Download Contemporary Logistics Medium-sized Enterprises Based on Data Mining

Contemporary Logistics 09 (2012) 1838-739X
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Contemporary Logistics
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Suggestions on the CRM Implementation of Small and
Medium-sized Enterprises Based on Data Mining
Zhigang BIAN1, Huibo DONG2
1. Jilin University of Finance and Economics, 130117, Jilin, P.R.China
2. Jilin Agricultural University, 130118, Jilin, P.R.China
KEYWORDS
ABSTRACT
Data mining,
Small and medium-sized enterprises,
CRM
With the changing market and the increasingly fierce competition, it is harder and harder to
meet customers’ need. As for 90% of the small and medium-sized enterprises, the competitive
environment is much severe. How to satisfy the customers’ demand and how to obtain more
profits are the problems that the small and medium-sized enterprises should consider
profoundly. This paper, with data mining, based on the analysis of the small and
medium-sized enterprises’ CRM programs, puts forward several suggestions, including the
unified plan and arrangement of senior managers, reasonable plan of enterprises’ business
process, enhancing employees’ CRM consciousness and providing training, highlighting the
function of data mining in CRM, co-developing and implementing CRM with competitors
and necessary government support, etc.
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Introduction
As a management concept, CRM became popular in 1990s in the west. In 1997, Gartner Group proposed the CRM concept, which
fastened its production and development. Foreign countries stress the implementation of CRM. In recent years, many enterprises in
European countries and America have already employed CRM system or CRM-to-be system, such as CISCO, DELL, HP, EMC,
ORACLE. Statistic data in foreign countries show that CRM is becoming a new customer service market. Taking America as an
example, although its CRM market exploitation rate is less than 25%, it is increasing rapidly by 44% in each year.
At the end of the 20th century, domestic enterprises began to accept CRM. Yet at present, in China, CRM is still at the teaching and
cultivating phase and there exist some theories and practice problems. First, CRM’s theory research lacks depth, and its content
cannot form a system. Second, CRM’s theory research lags behind its practice, especially the fundamental research lagging behind
the practical problems research. Third, CRM’s researching methods either only analyze the enterprises’ profits, or only research the
customers’ interests. Furthermore, the small and medium-sized enterprises often shrink at the sight of the expensive cost of CRM and
its complicated software system.
Data mining first appeared the 11th International Joint Conference on Artificial Intelligence in 1989. This technique is for application
from the very beginning. Now, it is a popular word in many fields, especially in such fields as bank, telecommunication, insurance,
traffic and retailing (supermarkets). Compared with foreign countries, domestic research on it is late, and has not formed integrity. In
1993, National Natural Science Foundation of China for the first time supported researching program of CRM. At present in China,
institutions and universities have conducted its fundamental theory and application research.
English edition copyright © ST. PLUM-BLOSSOM PRESS PTY LTD
DOI: 10.5503/J.CL.2012.09.016
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1 Data Mining and CRM Concept
1.1 Data mining concept
Data mining is a generalized concept. The generalized data mining means general data analysis. It includes both statistic and mining
methods. Data mining in narrow sense refers to the nonlinear statistic analysis method, the process of extracting valid, previously
unknown, comprehensible, and actionable information from large, incomplete, noisy, vague and random databases. It is an
interdisciplinary field with a wide range, including machine study, mathematical statistics, neural networks, database, pattern
recognition, rough set, fuzzy mathematics, etc. In terms of its concepts, data mining is a technique, which aims at solving problems
and achieving targets.
1.2 CRM concept
CRM (Customer Relationship Management), firstly proposed by American Gartner Group, for establishing a set of management
mechanism and system to manage the enterprises and information communication of customers. CRM makes all the following things
customer-centric, such as enterprises organization, working process, technique support and customers’ service, and also coordinate
the interaction with customers, in order to retain valuable customers, dig potential customers, win customers’ loyalty and finally
obtain the long-term value of customers. CRM is a combination of theories, methods, techniques, competence and software for
enterprises to develop a long-term cooperation with customers and improve the customers-centric performance. It is the application
of the customer-value management theory in practice. It is also an efficient way to expand the enterprise’s profit, enhance the
customers’ degree of satisfaction and employees’ productivity by customers.
