customer relationship optimization

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CARO advanced intro Steve Pinchuk 1 January 2017

An Introduction to a New Concept & Methodology

For Nurturing/Optimizing Customer Lifetime Value & 1-to-1 Customer

Interactions Called

“Customer Activated Relationship Optimization”

“CARO”

Steven Pinchuk World Wide Lead

Customer Intelligence & Revenue Management

Advanced Analytics Center of Competence

Global Business Services

IBM

References to CCPO should be replaced with CARO in pictures

[email protected]

mailto:[email protected]

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INTRODUCTION This paper describes a new concept (CARO) that changes the way companies and their customers interact and value each other. This is not just new analytics to support existing ways of interacting with customers, this is a major restructuring of the relationships between companies and their customers that changes the way we value, interact with and think about customers. This concept is implemented using new integrated advanced analytics supporting a new customer centric system. This is a well-developed concept, however, it has not been built yet. CARO is one of the new visions and concepts that are integrated in a “Cognitive Customer Centric Interactions” (C3I) approach and system that optimizes the lifetime value of each individual customer by optimizing all the interactions with them. A detailed introduction to C3I can be found in a narrated PowerPoint video on You Tube Reading this paper before watching the video will help set the foundation for understanding the systems discussed in the video.

GOALS In a 2011 IBM survey of hundreds of CMO’s, their number one desire was to know each of their customers as an individual,

and interact with them using 1-to-1 strategies and actions. They said they needed a system of engagement that delivered

personalized interactions through the entire customer lifecycle. Following are a summary of their comments.

1. From millions to one: deliver value to empowered customers and get to know and serve each customer as a

unique individual on a massive scale

2. Systems of engagement: foster lasting connections with customers. Engaging with a customer throughout

their entire customer lifecycle to deliver personalized interactions on a massive scale

This paper introduces a new Customer Activated Relationship Optimization (CARO) concept, which is powered by a new

lifecycles methodology and a new integrated system that achieves these goals and more. A new Customer Activated

Relationship Optimization Integrated System (CAROIS) is introduced that can systematically apply CARO across the entire

market and apply personalized proactive and reactive trigger based 1-to-1 interactions to all customers.

This approach and system allows CMO’s to achieve their goals. Today, CMO’s cannot achieve the goals above using existing

approaches, methodologies and systems.

INTRODUCTION To accomplish the goals of the CMO, we must change. We need to reengineer our relationships with our customers. We

need a new approach to our customers that focuses on optimizing their lifetime relationships and profitability for the

whole company instead of just their tactical value to different parts of the company for particular interactions. We need

a new integrated company-wide system to support this new 1-to-1 personalized approach. CARO is based on a new

customer behavioral traits pattern methodology and analytics that understands and predicts individual customer behavior

traits patterns (lifecycles).

All customer data needs to be aggregated and analyzed together using lifecycles as a key indicator of how other variables,

or combinations of variables, affect individual customer behavior patterns. This is a true 360 degree customer profile -

where all customer information is combined and analyzed together to understand the interactions between all these types

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of information and how to use this to create a better understanding of each customer and predictions about each

customer’s future behavior patterns.

Lifecycles (behavioral trait patterns) need to be understood at the level of each of the many separate behavior traits

patterns that an individual can exhibit. These separate behavior traits, each with their own lifecycle, are combined to

create the overall customer behavior pattern or lifecycle. Real customer behavior is not aggregated. It is a combination of

many separate behavior traits. To understand customer behavior we must start at the smallest level of the individual

behavioral traits and not at the aggregated level. Today we generally only track the aggregated behavior pattern and not

the individual behavior pattern traits. We must consider all customer information and not one time slice at a time.

Lifecycles need to be understood both longitudinally (what will happen for the remainder of any one behavior trait pattern,

or lifecycle, for that customer) and latitudinally (what impact does that customers other behavior traits in other lifecycles

have on that one behavior trait, or lifecycle, for that customer). The concept of longitudinal and latitudinal impacts on

individual behavioral trait lifecycles must also take into account the behavioral trait lifecycles of other individual customers

and also the impact of non-lifecycle customer data on the individual and combined lifecycles. For now it is important to

understand this concept and that it provides a new analytical and systematic methodology for achieving the CMO goals.

