Database: The Missing Link
CRM systems need analytical help to support direct marketing activities
August 2007 By Bill Singleton
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Does your marketing execution pursue strategy or tactics? Do you have the tools to help you pursue both to success? First you must know the difference between strategy and tactics. Strategy: the grand design, the plan for obtaining a specific goal, such as learning how to sell trucks. Tactics: a set of actions, devices or methods in service of the strategy, such as each day’s coursework in a sales class about how to sell trucks.
The Goal
The most effective marketers focus successively on their strategy and their tactics. Accomplishing this ideal approach requires the development and execution of a strategy through the well-organized and efficientperformance of intricate sets of tactical actions in phone, e-mail, online, viral and direct mail campaigns. The mechanics of such a performance are greatly supported by good marketing tools that accommodate customer database management, linked to advertising planning, accounting and distribution systems for outputting the instructions and materials. Highly touted tools include enterprise resource planning (ERP) systems’ CRM modules, with their grasp of the enterprise’s divisions, and marketing analytics modules to analyze customer activity and execute promotional plans.
The Problem
In the recent past, several companies with big ERP and CRM systems asked me to help them understand their customers for direct marketing purposes. When I looked into their customer data management systems, I was impressed with the sophisticated links they had to other company areas to support comprehensive and efficient reporting of inventory, orders and sales, shipments, and the history of the customers’ activities. These systems—for example, SAP/CRM and Oracle/Siebel/CRM—enabled the firms to input, sell to and organize their customers in a variety of account and contact structures.
So, why did they ask me for help? They asked because the analytics software did not let the firms perform the direct marketing analyses and strategic planning activities they felt they needed to plan and conduct marketing their way.
Put another way, the direct marketers at these companies knew that they needed to plan strategically, but they could not manipulate the customer buying information within the CRM systems to take a strategic rather than a tactical view of their customers. They wanted to perform data transformation and simple profiling steps to create or identify the variables that determined the buying behavior of their customers. The CRM systems only could present them with the operational data: order number, date, item at cost and retail, address, payment terms, and a keycode or campaign code captured during the transaction. They could not look at customer demographics, lifetime value or the customers’ successive responses to multiple promotions. They wanted to create a long baseline recency, frequency and monetary value (RFM) model, or use other statistical tools that these marketers were accustomed to accessing. So, they needed another point of view and the data access to take these steps.
The Light Dawns
The corporate requirements for reporting, financial transparency and compliance increase each year, growing as the companies themselves grow. The thoughtful selection of the right business operations system can simplify the management team’s focus on special projects of financial reporting and governmental compliance by standardizing those functions across the organization. These systems also can support multiple customer contact points through an account structure that separates and identifies the distinct contacts to which products and services are sold, shipped and billed.
Strict requirements are imposed on the users of these systems. They have to direct and modify their business rules to the one-size-fits-most approach employed by these ERP packages. If they don’t, all of the preprogrammed, information-sharing relationships and reports won’t work. Similarly, their marketing efforts have to follow the CRM packages’ approaches to handling customers. The ERP system provides detailed records on who and where the customers are and what items they bought at specific times for what payment terms. CRM packages reformulate this data to let marketers examine some views of customer behavior and select segments based on the available information. They are not designed to substitute for a full range of marketing management and statistical analysis tools.
The Mechanics
Let me illustrate what I mean by describing two projects, one that I saw a client perform and one that its system could not support. A marketing manager outlined an e-mail campaign to tell customers about a new product. The marketing analyst accessed existing records to find customers who had purchased within the same product category as that of the new item. She pulled the customer account information and e-mail addresses into the CRM campaign management module. She grouped the qualified customers into segments to receive different versions of the e-mail offer. Each segment was defined and loaded into the campaign management screen and assigned a keycode that would be part of the cookie that a response to thee-mail would trigger for tracking. The file of coded e-mail addresses was released for use by an e-mail service. Once the e-mails were sent, the responses were tabulated by segment in the CRM campaign management system and reported.
This was a perfect use of the system to accomplish tactical marketing. But what if the client had wanted to develop a customer contact strategy with a year-long timeline for product introductions, upselling and cross-selling promotions? Could the company do that within the CRM system?
The marketing manager described just that type of project to me. She wanted to enhance her customer database with business firmographics: employee size, annual sales and industrial classification. Then she wanted to analyze the customers’ purchases and characteristics and create distinct segments. From this segmentation she wanted to develop a contact strategy to reach the top customers more than the bottom customers. She described a system that would track all of the e-mail and direct mail she wanted to send to communicate with each contact at each account.
