Thesis

Role of Analytical CRM in Organizational Value Creation-BBA Thesis-Umair Ali
NUST Institute of Management Sciences

BBA - Thesis
“Role of Analytical CRM in

Organizational Value Creation”
Submitted to:
Hammad
Ashraf
Submitted by:
Dated: August 17, 2005. Umair Ali
1
2002-NUST-BBA-
098
Executive Summary
This paper has analyzed the key impact of Analytical Customer Relationship
Management in Overall organizational value creation. For developing a basic
foundation for the main argument of this research paper, a brief description of the
overall Customer Relationship Management philosophy as well as enterprise level
strategy has been described. In this regard, key reasons for the implementation of
CRM have also been put forward, with a highlight of key benefits accruing from the
implementation of CRM. The main human resource related issues have also been
brought forward to analyze how CRM can successfully be implemented and aligned
with the Human Resource Management strategy of the organization. Another key
aspect of this paper is that it has highlighted the difference between buying a CRM
process and developing it within the organization itself. The three main types of
CRM have been described to highlight the key aspect of a holistic CRM process and
also to set forward the main theme of this thesis. A complete analysis of Buy versus
Build decision of a CRM process has also been described to highlight the
application of CRM according to the varying needs of different type and scale of
organization. Distribution of the Analytical application market has also been
discussed to describe the currently prevailing functional focus of various
organizations. Different data acquisition modes have also been discussed along with
key terms related with the support processes of Analytical CRM. And lastly, future
direction in the field of Analytical CRM in various Business level functions as well
as enterprise level strategy has been discussed.
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Acknowledgements
Thanking Allah, Who is the light when everything is dark and One Who is always
there to lead us through the depths of darkness, towards path of wisdom and
enlightenment.
I would also like to thank Sir Hammad Ashraf, whose support remains a source of
constant inspiration for days to come.
I would also like to thank all my teachers and fellow students, who helped in various
manners throughout my educational career and continue to do so.
And last but not the least; I would like to thank my Parents, who always give me the
love, support and inspiration that I need.
Thank you, All!
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Table of Contents
1.
1. Introduction..............................................................................................................5
1.1 The compelling need for CRM......................................................................7
1.2 Benefits of CRM................................................................................................9
The benefits of CRM include:.................................................................................9
Improved Sales Execution.......................................................................................9
Improved Customer Service....................................................................................9
Bring the right offering to the right customers at the right time .............................9
Maximize your ROI with the ability to monitor results in real time and allowing
mid-course corrections ............................................................................................9
Improve customer satisfaction with improved customer experiences ....................9
Enable target marketing with accurate analysis of your customer base .................9
Always-on-Infrastructure for 24-hour availability .................................................9
Single point of contact for solution consulting and integration ..............................9
It is also important for the general applications and methodology of CRM to
integrate itself with overall “Goals pyramid” of the organization.........................10
2. Literature Review..................................................................................................11
2.1Operational CRM..............................................................................................13
2.2 Collaborative CRM..........................................................................................15
2.3 Analytical CRM...............................................................................................15
2.4 Difference between Analytic applications with Business intelligence
technologies...........................................................................................................16
2.5 Build Versus Buy.............................................................................................17
2.5.1 Financial/Business Performance Management:........................................19
2.5.2 Operations/Production Analysis:..............................................................20
2.5.3 CRM Analysis:.........................................................................................20
2.6 The Build Market by Analytic Application.....................................................21
2.7 Linking Analytics to Business Operations: The Key to ROI..........................23
4
2.8 Soft Areas related with Analytical CRM.........................................................28

3. Findings & Analysis..............................................................................................38
3.1 Data acquisition for Analytical CRM .............................................................38
3.2 Deploying CRM...............................................................................................41
3.3 Data Analytics Support for Analytical CRM...................................................42
3.3.1 Data Analytics Architecture.....................................................................42
3.3.2 Data Warehouse........................................................................................42
3.3.3 Data Mining..............................................................................................44
4. Conclusion.............................................................................................................47
Bibliography..............................................................................................................48
1. Introduction
The generally accepted purpose of Customer Relationship Management (CRM) is
to enable organizations to better serve their customers through the introduction of
reliable processes and procedures for interacting with those customers.
In today's competitive business environment, a successful CRM strategy cannot be

implemented by only installing and integrating a software package designed to
support CRM processes. A holistic approach to CRM is vital for an effective and
efficient CRM policy. This approach includes training of employees, a modification
of business processes based on customers' needs and an adoption of relevant IT-
systems (including soft- and maybe hardware) and/or usage of IT-Services that
enable the organization or company to follow its CRM strategy. CRM-Services can
even redundantize the acquisition of additional hardware or CRM software-licences.
The term CRM is used to describe either the software or the whole business strategy
(or lack of one) oriented on customer needs. The second one is the description
which is correct. The main misconception of CRM is that it is only software, instead
of whole business strategy.
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Formally, CRM is defined as “The strategies, processes, people and technologies

used by companies to successfully attract and retain customers for maximum
corporate growth and profit1”..
CRM initiatives are designed with the goal of meeting customer expectations and
needs in order to achieve maximum customer lifetime value and return to the
enterprise. As a primary sales, service and retention touch point for many
companies, the Contact Center is a critical component of a successful CRM strategy.
Major areas of CRM focus on service automated processes, personal information

