What is customer knowledge?

Customer knowledge refers to understanding your customers, their needs, wants and aims. It is essential
if a business is to align its processes, products and services to build real customer relationships. It
includes intimate and tacit knowledge such as that of key account managers, and distant or analytic
knowledge including database information about sales, web-behaviour or other analytical piece of data.

Obviously companies know about their customers, but frequently this is in a fragmented form and
difficult to share or analyse and often it is incomplete or just in the head of one or two people. To be
effective customer knowledge needs to be visible throughout the organisation to ensure the voice of the
customer is heard.

Customer knowledge has become a big topic since we started. It now encompasses Big Data, Data
Science and Business Intelligence drawing in Web analytics. One recent study of business failures
concluded that often failure can be put down to complacency creating a gap between what you think
customers want and will put up with, compared to what customers really want and what they will go to
your competitors for.

Customer knowledge can be approached from two viewpoints. Firstly, you could say that customer
knowledge is the "collection of information and viewpoints that an organisation has about its
customers". Using this definition, the role of customer knowledge management is to capture and
organise this data to allow it to be shared and discussed throughout the organisation. This can include
sales and Customer Relationship Management (CRM) systems, account reports, but also include
detailed analysis of more quantifiable factors such as purchasing patterns or contact activity, website
and social media behaviour.

An alternative definitive of customer knowledge is that it is the "collection of information and insight
that you need to have to build stronger customer relationships". From this point of view what you
currently know about your customers may not be sufficient. You may need to put in processes and
systems to gather more information and data about who your customers are, what they do and how they
think. It is likely that the business only has a partial view of customer activity. You may know what the
customer spends with you, but not what they spend with competitors for instance.

For practical purposes, customer knowledge management is more often than not biased towards the
collection of easy information you have, rather than useful information you should have. For example,
you could go to the extremes of looking for a complete psychographic breakdown of each of your
customers individually, but in practice this would be excessive. Consequently a judgement is necessary
to determine what value you are getting from any customer knowledge you collect and so what level of
detail do you need.

The aim of building up a strong body of customer knowledge is to develop and manage customer
relationships now and over the longer term. Customer knowledge should be determining what to offer,
when to offer it and how much for and to monitor and affect customer behaviour in the way you market
and promote your products. In the long term the company has to design new products, offer new
services, compete in new markets, but even in the short term if you lost a top salesman, would you
know enough about her customers in order to keep her key accounts? Would you know which
customers are most likely to switch to a competitor if their price dropped?

Customer knowledge draws on two converging strands. Firstly, because customer knowledge has a cost,
it was normally associated with larger accounts in business-to-business markets where the value of the
account is large enough to sustain the cost involved in keeping and analysing the data. And secondly, it
draws on data streams and tools from consumer marketing like CRM and database analysis aiming to
build 360 degree view of all customers they have to improve cross-sales and retention.

One problem with customer knowledge is that it can be confused with CRM (customer relationship
management) and contact management and analysis system. Although there is some overlap, we like to
see customer knowledge as including a wider variety of less structured information that will help build
insight into customer relationships.

Ideally, customer knowledge should work at both a micro and a macro level. That is it should include
information about individuals that helps explain who they are, what they do and what they are looking
for, but it should encompass the macro view across the customer database to enable broader analysis of
customers a whole and so allow for modelling of behaviour and needs and the implementation of
algorithmic systems to tailor products and services to specific customers one-by-one.

Thus customer knowledge includes both quantitative insights such as numbers of orders placed, value
of business - elements that can be understood numerically, and qualitative insight such as the "MD's
just been in post for 3 months, still finding his feet" or personal preferences like works a home on
Friday.

A successful customer knowledge programme should include information viewpoints and perspectives
on key customers and analytics and trend information across the broad customer base allowing
individuals to be targeted for communication and research and burgeoning relationships to be nurtured
and grown.

It also has to address issues and concerns about privacy and fairness and so recognise that customers are
people and not just data subjects. Clarity and transparency in what customer knowledge is held and how
it is used can reassure the customer that they are not being manipulated and use of the data is in the
customer's best interest.

Customer Knowledge Value

Like Customer Referral Value (CRV) and Customer Influence Value (CIV), Customer Knowledge
Value (CKV) is an indirect measure of a customer’s monetary contribution to a firm. But unlike those
other two metrics, CKV is not concerned with a customer’s interactions with existing or prospective
customers. Rather, CKV concerns a customer’s interactions with the firm itself, specifically those
interactions which involve a transfer of knowledge the former to the latter. CKV, in effect, aims to
measure the value accrued from any improvements within a firm that are attributable to the ideas or
suggestions provided by a given customer (Kumar, V., and Yashoda Bhagwat (2010)).

From a voluntarily submitted idea or suggestion to actual implementation on behalf of a firm requires
many intermediate steps. A firm must identify the most effective channel(s) for quality feedback, screen
and analyze the incoming feedback data, and then determine which suggestions are most in need of
being addressed and/or which are most viable for implementation. CKV then equates to all profits
realized post-implementation. Firms with strong feedback incentives, well-designed feedback channels,
effective analytical strategies stand to maximize CKV. Moreover, firms that supply their customer base
with greater knowledge about the products and services they provide are likelier to receive well-
informed feedback. CLV generally correlates with CKV, but after CLV rises above a certain threshold,
the customer in question is generally at a level of satisfaction that precludes the desire to submit
feedback.

Since customer feedback gets initiated through multiple channels, the following five-step strategy can
be used to measure and manage customer feedback (Kumar, V. (2013)).

Step One:

The business will have to analyze the various channels through which customers provide feedback and
identify those channels that provide significant and quality feedback that the business can use. Some of
the popular channels used by businesses to gather feedback include point-of-purchase surveys, web-
based surveys, telephone surveys, website feedback link, consumer user groups, focus groups, and
follow-up surveys, among others.

Step Two:

The business will have to come up with mechanisms of integrating the channels to collect feedback
data. Customer feedback is a resource, and it is wasted if not acted upon and used for improvement. By
finding out and addressing customer concerns from the feedback, the companies’ gain solid
understanding of customer needs, wants, and issues. That is, streamlining and consolidating all feedback
data can provide valuable insights into what customers need, want, and value most. Further, it is not
uncommon for unsatisfied customers to go the extra mile to narrate their experience with a product
while most satisfied customers do not even jot it down. It is all the more important to create a customer
feedback process for happy customers as it can be difficult to manage negative feedback once they
appear in the public. Receiving negative feedback is inevitable at some point; however, it is important to
remember that consumers want to see feedback and not just positive reviews as it would look like as the
company has edited/delete bad reviews.

Step Three:
Businesses will have to adopt a standard way to normalize the data collected from the various channels
to a “likert scale” of their choice that can be used for further analysis. Graphing the available data using
advanced computer systems is another technique.

Steps Four & Five:

The business will need to analyze and classify the feedback data into useful information that can be
used in generating CKV. The feedback information retrieved by the company can further be classified
in a 2x2 matrix. As shown in the figure below, the Type of Feedback is represented on the x-axis
(positive or negative) and the Time to Act on the y-axis (immediate or long term). A response for
internal and external action is presented within the matrix. In order to analyze the genuineness of the
feedback, the matrix can be completed with selected feedback received that is correlated with customer
interactions such as product returns and service calls with complaints during the same timeframe.

Feedback Response Strategy

In this regard, feedback from popular sites (e.g. yelp, amazon, and mouthshut) can be collected and
sorted out internally by a business. As we see the review/feedback reaction can be positive and negative
and the action that should be taken from the business side could be immediate or long term. Similarly,
the action from the business side can be an internal circular or a decision and there will be an external
response to the customer by means of a forum, email or a social media website.

What is Multichannel Communications?

“Technology has empowered the consumer, putting him in the driver’s seat 24/7. In other words it is
the customer who decides when and how to interact during a business relationship. This could be with a
bank, an insurance company, a telecommunications organization a utilities group or any other entity.
However if a consumer receives a message that is not relevant to him, or via the wrong media or at the
wrong time, his customer experience will be far from optimal.
How can enterprises deal with this? I believe that multichannel communications is a major part of the
answer as it enables companies to reach out to customers via their preferred channel, whether it be on
paper, a smartphone, laptop or other device. Companies need to move from simply sending information
to actually interacting with customers. And they need to ensure their customers are motivated to interact
with them.
Customer communications are evolving rapidly. New technologies are in the spotlight as organizations
make the transition to a world in which social media, mobility, data analytics and cloud computing
(known as SMAC) begin to take center www. So if enterprises really want to maximize the impact of
digital communications they need to acknowledge SMAC trends.

