Analytical CRM

Dr. Madhurima Deb

 Introduction
• Data mining is concerned with discovering
new, meaningful information, so that decision
makers can learn as much as they can from
their valuable data assets.
• Data warehousing is a methodology that
combines and coordinates many sets of
diversified data into a unified and consistent
body of useful information via operational
CRM.
 Data Mining
• Data mining searches for hidden relationships,
patterns, correlations, and interdependencies in
large databases.
• Data mining uses a motley toolkit of novel
algorithmic models that help to automatically
solve user defined questions.
• Each model in this panoply of powerful tools is
intuitive, easy to explain, understandable, and
simple to use.
 Steps in Data Mining
• IBM (1997) defined four operations for DM,
– Predictive Modeling: Using inductive reasoning
techniques such as neural networks and reasoning to
create predictive reasoning.
– Database segmentation: Clustering technique to
partition data into clusters.
– Link analysis: identify useful association between
data.
– Deviation detection: explaining why certain records
cannot be put into specific segments.
 Steps in Data Mining
• Fayyad et al., (1996) mentioned following
operations for DM,
– Retrieving data from a large databank/database.
– Selecting the relevant subset to work with.
– Deciding on the appropriate sampling system, cleaning
the data and dealing with missing fields and records.
– Applying the appropriate transformation,
dimensionality reduction and projections.
– Fitting models to the preprocessed data.
 Classification of Data Mining
• Based on database: Relational Vs Transactional
• Based on knowledge discovery: Association
rule, classification rule, characteristics rule.
• Based on technique: Statistics, Fuzzy Logic,
Decision Tree, AHP etc.
 Tools and Techniques of DM
• Statistics: Data selection, sampling, knowledge
extraction.
– Methods: Heuristics or rule of thumb, outliers,
clustering etc
– Data analysis: Hypothesis testing, regression and
correlation analysis, Amos, Lisrel etc.
 Tools and Techniques of DM
• Transaction Vs Relational Database: Mining
association rules in transactional and
relational database is the most attractive
topic.
– Eg: if a customer buys cornflakes then the
customer also buys milk.
 Tools and Techniques of DM
• AHP: Analytical Hierarchy Processing.
• Introduced by Dr.Thomas Saaty in early 1970’s
• Analysis
– Separating material or any entity into its
constituent elements
 AHP Basic Concepts
• Decompose problem and structure hierarchy
• Establish priorities
• Synthesis of judgments
• Evaluate inconsistency
 Why AHP?
• Helps organize the various elements of a
problem into a hierarchy
• Guides you in judging via pair-wise comparisons:
– The importance of the objectives
– The preference for the alternatives
• Helps you derive priorities by combining:
– Intangible information from your experience and
intuition
– Tangible information such as data
 Typical Application Areas
• Choosing
e.g. target market, retail site
• Resource Allocation
e.g. sales force team, budget
• Evaluation
e.g. salesperson performance, proposal
 AHP Traditional Model

Goal Goal
Goal

Criteria C1 C2 C3 C4
C1 C2 C3 C4

A1
A1 A1
A1 A1
A1 A1
A1
Alternatives
A2
A2 A2
A2 A2
A2 A2
A2
A3
A3 A3
A3 A3
A3 A3
A3
 Tools and Techniques of DM
• Decision Tree: Tree shaped structure that
determine the sets of decisions.
– Classification and regression.
 Decision Trees: Example
Sample Decision Tree

Outlook
sunny overcast rain

Humidity Play Windy

<=75 true false

> 75

Play No {1}
No Play No Play Play

Five leaf nodes – Each represents a rule

 Decision Trees: Example
Rules corresponding to the given tree
1. If it is a sunny day and humidity is not above 75%,
then play.
2. If it is a sunny day and humidity is above 75%, then
do not play.
3. If it is overcast, then play.
4. If it is rainy and not windy, then play.
5. If it is rainy and windy, then do not play.
 Decision Trees: Example
Classification of new record
New record: outlook=rain, temp =70, humidity=65,
windy=true.
Class: “No Play”

Accuracy of the classifier

determined by the percentage of the test data set that is
correctly classified
 Decision Trees: Example
Test Data Set

