Customer relationship management systems data warehouses and data mining

The increased sophistication of computer software and hardware means that managers in even the smallest companies can have reasonably cheap access to high-powered and technical means of managing information generated by the company. An increasingly important area has been in the management of information relating to customer contact so as to improve the relationship between an organization and its customers. This is known as customer relationship management (CRM).

CRM aims to produce a single view of the customer across all potential touchpoints. For example, a car manufacturer may have been contacted by a prospective customer through its website, its call centre and its dealership network. The ability to recognize the reality of customer behaviour is crucial to the successful development and deepening of the relationship between the customer and the organization. If a customer has made an enquiry online they may reasonably expect an organization's retail branches to know this and to recognize the fact.

CRM systems implementation has been one of the major growth areas in the consulting world. Companies have invested huge sums of money in aligning the diverse sources of information and information systems within organizations. For example, General Motors recently was reported to have invested US $1 billion in CRM systems, to manage relationships with its customers more effectively and more efficiently. It is estimated that General Motors removed US $1 billion of costs from its businesses.

In its broader application CRM works to manage customer contacts and the experience that a customer enjoys with the organization.

There are many suppliers of CRM systems and they range from the highly expensive to the relatively inexpensive. Leading players in this market include Oracle, SAP and Siebel. Systems will vary according to the complexity of the task they are designed to manage. A company with multinational operations and multiple product lines and customer groups will need a more complex and generally more expensive system.

A major issue for companies lies in turning the vast amounts of data they hold on their marketplace into actionable intelligence. Data-rich organizations should enjoy a competitive advantage, but in reality this is not always the case. Tesco is an example of a company that has access to a vast warehouse of data about its customers and recently it has made significant strides in its marketplace. Sainsbury's too has developed a loyalty programme which in turn generates a vast amount of data about its customers. This has not stopped their share of the grocery market falling. The ability to interrogate data warehouses for relevant meaning is known as data mining, and it is clear that the ability to mine the data for key customer insight remains the key to success.

Other areas of research can add further value to this raw data and place the information about customers in its broader market context.

Between 1996 and 2001 the call-centre market in the UK grew at 40 per cent per year. If a company's internal records showed growth of 20 per cent, this might have been considered a success. However, in the broader market context this company would have been falling well behind its competitors.

Data has been called 'the raw material of management'. Today's marketing executives have access to an ever greater array of information and the tools with which to analyse this historic data. Analysis software can allow marketers to make relationships between apparently unrelated data to produce valuable approaches to market and customer segmentation. With the development of the Internet the opportunity exists for real-time information gathering, analysis and marketing decisions.

The growth of the knowledge economy and of knowledge management in organizations has had several effects. Perhaps the most obvious of these is information overload. In certain markets there is so much data about the market that it is often hard to analyse the information in such a way as to produce actionable intelligence.

The reliance on data gathered from customers' behaviour is often at the expense of the broader customer or market context.

A small UK-based breakfast cereals company ran a series of tests for a communications programme. The results were excellent and showed that on rollout the company could achieve a 2 per cent uplift in its share of the sector. In reality, rollout achieved a far smaller and temporary uplift in sales. The sector is mature; value growth is negligible. The market is dominated by some of the world's most aggressive food marketers, including Kellogg, Quaker, Nestlé and General Mills, who were not likely to sit back and let this happen. In conjunction with the major retail multiples they launched an aggressive sales promotion campaign that effectively undermined the activity of the smaller company. The research had successfully measured an effective communications programme, but had failed to take the wider market context of aggressive competitors into account._

It should not be forgotten that a database is a sample of the company's customers, not a sample of the market as a whole. Very often this sample itself is a sample only of those who choose to respond to the company's communications. Transactional data about our customers describes what they have done, not what they will do. It certainly does not explain WHY they behaved in the way they did.

While it is possible to point to the weaknesses of the use of company databases, there is no doubt that careful management and analysis of this type of data has added significantly to the marketer's toolkit. In combination, databases and marketing research techniques provide a powerful planning approach to strategy and its implementation.

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