Data Mining in CRM - Data Mining Techniques in CRM: Inside Customer Segmentation - page 1

CHAPTER ONE

Data Mining in CRM

THE CRM STRATEGY

Customers are the most important asset of an organization. There cannot be
any business prospects without satisfied customers who remain loyal and develop
their relationship with the organization. That is why an organization should plan
and employ a clear strategy for treating customers. CRM (Customer Relationship
Management) is the strategy for building, managing, and strengthening loyal and
long-lasting customer relationships. CRM should be a customer-centric approach
based on customer insight. Its scope should be the ''personalized'' handling of
customers as distinct entities through the identification and understanding of their
differentiated needs, preferences, and behaviors.
In order to make the CRM objectives and benefits clearer, let us consider the
following real-life example of two clothing stores with different selling approaches.
Employees of the first store try to sell everything to everyone. In the second store,
employees try to identify each customer's needs and wants and make appropriate
suggestions. Which store will finally look more reliable in the eyes of customers?
Certainly the second one seems more trustworthy for a long-term relationship, since
it aims for customer satisfaction by taking into account the specific customer needs.
CRM has two main objectives:

1. Customer retention through customer satisfaction.
2. Customer development through customer insight.

The importance of the first objective is obvious. Customer acquisition is tough,
especially in mature markets. It is always difficult to replace existing customers