Data Mining Essay

What is meant by the term â€Å"lift†? The term â€Å"lift† describes the improved performance of an exact or specific amount of effort on a modeled sampling, as opposed to a random sampling (Spang, 2010). In other words, if you are able to market via a model to say, a given number of random customers (e.g. 1000), and we expect that 50 of them would be successful, then a model that can generate 75 successes would have a 50 percent lift. â€Å"Lift† is possibly the most commonly metric used to measure targeting model performance in marketing applications – the purpose of which, is to identify a subgroup or target from a larger population (Coppock, 2002 and Spang, 2010). The subgroup targeted or target members selected are those who are most likely to respond positively to a marketing offer. As such, the model is doing well if as predicted – the response within the targeted section is much better than average when compared to the population as a whole. Lift then, is simply the ratio of these values: target response divided by average response (Coppock, 2002). â€Å"Lift Charts† and â€Å"Lift Curves† are terms often seen in direct marketing. To quickly define them here – a lift curve is a popular technique which assigns a â€Å"probability of responding† score when used in an attempt to determine who the likely responders from a population are. â€Å"The lift curve helps us determine how effectively we can â€Å"skim the cream† by selecting a relatively small number of cases and getting a relatively large portion of the responders† (Keating, 2013). A lift chart or a â€Å"Gains Chart† is a convenient summary of all the cumulative lift curves whereby all the information in these multiple classification matrices are turned into a graph (Keating, 2013 and Coppock, 2002). What is Customer Relationship Management (CRM)? â€Å"There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.† – Sam Walton (Founder of Wal-Mart) Customer Relationship Management or CRM is a â€Å"company-wide business strategy† which is generally designed with the intent to â€Å"reduce costs and increase profitability by solidifying customer satisfaction, loyalty and advocacy† (CRM Magazine, 2010). While once, it was regarded of as a type of software, today, CRM has evolved into a â€Å"customer-centric philosophy that must permeate an entire organization† (CRM Magazine, 2010).   In other words, it is not a new concept but as the quote above by Sam Walton suggests – an extremely important one that can and should be instinctively employed to all businesses to ensure returning and new clientele. We may perhaps think of CRM in its most basic, common and best known form as â€Å"customer services† or simply, methodology employed to create happy customers. A true and effective CRM program revolves around three key elements – people, processes and technology (CRM Magazine, 2010). Targets within these elements that should be especially considered are individual applications, a data infrastructure to support them, and organizational changes to take full advantage of the technical upgrades (Goodhue et. al., 2002). Moreover, the CRM program should be bringing in information from all relevant data sources both within, and outside the organization when applicable. In doing so, a company is able to gain a â€Å"holistic view of each customer in real time† (CRM Magazine, 2010), thus allowing staff dealing directly with customers, for example, in the realms of customer support, sales and marketing – the ability to make informed yet quick decisions on everything from cross-selling and upselling to target marketing strategies and competitive positioning tactics (Info Entrepreneurs, 2013 and CRM Magazine, 2010). A working example of how CRM could be achieved may be through: discovering the purchasing habits, opinions, needs and preferences of one’s customers; then profiling the individuals and groups researched so marketing can be executed more effectively, thus increasing sales. Finally, by combining this information found with good customer services and satisfaction – customer relationships which are the heart of business success, can be appropriately and effectively fostered, then maintained and ultimately managed for efficiency and profitability. While there are many technical and technological components to CRM, thinking about CRM as primarily a strategy to learn about the needs and behaviors of customers in an effort to create, develop and strengthen relationships with them may prove to be more helpful overall and in the long term. Additionally, it should be thought of as a process bringing together information concerning customers, sales, marketing effectiveness, responsiveness and marketing trends (Goodhue et. al., 2002 and Writing, 2013). Finally, for CRM to be truly effective, everyone in the organization from the CEO to the frontline staff and those behind the scenes need to get on board, involved and invested in the company`s program (Info Entrepreneurs, 2013; CRM Magazine, 2010; Writing, 2013 and Goodhue et. al., 2002). What are its benefits? Provide examples of potential benefits. To reiterate the above – benefiting from CRM is â€Å"not just a question of buying the right software. You must also adapt your business to the needs of your customers† (Info Entrepreneurs, 2013).   