From Data to Decision

Feature Article | November 29, 2006 by SAP News

Companies face a universal, fundamental problem, turning the ever-growing sea of data they gather into actionable business decisions. CRM analytic applications help users analyze large and disparate sources of data and turn them into real business actions and best practices. Increasingly, CRM analytics software is bridging the gap between analysis and action.
SAP, for example, delivers critical business insight to improve core horizontal and industry-specific business processes including analytics for CRM that enable companies to analyze and optimize customer acquisition, customer retention and customer cross-sell and up-sell processes.
And while CRM analytics have become an important function for companies seeking to gain efficiency and capitalize on their existing customers, Gartner warned not every organization is ready and willing to invest in CRM analytics. Its analysis was the result of more than 500 interviews with clients across multiple industries. The clients, said the research firm, were at varying degrees of CRM maturity.

Adding to technology budgets require more justification than ever

Gartner emphasized while CRM analytics is a growing strategy for companies aiming to take full advantage of their investments in managing customer data or in operational systems – such as for customer service agents or sales force automation – , companies are cutting costs and additions to the technology budget require more justification than ever to gain approval.
Gartner analyst Gareth Herschel wrote in a research note, called “How to Tackle 10 Excuses Not to Invest in CRM Analytics,” that when presenting the case for CRM analytics, proponents should be prepared for some of these excuses. “I would like to invest in analytics, but my manager just doesn’t get it,” or “We tried it, but didn’t get any results,” or “We tried it but didn’t get the results we expected,” he wrote in the research paper.
The above three excuses tend to pop up when someone floats the expectation that analysis will magically generate return on investment with no further activity on the company’s part. Analytical investments can change opinions and influence decisions, but Gartner emphasized they cannot call customers, launch new products or fix broken processes.
Other excuses include: “We’re doing fine without the analytics; why fix what isn’t broken,” and “We’ve just bought a new operational CRM system and want to get that established first before making any new investments.”

Inertia is difficult to address

Gartner warned that misplaced confidence in how things are going is often the most difficult challenge to address. “In some cases, enterprises resist analysis because of the risk of what it will reveal; in others, all may be well, but early warning signs can be spotted with the right analysis,” the report stated. Of course companies can be lucky if their current success is due to pure talent, but nevertheless they should challenge the status quo with questions about how the enterprise will detect and then respond to changes in competitors’ strategies, its own organizational priorities, the regulatory environment or customer requirements. “Position investment in analytics as ‘insurance’ that current success can continue”, Gartner advises.
According to the Gartner report, which of these explanations for analytical inaction will arise within an enterprise will vary. The firm has seen all of the excuses used, often in combination, to slow the adoption of an analytic component to a CRM strategy. Another frequent excuse is “Employees wouldn’t know what to do with analytics if they had it” and “We are too busy this quarter, maybe in the next planning cycle.”
In these instances, Gartner recommends companies survey employees to identify the analysis and the benefit that having that analysis would have on the customer relationship, noting that this will provide the necessary justification for the analytic investment while ensuring buy-in from the users when the analysis is deployed.

Analysis can play the role of a neutral arbiter

Institutionalizing the ability to understand situations and evaluate alternative courses of action enables the enterprise to identify potential problems before they occur or to provide insights that will help to resolve them. In addition the firm emphasized outlining the role that analysis can play as a neutral arbiter to help the company prioritize the issues it is facing and linking the ability of analysis to clarify the business issues with its ability to also provide guidance in how to solve them.
This will enable companies to identify potential problems before they take place. “It takes too long to get results,” “We already do analytics,” and “We are totally in need of analytics, but it is someone else’s problem,” complete the list of ten excuses.
According to Gartner, arguments about cost allocation across multiple budgets and establishing requirements can fatally delay most initiatives and analytics is no exception. “In many enterprises, analytics is ‘owned’ by the people who create the analysis,” the report stated. “With the growing availability of analytic tools targeted at the casual user, there is little excuse for those analytic consumers who wish to invest in self-service tools not to do so.”
Gartner recommends in this instance to establish ownership of analysis with the group who will rely on it, such as the owners of the business process it supports, not with those who have traditionally been responsible for its creation.

Support for business processes

What’s more, market research firm IDC agrees many enterprises have been tackling the need of navigating from data to decision-making and action by implementing CRM analytic applications. These applications allow companies to support CRM with real-time analysis, business process support, data integration and other services. Users will need to pay close attention to both simple and complex analytics by weighing their effectiveness in ROI and in qualitative value.
CRM analytics comprise all programming that analyzes data about an enterprise’s customers and presents it so that better and quicker business decisions can be made. The challenge for most enterprises is an abundance of data, but no insight. Challenges such as how to identify relevant data, access the relevant data and manage this data, can make it difficult for companies to figure out what is truly important and zero in on it. As companies adopt these applications to enhance the effectiveness of finance, CRM and operations, they will gain a distinct competitive advantage over those companies that tolerate traditional inefficiencies.
According to IDC, the worldwide market for analytics software will reach more than $4.8 billion by 2007. And CRM analytics is expected to grow the fastest, with a compound annual growth rate going forward of 12.9 percent. IDC calculates that CRM analytic applications sales grew 11.3 percent last year, reaching $1.14 billion.

Finding out customer behaviour patterns

On the benefits side, analysts emphasized a critical piece of customer data is customer behaviour patterns because if a company understands its customers’ behavioural characteristics and can place them within a predictable model, the company will understand significant insights as to how to build rapport with them, how they make purchase decisions and what products and services they will likely purchase.
Even so companies looking at this complex space should keep several factors in mind. Vertical market specialization is increasing the capabilities of CRM analytics for many companies and enterprises must also evaluate whether building or buying CRM analytics systems will allow them to better reach their goals for return on investment (ROI).
Another major challenge in CRM analytics is how to integrate the analytical software with existing legacy systems as well as with other new systems. Analysts predict that even in the most conservative organizations, elements of analytics are increasingly forcing their way onto the business management agenda.
Companies should not let the challenges of customer data analytics cause them to miss out on the significant value that can be unleashed by appropriately using customer data to create insight and relevance. Gartner pointed out enterprises that take the time to understand the real benefits that analytics will bring to their customer relationships and the increasing ease of deployment and use of analytic tools will continue driving this type of initiative to the top of the business agenda.

Barbara Gengler

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