A better CRM: How analytics makes us smarter
Ah, the deluge of data. Consumers generate a jaw-dropping amount of it every day, about 2.5 quintillion bytes of data. And every day, companies and their traditional customer relationship management (CRM) solutions struggle to make sense of it. According to a recent IBM survey of 1,734 chief marketing officers, 71 percent felt underprepared for the explosion of data their companies are facing.
These companies understand that collecting data is just one small piece of the puzzle. "You may have all the data in the world," says Srini Chari, Managing Partner of Cabot Partners Group, "but if you do not turn that data into actionable intelligence and then act on it, there is no value to the data."
The pressure on companies to tap into all this data serves as the backdrop for the mounting interest in the power of business analytics. An IBM study of chief information officers conducted in 2011 found that 83 percent identified analytics as their top-priority investment area. Analyzing data from both within and outside of a company's four walls can turn information into insight and give companies a competitive edge.
Gaining better insight with data
As part of a CRM platform, business analytics uses seemingly unrelated real-time data and information to provide new insight into customers. The thinking goes that with this new insight, companies can improve loyalty, retain customers and ultimately, improve profitability. In fact, Nucleus Research reports that for every dollar invested in analytics, companies realize a return of $10.66. One form of analytics, predictive analytics, can even predict the outcomes of future customer interactions, keeping a company one step ahead of its customers and their evolving interests and behaviors.
Geoff Hamelin, Global Business Advisor for Business and Customer Strategy at IBM, has been helping companies capitalize on the new opportunities presented by the convergence of digital, social and mobile technologies. "Analytics is core to enabling capabilities in every aspect of an organization," says Hamelin. "It helps you do things more efficiently, make better decisions, drive growth, be proactive and manage from a position of knowledge rather than a position of gut feel which is the more traditional approach on a lot of things."
Companies in the retail and banking space in particular have been successful at analyzing real-time customer events to determine the next best action for their customers. These organizations analyze data to determine what an individual customer wants or needs from the company, all in real-time. These actions can range from a sales promotion to an up sell opportunity to even an apology for poor customer service.
Improving ROI by leveraging data
"We're seeing companies get a significant return on investment on creating marketing content based on an individual's behavior," says Hamelin. "With seamless offer optimization, companies are seeing huge gains in not only online selling but also within retail stores and call centers."
Companies are also using analytics to better understand market trends as well as manage inventory. Hamelin illustrates the power of analytics by citing an auto parts store that leveraged multiple factors including local vehicle registration, age of vehicles and vehicle reliability as well as customer behavioral data to predict customer demand and optimize inventory availability at multiple store locations.
Whatever the company's aim, Hamelin says that the importance of analytics cannot be understated. "When I look at the core areas of sales, service and marketing, you need to use analytics to understand what my customers are saying about me that I can't see. If you don't understand what customers want and need, there's someone else out there that is trying to figure that out and trying to make you irrelevant."
Challenges of unstructured data
Striving to become a data-driven company does have its challenges however. And unstructured data, which accounts for up to 80 percent of all data, amplifies those challenges. "Companies cannot afford to miss that vast 80 percent of information that could contain a considerable amount of insight," says Chari. "But it's a place where technology is still evolving."
Yes, the ability to navigate and analyze unstructured data like Twitter feeds, blog posts, log files and video can be incredibly valuable to companies. And as the amount and nature of data changes, so too does the technology that makes sense of it.
According to Hamelin, "Companies already struggle with data in general. With unstructured data, clients are realizing more and more that it takes specific tools, technology and people to take advantage of all this data and turn it into something that is actionable."
Diamond in the rough
There's no doubt that marketing to the individual is fast becoming the status quo in business. We are moving away from a traditional marketing model to delivering customized, targeted offers to customers with what they need and where they need it. . And in this increasingly customer-centric environment, we are moving to highly personalized products and customer service with the goal of retaining customers and increasing loyalty. In order to be effective with this new paradigm, companies will need to move past an intuition-driven approach that businesses are so accustomed to using. The road to a data-driven organization requires companies to understand what data is relevant and how best to leverage it.
"Data is like an uncut diamond in the rough," says Chari. "That uncut diamond needs a lot of work to obtain value in the marketplace. The same is true of data. It has to go through various processes to become valuable to a business."