Time to evolve from database marketing to customer intelligence command centresby
At the tail end of last year, Forrester’s Dave Frankland stirred up some serious discussion around the web when he forecast that that future generations of CMOs would hail from the analytics department. This, he suggested, would represent an important evolution of the marketing department – an evolution that would see customer data released from its current constraints and free to empower the organisation.
Frankland’s vision: instead of customer data being buried in the direct marketing department, utilised only to generate lists, it forms the backbone of a strategic command centre for the organisation, where it is deployed to improve the customer experience, grow long-term revenue and drive profitability.
But most firms have a long way to go.
"For years we have been talking about the 360 degree view of the customer – or the single customer view – and it is a myth," says Frankland. "I can't name a firm that has either of them!"
Part of the problem, he suggests, is that traditional company structures mean that customers can appear on the databases of several departments – sales, service, finance, etc - all unaware of each other's interactions with the customer. This lack of alignment is only further complicated by cross-selling, particularly for companies that may have hundreds of product lines. "Often all of these product lines have a single view – but it's not the company that has a single view. It's each of the individual parts," he continues. "So there are problems with organisational alignment – most firms are organised around either products, lines of business and service and not around customers."
Default marketing response
The domino effect means that many other areas are impacted, according to Frankland, from the processes and systems in place, to the metrics that are used, to the way that employees are compensated. And ultimately this encourages the default marketing response to be a mail shot. "Do you look at profitability by client segment or do you look at it by line of business?" he asks. "When it comes to the end of the quarter and your sales are behind you are looking at it from very much from a product point of view and so the solution is just to blast out more emails. You're not thinking about it from the point of view of the customer segments that are spending only 70% of their potential, and how you can push it up to 100% with the relevant message and offer."
But here's the kicker - these generic marketing shots are of course proving less and less successful. "The general mass advertising, most of which is completely irrelevant, hasn't necessarily changed," Frankland continues. "What has changed are the consumers – they have given themselves the permission to say 'no'."
Whether it is DVRs enabling viewers to forward through TV ads, or the National Do Not Call Registry stopping telemarketers calling, or email clients allowing users to opt-out of list as spam, consumers now have the power. And social media has only served to crank the pressure up even higher.
"We haven't always trusted marketing," adds Frankland. "We’ve always trusted word of mouth more – your friends or family. But today, with social media I can trust someone I've never met before and I do trust them more than I trust a marketer or the person that is producing this stuff. And they are affecting advertising and marketing."
People, processes, technology
So, in the spirit of Charles Darwin's Evolution of the Species and the survival of the fittest, it is time for database marketing to evolve into customer intelligence – something that will be no mean feat, given the work on systems and processes that is demanded.
"During our survey, we found that only 34% of organisations integrate database marketing and customer feedback and listening. This is bizarre. You hear something from a customer so shouldn't you go and check who that customer is and find out how influential, important and profitable they are – all things you can determine from the customer database – rather than just dealing with them in the listening moment? The opportunity to integrate them is huge."
In Forrester's study, it found that 95% of those organisations that had evolved to the strategic use of customer intelligence used the intelligence to drive or inform corporate strategy, compared to 30% of organisations using intelligence at a purely functional level. Intelligence was used for product development in 92% of evolved organisations compared to 55%. In terms of the level of the person who runs customer intelligence, 89% are VP or above at the strategic level, while at the functional level, 67% are manager or director.
And the people component is something that cannot be underestimated. Frankland emphasises the importance of progressing key people from areas that are either seen as "a failed enterprise" such as CRM or "red headed stepchildren" in the case of database and direct marketing, so that ultimately "these people evolve from the swamp and become a strategic resource."
Stepping up to the plate
But this will mean that the data teams will have to step up to the plate. "Historically, a lot of the database marketing personnel were either very technical or very analytical but didn't really have much business savvy. In order to be successful in this role they are going to need both left brain skills – be very comfortable running numbers and doing analytics – as well as the right brain skills – translating that into something that makes sense for the business."
And those that have made the transition are really seeing the benefit. Harrah's Entertainment, for instance, brought in a former Harvard professor to run everything by the numbers and the company has become very analytically driven. Capital One has been through a similar metamorphosis, as has Tesco.
"One of my favourite examples is 1-800 Flowers," says Frankland. "They developed from almost grass roots, with the two guys in the corner become really central to the strategic decisions that the company makes. In order to do so they had to get the buy-in of the president of the company and he started to really rely on a lot of what their customer knowledge team was developing. And that started to change the culture – it affected a very customer-centric approach that then manifested itself in the process side of it and the technology side of it. You can't do it without technology but if you start from the technology you'll fail – we saw that with CRM."
For most organisations, however, there is a long path ahead if customer intelligence is to operate as a strategic command centre for the business. But Frankland is convinced that the standard competitive organisation of the future will place intelligence professionals at the nexus of initiatives including sales, service and of course marketing.
"There is a recognition today that these things are coming together," he concludes. "Questions that a creative person will ask of the analytics team are things that the analytics team would never think about finding out about. But in doing so it sparks other ideas for the analytics team to go and check out, and the answer helps the creative team develop a better creative. So there becomes a virtuous cycle, and whereas in the past they were somewhat combative, today in some cases it is actually improving both disciplines by working together. Although it is still an evolution."
Neil Davey is the managing editor of MyCustomer. An experienced business journalist and editor, Neil has worked on a variety of newspapers, magazines and websites over the past 20 years, including Internet Works, CXO magazine and Business Management. He joined MyCustomer in 2007.