Customer databases and real-time CRM

In the latest part of his series on CRM, Khalid Sheikh explains the role that customer databases and real-time CRM play in helping companies build excellent customer relationships

A customer database is an organised collection of comprehensive information about individual customers or prospects that is current, accessible, and actionable for such marketing purposes as lead generation, lead qualification, sale of a product or service, or maintenance of customer relationships.

Database marketing—the predecessor of CRM—is the process of building, maintaining, and using a customer database and other databases (product, suppliers, resellers) for the purpose of contacting, transacting, and building relationships. Companies collect customer information through customer transactions, registration information, telephone queries, cookie information, and information from every contact with a customer at different touch-points. A customer database includes information about a customer’s past purchases, demographics (age, income, family members, birthdays), psychographics (activities, interests, and opinions), mediagraphics (preferred media), and other useful information.

The customer database is the central repository of all of the information pertaining to the relationship of a business and its customers. Since database architecture is not very efficient for analytical applications, CRM uses a data warehouse for storing customer information. Through data mining, marketing statisticians can extract useful information about individuals, trends, and segments from the mass of data. Data mining involves the use of sophisticated statistical and mathematical techniques such as cluster analysis, automatic interaction detection, predictive modelling, and neural networking.

The database stores all information about the customer, such as:

Individual-related information

• Name
• Addresses
• Age
• Income
• Spouse
• Children
• Home ownership
• Pets
• Hobbies
• Sports interests

Company-related information

• Name
• Addresses
• Number of employees
• Revenue
• Standard industry codes (SICs, that define business types)
• Individual buying behaviour
• Site buying behaviour

The database keeps track of all contacts by/with the customer, including:

Customer-initiated contacts

• Purchase transactions
• Calls
• Comments
• Returns
• Service calls
• Complaints

Company-initiated contacts

• Promotional offers
• Letters
• Calls
• Personal visits

The following information can be derived from the data stored in the database:

• Recency: When has the customer last purchased something from the company—a measure of retention.
• Frequency: The number of purchases the customer has made from the company within a specified time frame.
• Monetary Value: The amount the customer has spent on purchases from the company, again within a specified time frame.
• Demographic and lifestyle append: Information about the customer other than purchase transactions, including the customer’s age, income, number and ages of children, interests, and hobbies. CRM uses this information to gain a better understanding of what a customer will value about a relationship with the company, which core products or services or benefits will have the most value, and why these benefits are important to the individual.
• Modelling variables: The weight of the stored variables in predicting the customer’s profitability.

Use of customer database

The behavioural data included in the customer database is used for the following promotional purposes:

• Customer acquisition—identifying prospects: One of the ways companies can generate sales leads is by advertising their products or services through advertisements that include a response feature, such as a business reply card or a toll-free phone number. The database is built from these responses. The database can be sorted to identify the best prospects who can then be contacted by e-mail, phone, or personal calls in an attempt to convert them into customers.
• Customer retention—deepening customer loyalty: The data is used to identify individuals at risk of attrition (also called churn prediction) so that they can be targeted with special promotional activities. Companies can create interest and enthusiasm in customers by making offers that match their preferences, by sending appropriate gifts, discount coupons, and interesting promotional materials.
• Increasing share of wallet by identifying which customers should receive a particular offer: Data is used to help companies up-sell and cross-sell their products and services to specific customers for added profit. Companies set up criteria describing the ideal target customer for a particular offer. The database is scanned for those who most closely resemble the ideal type. Targeting precision can be improved over time by observing response rates. An automatic sequence of activities can be set up to follow a sale, for example a thank you note to be followed by a new offer after some time.
• Reactivating customers by making attractive timely offers: Companies can install automatic mailing programmes (automatic marketing) that send out birthday or anniversary cards, festival shopping reminders, or off-season promotions.
• Avoiding mistakes while interacting with customers: Different staff members of the company might interact with the same customer separately and provide inconsistent or contradictory information. Staff might fail to recognise a premium customer or somebody related to a premium customer and treat them as ordinary customers, leading to the risk of attrition. Such mistakes can be avoided if the people interacting with the customer access the updated customer profile.

Capturing customer information

Capturing customer information is the foundation of CRM and can spell success or failure for any CRM programme. Data capture can either improve customer relationships or destroy them. Transaction processing systems also collect data but they only provide a mechanical description of the transaction, which in reality is a much richer event—at least from the marketing point of view. For example, a customer order entered in a transaction processing system describes what was ordered and when, and what was the price. But it tells nothing about why and how the customer ordered the product. It contains no information that can be used for up-selling and cross-selling products to this customer. It is not practical to capture all the details of every transaction; and most customers won’t like the intrusion into their lives that such data collection entails. The idea is to capture the most useful information and maximise its value.

