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The four customer insight problems your firm must crack

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2nd Nov 2009
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With customer intimacy a priority, the use of information analysis has moved beyond a competitive advantage to become something simply necessary to stay in the game. Hypatia Research's Leslie Ament highlights the obstacles to effective use of customer insight.

Earlier this year, Hypatia Research released a research paper concluding that the use of marketing science and information analysis services had moved beyond a competitive advantage for companies – and had become something simply necessary to stay in the game. The bar had been raised once more. And, according to Leslie Ament, co-founder and research vice president of Hypatia Research LLC, it is unlikely to remain in its present position for long.

“In this highly commoditised global marketplace, in which companies are unable to compete on price alone, B2C companies will continue to defend market share by building greater customer intimacy through investment in customer intelligence initiatives,” she suggests.

And much of the pressure to create greater customer intimacy can be traced back to the customers themselves it would seem. The under-40 demographic in particular expects a higher level of customisation and personalisation from the organisations they interact with than ever before. And these organisations are well aware that if they do not deliver then they risk losing these customers.

This has left many organisations with the question of how they create actionable insight from the vast quantity of data – and unstructured information – that they gather about their customers.

“How do they use this information to reach their customers such that they create greater intimacy and influence them to purchase those goods?” asks Ament. “Companies are generally moving along the maturity grid, from mass customisation to true customer intimacy but they have yet to reach that visionary level in which they are effectively using this insight. And there are a number of reasons for that.”

The volume of information

Research by Ament has demonstrated that as well as collecting more traditional and structured forms of customer data, companies of all sizes are also capturing user generated content such as blogs, comments, and verbatim from call centres.

“Organisations are realising that there is value in their information,” says Ament. “A great majority of the way in which it is used today falls into two categories. One is for tracking and measuring media sentiment. The second way is for product innovation. The Swiffer Mop is the most public example of that – as P&G was able to launch to market this product based on features and so forth that came directly from conversations with customers in chat rooms.”

P&G, Dell and Starbucks are just a few companies that believe leveraging this information is necessary to compete. But not all organisations are handling the information appropriately.

“The more mature organisations achieve a higher return on investment because they have established more mature processes for normalising, analysing and then creating insight out of this information. Creating insight is the piece where most organisations really fall down,” says Ament. “There are all these analytics tools out there – analytical CRM, marketing automation, BI tools and platforms, customer interaction management tools, and so on – and the point of gathering this information is to allow you to interact with your customer in such a way as to create personalisation and intimacy so that the customer feels as though they are an audience of one.”

Data silos

To complicate efforts to create actionable insight, many companies store customer data and information in numerous sources spread across the organisation. Ament estimates that many larger retailers can have upwards of 10 different databases, each with different scheme for collecting customer data.

“Some organisations are moving towards a centralised data mart. Synchronisation and integration with CDI (customer data integration) is maturing – organisations are availing themselves of single view of the customer techniques to get there, and that’s a very good thing. But keep in mind they are still leveraging their legacy systems rather than building the house from the ground up,” says Ament.

“Rather than standardising on Oracle DB11 or a Teradata warehouse or an SAP ERP system, they are going to standardise on what they’ve got and just buy more software, assuming that’s going to be the silver bullet solution to their integration problems. However, this is not necessarily the case because the software alone is not going to create the methodologies and the processes to ensure best practices. It is basically the little Dutch boy sticking his finger into the proverbial dike to stop the water flow – they are not really fixing the structural issues.”

Data quality

In the absence of a single view of the customer through a CDI initiative or a master data management system, organisations can also struggle to apply data quality tools across the breadth of the enterprise, instead having to address customer data quality one at a time. Hypatia's end-user research found that in fact, despite the importance of data quality, less than 40% of organisations had deployed data quality tools enterprise-wide.

“If you’ve got multiple data marts and each one has different records about the same customer and then one tries to do analyses, you’ve got data garbage everywhere. That really lowers the accuracy of the analyses that much more,” explains Ament. “Data quality tools are a good way to approach it, especially if it is being approached up front, so when the information is entered before it is stored in one of the many data marts a type of matching occurs whereby it is automatically corrected before it is stored. That would be best practice. But there are other ways to handle the data quality issue, with CDI synchronisation and/or batch uploads and so on.”

Knowing your goals

Silloed or poor data could lead to missed opportunities, provide a barrier to customer intimacy, and alienate those customers who expect personalisation of their interactions. But the final obstacle to the effective use of insight is a much more fundamental issue - a lack of goals and objectives. Businesses may be going to great lengths to gather as much information as possible because they are well aware of the mantra ‘knowledge is power’. But there may not necessarily be a set of goals of objectives determined upfront to underpin this.

Ament provides some examples: “What do you want the data and insight to do for you? What kind of insight are you looking to create? How do you go from direct marketing to customer intimacy or improving the customer experience?

“There are all sorts of techniques such as multivariate analysis, cluster analysis and profiling, micro-channel segmentation, chaid or decision-tree analysis, and so on. All of these can be applied, but many vendors choose a few of these techniques and perhaps will have a template for a firm to choose from when deploying the software tool, but it is already built in so the customer hasn’t had a chance to determine their objectives and goals first. They have merely walked into the restaurant and selected something off the a la carte menu.”

The plus side of the issues that Ament has outlined is that none of the challenges above are insurmountable. However, there is an added urgency given the assertion that these skills are now not so much a competitive advantage as they are necessary to stay in the game. Ament recommends determining objectives and goals from the get go, ensuring your information is accurate before creating interaction rules and techniques, and knowing your customer. Ament quotes Sir Isaac Newton to hammer home this final point.

“For ever action there is an equal and opposite reaction,” she concludes. If you start dialoguing with your customers or best customers or lapsed customers, the message needs to be on target because there will be a reaction - and one of those reactions could be ‘you don’t know me at all, I’m going to go to this other store which seems to understand my preferences more often’. A lot of organisations are taking steps, however, and that is a wonderful thing to see. But there is still a disconnect between capturing all this information, analysing it in some sort of fashion and then having some sort of established methodologies for creating insight and then acting on that insight.”

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