IGG-06112003-03 G.

Herschel

Article 11 June 2003

Reproduo autorizada por Gartner Inc. concedida ao prof. J Matos para uso exclusivo em sala de aula, ficando expressamente proibida a reproduo e distribuio por parte dos alunos para quaisquer finalidades

Management Update: Applying Analytic Techniques to Gain Customer Insights

Gartner examines how data mining, predictive modeling and text mining relate to understanding customer behavior. Analysis is a process that turns data into insight. Even relatively straightforward types of analysis, such as standard reports, require significant thought and work to make them valuable to the user and, in turn, to the enterprise. Gartner examines how data mining, predictive modeling and text mining relate to understanding customer behavior. CRM Analytics Key Issue: What role will analytics have in predicting and understanding customer behavior? Two widely held myths exist about customer relationship management (CRM) analytics are: Analytics tells you what action to take. CRM analytics does not tell an enterprise what actions to take it provides information to help enterprises make decisions more intelligently. However, analysis without context is just more data. Only when placed in context does data become useful. To understand your data is to understand your customer. Quantitative analysis yields greater understanding of what happens; qualitative analysis yields greater understanding of why it happens. In the quest to understand the customer, quantitative analysis complements qualitative analysis. Many enterprises consider those two types of analysis to be competitors or substitutes for each other. In reality, each type can deepen and refine the questions asked by the other. Action Item: Recognize that analysis is a process to provide better inputs into the decision process; it is not a substitute for the decision process. Enterprises must identify whether the poor decisions they make stem from poor data (which can be solved through analysis investments) or poor decision-making processes (which are not affected by analysis). Data Mining Tactical Guidelines: Most enterprises will benefit from the use of a combination of a data-mining workbench and analytics black boxes.

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 The distinction between data-mining workbenches and black boxes will blur as workbench vendors build applications out of their tools and black boxes allow greater flexibility in their use. Data mining is a process, not a technology. Unfortunately, unrealistic expectations are being created by: The growing ease of use of data-mining software tools

A changing focus for vendor sales activities away from trained statisticians and toward marketing users The Cross-Industry Standard Process for Data Mining (CRISP-DM) project has developed a reasonable process that serves as a good starting model for many enterprises. The steps in the CRISP-DM process are: Problem Understanding: Determine the objective, define success criteria and determine data-mining goals. Data Understanding: Collect initial data, explore it and verify its quality. Data Preparation: Select and clean data, construct new data, and format it.

Modeling: Select the modeling technique, generate a test design, build the model and assess it. Evaluation: Evaluate results, review the process and determine next steps. Deployment: Deploy, monitor and maintain the model.

When developing a data-mining process, certain issues merit careful consideration. These include the need to: Identify critical data through extensive preliminary data analysis. Identify what causes of poor data quality and attempt to permanently improve this quality.

Solve quality issues in pragmatic ways for example, make reasonable assumptions and optionally estimate missing values. Use statistical validation techniques to confirm the success of various approaches.

Deploy new models carefully using champion-challenger programs. Initially, new models should not be not trusted fully; instead, they should be tested against a small percentage of the business. Recalibrate due to changed market conditions (for example, new products or competitors, or changes in the business cycle or buying season). Growing business user interest in predictive analytics has increased the number and variety of datamining tools. They range from extremely sophisticated and complex data-mining workbenches to the easy and simplistic black boxes (see Figure 6).

Figure 6 The Modeling Complexity Spectrum

Data-Mining Workbenches Flexible Extensive Rigorous Accurate Subtle Flexible
Source: Gartner Research

Black Boxes Problem Understanding Data Understanding Data Preparation Modeling Evaluation of Results Deployment Predefined Predetermined Automated Rapid Automated Seamless

Enterprises will often use a variety of tools, selecting the tool based on the skills and needs of particular users. The challenge for black-box vendors is to convince the analytics constituencies within the enterprise that their approach is valid. The challenge for data-mining tool vendors is to broaden their reach into the more casual business user without sacrificing the robustness of their tools. Scoring and Predictive Modeling Filtering different combinations of preinteraction and in-session data through a predictive model can yield different insights into the customer. Gartner has developed four approaches to scoring (see Figure 7).

