An Integration of Marketing with PDM, SCM and CRM

There’s been quite a major change in the concept of marketing, both from the theory and practice points of view (Srivasta, Shervani, and Fahey, 1999). The success or failure of marketing is no longer determined by conventional measures such as sales and market shares. It should also be based on broader marketplace performance such as brand loyalty and financial aspect such as cash flows.

Marketing aims to attract and maintain customers by providing better value than competitors. This value of customer and shareholder is created and maintained by an organization through three business processes known as Product Development Management (PDM), Supply Chain Management (SCM), and Customer Relationship Management (CRM). Thus, it is obvious that marketing is interconnected with business processes. PDM is related to the activities of creating or enhancing solutions for customers. SCM is the process that includes both the acquirement of all inputs and the effective and efficient transformation of those inputs into customer solutions. CRM deals with all activities in building relationship with the customers.

As macro environmental and competitive factors are dynamically changing, an organization must carefully design its business processes and wisely adapt changes. The competitive context has brought marketing paradigm to shift in many ways. A view of focusing on customer functionality has replaced its predecessor which focuses on product. Product differentiation is giving way to the solution customization. Transaction-based exchange is evolving to relationship-based customer intimacy. Competition between organizations is no longer a stand alone competition but it moves to network rivalry. These shifts are also should be absorbed into the business processes. Lehman states that information use and research process give a significant contribution to the establishment and delivery of business processes. I believe that there should be a closed cycle between marketing and business processes (PDM, SCM, and CRM). Information of result achieved in marketing and also its obstacles should be the input of business process enhancement. Srivasta et.al. (1999) say that aspects such as human resource, technology, and finance management are considered as support processes. However, I think human resource is also important since all the activities are done by human. Thus, organization should pay attention human resource-related aspects such as its quality, development, rewarding systems, etc.

Nevertheless, in order to assure the survival and growth of an organization, it has to integrate marketing and business processes, and also supporting processes especially human resources.


Srivasta, R. K., Shervani, T. A., and Fahey, L. (1999). Marketing, Business Processes, and Shareholder Value: An Organizationally Embeded View of Marketing Activities and The Discipline of Marketing. Journal of Marketing, 63(Special Issue 1999), 168 - 169.

Don’t Homogenize, Synchronize

This week’s reading material talks about synchronization in a company to build a better relationship with customer. Synchronization is necessary in a case that a company is distributed in units and products and there is no coordination between them since this situation can lead to several unfavorable results such as high-cost source maintenance, source duplication, tendency to make error, poor customer relationship, etc.

I think, it is common for a company to be divided into certain number of departments units based on its function, product or else, since it has many different things to be taken care off internally and externally. It needs different people with different skills or knowledge to be in charge with those different things in the same time. The problem would appear if they are not well coordinated, as illustrated in the 3M case in this article. 3M could neither identify profitable business opportunities nor recognize its loyal customers who have bought many different products since it does not have an integrated database. 3M’s customers have different experience even though they are dealing with the same company. As a loyal customer who has bought many products or paid company’s services for a certain period of time, I would expect the company to recognize, give better (best) services, or even give rewards to me. I think most customers are like that. So the company would be in danger if it can not deal with such issues because it is not well coordinated.

Sawhney proposes three aspects to be synchronized, i.e. offerings, technology, and organization. Offering synchronization deals with knowing customers’ characteristics and activities; and mapping company’s product and service to suit those character and activities. The difficulty would be in identifying customers’ characters, activities, and objectives. Once the company can do that, it would be able to assemble offerings according to those things.

Technology synchronization is related to separating the control over back-end application and customer-facing application. IT infrastructure such as database, networks, etc are no longer under the control of each divisional unit but integrated, and customer-facing application used by different divisional units access the same integrated database within the same network or channel. The customer-facing applications are also built uniformly in the matter of user interface so customers would have the same experience although they actually communicate with different divisional or product units. The difficulties would be in integrating different technology used by those units, merging the different format of data, and formatting new procedures, policies, securities related to the new integrated IT infrastructure.

The last synchronization is organization synchronization. It is related to the restructuring the organization especially the people within a company. Formerly, the structure focused in product, now it focuses in customers. The product specialists now have the role as support line, providing technical support to the customer specialist sales team. I think it would be the biggest challenge of all synchronizations since it is not easy to change people. The product specialist teams are used to sell products to customers, have sales targets, compete with others, and other business rituals. They are become habits. It is not easy to eliminate the habits. The product specialists could turn out to be frustrated. I think the change must be slowly and gradually. There must be equal and fair rewards for the product specialist even though they are no longer in the front line (they are probably used to have big rewards when they succeed doing business with customers).

Synchronization is important. However, company must take extra care when dealing with changing people. It is a sensitive issue. Well, any comments are welcome…….. as usual…. .

