Data Mining Techniques for Customer Relationship Management Essay

2219 Words 9 Pages
Abstract

Advancements in technology have contributed to the new business culture, where the Customer Relationship Management (CRM) is in the centre of a business concern. CRM is a widely implemented strategy for managing and fostering long term, profitable relationships with specific customers (Ling and Yen, 2001). The automated data mining tools made it possible to move beyond the analyses of the past events and data mining tools can be used to address problems that were seen as too time-consuming in the past, providing new opportunities for businesses within relationship management. This report identified that CHAID and neural networks are two of the most commonly used data mining techniques within CRM domain. However, each of these
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As argued by Carrer and Povel (2003), the generative aspect of data mining consists of the building of a model by performing one of the following types of data modelling:
• Association
• Classification
• Clustering
• Forecasting
• Regression
• Sequence Discovery
• Visualisation


Figure 1: Classification Framework for Data Mining Techniques in CRM (Swift, 2001).
In order to begin the managing and fostering relationships, organisation needs to possess information about customers. The main source of customer data is from internal sources (e.g., billing records, customer surveys, web logs). An enterprise data is a crucial component of a CRM strategy in any organisation that wishes to apply data mining techniques. Most companies have very big databases that contain Human Resources (HR), marketing and financial resources; however, CRM requirements can be limited to a marketing data mart with partial supplies from other corporate systems (Freeman, 1999). Alternatively the information can be acquired from external sources, which might be a key source for gaining customer knowledge advantage (Hill, 1999).


3. The Customer Lifecycle

In CRM, customer lifecycle refers to the progression of steps the customer embarks on when considering, purchasing, using and maintaining loyalty to a product or service (Petrisans, 1999). It is important to acknowledge the fact that customer relationship changes…