IFSM Discussion

CRM, Data Warehouses and Data Mining/Analytics Example:

A man walks into a convenience store to pick up some diapers, at his wife’s request.

While he’s there, he just happens to pick up a six-pack of soda as well. Meanwhile, back

at the convenience store headquarters, a data analyst poring through data in a data

warehouse sees this and recognizes that this pairing is emerging as a pattern.

Opportunity? You bet. The data analyst makes two recommendations to her marketing

department. First, move the diapers and the soda closer together. Second, place similar

items that men in this age group might also be inclined to purchase in between the

diapers and the soda. Welcome to the world of customer relationship management, or

CRM.

This week your readings will explain and define Customer Relationship Management

(CRM). CRM is a foundation element for business knowledge/intelligence. Your readings

will provide some examples of how CRM can be used, describe what makes it work and

who is using it, and discuss whether it has been as successful as many had hoped.

Traditional CRM

CC-BY by Janet Zimmer.

Alternate text: relationship diagram for CRM. Center circle contains “Customer.” Three connected circles

to “Customer” contain “Sales.” Marketing,” and “Service and Support.”

Customer relationship management (CRM) is a strategy used by companies to better

manage customer relationships. CRM also goes by the name of relationship

marketing or customer management. The definition of CRM is very broad because it

includes many facets of business-to-customer relationships. Robust CRM systems are

supported by software suites that help with the management of all the data acquired and

used by the system. But the following might be considered the primary focus of any CRM

system:

• providing a company's marketing department with information needed to identify and

target the company's best customers, design effective marketing campaigns, and

provide the sales team with quality leads

• optimizing the information shared among departments which results in an increased

number of sales and new accounts, better management of existing accounts, and

supporting the use of the latest communication devices (for example, allowing orders

to be made over mobile phones)

• improving customer satisfaction by supporting the development of individualized

relationships with customers; might also include providing the highest level of service

to the most profitable customers

• obtaining and sharing with employees the information and processes necessary for

them to effectively build relationships with their customers through understanding

and identifying the customer's needs (CRM, 2006)

In summary, the primary applications that are supported by a CRM are customer:

• acquisition—obtaining new customers • retention—retaining current customers • loyalty—developing customer loyalty to the company/product • profitability—increasing company profits by serving the customer • service—addressing customer inquiries and resolving issues

Relationships among CRM, Data Warehouses, and Data Mining

CC-BY by Janet Zimmer Alternate text: Relationship diagram in the form of puzzle pieces. Center piece is “Data warehouse.”

Pieces at all connect to the center (but separately) are “Data analysis tools,” Customer support records,”

“Purchasing history,” “Customer demographic data,” and “Data mining tools.”

The example cited in the introduction is one facet of CRM—data mining customers'

purchasing patterns. Data mining is the process of looking at the data stored in a company's

database to determine if statistically relevant trends exist. By identifying these trends and

patterns, companies can develop strategies to better serve their customers and at the same

time increase their sales.

Another example of CRM might be the evaluation of data purchased from a company that

specializes in collecting demographic data on purchasers, including such data as location,

age, gender, ethnicity, home ownership, employment status, and income level, to determine

which individuals might have a requirement for the company’s product or services.

CRM can improve services and products in other ways as well. For instance, if an

organization offers a call center that provides customer support, tracking the kind of support

that is provided most frequently might lead to solutions that could prevent the problems from

happening in the first place.

How It Works - Data Analytics Almost all CRM applications involve using a large relational database, sometimes referred

to as a data warehouse. This is where the raw data about customers, products,

transactions, demographics, and other information is stored. Typically, the data warehouse

gets its information in real time, or nearly so, from systems used to conduct transactions

between the company and the customer—point of sale (POS) systems, e-commerce web

applications, inventory management systems, and others.

Data from the data warehouse is retrieved, organized into categories, and reviewed to

support identification and analysis of data patterns (remember the example at the opening

of this reading?). So data analytics is referred to as "qualitative and quantitative techniques

and processes used to enhance productivity and business gain" (Data analytics, n.d.) . Data

analytics is primarily used in applications that involve the business to customer environment

and includes information about customers, business processes, market economics or

practical experience. Using complex statistical analysis software programs known as data

mining tools, data analysts are able to query the data warehouse in a multitude of ways.

For instance, an analyst might ask the data mining tool to retrieve from the database all

purchases made during the week of June 15 in which two specific products were purchased

together in stores in their East Coast region. Then, once the records are returned, the

analyst would ask the tool to show only those purchases in which a statistically relevant

correlation between the two items existed.

