Customer Relationship Management and Big Data
Authors: Damla Arman, Esteban Ceballos Lentini, Moritz Deitmar, Juliana Villegas
Customer relationship management: “a strategy for managing all your company’s relationships and interactions with your customers and potential customers”. Before this combination of words emerged as a widely used concept in the corporate world, things were much simpler. Back in the days, businesses were small and local, and the store owners personally knew their customers from everyday interaction. The dynamics of selling and buying was based on friendly relations, and given that only limited amount of goods were offered, shopkeepers could easily remember what each person from their small clientele purchased regularly, what products they liked the most, how they preferred their packaging, and whether they would pay in $50s or $5s.
As the 21st century approached, and technological innovations started to pop out here and there at an unprecedented pace, this relaxed, informal way of doing business was gradually overtaken by mass consumption and online shopping. Huge shopping centers started appearing in every corner, turning localized shopkeeper-client contact into large scale producer-consumer relations. With the advent of smart telecommunication devices and the world wide web, followed by the increasingly strong positioning of social media and the appearance of cloud computing and data centers, everything changed. Now, brands were able to cater to individual needs and provide consumers a customized shopping experience. Customer Relationship Management became about tracking details, finding patterns, and targeting arising needs and wants.
So how does CRM work?
In a way customer relationship management is very similar to attracting your crush and convincing him/ her to go out with you. Just as you would do everything for your crush if you are serious about getting in a relationship, companies have different strategies to build strong relationships to their customers. The steps that are taken with increasing levels of intimacy and trust can be divided into three stages.
- Acquiring new customers
We all know how important the first impression on the first date is. At the first point of contact, companies will try to give potential customers the best customer experience, so that they come back in the future. All commercial businesses want to keep their fingers on the pulse of time by offering a large range of products and regularly renewing their portfolios through innovation or by updating existing products and adding more convenience to them to fulfil their customers’ needs. Already at the first encounter customer data is collected to be able to predict customer preferences later on.
- Enhance profitability of existing customers
At this second stage the earlier collected data comes in handy because it gives businesses the opportunity to use cross-selling and up-selling strategies in the most effective way. If a coffee shop knows that most of its customers like their cakes with coffee or would not mind to drink a more expensive Chai Latte instead of a cheap Latte Macchiato, it can make appropriate offers and can thus get more of its customer base. Another possibility that uses the same principal would be If the coffee shop owner converts his small business into a One-Stop shop by adding a restaurant, a bar and a small kiosk to his concept.
Retain profitable customers for life
Is it better to concentrate on finding new customers or focus on the already existing ones? Due to the high costs of customer acquisition, it is extremely important for many companies to convert their already interested customers into loyal customers. In order to achieve this, businesses constantly work on improving their services and products to be able to respond to changing customer needs and adapt quickly. The ultimate goal for all companies is to achieve that customers stick with them because of the continuous superior value they see in their products, the so called customer lock-on.
Does this impressive tactic face any challenges?
With increasing digitalization, the challenges that companies face in their customer relationship management are changing. Whereas in the beginning of the digital age, the pressing questions were for instance “What products do my customers prefer?” and “Who are my most profitable customers?”, now businesses are searching for the most accurate way to find patterns in the vast amount of data that they collected. As CRM is shifting more and more to the internet, companies are trying to find the best means of communication via social media or mobile applications and optimize the frequency and content of E-Mails. Are you also one of those customers who immediately unsubscribes from Newsletters? Or do you like receiving long E-Mails about the newest products and special offers of your favorite retail stores on a daily basis? Of course it is necessary for businesses to be able to reach their customers somehow, but don’t those attempts have the opposite effect of annoying their customers rather than attracting them?
What does Big Data even have to do with all of this?
“Big Data”, the collection and evaluation of mass data sets, plays a crucial role in Customer Relationship Management, especially in the process of creating the “Customer Information file” (CIF). This database is a unified view of the information from the respective customer and encompasses data like his or her personal preferences, personal information or order details. By having this information pool about the customers, several operations inside the three phases of Customer Relation Management can be significantly improved.
Through the exchange of customer information (e.g. shipping information, order details etc.) among the different departments and their ability to access the CIF, the communication with the customer becomes quicker, more efficient and more convenient. Inquiries for instance regarding return policies or complaints can be handled more individually and the customer rather has the feeling of a personal 1:1 treatment than only being a recipient of an automatically generated answer. In this way customer loyalty can be enhanced and a customer “Lock-on” achieved. Allowing the company to save your data does not only improve the accuracy of the company’s CIF but also directly increases the customer’s convenience during the shopping-experience, for instance by simplifying (online-) logging-in processes.
In addition knowing the preferences of your customers enables the company to make use of potential cross-selling and upselling activities by coming up with the individually prefered product for the customer in an individualized context. Same applies for new or potential customers. The company then tries to come up with an innovative first shopping experience based on convenience and individuality of the consumer’s needs to acquire new customers.
