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SPSS Highlights Customers' Future Needs
Understand, predict, act--predictive analytics helps companies realize how to see customers' value both now and in the long term.
Posted Apr 26, 2005
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Companies must earn customers' trust to get the most value from them. That takes a combination of individual knowledge, balancing short- and long-term goals, and predicting what each customer will do in the future. Don Peppers, cofounding partner of Peppers and Rogers Group, shared his advice on creating customer value today during his keynote speech at the SPSS Predictive Analytics Summit 2005. "Businesses typically think of money as their scarcest resource, but it's really the customers," Peppers said. "How do customers create value? They increase sales and generate costs. But they also change their intent or their likelihood to buy in the future. That future value is actually today." Peppers gave an example of two farmers, Good Farmer Wilson, who rotates his crops every year and makes the most of his land--a farmer's most sacred resource--for a lifetime; and Bad Farmer Miller, who plants the most profitable cash crop each year. He has more profit than the good farmer at first, but his land burns out quickly--and he loses his sacred resource. "Farmers know if they lose their land they're out of business, but businesses do it all the time," Peppers said. "We take...steps that we know in our hearts are bad for the company, but we're paid to make this quarter's results." To have long-term success, companies need to focus on both the present and the future. The future is where predictive analytics come into play, especially from a marketing perspective. Using such intelligence tools allows companies "to move away from seat-of-the-pants, gut feel decision-making," said Colin Shearer, vice president of product marketing for SPSS. "Predictive analytics for marketing is about discovering what [customers] want, predicting what they will do, and applying this knowledge to create more profitable customer relationships--[companies must] understand, predict, act." Marketers are not the only ones who should be using these tools, according to Shearer. Data should be spread across organizations to improve retention, reduce costs, and increase profitability. SPSS CEO Jack Noonan pounded the point home: "All the data you have is worthless unless you're using it to change the way you do business. You have to leverage it across your entire organization to become that predictive enterprise."
When a customer calls with a complaint and hangs up dissatisfied, his future value has just decreased, Peppers said. "You may as well have gone to the bank, taken out the money, and thrown it down the rathole--just as your stock would go down the toilet if you predicted lower, expected future earnings today." Any business that's only focused on the short term is operating under "the Goldfish Principle," Peppers said. "Some species of tropical fish have no capacity for territorial memory. They swim around and around and they're never bored. They always see the same thing," he said. "Some marketers are the same way. You have to have some regard for the future and memory of the past to create value for your customer." Related articles: Get Smart! Enterprises are relying more and more on analytics to derive added value from their CRM systems. Here are the latest trends and hot analytics tools giving organizations better insight into their businesses. Market Watch: Analytics Analytics has taken a secure place in the big picture of CRM.
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