With such a wide range of working definitions of CRM (customer relationship management), few markets have suffered as much from vague vendor marketing messages as the somewhat immature Analytical CRM solutions market, according to a report by independent industry analysts, Datamonitor.
The report says that, as the investment cycle for operational CRM is coming to a close, most companies that have implemented systems are now seeking effective ways to get the most out of their assets. Analytical CRM solutions provide one means of deriving value from those existing investments.
Immature market
According to Datamonitor, the problem stems from the fact that in the currently immature market place, each software vendor can claim to be the market leader because they all quote their own definition of what analytical CRM is all about.
The report, Analytical CRM: profiting from ignorance, aims to provide some clarity in the analytical CRM market, which Datamonitor describes as being "confused". And, contrary to popular belief, the companies that appear to have had the most success in analytics are not the usual suspects - the two successful market newcomers being DataDistilleries and Trillium Software.
New leaders
The report says that SAS, Siebel and Microsoft could learn from the newcomers, both of which understand exactly how data works within an enterprise, and have much to teach the rest about targeting specific solutions that create value.
DataDistilleries is a Dutch company which creates analytics solutions purely for call-centres and direct marketing, providing intelligent real-time applications that allow marketers to target the right customers at exactly the right time.
Trillium Software is a Massachusetts, USA-based data quality firm that has gone to market to prove that what most would call 'good enough' is not actually good enough when it comes to the data on which an enterprise is built.
The analytical engine
The root for any analytical system is in the data, which means that companies must first invest in operational CRM systems for there to be customer data to analyse.
In a sense, operational CRM is the fuel for the analytical CRM engine. But, in some cases, investment in operational CRM has been compared to throwing money into a bottomless pit. Many companies are now using analytics as a way of making the pit a lot shallower.
For most IT technologies, vendors have to build a return on investment (ROI) model to justify the investment; With analytics, however, the ROI is far more immediate and most vendors quote between three and six months.
Vending or pretending?
The analytical CRM market is still considered immature, and has no clear market leader. This is in contrast to the operational CRM market, which is lead by a handful of large vendors, including Siebel, SAP, Oracle, and PeopleSoft.
"The marketing messages used by most vendors imply that true analytical CRM can be sold in an off-the-shelf packaged solution, and this simply does not reflect reality," a spokesperson for Datamonitor told The Wise Marketer.
According to the report, these vendors are unlikely to succeed in the long term because clients buying their technology rarely see the benefits that can be realised with sophisticated analytical CRM packages. The winners will be the vendors that work with companies to design and deploy tailored solutions rather than simply "grabbing the money and running", as the report puts it.
Data quality
The report also highlights the need for up-to-date, high quality data, quoting the old IT adage, "Garbage in = garbage out." This is perhaps more true of analytical CRM than of any other technology. Because analytical CRM uses the data in the data warehouse to precisely segment and define customer groups, and to target outbound marketing, it cannot work effectively without a solid data foundation.
Data Quality (DQ) is the process of consolidating and cleaning every piece of data within an enterprise, no matter how small. The quality of the data directly affects the effectiveness of outbound marketing, analytics, customer loyalty, and even the company's ability to do business. A common misconception is that DQ simply deals with data verification. More accurately, it deals with correct customer identification, making it a critical business process.
All about the customer
If a business has 100,000 customer dialogues on record, an error rate of 5% would mean that 5000 customer data sets are inaccurate. Many of the errors will no doubt be seemingly trivial, caused by life events such as moving house, changing jobs, or getting married.
But, when companies use inaccurate data, the results can annoy, upset, and potentially lose those customers. Worse still, the incorrect information may be about credit history, and the customer could potentially be mis-sold one or more products as a result.
"Vendors who offer analytics without emphasizing Data Quality and its fundamental importance may be misleading the market," said Ahmed Siddiqui, a technology analyst for Datamonitor. "Companies must be careful that they do not buy a solution that will not work at 100% effectiveness, and vendors must be careful that they do not become embroiled in long projects where DQ issues are insurmountable."
Global outlook
According to the report, most vendors will need to invest in sales and marketing operations outside the US. Datamonitor forecasts that the global analytical CRM market, in terms of application revenues, will grow from some US$2.3 billion (in 2002) to US$4 billion in 2006, representing a compound annual growth rate (CAGR) of 15%.
However, the regional differences in market size and growth will present both opportunities and problems for vendors, most of which are North American. While the US comprises two-thirds of the market, it will also be the slowest growing, at 8% CAGR from 2002 to 2006.
There are better opportunities in the smaller but faster-growing markets such as EMEA (23% growth) and in the Asia Pacific region (28% growth).
"Vendors need to invest in sales and marketing operations outside the US as well as developing local partnerships with systems integrators. But what makes this more complicated is that hardly any vendors can provide all the parts for a fully functional analytical suite," concluded Siddiqui.
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