gathering and processing, and self-service. It attempts to integrate and automate the
various customer serving processes within a company.
Successful companies round the world are famous for not just being innovative in
their products and services, but also in managing the general as well as strategic
relationships with customers. That is why companies like Oracle, Microsoft,
General Electrics, Pakistan Tobacco Company and Proctor & Gamble etc include
Customer Relationship Management, a critical component of their Value Chain.
A holistic overview of the uses of CRM can see by the chain of activities that are
related with Marketing, Sales and Product & Service processes.
1
www.ataconnect.org/IndustryResearch/TeleservicesGlossary.html
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1.1 The compelling need for CRM
Competition is requiring it
• Profitability – CRM promises new customers; more value from existing customers;
improved marketing, sales, and service; better customer relationships
• Differentiation – Customer service/satisfaction becoming a greater piece of a
company’s value proposition
Stakeholders are demanding it
2
Avoiding the Quick Fix Trend, “What You Need to Know About Hosted CRM”. AMR Research
Onyx Software IBM, IBM
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• Shareholders – Pressure from Wall Street and other stock exchanges to make better
use of customer data
• Customers – Want convenience of multi-channel access with seamless customer
experience
• Employees – Require integrated 360-degree view to provide improved customer
satisfaction, customized offerings, and faster response time
Business transformation is relying on it
• Enterprise wide – Companies need to be outward-facing versus inward-focused
• Integration/unification – Communicate across silos and databases, and show one
face to the customer
And lastly for a holistic understanding of the customer need solution CRM is a
necessary aspect of overall enterprise strategy, explained by triangular relationship
of customer understanding, customer relationship action and customer response on
the next page.
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1.2 Benefits of CRM
The benefits of CRM include:
Improved Sales Execution
Improved Customer Service
Bring the right offering to the right customers at the right time
Maximize your ROI with the ability to monitor results in real time and allowing
mid-course corrections
Improve customer satisfaction with improved customer experiences
Enable target marketing with accurate analysis of your customer base
Always-on-Infrastructure for 24-hour availability
Single point of contact for solution consulting and integration
There are two approaches in general for managing the CRM process of an
organization, the first is Organizational oriented approach while the other is known
as Cycle oriented approach. In general Cycle oriented approach cover a broader
sphere of effective customer centric CRM applications and tools.
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It is also important for the general applications and methodology of CRM to

integrate itself with overall “Goals pyramid”3 of the organization.
3
A Goals Pyramid defines the operational, business and strategic goals of an organization at various
Hierarchical levels.
4
Ahlert, H.: Enterprise Customer Management: Integrating Corporate and Customer
Information. In:
10
All of these goals should be defined keeping in mind their overall link and
alignment with the Enterprise Level Goal.
2. Literature Review
The importance of CRM can be seen by a recent IBM report summarized in the
table below.
Henning-Thurau, T., Hansen, U. (eds.): Relationship Marketing, Springer, Berlin

Heidelberg New York
(2000) 255-264
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Before the application of any concept is made, it is important to understand different

previously formulated theories and research papers related to that topic, so that a
strong foundation is created for further building a research argument.
There are three parts of application architecture of CRM:
 Operational - automation to the basic business processes (marketing, sales,

service)
5
IBM Business Consulting Services, “Doing CRM Right” global study, 2004.
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 Analytical - support to analyze customer behavior, implements business

intelligence alike technology
 Co-operational - ensures the contact with customers (phone, email, fax,
web...)
2.1Operational CRM
Operational CRM means supporting the so-called "front office" business processes,
which include customer contact (sales, marketing and service). Tasks resulting from
these processes are forwarded to employees responsible, information necessary for
carrying out the tasks and interfaces to back-end applications are being provided and
activities with customers are being documented for further reference.
Operational CRM provides the following benefits:
 Delivers personalized and efficient marketing, sales, and service through

multi-channel collaboration
 Enables a 360-degree view of your customer while you are interacting
 Sales people and service engineers can access complete history of all
customer interaction with your company, regardless of the touch point
According to Gartner Group6, the operational part of CRM typically involves three
general areas of business:
2.1.1 Sales force automation (SFA): SFA automates some of the

company's critical sales and sales force management functions, for example,
lead/account management, contact management, quote management, forecasting,
sales administration, keeping track of customer preferences, buying habits, and
demographics, as well as sales staff performance. SFA tools are designed to improve
field sales productivity. Key infrastructure requirements of SFA are mobile
synchronization and integrated product configuration.
6
http://www.180systems.com/business-intelligence.php
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2.1.2 Customer service and support (CSS): CSS automates some service
requests, complaints, product returns, and information requests. Traditional internal
help desk and traditional inbound call-center support for customer inquiries are now
evolved into the "customer interaction center" (CIC), using multiple channels (Web,
phone/fax, face-to-face, kiosk, etc). Key infrastructure requirements of CSS include
computer telephony integration (CTI) which provides high volume processing
capability, and reliability.
2.1.3 Enterprise marketing automation (EMA): EMA provides

information about the business environment, including competitors, industry trends,
and macroenviromental variables. It is the execution side of campaign and lead
management. The intent of EMA applications is to improve marketing campaign
efficiencies. Functions include demographic analysis, variable segmentation, and
predictive modeling occur on the analytical (Business Intelligence) side.
Integrated CRM software is often also known as "front office solutions." This is
because they deal directly with the customer.
Many call centers use CRM software to store all of their customer's details. When a
customer calls, the system can be used to retrieve and store information relevant to
the customer. By serving the customer quickly and efficiently, and also keeping all
information on a customer in one place, a company aims to make cost savings, and
also encourage new customers.
CRM solutions can also be used to allow customers to perform their own service via
a variety of communication channels. For example, you might be able to check your
bank balance via your WAP phone without ever having to talk to a person, saving
money for the company, and saving you time.
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2.2 Collaborative CRM
Collaborative CRM facilitates interactions with customers through all channels