You may have already decided you need to invest in a multichannel communications platform. Or
maybe you are not so sure. Whatever questions you may have, this white paper will help you make the
right choice for both your customers and your business. There is no single solution to suit every
business. But I am convinced that if you make multichannel communications part of your overall
business strategy you will be able to ensure that all the necessary elements of your customer
communications are adapted to suit your budget and expectations.”

THE DIFFERENCE BETWEEN MULTICHANNEL AND OMNICHANNEL

COMMUNICATIONS

Multichannel communications is all about using available technology to ensure your target audience is
presented with information or the ability to react to information across multiple channels. Customers
expect to receive personalized, relevant communications that capture their attention despite their busy
schedule. And, they are more likely to react to your message if it is delivered via their preferred media.
In practice this involves sending the right message, at the right time, via the right channel.

Multichannel communications is more of an operational approach, and enables customers to complete

transactions using different channels. Omnichannel communications however, views the experience
through the customers’ eyes and manages the customer experience across all channels so that it is
seamless, integrated and consistent. This synchronized approach presents a single face to the customer
and a consistent way of communicating. In other words Omnichannel is Multichannel done
professionally.

CUSTOMER COMMUNICATIONS MANAGEMENT

Communicating with customers today is all about connecting, engaging and building sustainable,
trustworthy relationships. A Customer Communications Management (CCM) strategy is therefore
essential for businesses wishing to remain profitable in the digital era. A CCM program can offer you
the following benefits:

 CUSTOMER RETENTION: Consumers do not think twice about unsubscribing from brand
communications when the messages they receive are not relevant to them. Therefore you have
got to have the ability to communicate appropriately across all channels in order to keep
customers.
 MARKETING OPPORTUNITIES: Transactional documents such as invoices and statements
are opened and read more than any other type of documents. But they are generally sent out by
Operations or Finance departments. If you allow your Marketing experts to leverage this type of
customer communications, by addnig for example personalized promotional messages, you
could transform your transactional mail into a valuable touch point, bringing in new orders.
 IMPROVED CASH FLOW: Outstanding payment figures dramatically decrease when
customers are offered a wider range of payment options. Expanding your payment options to
include physical mail and a range of digital-based bill paying options not only improves your
treasury performance, it also increases customer satisfaction.
EMBRACE DIGITAL & ENHANCE PHYSICAL MAIL
One of the fastest growing trends in customer communications today is the shift from physical to digital
communications. InfoTrends (a market research and strategic consulting firm) is forecasting that 8.6
billion (35%) consumer bills and statements in the U.S. will be delivered as paperless in 2017. So
although this represents a significant increase, compared to 18% in 2012, it still means that paper is here
to stay for another while. The reason for this is that the consumers surveyed value receiving bills and
statements by physical mail because it:

 Acts as a reminder for them to pay

 Can be archived as a hard copy
 Is their preferred way to receive communications

However in reality digital channels can also act as reminders to pay, while offering simple and secure
archiving capabilities. Customers who prefer to receive their transactional communications by physical
mail will most likely continue to do so. However they will expect high quality communications in the
future. Other customers will prefer digital communication channels for payment including pdfs by
email, web portals and e-invoicing service providers. Offering consistency across channels allows
people to switch according to their needs at any moment. This may involve the use of a tablet one day
and then moving to paper where prestige or attention grabbing may be more effective. If you would like
to serve your customers better, it is probably the right time to carry out a survey to find out how your
customers like to send and receive their business communications.

BUSINESS BENEFITS OF MULTICHANNEL COMMUNICATIONS

One single platform can be used to implement an integrated multichannel communications strategy
across an entire enterprise. This empowers the organization to produce, optimize and deliver customer
communications via both paper and digital channels, depending on customer preference.
A successful multichannel campaign enables you to:

 SPEED UP CUSTOMER ACQUISITION: by efficiently targeting individuals through their preferred

channels
 GROW CUSTOMER SATISFACTION AND LOYALTY: by providing clear, targeted and consistent
customer communications via any channel
 CROSS SELL/UP SELL: by transforming regular transactional documents such as invoices or statements
into relevant marketing tools containing personalized offers
 REDUCE OUTSOURCING COSTS: by bringing document creation in-house
 IMPROVE YOUR BRAND IMAGE: by reducing manual errors thanks to the automation of batch
document creation
 BOOST OPERATIONAL EFFICIENCY: by merging data and streamlining business processes to create,
produce, deliver and track customer communications
 ENSURE BRAND CONSISTENCY: by taking control of all of your document design and template
management
 INCREASE TIME TO MARKET: by designing documents once, maintaining less templates and
consolidating assets such as pdfs, Word documents and logos into one single controlled environment

EFFECTIVE CUSTOMER COMMUNICATIONS

There are four key foundations for effective communication:

CLARITY
This involves making sure we understand what customer needs are and ensuring content delivers these
needs. For example not all customers want to see all the transactions on their bank statements. Effective
communications is like having a conversation. It should only be about things the person you are talking
to is interested in.
CONTEXT
We know all customers are different. But how do we know what to give them? We need to give them
content that is relevant to their needs. For example if a bank notices that someone is saving a lot of
money it could embed targeted promotions and new product offers on statements and bills.
CHOICE
Organizations drive choice, not consumers. For example banks often fail to give us a choice and simply
inform us that statements will be sent in a digital format and if we prefer paper statements we have to
pay for them. By giving people the opportunity to choose how they receive their communications means
you can increase customer engagement.
CONSISTENCY
All of the benefits of multichannel communications are lost when there is no consistency. This means
coherence when it comes to messages, images and colors. Multichannel communications platforms
provide you with tools for creating consistency, in a sustainable compliant way. This ensures that
people know who their message is coming from, whether it be in a paper or digital format.

THE IMPORTANCE OF DATA

Data silos exist in many organizations. And this can cause problems. For example if you have a
customer who does not pay his bills, you should not be sending him new offers. Therefore someone
needs to take ownership. A team needs to bring together data from different systems and merge it into
both print and digital channels. Many companies make the mistake of taking data from different
sources. They do not realize that you need to merge data in order to create value. For example if a
customer regularly buys clothes online, the financial platform used for payment will contain a lot of
useful data on how the customer likes to pay. He may prefer to pay on receipt of goods or in advance. If
the retailer in question has a separate database containing a complaint from this customer because his
account was debited twice by mistake, this could be overlooked. Also if you have errors in your data
systems you may have different entries for the same person in different formats and the same person
may receive the same direct marketing campaign many times. “By merging all the data you have for the
same customer you can create a Single Customer View. This enables you to provide customers with
better service, create better customer relationships and more adapted communications campaigns”
explains Esther Labrie, Marketing Specialist at Human Inference. it becomes easier to manage complex
communications. Effective CCM adopters can truly focus on their customers, instead of focusing on
technology.”

Five Simple Ways to Increase Your Customer Base

Post summary:

 The key to business growth and profits

 How retention rates improve customer value
 Five simple ways to increase your customer base

Do you find yourself thinking about how to increase your customer base?
One of key drivers in your company’s value is the value of your customers. Analyzing customer
profitability and maximizing a customer’s lifetime value are highly important and essential to any
business.

To increase your customer base, it is necessary to stay in constant contact with potential and existing
customers and the more value your business can offer, the more likely they will remain loyal.

A 5% increase in customer retention can result in a 75% increase in customer value. The challenge is
how to improve your retention by 5%.

Below are 5 simple ways to bring in more customers and increase your customer base.

1. Offer a free newsletter

Free is something that everyone can afford, from small businesses to global corporations. When you
offer a free newsletter, you are informing your potential customers that you are willing to provide free
information from the start. If you provide good content, customers will know more about your business.

2. Increase your customer base by asking for opinions

Before a web visitor leaves your website, request that they complete a short survey related to your
business. People are happy to express themselves and often enjoy telling you about their online and
offline experiences. You can use a survey to conduct industry research, customer experience or measure
customer satisfaction.

