Once touted as the next big thing, customer relationship management
failed to deliver. Now data warehousing is helping it to fulfil its
initial promise. Parveen Bansal explains how.
Many financial services institutions invested in customer relationship
management (CRM) in the past few years but few appear to have reaped
any benefits from it. CRM systems have not delivered on their promise
of improved service and increased revenues because of a failure of the
underlying information architecture. But data warehousing could change
this
Improved profitability
The aim of CRM is to gather information on customers so those that are
profitable can be offered more appropriate products and service. It
aims to improve communication between the financial institution and its
customers, to retain customers and improve profitability.
One of its promises was to give the bank a single view of the customer,
which may have been where the trouble began. Banking products and
services were developed in separate product or service “silos”,
resulting in an ad hoc information architecture. For example, there
might be one database of customer information used by the marketing
department, another holding mortgage customers’ data and another for
credit card holders, and so on.
This resulted in a lot of data duplication and a lack of common
metadata (definitions about data held) so that a customer identified as
one number in one system could be recorded under a different number in
another. The consequences were not only superfluity of information but
also inconsistency.
The disparate data stores across a financial institution hindered the
integration of customer information, and had high operational,
maintenance and “lost opportunity” costs.
Rationalised data
Centralising storage of information via data warehousing offers the
benefits of significant cost reduction and predictability of fixed
costs. More importantly, in consolidating the data held in multiple
databases or data marts (the collection of databases for a single
function), data is rationalised and “cleansed”. On completion, the
organisation benefits from a single dictionary of metadata and a single
view of the customer for all product areas. An enterprise-wide data
warehouse is constructed and can be accessed by the marketing and
management functions.
Behaviour analysis
Apart from the regulatory requirements of storing data, the data can be
analysed that records customers’ spend patterns and product ownership.
This is often referred to as analytical CRM and consists of data
“mining” and analyses of behaviour patterns to identify potential
customer needs or determine the profitability of individual products.
Analytical CRM can help to replace mass marketing with frequent,
smaller and highly focused campaigns. This increases effectiveness
while reducing waste and customer irritation.
However, the data held must be up-to-date. Whereas monthly batch
updates used to be considered sufficient, today’s highly competitive
market requires near real-time updating of data.
It is important, therefore, that the front-office (branch, call centre
and online banking) operational CRM systems, such as Siebel and
Peoplesoft, and back-office transactional systems are integrated with
the data warehouse, so that data can be collected and analysed as it
becomes available. In this way banks will be able to offer interactive,
customised marketing for individual customers.
Fukui bank benefits
The benefits of data warehousing and integration of operational CRM
data are clear in the case of Japan’s Fukui Bank. It identified the
need to operate from a customer’s point of view and for more
sophisticated marketing, offering products and services tailored to
individual customers’ needs, lifestyles and preferences in a timely
manner.
To enable a shift from product-oriented to customer-oriented marketing
Fukui Bank implemented a new customer data warehouse from Teradata,
integrated with a CRM system that enabled it to analyse customer data,
find out marketing targets and methods, and record and manage
interactions with customers.
The data warehouse and CRM systems are integrated with other
mission-critical systems – accounting, call centre, and other
sub-systems – enabling enterprise-wide data management that provides an
integrated view of business.
As a result, Fukui Bank now has a bank-wide network that enables it,
through teller terminal screens, to give appropriate sales advice based
on individual customer data or to present appropriate proposals while
making simulations.
“Our field sales people are reporting that they can now get a good
grasp of customer needs that they would have overlooked before,” says
Etsuro Azuma, CRM project team leader at Fukui Bank.
They can now use their PCs to create much more effective sales
activities, such as offering financial products and services suited to
a particular customer.
