Market Research & Customer Intelligence: Media Influence Customer Intelligence Research Calculates Results!
Tips for using analytical tools to take action on customer data
SearchCRM.com
In this installment of the customer data and analytics guide, Leslie Ament of Hypatia
Research, LLC provides tips for optimizing analytics to take advantage of customer data. Read
expert advice on using analytics effectively and hear about real-world examples from companies like
GMAC Insurance and Bell Canada.
Don't miss the other installments in this customer data and analytics guide:
In most organizations, customer information resides in multiple data marts, is utilized by
multiple departments and is captured through multiple channels. Across numerous industries and in
B2C and B2B companies, customer data is analyzed and action is applied primarily for operational
and/or strategic decision support. In short, it is all about revenues and customers.
Taking action to support strategic or operational decisions
Previous quantitative research by Hypatia Research, LLC revealed that use of timely, complete and
accurate information leads to improved customer service levels, reduced operational costs,
increased revenues, and higher customer satisfaction and retention rates. In short, it's all about
revenues and customers -- how do we increase market share growth and customer profitability, reduce
customer migration or credit card fraud, and enhance retention rates?
Figure 1: Why take action on customer data?
Source: Copyright 2010 Hypatia Research, LLC
For many organizations, gaining customer visibility across all channels, trading partners,
distributors, suppliers, end users and stakeholders is a top priority, with the goal being to glean
customer insight. In B2C industries such as telecommunications, retail and financial services,
companies often struggle to understand and respond to their best customers within a multi-channel
environment. Not surprisingly, leveraging customer information requires that companies have
visibility across purchasing channels, products, and customer value metrics as well as demographic
information, transactional history and lifestyle stages.
Hypatia Research found that a majority of organizations take action on customer information for
the following five reasons:
Source: Copyright 2010 Hypatia Research, LLC
In fact, leading companies such as American Express, Wal-Mart, Harrah's Casino and Staples
consistently create actionable insight out of discernible patterns in customer behavior. These
patterns are tracked through various methodologies, such as:
Traditional direct marketing practices, such as response rates per customer segment or profile
based on discrete or diverse dimensions such as demographic or transactional information. Catalog
retailers, consumer goods and manufacturers of electronic equipment paved the way for this
approach.
Sophisticated predictive models (mathematically based algorithms and/or probability models)
designed to forecast or influence the customer's next likely online or in-store purchase. This type
of one-to-one relationship (1:1) is often referred to as mass customization or extreme
personalization.
Semantic and text analytics tools are used to glean actionable insights from blogs, online chat
rooms, customer call centers and feedback forms, and even online surveys. An early example of using
unstructured online information includes the product genesis behind the creation of the wildly
successful "Swiffer Mop" owned and distributed by Procter & Gamble.
Rules-based trigger communications or offers that are based upon recent customer events,
actions and online or mobile behavior. Retail banks were early adopters of this type of analytics
to target customers with products based on lifecycle events such as applications for mortgages,
opening IRSs, or 529 college saving plans.
Diverse enabling technologies and analytical tools can facilitate planning and execution of
both inbound and outbound customer interactions. Commonly used analytical tools are offered via
various delivery models, including enterprise licenses, Software as a Service (SaaS), and managed
services, and on a project basis. Often these analytical capabilities are defined by the following
categories:
"Trigger data such as life events, birth of a child, death in the
family, household move, or bankruptcies create an opportunity to influence customer
responses."
MyCustomer.com looks back at some of the major developments of
the last 12 months and outlines what the CRM industry has learned in
2009.
Phew. It has been a tough year.
Still, there have been some major lessons learned this year --and if we
really are seeing the green shoots of recovery then these lessons are
sure to stand us in good stead for the year to come. So let's take the
time to deliberate over some of the main talking points and emerging
trends and digest their implications for the future.
1. Analytics is at the top of the agenda
Business intelligence and analytics moved to the top of the agenda
for CIOs in 2009 as they looked to gain competitive advantage and
improve decision-making. A study by IBM, The New Voice of the CIO, revealed
that four out of five (83%) respondents identified business
intelligence and analytics as the best way to enhance organisational
competitiveness. This shift was reflected by the growth in the
analytics sector. According to IDC research
the sector grew 10% this year, while sales in the business analytics
space are predicted to rise at a compound annual growth rate of 7.2%.
Organisations hoping to glean priceless customer insight from
their analytics efforts need to be wary, however. And Leslie Ament,
co-founder of Hypatia Research LLC, warned of the fundamental barriers that businesses must overcome
if they are to have insight success as we move into 2010. As well as
the aforementioned volume of data, Ament also warned that many larger
retailers can have upwards of 10 different databases, each with
different scheme for collecting customer data; that despite
the importance of data quality, less than 40% of organisations had
deployed data quality tools enterprise-wide; and that often firms lack
a set of goals of objectives determined upfront to underpin their
analytics efforts.
