Effective business intelligence requires real time data (data warehousing), sophisticated data analysis (data mining) tools and front-end tools which allow managers to use the information to make informed decisions (decision support systems). Data mining is getting widespread attention as companies find it very useful for marketing purposes. For instance, if businesses know which segment of the masses is buying their products, they can make effective use of their valuable resources. Data warehousing and data mining are also used to serve existing customers in a more effective and efficient manner.
As you can see, the starting point of CRM as we know it today is data about customers or the database of customers. So what is a customer database? Customer database contains records for each individual customer. Each record contains information about customers. For instance, let us assume that John Doe is one of the customers of the company. The record of John Doe will contain information about John Doe such as his street address, city, state, country, pin code, telephone number, age, marital status, year-wise sales and any other information that you want to store about John Doe. When you add similar information about your other customers, it becomes a database of your customers. With the help of the database, you can identify how one customer is different from another or similar to another and then use this knowledge to develop strategies to win them over. With the help of the customer database, companies can understand who their customers are, what they are like, and what they do. You can use this information to make strategic plans, develop marketing strategies as well as be able to serve your customers in an effective manner thereby increasing customer satisfaction.
Database marketing came into existence with the introduction of computers. Since then it has gone through some serious transformation. In the 1970s, data warehousing cost was high. As such, businesses maintained just some basic information about the customers. Mostly it was their contact information. As a result, companies were unable to discriminate in their mass mailings except maybe according to their location. Needless to say, mail which we know as “junk mail” arrived in our homes and offices. Most of us ignored the “junk mail.” A 4-5% response to a mailing campaign was at one time considered to be very good. There was wastage of valuable resources and businesses were not happy. However, they didn’t have a choice as storing more data and keeping it updated was expensive. It was at this time that a number of mail order companies came into existence to take advantage of database marketing. Even data analysis tools were not very sophisticated. In addition, everybody could not use them as some basic programming skills were required to do so.
In the second phase, data warehousing technology improved and allowed companies to store large amounts of data cost effectively. This encouraged companies to store more and more information about each customer. With the need to analyze large amounts of data, Data analysis (datamining) tools also became more sophisticated which allowed companies to gain keener insight into customer behaviour. The marketing campaigns became more targeted and sophisticated.
In the third phase, data storage costs declined further and companies were now able to store extensive data about their customers including all the transactions and conversations that they have had with their customers. Also, till now the available data was not collected in real time which made the data analysis ineffective most of the time. With the help of the Internet and modern software tools, today companies are able to collect and store data of all transactions and communications with the customer through all channels of communication like telephone, emails and chatrooms in real time. For instance, the call centres act as the vehicles to collect information and data not only in real time but also in a centralized location. Sophisticated data mining tools can identify hidden relationships between the various elements of the profiles of customers and make it available to all the employees of the organization. Today, databases are being used for business intelligence by companies to efficiently manage all aspects of their relationship with customers for higher profitability.
The objective of CRM is to use customer information effectively to build profitable relationships. Successful CRM depends on data about customers, their preferences, their behaviors, their purchase history and their classification based on economic, demographic and psychographic information. It also depends on having the right internal processes and information technology to make customer data available throughout the organization - data from every point of contact with the customer, from the cash register to the service counter, to practically everybody in the organization on the click of a mouse.
I believe that how businesses maintained their relationship with the customer has been the function of the available technology at that time, that is, technology to cost effectively store, maintain and analyze the customer database in real time.
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