3. Keep up and maintain excellent customer support and service

A customer who contacts customer support about their first order is just as important as a customer who
contacts customer service about their tenth order. Treat each customer with respect and take appropriate
action. A happy customer is likely to tell at least three friends about a positive experience and great
customer service leads to increased sales. Best of all, you can keep track of previous customer
communication through tools such as CRM software.

4. Keep your website content fresh

Fresh and informative content is one of the main elements that pull in new visitors and potential
customers. Keep your content fresh by publishing a blog that reports the latest business news, key-
takeaways from whitepapers and hot topics within your industry. Fresh content will also help your
website be found in search engines.

5. Promote your business on social media networks

Facebook users have an average of 229 friends. When you create new content, launch a new product or
run a new campaign, be sure you share this across the social media channels you are active in. There is
no easier way to grow your customer base than providing value and then having your customers
promote your brand for you.

Building a solid customer base

Marketing is the art of attracting and keeping customers. If building a solid customer base for your
product or service is what you are looking to achieve in 2018, implementing the five steps above will
greatly increase your customer database in a short period of time.
customer relationship management
The concept of customer relationship management started in the early 1970s, when customer
satisfaction was evaluated using annual surveys or by front-line asking.[citation needed] At that time,
businesses had to rely on standalone mainframe systems to automate sales, but the extent of technology
allowed them to categorize customers in spreadsheets and lists. In 1982, Kate and Robert Kestnbaum
introduced the concept of Database marketing, namely applying statistical methods to analyze and
gather customer data.[3] By 1986, Pat Sullivan and Mike Muhney released a customer evaluation system
called ACT! based on the principle of digital rolodex, which offered a contact management service for
the first time.

The trend was followed by numerous developers trying to maximize leads' potential, including Tom
Siebel, who designed the first CRM product Siebel Systems in 1993.[4] Nevertheless, customer
relationship management popularized in 1997, due to the work of Siebel, Gartner, and IBM. Between
1997 and 2000, leading CRM products were enriched with enterprise resource planning functions, and
shipping and marketing capabilities.[5] Siebel introduced the first mobile CRM app called Siebel Sales
Handheld in 1999. The idea of a cloud-hosted and moveable customer bases was soon adopted by other
leading providers at the time, including PeopleSoft, Oracle, and SAP.[6]

The first open-source CRM system was developed by SugarCRM in 2004. During this period, CRM
was rapidly migrating to cloud, as a result of which it became accessible to sole entrepreneurs and small
teams. This increase in accessiblity generated a huge wave of price reduction.[5] Around 2009,
developers began considering the options to profit from social media's momentum, and designed tools
to help companies become accessible on all users' favorite networks. Many startups at the time
benefited from this trend to provide exclusively social CRM solutions, including Base and Nutshell.[5]
The same year, Gartner organized and held the first Customer Relationship Management Summit, and
summarized the features systems should offer to be classified as CRM solutions.[7] In 2013 and 2014,
most of the popular CRM products were linked to business intelligence systems and communication
software to improve corporate communication and end-users' experience. The leading trend is to replace
standardized CRM solutions with industry-specific ones, or to make them customizable enough to meet
the needs of every business.[8]

In November 2016, Forrester released a report where it "identified the nine most significant CRM
suites from eight prominent vendors," among them companies such as Infor, Microsoft, and NetSuite.[9]

Types
Strategic

Strategic CRM is focused upon the development of a customer-centric business culture.[10]

Operational

The primary goal of customer relationship management systems is to integrate and automate sales,
marketing, and customer support. Therefore, these systems typically have a dashboard that gives an
overall view of the three functions on a single customer view, a single page for each customer that a
company may have. The dashboard may provide client information, past sales, previous marketing
efforts, and more, summarizing all of the relationships between the customer and the firm. Operational
CRM is made up of 3 main components: sales force automation, marketing automation, and service
automation.[11]

 Sales force automation works with all stages in the sales cycle, from initially entering contact
information to converting a prospective client into an actual client.[12] It implements sales
promotion analysis, automates the tracking of a client's account history for repeated sales or
 future sales and coordinates sales, marketing, call centers, and retail outlets. It prevents duplicate
efforts between a salesperson and a customer and also automatically tracks all contacts and
follow-ups between both parties[12].[citation needed]
 Marketing automation focuses on easing the overall marketing process to make it more effective
and efficient. CRM tools with marketing automation capabilities can automate repeated tasks,
for example, sending out automated marketing emails at certain times to customers, or posting
marketing information on social media. The goal with marketing automation is to turn a sales
lead into a full customer. CRM systems today also work on customer engagement through social
media.[13]
 Service automation is the part of the CRM system that focuses on direct customer service
technology. Through service automation, customers are supported through multiple channels
such as phone, email, knowledge bases, ticketing portals, FAQs, and more.[11]

Analytical

The role of analytical CRM systems is to analyze customer data collected through multiple sources, and
present it so that business managers can make more informed decisions.[citation needed] Analytical CRM
systems use techniques such as data mining, correlation, and pattern recognition to analyze the customer
data. These analytics help improve customer service by finding small problems which can be solved,
perhaps, by marketing to different parts of a consumer audience differently.[11] For example, through the
analysis of a customer base's buying behavior, a company might see that this customer base has not
been buying a lot of products recently. After scanning through this data, the company might think to
market to this subset of consumers differently, in order to best communicate how this company's
products might benefit this group specifically.[14]

Collaborative

The third primary aim of CRM systems is to incorporate external stakeholders such as suppliers,
vendors, and distributors, and share customer information across groups/departments and organisations.
For example, feedback can be collected from technical support calls, which could help provide direction
for marketing products and services to that particular customer in the future.[15]

Customer data platform

A customer data platform (CDP) is a computer system used by marketing departments that assembles
data about individual people from various sources into one database, with which other software systems
can interact.[16] As of February 2017 there were about twenty companies selling such systems and
revenue for them was around US$300 million.[16]

Components

Components in the different types of CRM[15]

The main components of CRM are building and managing customer relationships through marketing,
observing relationships as they mature through distinct phases, managing these relationships at each
stage and recognizing that the distribution of value of a relationship to the firm is not homogenous.
When building and managing customer relationships through marketing, firms might benefit from using
a variety of tools to help organizational design, incentive schemes, customer structures, and more to
optimize the reach of its marketing campaigns. Through the acknowledgement of the distinct phases of
CRM, businesses will be able to benefit from seeing the interaction of multiple relationships as
connected transactions. The final factor of CRM highlights the importance of CRM through accounting
for the profitability of customer relationships. Through studying the particular spending habits of
customers, a firm may be able to dedicate different resources and amounts of attention to different types
of consumers.[17]

Relational Intelligence, or awareness of the variety of relationships a customer can have with a firm, is
an important component to the main phases of CRM. Companies may be good at capturing
demographic data, such as gender, age, income, and education, and connecting them with purchasing
information to categorize customers into profitability tiers, but this is only a firm's mechanical view of
customer relationships.[18] This therefore is a sign that firms believe that customers are still resources
that can be used for up-sell or cross-sell opportunities, rather than humans looking for interesting and
personalized interactions.[19]

CRM systems include:

 Data warehouse technology, used to aggregate transaction information, to merge the information
with CRM products, and to provide key performance indicators.
 Opportunity management which helps the company to manage unpredictable growth and
demand, and implement a good forecasting model to integrate sales history with sales
projections.[20]
 CRM systems that track and measure marketing campaigns over multiple networks, tracking
customer analysis by customer clicks and sales.
 Some CRM software is available as a software as a service (SaaS), delivered via the internet and
accessed via a web browser instead of being installed on a local computer. Businesses using the
software do not purchase it, but typically pay a recurring subscription fee to the software
vendor.[11]
 For small businesses a CRM system may consist of a contact manager system that integrates
emails, documents, jobs, faxes, and scheduling for individual accounts.[21] CRM systems
available for specific markets (legal, finance) frequently focus on event management and
relationship tracking as opposed to financial return on investment (ROI).
 CRM systems for eCommerce, focused on marketing automation tasks, like: cart rescue, re-
engage users with email, personalization.
 Customer-centric relationship management (CCRM) is a nascent sub-discipline that focuses on
customer preferences instead of customer leverage. CCRM aims to add value by engaging
customers in individual, interactive relationships.[17]
 Systems for non-profit and membership-based organizations help track constituents, fundraising,
sponsors' demographics, membership levels, membership directories, volunteering and
communication with individuals.[21]

Effect on customer satisfaction

Customer satisfaction has important implications for the economic performance of firms because it has
the ability to increase customer loyalty and usage behavior and reduce customer complaints and the
likelihood of customer defection.[22][23] The implementation of a CRM approach is likely to have an
effect on customer satisfaction and customer knowledge for a variety of different reasons.