I outlined the tracking requirements and added boxes and arrows on top of the company’s system diagram. A good CRM system, I said, had to be able to do all of the things that she wanted if it really was a CRM and analytical solution. She responded by pointing out that almost all of the arrows with inputs and outputs and the boxes with tracking files and analytical techniques I had drawn were outside the scope of the system. The CRM module worked to load customers and execute campaigns once the strategy was developed and all of the tactics to support the strategy were planned. But looking at the customers from a broader perspective to create the strategy was not possible. Similarly, the CRM analytics package was not designed to explore and model the customer data with techniques such as frequencies, correlation, customer profiling, market-basket analysis, regression or RFM modeling.
The Solution: Go Outside
The solution to the issues of transforming and working with the customer data in such ERP/CRM systems is to stop expecting the CRM analytic package to perform functions for which it’s not designed. I suggested to my client that she extract the customer records and the contact and sales data from her system. Then her marketing analyst or an outside service could use SAS or SPSS programs and standard direct marketing techniques to transform the data as needed. The analyst could identify contacts within a single company and combine the information to create a comprehensive view of the company’s purchases. She could create a record that summarized the purchases over the life of each customer. The customer records could be overlaid more easily with demographics, firmographics or other information that might be associated with purchasing behavior. Then, models based on RFM, lifetime value or other techniques could be created.
These types of database manipulations could be done outside of the CRM system. The resulting analyses would help define and support a marketing strategy. After the creation and approval of the strategy, the company could take the scoring model, mailing plan or other views and analyses of customers and use them to identify the appropriate tactics to implement the strategy. At that point, those tactics could be translated into specific promotions and campaigns to use within the CRM module. The final stage of this out-of-system processing would be the use of the CRM system as it was designed to be used.
Conclusion
As companies continue to explore and implement ERP and CRM systems, they will gain operational benefits. Direct marketers expecting to move in a straightforward path from CRM implementation to the techniques they are accustomed to using, however, might be surprised. The real-time reporting that these systems can offer through their integration of sales, inventory and customer record update capabilities allow for modification or re-execution of successful campaigns. But the systems do not operate well as direct marketing strategic planning and analysis tools. Direct marketers will best serve themselves and their companies if they have performed separately the analyses needed to define long-range, strategic programs—and then leverage this insight to deploy promotions through their CRM system.
Bill Singleton is a manager of analytic and consulting services with the Allant Group in Naperville, Ill. He frequently writes and speaks on database marketing topics. The conclusions offered in this article are his alone, based on experience with clients with SAP and Siebel installations and his own research. He can be reached at bsingleton@allantgroup.com or (630) 579-3448.
The Goal
The most effective marketers focus successively on their strategy and their tactics. Accomplishing this ideal approach requires the development and execution of a strategy through the well-organized and efficientperformance of intricate sets of tactical actions in phone, e-mail, online, viral and direct mail campaigns. The mechanics of such a performance are greatly supported by good marketing tools that accommodate customer database management, linked to advertising planning, accounting and distribution systems for outputting the instructions and materials. Highly touted tools include enterprise resource planning (ERP) systems’ CRM modules, with their grasp of the enterprise’s divisions, and marketing analytics modules to analyze customer activity and execute promotional plans.
The Problem
In the recent past, several companies with big ERP and CRM systems asked me to help them understand their customers for direct marketing purposes. When I looked into their customer data management systems, I was impressed with the sophisticated links they had to other company areas to support comprehensive and efficient reporting of inventory, orders and sales, shipments, and the history of the customers’ activities. These systems—for example, SAP/CRM and Oracle/Siebel/CRM—enabled the firms to input, sell to and organize their customers in a variety of account and contact structures.
So, why did they ask me for help? They asked because the analytics software did not let the firms perform the direct marketing analyses and strategic planning activities they felt they needed to plan and conduct marketing their way.
Put another way, the direct marketers at these companies knew that they needed to plan strategically, but they could not manipulate the customer buying information within the CRM systems to take a strategic rather than a tactical view of their customers. They wanted to perform data transformation and simple profiling steps to create or identify the variables that determined the buying behavior of their customers. The CRM systems only could present them with the operational data: order number, date, item at cost and retail, address, payment terms, and a keycode or campaign code captured during the transaction. They could not look at customer demographics, lifetime value or the customers’ successive responses to multiple promotions. They wanted to create a long baseline recency, frequency and monetary value (RFM) model, or use other statistical tools that these marketers were accustomed to accessing. So, they needed another point of view and the data access to take these steps.
The Light Dawns
The corporate requirements for reporting, financial transparency and compliance increase each year, growing as the companies themselves grow. The thoughtful selection of the right business operations system can simplify the management team’s focus on special projects of financial reporting and governmental compliance by standardizing those functions across the organization. These systems also can support multiple customer contact points through an account structure that separates and identifies the distinct contacts to which products and services are sold, shipped and billed.
