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Accenture

New tools and processes that provide deep insights into customer behavior are helping to realizesignificant operational and financial benefits – and gaining customer loyalty.

After a half decade of inward focus, companies are awakening to the need to shift from customer retention to acquisition. In fact, executives we’ve spoken with roundly agree that their company’s success – in some cases, survival – is directly tied to their ability to more effectively acquire new customers and foster much more intimate relationships with those customers.

Many companies, though, despite making significant investments in CRM over the past several years, still aren’t well-positioned to connect with customers in ways that maximize loyalty and repeat business. The reason is that most companies still lack the deep customer insights necessary to engage the right customers with offerings that more closely meet their needs, and subsequently proactively develop programs that maximize customer retention, profitability and lifetime value.

The logic really is quite simple. Unless a company fully understands key aspects of a customer, including behaviors, attitudes and perceptions of the company’s offerings relative to competitors’ products and services, it will be unable to take the steps necessary to create a strong bond with that customer. Of course, the simplicity of the concept often clashes with the reality of managing thousands, hundreds of thousands or millions of customers and their multiple interactions across numerous touch points. This is especially true with industries such as telecommunications and financial services, which often have different types of relationships with customers depending on the particular service or product being purchased.

But that’s not to say that all companies are struggling. A number of leading organizations are bucking this trend. They are adopting tools and processes that enable them to truly understand what drives customers, and are using the insights generated to more precisely target individuals and segments, execute superior marketing campaigns and create effective programs that boost customer loyalty and lifetime value. In the process, these organizations are realizing significant operational and financial benefits and higher business performance overall.

Creating a Single View of the Customer

The capability that is at the core of customer insight is the single view of the customer. Without such a view, it is impossible to paint a complete picture of customers and their needs and preferences. Gaining a single view of the customer begins with the implementation of a data warehouse into which all relevant internal customer data, often widely dispersed throughout the organization, is fed. This data includes customer contact information, products or services purchased, mode of purchases (Web, store, call center, catalog) and monetary value of purchases. Importantly, this information must be augmented by external demographic data on customers. By teaming a customer’s transaction history with key data such as number and ages of people in the customer’s household, median income of the customer’s neighborhood and customer’s ethnic heritage, a company can transcend the one-dimensional, internal picture of a customer that purchase history alone provides.

Just as important as getting the right type of data in the data warehouse is ensuring the data’s quality and accuracy. As the old saying goes, “garbage in, garbage out.” We have seen many companies spend considerable time and money implementing a data warehouse, but fail to take the necessary steps to ensure that what goes into the warehouse is clean and consistent. Tools and governance processes must be put in place to maintain data integrity and, hence, its value to the organization.

One country’s postal service has experienced firsthand the value of a single view of the customer. Facing formidable competition in the express mail segment, the organization was in trouble. It not only was losing money on various customer segments, it was losing customers to competitors better equipped to understand and meet their needs. Agency executives knew that the organization needed to develop deeper insights into its customers to create more relevant service offerings; ensure a level of service for customers appropriate to the amount of business they do with the postal service; and grow its overall customer base. However, they also recognized that their existing customer-facing database systems were holding them back. These systems were spread throughout the postal service; had their own set of business rules and view of the customer; had no linkages to each other; and suffered from pervasive data integrity and accuracy issues.

The postal service eventually decided it had to act. The organization first designed, developed, tested and deployed a technology solution that automatically cleanses and standardizes the data in all the postal service’s systems, and uses advanced matching capabilities to link corresponding customer entries across the disparate organizational systems to one unique identifier (a customer identification number). Next, the agency created a central repository of the 16 million uniquely identified postal service customers, as well as a cross-reference capability that allows the postal service to know which systems are storing transaction information for each of these customers. The various source systems can access these capabilities, in batch or in real time, depending on their business needs. Finally, to improve the quality of customer data stored in the source system databases, the project team worked with each source system business owner to assess data quality and address issues such as duplicate customers, bad address data and missing customer information. The resulting data consistency across all systems gives the postal service a clear and accurate picture of every way in which the organization serves a customer, and opportunities to enhance that service.

As a result of this initiative, the postal service team now has the capability to target marketing, sales and service efforts to specific customer needs, as well as identify new revenue and cost-cutting opportunities. Whereas in the past, the organization was centered on products and services, its new customer-centric model enables postal service employees to cluster products by particular customer segments, thus resulting in better service for these customers.