2 The Relationship Between Data Mining and CRM
Modern enterprises now are all facing a fact, that is, fewer and fewer product discrepancies, fewer and fewer efficient marketing
methods, more and more competitors, higher and higher customers’ demand. How should the enterprises tackle the competitive
market and how could the enterprises cultivate the competiveness? The answer is market orientation, customer center, customer
segmentation, establishing CRM with data mining and the brand strategy. If the enterprises take profits as the target, CRM is the most
useful tool to realize it, and data mining is the best engine of this tool.
Specifically, data mining and CRM have the following relationships.
2.1 The information and data that data mining needs are from CRM
Obviously, there must be a large amount of available information for data mining. The information is from CRM system. Enterprises
collect and keep a large amount of information related to customers’ need. Some is complete, valid and clear while some may be
fragmented, invalid and vague. Data mining searches for useful information from it to realize the aim of CRM management.
2.2 Data mining and CRM emphasize different things
Data mining can effectively search for the potential demand customers, market developing trend, and realize cross marketing, with an
emphasis on the use of software, methods and techniques, etc., while CRM is stressing the aim and process. How to realize aims
maybe more depend on data mining.
2.3 The final targets of data mining and CRM are the same
Although they stress different aspects, data mining and CRM are the same at final targets, that is, better meeting customers’ need,
achieving satisfaction and loyalty from customers as well as profits.
2.4 Data mining is a part of CRM
Although data mining and CRM emphasize differently, from system theory’s point of view, data mining is the part of CRM. From the
above concepts, CRM is the combination of a series of theories, methods, techniques, competence and software, and data mining just
belongs to techniques (including software).
3 The Necessity for Small and Medium-sized Enterprises to Implement CRM
Compared with the large enterprises in the same trade, small and medium-sized enterprises are smaller economic unities in staff
number, assets scale and managerial scale. The definitions of the small and medium-sized enterprises are different in different
countries, in different economic stages, in different trades, and are changing dynamically with economic development. Generally
speaking, the definition includes two aspects, quality and quantity. Quality indicators mainly include the enterprises’ organization,
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financing pattern, and the trade position, etc.; quantity indicators mainly include employee number, paid-in capital and total assets,
etc.
The small and medium-sized enterprises have many advantages, such as flexible mode of operation, cheap structure cost, convenient
movement, which make them more capable to follow the changing market and meet consumers’ individual and popular need.
Therefore, in the world’s economic development, including the developing countries, the small and medium-sized enterprises play a
significant and irreplaceable role. In China, there are about 10,000,000 small and medium-sized enterprises, which produce most
labor-intensive export products and some high-tech export products. The export volume accounts for 60% of the total exports. The
small and medium-sized enterprises also provide about 75% jobs for the city residents.
However, the small and medium-sized enterprises also face many difficulties, including unsmooth system, multi-management; unfair
policy, disordered market; difficult financing, no way for loans; unclear property rights, lack of drive; vague market competitive
advantage, weak capability to resist market risk; seldom using advanced management concepts and marketing software, etc. The
implementation of CRM is essential in obtaining customers’ favor and affection in the fierce competition and adverse market
environment.
4 The CRM Implementation Conditions of Small and Medium-sized Enterprises
Based on Data Mining
Obviously, CRM does not fit all the small and medium-sized enterprises. The implementation of CRM needs some conditions.
4.1 The idea of managers
The implementation of CRM first depends on managers’ ideas. Modern enterprises management requires managers should have
leading market ideas and pioneering confidence. CRM is neither software nor a fashion. Managers must have a correct recognition of
CRM’s functions.
