Have the technology and application vendors failed to respond to market demand? Or have end-user organizations failed to sufficiently define the need? Is there a shortage of supply, or too little demand? Ventana Research believes that both sides have struggled in addressing this critical issue, but a new revolution bringing performance management principles to customer intelligence is brewing. This papers looks into the demand side of the equation: the issues and business forces at end-user organizations that suggest the coming paradigm shift.

There is ample evidence of the business value derived from paying closer attention to an existing customer base. Studies have repeatedly shown that, when compared to acquiring new customers, cost of sales is lower, revenue per transaction tends to be higher, and profitability is greater with sales to existing customers. This is true whether an organization is engaged in B2B or B2C commerce. The demand-chain leverage that can be delivered through creative application of customer intelligence is indisputable. And yet, organizations with demonstrable success stories are few and far between. Customer intelligence has become a critical strategic priority among end-user organizations under two important banners: management accountability and integrated information management.

Management Accountability

Today's business climate brings with it an audible undertone of accountability. Organizations are under pressure to establish accountability for customer intelligence. Thus, the issue of ownership must be addressed. Who "owns" the customer and sets the customer-centric strategic agenda? Who holds budget accountability and has ultimate ROI responsibility? Marketing, sales, and service are most often fingered for isolated failures, but none of these departments can function alone. Each one is an intended beneficiary of component CRM technology, all are customer-facing, and all are responsible for influencing and responding to links in the demand chain. However, it is rare to find a single executive with the title of chief customer officer, let alone a clear set of objectives aimed at accountability for the customer across these functions. Market leaders are addressing this today.

Integrated Information Management

Many organizations have neglected to address integrated information management with respect to the customer. Based on our discussions with end-user organizations, Ventana Research is astounded at the lack of attention historically paid to this issue. There are exceptions, of course, such as within the consumer financial services industry and with direct marketing organizations. Still, consider the contrast vis-à-vis information management priorities with respect to transactions (sales and order management), capital assets (asset tags and RFID), supply chain movement (package scanning, now RFID), finances (especially under Sarbanes-Oxley and HIPAA). Even office supplies are often more carefully managed than customers.

Customer data quality is an important underlying issue. Many, if not most, organizations are still faced with untangling systems with inconsistently defined customer identification schema and performance metrics. With such a foundation, the inescapable outcome is confused cross-functional customer intelligence, poorly defined customer profitability and lifetime value, and suboptimal customer-interaction performance management.

Assessment

The recent recession has prompted extensive business retraction, with many organizations pulling away from investment in technology and making tactical moves such as cutting costs and reducing staff. All such actions are inwardly directed survival tactics. As the business climate improves, organizations should be prepared to engage in candid evaluation of what comes next. Leading organizations will begin to execute growth strategies, establish new IT investment priorities, and deploy performance management initiatives that support marketable business differentiation. Ventana Research strongly suggests that these efforts reflect and embrace a renewed focus on customer-centric intelligence.

Information surrounding customer interactions is one of the few truly private assets within most organizations - Web sites broadcast product information and plans, sales and distribution strategies are carried out in the open market, the pricing model is available, and financials are published by publicly traded companies. Customer interactions remain private, and information assets surrounding them should be leveraged to the benefit of the organization.

Recommendation

Led by the chief operating officer or an equivalent, organizations should begin to aggressively define customer intelligence strategies and plans now, even if they feel the financial conditions are not yet ripe for action. Solid advanced preparation will provide competitive advantage when opportunities and the economic triggers present themselves.

Strategies going forward must attack customer-centric information management, consistently capturing cross-functional interactions with the customer from the demand chain. This information is available today, housed primarily in siloed customer-facing CRM applications, especially, but not limited to, the direct marketing and customer service arenas. Supply chain, partner relationship, sales and order management, and accounts receivable systems also apply. When well-deployed and integrated into the performance management fiber of a firm, these applications can serve to deliver a significant data foundation for customer intelligence. Properly applied, these customer-focused data can forward the advancement of more effective customer portfolio management.

It is clearly impossible to address the performance management issue without proper accountability and information management. At the same time, business issues are what drive the information requirements of a performance management strategy, reflecting the priorities of the organization. Therefore, every organization must challenge itself to critically evaluate its commitment to its customers and establish more customer-centric strategic priorities. A solid performance management platform for customer intelligence will drive the organization toward new, actionable business insight and will enhance its customers' experiences.