Helping marketers with customer identity management.
Posted Mar 14, 2008
The idea of pulling together data to get a more accurate view of customers is not a new concept. Businesses have been creating data warehouses and data marts for years. While issues of data quality and accuracy remain impediments, departmental users are often faced with a greater challenge: how to analyze available data and derive actionable conclusions.
For senior customer-management and marketing executives, the discipline of Business Communications Intelligence (BCI) has emerged as a method to understand communications processes and measure their effectiveness.
Marketers often struggle with market segmentation and customer identity management. Adding communications intelligence to segment parameters provides insight into not only the communications behavior, but also the content and context of communication transactions.
If integrated properly, BCI can help the marketer effectively define, manage, and communicate with customer segments. BCI enables the development, creation, transmission and processing of response to communications across email, postal mail and Web content.
As an example, let's consider the cable TV operator that decides that the bottom 10 percent of its customers are not worth keeping and sends a letter to 1,000 of them terminating their contract. These are customers that incur a lot of cost, through service requests, complaints and other maintenance costs. The rationale behind this preemptive termination is that those customers are draining profits.
But who are these people really, and why are they behaving this way? Once you discover the true impact of each customer on your profitability, you can determine the true reasons behind the numbers. For your unprofitable customers, you'll have to admit that you are not offering them a compelling value proposition. The key is to identify your most profitable customers.
In the end, the formula for finding your most profitable customers is based on aggregating all costs incurred serving that customer against all payments made. But that doesn't necessarily help you understand why they are such good customers, or why other customers are not as good.
Profitability is another way of segmenting a customer population. Marketers do this all the time, some better than others. You've heard the labels: Soccer Moms, Empty Nesters, Early Adopters, etc. A segment is characterized by measurable characteristics, such as demographics, econometrics or profitability.
Many segmentation efforts are an exercise in futility because companies are basing their segments on inappropriate criteria. For example, a company that has several product divisions may segment those customers according to the products only that division sells, precluding a complete understanding of that customer.
Further, the more data used to segment, the larger the number of segments. Marketers tend to resist this because of the volume and complexity of data. If you have 100 segments, you have to develop 100 types of segment strategies. That's a lot of work.
But yet, in this age of mass customization, is the ideal segment size not "one"? Does a lack of tools and management approaches prevent companies from adopting this approach?
People do things differently than they say. For example, timeshare vacation vendors routinely discriminate desires from reality in their surveys. It appears that most people communicate their willingness to purchase a luxury product, then decline to actually do so.
How can you tell what people are really going to do? How do they communicate this? Few marketing consultants will tell you to analyze how people communicate. My guess is that's not because it's a bad idea, but because there are few tools available in the area of communication management.
But, what if you were able to plot each customer communication on a timeline, by subject or duration? You would get a graph that shows that a customer purchased a product or service, and the subsequent service or follow-up communications.
More questions would be answered: What kind of promotional message had the best response rate, by customer segment? Moreover, how do customers choose to respond; what are their communication preferences? What is the correlation between known product defects and customer-service requests, by channel? What is the shelf life of a print and Web message? Which products generate the most communication traffic? What are the best channels that elicit responses, by demographic?
If you had this information, would you still fire a low-profitability customer? Or, would you seek a better remedy to increase the profitability of that relationship?
The foundation of BCI is the ability to add communication characteristics to existing segmentation descriptors. These characteristics are:
Location describes all the location parameters of sender and receiver. Channel defines print and electronic communication channels. Production describes where, how, and what is sent and received. Customer describes all the identifying features and transactional history of a customer.
By associating communication data with customer and product data, BCI makes it possible to develop a completely new analytical capability that helps managers understand why and how customers communicate their needs and intentions.
About the Author
As vice president of strategy at Pitney Bowes' Group 1 Software, Michael Overturf (firstname.lastname@example.org) contributes insights to Group 1's current and future product-deployment strategies for a variety of industries and applications. He can be reached at 1-301-918-0854.
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