"Companies are generally moving along the maturity grid, from mass
customisation to true customer intimacy but they have yet to reach that
visionary level in which they are effectively using this insight," she
explained.
BI BULLETIN
Trends & Tips for Using Business Intelligence & Analytics in Retail Leslie Ament, SearchDataManagement.com Contributor. 10.29.2009
A majority of multichannel retail environments are structured as
separate profit-and-loss centers -- online store; physical retail store;
catalog sales; and not-for-profit, business or government-only sales.
In fact, each typically has a separate revenue target, IT
infrastructure and business unit leader. Moreover, those business
leaders usually have incentive plans based on the revenue targets set
for their individual units.
Compounding this conundrum, other departments within a retail
environment -- such as merchandising, marketing, corporate planning and
supply chain operations -- are typically shared services.
What's more, compared to other industries, retail
is highly focused on inventory replenishment. Multiple sales channels
require that retailers fastidiously avoid "stock-outs" -- or as commonly
viewed in online shopping carts, "out-of-stock" (OOS) situations -- in
order to maintain brand primacy and customer loyalty and steer clear of
lost sales. For example, if a customer prefers Band-Aid brand adhesive
bandages but a drugstore has in stock only NexCare, a 3M brand, the
probability of the customer driving to another store is slim -- especially when gasoline costs nearly $3 per gallon, or more.
Finding success with business intelligence in retail
The diversity of stock-keeping units (SKUs) makes retail
merchandising a rich lode for business intelligence (BI) utilization.
Retailers routinely parse sales data in an effort to better determine
what will sell in the future. For instance, does a particular color or
size sell more than another does? Do different colors sell better in
one season or region than others? Does one store in a particular region
do better than the others there?
When looking at sales, retailers frequently adjust the prism through
which they measure success. As the consumer goods and retail sectors
continue to expand their original business model from that of a single
brand and/or brick-and-mortar store to include catalog and online
channels, other challenges surface. Retailers as well as consumer goods
brands have found that measuring success effectively requires tracking
performance metrics for each discrete product or SKU through each
distribution channel -- in addition to a corporate level roll-up.
Finding outliers of success (or disappointment) can help identify
best practices and highlight flaws. Always, the question of
profitability looms, whether by customer or by product or by marketing
campaign. For example, how much profit margin is realized per SKU for a
certain in-store promotion? Are particular customers more profitable
than others? Among other things, using BI allows retailers to improve
existing affinity programs. They also can get answers to questions such
as whether rebates or trade promotions on a particular item prompt
customers to spend more during a particular shopping trip, or at a
specific time of year.
Using advanced analytics gives retailers an edge
Retailers strive to track and analyze "market baskets" and/or "attachment rates." Knowing the frequency of customer purchases and the
store location, total dollar value and assortment of products bought in
each store trip or online visit is of great interest for obvious
reasons, including the following:
Merchandising executives consider market-basket analysis --
looking for relationships between the products that a customer buys at
the same time -- to be a key performance metric and use it extensively
in planning store layouts, advertising and trade promotion campaigns.
Attachment rates, which measure purchases of accessories and other
supporting goods , are tracked in order to understand customer buying
patterns by lead products.
Research examples of attachment-analysis hypotheses used by retailers include the following:
Customers who buy high-definition television sets also order
installation services and/or longer warranties than those purchasing
standard TVs.
Women always purchase matching shoes when they buy dresses priced at more than $250.
More often than not, customers who buy computer equipment also
select peripheral items such as a mouse, storage devices and printer
ink at the same time.
Conclusion
Companies contemplating investments in BI and analytical
technologies that will be used to leverage multichannel information
should carefully consider the following recommendations:
Define and standardize performance metrics on a corporate level.
Corporate-wide agreement on how metrics are defined and calculated is
as necessary as enterprise standardization of data dimensions across
data marts. Failure to achieve this renders any analysis and insight
derived from BI applications and reports not credible.
In a prime example taken from our research, activity-based costing
was the preferred methodology for calculating product category
profitability at one retailer. However, Hypatia found that one team
included the actual cost of both production and raw materials in its
calculation, while others added in an average cost of sales per product
SKU. Cross-functional dysfunction resulted.
In another case, an office supply retailer utilized specific
marketing metrics to calculate "uplift" from a trade promotion run on
printer ink cartridges and internally announced the promotion as a
rousing success. However, at the profitability level, the company
actually lost revenue on the promotion as subsequent market-basket
analysis revealed that the promotion didn't influence shoppers to buy
other products with higher profit margins. In short, the retailer paid
for expensive media advertising, store signage and direct marketing and
reduced the price of the printer ink below cost -- and realized both a
negative return on its investment in the promotion and a revenue
reduction.
