Selective investment in high-value customers empowers companies.
Posted Sep 1, 2006
Leading performers have succeeded in transforming customer intelligence into measurable business benefits, such as increased customer retention, acquisition, and satisfaction rates, reduced operating costs, and higher sales conversions. Companies that use technology enablers and/or service providers to capture, manage, analyze, and apply intelligence--in batch or near-real time--are better able to understand and respond to their most profitable customers.
Often, they do so in ways that allow them to interact through their customers' preferred channel of communication, with customized information, offers, or service initiatives, based upon propensity to buy. For two of our winners, enhanced customer satisfaction and retention rates were the direct result of improved service levels due to automation and synchronization of data management processes.
Leaders focus on customers and revenues
Analysis of customer intelligence success winners found that persistent use of predictive analytics and modeling of customer behavior, automation of customer data management practices, greater front-to-back office integration, development of closed-loop business processes, and organizational acceptance were responsible for their achievements. While winners focused on one or more different areas of customer intelligence improvement, each exemplified compelling performance improvements that impacted annual revenues, affected customer acquisition, and/or retention rates, or cut operating expenses.
Key findings and recommendations
Companies that want to effectively leverage their valuable customer assets should consider these seven strategies for success:
1. Create and refine closed-loop processes to maximize ROI. While many of our winners demonstrated significant performance improvements in one or more customer intelligence categories, those that created closed-loop processes for leveraging customer intelligence gained the most. Through assessment of all key business processes--management, analysis, and application of customer intelligence--these leaders laid the groundwork for continuous performance improvements that are tangible, adaptable, and measurable.
2. Create and leverage customer intelligence effectively. Leveraging customer intelligence is all about creating value from customer data--converting information into actionable intelligence--to support profitable growth. To effectively leverage customer intelligence, leaders are focusing on front-to-back office integration initiatives to gain greater visibility and understanding of their customers. For example, linking customer billing information with service history and channel preference for transactions empowers organizations to gain greater insight into, and support for, decisions that impact business success.
3. Embrace technology to elevate performance. A number of success stories illustrated how technology use radically elevated performance in several key metrics. Upgrading infrastructure, platforms, and/or applications served as catalysts for other improvements, such as consolidation and standardization of customer information stored in numerous legacy data marts, or enabling a true 360-degree view of the customer. When organizations integrate, normalize, and verify customer records, they benefit from better decisions, because their decisions are based on visibly accurate data.
4. Streamline customer data management processes. Lacking a persistent process for customer data consolidation, integration, standardization, and verification, companies will make decisions based on "garbage in, garbage everywhere." Leaders who invest in technologies and services and establish data management processes have demonstrated benefits that range from cost reductions in labor and maintenance fees to gains in excess processing capacity.
5. Define and exploit customer value. Increasingly, leaders are defining customer value metrics in order to build better relationships with their most valuable customers through customized interactions. As a result, they are better able to reduce their operating costs by selectively investing in their high value customers to reduce churn, grow each share of customers' wallets, and increase profitability. Eighty percent of our winners analyzed customer data to define customer value, and interacted with customers based upon value metrics.
6. Organizational acceptance will make or break results. Several of our winners emphasized the need for executive-level support in gaining the organizational acceptance necessary to attain results. For numerous companies, customer intelligence improvements were part of a corporatewide initiative to foster a culture of customer centricity. For other companies they were a means to improve top-line growth and/or customer retention rates. As one of our winners stated, "You have to have top-down sponsorship and change the game because a fool with a tool is still a fool."
Framework for Leveraging Customer Intelligence
7. Automate decisions with rules-based interactions. In contrast to average performers, leaders have developed decision-tree workflows and/or rules-based best-fit selections for interacting with customers in real time across multiple channels. Use of predictive analytics and customer behavior modeling has enabled organizations to build matrixes of most probable outcomes (churn risk, propensity to buy, best offer) based upon unique sets of customer behaviors and prior transactions. As a result of these consistencies, companies can recommend the best possible customer-centric action to take in each interaction, including cross-selling, special offers, or service initiatives.
The future outlook
Forward-thinking organizations will continue to invest in select technology enablers, process development, performance measurement capabilities, and services that empower them to apply customer intelligence towards better decision-making in support of profitable growth.
About the Author
Leslie Ament is a research director of customer intelligence at Aberdeen Group. She can be reached at Leslie.Ament@aberdeen.com. Please visit www.aberdeen.com
Customer retention is one thing. Identifying the right ones to retain is another.
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