• October 16, 2009
  • By Jessica Tsai, Assistant Editor, CRM magazine

The Next-Generation CMO Knows Something You Don't Know

For David Frankland, the most frustrating thing to hear over and over again in marketing is the oft-cited claim typically attributed to John Wanamaker: "Half the money I spend on advertising is wasted," the retail magnate is alleged to have said. "The trouble is I don't know which half." Frankland, a principal analyst at Forrester Research, considers that perspective woefully antiquated: "It's just not realistic in this day and age," he says, "to admit that half of your marketing spend is wasted."

Now more than ever, Frankland says, senior-level executives are demanding accountability in the form of quantifiable metrics. He contends that a focus on customer intelligence (CI) -- which Forrester defines as "the management and analysis of customer data from all sources, used to drive marketing performance and business strategy" -- leads to improvements in all areas of customer profitability, value, satisfaction, and retention. And yet, according to the findings of his new report, "The Intelligent Approach to Customer Intelligence," roughly three-quarters of all companies still don't measure the value of CI.

Approximately 300 CI professionals participated in this survey, spanning B2C and B2B companies across multiple industries. Company sizes -- based on 2009 worldwide revenue -- also varied greatly:

  • less than $100 million................15 percent
  • $100 million to $499.9 million.....11 percent
  • $500 million to $999.9 million.......6 percent
  • $1 billion to $9.9 billion..............31 percent
  • $10 billion or more....................13 percent
  • Don't know/prefer not to say.......25 percent.

Frankland reports that 41 percent of respondents held a position at or above the level of director. The range of demographics, he adds, suggests that "CI is something that every firm can -- and should -- do." The amount of investment, like anything else, varies depending on the size and budget of the company.

Forrester launched its Customer Intelligence Professionals segment in July of this year, according to Frankland, and this CI survey is the first in-depth report on the topic to emerge in the four months since. The functionalities under the umbrella of CI thus far include:

  • market research;
  • direct marketing;
  • marketing analytics;
  • Web analytics and optimization;
  • consumer feedback and listening;
  • database marketing; and
  • competitive intelligence.

In any given organization, Frankland explains, CI professionals -- marketing technologists, scientists, practitioners, and consumer strategists -- all serve varying functions. In some cases, he adds, a group of several people can tackle a single function and come together as a team; in others, all roles are embodied by a single individual assuming all responsibilities.

According to the report, the rising demand for CI is being driven by the convergence of three market factors:

  • limited consumer tolerance for marketing;
  • technologically and socially empowered consumers; and
  • increased demand for marketing accountability.

While these factors may certainly have been true with the advent of any new media channel (e.g., telemarketing, email), Frankland argues that, in addition to marketing blockers such as the digital video recorder and the Do Not Call registry, the social media "firestorm" has empowered consumers to an extent never before imagined.

Making matters worse, Forrester contends that the same capabilities enabling consumers are actually hindering companies as they struggle against constraints of three kinds:

  • organizational;
  • technological; and
  • social.

Another significant motivation behind the growth in CI, Frankland says, is the ever-increasing amount of customer data companies are gathering. In fact, he says, according to an estimate by Andreas Weigend, the chief scientist at online retail giant Amazon.com, the amount of data accumulated in 2009 alone exceeds the cumulative amount gathered "in the entire history of mankind through 2008." The challenge is in making sense of that tidal wave of data, and generating actionable intelligence in the process.

When it came to integrating the various functions of customer intelligence, however, respondents claimed that actionable intelligence and marketing efficiency often took a back seat in the pursuit of "strategic value." Asked to name their objectives in integrating CI, respondents cited the following three goals most often:

  • Creating a unified customer intelligence function;
  • leveraging best practices across functions; and
  • enabling the integrated function to play a more strategic role at the corporate level.

Frankland admits that it wasn't unusual to find three-quarters of respondents not yet measuring the value of their customer intelligence. But that left approximately one-quarter of respondents with metrics to report -- and to compare. Frankland says that, among this minority, he was "pleasantly surprised to see how broadly they're [measuring performance], and the results they're seeing." According to the survey, the measurements that revealed the most-impressive results were:

  • Campaign metrics: Of the 53 respondents using this metric, 83 percent saw improvement.
  • Customer satisfaction: Of the 55 using this metric, 78 percent saw improvement.
  • Incremental revenue: Of the 43 using this metric, 77 percent saw improvement.
  • Customer retention: Of the 57 using this metric, 75 percent saw improvement.

Forrester has developed a Customer Intelligence Maturity Model to assess the industry's progress in embracing CI. The model includes the following three stages, listed here in increasing complexity and maturity:

  • Functional Intelligence (54 percent of companies): CI is restricted within a specific channel, product, or service.
  • Marketing Intelligence (34 percent): As the name suggests, CI is used to measure marketing performance across channels, products, and services, but rarely extends enterprisewide; and
  • Strategic Intelligence (12 percent): CI influences overall business growth and may be considered a "most-valued strategic asset."

According to Frankland, the model incorporates multiple factors, including:

  • depth and breadth of CI usage;
  • CI's sphere of influence within the organization; and
  • executive support of CI's role.

Advancing from one stage to the next is a challenge, Frankland says, and progression ultimately depends not only on each company's specific circumstances, but on the existing cultural and technological demands in evidence as well.

Frankland writes in the report that the desire to make an emotional impact on the customer "will move [CI] to the front of the room." As a result, he predicts, companies will gradually undergo a critical cultural shift powered by Customer Intelligence -- a shift that will lead to the evolution of what he calls "the next-generation CMO." 

News relevant to the customer relationship management industry is posted several times a day on destinationCRM.com, in addition to the news section Insight that appears every month in the pages of CRM magazine. You may leave a public comment regarding this article by clicking on "Comments" at the top; to contact the editors, please email editor@destinationCRM.com.

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