Investment ramps up for analytics

The focus of customer relationship management investments has typically been to collect data generated across channels (operational CRM). That will change in 2004. According to a recent report, “Customer Analytics: 85 Percent Do Not Achieve ROI – Know Why Before You Invest”, so-called “analytical CRM” will help executives make sense of – and make decisions based on – the numbers.

According to AMR Research Inc., CRM investment will grow to US$10.8 billion in 2004 – that’s US$1 billion more than 2003’s investment figure. Laura Preslan, research director at AMR, says companies that have made initial investments in data collection tools are now looking to spend as much as US$1 million to $2 million on analytic and predictive modeling tools that will help put more relevant data into their forecasts. Such large-scale investments take anywhere from six to 12 months to deploy.

“Companies have spent millions of dollars to collect data,” Preslan says. “Now, what do you do with it? With analytic tools, companies will have the visibility to make decisions using real-time data.”

Before companies can make new investments in analytical CRM, Preslan says, they must clean up their data warehouses, which are likely polluted with incorrect data culled from legacy databases that were put together in piecemeal fashion and flat-out bad data that was entered incorrectly or submitted falsely. This painstaking process can take several months in severe cases.

What can companies do with this data? For starters, they can change their marketing campaigns on the fly to adjust to real market conditions, not just preliminary forecasts. Preslan says one technology company she recently spoke with saw the response rate to one of its campaigns jump from 0.50 percent to 3 percent (an uptick of .05 percent is considered good) that has contributed $15 million per quarter to the organization’s bottom line. Preslan says analytical CRM has the potential to improve response rates anywhere from 30 percent to 70 percent.

The analyst stresses that it’s not enough just to collect the data and generate reports from it. Executives must devise strategies and communicate them to the rest of the organization to maximize the benefits of CRM investment. Too often, Preslan says, the data stays within the marketing department.

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