Data Mining For CRM: One Way to reach the goals

Following the lecture by Dr. Ilona Jagielska, this week reading materials reveal several data mining techniques, such as neural network, decision tree and CART methodology, and association rules. The three reading materials illustrate how those techniques work, the strengths, weaknesses, and also describe a study case in predicting whether a certain visa cardholder is a good or bad customer.

After reading all those materials, I think there are several important issues to be considered:

First is about the techniques used for mining the customer data. In my opinion, there is no technique that can be claimed as the best method for all problem domains. All techniques have their own characteristic, strength and weaknesses. For that reason, it is important to choose the proper technique and then build a model. In order to do that, the problem should be addressed properly. A model has the same nature as technique; it might only work best on a certain problem. The best model can only be defined according to certain cost or risk acceptable by ones who implement it.

Second, besides technique and model, one thing that is crucial is data. There is a jargon about it, “garbage in garbage out”. No matter how good the model is, if the quality of data is poor, it would not give the expected result (but data with the good quality not merely guarantee the good result. There is a possibility that the model is not suitable). That’s one reason why we should prepare the data.

Nevertheless, those techniques are helping companies in many things related to building and retaining a good relationship with their customers. They help companies to get to know their customers, to predict what their new customers would be like, to scale up their sales by cross selling and up selling since they know the customers now, etc. Companies can also apply the data mining technique to build a tool that would support customers. For example, related to the problem of choice overload, one data mining technique such as clustering analysis can be used to group the customers based on their similarity and then suggesting the choice based on customers on the same cluster. It can be both beneficial to companies and customers. Then it would bring companies a step closer to the goal………

Choice Overload

(Paper by Sheena S. Iyengar and Mark R. Lepper: When Choice is Demotivating: Can One Desire Too Much of a Good Thing?, Journal of Personality and Social Psychology, 2000, Vol. 79, No. 6, pp. 995-1006)

Continuing the discussion whether “choice overload” makes people happy or creates people aversions to make decision, this paper supports Schwartz position as seen in his video on the last week’s lecture. The authors wanted to investigate more on the widespread perception in economic theories and marketing practices that the more choices, the better. They had performed three experimental studies which showed a contrary to the previous presumption: “although having more choices might appear desirable, it may sometimes have detrimental consequences for human motivation”.

There are several important findings from this paper:

• People with “extensive-choice contexts” relish the process of “choice-making” more than the counterpart group. It is probably because they have more options to choose that lead them to the idea that they should be able to make a better (if not the best) decision, so that they feel more responsible for the decision they make. This situation makes them frustrated and dissatisfied with their choices. Furthermore the authors stated that it is not the matter of people’s satisfaction or dissatisfaction of their choices, but they are loaded with the expectation that they should be able to differentiate good and bad choices, and they feel uncertain about it.

Perhaps, not only the burden to make a good decision out of so many options, but also the time pressure.

• It is found that there is no empirical support for the theory that choosers in extensive-choice contexts are more likely to use a satisfying heuristic, whereas choosers in a limited-choice context are more likely to use an optimizing heuristic.

I think, in the relation to the methods people used to make decisions, we should also see the domain of the decision, the risk of the decision, and probably the habit in making decision.

• The substantial discouraging effects can be even worse in a ‘serious’ choice-making situation where there are costs related to making the “wrong choice” or the it consumes times and needs effort to be able to evaluate options substantially.

I agree with this opinion. If I have to make a decision in a trivial situation where the risk is small or bearable, I would have more courage to do it. I perceive it as a learning stage where I can gain knowledge from the process, and then used the knowledge for future references. The same condition will not happen if the risk is unacceptable. I think it is natural since human tend to have risk-aversion behaviour.

• If people see that the choice-making process needs competent information, they would likely choose not to make a decision. They tend to hand over the task to someone else who is more capable in the field or an expert. This opinion is strengthened by Schwartz’s belief (1994) – as quoted in this paper – that is “as the freedom of individuals expands, so too does their dependence on institutions and other people”.

I also think this result is a normal thing to happen. It is common that people have someone to help them in making decision by giving opinions – general or expert opinions. As I wrote in my last blog about recommender system, it tries to accommodate this social behaviour into a computer system. I don’t suggest that the problem would instantly disappear. There are always good and bad thing about a particular issue. In my opinion, the good thing about this system is that it helps people in making choices in the face of abundant options by seeing other people opinions which may be based on their experience or expertise. The bad news is whether we trust or value their opinions. L

• Besides the preference-matching contexts, in which people wish to come across some particular product or service they already know themselves to prefer, there is another context where people would become contented with extensive choices – although it is still a paradox. That is when people already have expertise built from previous experiences; they tend to see extensive choices as limited in number.