Outlook Temp Humidity Windy Class Rule 1: two records

Sunny 79 90 true Play Sunny & hum <=75
Sunny 56 70 False Play
(one is correctly
Sunny 79 75 True No Play
classified)
Sunny 60 90 True No Play
Accuracy= 50%
Overcast 88 88 False No Play
Overcast 63 75 True Play Rule 2:sunny, hum> 75
Overcast 88 95 False Play
Accuracy = 50%
Rain 78 60 False Play
Rule 3: overcast
Rain 66 70 False No Play
Rain 68 60 True Play Accuracy= 66%
Cost, Benefits and Effectiveness of DM tools

• Data mining users can evaluate the effectiveness of their

model by testing its robustness, measuring the accuracy of
the output, and examining its explanatory power.
• The quality of a data mining model’s results depends to a
great extent on its accuracy and explanatory power which in
turn depends on the quality, security, completeness, validity,
consistency, and timeliness of the data in the warehouse.
• The benefits of using data mining to the knowledge worker
are improved timeliness and flexibility of information due to
both rapid model development and the accumulated value
of a continuously evolving model.
Thank You
 Annexure I: Sales Force Automation
• In the increasingly competitive marketplace, information technology
(IT) is now frequently being employed as a distribution channel and
medium of interaction.
• For high-level financial services, it is frequently difficult to separate
technology from the relationship between firms and their customers.
• Some technology implementations may reduce interaction across
the employee – customer interface . However, customer satisfaction
in many services depends strongly on the service encounter .
• For technology to enhance competitiveness, it must deliver real
value to customers in the service interaction, and customers must
like it.
• So the sales force need to be equipped with rt information at rt time
and rt place.
 Sales Force Automation
• Part of the movement toward greater use of IT involves
adding sales force automation (SFA) systems to the sales
process. SFA is an example of technology used on the
customer interface, where it can affect customer
relationships.
• Successful application of SFA can potentially help a company
develop strategic advantage due to speed, improved accuracy,
greater synergy, and cost saving.
• Some salespeople individually own and use laptop computers
or cellular/mobile phones, but this does not necessarily imply
that the sales force is automated.
 Sales Force Automation
• Rivers and Dart (1999), indicate that SFA involves converting
manual sales activities to electronic processes through the use of
various combinations of hardware and software applications.
• Gillan (1992) argues that SFA systems should be integrated with
corporate information systems to facilitate the flow of information
across sales and related functions such as marketing and
customer service.
• As these definitions imply, frequently SFA does this through
streamlining routine information management and flow. SFA can
be considered to be sales management systems, which implement
technology in order to serve salespeople and customers by
enhancing efficiency of information use in the sales process.
 Transition from e-CRM to m-CRM
• Mobile CRM as defined by Camponovo et al.
(2005) aims at nurturing customer
relationships, acquiring or maintaining
customers. It also supports marketing, sales or
service processes and uses wireless network
as medium of delivery to customers.
• Mobile CRM helps business managers to reach
more close to customers.
 Key Drivers for m-CRM
• The key drivers with mobile market as defined by Muller-Veerse (2000)
are:
– Ubiquity: The communication of the organization with customers is
independent of the locations. The organizations managers can sit any
place and access customer related data without being at their office
premises.
– Reachability: The mobility has provided organization executive better
interact with customers. The customers can be reached at remote
places to get their views regarding the product and update customers
on new products.
– Security: The increase in security of wireless network has made mobile
market more reliable. The new technology provides various protocols
which helps ensure the security require for customer data over
wireless network.
 Key Drivers for m-CRM
– Convenience: The more close organization goes to the customers, more
convenient customers feel regarding the accessibility of organizations managers.
In other word mobile market has shorten the distance between the customers
and organization which has provided convenient way for customers to interact.
– Localization of service and applications: The mobility has helped the
managers to have the data available at all time irrespective of the location. That
means location is not a barrier for the organization managers to interact with
the customers.
– Instant Internet connectivity from a mobile phone: This has helped users of
mobile phone to be always in touch with each other. The users can know use
Internet to access any pieces of information.
– Personalization: The personalization has increased as more interactivity is
possible between the organization personnel’s and customers. The demographic
details and other details of the customers can be better collected by going more
close to them rather than from distance place.