This is a new methodology that can be integrated with all customer data, analyzed, and then applied to each individual

customer using an integrated system and approach. The system (CAROIS) allows this behavioral economics application to

be applied to massive numbers of customers. Further details about lifecycles are available, but are beyond the scope of

this introductory paper.

We need this new way to utilize and leverage each customer’s data. We need to treat each individual customer like a

unique individual and valued partner throughout their entire customer lifecycle. Today our most routine access and

analysis of customer data is when we need to create a customer segment for a single tactical action. The customer data

that we use today is also just a static slice in time and does not represent the past or future behavior traits or patterns of

each individual customer. We do not aggregate and analyze all the data for each customer in one individual customer

profile. We do not really try to understand the individual sequential behavior patterns in their individual past and the past

of other individuals and use that to predict their future behavior patterns. We are not using all the insights that we can

gain from all the data for each customer. Generally our analysis is only designed to target the company’s next tactical need

using a segment of customers. We do not consider or nurture the whole strategic lifetime journey of each individual

customer using an analysis of all of their data. We treat customers as tactical targets, stuck in time in groups.

We also require a new way to determine how to interact with each customer. We can no longer allow different parts of

the company to each utilize their own interpretations of different pieces of the static customer data – usually based on

just enough data and variables to create a segment of customers to target for their one tactical action. Today, based on

this limited data and analytics, and little or no true lifetime behavior pattern predictions, different parts of the company

interact tactically with the customers in segments. The customer feels like a target of our uncoordinated actions.

Customers, therefore, do not feel like a valued partner. Customers do not feel that the company cares enough about them

to try to know them as an individual, to engage in a 1-to-1 lifetime relationship, based on everything they have done and

what that tells us they want in their future as an individual and lifetime partner and treat them accordingly. Many times

thcustomers feel like they only hear from the company when the company wants something from them.

Companies need to change the way we use customer data, and we need to change the way we allow our most valuable

resource, our customers, to be treated. This will require a new way to use and understand data and new way to interact

with customers. We have to use this new customer insight to assure that each customer is only treated in ways that agree

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with what the data tells us they want in their future lifetime relationship with the company. We must stop treating

customers as tactical targets. This change must be supported by a system that can apply these techniques to as many

customers as possible.

The new CAROIS creates individual customer profiles, using lifecycles. The lifecycles in CAROIS are combined will all other

customer data to support true trigger based marketing across many behavior patterns that nurtures each customer and

optimizes their lifetime value to the company. We must to use these new insights to nurture and create a true 1-to-1

relationship with our most valuable asset – each individual customer.

The diagram below shows the architecture of the CAROIS. The individual dynamic customer profiles are now in the center

of the company’s functionality. No more data silos, excessive tactical use of customers or ignoring the lifetime behavior

patterns of customers. Now the customer belongs to the whole company and is nurtured based on their individual

behavior patterns and lifetime value for the company, which is determined by their unique individual dynamic 360 degree

customer profile. Their individual customer profile filters and directs all the company’s interactions with them over their

lifetime and across all of their lifecycles. We can attain true 1-to-1 lifetime relationships with customers on a massive scale

using a CAROIS based on individual customer profiles that combine lifecycles tracking customers many behavioral traits

with all other available customer and market information.

Many companies already have many of the data sources in the top layer of the diagram, and most companies already have

many of the customer interaction systems in the lower layer of the diagram. IBM already has several analytical customer

profile engines from several industries that can be combined to create the crucial 360 degree dynamic individual customer

profiles. IBM also understands the lifecycles methodology and how to make this new Intellectual Property work. There is

years of work on this concept. IBM also has all the components from all the layers of the CAROIS and can integrate them

tighter than anyone else – all under IBM instead of scattered across a dozen vendors. IBM can work with what customers

have today, and slowly or quickly fill in the gaps as needed for customers who want to pursue CAROIS. IBM is presently

integrating all of our existing products into CAROIS. We can approach the many different needs and existing products of

many different companies. This is a customized approach and not “one size fits all.”

This journey can start crawling, then walking and eventually running – but it needs to start and have a clear long term

target with interlocking intermediary steps. The first steps are to implement lifecycles and the individual dynamic

customer profiles. Each data source and type and each customer interaction system or channel can then be added and

layered onto the existing CAROIS capabilities.

