NEW YORK -- The core of CRM is understanding customers and customer behavior, and integrating CRM throughout the enterprise leads to high return on investment (ROI), according to Ronald Swift, vice president of CRM solutions at Teradata, a division of NCR Corp.
"We're moving quickly from information technology to relationship technology," Swift said in his address. "Organizations that have placed customer information as the value chain of their business and technology architecture have excelled."
The missing piece of CRM in most organizations is knowledge discovery, Swift said. This allows companies to know when to act and how to act on customer behavior, he said.
Strategies for communicating with customers are fivefold, Swift said. First is the informational approach, which is customer-initiated by visiting a Web page, for example. Next is the traditional outbound approach, which can include telemarketing, segmented marketing or electronic marketing, he said. Third is differentiated marketing, which looks at each customer's profitability, interactions and transactions. Fourth is real-time marketing, which includes face-to-face interaction as well as call centers, Internet chat, e-mail, ATM transactions and stops at a kiosk, Swift said.
By taking the best of those four, the fifth strategy for communicating with customers emerges, according to Swift. This is relationship optimization, which uses all four types of communication to acquire and retain customers. "Relationship optimization is ... really understanding clients," he said.
Companies that have successfully improved their ROI through relationship optimization include the Royal Bank of Canada, Swift said. They instituted CRM and installed a data warehouse to integrate information on 10 million customers. As a result, they saw a 61% improvement in marketing cycle time, an increase in the number and average profitability of high-value clients, and an 11% increase in retirement account deposits based on their targeted marketing program, he said.
Harrah's Entertainment, formerly headquartered in Memphis, Tenn. and now in Las Vegas, also implemented a data warehouse to track and reward 15 million "guests" visiting any of their casinos through their Total Gold loyalty plan, Swift said. The Total Gold card is used when checking in to a hotel, in slot machines and essentially registers whether a customer is spending money, he said.
By analyzing customer preferences from the Total Gold plan, Harrah's saw an increase in total cross-market revenue of 64%, Swift said. The customer attributes analyzed showed Harrah's the frequency of visits, predicted customer spending and identified cross-sell opportunities, he said. Promotions and mailings, therefore, were tailored to individual customer preferences, and the highest investment was made in the most profitable customers, Swift added.
Companies can also save money by not advertising where they already have customers, Swift said. A highly targeted, one-to-one campaign can yield a return of 18-30% in responses, conversions and purchases, he said, compared with a 1-3% return by passively collecting customer information and not acting on it.
"New software engines - personalization engines - can be optimized to meet (a company's) CRM goals," Swift said. "Make it personal, think about timeliness... if combined together, (CRM) can be very successful."
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