These improvements of the phases of CRM make mass data a valuable and key requirement for companies who want to rely on the success of these new features. However the possession of those mass data sets inevitably comes along with issues of data privacy and rises the question of who has access to the information sets. At least in the case of sensitive data, a company must ensure that not all employers should be able to look at the data.
Since the technological progress in this area is continuing at a rapid pace, the more new means of collecting and utilizing data are developed the more personalized and (potentially) efficient the relation to the customer can be.
We came across this interesting case study…
With the turn of the millennium, General Electric (GE), remained a very efficient and profitable company, but one that was starting to lose ground to very strong competitors, as well as suffering from a fall in prices of their most expensive and capital intensive goods. At this point, GE was faced with a very hard decision regarding their future and the direction in which they would take the company. When Jeffrey Immelt became the CEO, he had a clear vision of where GE had to go in order to maintain their position as one of the biggest conglomerate corporations in the world. This vision was the Internet of Things, or as GE called it, Industrial Internet.
GE saw the opportunities that the Internet of Things provided for their products, as this allowed them to gather tremendous amounts of data from their products, to make them more efficient, to better fit the needs of their customers, and to stay one step ahead of the competition. As the whole GE structure and business model was altered to help achieve this very ambitious vision, and the necessary technological and logistical milestones were met, the executive board saw how through the use of IoT they were able to achieve goals which they could not have previously imagined in 2001.
Through the connectivity of their products, and the analysis of the millions of data points that each sensor/CPU gathered from every single product that left a GE factory, they were not only able to once again become one of the leading companies in the world of engineering, but they forced the competition to shift into the world of connectivity in order to not grant GE tremendous market shares. Aside from the improvement of GE products from an engineering standpoint, there were also some very important benefits that came from the implementation of this Industrial Internet. By having inter connected devices, which provide valuable information for both the seller and the user, the risk of ownership is pooled together and thus reduces the overall cost of ownership for both stakeholders. Through the analysis of the data collected, they were able to provide very detailed and specific decision support services for their customers as well as significantly optimize very complex operations.
It was through the implementation of IoT in their products that GE was able to turn the tides on what appeared to be a grim future, and now allows GE not only to remain an extremely successful company, but to continue to lead the charge in the battle of technological innovation.
Privacy vs. convenience?
So who doesn’t like it when Amazon recommends you to buy the sequel of that breathtaking book you ordered last week and absolutely enjoyed? Or when Forever21 already knows what you usually choose size M when it comes to shirts, but you prefer buying dresses size S? And isn’t it the most annoying thing when you forget to click “remember me” and then having to fill in your basic information and shipping address when you want to make an online purchase?
Convenience and simplicity often make us forget that when we share our information with a certain brand, it doesn’t necessarily stop there. While some companies keep their databases solely for targeting their customers’ needs, others forward this valuable information to third parties, at a high price, which is a breach of trust and an offense to the loyalty of the consumers. Consumer surveillance is a very common practice in the online world of today: “software and tracking cookies collect data about your search history, your age, location, interests, items you liked but didn’t purchase, and the amount of time you spend on a website” (3).
Do we really want all of this personal details to be floating around, easily available for anyone interested enough to grab them? Is the ease of online shopping worth the dissemination of our information?
Some further knowledge
- To read about different opinions on the debate of privacy and the internet of things, read the discussion in the following page: http://www.nytimes.com/roomfordebate/2013/09/08/privacy-and-the-internet-of-things
- If you would like to read some tips on how to stay safe while shopping online, we recommend you to visit the following link: https://staysafeonline.org/stay-safe-online/protect-your-personal-information/online-shopping
- To get more insight on the current challenges of CRM follow this link: https://econsultancy.com/blog/68132-10-key-challenges-facing-crm-marketers/
Econsultancy, By Ben Davis @. “10 Key Challenges Facing CRM Marketers.”Econsultancy. N.p., 16 Aug. 1970. Web. 27 Sept. 2016.<https://econsultancy.com/blog/68132-10-key-challenges-facing-crm-marketers/>.
Kokemuller, Neil. “The Three Phases of CRM.” EHow. Demand Media, n.d. Web. 27 Sept. 2016.<http://www.ehow.com/info_8385706_three-phases-crm.html>.
“What Is CRM?” Salesforce.com. N.p., n.d. Web. 25 Sept. 2016. <http://www.salesforce.com/eu/crm/what-is-crm.jsp>.
“Most Important Inventions of the 21st Century.” The Telegraph. Telegraph Media Group, 19 June 2016. Web. 27 Sept. 2016. <http://www.telegraph.co.uk/technology/2016/03/09/most-important-inventions-of-the-21st-century-in-pictures/>.
Iansiti, Marco, and Karim Lakhani. “Digital Ubiquity: How Connections, Sensors, and Data Are Revolutionizing Business.” Harvard Business Review (2014): 1-22. Web. 27 Sept. 2016.