CRM and Big Data 101
Authored by Ningxin Annie Li, Demian Gass, Doygu Budancamanak and Saad Ashar Jalees (Summary B)
“The customer experience is the next competitive battleground.” – Jerry Gregoire
Businesses make or break on the premise of how many products they can sell, how effectively and for how long. For the best case scenario, it would be very convenient for the stores if there was data available for them to evaluate, so that they could better tailor the shopping experience and entice the customers to buy more. As it happens, something like this does exist: CRM.
What is CRM? Well, it’s Customer Relationship Management. Simple terms, the way in which the company interacts with its customers. In concrete terms, it’s about analysing real-time data and maximising the Lifetime Value of Customer Relationships. Trying to create a model that guarantees returning customers and attracts new customers at a healthy pace.
For that to happen, there are 3 phases of CRM.
- First, getting new customers means offering something new, something innovative, something exciting and convenient for the prospective customers.
- Second, enhancing the profitability of the existing customers by cross-selling & upselling. Selling them more products and preferably, more expensive companion products (read: Apple’s newest product: the $159 AirPods).
- Thirdly, retaining the customers for life. Loyal customers are a guaranteed source of income; locking them into an eco-system makes it easier for that goal to be achieved (read: Apple’s iTunes for all your Apple needs).
“Your most unhappy customers are your greatest source of learning.” – Bill Gates
Naturally, CRM tries to address challenges that beset your run-of-the-mill companies; not knowing your customers: their shopping habits, demographics and a multitude of other concerns. Not only that, but CRM also tries to make the customer experience richer and more engaging by bringing the company closer to the customer.
Think about your own experiences as a customer. We have many wants and needs but there are still a few essentials that are desired, for example:
- Reliability. We want good service from a company.
- Responsibility. If we get a defective product, we should be able to return it.
In fact, as customers, there is a good chance we’ve all come across Loyalty Schemes, the most common of which is Loyalty Cards. You can buy them from any store and they can be anything from simple cash cards (e.g. PSN Card, H&M Fashion Gift Card etc) to enhanced benefit programmes (e.g. Amazon Prime, Apple Care).
These schemes mark a shift in corporate thinking. It used to be the absolute that a product must be delivered, but now, that thinking has shifted to catering to potential future customers. Customer loyalty is something so fickle that it makes retail hyper competitive. It encourages Discount Programmes and more attention is poured into Customer Service. Online engagement is one that promises customer loyalty and bridges the gap between brick & mortar stores and the online presence (can’t go to your local H&M to buy that one Pullover? Don’t worry! Just shop online!)
“If you don’t cannibalise yourself, someone else will.” – Steve Jobs
Of course, with the change in world landscape, companies have to adapt as well. Sometimes, that means putting your established brands in danger. If they continue to focus on a specific demographic and refuse to innovate, they can lose out on potential market share.
Kodak (McAlone, 2015), is a prime example of failing to do so. Its engineer, Steven Sasson developed the first digital camera. Though the bosses were not impressed with the mish-mash of technology he had presented, they still allowed him to continue. In 1998, Sasson and Robert Hills produced the first functional DSLR Camera, similar to today’s models. Kodak, fearing that the camera would cannibalise the sales of their film services, refused to market it. They ‘could’, but didn’t want to. Kodak did make a lot of money off the patent till 2007 (when it expired). After that, their attempts to embrace the digital age were futile and the company filed for bankruptcy in 2012.
As previously mentioned, loyal customers are what bring in the dough. How does a company make sure that customers (current and future) get hooked in and have no desire to switch to a competitive product? By creating a product that is unparalleled, a service that is unmatched and a value that is continuously delivered upon.
“You’ll never have a product or price advantage again. They can be easily duplicated, but a strong customer service culture can’t be copied.” – Jerry Fritz
For example, take Apple (Lynch, 2016). Apple has a robust software ecosystem. Once you start using an Apple device, you are tied to iTunes (Apple’s Online Store). The applications that Apple has tailor made for its devices are so premium in quality compared to its competitors that people feel no need to switch. But, what about cost? Consider, for example, what Apple offers in its most popular product, the iPhone. With each iteration, comes a device with an extended software support (absolutely overshadowing its closest competitor, Google) (Loboa, 2015) and one of the most consistently fast devices on the market.
It doesn’t stop there; if there’s a physical problem with the product, the customers are encouraged to go to an official Apple store to get premium service. If the customers expect to use their devices for more than a year but still want the premium service, then they are given the option to pay for it (AppleCare). Customer satisfaction is guaranteed and that is what makes people go for Apple products over its competitors. Google and various other device manufacturers are just catching up now in fields that Apple has absolutely dominated for years.
Everything that Apple has done up to now has not been an act of sheer luck. It’s calculated and can be utilised by competitors as well (for example, after years of depending on the sale of the Windows platform, Microsoft entering the Hardware market with their Surface line).
“Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves.” – Steve Jobs
Brand analysis can yield crucial information about demographics and purchasing habits. The Internet, for example, is a vast place and it’s beneficial for the company to know what is it that the denizens of the Internet are saying about their brand. Social media sites such as Facebook, Twitter and Reddit generate a lot of rich data; data that can be used to better optimise the overall customer experience. The information extracted from the raw data is always improving and naturally, gets better with every new iteration. Companies like Unmetric offer just that and allows for companies to create a more fulfilling experience by consulting the data that has been collected by the company.