(personal, letter, fax, phone, web, e-mail) and supports co-ordination of employee
teams and channels. It is a solution that brings people, processes and data together
so companies can better serve and retain their customers. The data/activities can be
structured, unstructured,conversational, and/or transactional in nature.
Collaborative CRM provides the following benefits:
 Enables efficient productive customer interactions across all

communications channels
 Enables web collaboration to reduce customer service costs
 Integrates call centers enabling multi-channel personal customer interaction
 Integrates view of the customer while interaction at the transaction level.
2.3 Analytical CRM
In analytical CRM, data gathered within operational CRM are analyzed to segment
customers or to identify cross- and up-selling potential. Data collection and analysis
is viewed as a continuing and iterative process. Ideally, business decisions are
refined over time, based on feedback from earlier analysis and decisions.
The link between Operational and Analytical CRM is explained by the figure below:
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Thus as the “Contact” is made during the operational crm phase, it is than later on
“Analyzed” during the analytical crm phase of the total crm process.
The main focus of this research paper is upon the Analytical CRM strategy
formulation and implementation for the purpose of organizational value creation.
Therefore the subsequent literature review would focus upon Analytical CRM.
Analytic applications are filling a need in enabling organizations to measure,

analyze and optimize business performance. Today, analytic applications represent a
market that is approaching $3 billion in total worldwide software revenue7.
2.4 Difference between Analytic applications with Business

intelligence technologies
It is important not to confuse analytic applications with business intelligence

technologies or tools. There is a long- standing market for business intelligence
tools such as OLAP, query/reporting and data mining. Analytic applications
incorporate such technologies, but are fundamentally different in terms of
specialization, segmentation and structure.
7
www.crm.ittoolbox.com/documents/document.asp?i=2060
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2.4.1Specialization:
Analytic applications are specialized to a particular business process or function,
while business intelligence tools are generic.
2.4.2Segmentation:
Analytic applications can be segmented by business function (such as finance or
marketing), while business intelligence tools can be segmented by technology (such
as data mining or OLAP).
2.4.3Structure:
Analytic applications structure and coordinate business activities to achieve a
particular result (such as producing a budget or assessing the performance of key
suppliers), while business intelligence tools can support ad hoc query and analysis
that is not predefined.
Analytic applications expand the reach of business intelligence to an extended user

base, packaging these technologies in a business context; but analytic applications
will not displace business intelligence tools. There will continue to be a need for ad
hoc analysis to explore new types of issues and questions as they arise.
2.5 Build Versus Buy
Should companies build or buy analytic applications? This is not an "all or nothing"
question. Most companies will adopt a strategy of selectively building and buying
applications, depending on their business needs, IT skill and application availability.
Based upon distribution of CRM applications, corporate level applications are

projected have the highest impact on CRM ownership success.
17
Whereas the actual ownership figures of CRM application currently prevailing

reflect an opposite scenario, that clearly implies that there is still much to improve
on CRM strategies of organizations.
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9
18
Another important factor to note is to see the alignment of the various entities with
the CRM process, related with organization. Unsurprisingly, employees and
customers have the highest level of importance followed by shareholder alignment
importance.
Companies may choose to adopt different strategies (build versus buy) according to
application type:
2.5.1 Financial/Business Performance Management:
Analytic applications of this type measure and optimize financial performance (e.g.,
budgeting) and/or evaluate an enterprise business strategy (e.g., balanced scorecard).
Budgeting and financial consolidation were among the first packaged analytic
applications because the processes involved are well understood and because they
apply across all industries. There is a move toward integrated suites comprising
budgeting and planning, consolidation, activity-based management and balanced
scorecard.
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2.5.2 Operations/Production Analysis:
Analytic applications of this type measure and optimize the production and delivery
of a business's products and services (e.g., demand planning, workforce optimization
and healthcare outcomes analysis). These applications differ from industry to
industry. Hot applications include demand planning and pricing optimization, and
the first packaged applications for optimizing biotech-specific processes are now
beginning to appear on the market.
2.5.3 CRM Analysis:
Analytic applications of this type measure and optimize customer relationships (e.g.,
customer profitability, customer retention and marketing analysis). Customer-
specific analytic applications first gained a foothold in the marketing department,
but they are now becoming cross-functional as optimizing customer relationships
becomes an enterprise imperative. In this regard, Analytical CRM enables the
organization to choose the best form of customer communication channel out of the
available choices.
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Figure 1: Buy: Worldwide Software Revenues for Packaged Analytic Applications

Source: IDC, 2002
Though the "buy" market is gaining momentum, IDC believes that companies will
continue to build applications for the foreseeable future. One factor is lack of
availability; some vertical industries are not well served by analytic applications. A
second reason is the strategy to develop unique applications that provide
competitive differentiation.
2.6 The Build Market by Analytic Application
Which types of custom analytic applications are organizations most likely to build?
Figure 2 shows IDC's estimate for the current state and forecasted future state for
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custom analytic applications. IDC sizes the worldwide market for data warehousing
tools. These include software to populate a data warehouse, store the data in a
DBMS and access the data using business intelligence tools. Then IDC segments
this market for tools by application based on surveys that show how companies
prioritize the types of access to a data warehouse.
Figure 2: Build: Allocation of Worldwide Software Revenues for Data

Warehousing Tools by Application
Source: IDC, 2002
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Financial analytic applications are not nearly as important for custom analytic
applications since this is the sector best served by packaged applications. Though
CRM is important, IDC believes the operations/production sector comprises the
largest part of the custom market. It is in this sector that companies are seeking to
drive greater efficiencies in their supply chain, research and development, and other
product and service-related functions. (For more information, see the IDC report
"Build versus Buy for Analytic Solutions Market Forecast and Analysis, 2000-
2005.")
2.7 Linking Analytics to Business Operations: The Key to

ROI
Return on investment is computed as:

