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Manasco Marketing Partners

High performers move from insight to action.

It’s not enough to merely know your customers. There is certainly great value associated with analysis of customer attitudes and behaviors, profitability and potential. But customer intelligence is not an end in itself. As impressive companies in an array of industries are now demonstrating, it is the ability to act on all this insight that generates customer value and leads to outstanding performance.

There are several reasons for the current wave of interest in customer analysis and insight. One is the objective to capitalize on huge existing investments in CRM systems. While companies have spent heavily on operational systems over the years, they are now trying to reap more significant gains from these investments through analytical capabilities that add value to transactional data.

At the same time, diminishing returns associated with outbound marketing are forcing companies to reassess their marketing strategies. Response rates linked to direct mail campaigns have dropped in recent years. Outbound telemarketing has come under increasing legal restrictions. And even the potential of email marketing has been severely undermined by spammers.

Companies are realizing, however, that they can generate significant gains by strengthening their knowledge of customers and prospects. Indeed, they are intent on using analytical technologies to acquire and grow customers in an intelligent way.

Recognizing the successes of several intelligence-driven companies, executives are now actively investing in new customer intelligence capacities. What seems increasingly clear is that analytical, fact-based strategies and approaches can tell us what our own experiences and our conventional wisdom cannot.

Operationalizing Insight

Less clear is how executives can infuse their organizations with the rigor and discipline necessary to leverage their customer intelligence. So, while the value of customer analysis has been a topic of great interest over the past few years, it’s the ability to operationalize that insight that now deserves our attention.

“If you can develop valuable insights about your customers, and then act on them, you are going to beat a rival that doesn’t really know its clients in the first place or even one that can do the analysis but can’t turn it into actionable advice,” says Scott Nelson, vice president and research director with Gartner. Winning strategies, he believes, are “not only about how much you know about your customer, but how well you can act on what you know.”

One company that shows the power of acting on customer intelligence is Harrah’s Entertainment. With $46 million in profit in 2003, Harrah's is the most profitable casino on the Las Vegas strip. The company's announcement last June that it would acquire Caesars for $5.2 billion in cash and stock also makes it the world's largest casino entertainment company – demonstrating that customer insight can lead to marketplace might.

While other gaming companies have attempted to grow through acquisition and large investments in physical amusements, Harrah’s has created a multiproperty loyalty program, Total Rewards, that allows it to track an individual’s play and activities across all of its gaming properties. Leveraging this insight, Harrah’s now markets custom trip packages and delivers personalized treatment.

In an article last year in Harvard Business Review, Harrah’s CEO Gary Loveman stated that the company has strengthened customer loyalty and profitability in two key ways: “First, we use database marketing and decision-science-based analytical tools to widen the gap between us and casino operators who base their customer incentives more on intuition than evidence. Second, we deliver the great service that consumers demand. In short, we’ve come out on top in the casino wars by mining our customer data deeply, running market experiments and using the results to develop and implement a finely tuned marketing and services strategies that keep our customers coming back.”

Beyond IQ

Winning, however, isn’t simply about having the highest IQ in the room. Despite their large departments of analysts, statisticians and data modelers, many companies are failing to perform in today’s hypercompetitive markets. While intelligence certainly matters, the real challenge lies in putting it to work.

“A truly analytical company is one that measures its actions and tries to understand the implications of its measurements,” says Naras Eechambadi, founder and CEO of Quaero, a customer-strategy consulting firm. “It designs and drives its marketing programs based on actual facts and learning that emerge from past experience ... Sophisticated analytics and models are not the key. It’s about how well the learning is disseminated across the organization so decision makers can apply it to new campaigns and front-line service people can make discretionary judgments about how they ought to treat individual customers.”

One grocery retailer that has demonstrated the value of customer intelligence through its widespread application is UK-based Tesco. The company’s Clubcard loyalty program generates more than 100 million pounds of incremental sales each year, and has more than 10 million members. In fact, Tesco has passed Sainsbury’s to become the country’s No. 1 grocer.

As the Tesco experience demonstrates, successful execution depends on strong leadership, vigorous processes and cultural reinforcement. “One of the accepted principles of the program is that there is no such thing as a complete success or a complete failure,” according to Scoring Points, a recent book about Tesco’s phenomenal success. “Everything that happens to Clubcard is seen as an opportunity to learn, to refine, to improve and move on. There is constant monitoring and measurement of how well the card has been working and how it hasn’t.”

The Value Of Observation

Even companies that don’t tend to have direct interaction with their customers – such as those in the consumer product goods sector – have an opportunity to generate critical intelligence that drives more successful outcomes.

Procter and Gamble, another company that actively leverages customer intelligence, has seen its stock price nearly double over the past three years as growth climbs into the double digits. P&G has decided that it can derive valuable customer insight from observing behavior – more so than it can from surveys and focus groups. Jim Stengel, the company’s chief marketing officer, believes the obvious needs of consumers have already been met, and the real challenge lies in defining unarticulated needs.

Stengel encourages his marketers to invest a great deal of time observing consumers – watching them wash clothes, clean floors and change diapers. A few years ago they spent four hours a month with consumers. “It’s at least triple that now,” he says.

By observing dozens of young mothers close-up in an onsite diapertesting center, P&G’s baby-care division learned how frustrating extended periods of toilet training can be to these moms. Based on that insight, P&G is launching a new line of diapers, Feel ‘n Learn Advanced Trainers, that are designed to stay wet for two minutes, encouraging children to use the toilet. Rather than focusing on having the driest diapers, the company has reframed its positioning to focus on “helping moms with baby’s development.” Having launched an array of products with this in mind, P&G is now gaining market share against Kimberly- Clark’s Huggies for the first time in a decade.

