Big Data

ROI and analytical processing key to CRM success

For IT managers, staying ahead of the customer relationship management (CRM) game can be a difficult task. Here is an overview of how to calculate the ROI of CRM and a look at how CRM uses analytical processing.


Customer relationship management (CRM) is a segment of IT that never sits still. It’s a whirl of business and technology that can be difficult to follow for many IT managers and executives.

To help you understand CRM, we'll discuss the use of online analytical processing in CRM and the importance of determining the return on CRM projects.

OLAP
OLAP translates to online analytical processing. More organizations are using OLAP with CRM data mining solutions to analyze customer data.

An OLAP solution extracts and displays customer data from any angle. For example, with OLAP, a CEO can see how many customers purchased snow blowers in Minneapolis during October and compare that sum with how many customers bought snow blowers in Boston during the same month.

According to a report from Gartner, “…with OLAP, users can view the company as a series of hierarchies or dimensions such as products, channels, geographic markets, and time periods.” (TechRepublic is a subsidiary of Gartner.)

Analyzing sales behavior like this helps organizations match products with customer needs and better understand customer behavior. In addition, OLAP solutions let CEOs choose how data is displayed: pie chart, bar graph, or worksheet.

To allow for different avenues of analysis, OLAP data is stored in a multidimensional database, or a database that regards each piece of data as a separate dimension. OLAP software locates the intersection of dimensions (the quantity of snow blowers sold in Minneapolis during October) and displays the results.

The possibilities of OLAP are endless, determined only by the amount and type of customer information an organization collects.

Edgar .F. Codd, the father of the relational database and author of “A Relational Model of Data for Large Shared Data Banks,” coined OLAP in 1993. According to Gartner, Codd wanted “…to distinguish OLAP from online transaction processing (OLTP).”

OLTP is used to run the daily operations of a business while OLAP is used for business intelligence purposes. However, OLAP often uses OLTP data as its foundation. Some vendors offering OLAP solutions are Cognos, Microsoft (SQL Server 7.0), and Oracle. For more information on OLAP, visit the OLAP Information Site and The OLAP Report.

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The ROI of CRM
Most IT managers know ROI means return on investment and are aware that it is important to determine the ROI before the start of any project. However, calculating the ongoing ROI of a CRM project can be tricky.

Costs for CRM projects can span from several thousand dollars to a few million, and the financial strains are often felt long after a project begins. In fact, Gartner contends that over a three-year period, one CRM user can cost an organization as much as $15,000 to $30,000. With price tags like this, determining the ROI of a CRM project is crucial.

Finding the ROI of CRM starts with determining the number of sales leads an organization generates, discards, and completes compared with the cost of the CRM software used to track sales and customer metrics. It all comes down to measuring the financial metrics of an organization.

According to Gartner, “Winning organizations develop a measurement system that captures the information necessary for calculating costs and benefits prior to CRM investments. These measurement systems should be used to recalculate costs and benefits during pilots, rollouts, and throughout ongoing life-cycle support for any CRM implementation.”

Calculating ROI online
An online ROI calculator is available from e-marketing software vendor, Revenio. For more information on the ROI of CRM, download, "Making a Compelling Business Case for CRM," a free white paper from Hewson Consulting Group and Sistrum.

An organization’s second step is planning how to reduce expenses and increase revenues. In his article “Where is the ROI in CRM?” for DM Direct, Tom Humbarger writes, “When reduced to the simplest terms, increasing revenues and profits can only be derived from three sources—better customer management, targeted selling efforts, and focused customer retention.”

Humbarger, senior director of Oracle’s CRM development division, argues that a strong ROI comes from a strong foundation of customer intelligence that includes detailed customer profitability, data mining, and predictive modeling. Organizations also need capable marketing tools and people with strong marketing skills to measure and manage customer interaction programs. Ultimately, customer intelligence needs to tie into all of an organization’s customer-facing applications.

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