Firstly, firms are able to customize their offerings for each customer.[24] By accumulating information
across customer interactions and processing this information to discover hidden patterns, CRM
applications help firms customize their offerings to suit the individual tastes of their customers.[24] This
customization enhances the perceived quality of products and services from a customer's viewpoint, and
because perceived quality is a determinant of customer satisfaction, it follows that CRM applications
indirectly affect customer satisfaction. CRM applications also enable firms to provide timely, accurate
processing of customer orders and requests and the ongoing management of customer accounts.[24] For
example, Piccoli and Applegate discuss how Wyndham uses IT tools to deliver a consistent service
experience across its various properties to a customer. Both an improved ability to customize and a
reduced variability of the consumption experience enhance perceived quality, which in turn positively
affects customer satisfaction.[25] Furthermore, CRM applications also help firms manage customer
relationships more effectively across the stages of relationship initiation, maintenance, and
termination.[26]

Customer benefits

With Customer relationship management systems customers are served better on day to day process and
with more reliable information their demand of self service from companies will decrease. If there is
less need to interact with the company for different problems, customer satisfaction level increases.[27]
These central benefits of CRM will be connected hypothetically to the three kinds of equity that are
relationship, value and brand, and in the end to customer equity. Eight benefits were recognized to
provide value drivers.[28]

1. Enhanced ability to target profitable customers.

2. Integrated assistance across channels
3. Enhanced sales force efficiency and effectiveness
4. Improved pricing
5. Customized products and services
6. Improved customer service efficiency and effectiveness
7. Individualized marketing messages also called campaigns
8. Connect customers and all channels on a single platform.

In 2012, after reviewing the previous studies, someone selected some of those benefits which are more
significant in customer's satisfaction and summarized them into the following cases:[29]

1. Improve customer services: In general, customers would have some questions, concerns or
requests. CRM services provide the ability to a company for producing, allocating and managing
requests or something made by customers. For example, call center software, which helps to
connect a customer to the manager or person who can best assist them with their existing
problem, is one of the CRM abilities that can be implemented to increase efficiency.[30]
2. Increased personalized service or one-to-one service: Personalizing customer service or one-to-
one service provides companies to improve understanding and gaining knowledge of the
customers and also to have better knowledge about their customers' preferences, requirements
and demands.
3. Responsive to customer's needs: Customers' situations and needs can be understood by the firms
focusing on customer needs and requirements.[31]
4. Customer segmentation: In CRM, segmentation is used to categorize customers, according to
some similarity, such as industry, job or some other characteristics, into similar groups.[32]
Although these characteristics, can be one or more attributes. It can be defined as a subdividing
the customers based on already known good discriminator.
5. Improve customization of marketing: Meaning of customization of marketing is that, the firm or
organization adapt and change its services or products based on presenting a different and
unique product or services for each customer. With the purpose of ensuring that customer needs
and requirements are met Customization is used by the organization. Companies can put
investment in information from customers and then customize their products or services to
maintain customer interests.
6. Multichannel integration: Multichannel integration shows the point of co creation of customer
value in CRM. On the other hand, a company's skill to perform multichannel integration
successfully, is heavily dependent on the organization's ability getting together customer
information from all channels and incorporate it with other related information.[33]
 7. Time saving: CRM will let companies to interact with customers more frequently, by
personalized message and communication way which can be produced rapidly and matched on a
timely basis, and finally they can better understand their customers and therefore look forward to
their needs.[34]
8. Improve customer knowledge: Firms can make and improve products and services through the
information from tracking (e.g. via website tracking) customer behaviour to customer tastes and
needs.[35] CRM could contribute to a competitive advantage in improving firm's ability of
customer information collecting to customize products and services according to customer
needs.

Examples

Research has found a 5% increase in customer retention boosts lifetime customer profits by 50% on
average across multiple industries, as well as a boost of up to 90% within specific industries such as
insurance.[36] Companies that have mastered customer relationship strategies have the most successful
CRM programs. For example, MBNA Europe has had a 75% annual profit growth since 1995. The firm
heavily invests in screening potential cardholders. Once proper clients are identified, the firm retains
97% of its profitable customers. They implement CRM by marketing the right products to the right
customers. The firm's customers' card usage is 52% above industry norm, and the average expenditure is
30% more per transaction. Also 10% of their account holders ask for more information on cross-sale
products.[36]

Amazon has also seen great success through its customer proposition. The firm implemented personal
greetings, collaborative filtering, and more for the customer. They also used CRM training for the
employees to see up to 80% of customers repeat.[36]

Customer profile
Further information: Consumer behaviour, Biology and consumer behaviour, and Buying decision

Customer or consumer profiles are the essence of the data that is collected alongside core data (name,
address, company) and processed through customer analytics methods, essentially a type of profiling. A
customer is abstracted to information that sums up consumption habits so far and projects them into the
future so that they can be grouped for marketing and advertising purposes.[37]

Improving CRM within a firm

Consultants, such as Bain & Company, argue that it is important for companies establishing strong
CRM systems to improve their relational intelligence.[38] According to this argument, a company must
recognize that people have many different types of relationships with different brands. One research
study analyzed relationships between consumers in China, Germany, Spain, and the United States, with
over 200 brands in 11 industries including airlines, cars and media. This information is valuable as it
provides demographic, behavioral, and value-based customer segmentation. These types of relationships
can be both positive and negative. Some customers view themselves as friends of the brands, while
others as enemies, and some are mixed with a love-hate relationship with the brand. Some relationships
are distant, intimate or anything in between.[19]

Analyzing the information

Managers must understand the different reasons for the types of relationships, and provide the customer
with what they are looking for. Companies can collect this information by using surveys, interviews,
and more, with current customers. For example, Frito-Lay conducted many ethnographic interviews
with customers to try and understand the relationships they wanted with the companies and the brands.
They found that most customers were adults who used the product to feel more playful. They may have
enjoyed the company's bright orange color, messiness and shape.[39]
Companies must also improve their relational intelligence of their CRM systems. These days,
companies store and receive huge amounts of data through emails, online chat sessions, phone calls, and
more.[40] Many companies do not properly make use of this great amount of data, however. All of these
are signs of what types of relationships the customer wants with the firm, and therefore companies may
consider investing more time and effort in building out their relational intelligence.[18] Companies can
use data mining technologies and web searches to understand relational signals. Social media such as
Facebook, Twitter, blogs, etc. is also a very important factor in picking up and analyzing information.
Understanding the customer and capturing this data allows companies to convert customer's signals into
information and knowledge that the firm can use to understand a potential customer's desired relations
with a brand.[39]

It is also very important to analyze all of this information to determine which relationships prove the
most valuable. This helps convert data into profits for the firm. Stronger bonds contribute to building
market share. By managing different portfolios for different segments of the customer base, the firm can
achieve strategic goals.[citation needed]

Employee training

Many firms have also implemented training programs to teach employees how to recognize and
effectively create strong customer-brand relationships. For example, Harley Davidson sent its
employees on the road with customers, who were motorcycle enthusiasts, to help solidify relationships.
Other employees have also been trained in social psychology and the social sciences to help bolster
strong customer relationships. Customer service representatives must be educated to value customer
relationships, and trained to understand existing customer profiles. Even the finance and legal
departments should understand how to manage and build relationships with customers.[41]

Application

Applying new technologies while using CRM systems requires changes in infrastructure of the
organization as well as deployment of new technologies such as business rules, databases and
information technology.[39]

In practice
Call centers

Contact center CRM providers are popular for small and mid-market businesses. These systems codify
the interactions between company and customers by using analytics and key performance indicators to
give the users information on where to focus their marketing and customer service. This allows agents
to have access to a caller's history to provide personalized customer communication. The intention is to
maximize average revenue per user, decrease churn rate and decrease idle and unproductive contact
with the customers.[42][43][44]

Growing in popularity is the idea of gamifying, or using game design elements and game principles in a
non-game environment such as customer service environments. The gamification of customer service
environments includes providing elements found in games like rewards and bonus points to customer
service representatives as a method of feedback for a job well done.[45] Gamification tools can motivate
agents by tapping into their desire for rewards, recognition, achievements, and competition.[46]

Contact center automation

Contact center automation, the practice of having an integrated system that coordinates contacts
between an organization and the public, is designed to reduce the repetitive and tedious parts of a
contact center agent's job. Automation prevents this by having pre-recorded audio messages that help
customers solve their problems. For example, an automated contact center may be able to re-route a
customer through a series of commands asking him or her to select a certain number in order to speak
with a particular contact center agent who specializes in the field in which the customer has a
question.[47] Software tools can also integrate with the agent's desktop tools to handle customer
questions and requests. This also saves time on behalf of the employees.[13]

Social media

Social CRM involves the use of social media and technology to engage and learn from consumers.[48]
Because the public, especially young people, are increasingly using social networking sites, companies
use[19] these sites to draw attention to their products, services and brands, with the aim of building up
customer relationships to increase demand.

