Cost and integration top analytical CRM issues

Finding themselves sweating in the current gloomy economic climate, companies are especially eager to harness their wild customer relationship management (CRM) data to maximize their marketing dollars. But there are plenty of obstacles, say users and analysts.

Although advances in Web, storage and business intelligence technologies make analytic CRM systems more attractive than ever, users still face a big upfront investment, as well as scalability and data integration issues.

International Data Corp. (IDC) in Framingham, Mass., predicts that spending on CRM analytic applications will surpass US$2.3 billion by 2004, a 51 percent increase since 1999. But users and analysts agree that the devil is in the data.

“The biggest challenge is that data is in silos, so it takes a lot of effort to take all that and get a single 360-degree view of the customer,” said Bill Lepler, vice-president of CRM at The Limited Inc., a clothing retailer in Columbus, Ohio.

The company, whose stores include Express and Victoria’s Secret, has started doing marketing pilot tests using analytical software from Cary, N.C.-based SAS Institute Inc. The application helped The Limited target 100,000 of the best potential customers for a recent upselling and cross-selling campaign, resulting in a 400 percent return on investment in the marketing campaign.

Fighting over the question of who owns the data is another issue, said Kaenan Hertz, director of CRM and digital intelligence at the Reston, Va.-based Student Loan Marketing Association, or Sallie Mae. The firm uses a mixed set of applications from vendors such as E.piph-any Inc., in Santa Clara, Calif., to cross-sell to customers. “People who are responsible for certain databases don’t want other people accessing data from them,” said Hertz.

The cost of the applications keeps some users on the fence. According to SAS, $500,000 is about average for a full analytical CRM package.

“One of the biggest fears is that it is a very expensive proposition, and you have to prove there is a return on that kind of expenditure,” said Jim Sofranko, the executive director of marketing and new business development at Chicago Blackhawks Hockey Team Inc. It’s hard to craft a return on investment on analytical CRM, he said, but the franchise is interested in pursuing it anyway.

The Internet has made it relatively cheap to run marketing campaigns via e-mail and to leverage disparate pieces of CRM data gathered through the Internet and other channels into one place for analysis, said Jeff Hunter, a CRM director at General Mills Inc., a food producer in Golden Valley, Minn.

But he said there are limitations. “We have to approach this in a particular way, as we’re a consumer packaged food goods company and no database covers all customers,” Hunter said.

General Mills this year plans to run analytical CRM pilots using its SAS business intelligence application.