Executing More Precise Targeting And Superior Campaigns

With a single view of the customer, an organization can take the next step toward building stronger customer relationships: executing more precise targeting and superior campaigns. Using a variety of analytical tools and processes to deeply analyze customer and prospect data, the company can conduct: 1) strategic market segmentation to understand its relative position in the marketplace, 2) strategic customer and prospect segmentation to understand the behavior and value of customers, and 3) tactical customer and prospect segmentation to continually improve marketing campaigns based on initial response.

Building on effective segmentation, the company can then take advantage of best-of-breed marketing practices and a more rigorous, scientific approach to customer interaction to plan and coordinate multichannel campaigns that reach customers with the appropriate offers via their preferred channel. And by using advanced technology to automate the campaign development and execution process, the company can capture information on campaign performance to continually improve campaign effectiveness.

The experiences of Telco (a global telecommunications company) in improving its campaign management process illustrates the impact more precise targeting and better campaign execution can have on a company’s marketing efforts. The company began its effort by building a campaign data repository in which customer data could be consolidated. This repository enables the company to quickly pull relevant data for specific campaigns. It also allows the company to conduct complex analyses that often require cross-referencing with different data sets. Next, the company implemented a new campaign management system that accesses the data in the repository for analysis, segmentation and list generation by marketing personnel. This system is critical to the marketing team’s ability to more efficiently and effectively launch campaigns to the right audience and to evaluate the effects in time to make necessary adjustments.

As a result of its efforts, the company has reduced by 25 percent the cycle time of marketing campaigns from initial data sourcing to final evaluation of campaign performance. In fact, Telco’s campaign process has become 32 percent more efficient, as measured by the amount of time that the activities associated with the campaign are actually adding value. Through automation, the company has improved the speed of campaign creation and execution and has strengthened its analytical capabilities and on-demand evaluation of campaign performance. Company executives believe the new campaign management capabilities give Telco a strong competitive advantage not only by solidifying the company’s current market leadership position, but also by laying the groundwork for future efforts that are expected to include real-time personalization capabilities that can help the company boost revenue through increased cross-selling and up-selling.

Boosting Customer Loyalty and Lifetime Value

History and conventional wisdom tell us it is much cheaper to keep a customer than get a new one. So while organizations make a pronounced move toward more aggressive customer acquisition, they must not do so at the expense of existing customers who are a prime target for competitors. As customers become more informed and competition intensifies, leading companies have recognized the necessity of instilling discipline and rigor in their customer loyalty activities and boosting the lifetime value of their most profitable customer segments.

The key to managing and growing loyalty is developing specific experiences for each customer segment that are unique to those customers and their specific needs. By analyzing patterns of churn on a segment-by-segment basis, an organization can develop a deep understanding of the reasons why customers defect. Once a company has identified its most important sources of value, it then can develop specific loyalty programs that have the highest chance of being enthusiastically received by the most profitable customers.

One large retailer boosted its top and bottom lines on the back of stronger loyalty. To differentiate itself in a crowded market and reverse a serious decline in revenue and profits, this organization decided to make a major shift in focus. Historically, the company had a very product-centric approach that dominated almost every aspect of its business. This approach had the retailer carrying a wide assortment that was difficult for its sales force to support and that greatly hindered profitability. The company thought that shifting to a customer-centric business model – a new store layout, selling strategy and operating model geared to the retailer’s most profitable customer group – would restore the organization’s growth and profitability. The retailer’s first step was to mine its customer database to determine the shopping and lifestyle traits of the company’s most profitable customer group. After conducting a fact-based analysis of historical purchases and primary research, the company realized that it didn’t need such a broad assortment. On the contrary, its most profitable customer group wanted fewer, select items with better sales support and higher-value offerings. As a result of its findings, the company began reformatting its stores to expressly appeal to its most profitable customer segments in various geographic areas. The new-format rollout is still in its early stages, but thus far, the company reports that its new formats are generating sales at twice the rate of the company’s traditional formats.

To be sure, building and maintaining strong, profitable customer relationships is far from easy. It requires significant shifts in organization and culture, sophisticated technologies and analytical capabilities, and the discipline to continuously monitor and measure the results of all marketing activities. And, because of constantly changing market conditions, customer nirvana is a journey, not a destination. Although difficult, however, it’s a journey that every company must take to grow and prosper in the next five, 10 and 20 years.

Leading organizations such as those profiled here are examples of how customer insight can be a powerful tool in the drive toward more valuable and lasting customer relationships. Armed with a single view of its customers – and leveraging that capability to segment customers more precisely, execute more effective and efficient campaigns, and engender stronger customer loyalty and higher lifetime value – these organizations are becoming experts at learning what their customers want and need, and then giving it to them. In doing so, they are positioning themselves to make and strengthen the connection with customers that is so vital to keeping revenue and profits high and leaving competitors far, far behind.