Some CRM systems integrate social media sites like Twitter, LinkedIn and Facebook to track and
communicate with customers. These customers also share their own opinions and experiences with a
company's products and services, giving these firms more insight. Therefore, these firms can both share
their own opinions and also track the opinions of their customers.[15]

Enterprise feedback management software platforms, such as Confirmit, Medallia, and Satmetrix,
combine internal survey data with trends identified through social media to allow businesses to make
more accurate decisions on which products to supply.[49]

Location-based services

CRM systems can also include technologies that create geographic marketing campaigns. The systems
take in information based on a customer's physical location and sometimes integrates it with popular
location-based GPS applications. It can be used for networking or contact management as well to help
increase sales based on location.[13]

Business-to-business transactions

Despite the general notion that CRM systems were created for the customer-centric businesses, they can
also be applied to B2B environments to streamline and improve customer management conditions. For
the best level of CRM operation in a B2B environment, the software must be personalized and delivered
at individual levels.[50]

The main differences between business-to-consumer (B2C) and business-to-business CRM systems
concern aspects like sizing of contact databases and length of relationships.[51] Business-to-business
companies tend to have smaller contact databases than business-to-consumer, the volume of sales in
business-to-business is relatively small. There are fewer figure propositions in business-to-business, but
in some cases, they cost a lot more than business-to-consumer items and relationships in business-to-
business environment are built over a longer period of time. Furthermore, business-to-business CRM
must be easily integrated with products from other companies. Such integration enables the creation of
forecasts about customer behavior based on their buying history, bills, business success, etc. An
application for a business-to-business company must have a function to connect all the contacts,
processes and deals among the customers segment and then prepare a paper. Automation of sales
process is an important requirement for business-to-business products. It should effectively manage the
deal and progress it through all the phases towards signing. Finally, a crucial point is personalization. It
helps the business-to-business company to create and maintain strong and long-lasting relationship with
the customer.

CRM market

The overall CRM market grew by 12.3 percent in 2015.[52] The following table lists the top vendors in
2012-2015 (figures in millions of US dollars) published in Gartner studies.[52][53][54][55]
 2015 2014 2013 2013 2012 2012
2015 2014
Vendor Revenue Revenue Revenue Share Revenue Share
Share(%) Share(%)
($M) ($M) ($M) (%) ($M) (%)

Salesforce.com
5,171 19.7 4,250 18.4 3,292 16.1 2,525 14.0
CRM

SAP AG 2,684 10.2 2,795 12.1 2,622 12.8 2,327 12.9

Oracle 2,047 7.8 2,102 9.1 2,097 10.2 2,015 11.1

Microsoft
1,142 4.3 1,432 6.2 1,392 6.8 1,135 6.3
Dynamics CRM

Others 15,245 58.0 12,520 54.2 11,076 54.1 10,086 55.7

Total 26,287 100 23,100 100 20,476 100 18,090 100

The four largest vendors with CRM system offerings are Salesforce, SAP, Oracle, and Microsoft, which
represented 42 percent of the market in 2015.[52] Other providers also are popular for small and mid
market businesses. Splitting CRM providers into nine different categories (Enterprise CRM Suite,
Midmarket CRM Suite, Small-Business CRM Suite, sales force automation, incentive management,
marketing solutions, business intelligence, data quality, consultancies), each category has a different
market leader. Additionally, applications often focus on professional fields such as healthcare,
manufacturing, and other areas with branch-specific requirements.[citation needed]

Market trends

In the Gartner CRM Summit 2010 challenges like "system tries to capture data from social networking
traffic like Twitter, handles Facebook page addresses or other online social networking sites" were
discussed and solutions were provided that would help in bringing more clientele.[56] Many CRM
vendors offer subscription-based web tools (cloud computing) and SaaS. Some CRM systems are
equipped with mobile capabilities, making information accessible to remote sales
staff.[57]Salesforce.com was the first company to provide enterprise applications through a web browser,
and has maintained its leadership position.[58]

Traditional providers have recently moved into the cloud-based market via acquisitions of smaller
providers: Oracle purchased RightNow in October 2011[59] and SAP acquired SuccessFactors in
December 2011.[60]

The era of the "social customer"[61] refers to the use of social media (Twitter, Facebook, LinkedIn,
Google Plus, Pinterest, Instagram, Yelp, customer reviews in Amazon, etc.) by customers. CRM
philosophy and strategy has shifted to encompass social networks and user communities.

Sales forces also play an important role in CRM, as maximizing sales effectiveness and increasing sales
productivity is a driving force behind the adoption of CRM. Empowering sales managers was listed as
one of the top 5 CRM trends in 2013.[62]

Another related development is vendor relationship management (VRM), which provide tools and
services that allow customers to manage their individual relationship with vendors. VRM development
has grown out of efforts by ProjectVRM at Harvard's Berkman Center for Internet & Society and
Identity Commons' Internet Identity Workshops, as well as by a growing number of startups and
established companies. VRM was the subject of a cover story in the May 2010 issue of CRM
Magazine.[63]
 Pharmaceutical companies were some of the first investors in sales force automation (SFA) and some
are on their third- or fourth-generation implementations. However, until recently, the deployments did
not extend beyond SFA—limiting their scope and interest to Gartner analysts.[64]

Another trend worth noting is the rise of Customer Success as a discipline within companies. More and
more companies establish Customer Success teams as separate from the traditional Sales team and task
them with managing existing customer relations. This trend fuels demand for additional capabilities for
more holistic understanding of the customer health, which is a limitation for many existing vendors in
the space.[65] As a result, a growing number of new entrants enter the market, while existing vendors add
capabilities in this area to their suites. In 2017, artificial intelligence and predictive analytics were
identified as the newest trends in CRM.[66]

Expanding the size of customer database

Have more customers, money and time than you know what to do with? Many entrepreneurs always
seem to be struggling with finding the time and money to market effectively. Expanding a contact
database beyond friends, family and close business acquaintances on a budget can be a challenge.

One option may be to consider buying a contact database. Automatic leads, right? There can be
potential problems with this route. A list can be expensive, and it is only effective if you can get a list
specific to your target market. Another difficulty is that the contacts are usually completely cold and
they have no prior relationship with you. What's more, the contact information may be inaccurate by the
time it gets into your hands.An alternative can be subscribing to a service that provides more accurate
contact information on a real time basis such as Hoovers, but this, too, can be an expensive way to get
an optimal, but cold, contact list.So how can you expand your contact database on a budget? By
practicing the few simple steps discussed below:

1. Embed networking naturally into your day-to-day life.

Start by brainstorming everyone you know, and I mean everyone. What organizations to you belong to?
Who are your kid's friend's parents? Who do you know in your neighborhood? What about your barber?
Your cleaning lady? . . . Literally, everyone.

During conversations you have, casually mention what you do using a well-crafted elevator pitch that is
compelling and memorable. If people are clear about what you do, how you help and who you help,
they are better able to make qualified referrals.

 Related: Five Ways to Take Charge of Your Own Networking

Gather information that you receive and incorporate into a contact management system for future
follow-up.