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SUMMARY CARO is based on a new approach to applying behavioral economics. A CAROIS is an advanced integrated predictive

analytics system based on CARO. CAROIS can be used by any organization which gathers customer information, and wants

to optimize their understanding of and interactions with all their customers.

CAROIS divides customers into three broad customer data categories which are created to reflect how much data we have

on each customer. Each customer is placed in one of these categories based on what data that we have for them. The way

each customer is valued, and therefore interacted with, is based on where they are in the following continuum. (diagram

below)

1) Unknown mass market customers

2) Known customers

3) Loyal/frequent customers

“Loyal/frequent customers,” who we have enough information on to treat as individuals, should be analyzed and treated

as individuals. “Known” customers, who we know but not well enough to treat as individuals, should not be treated like

the mass market. “Mass market” customers should be analyzed using statistics since there is not any individual

information to even apply segmentation to them.

DATA LAYER

INDIVIDUAL

CUSTOME

PROFILES

CUSTOMER

CONTACT

POINTS

Most of this data exists today

except Lifecycles

Individual customer profiles

aggregate & analyze all

individual customer data & act

as gatekeepers for accessing

individual customers

All interactions with each

customer is directed /

approved by each individual

customer profile

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The slide image below is substantially updated and shown in more detail in the video of the narrated Cognitive Customer

Centric Interactions PowerPoint presentation on You Tube https://www.youtube.com/watch?v=ZGtBO4f-7pk

CAROIS assures all customer interactions optimize lifetime value and profitability. CAROIS integrates all customer analytics

to create a dynamic 360 degree “individual lifetime customer profiles” (ILCP) for each customer using new lifestyle

methodologies. ICLP allow CAROIS to understand, track, predict and act upon detailed individual customer behavior

patterns. Implementing CAROIS is not a big bang theory. Smart companies will want to understand each customer at a

level of detail that allows them to systematically understand, predict, interact with and optimize each individual customer

over their lifetime, not just their next purchase.

Some of the key new capabilities in CAROIS include: (shown in diagrams at the end of this section – more details in the

next “details” section of this paper))

1. Tracking & predicting actions/interactions by a customer

At the level of each behavior trait and action by assimilating all customer data into a dynamic 360 degree

individual customer profiles

2. Dynamic customer centric marketing (based on projections of each customer’s future lifetime behavior patterns

and the lifetime or strategic value of each customer)

Strategic, tactical, proactive, reactive, trigger based, loyalty & nurturing

3. Dynamic customer centric strategic pricing (based on lifetime or strategic value of customer)

4. Large third party distribution costs savings from using customer centric pricing to incent customers to buy direct

from the company (see explanation in “details” section)

5. Identifying and understanding market changes much earlier and understanding their causes by seeing these

changes occur and grow at the individual customer behavior trait levels

https://www.youtube.com/watch?v=ZGtBO4f-7pk

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6. Customer Analytics and loyalty are moved to a very advanced next level using proprietary IBM computer

technologies and new methodologies.

There are narrated Power Points that discuss the new 1-to-1 tracking, 1-to-1 dynamic marketing and pricing, strategic

pricing and 1-to1 nurturing/loyalty approaches that are enabled with CAROSM. Go to

http://www.authorstream.com/channels/stevepinchuk/Customer-Centric/ . When you go to the Power Points, start

with the 15 minute “summary” PowerPoint. The Power Points can be viewed in full screen mode.

Instead of a company having to buy and integrate numerous separate products, that analyze customers’ different

behaviors and actions, CARO will integrate customer, social, market and data analytics resources to create a new 360

degree behavioral customer profile that CARO’s new behavioral analytics approaches, leverages an then drives.

Unlike other customer analytics methodologies, lifecycles do not just look at individual transactional data points or

“snapshots in time” for many customers (segments). Lifecycles look at the whole linear time based behavior pattern for

each behavior trait for each customer – all the data points in all behaviors instead of just one time frame for a few

transactional data points. CARO see high definition 360 degree high speed video while today’s approaches, in comparison,

are like black and white photographs.

These customer behavior “lifecycles” can be used to track customer’s behavior against expectations; to set off trigger

based marketing, customer centric pricing, and other automated and manual interactions. Today, customer analysis

focuses on discrete points of data in one time, in a customer’s behavior, and not on the whole of each linear behavior

pattern(s). The Lifecycles methodology enables CARO. CARO‘s goal, partially described above, is to create an analytically

driven company wide integrated analytics, tracking and predictive system that assures everyone in the company shares

the same 360 degree customer profile for each customer and all actions optimize each customer’s lifetime profitability.