Targeted advertisements are another thing that are common in the Internet. Cookies are a treasure trove of information and companies such as Google (Karch, 2016) make an astounding amount of money from targeted ads alone. Advertisements are an expensive endeavour and obviously, no company wants to ‘waste’ money appealing to the wrong crowd. Focus on the right demographics and the possibility of a new sale is created. Such algorithms are especially useful for brick and mortar stores; knowing the foot traffic in a store allows for further optimisation of the floor plan and product distribution that allows for product exposure to customers.
Side note: This sort of personalisation is not something explicitly reserved for advertisements. Songza (now integrated into Google Play), analysed the user’s music listening patterns and created music playlists accordingly. It’s an added layer of personalisation that opens up the user to trying out new music, listening to new artists and potentially becoming a fan. This may, further down the road, result in buying a concert ticket and other merchandise.
CRM is versatile tool. It provides data that can be used in numerous ways. For example, Hobson’s offers CRM services to Education institutes to better cater to the needs of students.
CRM is a growing field, with the Information Age propelling its importance to new heights; it’s a lot of information to digest and process. There’s always the danger of being completely overwhelmed with it and not properly utilising any of it. So, a ‘comprehensive’ system is not necessarily a good thing.
CRM has been breathed new life thanks to the ever growing landscape of ‘freemium services’, as customer loyalty is once again in the spotlight. Companies such as Soundcloud and Spotify already offer a plethora of services for free, so how does a company make money? Because of its Freemium model, Spotify is subject to the Pareto Principle. After all, out of the 110 million users, only 35 million users actually pay for the service. Spotify’s solution is to offer regional ads for the free users and added features (downloadable music, high quality audio, exclusive music releases) for the premium users. But, is that enough? Every year Spotify operates at a loss, and it’s beginning to hurt it. Its business practise of paying one of the lowest rates to musicians per play is becoming a point of serious contention, and its competitors, Google Play and Apple Music, are attracting potential customers away from it by offering better rates to musicians and larger music libraries to users.
In the same vein, you have Netflix, a service that is impossible to use without paying for it in the first place (free trial period aside). Netflix has capitalised on the power of word-of-mouth and the popular usage of the meme “Netflix and Chill”; allowing it to boast 70 million paying users. Netflix knew it couldn’t rely on providing just shows and movies. They started producing their own original series, that would entice people to sign up for Netflix because that’s the only the place they could see them. The shows boast unbelievable viewing numbers and strong critical reviews (Adalian, 2015). Its closest competitor, Amazon Prime, may have a larger library of shows and movies, but Netflix is where you get critically acclaimed programming (for reference; Archer, Stranger Things, Beasts of No Nation, House of Cards, Daredevil, Jessica Jones and Narcos are all Netflix originals).
“The purpose of a business is to create a customer who creates customers.” – Shiv Singh
All of these actions are governed by what the companies know about their customers. There’s a reason Netflix is continuing to rise and becoming a major player in television. CRM is a crucial cog in the machine and will continue to play an important role in business decisions. It is impersonal, certainly more so than physically being at the store and asking the customers about their preferences. But, CRM as a tool is one that should utilised to the maximum of its current potential. Smart usage of data allows for a company to boast better numbers in customers and a better reputation. CRM is the realisation of Big Data and how it can be used to make better experience for all parties involved.
Adalian, J. (2015). How Netflix’s Original Programming Is Poised to Outpace the Top Cable Networks, in One Chart. (2015). Vulture. Retrieved 27 September 2016, from http://www.vulture.com/2015/07/netflix-original-programming-hbo-fx.html
How ‘Netflix and chill’ became internet slang for having sex. (2015). Fusion. Retrieved 26 September 2016, from http://fusion.net/story/190020/netflix-and-chill/
Ingham, T. (2016). Spotify revenues topped $2bn last year as losses hit $194m – Music Business Worldwide. Music Business Worldwide. Retrieved 26 September 2016, from http://www.musicbusinessworldwide.com/spotify-revenues-topped-2bn-last-year-as-losses-hit-194m/
Lobao, M. (2015). Software Updates: A Visual Comparison Of Support Lifetimes For iOS vs. Nexus Devices. Android Police. Retrieved 26 September 2016, from http://www.androidpolice.com/2015/09/17/software-updates-a-visual-comparison-of-support-lifetimes-for-ios-vs-nexus-devices/
Lynch, J. (2016). Does Apple’s ecosystem lock in users? . CIO. Retrieved 26 September 2016, from http://www.cio.com/article/3088693/consumer-electronics/does-apples-ecosystem-lock-in-users.html
McAlone, N. (2015). This man invented the digital camera in 1975 — and his bosses at Kodak never let it see the light of day. Business Insider. Retrieved 26 September 2016, from http://www.businessinsider.com/this-man-invented-the-digital-camera-in-1975-and-his-bosses-at-kodak-never-let-it-see-the-light-of-day-2015-8?IR=T
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