2. Network strategically.
Create a goal-oriented plan. Hang out where your customers and most qualified prospects are, both in
person and online. This very personal strategy serves three purposes. You can stay up to date on
industry trends. You may get access to people who may be interested in your products and services and,
importantly, they can get to know you on a personal level. That personal connection can make the
difference between you and your competitor.

In-person opportunities include networking events, conferences, and tradeshows. Often, there are costs
to participate, but the personal connection is worth it. One way to attend at no cost may be to be a guest
speaker or to facilitate a workshop. A big advantage to attending or speaking at conferences and
tradeshows is that you typically get access to all participant contact information.

 Related: Three Essentials to Creating a Networking Strategy

 You can make a personal connection online as well. Participate in blog discussions. Connect with other
business professionals on LinkedIn and set up networking conversations. Join online communities and
participate by providing your expert opinions on topics and sharing advice.

Whether you are networking online or in person, it is important to have a plan. Know who you want to
target and be clear on how many people you want to meet (either per event or on an ongoing basis,
whether it's weekly or monthly). Establish a follow-up strategy with your qualified contacts and
continue to build your relationships.

3. Build strategic alliances.

Partner with other businesses that offer complimentary products or services and you could grow your
contact reach instantly. The overall marketing investment can stay the same, but now the cost per
partner will be reduced. Most small-businesses owners can't do everything on their own and having a
strategic business partner allows you to work together more efficiently with shared resources. The key is
to make sure you are targeting similar markets.

When people visit your website, always have a "call to action" on a page. A call to action is something
that encourages interaction with your website visitors and provides you with the chance to capture
contact information. A call to action can be a free download of a whitepaper, an invitation to a webinar,
a free/discounted trial of your product or service, a discount on your product or service, to immediately
be able to purchase your product. Consider requesting contact information to access these materials.

4. Ask for referrals.

There are many opportunities to ask for referrals, but many people just plain forget. The times that make
the most sense are right after the sale, after receiving positive feedback about your product or service, in
your newsletter, or in any correspondence with your customers and prospects.

Continuously find ways to drive traffic to your website and don't forget to have a compelling call-to-
action and an ability to capture contact information.

 Related: 10 Ways to Strengthen Referral Relationships

Send out a newsletter on a regular basis to stay in touch with your contacts. If you have relevant and
interesting information, they will potentially share it with others. Press releases are a great way to get
the word out about your company and drive traffic to your website. You can write about industry
challenges and how your product or service can help, about a new hire and how that person will benefit
your customers, or anything interesting going on with your company.

Also don't lose sight of your employees. They like working in your company, right? So give them
incentives to think about people they know that would be good candidates for your product or service.

5. Have a follow-up strategy and use it.

Your leads may become stale if you don't have a process to follow-up and stay in touch. A contact
management system can help you to stay organized.

When you go to networking events, strike up conversations with people you don't know. When you
exchange business cards, write down details on the back so you have some information you can use for
your follow-up.

When you call a referral or someone you met at a networking event, don't use a prepared script that you
read word for word. Do research on the people you are contacting before the phone call and have a list
of your talking points, so you can refer to it during your conversation and remember to address key
points.
What is Data Analysis and Data Mining?
The exponentially increasing amounts of data being generated each year make getting useful
information from that data more and more critical. The information frequently is stored in a data
warehouse, a repository of data gathered from various sources, including corporate databases,
summarized information from internal systems, and data from external sources. Analysis of the data
includes simple query and reporting, statistical analysis, more complex multidimensional analysis, and
data mining.

Data analysis and data mining are a subset of business intelligence (BI), which also incorporates data
warehousing, database management systems, and Online Analytical Processing (OLAP).

The technologies are frequently used in customer relationship management (CRM) to analyze patterns
and query customer databases. Large quantities of data are searched and analyzed to discover useful
patterns or relationships, which are then used to predict future behavior.

Some estimates indicate that the amount of new information doubles every three years. To deal with the
mountains of data, the information is stored in a repository of data gathered from various sources,
including corporate databases, summarized information from internal systems, and data from external
sources. Properly designed and implemented, and regularly updated, these repositories, called data
warehouses, allow managers at all levels to extract and examine information about their company, such
as its products, operations, and customers' buying habits.

With a central repository to keep the massive amounts of data, organizations need tools that can help
them extract the most useful information from the data. A data warehouse can bring together data in a
single format, supplemented by metadata through use of a set of input mechanisms known as extraction,
transformation, and loading (ETL) tools. These and other BI tools enable organizations to quickly make
knowledgeable business decisions based on good information analysis from the data.

Analysis of the data includes simple query and reporting functions, statistical analysis, more complex
multidimensional analysis, and data mining (also known as knowledge discovery in databases, or
KDD). Online analytical processing (OLAP) is most often associated with multidimensional analysis,
which requires powerful data manipulation and computational capabilities.

With the increasing data being produced each year, BI has become a hot topic. The increasing focus on
BI has caused a number of large organizations have begun to increase their presence in the space,
leading to a consolidation around some of the largest software vendors in the world. Among the notable
purchases in the BI market were Oracle's purchase of Hyperion Solutions; Open Text's acquisition of
Hummingbird; IBM's buy of Cognos; and SAP's acquisition of Business Objects.

Definition

The purpose of gathering corporate information together in a single structure, typically an organization's
data warehouse, is to facilitate analysis so that information that has been collected from a variety of
different business activities may be used to enhance the understanding of underlying trends in their
business. Analysis of the data can include simple query and reporting functions, statistical analysis,
more complex multidimensional analysis, and data mining. OLAP, one of the fastest growing areas, is
most often associated with multidimensional analysis. According to The BI Verdict (formerly The
OLAP Report), the definition of the characteristics of an OLAP application is "fast analysis of shared
multidimensional information.

Data warehouses are usually separate from production systems, as the production data is added to the
data warehouse at intervals that vary, according to business needs and system constraints. Raw
production data must be cleaned and qualified, so it often differs from the operational data from which it
was extracted. The cleaning process may actually change field names and data characters in the data
record to make the revised record compatible with the warehouse data rule set. This is the province of
ETL.

A data warehouse also contains metadata (structure and sources of the raw data, essentially, data about
data), the data model, rules for data aggregation, replication, distribution and exception handling, and
any other information necessary to map the data warehouse, its inputs, and its outputs. As the
complexity of data analysis grows, so does the amount of data being stored and analyzed; ever more
powerful and faster analysis tools and hardware platforms are required to maintain the data warehouse.

A successful data warehousing strategy requires a powerful, fast, and easy way to develop useful
information from raw data. Data analysis and data mining tools use quantitative analysis, cluster
analysis, pattern recognition, correlation discovery, and associations to analyze data with little or no IT
intervention. The resulting information is then presented to the user in an understandable form,
processes collectively known as BI. Managers can choose between several types of analysis tools,
including queries and reports, managed query environments, and OLAP and its variants (ROLAP,
MOLAP, and HOLAP). These are supported by data mining, which develops patterns that may be used
for later analysis, and completes the BI process.

Business Intelligence Components

The ultimate goal of Data Warehousing is BI production, and analytic tools represent only part of this
process. Three basic components are used together to prepare a data warehouse for use and to develop
information from it, including:

 ETL tools, used to bring data from diverse sources together in a single, accessible structure, and
load it into the data mart or data warehouse.
 Data mining tools, which use a variety of techniques, including neural networks, and advanced
statistics to locate patterns within the data and develop hypotheses.
 Analytic tools, including querying tools and the OLAP variants, used to analyze data, determine
relationships, and test hypotheses about the data.

Analytic tools continue to grow within this framework, with the overall goal of improving BI,
improving decision analysis, and, more recently, promoting linkages with business process management
(BPM), also known as workflow.

Data Mining

Data mining can be defined as the process of extracting data, analyzing it from many dimensions or
perspectives, then producing a summary of the information in a useful form that identifies relationships
within the data. There are two types of data mining: descriptive, which gives information about existing
data; and predictive, which makes forecasts based on the data.

Basic Requirements

A corporate data warehouse or departmental data mart is useless if that data cannot be put to work. One
of the primary goals of all analytic tools is to develop processes that can be used by ordinary individuals
in their jobs, rather than requiring advanced statistical knowledge. At the same time, the data warehouse
and information gained from data mining and data analysis needs to be compatible across a wide variety
of systems. For this reason, products within this arena are evolving toward ease of use and
interoperability, though these have become major challenges.

