Successful customer relationship strategy involves more than skillfully
managing every customer touch point from the initial contact onward. After
all, how do you know you’re reaching the right customers in the
first place? Are you investing your marketing dollar effectively, targeting
the most profitable audience, and promoting the right products for up-selling?
And, perhaps most importantly today, how can you ensure the loyalty of
your current customer base?
The answers to these questions are typically scattered across the company
in sales, service, marketing, finance, and operations. So an analytical
approach to CRM will require a complete platform — one that provides
access to customer and backend information across the company, a broad
range of analytical methods to properly evaluate customers, mechanisms
to develop recommendations, and strategies to apply these insights for
improvements to customer-facing processes.
SAP offers this platform with mySAP Customer Relationship Management
(mySAP CRM) and SAP NetWeaver. Working together with your SAP solutions,
they supply the analytics, applications, and technology to:
- Measure: mySAP CRM includes over 300 standard queries
to measure customer value and CRM effectiveness.
- Predict: Powerful predictive modeling capabilities
required for analyzing potential customer attrition or automated customer
segmentation are included as part of the Data Mining Workbench, part
of SAP NetWeaver.
- Plan: Forecasting, planning,
and budgeting is accomplished with an integrated
planning framework (see the sidebar).
- Optimize: Analytical applications are integrated
with or embedded in mySAP CRM applications to transfer this information
into the optimization of your business processes.
mySAP CRM allows you to immediately tap into the analytics that are
woven into all its key applications. And if you don’t yet have mySAP
CRM, it’s still possible to make use of analytics available in your
current SAP solutions and running standalone on the NetWeaver platform.1
In either case, these capabilities are an excellent foundation for evaluating
the state of your customer information and customer-facing processes and
for identifying the next steps in your CRM strategy.
Four Analytics That Can Enhance Your CRM Vision
You can begin using analytics now to gain greater insight into your
customers, add controls to current CRM processes, uncover low-hanging
fruit for immediate returns on customer-facing initiatives, and identify
your highest-priority process and application needs. This article highlights
just four examples from the full menu of SAP’s reporting and analytic
capabilities across your company:
Select one or more of these analytics as a key starting point in moving
toward a more comprehensive view of your customers and strategies.
Cross-Selling to Drive Sales
By expanding the product portfolio being sold to each customer, a company
can gain greater “wallet share” within its current customer
base. Many companies already have cross-selling rules in place based on
logical product groupings for use by e-commerce and interaction centers.
(For instance, when customers buy a PC, they’re likely to need a
monitor as well.) Analytics help quantify the quality of these
product relationships, both from a strength-of-relationship perspective
as well as a profitability perspective, and can even identify non-intuitive
SAP provides the ability to define cross-selling
rules for use in CRM applications (Internet
Sales, Interaction Center, etc.) such as:
- Association Analysis, for more automated creation of cross-selling
rules (also known as Market Basket Analysis), which evaluates products
sold to identify the products most likely to sell together. The results
drive the creation of new cross-selling rules.
- Customer Lifetime Value Analysis, a more sophisticated approach
to cross-selling. Here, you can identify the customers that have provided
the highest value over the lifetime of their relationship with the company.
The customers are then automatically segmented and prioritized. Once
customers are segmented, marketers can understand the attributes of
the high-value customers and target prospects with similar attributes.
With customer lifetime values identified, companies can put together
the appropriate selling strategy for each customer group or segment
and focus on profitably achieving the value potential of each customer.
With mySAP CRM Analytics, cross-selling rules like these can be evaluated
to identify their effectiveness and frequency of use.
A Holistic Approach
Once you have a more complete view of your customer, you can more
confidently plan your marketing, sales, and service initiatives.
But although every customer-facing strategy must be tailored to
your specific industry, products, and types of customers, financial
and supply chain information plays a significant role as well.
After all, the sales forecast that is so critical to setting sales
targets is also the same basic information your financial team needs
to create budgets and your operations management needs to drive
an overall production plan. However, these planning efforts are
often duplicated (even triplicated!) when isolated teams use disconnected
methods for collecting and disseminating data. This can lead to
weeks, sometimes months, of reconciliation effort.
New demands for more transparent business reporting also affect
this process. In the US, for example, the Sarbanes-Oxley Act requires
managers to establish and maintain adequate internal control structures
and procedures for financial reporting. These structures and procedures
— including the planning processes that lead to reporting
of financial targets and pro forma statements — will involve
additional steps, as they are subject to third-party audit.
Happily, SAP provides an integrated planning platform on which
all relevant data is consolidated and, in most cases, immediately
reconciled. Where appropriate, planning applications are embedded
in the operational processes of mySAP CRM, and all are accessible
using SAP Enterprise Portal. In addition, mySAP CRM includes several
“out-of-the-box” planning applications: Sales Planning,
Opportunity Planning, Marketing Budgeting, Key Account Management,
and Territory Planning. Consumer products companies can also take
advantage of Trade Promotion Planning.
As a result, companies can achieve shorter planning cycles and
more accurate plan data — and ultimately, with this high level
of built-in integration, lower total cost of ownership.
Customer Retention to Sustain Profits
A truly analytical CRM solution should both capture and analyze customer
satisfaction data — a key driver of customer retention. Two
SAP analytical applications address issues of customer retention and leverage
the rich customer data available across your SAP solution landscape.
