Analytical CRM

• Analytical CRM is the

process through which
organizations transform
customer-related data into
actionable insight for
either strategic or tactical
purposes.
How Analytics Support Strategic CRM

• Strategic CRM focuses on the

development of a customer-centric
business dedicated to winning and
keeping (potentially) profitable
customers by creating and delivering
value better than competitors cost-
effectively.
• Analysis of customer-related data can
help answer crucial strategic CRM
questions such as:
• which customers should we serve? What
is our share of customer spending on our
category? What do our customers think
and feel about their experience of doing
business with us?  
How Analytics Support Operational CRM

• Operational CRM involves deployment

of automated solutions in the sales,
marketing and service areas.
• Analysis of customer-related data can
help answer crucial operational CRM
questions such as:
• which channels should we use to
communicate with our customers? What
offers should we make, and when should
we make them? How does our sales
performance differ across territories and
product ranges, and how can we fix any
problems? How well do we manage our
opportunity pipeline? How satisfied are
customers with the service we provide
and what can be done to improve it?
Basic data configuration for CRM analytics
Analytics for CRM Strategy and Tactics
Module
How Analytics are Used During the Customer
Lifecycle
• Customer acquisition
• Lead scoring might take
account of a wide range of
market, organizational,
personal, relational and
behavioural attributes.
• Customer retention
• Identify which customers have
highest future potential CLV.
• Customer development
• Identify the next best offer to
make the customer.
Criteria Used in Prospect Scoring
NBA
• Next best action (NBA) merges
customer insight (predictive analytics
particularly) and context to deliver
recommendations for action.
• Company desired actions include up-
sell or cross-sell.
• Context determines whether or not
an offer should be made, what that
offer should be and even when it
should be made.
• A customer with an unresolved
complaint should receive an outbound
customer service call to establish what
the customer expects by way of
complaint resolution, not an offer.
NBO
• ‘Next best offer’ (NBO) is a subset of
NBA.
• Early groundwork for NBO was laid by
Amazon.com
• Today’s modelling is based on more
complex, context-sensitive, predictive
analytics that enable the right offer to
be made at the right time and in the
right channel.
• The tools that support NBO are
known as recommendation engines.
• Dynamic NBOs are made to
customers in real time as they
interact at a business’s touchpoints.
Module
Analytics for Structured Data
• CRM analytics for structured data are
well developed.
• As questions become more complex
and shift from description to
explanation or prediction, the analytical
procedures required to generate
answers also become more complex.
• OLAP queries allow CRM users to drill
down into the reasons why a particular
piece of data is as it is.
• Data mining tools draw on a well-
established array of statistical
procedures, such as correlation,
regression, decision-tree and clustering
routines.
Analytics for Unstructured Data

• Unstructured data do not fit a pre-

defined data model
• Includes textual and non-textual
files such as:
• spreadsheets, documents, PDFs,
handwritten notes, and image,
audio, video and multimedia data.
• Unstructured data often reside
outside the business in social
media data repositories, which can
be huge, hence the term ‘Big Data’.
• Analytics for these types of data
are still evolving.
 Text analytics

• Text analytics extracts relevant information from unstructured text

files, and transforms it into structured information that can then be
leveraged in various ways.
• Unstructured textual data are found in:
• call centre agent notes, emails, documents on the Web, instant messages,
blogs, tweets, customer comments, customer reviews, questionnaire free-
response boxes, social media posts, transcripts of telephone calls and
interviews and so on.
Social Media Sentiment Analysis
Module
How Text analytics supports CRM

• Improving the accuracy of

the predictive models
• Automatic routing
• Root cause analysis
• Trend analysis
• Sentiment analysis
3Vs of big data
Technology Essentials for Analyzing Big
Data
1. Hadoop, an open-source
framework or computing
environment, distributes data
across a large number of
computers, each of which
processes a portion of the data.
2. Open-source analytics
applications.
3. Commercial software-solution
vendors add further management
and decision support tools,
frameworks and solutions.
Module
Types of Structured Data kept in Relational
Databases
• Categorical data, also known as discrete
data, are data about entities that can be
sorted into groups or categories.
• Unordered categorical data are nominal
data.
• Ordered categorical data are ordinal data.
• Continuous data are data that can take
on any value within a finite or infinite
range.
• Interval data are measured along a
continuum that has no fixed and non-
arbitrary zero point.
• Ratio data are also interval data but with
the added attributes of a fixed data point 0
(zero).
Three Ways to Generate Analytical Insight