For all analytic tools, it is important to keep business goals in mind, both in selecting and deploying
tools and in using them. In putting these tools to use, it is helpful to look at where they fit into the
decision-making processes. The five steps in decision-making can be identified as follows:
  Develop standard reports.
 Identify exceptions; unusual situations and outcomes that indicate potential problems or
advantages.
 Identify causes of the exceptions.
 Develop models for possible alternatives.
 Track effectiveness.

Standard reports are the results of normal database queries that tell how the business is performing and
provide details of key business factors. When exceptions occur, the details of the situation must be
easily obtainable. This can be done by data mining, or by developing hypotheses and testing them using
analytic tools such as OLAP. The conclusions can then be tested using "what-if" scenarios with simple
tools such as spreadsheet applications. When a decision is made, and action is taken, the results must
then be traced so that the decision-making process can be improved.

Although sophisticated data analysis may require the help of specialized data analysts and IT staff, the
true value of these tools lies in the fact that they are coming closer to the user. The "dashboard" is
becoming the leading user interface, with products such as Informatica's PowerCenter, Oracle's
Hyperion Essbase, SAS Enterprise Miner and Arcplan Enterprise server tools designed to provide easily
customizable personal dashboards.

One of the recurring challenges for data analysis managers is to disabuse executives and senior
managers of the notion that data analysis and data mining are business panaceas. Even when the
technology might promise valuable information, the cost and the time required to implement it might be
prohibitive.

The 12 Rules

In 1993, E.F. Codd, S.B. Codd, and C.T. Salley presented a paper entitled "Providing OLAP (On-line
Analytical Processing) to User-Analysts: An IT Mandate" that offered 12 rules for evaluating analytical
processing tools. These rules are essentially a list of "must haves" in data analysis, focusing on
usability, and they continue to be relevant in evaluating analytic tools:

 Multidimensional Conceptual View.

 Transparency.
 Accessibility.
 Consistent Reporting Performance.
 Client/Server Architecture.
 Generic Dimensionality.
 Dynamic Sparse Matrix Handling.
 Multi-user Support.
 Unrestricted Cross-Dimensional Operations.
 Intuitive Data Manipulation.
 Flexible Reporting.
 Unlimited Dimensions and Aggregation Levels.

Since analytic tools are designed to be used by, or at the very least, their output understood by, ordinary
employees, these rules are likely to remain valid for some time to come.

Current View

The analytic sector of BI can be broken down into two general areas: query and analysis and data
mining. It is important to bear in mind the distinction, although these areas are often confused. Data
analysis looks at existing data and applies statistical methods and visualization to test hypotheses about
the data and discover exceptions. Data mining seeks trends within the data, which may be used for later
analysis. It is, therefore, capable of providing new insights into the data, which are independent of
preconceptions.

Data Analysis

Data analysis is concerned with a variety of different tools and methods that have been developed to
query existing data, discover exceptions, and verify hypotheses. These include:

Queries and Reports. A query is simply a question put to a database management system, which then
generates a subset of data in response. Queries can be basic (e.g., show me Q3 sales in Western Europe)
or extremely complex, encompassing information from a number of data sources, or even a number of
databases stored within dissimilar programs (e.g., a product catalog stored in an Oracle database, and
the product sales stored under Sybase). A well-written query can exact a precise piece of information; a
sloppy one may produce huge quantities of worthless or even misleading data.

Queries are often written in structured query language (SQL), a product-independent command set
developed to allow cross-platform access to relational databases. Queries may be saved and reused to
generate reports, such as monthly sales summaries, through automatic processes, or simply to assist
users in finding what they need. Some products build dictionaries of queries that allow users to bypass
knowledge of both database structure and SQL by presenting a drag-and-drop query-building interface.
Query results may be aggregated, sorted, or summarized in many ways. For example, SAP's Business
Objects unit offers a number of built-in business formulas for queries.

The presentation of the data retrieved by the query is the task of the report. Presentations may
encompass tabular or spreadsheet-formatted information, graphics, cross tabulations, or any
combination of these forms. A rudimentary reporting of products might simply show the results in a
comprehensible fashion; more elegant output is usually advanced enough to be suitable for inclusion in
a glossy annual report. Some products can run queries on a scheduled basis and configure those queries
to distribute the resulting reports to designated users through email. Reporting products routinely
produce HTML output and are often accessible through a user's Web browser.

Managed Query Environments. The term managed query environment has been adopted by the
industry to describe a query and reporting package that allows IT control over users' access to data and
application facilities in accordance with each user's level of expertise and business needs. For example,
in some organizations, IT may build a set of queries and report structures and require that employees
use only the IT-created structures; in other organizations, and perhaps within other areas of the same
organization, employees are permitted to define their own queries and create custom reports.

A managed report environment (MRE) is a type of managed query environment. It is a report design,
generation, and processing environment that permits the centralized control of reporting. To users, an
MRE provides an intelligent report viewer that may contain hyperlinks between relevant parts of a
document or allow embedded OLE objects such as Excel spreadsheets within the report. MREs have
familiar desktop interfaces; for example, SAP's Business Objects tabbed interface allows employees to
handle multiple reports in the same way they would handle multiple spreadsheets in an Excel workbook.

Some MREs, such as Information Builders' FOCUS Report Server, can handle the scheduling and
distribution of reports, as well as their processing. For example, SAP Business Object's Crystal Reports
can develop reports about previously created reports.

Online Analytical Processing (OLAP). The most popular technology in data analysis is OLAP. OLAP
servers organize data into multidimensional hierarchies, called cubes, for high-speed data analysis. Data
mining algorithms scan databases to uncover relationships or patterns. OLAP and data mining are
complementary, with OLAP providing top-down data analysis and data mining offering bottom-up
discovery.
OLAP tools allow users to drill down through multiple dimensions to isolate specific data items. For
example, a hypercube (the multidimensional data structure) may contain sales information categorized
by product, region, salesperson, retail outlet, and time period, in both units and dollars. Using an OLAP
tool, a user need only click on a dimension to see a breakdown of dollar sales by region; an analysis of
units by product, salesperson, and region; or to examine a particular salesperson's performance over
time.

Information can be presented in tabular or graphical format and manipulated extensively. Since the
information is derived from summarized data, it is not as flexible as information obtained from an ad
hoc query; most tools offer a way to drill down to the underlying raw data. For example, PowerPlay
provides the automatic launch of its sister product, Impromptu, to query the database for the records in
question.

Although each OLAP product handles data structures and manipulation in its own way, an OLAP API,
developed by a group of vendors who form the OLAP Council, standardizes many important functions
and allows IT to offer the appropriate tool to each of its user groups. The MD-API specifies how an
OLAP server and client connect, and it defines metadata, data fetch functions, and methods for handling
status messages. It also standardizes filter, sort, and cube functions; compliant clients are able to
communicate with any vendor's compliant server.

OLAP Variants: MOLAP, ROLAP, and HOLAP. OLAP is divided into multidimensional OLAP
(MOLAP), relational OLAP (ROLAP), and hybrid OLAP (HOLAP).

ROLAP can be applied both as a powerful DSS product, as well as to aggregate and pre-stage multi-
dimensional data for MOLAP environments. ROLAP products optimize data for multi-dimensional
analysis using standard relational structures. The advantage of the MOLAP paradigm is that it can
natively incorporate algebraic expressions to handle complex, matrix-based analysis. ROLAP, on the
other hand, excels at manipulating large data sets and data acquisition, but is limited to SQL-based
functions. Since all organizations will require both complex analysis and analysis of large data sets, it
could be necessary to develop an architecture and set of user guidelines that will enable implementation
of both ROLAP and MOLAP where each is appropriate.

HOLAP is the newest step in the ongoing evolution of OLAP. HOLAP combines the benefits of both
ROLAP and MOLAP by storing only the most often used data in multidimensional cube format and
processing the rest of the relational data in the standard on-the-fly method. This provides good
performance in browsing aggregate data, but slower performance in "drilling down" to further detail.