ROI = Profits x 100
Investment
It measures how much profit is returned from a given investment.
In the context of CRM10, this simplicity is however complicated by 4 issues:
1. Defining the boundaries of CRM
2. Establishing what constitutes a CRM investment
3. Deciding what counts as a ‘return’ on that investment
4. Choosing the time frame to use in the assessment
Whether analytic applications are built or bought, the feedback from analytics must
lead to corrective action that impacts business operations. If it does not, there is no
clear way to measure its impact on the business.
This implies that analytic applications must do more than provide information. They
must guide the decision-making process, leading to actions that improve business
performance. To maximize their business impact, analytic applications must evolve
as follows:
10
Lawrence Ang and Francis A. Buttle, Macquarie Graduate School of Management, ROI on CRM:
a customer-journey approach
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• Eliminate the disconnect between analyst and decision- maker.
Decision support implies a technical end user bringing together information

for the benefit of a manager who has responsibility to make decisions. In this
scenario, the actual user of the software is not empowered to make decisions.
How likely is it that the information will be relevant? Decision-makers, not
just technical analysts, must be direct users of the analytic applications.
• Focus on teams, not just the individual.
Improving decision making requires more than correcting for individual bias.
Many decisions are the result of collaboration between individuals, and
biases occur in the dynamics of group interaction. Guiding decision
processes requires collaborative support.
• Track the decisions and evaluate their effectiveness.
It is ironic that business intelligence software traditionally has not been

interested in capturing decisions. We improve by learning from our mistakes.
Analytic applications will evolve to track the outcome of the decisions and
measure their effectiveness.
• Capture the decision-making processes of the best performers.
The best performers in an organization use information to make better

quality decisions, such as a sales representative qualifying leads or a
customer service specialist handling difficult cases. Capturing decision-
making processes addresses the fundamental goal of knowledge
management: preserving employee expertise. Process support is one of the
defining characteristics of analytic applications.
Improving the decision-making process requires supplying relevant feedback that

can correct for the irrational biases of the decision-maker. This is the future
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direction of analytic applications - one that is likely to bring greater business impact
and more rapid return on investment.
The key to good customer relationship management is to re-think your organization

completely, in all its strategies, tactics, processes and interactions, so that the
“customer” is in charge. This kind of on-demand model is really nothing new: When
I began writing business plans twenty years ago, the most clarifying part of the
process was defining the “user benefit” – in other words, being really specific about
what the customer is going to get from me.
Even though this idea is not new, the customer-centric organization has never been
more important. In the past, you could be guilty of any of these sins and be forgiven:
• Thinking of your members in terms of what they buy from you

• Promoting products and meetings prominently at the top of your web site
• Talking a lot about your mission, your staff, your Board members and your
history
• Shipping products from third-party suppliers who don’t give you reliable
tracking information
• Raising dues as a result of rising expenses
Some main common characteristics11 of companies that successfully manage the

CRM process than those who don’t include;
Companies that track gross margins and cost-to-serve as customers move along the
journey will achieve better business performance than companies that don’t.
Companies that manage the value of each customer/segment/cohort as they progress

along the customer journey are likely to have a better business outcome than
companies
that do not.
11
Helms, C. (2001). Promising ROI keeps CRM expenditures high.
25
Companies that have explicit customer acquisition, development and retention plans
will have better business performance than companies that don’t.
Companies whose people are skilled in managing the customer journey will achieve
better business performance than companies whose people are not so skilled.
Companies that incentives their people to achieve specific targets for customer
acquisition, development and retention will achieve better business performance
than
companies that don’t.
Customer acquisition is more effective when companies have better insight into the
buying intentions of customers. Customer retention will improve if the company
understands the switching
propensity of its customers.
Customer retention will be better in companies that monitor trends in customer

spend.
Companies that experiment with new offerings to existing customers will enjoy
better
cross-selling and up-selling rates that companies that do not.
The more the senior management team understands the enterprise-wide aspects of
CRM, the greater the success of CRM implementations.
Companies that have a more customer-centric culture are more likely to be
successful in their CRM implementation than others.
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CRM initiatives that are lead by IT champions are less likely to succeed than those
that are championed by marketing, sales or general management.
Companies that adopt a coordinated customer-journey approach in their CRM

