With warranty costs ranging in the billions and indirect costs — such as government scrutiny and customer dissatisfaction — on the rise, manufacturers must have an effective warranty management and analysis system.

Beyond automating legacy and paper processes, warranty management should be about accelerating cycles for engineering design and redesign, improving customer response, recovering costs, improving channel relationships and building a service business with much higher margins than traditional business.

In short, the customer expects the warranty program, but the manufacturer needs it.

Warranty service can and should be about more than fixing product field failures. Warranty service presents opportunities to proactively identify issues and opportunities, differentiate yourself with exceptional customer service, build customer loyalty and in the process enhance brand reputation and lifetime value from each customer relationship.

In order to produce these results, you must make sense of the abundance of data that is collected from warranty claims. Aside from costly field studies, warranty claims data provides the most practical representation of how a product operates in the customer’s hands.

The data analysis, reporting and communication capabilities of this solution satisfy the requirements of all users — from executives who want to see key performance metrics at the company level or across business units, to business users who can exploit all that analytical power to turn warranty data into useful knowledge without having to be a statistician, to the power users who will fine tune and invoke advanced analysis tools.

Read on for a discussion of ten business realities constraining today’s warranty management programs — and what progressive companies should be doing about them.

At the end of the day, warranty issues not only affect a company’s bottom line; they also affect customer satisfaction and the overall impression a company makes on the public, in terms of the safety and reliability of its products.

Leading post-sales service organizations are not only seeking ways to move faster, they’re moving away from a break/fix mentality and toward a focus on adding value.

Increased Response Rate Equals Cost Savings..........................................................4

Cost Savings and Increased Revenue .........................................................................5

Customer-Focused Goals and Strategies ....................................................................5

Maintenance .................................................................................................................6

Retention ......................................................................................................................6

Delivery Timing and Media ...........................................................................................7

Controlling Marketing Processes Through Marketing Automation ...............................8

Data Management ........................................................................................................9

Analytic Management ...................................................................................................9

Campaign Management .............................................................................................10

Cost Management ......................................................................................................10

Reducing Business Planning Risk..............................................................................11

Results Example: Telemarketing...............................................................................11

Extended Results........................................................................................................12

Analytical Models........................................................................................................13

Campaign Management .............................................................................................13

Productivity .................................................................................................................14

Reduced Business Risk..............................................................................................15

Worksheet...................................................................................................................16

Modeling Impact......................................................................................................16

Campaign Management..........................................................................................16

Productivity..............................................................................................................17

Reduced Risk..........................................................................................................17

Total Impact ............................................................................................................17

There has been a significant shift in business focus, from product sales and profits to customer profitability and customer retention. As a result of this shift, there has been a corresponding shift in how businesses measure profits and the investments which support or even drive these profits.

A standard profit and loss statement shows revenue, expense and profits. In this type of model, marketing communication costs are an expense. Measuring the expense of marketing communication in the context of customers, promotions and results provides a model for treating the expense as an investment. Specifically, linking revenue and gross profits to the investment provides a clear picture as to the return, providing ample justification for and an opportunity to improve the return.

Within this framework an organization can effectively focus efforts on reducing marketing communications costs and improving revenues. Positive results in these areas in turn improves the return on investment (ROI) and the profitability of the business.

This model also suggests specific strategies and tactics to be pursued which will reduce the cost of marketing and improve revenue. While there are also significant business challenges in pursuing such goals, particularly in relation to infrastructure, there are proven methods which successfully meet these challenges — methods whose results can have a dramatic impact.

This paper focuses on the opportunity represented by marketing and specifically marketing communications, in improving customer profitability and retention.

While all of the tactics discussed above represent excellent opportunities for improving the customer experience as well as company profits and profitability, the increase in complexity and demands on resources within the company are significant. The table on the previous page identifies four categories and at least five possible variations of communication in each category.

Foremost in emphasis is rapid access to customer-specific information, in sufficient detail to provide an understanding of how customers are relating with the company. Beyond simple consistency of information between channels, required information includes channels they use, what products they purchase through which channel, to what promotions are people responding or not responding. This information provides a basis for segmentation as well as personalization.