Establish processes for updating, synchronizing, cleansing and normalizing all types of information.
That includes data about your customers, products and supply chain
partners. Gleaning market intelligence at a granular level, derived via
advanced analytics, data mining and operational reports, requires that
retailers have processes in place to track and store accurate, updated
and normalized data prior to analysis.
Ensure that your organization takes out the trash. Boosting
decision-support accuracy and credibility means ending the
dissemination of bad data throughout a multichannel environment.
Remember, it's not about data garbage in, data garbage out -- it's about
information garbage in, information garbage everywhere.
About the author
Leslie Ament, co-founder of Hypatia Research LLC, is a
customer intelligence management thought-leader and industry analyst
who focuses on how organizations capture, manage, analyze and apply
actionable customer insight to improve customer management techniques,
reduce operating expenses and accelerate corporate growth. Her research
coverage includes: business intelligence, media
intelligence/search/text analytics, CRM, Web analytics, marketing
automation and customer data management/data quality.
Scores of companies offer analytical tools, platforms and
services. For information on vendor selection criteria, research
products or scheduling an analyst briefing, contact Hypatia at ZGR@HypatiaResearch.com or Research@HypatiaResearch.com.
Executive Summary published on: www.mycustomer.com
Wal-mart, American Express, Coca-Cola, Staples, Best Buy, Harrah's
Entertainment, Proctor & Gamble, Toyota, Hilton International. AOL,
IBM, Oracle are among numerous blue-chip companies that believe
leveraging business and consumer data is necessary to compete in
today's economy. What used to provide a 'secret sauce' or competitive
advantage to companies savvy enough to exploit the value of customer
data within their own proprietary databases, has now become a rather
lucrative service business for vendors able to provide key components
including customer analysis; list and data enhancement; customer data
integration; and database marketing services.
Decision Science & Customer Analysis
Hypatia's Analytics Report, SMS for Voter Registration, Webcom and Tripwire, Vitrium's Documentrics Challenge
By David Sims
David at firstcoffee d*t biz
Hypatia
Research, LLC has released a report titled "Decision Science and
Customer Analytics: Competitive Advantage or Necessary to Compete"
which outlines "strategies, techniques, vendor products and services"
used by companies, according to Hypatia officials.
Wal-Mart,
American Express, Cocoa-Cola, Staples, Best Buy, Harrah's
Entertainment, Proctor & Gamble, Toyota, Hilton International. AOL,
IBM, and Oracle
are among numerous blue-chip companies using business and consumer data
today, report officials say. In fact it'd be hard to find a
significantly successful company who doesn't use analytics, First
Coffee thinks.
The
report finds that information is "a currency used for competitive
advantage since the earliest beginnings of barter negotiations and
commercial commerce." In today's global economy, knowledge of consumer
and business behavior, lifestyle and demographic information can be
transformed through information analysis, the report finds, in a form
known as "Decision Science, Marketing Science or Customer Analytics."
It
is this insight that is used in decision-making to help companies that
seek to enhance profitability or gain a competitive business advantage.
"In
order to create an effective decision analytics eco-system, companies
need to establish an operational foundation for customer data analysis
and decision-support," says Leslie Ament, Managing Partner at Hypatia.
If read off-site hit http://blog.tmcnet.com/telecom-crm/ for the
fully-linked version. First CoffeeSM accepts no sponsored content.
IBM
Global Business Services has strengthened its performance this
year, coming out of a two-year slump during which it was the lowest-rated in
customer satisfaction among our leaders. In fact, Gartner says the firm's
increasing its share of the CRM services market faster than the competition.
Leslie Ament, partner at Hypatia Research, says that IBM GBS has expanded its expertise
through new hires, and that customers can expect excellence in technological
knowledge. With a solid long-term partner in SAP and rapidly expanding
practices in India and elsewhere, IBM promises impressive strides going
forward.
THE
WINNER
Ever a standout in customer satisfaction, Deloitte shoulders out the competition this year,
making 2008 the first year we've crowned a new winner in nearly half a decade.
Deloitte's central differentiator is its focus on CRM, which, according to
Gartner, receives the majority of the firm's investments. "They've got the
business processes piece, and the implementation piece," Ament says. "You're
getting value there."
Half of the companies have actually deployed data quality tools or started Data Quality initiatives.
Of those who use data quality tools, less than one third has deployed these enterprise-wide.