Having said that, after investing the time and expense in implementing a good CRM solution, there are many potential benefits, some being extremely significant and having a major impact on the establishment in question: −Development of better relationship with existing customers due to understanding and therefore addressing their specific requirements. −Increased sales and revenue through better timing gained via anticipating the customers’ needs based on historic trends. −Cross-selling of other products by leveraging the customer relationship. −Ability to identify the most profitable clientele. −Improved profitability through focusing on most profitable clients while dealing with less profitable clients in a more cost effective manner. −Better overall marketing of products or services. −More effective target marketing communications aimed specifically at customer needs. −An improved, more personal approach which can help win additional business in the future. −The development of new and / or improved products and services through better client feedback, complaints, comments and suggestions. −Reducing cost of sales and cost of new customer acquisition and generation by concentrating on customer retention, thus improving organization reputation and word-of-mouth recommendations. (Writing, 2013; Info Entrepreneurs, 2013 and Goodhue et. al., 2002). With respect to CRM systems, what does it mean if the system is â€Å"scalable†? A â€Å"scalable† system according to the Business Dictionary, is one whose â€Å"size, performance or number of users can be increased on demand without a penalty in cost or functionality†.   A secondary definition details that such a system is well designed enough to handle â€Å"proportionally very small to very large usage and service levels almost instantly, and with no significant drop in cost effectiveness, functionality, performance or reliability.† It goes on to add that scalable systems may generally utilize technologies such as automatic load balancing, clustering and parallel processing as a means to achieve the points listed above (Business Dictionary, 2013). With respect to CRM systems (and even data mining systems), both definitions apply with equal precision and aptness to scalability because scalability deals with not only the increasing size of data sets, but also how to process them within a useful timeframe. We can go so far as to concur that the issue of scalability in systems such as CRM are similar for performance scaling issues for Data Management in general (Piatetsky-Shapiro and Parker via Massa-Lochridge et. al., 2013). Ultimately, the scalable system is in the business of efficiency of analysis – and being able to do so with very large data sets (Olson and Shi, 2005). A system which is scalable is one which can aid in overall performance in the organization. In fact, scaling and performance are often considered together in both data mining and CRM systems (Massa-Lochridge et. al., 2013). To further emphasize and prove these points, we can look towards real life examples such as the Onyx checklist for scalability which sets the criteria as a customer management system deployed across the company that is able to support staff without any degradation in performance. Furthermore, the system must also be able to support thousands of users with sub-second response times. For it to be truly scalable, it needs to be a flexible CRM solution – preferably one which adheres to an industry standard architecture which can leverage existing infrastructure. This, coupled with efficiency and easiness of upgrading, will help to keep the total cost of ownership low now, and into the future (Onyx, 2013). Compare and contrast affinity positioning and cross-selling (minimum 500 words). Provide real life examples and personal experiences to substantiate this analysis. Affinity positioning is a marketing tactic that is defined exactly as its component words suggest – the practice of positioning or placing products that have a natural or inherent attraction or connection with each other, together. For example, a retail store may arrange their shop layout in such a way that there is a deliberate, close placement of complementary products on the shelves (Olson and Shi, 2005). Consider also, this potential real life situation where a retailer may have identified through perhaps, a Market Basket Analysis that customers who tend to buy cold medicine also have been observed to purchase tissues. Similarly, the buying of coffee makers may be strongly correlated with the purchase of ground coffee. It therefore makes sense from a marketing and profitability perspective to place both these items in each set, in close proximity to each other. Cross-selling is a related and resulting concept. Where there is knowledge of products that go together, one is able to use this information to create cross-selling opportunities through marketing the complementary product (Olson and Shi, 2005; Microstrategy, 2013; and Tsai, 2010). Apart from positioning products on shelves like a grocery store might do, retail stores for example, can be seen to rely upon advertising to create this connection within the purchaser`s mind.   