In addition to access to information, it must be recognized that increasing profitability in campaigning is of little benefit if it can only be achieved through increasing costs in personnel, hence the need to focus on improving productivity, particularly the productivity of the most knowledgeable marketers and database marketers.

Increasing the volume of communication also increases the risk of inconsistent or redundant communications. Sophisticated functionality must be provided to identify conflicting communications and assign a priority or a limitation on the total volume over time. With more communication taking place over multiple channels, it is more difficult to optimize the volume or frequency and the sequence.

Lastly, the increase in volume of communication poses a risk for increasing complexity in marketing, database development, information technology (IT) and operations. With the new tools available for analysis of campaign activity, some of which can help identify most and least profitable opportunities, there is the corresponding requirement to measure performance at the individual communication level which introduces a new level of complexity for the infrastructure.

This paper demonstrates that the comparatively recent shift in business focus, from product focus to customer focus, represents a significant opportunity for businesses to improve profits and profitability. To capitalize on this opportunity requires adopting a financial model which relates customer profits to the marketing investment. Adopting such a model and performance metrics empowers the business to identify and further exploit positive promotional opportunities.

In so doing, a dramatic increase in communication complexity will arise, a complexity which will require improvements in the data management as well as the analytic and campaign management infrastructures. Improving the infrastructure by adopting efficient marketing automation strategies creates an opportunity for improving customer knowledge, managing more frequent and more complex campaigns, and significantly increasing productivity.

The boost in sophisticated functionality and productivity will translate directly to an increased frequency of campaigns, campaigns which are more customer focused and which increase the likelihood of higher response, profits and profitability. The resulting improved information will further enhance business planning, improving the likelihood of achieving plan goals and resulting in a corresponding reduction in business risk.

These factors make investment in CRM-enabling capabilities a distinct business opportunity.

How can you consistently beat your profitability goals — and your competitors? On the surface, it’s not that complicated. Just understand your customers better and faster than anyone else, anduse that knowledge to target them more effectively than anyone else.

If only it were that simple. Unfortunately, while information about customers is plentiful, actionable customer intelligence often remains elusive. Customer data pours in from every conceivable channel. Assembling a coherent picture of customers from all those puzzle pieces — a picture on which you can confidently build a profitable marketing strategy — can be a formidable challenge.

To tackle this challenge, many companies are turning to marketing automation for improved efficiency and effectiveness of marketing activities. These companies often find, however, that this technology isn’t sophisticated enough to operate at the speed of business today.

To provide a comprehensive solution for current marketing challenges, marketing automation solutions must offer three key functions:

The most advanced generation of marketing automation technology seamlessly combines these functions to produce a centralized, fully integrated environment for total marketing performance. Marketers can leverage the breadth of this functionality to maximize campaign returns through the essential phases of a disciplined marketing process: plan, target, act and learn.

Estimating the ROI on purchasing equipment is near science. In contrast, determining the ROI on marketing programs may be considered by some more of an art than science. Thus, a large part of the marketing budget is typically based on faith that it will somehow grow the business. There is a very old rumored quote from a company president stating, “I am certain that half the money I am spending in advertising is wasted. The trouble is, I do not know which half.”

This expresses a concern—and it applies to the many marketing programs in addition to general advertising. Marketing spends money in certain areas, and the company hopes for return. Was that brochure we just mailed a waste or did it actually influence someone to purchase? Senior management has had the unquestioned view that marketing and advertising are things you must spend money on—but how much money? How much is too much? Where is the highest payback area to focus on and which areas should be avoided?

Companies are extremely vigilant about all spending. They often exercise draconian actions, such as layoffs, to right-size their cost structures. The budget expenditures for marketing should be subject to the same intense examination by the COO and CFO as any other spending program. The ROI on marketing, and each marketing program or campaign, must be better projected—not with fuzzy math but by using modern analytical techniques, fact-based logic and financial data. After all, in the absence of facts, anyone’s opinion is a good one. (And the biggest opinion usually wins!) Many marketing functions rely on imperfect metrics, anecdotes and history that may have resulted from unusual occurrences unlikely to be repeated.

