Analyze your customers

A customer data warehouse is no longer enough. From startup dot-coms to established companies, businesses are turning to CRM analytics to get closer to their customers and close that sale.
Posted September 26, 2000

Alan Radding

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AXA Financial Inc.'s Sharon Sibigtroth, managing director, strategic data

When AXA Financial Inc., a New York-based diversified financial services company, focused on its products, it didn't bother with customer relationship management or CRM analytics. Customers? They weren't even on the radar screen. AXA is a company with $565 billion in assets under management, and about two years ago things started to change dramatically. New management declared customers, not products, to be the primary company focus.

"This shift kicked off a number of changes in IT. Basically, we were going to transform the agent from an insurance person to a financial person," explains Sharon Sibigtroth, managing director, strategic data at AXA Financial. Now, the agent--and everyone else--needs to understand the customer, his or her motivations, retention issues, and more. In short, they need information about the customers. So, the IT group set about building an enterprise data warehouse as its first step toward providing this information.

Very quickly, the enterprise data warehouse was bulging with customer data. "There was a lot of data. Humans can't really handle it alone. We needed analytical and datamining tools," continues Sibigtroth. By 1999, the company added SAS Enterprise Miner from SAS Institute Inc. as its global choice for CRM analytics. "We set up a new group to help us understand customer needs, motivations, and retention issues, and SAS' Enterprise Miner will help us do this," says Sibigtroth. Insights gained here will be used to personalize communication and interaction with customers.

AXA Financial isn't the only company adopting CRM analytics. From startup dot-coms that desperately need to convert browsers into buyers to established companies seeking to get closer to their customers, businesses are turning to CRM analytics.

Mining insightful nuggets

CRM analytics is the latest label for an old concept, datamining. For a decade or more, large packaged goods manufacturers and direct marketers turned to highly sophisticated datamining tools for insights into how best to promote and merchandise to their customer base.

Proctor & Gamble Inc. and American Express Co. Inc., among a host of leading marketers, employed many statisticians and Ph.D.s armed with complex datamining tools to cull insightful nuggets from volumes of point-of-sale (POS) data and other information they collected. Just a few nuggets could help these companies boost the response rate to a campaign or promotion by a few percentage points, which could easily translate into millions of dollars in additional sales.

"CRM analytics builds on data warehousing, datamining, and business intelligence," observes Phillip Russom, director, data warehousing and business intelligence knowledge center at Hurwitz Group, a research firm based in Framingham, Mass. CRM analytics, or CRA (customer relationship analytics) as Russom prefers, deals with the analysis of information while data warehousing focuses on the management of information. Businesses also use online analytical processing (OLAP) and even ad hoc querying for the purposes of CRM analytics.

CRM is attracting big money. International Data Corp. (IDC) of Framingham, Mass., which does not break out CRM analytics separately but considers it part of the CRM market segment, expects worldwide revenues generated from CRM data warehousing software and services to soar from under 4.2 billion in 1999 to over $20 billion by 2004 (see chart, CRM growth skyrockets).

While any data analysis tool can be applied to CRM and most CRM tools provide some analytics, tools intended for CRM analytics differ in several ways. Often they can capture data directly off an Internet site and perform some analytics in real time rather than in batch mode, thus enabling the organization to respond while the customer is still on the telephone or online. They also will include prebuilt models that address the types of CRM problems many managers typically wrestle with, such as converting browsers to buyers or boosting customer retention.

Driving the interest in CRM analytics, both directly and indirectly, is the Internet, suggests Dan Vesset, IDC senior analyst. The Internet, for example, gives companies access to massive amounts of data that can be analyzed and massaged to reveal valuable insights into customer behavior. "Every click is data to be stored and analyzed," Vesset explains. And this Internet data can be brought together with other data in one place--typically the enterprise data warehouse or a marketing datamartto create a complete picture of the customer.

AT A GLANCE: AXA Financial Inc.
The company: Part of the global AXA Group, which operates in 60 countries, New York-based AXA Financial Inc. manages nearly $565 billion in assets. Its major U.S. brands include The Equitable Life Assurance Society; Donaldson, Lufkin & Jenrette (DLJ); and DLJdirect.

The problem: The company needed IT support for a major business strategy shift from a product-centric to a customer-centric focus.

The solution: Implement a CRM IT infrastructure beginning with an enterprise data warehouse built on a UNIX/Oracle Corp. database platform and customer information architecture. It is installing the Siebel CRM product and has implemented SAS Enterprise Miner for datamining and CRM analytics.

Drilling the data for driving forces

The Internet also magnifies a trend that began before the Internet--the shift in the balance of power from the seller to the buyer, the customer. Customers who had growing numbers of alternatives before the Internet now find a mind-boggling array of options available to them on the Web. If you don't like the product selection, price, or terms being offered, a simple click of the mouse brings up a completely new set of options. In this kind of competitive environment, businesses must become highly attuned to the customer's every whim, identifying and responding to even slight shifts in customer preferences. This is where CRM analytics pays off.

eBags Inc., a Greenwood Village, Colo.-based pure-play online retailer of a wide range of carrying products from handbags to luggage, turned to CRM analytics to better understand its customers and their behavior online. Using Broadbase Software Inc.'s CRM application, Foundation, eBags already has segmented the visitors to its site and is beginning to mine the data. "This will put us light years ahead of what our merchandising and marketing people are used to," notes Mike Frazzini, vice president, technology.

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