Most businesses have to deliver their products through intermediaries. This complicates their relationship with customers. Examples of intermediaries include doctors for pharmaceutical companies, agents for insurance companies, wholesalers and retailers for fast-moving consumer goods (FMCG) companies. In such businesses the data collected is not only about customers but also about important intermediaries.

Building a customer database—the critical issues

• What to capture?
• What technology to use?
• Ensuring employee acceptance and implementation: Company representatives must be fully aware of data protection issues, such as how customer information will be used. CRM literature should include customer rights and how information will be used.
• Explaining data capture to the customer: A CRM programme must be communicated properly and not as an intrusive data capture effort. It is important and desirable to be honest and informative with your customers and also with your company representatives about how customer information will be used. In many countries it is the law. Explaining how the information will serve the customer and convincing customers about the programme’s benefits for them is critical to the success of any CRM programme.
• Reiterating programme objectives and benefits and thanking the customer at each communication: Data capture is just the start. Each subsequent communication to the customer should reiterate programme objectives, reinforce benefits, and thank the customer.

The customer database is stored in the data warehouse and data marts.

• Enterprise data warehouse: The true data warehouse is an operational tool serving all areas of the business. Because it serves all functions within the company, it is often referred to as the enterprise data warehouse.
• Data mart: A data mart is simply a sub-set of the data warehouse.

To be valuable to the marketing function, data stored in enterprise data warehouse must be converted into useful marketing information that marketers can use for segmentation, promotion, and analysis. The data mart provides the view of the customer that turns data into useful marketing information.

CRM and Web-enabled call centres

Call centres are where corporations talk directly to their customers, discovering their requirements, persuading them to do business, and ensuring their demands are satisfied. The function of the call centre is more than just tele-marketing, it is an important part of establishing a dialogue with customers. Call centres provide a crucial advantage over self-service media to the company by allowing certain proactive ways that could be easily ignored if only self-service media were used.

To accommodate the needs of today’s sophisticated consumers, the call centre must become a ‘customer interaction centre’ supporting multiple channels of access and integrating with other departments within the company. A Web-based customer interaction system can deliver seamless integration of Web call centre applications, relational databases, and legacy system data to the call centre agent, employee, or self-service customer. By providing access to the exact information needed, the agent can best respond to or fulfil a request.

Real-time CRM

Real-time CRM is the process that enables the marketer to determine appropriate action to take with individual customers in real-time (that is, with the shortest possible lapse between idea and action) through the use of technology. Real-time CRM requires that all customer information is available to all of the company’s representatives. A call centre cannot offer a satisfactory service to customers if call centre agents have to flip through a large number of screens to provide the information or service asked by the customer. A Web-enabled call centre can improve customer relationships by eliminating much of this frustration. Using a combination of rich databases and Web browsers, agents in Web-enabled call centres can access needed information in seconds. All that the centre agents have to do is to enter a single unique data point, such as caller’s telephone or account number, to access all relevant data about him. Speeds like this help shorten the length of calls, thereby easing customer frustration and saving long-distance costs and staffing.

Real-time capability offers the greatest advantage in terms of opportunities for cross- and up selling and for offering customer services based on the updated customer profile. When a customer calls the call centre for some information or service, as the agent answers the question, the real-time system develops the dynamic customer scoring on the fly and finds the special benefits most meaningful to the calling customer and immediately displays it to the agent. Personalised real-time actions like this can not only halt possible customer attrition but also help increase the share of wallet.

Web-enabled call centres use Internet Protocol (IP) telephony. The Web-to-phone interface is meant to give a true interactive experience to both the company and customers. It works via a Web browser plug-in that can be downloaded from the company’s website for free. The plug-in is programmed to call fixed numbers as defined by the company through the same telephone line by opening a separate channel for voice communication without leaving the active Internet connection. By clicking the plug-in button, users can connect to the company’s staff or wherever the company wishes to route calls. This is very useful for customers who use a single telephone line for both telephone and Internet access.

Suppose such a customer is browsing the company’s website, going through the product catalogue. He or she might feel the need to call the company’s call centre for some additional information that is not available from the Web. He or she would not want to log out of the website as he or she wants to come back to the Web for placing the order. Web-enabled call centres facilitate such an interaction by routing the call over the Internet and through the telephony gateway into the company call centre. The caller is given immediate access to the services needed. Thus, Web shoppers can now direct an immediate voice contact to call centre agents without terminating their Internet session or waiting for a call back.

Today’s Web-based sales and customer service software offerings have additional features, such as:

• Automatically route each incoming call to the appropriate agent.
• Create a screen with the customer’s name, account history, and all relevant information and make it available to the concerned agent.
• One-click access to a customer’s past session transcripts and e-mail messages.
• Ability to automatically e-mail complete transcripts to customers at the end of sessions.

The author is associate

professor of Supply Chain Management at the S P Jain Institute of Management & Research, Mumbai. He can be contacted at khalid_sheikh@hotmail.com