Data Mining

Databases are growing in size to a stage where traditional techniques for analysis and visualization of
the data are breaking down. Data mining and KDD are concerned with extracting models and patterns
of interest from large databases. Data mining can be regarded as a collection of methods for drawing
inferences from data. The aims of data mining and some of its methods overlap with those of classical
statistics. It should be kept in mind that both data mining and statistics are not business solutions; they
are just technologies. Additionally, there are still some philosophical and methodological differences
between them.

This field is growing rapidly, due in large part to the increasing awareness of the potential competitive
business advantage of using such information. Important knowledge has been extracted from massive
scientific data, as well. What is useful information depends on the application. Each record in a data
warehouse full of data is useful for daily operations, as in online transaction business and traditional
database queries. Data mining is concerned with extracting more global information that is generally the
property of the data as a whole. Thus, the diverse goals of data mining algorithms include: clustering the
data items into groups of similar items, finding an explanatory or predictive model for a target attribute
in terms of other attributes, and finding frequent patterns and sub-patterns, as well as finding trends,
deviations, and interesting correlations between the attributes.

A problem is first defined, then data source and analytic tool selection are undertaken to decide the best
way to approach the data. This involves a wide variety of choices.

Decision trees and decision rules are frequently the basis for data mining. They utilize symbolic and
interpretable representations when developing methods for classification and regression. These methods
have been developed in the fields of pattern recognition, statistics, and machine learning. Symbolic
solutions can provide a high degree of insight into the decision boundaries that exist in the data and the
logic underlying them. This aspect makes these predictive mining techniques particularly attractive in
commercial and industrial data mining applications.

Applying machine-learning methods to inductively construct models of the data at hand has also proven
successful. Neural networks have been successfully applied in a wide range of supervised and
unsupervised learning applications. Neural-network methods are not commonly used for data mining
tasks because they are the most likely to produce incomprehensible results and to require long training
times. Some neural-network learning algorithms exist, however, that are able to produce good models
without excessive training times.

In recent years, significant interest has developed in adapting numerical and analytic techniques from
statistical physics to provide algorithms and estimates for good approximate solutions to hard
optimization problems. Cluster analysis is an important technique in exploratory data analysis, because
there is no prior knowledge of the distribution of the observed data. Partitional clustering methods,
which divide the data according to natural classes present in it, have been used in a large variety of
scientific disciplines and engineering applications. The goal is to find a partition of a given data set into
several compact groups. Each group indicates the presence of a distinct category in the measurements.

In all data mining applications, results are considerably subject to interpretation, since it is a search for
trends and correlation rather than an examination of hypotheses based on known real-world information.
The possibility for spurious results is large, and there are many cases where the information developed
will be of little real value for business purposes. Nonetheless, when pay dirt is struck, the results can be
extremely useful.

Interest in data mining is growing, and it has recently been spotlighted by attempts to root out terrorist
profiles from data stored in government computers. In a more mundane, but lucrative application, SAS
uses data mining and analytics to glean insight about influencers on various topics from postings on
social networks such as Twitter, Facebook, and user forums.

Data Mining and CRM

CRM is a technology that relies heavily on data mining. Comprising sales, marketing, and service,
CRM applications use data mining techniques to support their functionality. Combining the two
technology segments is sometimes referred to as "customer data mining." Proponents claim that positive
results of customer data mining include improvements in prospecting and market segmentation;
increases in customer loyalty, as well as in cross-selling and up-selling; a reduction in risk management
need; and the optimization of media spending on advertising.

Recommendations

Since data analysis is such a key method for developing knowledge from the huge amounts of business
data collected and stored each day, enterprises need to select the data analysis tools with care. This will
help ensure that the tools' strengths match the needs of their business. Organizations must be aware of
how the tools are to be used and their intended audience. It is also important to consider the Internet, as
well as the needs of mobile users and power users, and to assess the skills and knowledge of the users
and the amount of training that will be needed to get the most productivity from the tools.

Visual tools are very helpful in representing complex relationships in formats that are easier to
understand than columns of numbers spread across a screen. Key areas of discovery found with visual
tools can then be highlighted for more detailed analysis to extract useful information. Visual tools also
offer a more natural way for people to analyze information than does mental interpretation of a
spreadsheet.

Organizations should also closely consider the tool interface presented to users, because an overly
complex or cluttered interface will lead to higher training costs, increased user frustration, and errors.
Vendors are trying to make their tools as friendly as possible, but decision-makers should also consider
user customization issues, because a push-button interface may not provide the flexibility their business
needs. When considering their OLAP processes, companies need to determine which approach is best.
The choices include a multi-dimensional approach, a relational analysis one, or a hybrid of the two. The
use of a personalized "dashboard" style interface is growing, and ease of use has emerged as a key
criterion in corporate purchasing decisions.

While data analysis tools are becoming simpler, more sophisticate techniques will require specialized
staff. Data mining, in particular, can require added expertise because results can be difficult to interpret
and may need to be verified using other methods.

Data analysis and data mining are part of BI, and require a strong data warehouse strategy in order to
function. This means that attention needs to be paid to the more mundane aspects of ETL, as well as to
advanced analytic capacity. The final result can only be as good as the data that feeds the system.

Key Differences Between Data Mining Vs Data Analysis

Data Mining and Data Analysis are two distinct names and processes yet there are some views where
people use them interchangeably. This also depends on the organization or project team undertaking
such tasks where this distinction is not marked specifically. To establish their unique identities, we are
highlighting the major difference between Data Mining and Data Analysis:

1. Data mining identifies and discovers a hidden pattern in large datasets. Data Analysis gives
insights or tests hypothesis or model from a dataset.
2. Data mining is one of the activities in Data Analysis. Data Analysis is a complete set of
activities which takes care of the collection, preparation, and modeling of data for extracting
meaningful insights or knowledge. Both are sometimes included as a subset of Business
Intelligence.
3. Data Mining studies are mostly on structured data. Data Analysis can be done on both
structured, semi-structured or unstructured data.
4. The goal of Data Mining is to make data more usable while the Data Analysis helps in proving a
hypothesis or taking business decisions.
5. Data Mining doesn’t need any preconceived hypothesis to identify the pattern or trend in the
data. On the other hand, Data Analysis tests a given hypothesis.
6. While Data mining is based on Mathematical and scientific methods to identify patterns or
trends, Data Analysis uses business intelligence and analytics models.
7. Data mining generally doesn’t involve visualization tool, Data Analysis is always accompanied
by visualization of results.

Data Mining Vs Data Analysis Comparison Table

Basis for Comparison Data Mining Data Analysis
 It is the process of ordering and
It is the process of extracting a
organizing raw data in order to
Definition specific pattern from large
determine useful insights and
datasets
decisions.

It requires the knowledge of

It involves the intersection of computer science, statistics,
Area of expertise machine learning, statistics, and mathematics, subject
databases. knowledge, AI/Machine
Learning

Data Analysis is of several

It is also known as Knowledge types – exploratory, descriptive,
Synonyms
discovery in databases text analytics, predictive
analysis, data mining etc.

Data Mining specialist usually A Data Analyst usually cannot

builds algorithms to identify be a single person. The job
meaningful structure in the profile involves preparation of
data. raw data, its cleansing,
Work Profile
transformation and modeling
A data mining specialist is still and finally its presentation in
a Data Analyst with extensive the form of chart/non-chart-
knowledge of inductive based visualizations.
learning and hands-on coding
Is responsible for extracting Is responsible for developing
and discovering meaningful models, explanations, testing
Responsibilities
patterns and structure in the and proposing hypotheses using
data analytical methods

The output of Data Analysis is

The output of a data mining
Output a verified hypothesis or insight
task is a data pattern
on the data

One of major application of

Data mining is in the E-
Commerce sector where
Examples
websites display the option of
“those who purchased this also
viewed”
An example of Data Analysis
could be “time series study of
unemployment during last 10
years”

Conclusion – Data Mining Vs Data Analysis

The term Data Mining and Data Analysis have been around for around two decades (or more). They
have been used interchangeably by some user groups while some have made a clear distinction in both
the activities. Data mining is usually a part of data analysis where the aim or intention remains
discovering or identifying only the pattern from a dataset. Data Analysis, on the other hand, comes as a
complete package for making sense from the data which may or may not involve data mining. Both
require different skillset and expertise and in the following years, both areas will see high demands both
data, resources, and jobs.

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