implementations are more likely to have better business performance than
companies
that don’t. The more business processes need to be changed, the longer it will take
before
there is a measurable improvement in business performance.
Service companies that implement CRM practices are more likely to see quicker
benefits than product-based, manufacturing companies.
Manufacturing companies that have modular products are more likely to see a
quicker return on their CRM investment than companies having non-modular
products.
The larger the company, the longer it will take before seeing the benefits of CRM
initiatives.
Larger companies that implement CRM in a phased way, mimicking the scale of
implementation of smaller companies, will experience a faster ROI than their large
counterparts who do not. Companies that systematically communicate their
offerings will see a quicker ROI on their CRM investments than companies that
don’t.
The shorter the purchase cycle, the faster the customers experience the benefits of
CRM implementations.
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The previously mentioned areas of Analytical CRM covers that “hard side” of this
concept, the next step is analyze the key soft areas related with Analytical CRM.
2.8 Soft Areas related with Analytical CRM
Loyalty Ain’t What it Used to Be
Some decades back, any organization could build a brand by coming up with a
catchy slogan, a nice logo and some products and services. Advertising and
promotion was a top-down affair, driven by marketing departments and made real in
the form of print ads, direct mail, flyers, buttons, banners and so on. And it used to
work pretty well. Which means, in business talk, that the metrics gave you a way of
predicting outcomes based on what you spent? But this happens no more.
The reason is subtle but profound. It’s affecting every part of the world’s economy.
And it explains why so many associations are losing members.
The reason? It costs very little for individuals to find alternatives to what you have
to offer. With the click of a mouse, someone can use a search engine to find a
competing association. If they’re offering similar products and services at a lower
price, or better products and services at a good value, you’re at risk. Switching is
simple, and the decision process is almost as simple: People ask whether they’re
getting a good value.
Let’s call this reason the Switch Factor. It explains why you have to re-think your
organization’s behaviors, technology and metrics. It explains why you may have
been losing members. It explains why it’s harder to prospect.
The Double Bottom-Line: Is the End Near?
Non-profits have two kinds of value.
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First, they offer products (publications, for example) and services (annual meetings,
list serves, and so on). These have a price. If the perceived quality of these offerings,
divided by price, is high, you have what’s called a high perceived customer value
(PCV). If your PCV is higher than anyone else, you’re probably going to find it
easier to prospect, and people won’t tend to quit your association.
You’ll note that, in business talk, you’ve now got a metric (PCV) that may give you
a way of predicting outcomes based on what you spend. In the best case, you can
use PCV to improve the total customer lifetime value (CLV) of your members.
That’s sounds good, doesn’t it?
Set aside PCV for a moment. In fact, set aside the value of all of your products and
services. After all, any organization can duplicate what you do, given enough time
and money.
But can they duplicate who you are?
Your association has an overall “value proposition” that’s related to your mission
and to the intrinsic integrity of your staff and their behaviors. This is part of your
brand equity that’s separate from your products and services. You can measure your
success not only by how well you sell products and services to keep the lights on,
but by how well you provide a sense to members that they belong to an organization
that has softer values.
That is what has been called the Double Bottom-Line. It’s a measure of your value
and your values.
But the Switch Factor is going to change the Double Bottom-Line: Your prospects,
members and customers won’t stay with you only because of your values. The shift
in the marketplace towards the customer and away from the organization – the shift
towards a business environment where the power is in the hands of the individual –
makes your work harder.
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It’s not that your members and prospects fail to care anymore about your values. It’s
simply that they’re more willing and able to find alternative sources for your key
products and services, at zero cost. The Internet made it impossible for Nike to hide
from its exploitation of women and girls in sweatshop conditions also makes it
impossible for perfectly ethical organizations such as non-profits to hide from their
lack of customer-oriented products and services.
Measuring and Cutting
Customer Relationship Management hit the streets with force four years ago. Your
organization engages in CRM principles when it creates processes that measure and
improve the quality of relationships you have with customers (and prospects). This
is made simpler by creating enterprise-wide data systems that track customer and
prospect interactions with you, including e-mails, phone calls, purchases, returns,
and so on. In fact, CRM done properly extends beyond what you might think of as
your enterprise. If your association uses vendors and partners to create content,
products or services, a true “extended enterprise” CRM system will ensure that these
vendors and partners measure and improve the quality of their interactions with your
customers and prospects.
One key feature of CRM has been to support reporting customer data to decision-
makers (sometimes in real-time, such as in call centers). Customer data is thus built
from a “single view” of the customer. This can include analytics – data derived from
transaction data – that can help decision-makers determine appropriate levels of
service. For example, many CRM systems monitor the recency, frequency and
amounts of a customer’s purchases. Such measures (the so-called RFM metric) are
thought to correlate to future buying patterns, and perhaps to member or customer
loyalty as well.
Another example of analytics can be the total revenue a member brings in less the
cost of servicing that member. When the cost of servicing a member/customer
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exceeds the revenue, CRM folks call that member/customer a “below zero” (BZ).
Looking at this kind of metric can help your association build service and support
systems that won’t bleed you dry.
Should you “fire” members that cost you more to service than they bring in? It’s
certainly a popular mantra in the CRM industry that companies should consider
“firing” their BZ customers.
You’ll have to decide for yourself. But even if you decide that BZ’s are still
important to your association, or if you’re concerned that being too “exclusive” will
alienate other members, you should take a hard look at creating member service
systems that scale according to the value a member provides you.
The flip side of this coin, which is hardly ever discussed in CRM circles, is that
member service can be greatly improved for your most worthy members. By
shifting resources to attend to the needs of these most valuable folks, you may be
able to increase your revenues, build loyalty, create strong word-of-mouth, and
energize your membership. You may even be able to enlist these members to help
mentor and invigorate your BZ’s.
Make Your Value Visible
It’s critical to CRM that well-tuned internal systems support your efforts.
Association Management Systems are moving in the right direction, but many –
even those based on products such as Microsoft’s formidable MS-CRM – still focus
on improving internal systems with very little measurable benefit to customers.
Microsoft, in fact, led with two key applications of CRM: Sales force automation,
which tracked which bids and agreements related to a customer; and call center
support, which tracked phone and email interactions with customers after a sale. In
theory, then, a company with a sales force could track a customer from cradle to
grave – the Holy Grail of CRM.
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But that’s a corporate-centric vision. Essentially creating a single customer view that
provides no unique, differentiating improvement over other call center or sales force
automation tools, MS-CRM out of the gate missed one of the critical aspects of
CRM. Let’s call it the “single enterprise view”. Customers should have a single,
unified experience of an enterprise. That’s not to say that the enterprise shouldn’t
customize its interactions. It should. Think of Amazon.com’s ability to offer music
and books suited to your tastes. But Amazon’s value proposition is that it makes
online purchases simple, transparent and high-value. No matter how much Amazon
customizes your experience, it always gives you that kind of value.
It’s this kind of “single enterprise view” that most AMS systems omit. They don’t
support building a brand because they almost never ask the question: How do we
model member and prospect interactions with an association so that its value
proposition emerges naturally from these interactions? When the American
Hardwood Export Council re-vamped its web site with Rock Creek Creative, Rock
Creek added an automated system for hardwood buyers to find hardwood producers.
Simple, effective, transparent value. Such a simple system raised the profile and
customer satisfaction levels of the American Hardwood Export Council’s brand in a
few short months.
In fact, if you think about how plain Amazon.com’s logo is, and how cluttered their
pages are, you begin to realize that the power of Amazon.com’s brand is so great
that we overlook elements that normally are associated with the term “brand”. The
power brand is just as much about setting and exceeding expectations in each
interaction as it is about a nice looking logo and catchy tag line.
In short, once you realize that the Switch Factor is in play, you’ll realize that you
must completely re-think all the interactions you have with members and prospects
and then build systems that help you create that power brand.
32
Loyalty
What makes a member loyal? Ultimately it comes down to two critical factors. How
much do they spend with you and how often they refer other people to you. Loyalty
as a feeling is important, of course, but associations must ultimately manage from
facts, and you can measure what people spend and how often they refer other people
to you. Let’s call that blended number “loyalty”.
In the new customer-driven economy, what will inspire a member to buy from you
(or just keep their membership current), or to refer others to you, or both?
Their inspiration is increasingly based on their perception of your value. We noted

