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This strategic solution is helping companies take control of customer value management
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Small companies often have the luxury of recognizing their customers by sight, and knowing their purchase preferences and service needs. Savvy business owners are able to meet these expectations – and reap the benefits of strong customer loyalty and lifelong customer value.
Larger enterprises with thousands – or millions – of customers recognize they’re at a distinct disadvantage in this ability to sort through and cater to customer preferences. Even with the myriad of sophisticated data-capturing systems, some executives freely admit that they cannot cope with the volumes of data they collect. And they’re often at a loss to correlate the elements within the data – such as lifetime customer value, customer volatility, sales transactions, marketing activities, customer lifecycle stages and current profitability – in a way that optimizes service to their best customers to help improve business results.
IBM’s Customer Equity and Lifetime Management (CELM) is a powerful analytical customer retention management solution developed by an IBM ODIS team. Using advanced stochastic optimization algorithms, a combination of Markov Decision Process, Reinforcement Learning and Portfolio Theory, CELM captures and analyzes customer dynamics to model and optimize long-term customer relationships in a way that can help maximize the value/risk ratio of the overall customer portfolio.
One of the basic tenets of marketing is that it costs more to recruit customers than to retain them. While companies must continue to woo new patrons, it’s simply good business to determine the current and potential value of customers, and deliver what they need and prefer.
CELM helps companies understand their current customers and their long-term value. Then it helps manage, support and nourish customer relationships, allowing companies to allocate or reallocate marketing budgets dynamically to help maximize their return on investment (ROI) and increase customer lifetime value and loyalty. Companies can then recruit new customers who fit high-value profiles.
The IBM lifetime management solution also helps companies design more efficient communication policies by analyzing data related to such critical questions as: How effective is our current communication mix? And how can we better plan and budget campaigns to help maximize ROI and reduce customer volatility (risk)? The answers can help reduce marketing costs, improve response rates and customer value forecasts, and boost customer satisfaction.
CELM may be deployed in several ways – optimally as a comprehensive IBM solution that integrates CELM into existing middleware and analytic components to support various business users across an enterprise, from call center representatives to strategic marketing managers. Other options include a standalone desktop application, with customized IBM or business partner software added to an existing application for discrete business purposes, such as creating a marketing plan or monitoring customer retention. Or IBM may assume a true consulting role, running a customer’s existing data through CELM analysis, then providing the results and recommendations for a pilot project that can be scaled at a later date.
Finnair, a major European airline that wanted to redesign and improve its customer loyalty management processes, was an important partner in the practical development of CELM. Finnair is now one of CELM’s premier clients. Banking and telecommunications companies are also adopting this highly effective first-of-a-kind on demand solution from IBM.
In addition to its potential to provide significant value to enterprises across many industries, CELM is a timely demonstration of IBM’s commitment to helping companies achieve aggressive business goals through innovation.
Eero Ahola, Finnair’s senior vice president of Strategy and Business Development, told The New York Times in a Jan. 25, 2004, article that the technology has reduced marketing costs by more than 20 percent, improved response rates by up to 10 percent, and enhanced the IBM/Finnair business relationship.
"They've gone from being a supplier to being our data center to being a partner. It’s a totally different relationship," Ahola said.
For further information on how CELM can help transform your business from the company of today into the enterprise of the future, contact ODIS today.