4.2 The resource capability of enterprises
The implementation of CRM needs a large amount of money. The small and medium-sized enterprises should carefully consider
whether the capital chain can afford it or not. Generally speaking, in order to implement CRM, software takes amount of 1/3 and
training, consultancy and implementation 2/3. Before investing CRM, enterprises should have some necessary IT equipment, such as
hardware system, e-mail servers, the local area network (LAN) and wide area network (WAN), as well as the earlier used software.
4.3 The capability to bear failure
Implementing CRM is not with the hitch. According to IDC’s research on more than 300 big companies in America and Europe, 65%
companies know CRM very well; 28% companies are developing CRM programs; 12% companies are using CRM system. The
research also shows that, among the companies that implement CRM, 70% companies fail. In China, the successful implementation
rate of CRM is also low. Thus, the small and medium-sized enterprises should have the capability to bear failure, otherwise not.
5 Suggestions on the Implementation of Small and Medium-sized Enterprises’
CRM Based on Data Mining
5.1 Senior managers’ unified plan and arrangement
In order to successfully implement CRM, senior managers must know CRM very well. CRM is a comprehensive application system.
CRM involves many sectors and departments such as enterprises production sales, marketing service, management. It needs their
cooperation. Therefore, there must be a strong and decisive leader and CRM team who can fix the enterprise’s CRM program target,
program’s plan and implementation scheme, coordinate all departments’ activities and guarantee the successful implementation
through rationally distribute all types of resources.
5.2 Reasonable plan of the enterprises’ business process
In actual enterprises’ activities, most small and medium-sized enterprises may have irrational inner structure, irregular business
process, obstructed communication and cooperation between departments and unsmooth information communication. These
problems are bad for the CRM implementation. Therefore, it is necessary to perfectly combine CRM system and the enterprises’
related business systems and optimize enterprises’ management process with customers as centers. Enterprises should establish the
“customer-center” business process, correct and improve the old business process, and ensure that the CRM system can fit these
reformed business process.
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5.3 Enhancing employees’ CRM consciousness and training them
First, enhancing employees’ CRM consciousness means all employees should realize that CRM is not personal or only related to
certain department, but a systematic project, involving the interest of the whole company. All the employees are required to
participate in it and the enterprise should offer more conscious training. Second, the enterprises should train those employees
working on CRM, mainly about the use of CRM system, data mining skill, information analysis capability. Furthermore, the spiritual
and material incentives should be given to employees, which can benefit the smooth implementation of CRM.
5.4 Highlighting the function of data mining in CRM
On the one hand, sufficiently using data mining can exploit potential customers and their needs during the CRM management,
reasonably differentiate and choose market, achieve cross sales and avoid customer loss. On the other hand, enterprises should have a
proper expectation on CRM, of which data mining is just a part.
5.5 Co-development and implementation of CRM with competitors
The relationship between modern enterprises is not only fierce competition, but also cooperation. Since the scale of the small and
medium-sized enterprises is small, the resources limited, cost of individual development and implementation of CRM high, they can
co-develop and co-implement CRM, which can greatly save costs, expand market and meet the customers need. Enterprises can also
cooperate on CRM development, to develop suitable CRM according to their own conditions and marketing aims.
5.6 Necessary support of government
The paper has mentioned the importance of the small and medium-sized enterprises in China’s economic development and the
difficulties that they are facing. If government can help them in policy, environment, capital, manpower, etc, the small and
medium-sized enterprises will do more to economic development.
6 Conclusion
Data mining will play an increasingly essential role in the CRM implementation of the small and medium-sized enterprises. As long
as they can know well of the CRM unction, adopt suitable CRM and sufficiently apply data mining technology, the small and
medium-sized enterprises in China will get benefits in the fierce market competition.
References
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[3]. CUI Xue. SMEs in China during the Implementation of CRM Suggestions [J]. China Business and Trade. 2010 (11): 73-74 (in
Chinese).
[4]. YIN Xiaoli, FANG Xusheng. Data Mining Technology in the Banking CRM application [J]. Economic Research Guide. 2009
(20): 112-113. (in Chinese)
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