The reason is that the information is siloed in different databases
collected from different sources, with no tools to connect them
together. Or as Leslie Ament, Managing Partner, Hypatia Research says:
"Many larger retailers have upwards of 10 different
databases with different schema for collecting customer data," Ament
said. "Standardizing and normalizing this information is akin to having
root canal surgery at the dentist."
I like analogies like that, hopefully we can make customers address
the challenges, even though it hurts. The good thing is that I think
we can see more business is becoming increasingly aware of these
challenges.
"The challenge for a multi-channel retailer is to understand which channel the customer prefers and which channel is most profitable per unique customer," says Leslie Ament, and that requires getting the data in order--no small feat."
"That could be a 12- to 18-month project for some companies, depending on how many legacy databases need to be integrated and cleansed. With mergers and acquisitions, many retail organizations end up with multiple databases," Ament says. "There could be 12 or 20 legacy database systems holding customer information at one company," she says. "Or large companies could have different brands and each brand might be in a separate business unit and each business unit has separate customer data."
"Retailers need to weed out redundant listings, bad addresses and other poor quality data. If they don't, subsequent analysis will result in the classic 'garbage in-garbage out.' Once data is consolidated, standardized and verified, the retailer can begin capturing crucial information about which channels a customer prefers, another daunting task," Ament says.
"Often a customer will access multiple channels before buying an item, making it difficult for the retailer to determine which channel played the key role in the customer's purchase decision. Ament notes that she often looks at an outfit in a catalog but will go to the store to try it on and then will buy it online because the color she prefers is only available at the web site. "If you're a marketer, how do you know what influenced my purchasing decision and to what extent I'm going to interact with you as a customer?" she says. "But technology is evolving that can help retailers analyze multi-channel data, including operational business intelligence and predictive analytics," according to Ament.
"Customer Intelligence Management (CIM) is a set of business intelligence tools and practices applied specifically to customer data. According to industry analyst Leslie Ament, CIM combines technology, people, process and data, but technology is a key enabler of successful initiatives. Top performing organizations are more likely to use customer data integration (CDI) tools prior to analysis, according to the study. These leaders are also more likely to use operational and predictive analytics to better understand their high-value customers."
"Siloed data and lack of effective CDI is the biggest CIM technology challenge for most companies and maintaining data quality is the second greatest challenge" revealed Ament. This is an area where the majority might be able to take a tip from the leaders. Ament found that selectively outsourcing CIM processes, which may include data management, and analysis and application of customer intelligence, was more prevalent in best-in-class companies than she had expected. Of the top performers, 50% used outsourcing for some part of their CIM process."
"I did expect companies to selectively outsource, but I didn't quite expect it to be at the range it came in at. It's a very healthy sign," Ament explained. "Companies recognize that they need to bring in experts and service providers with expertise." --"Best Practices in Customer Intelligence" by Hannah Smalltree, SearchDataManagement
"Before inviting the first BI vendor in to give a pitch, CIOs at a small- or mid-market company should ask themselves one question: How will my organization use the data that a BI application will provide? Organizations answer that question in one of two ways," says Leslie Ament.
"And the way you answer that question will direct you toward the type of BI investment you may want to make. Some organizations plan to use business intelligence to support strategic decisions, such as developing new products or corporate performance management initiatives. Others may want to use the data for operational decisions, such as for sales, marketing, customer service, procurement or production." According to Ament's research, little more than half of all organizations that use BI do so to support strategic decisions.--"Smart Tools and How to Pick Them" by Allan Holmes, CIO Magazine. .
"While virtually all on-demand CRM vendors provide features to support sales force automation, marketing campaign management and/or customer service, providing front-to-back office integration has become a clear differentiator in vendor selection according to Leslie Ament."
Hypatia Research,
LLC, http://www.HypatiaResearch.com
delivers high impact market intelligence, industry benchmarking, best practice,
and vendor selection research for how businesses use technology and service
providers to capture, manage, analyze and apply customer intelligence to
enhance performance and to accelerate growth. Coverage areas include:
CRM, Business Intelligence, Customer Analytics, Marketing Automation, Database
Marketing, and Customer Data Integration and Quality. Since its
inception by co-founder Leslie Ament in 2001, clients have relied on
Hypatia for industry insight, expertise and independent research for
guidance in assessing various technology and service options. Like our
namesake, Hypatia, we are committed to Calculating ResultsTM for our
clients.
Hypatia of Alexandria (circa. 370-415 AD), invented
several scientific devices--the astrolabe, planesphere, and hydroscope (hydrometer). These
instruments were used to calculate the distance between planets, the
position of visible stars at any time of the year, and the gravity of
liquids respectively. Hypatia was the first woman to make substantial
contributions to the development of mathematics, astronomy &
philosophy.
