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High Performance Marketing:
Justifying Your Analytic CRM Investments

online columnist Steve Schultz     Column published in DMReview.com
August 11, 2005
 
  By Steve Schultz

Driving your organization forward along its customer-centric path often places a series of opportunities/ challenges/burdens at your feet. Among these are: defining processes, obtaining organizational consensus, managing organizational change, evaluating and selecting tools and technologies, and building business cases to justify the desired investments. In this column, I would like to focus on the last of these and discuss the typical justifications used to obtain the funding required to purchase various analytic CRM tools, including: databases; extract, transform and load (ETL); data cleansing; business intelligence/reporting; management relationship marketing (MRM); campaign management; analytics/data mining; and real-time tools.

When faced with the challenge of developing a business case for investments in tools and technologies, most people leverage a combination of strategic benefits and quantifiable benefits to accomplish the deed. Strategic benefits are important as they often provide the context for the investment. However, in an increasingly ROI-conscious culture, strategic benefits rarely are sufficient to get most projects approved. This is the role of the quantifiable benefit. That revenue enhancement or cost savings that is most appropriately associated with some investment in tools and technologies is designed to make process more effective and efficient.

What follows is a short description of common quantifiable benefits (revenue enhancement or costs savings) that generate positive ROI. These are presented for each of the eight tools categories most commonly associated with direct marketing/analytic CRM.

Database:

  • Revenue Enhancements: Rarely used.
  • Cost Savings: Reduction in the number of extraction requests for data from source systems; fewer project managers to manage data flows throughout the organization as the database provides an accessible repository; less investigation of data meaning and errors as all data is processed in tested and standardized fashion for input into database.

ETL:

  • Revenue Enhancements: Rarely used.
  • Cost Savings: Reduction in the time required to code new data sources for loading into the database; fewer resources required to manage the database update and ETL maintenance processes; lower labor costs due to ability to leverage less expensive resources who can use GUI interfaces vs. specific language coding skills required today.

Data Quality:

  • Revenue Enhancements: Sometimes used. Better targeting based on customer profit or value due to fewer errors in the definition of a customer or household.
  • Cost Savings: Reduced instances of duplicate contacts made to same individual or business due to proper hygiene; lower non-delivery or bad address costs associated with bad contact information; less manual effort required to manage the definition of a customer or household as the basis for understanding profitability or/and value.

Business Intelligence/Reporting:

  • Revenue Enhancements: Quicker business decisions are enabled through access to timely information enabling faster needs identification, more effective cross-sell activities and more accurate customer retention/exit decisions.
  • Cost Savings: Reduced efforts are required to reconcile different sources of the "true numbers;" fewer resources are required to create and leverage ad hoc and reusable reports; less time is spent accumulating or aggregating data for use in generating business insight.

Marketing Relationship Management:

  • Revenue Enhancements: Better allocation of high-level resources (people and dollars) to marketing activities that generate superior returns due to the establishment of common metrics that permit comparison across media types.
  • Cost Savings: Fewer resources are required to manage the campaign execution and creative development and production processes; Less time is spent tracking costs and reallocating them from financial to marketing categories; Easier dissemination of project plans and digital assets; Fewer errors are associated with use of dated materials.

Campaign Management:

  • Revenue Enhancements: Reduced time to market shortens the learning cycle and permits faster exploitation of valuable customer insights; better allocation of resources (people and marketing dollars) to programs that produce superior results;
  • Cost Savings: Increased productivity in campaign execution; shortened learning curve for new resources based on codified process and templates; migration to a less technical, less costly skill set for campaign execution compared with the use of IT resources for list extraction; reduction in the costs of handling recurring or/and event-based contact strategies; reduction in the time required to manage multiple customer interaction points due to ability to define an interface once and use it repeatedly.

Analytics/Data Mining:

  • Revenue Enhancements: Making the right offer to the right individual at the right time maximizes revenue generation for a fixed marketing spend allocation.
  • Cost Savings: Reduced time to develop a customer segmentation or clustering schema; reduced time to develop a response, cross-sell or retention model; ability to maximize marketing spend through targeting based on propensities; reduction in number of highly skilled individuals required to build models when the desired tool has an easy-to-use GUI interface.

Real Time:

  • Revenue Enhancements: Increases the ability to make more timely offers to increase acquisition, cross-sell or retention rates of customer contact programs based on up-to-the-minute interaction information.
  • Cost Savings: Reduces the number of outbound customer contact spend by leveraging inbound contact opportunities to present appropriate acquisition, cross-sell and retention offers; increases the cross-sell rates, especially for businesses whose economic models benefit from short or instantaneous timeframes for customers making purchase decisions.

Hopefully, some of these suggestions can help you the next time you are faced with justifying investments in database marketing or analytic CRM tools and technologies. If you are still feeling challenged about how best to build out the business case, here is one last word of advice. Revisit the business requirements that you used to define and select your tool and technology needs. Most business requirements focus on key words such as "improve," "automate," "reduce" and "optimize." These requirements almost always will lead you straight to the quantifiable benefits that your company can realize from its investment.

...............................................................................

For more information on related topics visit the following related portals...
Analytics, CRM and ROI.

Steve Schultz is a leading customer relationship management (CRM) practitioner who combines an understanding of information technology with extensive business process design experience and information-based decision-making methodologies. As executive VP of Client Services for Quaero (www.quaero.com), he helps clients identify, justify, implement and leverage leading edge analytical CRM environments to create or/and improve their database marketing capabilities. Schultz has worked with companies in the financial services, telecommunications, retail, publishing and hospitality industries. Contact him at schultzs@quaero.com.



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