What explains the success of such companies? After all, it’s nothing new to commit one’s organization to customer success. Customer strategies, in fact, have been a dime a dozen for the past decade. Enduring success, however, has been all too rare.

Core Processes Of Execution

As a closer look at these top-performing companies suggests, the key success factor is the ability to truly execute their strategies – and operationalize their insight. “Strategies most often fail because they aren’t executed well,” write Larry Bossidy and Ram Charan in their best-selling book Execution: The Discipline of Getting Things Done. “Things that are supposed to happen don’t happen. Either the organizations aren’t capable of making them happen, or the leaders of the businesses misjudge the challenges their companies face in the business environment, or both.”

The phenomenal success of their book reflects the growing demand for accountability and transparency. Promoted by market leaders such as General Electric, Honeywell and Duke Energy, execution is an emerging discipline that focuses on getting results through a rigorous system of questioning, dialogue, analysis, followthrough and action.

Bossidy, the former chairman of Honeywell, and Charan, a celebrated adviser to Fortune 500 firms, offer an accessible framework for taking action and driving results. They describe three “core processes” that underlie execution-oriented leadership: people, strategy, and operations. Through this framework, we can gain a clearer perspective of what separates the companies that are capitalizing on customer intelligence from those that are not. Consider each process:

The People Process

At the heart of strong execution, one finds a central focus on people and their performance, according to Bossidy and Charan. This means rigorous selection and promotion, unsparing performance appraisals, and highly differentiated rewards to reflect performance expectations and successful execution. It means companies must ensure that the right people are in place to execute an intelligence-driven, customer strategy and, if not, ensure they are hired or developed to take on the necessary roles.

Harrah’s and Procter & Gamble have taken two distinct approaches toward the people process in order to leverage customer intelligence and strengthen their market positions.

Gary Loveman essentially fired the existing marketing team when he became CEO of Harrah’s, replacing them with “rocket scientists” who could perform and act on the sophisticated analysis necessary to build the company’s loyalty and rewards program. It worked. “We took out the entire corporate marketing department,” he says in McKinsey Quarterly. “They were never going to get our program where it needed to go. They were never going to build the decision tools or be able to plot out the mathematics of this program the way we needed. So we brought in the kind of people we have now, who have the horsepower to do this kind of work.”

When Stengel took over at P&G, he also realized that new skills would be necessary to put the company back on the path to vibrant growth. After a thorough assessment process to determine where skill gaps and morale problems existed, he invested heavily in new communications, training, coaching, networking and career development efforts that would give the marketing organization the competencies and incentives necessary to execute the company’s growth plan. One key way the company generates intelligence now is by encouraging its people to spend more time in the field with customers.

The Strategy Process

The tendency of executive leaders to issue strategic proclamations without ensuring they are successfully executed continually undermines companies. Bossidy and Charan worry about corporate “philosophers” who do not engage in robust dialogue with their direct reports or demand accountability for results in a thoroughgoing fashion. While their concerns often are directed at globe-trotting and fame-seeking CEOs, they might easily be applied to the marketing profession – and the executives who have airily championed “customer-focus” in recent years. However, the fate of customer intelligence as a differentiator depends on marketing, more than any other group, committing to and delivering results.

The Operations Process

It’s one thing to promote and proclaim “customer centricity”; it’s quite another to take the difficult and disciplined steps necessary to ensure customer-focused objectives are rigorously met. It’s one thing to stand on a stage or issue memos; it’s another to communicate across groups and organizational boundaries to ensure people are executing against plans. It takes effort to step into the organization, learn the different parts of the business, set goals, ensure they are being met, and make course corrections when they are not. Course corrections may require development and coaching; other times, it may mean that new talent must be drawn upon. As Bossidy and Charan see it, leaders must have the “emotional fortitude” to drive their strategies all the way to an operational level.

Perhaps it’s no surprise, then, that some of today’s most successful proponents of strategies that leverage customer intelligence come from operational backgrounds. Harrah’s Loveman was initially hired into the chief operating officer position – a role he believes has been critical in establishing the credibility necessary to test and introduce new operating processes at various Harrah’s properties. He has had to win the confidence and commitment of property general managers that might have resisted an executive who had no operational experience or authority. The top leaders at Tesco and P&G also have risen to their positions from operational roles within the business. They understand how their companies operate – and have deep insight into the operational implications of strategic plans.

The Execution Culture

As these insights suggest, the challenge ahead lies not simply in operationalizing customer analysis and insight. It depends on having an “execution culture” that believes in results and performance at all levels. The strategy, operations and people processes are all interconnected. They provide a foundation on which deep customer intelligence can be actively applied to build enduring, high-value customer relationships. Without attention to all these core processes, customer intelligence is likely to lose its power and value – and, eventually, be shrugged off as just another faddish concern.

“Execution is a systematic process of rigorously discussing hows and whats, questioning tenaciously, following through, and ensuring accountability,” write Bossidy and Charan. “It includes making assumptions about the business environment, assessing the organization’s capabilities, linking strategy to operations and the people who are going to implement the strategy, synchronizing those people and their various disciplines, and linking rewards to outcomes. … In its most fundamental sense, execution is a systematic way of exposing reality and acting on it.”

As companies develop an execution culture, they gain the key perspectives and capacities necessary to capitalize on customer analysis. They learn to be rigorous and relentless, driven and demanding. And they seek results – something many of today’s most impressive companies obtain by leveraging customer intelligence.