A buyer of suits for instance, may notice the sale of shirts and ties from posters and advertising stands on shop windows and outside the door, respectively. In terms of technology, we may observe computer stores selling laptops while encouraging customers to purchase accessories or peripherals like casings, screen protectors and external hard drives concurrently. While both strategies have always been applied by the clever retailer, today data collection (e.g. generated from cash register data) and automated data mining tools provide them with a yet unmatched ability to even identify the less expected and less obvious product affinities and cross-selling possibilities. Sellers are now able to use current technology to look at customers’ purchase history and target marketing operations specifically to their individual and group needs and wants (Olson and Shi, 2005). A Customer Cross-Cell Analysis can be employed to identify customers who might be interested in purchasing complementary products and services to those which have already been bought previously (MicroStrategy, 2013). Indeed, sales and marketing managers have long relied on the cross-sell analysis to create more efficient marketing projects, thereby producing increased revenue with less resources through focused efforts. A customer cross-sell analysis typically begins with using data mining techniques and tools to determine which product pairs (product affinity) are frequently purchased by a significant number of customers. From here, an organization can then identify which customers bought one but not both products or services. By executing this second stage, we can now know who these customers are and hence target them specifically – thereby reducing total advertising campaign costs, increasing response rates and finally and most importantly, create increased sales (MicroStrategy, 2013; Olson and Shi, 2005; and Tsai, 2010). One point worth mentioning, is a separate but related concept to both affinity positioning and cross-selling, which is upselling (also often referred to as up-selling or up selling). This involves searching for opportunities to sell an improved, higher grade or generally more expensive â€Å"latest† product to the consumer. Going back to the example of the computer store, a staff member who tries to upsell to a new or returning customer may sing the praises of another, higher-end model of laptop which may have more features the client may find useful, thus hoping to create a more profitable sale. In my own, personal experience in a hospital setting – affinity positioning is seen for example, in the maternity ward where â€Å"New Mother† and â€Å"Baby Care Training† hospital sponsored classes or their adverts are held or displayed in an area close by, thus encouraging expecting women to come back to the hospital after delivery to take advantage of this value added service. In doing so, the hospital then creates a cross-selling opportunity by ensuring additional services such as pediatrician care for babies or postpartum care for mothers are clearly advertised via a targeted campaign. Finally, upselling is also seen in this ward via examples such as when staff offer mothers increased comfort and privacy with the option of upgrading shared rooms to private ones. Identify and discuss some potential ethical mishandling when it comes to cross-selling. Some of the more commonly known ethical issues to watch for in cross-selling, as well as in general marketing include but are not limited to: −Intentionally trying to sell sub-par goods or services to the client in a bid to create a sale, when aware of the quality deficiency. −Related to the above, is the deliberate misrepresentation of goods or services, in both cross-selling and otherwise. −Incessantly contacting existing or potential clients without consent in order to cross-sell products or services. −The refusal to respond to, acknowledge or correct customer complaints after a sale has taken place – be it cross-selling or initial sales. −An unclear privacy policy which may involve personal details being distributed or sold. −An unclear after sales policy which may involve the placement of deliberate loopholes for the sellers to have an advantage. Again, this point can be attributed to both regular sales and cross-selling issues. With regards to issues more specific to cross-selling, research has revealed that certain service sectors may be affected by ethical mishandlings and / or concerns more than others. In particular, it is revealed that situations regarding cross selling in hospitals; situations to