1. Standard reports
2. Online analytical
processing (OLAP)
3. Data mining
Standard Reports

• Can be either pre-defined, or

query-based (ad hoc).
• Standardized reports are typically
integrated into CRM software
applications, but often need
customization.
• Some customization of the report can
be done when it is run, for example in
selecting options or filtering criteria,
but the end result is limited to what
the report designers envisaged.
• Visualization tools include tables,
charts, graphs, plots, maps,
dashboards, hierarchies and
networks.
Standard Report: active accounts of a sales rep
Online Analytical Processing (OLAP)

• OLAP technologies allow data stored

in a data mart to be subjected to
analysis using processes such as
• slice-and-dice, drill-down and roll-up.
• OLAP data are stored in one or more
star schema.
• A star schema separates data into
facts and dimensions.
• Facts are quantitative data such as
sales revenues and sales volumes.
• These facts have related dimensions.
Dimensions are the ways in which facts
can be disaggregated and analysed.
Star Schema - example
Module
Data Mining

• Data mining is the

application of descriptive
and predictive analytics to
large datasets to support
the marketing, sales and
service functions.
What Data Mining Analytics Do

• Classification
• Estimation
• Prediction
• Affinity grouping
• Clustering
• Description and visualization
 Directed vs. Undirected Data Mining
Directed
Directed data mining (also called
supervised, predictive or targeted data
mining) has the goal of predicting some
future event or value. The analyst uses
input data to predict a specified output.
Directed data mining stresses classification,
prediction and estimation.
Undirected
Undirected (or unsupervised) data mining is
simply exploration of a dataset to see what
can be learned. It is about discovering new
patterns in the data. The analyst isn’t trying
to predict or estimate some output.
Undirected data mining uses clustering and
affinity-grouping techniques.
Data Mining Procedures
Module
Decision Trees

• The graphical model output of

decision tree analysis has the
appearance of an inverted root and
branch structure.
• Decision trees work through a
process called recursive
partitioning.
• The decision tree algorithm
progressively partitions the dataset
into groups according to a decision
rule that aims to maximize
homogeneity or purity of the
response variable in each of the
obtained groups.
Logistic Regression

• Logistic regression
measures the influence of
one or more independent
variables that are usually
continuous (interval or ratio
data) on a categorical
dependent variable
(nominal or ordinal data).
Multiple Regression

• Multiple regression uses

two or more predictor
variables to predict a
dependent variable. The
dependent variable must be
a continuous (interval or
ratio) variable.
Discriminant Analysis

• Discriminant analysis (DA)

clusters observations into
two or more classes.
• DA can be used to find out
which variables contribute
most to explaining the
difference between groups.
Neural Networks

• Neural networks fit a model to

existing data for classification,
estimation and prediction
purposes.
• Neural networks’ foundations are
machine learning and artificial
intelligence.
• Neural networks can produce
excellent predictions from large,
complex and imperfect datasets
containing hundreds of potentially
interactive predictor variables.
Module
Hierarchical Clustering

• Hierarchical clustering is the

‘mother of all clustering
models’.
• It works by assuming each
record is a cluster of one
and gradually groups records
together until there is one
super-cluster comprising all
records.
Dendrogram output from hierarchical clustering routine
K-means Clustering

• K-means clustering is the most

widely used form of clustering
routine.
• It works by clustering the records into
a predetermined number of clusters.
The predetermined number is ‘k’.
• The reference to ‘means’ refers to
the use of averages in the
computation.
• In this case it refers to the average
location of the members of a particular
cluster in n-dimensional space, where n
is the number of fields that are
considered in the clustering routine.
K-means Clustering Output
Two-Step Clustering

• Two-step clustering combines

predetermined and hierarchical
clustering processes.
• At step one, records are assigned to
a predetermined number of
clusters (alternatively you can allow
the algorithm to determine the
number of clusters).
• At step two, each of these clusters
is treated as a single case and the
records within each cluster
subjected to hierarchical clustering.
• Works well with large datasets.
Factor Analysis

• Factor analysis is a data

reduction procedure.
• It does this by identifying
underlying unobservable
(latent) variables that are
reflected in the observed
variables (manifest
variables).