Database: The Missing Link

CRM systems need analytical help to support direct marketing activities

August 2007 By Bill Singleton

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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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