above that if you know what your members and prospects value about you, in what
order, and with what weighting, you can create an index – a number – that helps you
manage your products, services, budgets and staffing much more rationally.
I’m now suggesting that perceived customer value (PCV) will also be what creates
loyalty, once you define loyalty as we did above.
This is bold and new, incidentally. If you pick up Reichheld’s great book, The
Loyalty Effect, you’ll be hard-pressed to find much of anything about the cause of
loyalty. It’s great to know that the effect of loyalty is greater revenues, lower cost of
sales and increased total lifetime customer value. But that’s an effect, and as an
association executive you’ll be more interested in the cause of loyalty. Now you
know what it is.
The Black Hole for Loyalty
Now that we’ve established that the economy is increasingly customer-driven, that
values by themselves are not enough to maintain members or convert prospects, and
that loyalty is really a product of perceived customer value, we ask the following
tough question:
33
How do you prove in your association’s interactions that you understand this?
Look at your web site. How much of the menu is devoted to information about you,
your products and services? Look at your e-mail newsletters. Have you written them
with members and prospects in mind? How about your trade shows, your journals?
If you’re member and prospect interactions aren’t intensely customer-centric, you’re

not building a power brand. You’re not building trust. You’re relying on old
thinking puts you first and your members and prospects second.
And when you consider that most associations offer content and networking, you
have to ask yourself: In this world of Google and blogs, who needs associations who
just blather on about themselves on their websites and in their e-mails?
The black hole for loyalty, down which you will lose member and prospects, is
precisely any interaction you have that isn’t centered on the customer. When you
don’t know your customers’ needs, it shows.
And customers expect more. They’re comparing you to Amazon.com whether you
like it or not.
Chunking the Market
What can you do about this?
Start with understanding your customers using a perceived customer value study.
This is not just another survey. After all, it requires that you survey your prospects,
and the vast majority of associations I deal with have never surveyed their prospects.
Plus, the PCV study requires that you get weightings for each preferred product,
service or attribute. This is done even more rarely.
The good news is that PCV studies are not hard to do; that your competitors
probably don’t have this data; and that you’ll see the benefits in the first year. A
34
colleague of ours turned a packaging company’s market position from worst to first
in eighteen months using PCV methods.
One critical question to ask as you create a PCV study: How will you determine the
segments into which your markets fall? The answer is simple to state, but difficult
for most organizations: Name your market segments using terms your markets will
understand. One client of ours caters to sociologists. Under questioning, they further
divided these into academics, students and professionals. But this isn’t enough.
Academics may think of themselves as teaching academics, research academics,
new faculty members, thought-leaders, writers, and so on. You can break down
students and professionals into as many groups. Once you define these segments,
you have a better chance of looking for meaningful correlations between a segment
and their weighted list of preferred services and products.
Once you have PCV data for your segments, you should ask the question: Which of
these segments are most important to us? You can answer that question primarily
either in terms of the revenue they bring you now, or the revenue you’d like them to
bring you in the future. Our client viewed every single major segment of
sociologists as important as the others. It’s unlikely that each segment generates the
same revenue for the association, so it’s plain that this association will spend more
money relative to revenue on some segments. This flies in the face of the basic
CRM principle: Preserve your service cash for your best customers so you can build
more loyalty, revenues and long-term stability.
Finally, you have data (PCV indices) for each segment. Use this data to create a web
experience that provides proportionately more screen space, content, products and
services to your most valued offerings. In short, make sure your staffing, budget,
processes and web site line up with a value creation strategy. Use this data to drive
your publications, your trade show, your list serve topics, your e-mail newsletters.
When every interaction shows your value, visibly and proportionately to a
segment’s needs, you are building loyalty.
35
Unifying the Experience
Designers, not business people, create most branding projects. Until recently, that’s
been a great thing. But now, in the customer eco-system that is our economy, a
brand isn’t just beautiful, clever or mission-based. A brand must capture the promise
of your processes. If your association provides professional development, your
brand will have to promise you’ll develop members professionally, and then your
processes must deliver on that promise. A brand, then, starts with an explicit or
implied value proposition. The graphics and taglines are just part of branding.
But if you have multiple member and prospect segments, how can you build a
unified brand? If you’re providing unique value to each segment – or even to each
person – won’t everyone see you as a somewhat different company?
Yes and no.
Think of IBM. In fact, visit their web site. Are they a computer company? If so, for
end-users or for big companies? Or are they a consulting company? Yes to all.
If you look at the IBM site, you’ll see that they have different regions for each of
their brands. I’ll bet the variation in the size of these regions is directly proportional
to the income they receive from what they offer in these regions. Check it out.
And while you’re looking at IBM’s site, glance at the left menu. Notice all the
market segments? Not only will a prospect or customer instantly be able to identify
where to go, IBM can track how many hits they get in each segment’s area. That’s a
metric they can take to the bank.
But what unifies the experience? IBM’s logo, it’s reputation as Big Blue, its appeal
to quality and to end-users – all these combine to create a unified brand. You don’t
need a tagline to understand that IBM wants to make it easy for your to do business
with them, whatever the level of your current need.
36
Next Time
Believe it or not, some of your prospects may already be your customers. If a

prospect knows about you at all, you have a chance to exchange value with a
prospect – even before they buy something from you, or join your association.
These are your “almost customers”. How can you use CRM principles to identify
these “almost customers” and convert them? We’ll find out next time. We’ll also list
other “customers” of yours. You’ll be surprised who they are – and how well you
can apply CRM principles to make them happy. And when your customers and
members are happy, your association is stronger.
At an analytical level, CRM is focused upon exploitation of customer data to drive

more
highly focused sales and marketing campaigns. Analytical tools such as decision trees,
neural networks and clustering can be used to improve the effectiveness and efficiency
of
customer acquisition, customer development and customer retentions strategies.
37
3. Findings & Analysis

3.1 Data acquisition for Analytical CRM
It is important to know the actual division of suspect, active and former customers,
so that the Analytical CRM process can then be specifically tailored according to the
importance of each category of customers.
38
Now it is also important to note that data collection for each category of customers
is also to be made based upon the various key attributes related with the customer
and also having different implications for the organization itself. These attributes
are explained in three categories that are explained in the figure on the next page.
The amount and quality of internally available data grows when

the subject becomes an active customer. Second with modest
internal data situation in acquisition, which make additional
external data a must. Loyalty and recovery also require external
39
data – but to a lower extent and with different focal points.