I am not arguing to slash all marketing budgets by exposing them as a waste. In fact, I mean just the opposite. My belief is that the marketing spend is critical—but it should be treated as a preciously scarce resource to be aimed at generating the highest, long-term profits. This means there is the need to answer questions such as: “Which type of customer is attractive to newly acquire, retain or win back? And which types are not? How much should we spend attracting, retaining or recovering them?” Some firms have already enacted programs in these areas to begin trying to answer these questions. More must.

One way to think about measuring a company’s promise for long-term economic growth is to measure its customers.

For most companies, marketing is an expensive investment with gradually diminishing results. As customer communications have continued to grow more frequent and more diverse, the need to show the best possible return from campaigns has become more pronounced. Many companies now routinely launch thousands of campaigns to millions of customers through a wide variety of channels. Customers, in turn, have become more demanding and less tolerant of irrelevant or repetitive communications.

While the need to communicate more effectively with customers continues to grow, marketing budgets and other resources often have not. Marketing departments face growing pressure to show a clear contribution to organizational performance and growth. Yet there’s a limit to how many offers can be sent — and how many customers are willing to receive. Each contact must hit the right target at the right time, with the right message — and deliver the best possible result.

However, many marketers lack an effective method for determining which customers should receive which communications. Simple rank ordering based on expected customer value does not take budget and channel constraints into consideration. As a result, financial returns on database marketing continue to fall short of expectations. For this reason, companies need a more effective way of optimizing offer distribution to achieve the best results.

SAS Marketing Optimization is the only solution that combines true mathematical optimization, user-defined constraint modeling and integration with the leading solution for predictive analytics and marketing automation.

Its easy-to-use, Web-based interface is designed for business users (marketing analysts or quantitative modelers) and marketing executives who want to create optimal campaigns and contact policies. No expertise in advanced mathematics is required — only knowledge of the company’s marketing strategies and campaign economics.

Using SAS Marketing Optimization, marketers can develop multiple optimization scenarios and view predefined reports and graphics to understand the economic impact of different contact policies and channel and offer constraints before campaigns are executed. With analytic insight into the value of business constraints, such as channel capacity, you also gain a quantifiable business case to present to the financial team when making budget requests.

SAS Marketing Optimization is tightly integrated into the SAS Intelligence Architecture and other SAS solutions for customer intelligence and enterprise performance management. The solution can be deployed as a stand-alone application working with third-party campaign management systems and customer databases. However, SAS is unique in offering marketing optimization as an integrated part of an end-to-end solution for designing and executing marketing campaigns.

For direct marketing organizations that have already achieved maturity in campaign management processes, SAS Marketing Optimization offers a way to step up to the next level in effectiveness and profitability.

The year 2000, then what? Many companies aren’t thinking past the new millennium. But smart organizations are considering initiatives and strategies to increase profits and revenues. Many have invested heavily in enterprise resource planning (ERP) and supply chain (SC) systems to automate the back office and cut costs through more efficient and streamlined financial, inventory management, and order-entry systems. Cutting costs alone is a tried-and-true route to return on investment. But why not increase revenue while also reducing costs? While many of these ERP and SC systems improve external processes, such as distribution, these initiatives remain largely internally focused. Yet addressing external issues and pressures have the greatest impact on corporate profitability.That is why so many smart businesses have turned their attention to customer relationship management (CRM) strategies.

CRM recognizes that customers are at the core of the business, and the company’s success depends on effectively managing relationships with them. To correctly manage those relationships, the company must first know who its customers are, not just as groups or segments of customers, but each individual customer. Is this customer a good customer? Is he or she profitable? Why does he or she do business with me? What does this person like about my business? Does this person also do business with my competitor?

Data warehousing technology makes one-to-one interactions with customers possible because they sit at the core to consolidate information and turn data about customers into customer intelligence. Smart organizations know that they have to think beyond automating processes and figure out how to better understand their customer base to increase revenues and profits. Information technology plays a crucial role in ensuring that the data and metadata associated with these various systems is kept clean, accurate, and valid.

There is an increasing realization that a metadata strategy is central to an organization’s future. The demand for readily accessible and reliable information to support strategic and tactical decision making has grown steadily in recent years.

As a result, organizations have dedicated substantial resources (in some cases massive resources) to building data warehouses and data marts.