do with plastic surgery; and cross-selling targeted towards the elderly, have all been widely discussed in recent years and may be cause for action. With respect to cross-selling in hospitals, an example which can be seen is that ethical issues often arise when medicine, equipment or medical product reps all too easily ignore or forget that they are supposed to have the hospital’s, doctor’s, medical staff’s and patient’s needs at heart – attempting to create sales based on the pharmaceutical companies’ incentives and profit margins instead. When this happens: It ignores the necessity of consultative selling, which involves proper questioning techniques. It fails to connect the customer on a value level. In essence, it’s not selling at all; it’s simply peddling! (Francis, 2008). The literature available also suggests that there have been events with respect to aesthetic plastic surgery which again raise the question of ethics mishandling and cross-selling. Concerns here include examples such as cross-selling and â€Å"bundling† cosmetic surgery and procedures as attractive package deals – whether they be necessary or not (Fatah, 2011), or the rise of incidences such as patients having undergone breast implant removals or replacements being â€Å"bullied† or pressured into buying additional surgery such as nipple lifts (mastopexy). In addition, these cross-selling strategies may be coupled with other marketing tactics such as time-limited offers from their clinics, resulting in anxiety and customers feeling the need to respond instead of taking time out to heal after surgery (BAAPS, 2012). Finally, in terms of targeting the elderly for cross-selling certain products and services which may be deemed unethical – one may wish to consider the â€Å"unethical and dishonest conduct† of promoting and selling expensive annuities to elderly customers, the market targeting done here because the elderly may be seen as â€Å"easy targets† (Litterick, 2005). There have been cases of banks which have been accused employing cross-selling practices such as referring existing, elderly customers who come in for separate bank services, to stockbrokers who in turn sold them variable annuities that are often considered unsuitable for older people because they can be â€Å"expensive and do not pay out quickly† (Litterick, 2005). This was often found to be due to the fact that service staff were receiving incentives for doing so. In response to such cases, Banner (2011), maintains that: â€Å"Improper cross-selling – cross-selling of products to earn a fee or a commission that does not truly benefit the client’s quality of life on a long-term basis – is wrong, unethical and immoral† (Banner, 2011). He does go on to ascertain however, that the cross-selling of a product or service which truly is suitable to them – meaning to say it can benefit and / or protect the client appropriately, is well worth considering (Banner, 2011). As a final note on the ethics of cross-selling, to avoid ethical dilemmas and mishandling, it is prudent to keep in mind often that the key to effective cross-selling can be boiled down to mutual benefit on the parts of both the selling and buying parties, and suitability, suitability, suitability! (Banner, 2011; Francis, 2008 and NRMLA, 2008). References BAAPS – The British Association of Aesthetic Plastic Surgeons (2012, February 10). Cross-selling to breast implant scandal victims ‘immoral’. The British Association of Aesthetic Plastic Surgeons. Retrieved February 26, 2013, from http://www.baaps.org.uk/about-us/press-releases/1136-cross-selling-to-breast-implant-scandal-victimes-immoral Banner, M. (2011, May). Originating: Living at Home Brings Peace of Mind. The Reverse Review. Retrieved from http://www.reversereview.com/magazine/3862-living-at-home-brings-peace-of-mind.html Business Dictionary (2013). What is scalable? Definition and meaning. In BusinessDictionary.com – Online Business Dictionary. Retrieved February 25, 2013, from http://www.businessdictionary.com/definition/scalable.html Coppock, D. S. (2002, June 21). Why Lift? Information Management. Retrieved February 24, 2013, from http://www.information-management.com/news/5329-1.html CRM Magazine (2010, February 19). What Is CRM? – CRM Mag azine. destinationCRM.com – The leading resource for Customer Relationship Management – from the editors of CRM magazine. Retrieved February 24, 2013, from http://www.destinationcrm.com/Articles/CRM-News/Daily-News/What-Is-CRM-46033.aspx Fatah, F. (2011, May 5). BBC News – ‘A little lipo with your facial, madam?’. BBC – Homepage. Retrieved February 26, 2013, from http://www.bbc.co.uk/news/health-13228094 Francis, P. T. (2008). Cross-Selling Your Hospital’s Capabilities. Clinical Laboratory Sales Training with Peter Francis. Retrieved February 26, 2013, from http://www.clinlabsales.com/pdf/Cross-Selling-092508.pdf Goodhue, D. L., Wixom, B. H., & Watson, H. J. (2002). Realizing Business Benefits through CRM: Hitting the Target in the Right Way. MIS Quarterly Executive, 1(2), 79