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Using EDM to reduce and control business costs


First post in my series of posts on using EDM to thrive in a recession. Let’s start with the easy stuff – companies always look to reduce and control business costs in a recession so how can EDM help you do this?

  • One of the costs many businesses carry, almost without thinking, is a certain level of fraud. EDM, with its combination of rules and analytics, is particularly effective at reducing fraud without requiring additional staff. Whether it is used to automate fraud detection and denial or to prioritize the work of agents, EDM has proven itself again and again in credit card fraud, for instance. Implementing a simple decision service (wiki) to identify a transaction as potentially fraudulent and gradually making it more and more sophisticated with rules from expertise, regulations or data mining and ultimately by adding predictive analytics is a proven approach for reducing the cost of fraud. Check out this post for more.
  • Most organizations have to deal with customers who don’t pay, with collections. Most organizations do collections in a very simplistic fashion, focusing only on the amount overdue or the length of time involved. Analysis of historical collections results and the integration of analytics based on this analysis with rules appropriate to a specific organization can dramatically improve the amount of money actually recovered, reducing collections costs and bad debt. This works in hospitals, for profit-businesses and government agencies alike. Nice summary here.
  • Perhaps the most obvious way to use EDM to reduce costs is in staff reduction. Anywhere you have a decision that today is taken by one of a group of people you have the potential to reduce costs with EDM. You can automate 80,90 or even 95% of the instances of the decision. This typically does not translate into a similar percentage reduction in the workload – the decisions that remain manual are often the more difficult – but it has been shown to reduce workload by 40%. You can use this to reduce headcount (and thus costs) or, perhaps more productively, to assign those people to activities that grow or protect your revenue streams. Insurance companies, for instance, have found that automating underwriting means that they don’t need to keep hiring underwriters and they can assign their experienced underwriters to business develop and agency management tasks, making their overall business more robust. Check out this article, for instance.
  • Any organization that sends a lot of mass mailings (junk mail or not) can use EDM to dramatically reduce the number of items it mails without reducing their success rate. Treating each mailing decision as a separate one, rather than treating the campaign as a single decision, can boost results tremendously and so reduce the amount of mail sent for a given result. Jeff Zabin has a nice article on why this is a green initiative as well as a cost effective one.

In every case applying EDM requires an investment, typically a capital investment, but one that earns itself back in reduced costs and, perhaps even more importantly, managed costs. The costs eliminated are eliminated systematically and without significant impact on revenue generating activities and won’t have to be immediately replaced when the economy picks up.

More tomorrow.