Sound fascinating? That is only the beginning. Consider this: Why not design the data

mining tool to run specific queries such as this one on all data, once a day, and send an e-

mail to the analyst if anything interesting turns up? In other words, why not build "triggers"

into the system that alert the analyst to anything that might be considered an anomaly, good

or bad? Why not have the data mining tool do all the work?

By now, you have probably determined that sophisticated CRM data mining tools do just

that. Although you may have never heard of these data analysis tools (except for the one

that you are using in this class), here is a list of the most commonly used ones as provided

by Vohra (2017):

Open Source Analytics Tools Commercial Analytics Tools R- the most popular big data popular analytics tool in

the industry. It integrates very well with many Big

Data platforms that process and store extremely

large data sets. Known as having a rather

steep learning curve.

SAS- For a long time, the leading data analytics

tool (but costly)..It is robust, versatile and easy to

learn and provides specialized modules SAS

analytics for IOT, SAS Anti-money Laundering,

and SAS Analytics Pro for Midsize Business. Python- a favorite of programmers since its release

in the early 1990s. Today it offers a comprehensive

coverage of statistical and mathematical

functions. Useful in the analysis phase of analytics,

python can also be used as a data gathering tool on

the Internet using a technique known as 'web

scraping'. Data can be extracted or gathered from

nearly any website to analyze content, but data-

centric websites and social media sites are often the

focus of web scraping. The analysis phase of social

media data is also known as social media analytics,

described below.

Tableau- great for creating great visualizations and dashboards. More robust in visualizations that

Excel and can handle much more data than Excel

can.

Apache Spark – built with a focus on analytics, especially on unstructured data or huge volumes of

data

Excel-most widely used analytics tool in the

world. Non-analytics professionals will usually not

have access to tools like SAS or R on their

machines. But everyone has Excel. Apache Storm - tool of choice for moving data or

when the data comes in as a continuous stream. It is

ideal for real time analytics or stream processing

QlikView- another data visualization giant

PIG and HIVE - Most companies that work with Big Data and leverage the Hadoop platform use Pig

and/or Hive Note: "Hadoop is an open source, Java-based

programming framework that supports the processing

and storage of extremely large data sets in a

distributed computing environment. It is part of

the Apache project sponsored by the Apache

Software Foundation" (Hadoop, n.d.).

Splunk- great visualization options, and a web

interface makes it easy to use.

CRM Is Big Business There are real business benefits associated with improving customer relationships and

offering great customer service. Research shows that companies that make customer

experience a priority generate higher profits than their competitors. It is more cost effective

to retain current customers than to attract new ones. So establishing and maintaining a

good relationship with customers is critical to the financial bottom line.

What are major benefits for a company that uses CRM to improve relationships with its

customers?

• With CRM software, a company can track how long current customers have been

with the company, how often they purchase from or use the company's services, and

other key information. Rewarding customer loyalty does more than simply make

customers feel good about the company; it can actually improve the company's

financial picture (What is CRM?, n.d.). Think credit cards, frequent flyer programs,

special offers for loyal customers, and other rewards programs.

• It’s widely accepted that customers and prospective customers judge companies

based on how well the company handles customer issues and complaints. CRM can

facilitate the handling of customer problems because CRM systems allow for a more

rapid response to queries and concerns by forwarding the query to the right

department. And members of each department have access to all the relevant

information, enabling them to answer queries and resolve problems quickly and

easily. This ability to resolve complaints quickly and fairly makes a real difference to

customers’ perceptions of the company. One study showed that more than 85

percent of customers will do business or increase business with a company again if

a customer service issue is dealt with fairly. For customers who have had a negative

experience with customer service, over 70 percent will decrease business with that

company or even switch companies altogether (Barbier, Noronha, & Dixit, 2013). So

it is even possible that a company may forego profits in order to address customer

satisfaction first. For example, product recalls and timely fixes or product

replacements by a manufacturer might result in a loss of profitability. Beyond just the

safety considerations, however, customers who feel they have been served well by

the recall/replacement may return to the same manufacturer for their next product.

Traditional CRM versus Social CRM (SCRM) The number of sales, marketing, and customer service pathways that customers are using

to communicate with companies is expanding quickly. Many customers now use a website

or chat service to request assistance. This, coupled with increased social media usage,

means that customers and potential customers are coming to businesses through more and

different pathways than ever before. With so many potential customers, prospective

customers, and competitors on the various social networks, companies must actively

engage with these platforms to stay competitive. As a result, many companies are turning to

CRM systems that include social media integration (What is CRM?, n.d.), known as social

CRM, or SCRM. An article in Harvard Business Review indicates that 79 percent of

businesses already use or are planning to find a presence on social media sites, although

not all of them feel they are using such a vehicle effectively (Social Media, n.d.).