Figure 7 Four Scoring Approaches to Predictive Modeling

Pre-Interaction Data

In-Session Data

Model

Model

Model

Model

Batch Score

Real-Time Score

Dynamic Score

Spontaneous Score

Efficient
Source: Gartner Research

Updated Treatment

Anonymous/ New Customer

The following list describes the circumstances under which each approach will prove useful: Batch scoring is the baseline approach for most enterprises. It can be very efficient because the scoring process can be scheduled in advance and the resulting scores can be shared among many different applications. Real-time scoring allows for updates based on recently collected data. It is effectively the same as batch scoring, but with the potential for data lags removed. This scoring approach is useful for interactions in which little new data is collected. Dynamic scoring allows for combining the most up-to-date information both from data collected prior to the interaction and from new data collected during the session. It is useful when new data must be collected to refine the offer or when new data indicates a significantly different course of action. Spontaneous scoring can be used to gain insight into a new or anonymous customer for whom a previous history or profile is unavailable. Action Item: Identify the level of real-time analysis that makes sense, based on the need for updated information during the interaction with the customer. Text Mining

Strategic Planning Assumptions: Widespread communication analysis will be technologically limited to digital textual media (such as e-mail and the Web) until at least 2008 (0.9 probability). By 2006, 80 percent of enterprises will have implemented an e-mail response management system (0.6 probability).

 Through 2007, the number of e-mail messages sent and received within an enterprise will increase by a compounded rate of 40 percent per year (0.8 probability). Through 2012, more than 95 percent of human-to-computer information input will remain keyboard- and mouse-based (0.6 probability).
Text mining has long had a role in CRM. For example: Documents must be classified to allow for easier searching Inbound e-mail must be understood so it can be routed more appropriately

In the future, analysis of overall communications will complement the microanalysis done through text mining. This will allow enterprises to understand the patterns in large numbers of documents (such as customer surveys, customer complaints and inbound e-mail messages) and will reveal trends from customer interaction. The main challenge to doing this type of analysis effectively now stems from collecting the data in a usable form. Digital content, such as e-mail messages and Web-based electronic forms, is relatively straightforward. However, paper-based content is much less reliable, particularly when handwritten. Optical character recognition software is, at best, 90 percent to 98 percent accurate even when used on clean, printed text. Other communications channels will not significantly improve this situation. Associated technologies will remain too cost-prohibitive or immature for mainstream use for the better part of the next decade. For example, widespread capturing of data and content through voice communication will not be feasible for most enterprises until well after 2012. In the interim, data entered through a keyboard or mouse will dominate the way that people input information into a computer. Action Item: Evaluate the value of data that can be captured from e-mails to detect trends in customer communication. Bottom Line Analytics forms a hierarchy that focuses on reporting, then managing, and finally predicting and understanding customer behavior. Metrics must be integrated across the enterprise, and applied consistently using a framework such as the balanced scorecard. Analytics provides better data with which to make decisions. Better analysis will not help a flawed decision-making process. Combine quantitative and qualitative analysis to create better customer understanding. Many valid analytics approaches can meet the same business requirements.

Multiple categories of analytics tools are available. Evaluation and selection of the tools depends on the unique needs of the enterprise. Written by Edward Younker, Research Products Analytical source: Gareth Herschel, Gartner Research

This article is an excerpt of a chapter from a new Gartner report, Building Business Benefits From CRM: How to Design the Strategy, Processes and Architecture to Succeed. The report is an offering of the Gartner Executive Report Series, a new business venture of Gartner Press that provides buyers with comprehensive guides to todays hottest IT topics. For information about buying the report or others in the Executive Report Series, go to www.gartnerpress.com/executivereports.
For related Inside Gartner articles, see: Management Update: The Real-Time Enterprise at the Customer Front Line, (IGG05282003-01) Management Update: BI Market Consolidation Gains Momentum, (IGG-11062002-02)

Management Update: Data Mining Trends Enterprises Should Know About, (IGG10092002-02)