Cruising somewhere along U.S. Interstate 80 right now is a truck driver with about $500 worth of high-end tea in his cab.
Truck drivers may not be the first demographic youd think of when deciding whom to target as a fastidious tea drinker, but the ability to make such seemingly unlikely connections is driving interest in analytic customer relationship management systems, or CRM analytics, one of the newest and fastest-growing segments of CRM today.
The dilemma of how to identify great customers was facing Bill Todd, owner of Todd & Holland Tea Merchants, an importer of upscale tea and tea accessories that sells its goods via the Web, catalogs and a storefront just outside Chicago. Because of the high cost of acquiring new customers —- specialty teas are very much a niche market — Todd felt that retaining his current customers and deriving more business from them was critical.
"The frustration of the Web is we cant get that same touch that we get with customers when we see them face to face," Todd says. He notes that the truck driver is a loyal customer and asks, "How do you type that person?"
For an answer, Todd turned to CRM analytics. While he says Todd & Holland has seen some improvement in sales because of its use of analytics software, he doesnt expect to know for sure whether the investment was worth it until the winter, when cold weather and the holiday season drive his best tea sales.
The cataclysmic failures of CRM projects past have turned much of the software purchased into dead wood. Analytics applications, which act much like data mining tools, are resurrecting those projects from the ashes. A recent report by Meta Group forecasts that sales of CRM analytics would surpass all other CRM purchases in the next 12 to 18 months. Of the 400 enterprises surveyed by the research firm, 37 percent said analytics would become the key ingredient in their CRM stew.
"Its a way to lift CRM projects into a higher level of return on investment," says Doug Laney, a Meta Group analyst. "Any time theres a large amount of cross-functional data you can explore for relationships, thats an ideal solution for data mining."
CRM encompasses the business practices of handling customer interactions. Sales forces, contact centers and marketing departments use "operational" CRM, applications designed to optimize each customer interaction by collecting data about the customer.
"If you go back and look at the history of software, once youve got an operational system in place, youre collecting information — but it isnt useful until you can use that data," says Susan Gertzis, director of marketing of SPSS, a CRM supplier in Chicago.
Putting that data to use is what CRM analytics is all about. But Nelle Schantz, software vendor SAS Institutes program director for CRM, warns that analytics shouldnt be seen as a way to resurrect CRM projects that were doomed from the start. If a company hasnt figured out a way to make CRM work, or how to get its employees to use it, then applying analytics can be a big waste of time and money.
"The analytics are critical, but you cant use it unless you have an operational front end to deliver it," Schantz says.
Hitting the Bulls Eye
Traditionally, companies have implemented CRM analytics software to capture customer interactions in a database and apply reporting tools to identify customers buying and browsing patterns. Based on that data, a company can launch more accurate marketing campaigns, optimize its Web site or improve customer service.
"Companies are realizing they need to be targeted with their messages," says Brett Ehrlich, director of product marketing of Kana, a CRM company that merged with Broadbase Software in April. The new Kana combines Broadbases analytics technology with Kanas CRM tools.
More recently, Siebel Systems, by far the leader in sales of CRM software, acquired nQuire Software, another analytics specialist. In addition, Siebel already had marketing relationships in place with SPSS and Netherlands-based DataDistilleries.
Ehrlich says that as the bad taste of failed CRM projects still lingers with companies, theyre demanding that analytics and reporting be a part of the system from the very beginning and tied in to a successful CRM platform.
"Businesses want to gain some insight for what customers are calling for and how effective marketing campaigns are so they have insight into the future," Ehrlich says. Analytics can determine which customers should be marketed a particular product or given special discounts, based on their profiles.
Increasingly, however, companies are considering using CRM analytics at the point of sale, when they already have the customers attention. Todays analytics technology can combine the historical data about customers — such as their addresses, ages, products theyve previously purchased and the amount of money they tend to spend — with information about an active customer interaction, such as what a customer currently has in his or her shopping cart.
Not everyone is convinced that the analytics train is ready to enter the e-business station. Keith Raffel, chairman of online sales force automation service UpShot, thinks CRM analytics today is much like the craze over wireless CRM a year ago.
"We introduced a wireless module, and its nice to have, but that was more a result of listening to analysts than it was listening to customers," Raffel says. "Today, were hearing more from analysts than we are from customers that analytics is the next best thing."