A high level of customer knowledge is crucial to organizations today because of competition in shrinking markets. Deregulation, diversification, and globalization have stimulated a dramatic rise in competitiveness, making it more imperative than ever to better manage customer relationships at every point of contact, and to acquire and build loyalty among those customers deemed most profitable. This has focused intense scrutiny on front-office applications, where the company interacts most often with the customer directly or indirectly via such outlets as branch offices, kiosks, call centers, sales representatives, marketing, the Web, email, and order entry. Customers are defined in many different ways. For example, the customer can be the direct consumer or an organization, such as a business partner, distributor, or shareholder. The point is, today’s customers have many choices, and it is up to the company to make sure profitable customers remain loyal and new prospects grow in loyalty and profitability............

Until very recently, a surefire way to provoke an embarrassed silence at any meeting between business and information technology (IT) people was to mention the word metadata. Even if they knew what you were talking about, business peoples’ eyes would glaze over. IT people might think, “Someone ought to do something about metadata, but please, not me!”

Organizing all customer data into an integrated warehouse environment is one of the biggest challenges faced by information technicians. However, an equally important challenge is to create an integrated environment for telling everyone what data is available and how it can be exploited. Without data about data (metadata) the organization will, at best, fail to get the full return on its investment in data warehousing. At worst, there is the risk that as the amount of data in the data warehousing infrastructure rises exponentially, business users will despair at the time it takes to find useful information. Other trends are also contributing to the need for a tighter inventory of information resources. For example:

• Changes in the business environment create constantly evolving business definitions.

• Data marts are proliferating, often without central planning.

• Business units and teams create their own terms for similar data elements.

• Trans- and multinational ventures create language difficulties.

• Increasing staff turnover means a constant outflow of undocumented business knowledge.

• Valuable but unstructured external information (such as Web-based) is adding to data volumes.

Customer-centric analytic applications are one of the most important elements of the analysis side of CRM. These applications help you understand your customer relationships. They give you the ammunition you need to take actions (on the operational side of CRM) that strengthen customer relationships, improve loyalty and satisfaction, and increase profitability.

SAS Marketing Optimization is a customer centric analytic application designed to improve the effectiveness of your cross-channel marketing campaigns, strengthening your customer relationships and helping your business. Built on SAS Operations Research, SAS’s proven, general-purpose mathematical programming tool set, SAS Marketing Optimization uses optimization technology to help you identify, from among all of your campaigns, the offer and the channel best suited to each of your customers, subject to the limits of your marketing resources.

If you market to a large number of consumer customers, if you deliver a large number of campaigns (each with many offers), if your campaigns cross a broad range of channels (direct mail, Web, telephone, or email), and if you have limited marketing resources (don’t we all?), then SAS Marketing Optimization might be the kind of tool you need to achieve the objectives of your marketing initiatives. You can use SAS Marketing Optimization with any campaign management product, but you’ll find it easiest to use with SAS Marketing Automation.

SAS Shakes Up Marketing Automation

March 5, 2004   (4 pages)

Last October, we conducted a hands-on evaluation of consumer marketing platforms that revealed several important weaknesses in version 3.2 of SAS Marketing Automation.1 At that time, SAS planned to release the next version of the product in late Q2. Since then, it has decided to accelerate the rollout of Marketing Automation 4 to the end of March 2004. The new product:

· Leverages a single enterprise infrastructure. Earlier versions of SAS Marketing Automation were built on the Visual Basic code base that SAS acquired from Intrinsic in 2001. Version 4 finnally retires this legacy, instead featuring an entirely new architecture based on the SAS 9 platform.2 As a result, the new product inherits enterprise-class strength in user administration and security, enhanced data integration capabilities, and all of the scalability improvements that were delivered with SAS 9.

· Seamlessly integrates with SAS analytics. Ironically, the old SAS marketing product provided minimal integration with the vendor’s core analytics modules like Enterprise Miner. The new release changes this, bringing deep integration with the SAS analytical tools — the same tools that are already a standard in many direct-to-consumer marketing environments today. The SAS 9 architecture also provides the new product with a common metadata layer and component logic so routines developed elsewhere are accessible and reusable in the marketing environment.