Summary: With Analytical Customer Relationship Management (Analytical CRM),
many
enterprises have used software to analyze
enterprise touch-point data as a way to become more effective marketers
and sellers. A new form of software called
Customer Behavior Analytics (CBA) is aimed at monitoring “the other
side” – i.e., the customer’s point-of-view –
and shifting the enterprise’s perspective to true “customer-centricity.”
By tracking “behavioral elasticity” of
customers and prospects within and outside the corporation, enterprises
truly can adjust to customer demand. In turn,
customers find it easier to buy, thus increasing customer demand
in this down economy.
Analytical CRM – A One-Way View
Enterprises deploying Analytical CRM solutions not only are gaining business
benefit, but also
are recognizing that they need a wider point-of-view
to encompass the customer-enterprise interaction.
Despite the marketing hype over gaining a 360-degree view of the customer,
Analytical CRM is
only enterprise-centric. Vendors designed Analytical
CRM systems, which are typically based on data mining technologies,
to help enterprises analyze customer behavior within
the context of the enterprise’s multiple customer touch-points
– retail sales, online sales, support, telesales, and
so on.
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Put another way, CRM systems have portrayed the customer as a relatively
static creature, surrounded
by changing products and selling techniques. “Aha, a
new product – can we upsell it to anyone?” Analytical CRM
software vendors have absorbed this corporate
point-of-view – that a customer’s purpose in life is to consume an
enterprise’s products or services.
The Mirror of Analytical CRM: CBA
In sharp contrast, the world looks very different from the customer’s
point-of-view. The customer
views the universe of vendors as a collective supply
base, ready to satisfy his or her needs. Thus, the customer
sometimes mixes and matches vendors, as well as
channels, during the research-and-buy process. For example, a consumer
may browse customer reviews of a book at Amazon.com,
and then buy the book at a Borders retail store. Option-savvy
customers have created a need for systems that can
monitor behavior from the customer’s point-of-view.
Customer Behavior Analytics (CBA) fulfills that requirement. By
watching customer behavior in a larger context, such
systems enable enterprises to increase sales by using a softer
sell. It is not uncommon for enterprises using CBA to
increase sales or decrease churn by over 100 percent. These lifts
occur because the customer’s agenda and timing drive
the sale, rather than the enterprise’s schedule. As such,
CBA brings sorely needed – and profitable – “customer
centricity” to the enterprise.
Customer Behavior Analytics Defined
CBA monitors the ebb and flow of customer
behavior both within and outside the corporation. By
tracking general and/or individual consumption
patterns, and enhancing these insights with
demographics and psychographics, the software identifies how customer
interests and buying patterns shift over time, and
notes whether this behavior is typical or not.
CBA reaches beyond Analytical CRM’s ability to instruct a company to recommend
specific products
when a specific customer interacts with a specific
touch-point. A CBA system extends this knowledge by predicting
the interaction pattern; it also helps an enterprise
measure whether the results are normative. For example, if
a company is successfully up-selling another $1,000
worth of product, that success looks dismal if customers typically
buy $2,500 worth of product from the company’s
competitors.
Discerning Behavioral Elasticity
At the heart of CBA is the use of powerful analytical technologies to
understand customer behavioral
elasticity: determining which elements – and in which
proportion – trigger changes in customer behavior. An enterprise
that can discern that a certain customer will switch
brands when given a 20 cent coupon, rather than the more typical
50 cent coupon, has discovered a way to change
customer behavior without overspending.
This bottom-line attitude is what separates CBA from what some people are
calling Customer Experience
Management (CEM). CEM works at measuring and improving
the “customer experience,” usually on a Web site. However,
enterprises cannot afford to perpetually improve the
customer experience – at some point they need to decide when
the experience is “good enough.” CBA helps
corporations decide – based on an analysis of customer behavior – when
the investment level is “just right.”
CBA Players
A variety of vendors offer CBA. In most cases it is a core competency,
although at times it is
a by-product of the supplier’s main business. What is
common across all of these vendors is a customer-centric
point-of-view. Descriptions of three CBA offerings
(below) help make this point clear:
Active Decisions offers guided selling tools – online buying guides
that it sells to a variety of e-Businesses: e.g., Sony
(manufacturer), Schwab (financial services), Good Guys (electronics
retailer), and Consumer Reports (publisher). A
by-product of quizzing the user on feature and price preferences
is that the software develops a profile of customer
preferences. Consequently, the Web site not only ensures that
the customer is offered the correct product or service
but also gets a better idea of emerging customer demand.
comScore Networks monitors the online surfing habits of more than
1.5 million Internet users. This large, representative
sample enables comScore to understand Web surfing and buying
behavior in the broad sense and, in some cases (based
on the sample size), very specific customer segments that
are otherwise difficult to track. The company tracks a
variety of online behaviors. Examples include online spending
and other transactions (e.g., site registration and
software downloads), typical site-to-site surfing patterns,
and which Web sites are falling into and out of favor.
However, comScore is not limited to analyzing just online
data. Due to its opt-in privacy model, the company can
at times overlay online behavior with offline behavior (such
as point-of-sale data), thereby enabling enterprises
to monitor how their customers move between the online and
offline worlds.
Xamplify analyzes customer transaction history, demographics, and
psychographics for financial institutions to create
sophisticated customer profiles. Customers are defined in terms
of gradations along spectrums such as price
sensitivity, product needs, channel preference, impulsiveness, and
status consciousness. Using agents to monitor the
customer touch-points and refine the profile in real time, the
software enables companies to align their offerings to
what the customer wants, rather than what the company is
looking to push.
Why Now? – The Market Drivers
CBA has emerged for three predominant reasons:
- 1. CBA builds on the foundation of Analytical CRM. Only because
enterprises have a better understanding
of their interactions with customers can theynow pursue an understanding of customers within a larger context.
- 2. The Web enables closer monitoring of
customer behavior than ever before. This shift in “data
granularity” is making enterprises not onlyanalyze online behavior, but also rethink how to use offline data that
they previously ignored – such aspoint-of-sale (POS) information. In the past, corporations often used surveys
to understand brand equity and customerdesires. However, surveys have always had two drawbacks: they depend on
sampling, and customers do not always do whatthey say. By monitoring actual behavior – i.e., which Web sites customers
visit, the search terms they use, and whatthey put in their online and physical shopping carts – enterprises are
getting a more accurate, complete, and timelypicture of customer behavior.
- 3. The adverse economic climate has put a
premium on influencing customer behavior while using
less money. Today, getting the “tippingpoints” right can mean the difference between being in the black and being
in the red.
Aberdeen Conclusions
Customer Behavior Analytics is an emerging sector – but has not yet gained the
recognition and
penetration that the more mature Analytical CRM market
has achieved. However, savvy enterprises are recognizing
that CBA serves as a powerful complement to Analytical
CRM because it views the customer-enterprise relationship
from “the other side” – that is, from the customer’s
point-of-view.
As such, applying the lessons from CBA makes it easier for the customer to buy
– a necessary
counterbalance to the Analytical CRM benefit of making
it easier for the enterprise to sell. By looking at both
sides of the customer-enterprise picture, enterprises
will begin to mirror their customers’ desires – a welcome
(and profitable) melding of two interrelated
points-of-view.
Guy Creese is research director, internet analytics, for Boston-based Aberdeen Group.