Traditional CRM

CC-BY by Janet Zimmer

Alternate text: relationship diagram for CRM.

Center circle contains “Customer.” Three

connected circles to “Customer” contain “Sales.”

Marketing,” and “Service and Support.”

In traditional CRM, there is little collaboration between the customer and the company.

Marketing’s focus is on pushing messages to the customers in order to generate sales.

There is definitely a service and support component, of course, which does involve the

customer directly.

Social CRM

CC-BY by Janet Zimmer.

Alternate text: Three layered rectangles. The innermost rectangle contains “Customer.” The next layer

contains “Customer Empowerment” and “Advocacy.” The outmost rectangle contains “Sales,” “Service,”

“Support,” and “Public Relations & Marketing.”

In contrast, SCRM invites the customer to collaborate with the company in solving business

problems, primarily through interaction with online social media sites. This format empowers

customers to shape their own experiences and build customer relationships directly with the

company. Companies such as Coca-Cola and Dell maintain their own such sites. Dell

reports that customers had posted over 18,000 new product ideas and almost 100,000

comments. Nearly 500 of the ideas had actually been implemented by Dell (Reynolds,

2012).

SCRM is a vehicle for direct and indirect advertising, as well. Some social media sites

display banner ads promoting companies or services. These ads can be directed to

everyone who visits the site, or just to certain visitors who match particular demographics.

Another marketing technique is the use of “fans” of a particular site, product, or company.

When you “like” or “friend” a certain page on the Facebook site, for example, you are added

to a fan base which, in turn, promotes awareness about the company or product.

Participation by companies in the social media environment has resulted in a newer branch

of CRM called customer experience management (CEM). Online surveys that you fill out

after purchasing products online or using services such as an airline flight feed into the

company’s management of the customer experience. Loyalty or reward programs are also a

means of managing the customer experience. The customer is no longer a passive recipient

of the company’s services but an integral part of the customer experience and relationship

development.

Trends for the Future of CRM CRM and the software that supports it is not a static product. To address changes in

customer expectations, companies that use CRMs must be sensitive to the following issues

and tasks in making sure the CRM system is effective and efficient:

• Customers expect more. Members of Generation Y—the children of Baby Boomers,

born between 1977 and 1994 and coming of age between 1998 and 2006—often

demand the capability of interacting with a company in ways beyond the traditional

phone call. Those interaction vehicles include web chat, smartphone applications and

social media. In fact, many customers are now reporting that the telephone is their

fourth choice when it comes to interacting with customer support (Earls, 2014).

• Keeping valuable staff. Front-line customer service staff at contact centers are leaving

their positions at a growing rate. Proper CRM training, support, and state-of-the-art tools

to recruit and retain CRM staff should be the focus. Because customers are increasingly

relying on the use of mobile devices and social media, both for communication and for

sharing thoughts (including positive or negative reviews of a company, its products, and

it service record), call center agents, service representatives, and sales personnel will

see a corresponding increase in duties because they are no longer answering only

telephone calls. An agent, whether in customer service or sales, needs to know how to

handle the various means by which customers interact with the company personnel and

use the consumer's information accordingly to solve problems (Earls, 2014; McKoen,

2012).

• Privacy. The information known about consumers gleaned from their digital interactions

continues to grow. Users may be willing to sacrifice some privacy, such as sharing

personal data, if they recognize the purpose or goal of that sharing. But they also expect

the data to be protected and not used for purposes other than the recognized goal.

Companies need to foster a strong sense of trust in the relationship if they expect

customers to continue to share data freely (Earls, 2014). We will address security issues

related to databases in the next page.

• Mining the social media inputs. Customers may be posting on social media sites their

honest insights directed toward products and services. Companies pay for surveys to

gather this same data, which is available for free if the content can be extracted from

these postings. Thus, social media analytics, the gathering of data from blogs and

social media websites for analysis in order to make business decisions, is gaining

importance in businesses. These tools help marketers, sales personnel, and contact

center agents observe customers' social output and respond accordingly to any talk

about their brand (McKoen, 2012).

• Cleaning up the data. Organizations need to continue investing efforts into cleaning up

CRM data. Incorrect and duplicative data can add wasted time and efforts to the work of

call center or sales employees and lead to both errors and missed opportunities (Earls,

2014).

