Application of data mining techniques in customer relationship management-literature review

Despite the importance of data mining techniques to customer relationship management (CRM), there is a lack of a comprehensive literature review and a classification scheme for it. This is the first identifiable academic literature review of the application of data mining techniques to CRM. It provides an academic database of literature between the period of 2000–2006 covering 24 journals and proposes a classification scheme to classify the articles. Nine hundred articles were identified and reviewed for their direct relevance to applying data mining techniques to CRM. Eighty-seven articles were subsequently selected, reviewed and classified. Each of the 87 selected papers was categorized on four CRM dimensions (Customer Identification, Customer Attraction, Customer Retention and Customer Development) and seven data mining functions (Association, Classification, Clustering, Forecasting, Regression, Sequence Discovery and Visualization). Papers were further classified into nine sub-categories of CRM elements under different data mining techniques based on the major focus of each paper. The review and classification process was independently verified. Findings of this paper indicate that the research area of customer retention received most research attention. Of these, most are related to one-to-one marketing and loyalty programs respectively. On the other hand, classification and association models are the two commonly used models for data mining in CRM. Our analysis provides a roadmap to guide future research and facilitate knowledge accumulation and creation concerning the application of data mining techniques in CRM

Customer relationship management (CRM) comprises a set of processes and enabling systems supporting a business strategy to build long term, profitable relationships with specific customers (Ling & Yen, 2001). Customer data and information technology (IT) tools form the foundation upon which any successful CRM strategy is built. In addition, the rapid growth of the Internet and its associated technologies has greatly increased the opportunities for marketing and has transformed the way relationships between companies and their customers are managed (Ngai, 2005). Although CRM has become widely recognized as an important business approach, there is no universally accepted definition of CRM (Ling & Yen, 2001; Ngai, 2005). Swift (2001, p. 12) defined CRM as an ‘‘enterprise approach to understanding and influencing customer behaviour through meaningful communications in order to improve customer acquisition, customer retention, customer loyalty, and customer profitability”. Kincaid (2003, p. 41) viewed CRM as ‘‘the strategic use of information, processes, technology, and people to manage the customer’s relationship with your company (Marketing, Sales, Services, and Support) across the whole customer life cycle”. Parvatiyar and Sheth (2001, p. 5) defined CRM as ‘‘a comprehensive strategy and process of acquiring, retaining, and partnering with selective customers to create superior value for the company and the customer. It involves the integration of marketing, sales, customer service, and the supply chain functions of the organization to achieve greater efficiencies and effectiveness in delivering customer value”. These definitions emphasize the importance of viewing CRM as a comprehensive process of acquiring and retaining customers, with the help of business intelligence, to maximize the customer value to the organization.

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