The understanding and goals for each customer should be determined by a new central CRO area of the company using

Lifecycles analytics and CARO processes

http://www.authorstream.com/channels/stevepinchuk/Customer-Centric/

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DETAILS –

More information about the concepts that were described in the Introduction and Summary

We need to optimize our relationships with our customers. These customer centric goals cannot be accomplished by just

applying a new or better technology to our current approaches. Our approach to customers, what we seek to optimize in

our relationships with our customers and the concepts for how we interact with and optimize customer relationships need

to change. The supporting methodologies/technologies used to analyze and determine the best way to do these things

also need to change. We need to figuratively and literally place the optimization of each customer’s lifetime relationship

and profitability with the company at the center of our organizations, and at the center of all our interactions with our

customers. Tactical segmentation and targeting of individual customers is damaging our lifetime relationships and

profitability with our known customers.

We need a new approach to our customers that focuses on optimizing their lifetime relationships and profitability. We

cannot take the existing structure and just implement new technologies to accomplish these changes. We cannot continue

to treat our most valuable resource, our customers, as targets for tactical promotions from different areas of our company.

We cannot continue to allow different areas in the company to interpret customer data their own different ways,

sometimes even using their own silo customer data. This has led to the customer experiencing inconsistent messages from

the different parts of the company. They are confused about how the company sees their value as a lifetime partner with

the company. Everyone in the company needs to have the same view of the lifetime value of the customer and how each

individual customer should be treated. The company needs to guard the customer as a corporate asset and protect them

from inappropriate interactions.

CARO is based on a new approach to applying behavioral Economics. This new approach focuses on understanding the

past and predicting the future behavior of each customer by understanding all their many detailed nano level behavioral

traits, attributes and actions. Today, customer analytics only uses a fraction of the information that is available for each

customer. A new methodology for predicting customer lifecycles enables a new and much deeper and richer analytically

derived understanding of each customer’s past actions, and predictions of their future actions for many detailed

behavioral traits and other attributes. The CARO concept uses these new lifecycles analytically derived quantifiable

insights.

We need a new supporting integrated company-wide system to support this new approach. The new customer centric

system must develop much better predictive customer analytics, optimization of individual customer lifetime profitability

strategies and approvals and directions for all the company’s interactions with each individual customer. This new

approach must assure all interactions with customers are based on optimizing the lifetime value and behavior of that

customer. As obvious as this sounds, there are many things that are not being done today to fulfill this concept.

Customer Activated Relationship Optimization Integrated System (CAROIS) is an advanced integrated predictive

analytics system. It is designed from the inside out to integrate and coordinate all the customer interactions across a

company. CARO is based on new individual customer profiles that rely upon and integrate many new sources of customer

analytics data. CARO is not an aggregation of existing silo systems. CARO‘s goal is to optimize the lifetime profitability of

each customer while nurturing them into becoming loyal repeat affinity customers. CARO is too big and complex to be

implemented as a big bang theory. It must be implemented in smaller phases, where each phase is built individually, one

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at a time. Each phase must be built so that later they can all be integrated into the larger CARO integrated system. Each

phase must add value on its own.

CAROIS can be used by any organization which gathers customer information, and wants to optimize their

understanding of and interactions with all their customers. CAROIS integrates many new customer analytics

technologies, and types of customer data, into one seamless advanced customer analytics/interactions system that uses

a new analytically driven customer centric lifetime approach profile for each customer’s optimization. The new CARO

system enables customer centric dynamic pricing (tactical, strategic and lifetime), marketing (1-to-1, trigger based,

tactical, strategic), loyalty (acquisition, retention and affinity) and all other customer interactions to become live, dynamic,

customer centric, and 1-to-1 based on advanced new predictive 360 degree individual customer profiles.

CAROIS divides customers into three broad customer data categories which are created to reflect how much data we

have on each customer. Every customer is continually reviewed and placed in one of these three categories, which

equates to how much information we have on the customer, and therefore how much 1-to-1 interaction we can have with

that customer.

