CRM + Predictive Analytics: Why It All Adds Up

by Jim Berkowitz on May 3, 2011

Here’s are several excerpts from an article by Eric Barkin about predictive analytics, a subject near and dear to me, that’s definitely worth the read, CRM + Predictive Analytics: Why It All Adds Up:

Though predictive analytics (PA) tools have been around for decades—with a strong uptake historically in telecommunications and banking—demand has risen dramatically in the past couple of years. In fact, any CRM vendor focusing on a business-to-customer-facing client base must incorporate some PA into its offerings in order to build staying power.

Traditionally much of the ROI derived from PA involves “maximizing the lifetime value of a customer,” which in many cases refers to customer retention. That means intervening with a next-best offer when a customer appears likely to turn away from a provider or making the right offer once the customer has announced his intention to break ties. In some cases, it’s vital to determine when a customer seems likely to leave before he says anything…

“If people actually tell you they’re going to leave, it’s much more difficult to retain them,” says Rob Walker, vice president of decision management and analytics for Pegasystems, a business process management (BPM) and CRM solutions provider.

Also contributing to the spike of interest in PA is the rise of actionable social media data from external consumer communities. Networks like Facebook and Twitter have managed to net an enormous sea of users—far more than any opt-in network a business might hope to build for itself. The potential to learn about current customers is enormous, as is the ability to define and target prospective customers. There’s been no shortage of heralds belting out “the future is social CRM” through any trumpet within reach.

In some cases, enterprises have tapped those networks to gain deeper insight into customer behavior. Social media has been used to support market research and development; to get out marketing messages faster; to define segments of an enterprise’s consumer base; and, in some cases, to promote self-service as a way to drive down support costs. The real show-stopping stuff is yet to come, though.

“Over the next several years…[expect] a shift from stand-alone communities to external socials integrated with CRM systems,” writes James Kobelius, a senior analyst for Forrester Research, in an email to CRM magazine.

Every department of a business can find use for greater intelligence about who their company’s customers are and what would be the most efficient ways to reach them, he explains. Given all that, it’s no wonder Walker brags that PA’s business proposition is “so easy to sell it’s ridiculous.”

Vendors seem to know it, too. BPM companies without strong PA offerings are looking to forge partners or make acquisitions.

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