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."
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:
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.