree of of latency that that ensures data data delivery/availability of of data data fresh enough (or (or current within an an established degree of of certainty ) for for the the individual or or process using using it. it. Enterprises should define real-time relative to business event integrity, not absolute time 16

17 Creating the Enterprise Marketing Management Technology Portfolio Issue 3 If customer interaction is 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 organization s marketing efforts 17

18 Defining Enterprise Marketing Portfolio Management (EMM) Issue 2 EMM is a component of 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 Technology Operations Management Process Campaign Management People Lead Management Customer Centricity 18