Each customer is placed in one of these categories based on the data that we have for them. This is because the amount

of data that we have on each customer will determine how we can interact with them. If there is not enough data to

predict their individual movement, or we don’t even have their contact information, then we can not treat them as an

individual. If we have enough data to know and predict their individual behavior patterns, then we should not have them

in segmented interactions or worse yet, mass market interactions.

The way that each customer is valued and therefore interacted with is based on where they are in the following

continuum. The market is a continuum with unknown mass market customers on one end and frequent/loyal customers

on the other end. In the middle are known customers who we do not have enough data to treat as individuals. Each

customer falls somewhere along this continuum, these are not hard buckets with set walls where everyone in a

classification has the same data as everyone else in that classification. Some known customers have enough individual

data to almost be treated all the time as an individual, however, some areas may still require segmentation as an approach.

People move across the continuum and the company’s goal is to migrate everyone from mass to frequent/loyal customers.

The broad customer data categories are –

4) Unknown mass market customers

5) Known customers

6) Loyal/frequent customers

Each customer is placed in one of these categories based on the data that we have for them. Customers are no longer

tactical targets, they are strategic partners, and the company and all its actions are changed to deliver and nurture this

new concept. How we interact with and analyze a customer depends on the category they are in, which tells us how much

data we have for them, how well we can predict their individual behavior, and how well we interact with them at a 1-t-1

level.

“Loyal/frequent customers” – who we have individual contact information on plus enough individual data to predict as

individual customer should be analyzed and treated as individuals. These customers should be analyzed and interacted

with using lifecycles and 1-to1 interactions.

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“Known” customers who we do not have enough information about to treat as loyal 1-to-1 clients, but who we do have

some information on and know how to contact, should not be treated like the mass market. Existing products like Next

Best Action are perfect for these “known” but not “loyal” customers. Next Best Action uses a new way to create micro-

segments for these known, but not as of yet loyal customers, using behavioral attributes. Together, NBA and CARO can

cover all the known and loyal/frequent customers.

“Mass market” customers should be analyzed using statistics since there is not any individual information to even apply

segmentation to them. There are also existing solutions using new techniques to understand mass market customers,

where the company will not have any individual customer information. However, the goal for them is still CARO - to make

each customer more loyal so we have more data for them and we can eventually use CARO behavioral models.

CAROIS assures all customer interactions optimize lifetime value and profitability. In the CAROIS all the decisions the

company makes about interacting with the customer will be made based on the customer’s predicted lifetime profile,

their lifetime value, and what actions are needed to nurture and optimize that lifetime relationship. Many of these new

technologies have already been built into operating solutions, and some are new ways to combine existing technical

capabilities.

CAROIS integrates all customer analytics to create a dynamic 360 degree “individual lifetime customer profiles” (ILCP)

for each customer. The new ILCP combines all available customer information - transactional, behavioral, web analytics,

social media, economic and market data and all customer actions/interactions. CAROIS uses a new “lifecycle”

methodology to apply new behavioral economics and analytical capabilities for understanding individual customer’s past

and future actions. This allows CAROIS to understand past behavior and use that to predict future behavior. These ILCP’s

are created, maintained and kept updated by the CAROIS. ILCP are key pieces of information in CAROIS.

ICLP allow CAROIS to understand, tracks, predicts and acts upon detailed individual customer behavior patterns using

new lifestyle methodologies. The complexity of learning and correlating these numerous individual and market behavior

patterns, at the individual behavior trait level for each customer, would greatly benefit from using IBM’s advanced

computers. These computers process data differently than normal computers. They can “learn” instead of just finding key

words like most computers. IBM can build this new approach to customer analytics and 1-to-1 customer interactions and

lifetime optimization. IBM already has several existing

The company uses the ILCP to determine what actions are needed to nurture the customer and optimize their lifetime

profitability. All company actions from all functions in the company must optimize the lifetime value of the customer as

determined from the ILCP. This assures that all functions in the company have the same view of the value of each

customer, and that all their actions will optimize that lifetime value. The customer will stop receiving interactions from

the company that do not serve this purpose and often makes the customer feel the company does not know them or value

them as an individual. The company, with the help of CAROIS, will be responsible for determining the best ways to interact

with each customer, based on their ILCP, in order to optimize their lifetime relationship and value with the company.

These decisions can be stored in the CAROIS for it to use when analyzing each customer’s actions and determining what

reactions are optimal.