Depending on the CRM goals we stated different requirements on
the external data. While in acquisition market coverage is an
important criterion, specific data about purchase history and
behavior are much more important in loyalty and recovery.
Furthermore, in order to reach the corresponding CRM goals the
programs have to be coordinated closely especially for exchanging
data and knowledge derived.
It is also to be observed that the traditional mode of customer

relationship management is no longer applicable in the new fast
changing economy which competition depends upon time based
cost and quality management.
Instead the process is based upon creating an E-phase in each and every customer
contact point in the total Customer Relationship Management process.
40
3.2 Deploying CRM
Successful CRM implementation must factor in what kind of deployment best fits
the company, a small, modular approach or a large, enterprise-wide approach. Both
styles have distinct advantages and disadvantages. The large CRM companies like
Siebel or SAP push large scale CRM implementations as a way to gain the most
ROI for the organization but deploying a company-wide CRM system in a single
chunk can cause company-wide disruptions if anything goes awry. Given the
number of negative CRM experiences associated with enterprise-wide approaches,
many companies are looking at smaller, modular approach to CRM12. By taking a
modular approach, companies can usually experience faster implementation
schedules and faster ROI because a smaller CRM project can start being used sooner
than a larger rollout would allow. Lastly, a modular approach allows for best of
breed purchasing. shows the time frames for implementing CRM initiatives.
12
Bass, Alison (2004, July 7). Small is beautiful. CIO Magazine, Retrieved from the World Wide
Web
August 2004: <http://comment.cio.com/crm/060704.html>
41
3.3 Data Analytics Support for Analytical CRM

In this section we describe the backend support needed for analytical CRM.
Specifically, we first outline a generic architecture, and then focus on the two key
components, namely data warehousing and data mining.
3.3.1 Data Analytics Architecture

The Figure on the next page shows example architecture needed to support the data
analytics needs of analytical CRM. The key components are the data warehouse and
the data analysis tools and processes.
3.3.2 Data Warehouse

Building a data warehouse is a key stepping stone in getting started with analytical
CRM. Data sources for the warehouse are often the operational systems, providing
the lowest level of data. Data sources are designed for operational use, not for
decision support, and the data reflect this fact. Multiple data sources are often from
different systems, running on a wide range of hardware, and much of this software is
built inhouse or highly customized. This causes data from multiple sources to be
mismatched. It is important to clean warehouse data since critical CRM decisions
will be based on it. The three classes of data extraction tools commonly used are –
data migration which allows simple data transformation, data scrubbing which uses
domain-specific knowledge to scrub data, and data auditing which discovers rules
and relationships by scanning data and detects outliers.
42
Loading the warehouse includes some other processing tasks, such as checking
integrity constraints, sorting, summarizing, and build indexes, etc. Refreshing a
warehouse requires propagating updates on source data to the data stored in the
warehouse. The time and frequency to refresh a warehouse is determined by usage,
types of data source, etc. The ways to refresh the warehouse includes data shipping,
which uses triggers to update snapshot log table and propagate the updated data to
the warehouse, and transaction shipping, which ships the updates in the transaction
log.
The key entities required for CRM include Customer, Product, Channel, etc.
Usually information about each of these is scattered across multiple operational
databases. In the warehouse these are consolidated into complete entities. For
example, the Customer entity in the warehouse provides a full picture of who a
customer is from the entire organizations perspective, including all possible
interactions, as well as their histories. For smaller organizations the analysis may be
done directly on the warehouse, while for larger organizations separate data marts
43
may be created for various CRM functions like customer segmentation, customer
communication, customer retention, etc.
3.3.3 Data Mining

The next generation of analytic CRM requires companies to span the analytical
spectrum and focus more effort on looking forward. The “what has happened” world
of report writers and the “why has it happened” OLAP worlds are not sufficient.
Time-to-market pressures, combined with data explosion, are forcing many
organizations to struggle to stay competitive in the ’less time, more data’ scenario.
Coupled with the need to be more proactive, organizations are focusing their
analytical efforts to determine what will happen, what they can do to make it
happen, and ultimately to automate the entire process. Data mining is now viewed
today as an analytical necessity. The primary focus of data mining is to discover
knowledge, previously unknown, predict future events and automate the analysis of
very large data sets. The data mining process consist of a number of steps. First the
data collected must be processed to make it mine-able. This requires a number of
steps to clean the data, handle mismatches in format, structure, as well as semantics,
and normalization and integration. Once the data has been cleaned up, various data
mining algorithms can be applied to extract models from it.
A number of data mining techniques have been developed, and the one to be applied
depends on the specific purpose at hand.
Once a model has been developed, it can be used for two kinds of purposes. First is
to gain an understanding of the present behavior of the customers. A model used for
this purpose is called a descriptive model. Second is to use the model to make
predictions about future behavior of the customers. A model used for this purpose is
called a predictive model. The descriptive model, extracted from past behavior, is
used as a starting point from which a predictive model can be built. Such an
approach has been found to be quite successful, as is based on the assumption that
past behavior is a good predictor of the future behavior with appropriate
adjustments. This holds quite well in practice.
44
Another factor affecting a CRM rollout schedule is the company’s size and levels of
bureaucratic
13
Patton, Susannah (2002, May 1). Get the CRM you need at the price you want. CIO Magazine, 60-
62.
45
and information systems14. With CRM’s aim of creating a comprehensive view of