Satisfaction & Loyalty Analysis is a customer analytic
available with SAP NetWeaver.2 It provides
graphical results from customer satisfaction surveys, identifies the survey
questions most important to overall satisfaction, tracks development of
customer satisfaction over time, provides indexes of satisfaction and
loyalty, and indicates areas where performance and satisfaction are most
Churn Management3 is a comprehensive
retention program centered on identifying and preventing lost customers.
It helps determine the reasons customers were lost, predict customers
most likely to leave, evaluate those “at-risk” customers,
and then prioritize customers to be retained. The process requires a variety
of analytic techniques and customer data such as transaction and activity
history, profitability, and customer profile information.
For example, in Figure 1, a decision-tree model from
Churn Management is the basis for a “what-if” prediction —
a predefined Web Item available from SAP NetWeaver’s Web Application
Designer that can be added to a Web or portal page.4
This particular Web Item allows a business-to-consumer company (i.e.,
a retail company) to predict whether a customer is likely to churn based
on gender, discounts, revenue, or other factors.
|"Whatif Prediction" Interface
Based on an SAP Churn Management Scenario
Customer Segmentation to Reach the Right Audience
Customer segmentation helps to more accurately address customer wants
and needs by identifying customers with similar attributes and behavior.
Using this knowledge, companies can maximize the effectiveness of marketing
SAP customers benefit from a variety of customer
segmentation options. Naturally, mySAP CRM
enables marketing professionals to use their
expertise to manually segment customers with
its Segment Builder tool. But to add a more
scientific dimension, mySAP CRM Analytics provide
automated customer segmentation options — such as algorithms for clustering
and ABC analysis — to enhance the process based on statistically
relevant factors. SAP also provides a solution to monitor customers as
they migrate from one segment to another.
For example, in Figure 2, the Data Mining Workbench5
in SAP NetWeaver has created a model for a retail company. It displays
customer segmentation using clustering, a technique for finding statistically
relevant, homogeneous segments in a data set. The cluster model has identified
five distinct customer segments. In this case, gender and marital status
are the most important factors in determining the cluster to which an
individual customer is assigned.
|Customer Segmentation Using a Clustering Algorithm
Marketing Optimization to Do More with Less
Marketing optimization helps companies send the appropriate offers to
the right customers through optimal channels. Not surprisingly, analytics
can play a major role in how marketers decide which campaigns to execute.
SAP offers applications to help marketers maximize their resources and
improve results, including:
- Recency, Frequency, and Monetary (RFM) Analysis, which segments
customers based on their likelihood to respond profitably. Customers
are categorized into segments based on their respective recency, frequency,
and monetary values. Once this segmentation occurs with SAP BW, the
segments can be accessed from the Segment Builder within SAP CRM. Once
the RFM segments are known, marketers can use the expected response
rates and profit levels to predict ROIs on their marketing campaigns.
- Marketing Optimization & Refinement (MORE), part of
the Marketing Campaign Automation offering in SAP CRM 4.0, which combines
the RFM model with constraints — number of calls per week in the
call center, maximum marketing budget, etc. — and restraints such
as only contacting customers in Ohio.
For example, in the MORE scenario in Figure 3, marketers
can start with the campaign model, plug in various conditions to simulate
a campaign, and produce a recommendation for the best combination of products,
channels, and offers. In this example, a campaign is designed around telemarketing
and direct mail, and predicted ROIs are shown for each channel. The ROIs
shown are the results of the simulation.
|Modeling and Simulating a Campaign with mySAP CRM
The Key Is Integrated Analytics
Analytics should go beyond simple reporting — they must have clear
objectives and implications for improving business processes. Successful
cross-selling, customer segmentation, customer retention, and marketing
optimization are key to increasing the ROI of a CRM strategy. Planning
and forecasting applications across sales, service, and marketing facilitate
the collection of information to enable more accurate plans and strategies
to execute a CRM vision.
Begin by considering the returns to be had when you make use of CRM
analytics in formulating and enhancing your CRM strategy. SAP provides
everything a company needs to incorporate analytics into a CRM program.
With mySAP CRM, analytics are built into and integrated with key applications.
And mySAP CRM runs on the SAP NetWeaver platform, which offers its own
set of business intelligence functions, along with the tools and technology
needed to implement these analytics across all your solutions.
For more information on analytics for mySAP CRM, visit http://service.sap.com/crm-analytics
of the analytics and the planning functionality
mentioned in this article are available in
SAP Business Information Warehouse (SAP BW),
SAP Sales & Distribution (SAP SD),
SAP Logistics Information System (SAP LIS),
and SAP Strategic Enterprise Management (SEM)
for planning applications.
2 It is part of SAP BW Business Content, now
included in SAP NetWeaver.
3 Churn Management is part of mySAP CRM Analytics,
which encompasses SAP CRM and SAP BW.
4 In BW 3.0 and higher.
5 Available with SAP BW 2.1C (SP 9) and higher.
SAP BW is part of the SAP NetWeaver platform.
a Product Director at SAP, Christopher
J. Eldredge is responsible for all solution
strategy-related activities for mySAP
Customer Relationship Management (mySAP
CRM) technology on the SAP NetWeaver
platform. He joined SAP in 1997 as an
implementation consultant focused on
reporting applications. Mr. Eldredge
holds an M.B.A. from The Ohio State University
and a B.A. in Economics from Ohio University.