Implementing CAROIS is not a big bang theory. This is a journey. The CARO system changes companies’ philosophies and

their approach about how to think about, treat, value and interact with customers. CAROIS can be implemented in stages

so there is payback in each stage. Different companies will have different levels in their existing systems, and customer

philosophies, that will need to be analyzed and built into the CAROIS implementation.

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Smart companies want to understand each customer at a level of detail that allows them to systematically understand,

predict, interact with and optimize each individual customer over their lifetime, not just their next purchase. They need

a system that will create advanced and predictive customer lifetime profiles, while also having a way to systematically

implement and interact with each of their customers, based on each customer’s lifetime profile. Results from CARO, like

the future behavior and lifetime value of each customer, can be used by pricing, marketing and other functions that

interact with customers, to fully understand and optimize the lifetime profitability of each individual customer through 1-

to-1 interactions. This allows the company to interact with customers strategically to optimize each customer’s individual

lifetime profitability, instead of the existing tactical approach. Once the new lifetime customer profiles are created, the

company can act accordingly, perhaps with customer centric strategic pricing, 1-to-1 marketing or other 1-to-1

interactions that nurture that customer’s lifetime profitability based on where the customer is in their lifecycle now.

Some of the key new capabilities in CAROIS include:

1. CAROIS allows tracking of all actual actions/interactions by a customer, at the level of each behavior trait and

action by assimilating all customer data into a dynamic 360 degree individual customer profiles, against their

predicted actions in the ILCP, and initiates automated actions like trigger marketing, recovery offers, recognition

of loyalty and desired actions, alerts, exception reports, etc.

This level of detailed 1-to-1 interactions cannot be accomplished manually and must have a system

performing most of the tracking, analytics and suggesting appropriate actions. The system must integrate

the ILCP and the associated actions/reactions for that customer into the same integrated system. This

must be seamless and have one user interface. Silo capabilities would be too difficult to coordinate at the

volume of transactions that will be required in a true customer centric company. The ILCP is created from

numerous individual behavior traits whose lifetime behavior and value is forecasted by CAROIS using new

patent pending methodologies based on both existing and new data sources. These lifetime behavior

forecasts are called “lifecyles” and can be used to compare actual behaviors against predicted behaviors,

one trait at a time. CAROIS tracks behavior against these lifecycles and initiates approved automated

responses.

2. CAROIS enables dynamic customer centric marketing including strategic, tactical, proactive, reactive, trigger

based, loyalty & nurturing

xxx

3. CAROIS enables dynamic customer centric strategic pricing.

Pricing can be based on optimizing the lifetime value of the customer instead or their tactical value, or

the company can select the best combination of both approaches. Optimal long term company profits are

derived by optimizing the lifetime value of your best customers, not using them as tactical targets with

pricing that is not different from unknown customers. Most casinos today (100+) use a bid price revenue

management system that can take the lifetime value of a customer and input it into the dynamic pricing

for that customer. This revenue management/dynamic pricing technology exists now, and has been used

for many years for many companies, and is not that difficult. Dynamic customer centric strategic pricing

can be easily accomplished and implemented and is not a dream or unknown capability.

4. CAROIS opens a new way to save large third party distribution costs.

By creating true customer centric prices based on extensive analytics of internal customer information,

there is a new reason for known customers to buy directly from the company, and not through

distributors. Like casino pricing for repeat guests, which does not have to be in parity with retail mass

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market prices sold by distributors, companies can give customers preferred prices if the customer’s ILCP

determines this is in the company’s best interest for optimizing each customer’s lifetime profitability. Only

the companies have the ILCP from the CAROISSM, and distributors, therefore, cannot determine what

customers should get strategic prices and what those prices should be. To get these customer centric

prices the customer must buy direct from the supplier, or company. The cost savings from creating

dynamic prices, that lead the customer to buy directly from the company, and therefore the company not

paying commissions, can be significant and far exceed the costs of CAROISSM.

5. If behavior is tracked at an individual customer behavior level market changes will be seen much earlier and their

causes will be better understood.

Today, market trends and changes are seen when the “average” behavior or results for a large number of

customers changes. It takes many individual changes to change an average of many people. This means

that if using CAROIS we could spot changes at the individual level, and see other individuals making similar

changes, we can understand market changes much faster. We can also look at the individual changes and

see what behaviors led to those changes in each individual. When we spot a trend using CAROIS, then we

will have an idea of what is causing these changes before existing “averages” even know there is a change.