I am used to observe my mother when she goes shopping in the supermarket. She doesn’t seem to have trouble in deciding which items should be bought nor the location of the items. Even tough, there are many brands that produce a certain item, she manages to choose one. And if I pay attention on her choice over time, she always chooses the same brands. When I ask her why she chooses that brand, she says that it is the best - according to her. Then I ask her again whether she wants to try other brands, she replies that she doesn’t have to. So besides the fact that she has the experience of the product and the location of the shelves, there is also another thing: a brand loyalty.

Although it is revealed now that the availability of extensive choices proves unexpectedly demotivating in the end, I think this condition is not going to stop. Proctor & Gamble may reduce the number of versions of its popular Head and Shoulders shampoo from 26 to 15, but there are still many competitors who produce the same items. Likely, we are – the customers – still facing this problem (as an example given by the authors on the part of their paper). Well, what do you think? Any comments are welcomed……

My Comment on Schwartz Video: Too many choices – Intelligent Recommender System is one option.

It was exciting to watch the video of Schwartz giving his opinion about choices. Somehow, he’s got the point that sometimes too many choices can hinder someone to make decision, or make someone regrets the decision she / he makes. However, it’s inevitable that “world” has provided us many choices, and we have to make decision upon those choices.

Regarding this matter, there is a technological approach called intelligent recommender system. It observes the reality that sometimes people rely on others to make decision. People have other people’s opinion as their based to make decisions. One method used is collaborative filtering. Collaborative filtering works by grouping people base on their similar taste upon certain things, and whatever these people think of something based on their experiences and taste, the opinion are passed through to someone else that need the recommendation of those same certain things. Imagine we could build a recommending society that consists of all people of world, and then we could recommend each other. It sounds good enough. It might shorten the time taken to decide something. Somehow it works quite well, despite the fact that it also needs some enhancement – like the value of the recommendation, the trust, etc (and the dedicated researchers are working on them).

My conclusion is: people do make problems – in this case, by making many choices available, then make people are more confused to decide – but people also try to build solutions of the problem. Human is blessed with the capability of learning from mistakes. So………. Keep the spirits alive…… keep creative….. :-)

The Implementation and Technology Utilization For Analytical CRM – Is It As Good As It Sounds?

(A Thought Based on a paper by Ron Swift – “Analytical CRM Powers Profitable Relationship: Creating Success by Letting Customers Guide You” and SAS White paper - “Implementing the Customer Relationship Management Foundation – Analytical CRM”)

Both papers describe technology of customer relationship management thoroughly. Although they do mention operational CRM, analytical CRM is the main focus of these papers. As depicted in its name, analytical CRM consists of data management and various analysis and modeling tools used to analyse and understand customers’ values, needs, and wants. The result will be applied as customer relationship strategy.

The SAS white paper highlights four major technologies implemented in analytical CRM, such as 1) data warehouse; 2) data mining; 3) OLAP; and 4) decision support and reporting tools. SAS gives a well structured explanation of how analytical CRM uses these four technologies step by step. It starts from the “data cleansing” stage; building data warehouse; adding metadata; analysing data in the data warehouse using data mining tools and OLAP; and then deploying the information discovered from the previous stage with reporting tools and executive information system.

Meanwhile in another paper, Swift emphasizes the process undergone by analytical CRM. He illustrates four processes in the “CRM intelligence management cycle”, i.e. data collection; analysis and modeling; action; and measurements. Data collection involves gathering all the customer data, transaction, operational and financial data. Analysis takes place after data being amassed. The analysis is done to get comprehensive information in three related areas, i.e. customer behaviour and preferences; operational factors possessed by the organization; and financial factors. The third process is action which means to implement the result of analysis by managing communication to customers. There are several concepts involved in this phase, such as 1) personalization - an understanding that you cannot treat your customers the same way; 2) optimization – a way to prevent conflicting communication by setting up a priority in communication; and 3) consistent customer communication experiences through all touchpoints. The last process is the measurement of business value in implementing CRM.

Both papers give “flawless” descriptions of how good analytical CRM is, especially SAS white paper. Perhaps, it is because SAS tries to sell its products. It shows how SAS has all products that fit in all major technologies needed by CRM. Does it mean there will be no problems in implementing them? I see two groups of problems in this matter. The first one is technological related. Many questions emerge in this category. For instance, how to integrate a ready software solution (like ones that SAS has) to a previously established system of a business institution? If the integration is successful, are the users – the management, employees and customers – instantly ready to migrate to a new system? How this would affect the business process? Other thing is related to “centralized repository” as Swift mentions in his paper. If “centralized repository” is meant to support a reliable data access, then it could result in the opposite direction. To be able to maintain the reliability of a single repository to be accessed by many users in the same time, the system should be powerful without the chance of being down or even off. So in order to be able to provide reliable “up-to-the-minute information” in a timely manner and at the frequent refresh rate, decentralized repository is one choice.

