Gain Pareto Thinking in CRM

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In 1906 Italian economist Vilfredo Pareto uncovered the fact that a large percentage of wealth was concentrated in a small proportion of the population. From this Pareto advanced the logarithmic law of wealth distribution, emphasizing the disproportion--in other words, the "separation of the vital few from the trivial many." According to Pareto's law, 80 percent of profits come from 20 percent of customers. Applying Pareto thinking to CRM activities could make the difference between losing customer retention opportunities and optimizing long-term relationships with this profitable top tier. Over the past 100 years, the 80/20 rule has stood the test of time in the business world. Companies have used it to create more productive and more profitable strategies in many ways. Now companies can apply this axiom to their CRM activities to leverage results with their own vital few. For example, contact centers can focus their retention efforts on their highest-value inbound calling customers, rather than spend valuable time, energy, and money making retention and cross-sell offers to their entire customer base. Spend 80 Percent of Effort on the Top 20 Percent The key to putting the Pareto principle into practice in customer contact programs starts with separating high-value customers from the rest. The next step is to capture that value by determining which actions will make these top customers more loyal (and thus even more profitable) to the company. Next, implement the actions with each high-value customer at a time when she will be receptive. Then consistently identify high-value customers and actions for every moment of the workday. And, last, execute this strategy with the smartest use of the enterprise's resources, including agent hours. While this sophisticated strategy aims for lofty goals, achieving them is not difficult thanks to innovative predictive analytic technologies designed for the task. Many solutions do the heavy lifting, so customer contact centers can simply plan the preferred Pareto strategy and reap the benefits. Putting Pareto Thinking Into Practice
Innovative predictive analytic software solutions can help you effortlessly separate your highest value customers from the rest, predict the action that will make them more loyal to your company, and execute the action at the right time--all while optimizing your resources. Here's how: 1. Predictive analytics extracts the top 20 percent. These solutions intelligently identify your highest value customers and their predicted reactions to various actions, using traditional, nontraditional, and innovative new data sources. The behavior assessment is critical because even among your high-value customers there are differences in how they will react to various sales or retention offers. For example, one customer will welcome an offer for a second product, such as a credit card, and another customer will be exasperated by the sales pitch. The trick is identifying the optimal action to take with each customer to garner her loyalty. 2. Predictive solutions execute targeted actions. Companies can preprogram their predictive analytic applications to handle each customer based on her value and scores at the individual account level. This enables companies to pinpoint the right strategy for the individual customer, unlike traditional behavior scores, which treat groups or segments of like customers alike. This customization allows companies to handle customers according to business goals and strategies. Here are a few examples of typical customer-handling scenarios in an inbound call center:
  • High-value customers with a high propensity to accept an offer are routed to special agents for personalized cross-sell offers.
  • High-value customers with a predicted risk of attrition are routed to retention agents for upsell offers.
  • Low-value customers remain in self-service. 3. Analytics dynamically manage calling queues. Traditionally inbound customer call centers operate on first-come, first-served. But this inflexible strategy doesn't support the 80/20 rule. Predictive analytics updates this standard operation by continually and dynamically resequencing the customer calling queues. Thanks to this sophisticated and highly flexible capability, companies are assured that their highest value customers always receive the ideal level of loyalty-boosting service. Modern Analytics Support 100-Year-Old Theory In today's highly competitive marketplace, customer retention is at the forefront of every company's mission. Progressive companies realize that it only takes one mistake, such as a mishandled inbound service call, to lose a customer to a competitor. Adding sophisticated analytic products to your existing preagent routing systems is one of the best ways to identify and service high-value inbound calling customers. Companies that leverage leading-edge predictive applications can easily maximize the Pareto law and reap these benefits:
  • Identify customers with a high propensity to purchase cross- and upsell offers.
  • Conduct continuous retention activities with high-value customers.
  • Deepen engagement with high-value customers.
  • Reduce the risk of attrition with superior service.
  • Deliver a better customer experience and win the CRM battleground. About the Author Robert Tate is the vice president of marketing at Austin Logistics. Bob can be reached at Please visit
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