One Customer, Divisible? It’s (Almost) All About The Data   by Michael Lowenstein   Much of what I’ve learned over the years about Sales, Marketing, and Customer Service has to do with the critical importance of customer data. It's how smart, well-led, customer-centric companies generate the right customer data, manage data the right way, and use it at the right time, and to best effect to optimize loyalty and profitability, that makes them successful, or not, on an individual customer basis. Culture, leadership, and systems will facilitate effective information gathering, storage, and application; and, CRM, ERP, or other acronyms notwithstanding, it's impossible to be successful without having as much relevant insight about customers as possible.   One of my key sources for the uses of information gathered by customer clubs and loyalty programs, for instance, is my friend and colleague, Brian Woolf (www.brianwoolf.com). Brian is President of the Retail Strategy Center, Inc., and a fountain of knowledge and insight about how companies apply, and don't apply, data generated through these programs.   In a Peppers & Rogers newsletter, for example, Don Peppers quoted Brian in his article, "The Secrets of Successful Loyalty Programs":   "Loyalty program success has less to do with the value of points or discounts to a customer, and much more to do with a company's use of data mining to improve the customer experience. Top management hasn't figured out what to do with all the information gleaned. You have all this information sitting in a database somewhere and no one taking advantage of it.   You need to mine the information to create not only relationships but also an optimum (purchasing) experience. The best loyalty programs use the customer data to improve not only promotions, but also store layout, pricing, cleanliness, check-out speed, etc.   Firms that do this are able to double their profits. When these elements are not addressed, all you're doing is teaching the customer to seek out the lowest price."   Most companies fit within a narrow spectrum that extends from mediocre to downright awful in how they approach the data need identification/development/storage/application process. In fact, it’s a worldwide epidemic of inefficiency and ineffectiveness.   Poor customer data development and application negatively impacts customer loyalty efforts for companies of any size. According to a 2001 survey of 506 global CEOs by The Conference Board, these execs ranked customer loyalty and retention as their #1 management challenge. That challenge and need has driven some companies to invest as much as $30 million, or more, to install CRM systems and to invest even higher amounts in frequency marketing programs. But, we know there's widespread frustration among execs because 1) CRM systems aren't being used with nearly enough effectiveness to optimize customer loyalty and 2) frequency marketing programs tend to reward customers who are already loyal, and don't cover other customers very well.   There is little or no attempt, within either CRM systems or frequency marketing programs, to either generate information about what customers consider as having tangible or intangible value and then use that insight for leveraging loyalty behavior. That's the pivotal cause for the high failure rates of these systems and programs.   Even companies that properly introduce a CRM system often underutilize a its full information-gathering and application capabilities. "Businesses are often limiting the scope of information that they attempt to capture in their CRM environments," says Karl Büttner, president and CEO of 170 Systems, Inc., a systems application provider. Büttner says he sees many companies mistakenly focusing only on contact information, thereby passing up the opportunity to capture a broader, "360-degree”, view of the customer.   Here are study findings, for instance, showing that very few UK businesses are collating or exploiting their customer data adequately, according to the results of research carried out by UK CRM consultancy firm, Detica.   The research report, Converting Customer Data Into Effective Decisions, shows that only 13% of companies can be categorized as leaders when it comes to collating customer data and subsequently using it to improve customer relationships. Another 32% were classed as the 'followers', having good data in certain areas but only using it to support a limited number of business functions. Another 15% of companies were classed as 'under-achievers', having some good customer data but making very little use of it; and the remaining 40% were categorized as 'strugglers', having very little good data and limited ability to exploit what they do have.   Colin Sheppard, strategic business development director at Detica said, "The research highlights the challenges businesses face in developing a good understanding of their customers, and in using the resulting insights effectively across the enterprise." Sheppard added, "Our research shows significant differences across different markets. In particular, telecommunications and utility companies have been shown to be lagging well behind those in the financial services and travel, transport and leisure sectors."   When it comes to the types of data being used, most companies are good at capturing the basics, such as contact and billing details, but few use additional descriptive information such as demographic or lifestyle data. When asked if their business had a good single view of the customer, no industry sector performed well. Just 17% of travel, transport and leisure companies said they did, compared to 27% of utilities, with telecommunications (55%) and retail banking (60%) performing the best.   Here is a graphic depiction of Detica’s key findings: Figure 1 Customer Data Availability and Quality By Industry Sector Source: Detica, Ltd.   Clearly, while some Industries are generally capable of generating in-depth customer information, most are not. Generating the right data, however, is only the beginning of customer insight challenges for most companies.   According to Sheppard, creating a single view of the customer is a key business requirement which very few companies have truly achieved. This problem hampers the effectiveness of marketing, sales and customer service operations alike. And when asked how their customer data is used, companies in all sectors were strong in using it for acquiring new customers (if fact, many cited this as a reason for developing a database in the first place). Yet few are using it to target cross-selling, retention and win- back campaigns or to reinforce relationships with customers.   Detica has created a model, which we actively support, for the continuum of generating, storing, sharing, and applying in-depth data for customer value optimization:     Figure 2 Customer Data Value/Stages Source: Detica, Ltd.   This model is really pretty straightforward. It provides a disciplined, sustainable process for moving from data collection to creating customer advocacy and commitment. Like most elegantly simple approaches, however, completing the journey has been a challenge for most companies, as borne out by the results of the Detica study.   The underlying reason study findings like this keep surfacing is that companies, in the main, do not identify what customers want. In addition, these companies do not become customer-centric, using their learning to build stronger relationships with customers, in spite of all the CRM system and loyalty program investment we've witnessed.   A good analogy, or model, for CRM and loyalty program effectiveness or ineffectiveness may be what can be termed the ‘car-fuel relationship’. A car, no matter how attractive, powerful, and technically sophisticated, can’t go anywhere without fuel. Not only that, to reach a desired destination, the car must have the right fuel for its engine, and in the right quantity. For customers, the car is CRM, and its key data- related systems components (data gathering, integration, warehousing, mining and application). The destination is optimized customer lifetime value and profitability. The fuel is the proper octane and amount of customer data.   One of the key elements in the Detica model is Deployment, the internal movement of customer data for action. A recent British Telecom study showed that managers are often suspicious of sharing information, with almost one-third keeping customer information within their groups and another tenth keeping data on paper-based systems. As a BT executive concluded: “Sharing the right information at the right time is crucial to getting the best results, but it seems that too few businesses are encouraging their staff to do so.” This is equivalent to keeping fuel from getting from the tank to the pistons.   Leading-edge companies are focusing on real and projected customer lifetime value, and the creation of felt loyalty and customer advocacy, as a destination. They are collecting the right data and using the right skills, processes, tools and customer data management technologies to make sure that key customer insights are available wherever they are needed, in all parts of the enterprise. Dave Cox, Managing Director of Swallow Information Systems, a customer support software provider, believes that service and use of customer data are what positively, and strategically, differentiates one company from another:   “Customer information held in databases in the service department provides the clues that sales, marketing and development are looking for to understand their customers. So share it. Integrate the systems and let everybody listen to what customers are telling you. Bottom-up, customer-led, service-driven, call it what you want, but customer feedback must be included in the strategic decision-making process for any hope of continued success.”   He concludes: “Good service isn’t just about providing a helpline or a support desk any more. It’s about gathering the information, disseminating it throughout the company, and considering customers’ opinions in corporate decision-making.” We completely agree.