The second group is related to non technological matters. It is consist of management commitment and customer satisfaction. Are the managers committed to implement the technology? If they only justify the statement by Swift – “the ROI for effective CRM projects has been exponential, surpassing typical financial expectations of 30 to 80 percent tenfold”, managers would willingly implement CRM. But, it isn’t clearly stated for how long it takes to get an exponential ROI. How if it takes more times, until there is a change in management. The new managers are appointed. Then are they still going to be committed to use the technology? There is a possibility that the new managers would make the new policies affecting CRM. So, it’s not the matter of whether the technology works or not, it because the organization has a new management, and the management want to change the way they do the business.

What about customers? Are they satisfied? I had annoying experiences of promotion conducted by a bank in my country. The bank officer kept on calling me in her effort to promote products that I didn’t need. Perhaps, the system promoted a recommended strategy that carried bias. For example, it gives a suggestion that a customer prefer certain product, but the fact is the customer doesn’t need it (it is called false positive, if I’m not mistaken). In the other hand, certain product is not suggested to a customer even though she needs it (it is called false negative). Instead of only measuring how analytical CRM support organizations in maintaining customer relationship, it should also involves measuring customer satisfaction. Nevertheless, technology does give a great favor for organizations in doing their CRM, and there are many proof of it. It is just there are many things to be considered.

“Customer Scenario” – The Vital Scenario to Companies’ Success (A Reflection of Reading Material: Get inside the Lives of Your Customers)

People are different indeed, so are customers. Never treat them the same way as they have different purposes and preferences. Company has to understand how these customers want to be treated in the business or “customer scenario” as named by Seybold. Seybold also gives three examples of how these companies struggle to win their customers by paying great attentions to their “customer scenario” and providing them services and supports even though they are beyond their line of products.

National Semiconductor for instance, it supplies a one-stop on-line design tool, called “Webench”, to its customers (designers). It helps them finish their designing job faster and easier, allows them to run as many real-time simulations as needed until they have come to a final design, and enables them to purchase all the required components not only from National semiconductor, but also other distributors.
It doesn’t stop there. By listening to the need of designers, the system had been developed since then by adding more function, namely “WebTherm” and “Wireless design tools”. National keeps on listening, learning and engaging itself to its customers. Although National has to put much effort, but it gains significantly at the end. There is also one good thing resulted from this. National has built a network with other distributors by enabling the customers buy their product through National’s site. According to Buttle (2004, p.172), the trend of competition is shifting from “head to head between independent companies” to “between networks”. It would be a great future ahead as long as National can manage this network, especially the network position based on their activity links, resource ties and bonds.

Another example is Tesco. Its Tesco Direct, an on-line shopping application, has been claimed as “the world’s largest and profitable internet grocer”. Tesco has reached its success by paying attention to their “customer scenario”. Their customers don’t think that on-line shopping would replace conventional shopping. In response to this, Tesco combine its on-line and off-line promotion. Tesco also does its on-line shopping operation in a different way. While others minimize cost by strengthening their supplies and processes in the main warehouse, Tesco builds its on-line shopping from every store where its customers are used to shop. It doesn’t force its customers to change their habits. It is a good strategy. Since customers might experience a “switching cost of time, money or personal risk” (Zikmund, McLeod, & Gilbert, 2003) in facing a new situation, they might be reluctant to change their habits. More important, customers’ habit is one factor that influences customer loyalty. So Tesco makes it as if customers buy from the usual stores unless now it is online.

The last illustration is Autodesk’s Buzzsaw.com. Buzzsaw.com is an on-line collaborative work space enabling building owners, architects, engineers, other construction professionals, and even banks or financial institutions. Again, it is built as an effort to accommodate customers’ needs. It has reached its success not only because it pays a great attention to “customer scenario” but also enables customers to develop their own scenarios.

Those three examples give a clear model how those companies trying to know who the customers are, what goals they expect to achieve, etc. They do it by developing “customer scenarios”. They learn from the scenarios, revise it, and give more support to the customers. Customers feel that the company knows and understands them better. This situation builds good interaction and relationship between customers and company which eventually will contribute to the customer loyalty. Also from the “customer scenario”, companies are able to give a bundled of product and service that sometimes beyond their own business, and it creates more value to companies and customers. So it can be said that a “customer scenario” is definitely a scenario to companies’ success.

References:

Buttle, F. (2004). Customer Relationship Management: Concepts and Tools. Oxford, UK: Elsevier Butterworth-Heinemann.

Zikmund, W. G., McLeod, R., & Gilbert, F. W. (2003). Customer Relationship Management: Integrating Marketing Strategy and Information Technology. Hoboken, NJ, USA: John Wiley & Sons, Inc.