Strict requirements are imposed on the users of these systems. They have to direct and modify their business rules to the one-size-fits-most approach employed by these ERP packages. If they don’t, all of the preprogrammed, information-sharing relationships and reports won’t work. Similarly, their marketing efforts have to follow the CRM packages’ approaches to handling customers. The ERP system provides detailed records on who and where the customers are and what items they bought at specific times for what payment terms. CRM packages reformulate this data to let marketers examine some views of customer behavior and select segments based on the available information. They are not designed to substitute for a full range of marketing management and statistical analysis tools.
The Mechanics
Let me illustrate what I mean by describing two projects, one that I saw a client perform and one that its system could not support. A marketing manager outlined an e-mail campaign to tell customers about a new product. The marketing analyst accessed existing records to find customers who had purchased within the same product category as that of the new item. She pulled the customer account information and e-mail addresses into the CRM campaign management module. She grouped the qualified customers into segments to receive different versions of the e-mail offer. Each segment was defined and loaded into the campaign management screen and assigned a keycode that would be part of the cookie that a response to thee-mail would trigger for tracking. The file of coded e-mail addresses was released for use by an e-mail service. Once the e-mails were sent, the responses were tabulated by segment in the CRM campaign management system and reported.
This was a perfect use of the system to accomplish tactical marketing. But what if the client had wanted to develop a customer contact strategy with a year-long timeline for product introductions, upselling and cross-selling promotions? Could the company do that within the CRM system?
The marketing manager described just that type of project to me. She wanted to enhance her customer database with business firmographics: employee size, annual sales and industrial classification. Then she wanted to analyze the customers’ purchases and characteristics and create distinct segments. From this segmentation she wanted to develop a contact strategy to reach the top customers more than the bottom customers. She described a system that would track all of the e-mail and direct mail she wanted to send to communicate with each contact at each account.
I outlined the tracking requirements and added boxes and arrows on top of the company’s system diagram. A good CRM system, I said, had to be able to do all of the things that she wanted if it really was a CRM and analytical solution. She responded by pointing out that almost all of the arrows with inputs and outputs and the boxes with tracking files and analytical techniques I had drawn were outside the scope of the system. The CRM module worked to load customers and execute campaigns once the strategy was developed and all of the tactics to support the strategy were planned. But looking at the customers from a broader perspective to create the strategy was not possible. Similarly, the CRM analytics package was not designed to explore and model the customer data with techniques such as frequencies, correlation, customer profiling, market-basket analysis, regression or RFM modeling.
The Solution: Go Outside
The solution to the issues of transforming and working with the customer data in such ERP/CRM systems is to stop expecting the CRM analytic package to perform functions for which it’s not designed. I suggested to my client that she extract the customer records and the contact and sales data from her system. Then her marketing analyst or an outside service could use SAS or SPSS programs and standard direct marketing techniques to transform the data as needed. The analyst could identify contacts within a single company and combine the information to create a comprehensive view of the company’s purchases. She could create a record that summarized the purchases over the life of each customer. The customer records could be overlaid more easily with demographics, firmographics or other information that might be associated with purchasing behavior. Then, models based on RFM, lifetime value or other techniques could be created.
These types of database manipulations could be done outside of the CRM system. The resulting analyses would help define and support a marketing strategy. After the creation and approval of the strategy, the company could take the scoring model, mailing plan or other views and analyses of customers and use them to identify the appropriate tactics to implement the strategy. At that point, those tactics could be translated into specific promotions and campaigns to use within the CRM module. The final stage of this out-of-system processing would be the use of the CRM system as it was designed to be used.
Conclusion
As companies continue to explore and implement ERP and CRM systems, they will gain operational benefits. Direct marketers expecting to move in a straightforward path from CRM implementation to the techniques they are accustomed to using, however, might be surprised. The real-time reporting that these systems can offer through their integration of sales, inventory and customer record update capabilities allow for modification or re-execution of successful campaigns. But the systems do not operate well as direct marketing strategic planning and analysis tools. Direct marketers will best serve themselves and their companies if they have performed separately the analyses needed to define long-range, strategic programs—and then leverage this insight to deploy promotions through their CRM system.
Bill Singleton is a manager of analytic and consulting services with the Allant Group in Naperville, Ill. He frequently writes and speaks on database marketing topics. The conclusions offered in this article are his alone, based on experience with clients with SAP and Siebel installations and his own research. He can be reached at bsingleton@allantgroup.com or (630) 579-3448.
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