Xu and Walton (2005) state that special tools are included in analytical CRM systems
which facilitate analyzing large volumes of customer data to provide strategic
customer information and help in enhancing the customer knowledge base. However,
in most cases, analytical CRM involve piecing together with the various technologies
in a manner which will enable the organization to procure valuable information about
the customer (Ibid). Payne and Frow (2005) add that present day specific CRM
application packages provide various analytical tools which can assist the company in
tasks like campaign management analysis, credit scoring, and customer profiling.
Analytical CRM, therefore, provides a storehouse of data to be assimilated in the
business analytical systems (online analytical processing - OLAP), with the purpose
of giving the organization information which is tailor made for competitive marketing
and is targeted towards specific customers. It also enables the organization to use the
data promptly leading to a speedy realization of value. Information can be procured
from vast pool of all the systems of the organization and systematically used to
customize the offer to be made to a customer and identify those customers which do
not provide much benefit for the business (Gaines, 2002). Thus, a combination of
OLAP and e-CRM allows for information to be used for targeted campaigns and for
realizing the effectiveness of those campaigns. Company needs to be fully aware of
its targeted customers while launching new products as part of its effective marketing
strategy, and in such a situation, CRM enables the firm to identify customer
preferences and the likelihood of a successful launch (Scullin et ah, 2004)
2.2.1. An Analytical CRM Model
Xu and Walton (2005) state that customer knowledge is not restricted to information
about the identity of the customers i.e. customer profiling and segmentation, but also
must be wide enough to understand the customer behavior and purchase patterns.
This would mean that acquisition of knowledge is not a one time process; rather it is a
more continuous process keeping track of new customers, existing customers
(internal) and customers when been weaned away to the competitors, i.e. customers
who have crossed the boundaries of the organization. Information about potential
customers and even customers who are loyal to the competitors (external) is essential.
This implies that it is imperative for the managers to recognize the advantages of
analytical CRM systems, particularly for acquiring vital knowledge about the
customers. Figure 2.5 displays an analytical CRM system model which can be used
for acquiring relevant customer information (Ibid).
Figure 2.3. An Analytical CRM for Customer Knowledge Acquisition Source:
Adopted from Xu and Walton, 2005, p. 963
Xu and Walton (2005) further add that even though companies attach a lot of
significance to retaining the existing customers, pitched battles are fought for adding
potential customers into the company’s existing customer base. Managers need to
have a wide view and clear perspective for acquiring newer customers, indicating
their proficiency in strategic handling of the organization’s customers. It points to the
effectiveness of CRM if it enables the organization to recognize its prospective
customers and even those customers who are loyal to the competitors or have changed
their affections. This would imply that with analytical CRM it is possible to analyze
prospective customers and maintain customer profiles using data which has been
procured from internal and external sources. It also indicates to the importance of
assimilating CRM applications into the overall intelligence system of the organization
to understand and analyze profiles of all customers including those who are loyal and
even those who have shifted their loyalties to the competitors (Ibid).
2.2.2. Banks and Analytical CRM
Bolton (2004) maintains that in the context of bank’s CRM system, it is just not
enough to maintain records of processing of checks, withdrawals, transfers, etc. since
these are many transactions which do not in any way signify the importance of the
customer. An analytical CRM would, on the other hand, enable customer profiling
and segmentation leading to the identification of customers who are strategically
important for the bank. Senior management must focus on such customers, tracking
them consistently through the use of effective analytical CRM (Xu & Walton, 2005).
Marcus (2001) categorized the strategically significant customers into four types.
High lifetime value customer falls in the first group. To assess the lifetime value of a
customer, the management needs to evaluate the current value of future profitability to
be earned from maintaining relationship with such a customer. Keeping in view this
evaluation, it is possible to recognize the more valuable customers among the lot.
However, it is not necessary for all high volume customers to have high lifetime
value. The management needs to keep track of high lifetime value customers as part
of their customer retention programs. High-value customer can be identified by using
various methods. For example, there is the Pareto or 80/20 rule where 20% of the
current customers provide 80% of the revenue or profit, their profitability is taken as
the difference between revenue and costs. Customer profitability can be measured by
analyzing factors like product costs, acquisition costs, service costs and retention
costs. Lifetime value of a customer must also consider the retention level and loyalty
weighting of the customer (Xu & Walton, 2005).
Strategically significant customers falling in the second group are considered as
"benchmarks". Such customers do not maintain high-value or high volume, but
eagerly adopt new products