the customer, independent of whether an employee is in sales, marketing, or
customer service, the amount of current systems directly influences decision of
CRM deployment. For companies that have legacy systems or individual department
systems used to manage their own sets of customer information, the challenge of
integrating all of systems without alienating the separate departments’ end users can
be daunting. The modular approach alleviates some of the issues by breaking down
the entire CRM initiative into smaller, more manageable projects.
14
Dignan, Larry (2002, April 3). Is CRM all it’s cracked up to be? CNet News.com, Retrieved from
World
Wide Web August 2004: <http://news.com.com/2102-1017_3-874356.html?tag=st.util.print>
46
4. Conclusion
The Internet has emerged as a low cost, low latency and high bandwidth customer
communication channel. In addition, its interactive nature provides an organization
the ability to enter into a close, personalized dialog with its individual customers.
The simultaneous maturation of data management technologies like data
warehousing, and analysis technologies like data mining, have created the ideal
environment for making customer relationship management a much more systematic
effort than it has been in the past. While there has been a significant growth of
software vendors providing CRM software, and of using them, the focus so far has
largely been on the relationship management part of CRM rather than on the
.customer understanding part. Thus, CRM functions such as e-mail based campaigns
management; on-line ads, etc. are being adopted quickly. However, ensuring that the
right message is being delivered to the right person, that multiple messages being
delivered at different times and through different channels are consistent, is still in a
nascent stage. This is often leading to a situation where the best customers are being
over communicated to, while insufficient attention is being paid to develop new
ones into the best customers of the future. In this Thesis, i have described how
Analytical CRM can fill the gap. Specifically, we described how data analytics can
be used to make various CRM functions like customer segmentation,
communication targeting, retention, and loyalty much more effective. Our hope is
47
that the data mining community will address the analytics problems in this important
and interesting application domain.
Bibliography
 www.ataconnect.org/IndustryResearch/TeleservicesGlossary.html
 Avoiding the Quick Fix Trend, “What You Need to Know About Hosted CRM”. AMR
Research
Onyx Software IBM, IBM
 Ahlert, H.: Enterprise Customer Management: Integrating Corporate and Customer

Information.
 Henning-Thurau, T., Hansen, U. (eds.): Relationship Marketing, Springer, Berlin Heidelberg

New York (2000) 255-264
 IBM Business Consulting Services, “Doing CRM Right” global study, 2004.
 http://www.180systems.com/business-intelligence.php
 www.crm.ittoolbox.com/documents/document.asp?i=2060
 Lawrence Ang and Francis A. Buttle, Macquarie Graduate School of Management, ROI on
CRM: a customer-journey approach
 Helms, C. (2001). Promising ROI keeps CRM expenditures high.
48
 Bass, Alison (2004, July 7). Small is beautiful. CIO Magazine, Retrieved from the World
Wide Web August 2004: <http://comment.cio.com/crm/060704.html>
 Patton, Susannah (2002, May 1). Get the CRM you need at the price you want. CIO
Magazine, 60-62.
 Dignan, Larry (2002, April 3). Is CRM all it’s cracked up to be? CNet News.com, Retrieved
from World
 Wide Web August 2004: <http://news.com.com/2102-1017_3-874356.html?
tag=st.util.print>
49

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Role of Analytical CRM in Organizational Value Creation-BBA Thesis-Umair Ali

NUST Institute of Management Sciences

“Role of Analytical CRM in

Thank you, All!

2.8 Soft Areas related with Analytical CRM.........................................................28

In today's competitive business environment, a successful CRM strategy cannot be

Formally, CRM is defined as “The strategies, processes, people and technologies

Major areas of CRM focus on service automated processes, personal information

1.1 The compelling need for CRM

1.2 Benefits of CRM

The benefits of CRM include:

Improved Sales Execution

Improved Customer Service

Improve customer satisfaction with improved customer experiences

Enable target marketing with accurate analysis of your customer base

Always-on-Infrastructure for 24-hour availability

Single point of contact for solution consulting and integration

It is also important for the general applications and methodology of CRM to

Henning-Thurau, T., Hansen, U. (eds.): Relationship Marketing, Springer, Berlin

Before the application of any concept is made, it is important to understand different

There are three parts of application architecture of CRM:

 Operational - automation to the basic business processes (marketing, sales,

 Analytical - support to analyze customer behavior, implements business

Operational CRM provides the following benefits:

 Delivers personalized and efficient marketing, sales, and service through

2.1.1 Sales force automation (SFA): SFA automates some of the

2.1.3 Enterprise marketing automation (EMA): EMA provides

2.2 Collaborative CRM

Collaborative CRM facilitates interactions with customers through all channels

Collaborative CRM provides the following benefits:

 Enables efficient productive customer interactions across all

2.3 Analytical CRM

Analytic applications are filling a need in enabling organizations to measure,

2.4 Difference between Analytic applications with Business

It is important not to confuse analytic applications with business intelligence

Analytic applications expand the reach of business intelligence to an extended user

2.5 Build Versus Buy

Based upon distribution of CRM applications, corporate level applications are

Whereas the actual ownership figures of CRM application currently prevailing

2.5.1 Financial/Business Performance Management:

2.5.2 Operations/Production Analysis:

2.5.3 CRM Analysis:

Figure 1: Buy: Worldwide Software Revenues for Packaged Analytic Applications

2.6 The Build Market by Analytic Application

Figure 2: Build: Allocation of Worldwide Software Revenues for Data

Source: IDC, 2002

2.7 Linking Analytics to Business Operations: The Key to

Return on investment is computed as:

• Eliminate the disconnect between analyst and decision- maker.

Decision support implies a technical end user bringing together information

• Focus on teams, not just the individual.

• Track the decisions and evaluate their effectiveness.

It is ironic that business intelligence software traditionally has not been

• Capture the decision-making processes of the best performers.

The best performers in an organization use information to make better

Improving the decision-making process requires supplying relevant feedback that

The key to good customer relationship management is to re-think your organization

• Thinking of your members in terms of what they buy from you

Some main common characteristics11 of companies that successfully manage the

Companies that manage the value of each customer/segment/cohort as they progress

Customer retention will be better in companies that monitor trends in customer

Companies that adopt a coordinated customer-journey approach in their CRM

2.8 Soft Areas related with Analytical CRM