Summary Customer relationship management is a strategy used by companies to better manage customer relationships. CRM is defined very broadly because it includes many facets of business-to-customer relationships. But the following might be considered the primary focus of any CRM system:

• acquisition—obtaining new customers • retention—retaining current customers • loyalty—developing customer loyalty to the company and/or product • profitability—increasing company profits by serving the customer • service—addressing customer inquiries and resolving issues

CRM is an exploding market and career field that incorporates technology, marketing, and

management. The applications appear to be endless in just about every major industry. It is

all about data—collecting it, analyzing it, and acting on it.

CRM can be used to:

• improve relationships with customers by locating and engaging existing and potential

customers, rewarding customer loyalty, and ensuring that customer issues are

resolved quickly and fairly;

• increase revenue and referrals from existing customers; and

• improve products and services by gathering feedback from customers, whether

through surveys or social analytics (What is CRM?, n.d.).

Relationships among CRM, Data Warehouses, and Data Mining Data mining is the process of looking at the data stored in a company's database to

determine if statistically relevant trends exist. By identifying these trends and patterns,

companies can develop strategies to better serve their customers and at the same time

increase their sales. One example of data mining is the evaluation of data purchased from a

company that specializes in collecting demographic data to determine which individuals

might have a need for the company’s product or services.

How It Works Almost all CRM applications involve using a large relational database, sometimes referred

to as a data warehouse, where raw data about customers, products, transactions,

demographics, and other information is stored. Using complex statistical analysis software

programs known as data mining tools, data analysts are able to query the data warehouse

in a multitude of ways. There are real business benefits associated with improving customer

relationships and offering great customer service. Research shows that companies that

make customer experience a priority generate higher profits than their competitors.

Because it is more cost effective to retain current customers than to attract new ones,

establishing and maintaining a good relationship with customers is critical to the financial

bottom line.

Social Relationship Management (SCRM) Customers and potential customers are coming to businesses through more and different

pathways than ever before, using mobile devices and social media sites instead of relying

only on the telephone. As a result, many companies are turning to CRM systems that

include social media integration. This new CRM is typically called social CRM, or SCRM.

To keep pace with changing customer expectations, CRMs must be sensitive to the

following issues and tasks in making sure the CRM system is effective and efficient.

• Increased customer expectations. Customers demand the capability to interact

with a company beyond the traditional phone call.

• Keeping valuable staff. Proper CRM training, support, and state-of-the-art tools to

recruit and retain CRM staff should be the focus. An agent needs to know how to

handle the various means by which customers interact with the company personnel,

and how to use the consumer's information appropriately to solve problems.

• Privacy. Companies need to foster a strong sense of trust in the relationship if they

expect to continue to have customers share data freely.

• Mining the social media inputs. Social media analytics, the gathering of data

from blogs and social media websites for analysis in order to make business

decisions, is gaining importance in businesses. This process helps marketers, sales

personnel, and contact center agents observe customers' social output and respond

accordingly to any talk about their brand.

• Cleaning up the data. Incorrect and duplicative data can add wasted time and

efforts to the work of call center or sales employees. It also can lead to errors and

missed opportunities.

References Barbier, J., Noronha, A., & Dixit, A. (2013, March). Assessing the Economic Value of

Making the Right Customer Satisfaction Decisions and the Impact of Dissatisfaction on

Churn. Retrieved from Cisco: http://www.cisco.com/web/about/ac79/docs/re/Value-of-

Customer-Satisfaction.pdf.

CRM (customer relationship management). (2006, November).Retrieved from Techtarget:

http://searchcrm.techtarget.com/definition/CRM.

Data analytics. (n.d.). Retrieved from

Technopedia: https://www.techopedia.com/definition/26418/data-analytics

Earls, A. (2014, January). Predicting the future of CRM in 2014 and beyond. Retrieved

from Techtarget: http://searchcrm.techtarget.com/feature/Predicting-the-future-of-CRM-

in-2014-and-beyond.

Hadoop. (n.d.). Retrieved from TechTarget:

http://searchcloudcomputing.techtarget.com/definition/Hadoop

McKoen, A. (2012, December 27). Top five CRM trends you should know about. Retrieved

from Techtarget: http://searchcrm.techtarget.com/photostory/2240175337/Top-five-

CRM-trends-you-should-know-about/1/CRM-industry-trends#contentCompress.

Reynolds, G. (2012). Ethics in Information Technology. Boston: Course Technology Engage

Learning.

Social media: What most companies don't know. (n.d.). Retrieved

from http://www.slideshare.net/Geek4Green/social-media-insights-what-most-

companies-brands-dont-know.

What is CRM? (n.d.). Retrieved from Salesforce: http://www.salesforce.com/uk/crm/what-is-

crm.jsp.