6. Combining the new CAROIS approach, concept, methodologies and creating ICLP’s can be moved to a very

advanced next level using proprietary IBM computer technology.

This new advanced computer technology is a combination of new hardware and software design to create

a new type of computer that can be fed information and learn the patterns in that information. They do

not just find indexed key words like other computers. This was demonstrated on Jeopardy where this type

of computer beat all the competitors. It held over 8 terabytes of information in its live memory, or RAM,

and could search that information and find hundreds of patterns, perform analytics on the patterns and

determine the probability that its answer was correct in under 3 seconds.

Instead of a company having to buy and integrate numerous separate products, that analyze customers’ different

behaviors and actions, CARO will integrate selected IBM’s customer, social, market and data analytics resources to add

further value to the 360 degree behavioral customer profile that CARO’s new behavioral analytics approach creates. All

these customer analytics resources can be combined into one CAROIS to produce the best possible predictive and detailed

individual customer profiles. Companies need a system that integrates the data, analytics and user interfaces from many

different solutions to form one integrated system that can analyze and optimize any customer and their lifetime journey

as a customer. It is also important that this is one integrated system so the movement of customers between customer

categories can be monitored and used in the system’s customer lifetime analytics. Using “silo” tools will not allow a full

understanding of customers and their movements.

Unlike other customer analytics methodologies, lifecycles do not just look at individual transactional data points or

“snapshots in time” for many customers (segments). Lifecycles looks at the whole linear time based behavior pattern

for each behavior trait for each customer – all the data points in all behaviors instead of just one time frame for a few

transactional data points. Lifecycles understands the time factor(s) in how behavior develops. Lifecycles understands how

the many separate behavior patterns within each customer influence each other. Lifecycles analyzes and understands

how the behavior patterns from one customer are similar or different to the same behavior patterns from all other

customers. Lifecycles is much deeper and broader than current practices that just look at a few individual transactional

data points. This new Lifecycles methodology creates the systematic analytics that enables true 1-to-1 customer

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interactions and the ability to predict the lifetime behavior and value of each customer in aggregate and also for all

individual traits and attributes.

Today, customer analysis focuses on discrete points of data in one time, in a customer’s behavior, and not on the whole

of each linear behavior pattern(s). Lifecycles does not just seek to understand a customer’s probable reaction to the next,

or one interaction with the company. Lifecycles creates long term and lifetime behavior patterns for each of the behaviors

or descriptive attributes in each customer. The linear natures of these patterns, and the interaction of all the behavior

patterns for one individual, are used to understand, track, predict and act upon the behavior of each customer. Patterns

of similar customers are used to understand the probable future behavior of one customer.

These customer behavior “lifecycles” can be used to track customer’s behavior against expectations; to set off trigger

based marketing, and other automated and manual interactions. The company can also learn what actions work at

certain points in a lifecycle, to maintain that lifecycle, or move the customer to a better lifecycle.

The Lifecycles methodology enables CARO. CARO‘s goal, partially described above, is to create an analytically driven

companywide integrated analytics, tracking and predictive system that assures everyone in the company shares the

same 360 degree customer profile for each customer. That 360 degree profile uses all available sources of data and many

analytical models, including behavioral, social media, web and transactional data, to track and predict future behavior for

each customer. This 360 degree customer profile allows the company to understand, nurture and set goals for each

customer that can be stored in each customer’s profile and used to direct future actions. CARO assures that all the actions

across the company nurture and optimize this shared companywide customer profile and the concept of what the optimal

lifetime profitability and behavior is for each individual customer. I have called this Customer Relationship Optimization

(CRO). It is not a CRM mailing list.

The understanding and goals for each customer are determined by a new central CRO area of the company using

Lifecycles analytics and CARO processes. All areas of the company use the new profiles, and all their actions must conform

to the company wide concept for that individual customer’s lifecycle(s) for each behavior. CARO believes that in the long

term, optimizing the lifetime value of each customer is more important than their tactical value for filling a near term slow

demand period for one department. Customers have been tactical targets and not strategic partners.

Please let me know what you think. This will need to be calibrated and adapted to each industry and to each company.

However, this model is very adaptable and very unique and most of its knowledge comes from the data that it is fed.

customer relationship optimization

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