3. Competing in a different dimension
Customer
Needs
Satisfied
Custom Centricity
Share of
customer
mer
Product Centricity
Market share
Customers Reached
Competing in a different dimension
Customer Maximizing the value
Needs created by each customer
Satisfied
Custom Centricity
Share of
customer
Maximizing the value
created by each product
mer
Product Centricity
Market share
Customers Reached
3
4. Customers create value in two ways
First, they generate current-period sales and costs
, yg p
But second, they change their intent to buy, or their
likelihood of buying, in the future
Suppose a customer calls you with a complaint…
Competing in a different dimension
Customer
Needs
Satisfied
Custom Centricity
Share of
customer
Relationships are required
Product Centricity
mer
Market share
Customers Reached
4
5. Classic framework for
customer relationships
Identify Differentiate Interact Customize
…customers as …by value, …more cost - …some aspect of
unique addressable behavior and efficiently and the company’s
individuals needs effectively behavior, offerings,
or communications
Classic framework for
customer relationships
Identify Differentiate Interact Customize
…customers as …by value, …more cost - …some aspect of
unique addressable behavior and efficiently and the company’s
individuals needs effectively behavior, offerings,
or communications
Customer Insight Customer Experience
5
6. Return on customer
Profit from investment + Change in value of investment
ROI = Starting value of investment
Profit from customer + Change in value of customer
ROC = Starting value of customer
ROI answers the question:
How much value can I create for the money I have to use?
ROC answers the question:
q
How much value can I create for the customers I have to use?
Which metric to choose depends
on what resource is scarcest
Enterprise value and customer equity
Total lifetime values of all current
and future customers
Customer equity = enterprise value of the firm
Therefore, ROC on customer equity is the same financial
value as “Total Shareholder Return”
Profit from customers + Change in customer equity
ROC = Starting value of customer equity
Company profit + Change in company’s value
= Starting value of company
= Total Shareholder Return
6
7. Leading indicators of LTV change include:
LTV drivers
Churn rate, frequency of purchase, share of customer, service
contract, account penetration level…
Behavioral cues
Changes in account profile, interactions, sales, referrals, returns,
complaints…
Lifestyle changes
New j b retirement, graduation, marriage, moving…
N job, ti t d ti i i
Attitudinal indicators
Willingness to recommend, customer satisfaction, brand preference,
level of trust and confidence…
Technical enablers
1 Multiple connected media and platforms
Major European Wireless provider running dynamically
personalized and linked offers through PDAs, Web, VRI, Call
centers
2 Better technology and newer modeling techniques
Major retail bank treating each customer based on their LTV,
Churn and ROC scores d
Ch d dynamically calculated and di l
i ll l l t d d displayed on
d
customer service agents’ monitor
7
8. Data sources & trends
1 Access and use of new data forms
Combination of transactional, online click-stream, POS, and
customer demographic data with marketing research provides
opportunities for determining customer needs with significantly
higher accuracy
2
Rising customer power
Social media and network analysis require new models for
p
predicting customer value
g
3
Search for a new competitive advantage
Financial crisis forced many firms to further optimize retention
efforts, cost management, and differentiation in service levels
All-State Legal analytics program
Goal
Gaining actionable insight into customers to improve marketing ROI
and sales performance
Results
Quicker and more targeted decisions with a lower marketing
investment
Next steps
p
Use segmentation to redefine the sales model and prioritize
operational processes
8
9. Challenges that companies face include:
Data ACCESSIBILITY, CLEANLINESS
Data and ACCURACY
Mission Having and LEVERAGING the right data
for HIGH-VALUE activities
Ability to GAIN CREDIBILITY for the ROI of
Support the program - especially calculating the
softer benefits
Organizational BREAKING SILOS of conflicting
Structure responsibilities, lack of accountability, etc.
Dealing with data issues
High-quality integrated customer data is the basis of
analytics
It is found that less than 10 percent of the companies have a
single, integrated view of their customers
Do not overlook the organizational challenges
Remember: the success of any analytical initiative
depends on the employees
9
10. Mining for gold in the database
Not about data integrity, it was
data overload
Lots of data at the customer level,
but needed the talent and
technology to analytically mine
this data
Our IT team was great at “running
reports” we asked for but could not
analytically answer business
gaps in way for us to take sales
or marketing action
Framework for customer relationships
Identify Differentiate Interact Customize
…customers as …by value, …more cost - …some aspect of
unique addressable behavior and efficiently and the company’s
individuals needs effectively behavior, offerings,
or communications
Customer Insight Customer Experience
10
11. Managing the customer experience
Integrate all customer-
g
facing operations
Optimize by customer, not
by product or channel
Interact Customize
Align enterprise-wide
…more cost - …some aspect of
p
efficiently and the company’s
metrics and incentives
effectively behavior, offerings,
or communications Ensure cultural “buy in” by
all employees
Customer Experience
Customer experience at MCI
US long-distance market, 1992:
Long distance is a commodity-like business
commodity like
MCI saw itself as having a parity product, differentiated
only by perception of value
10 million retail consumers
Aggressive, check
Aggressive “check in the mail” campaigns
mail
Serious retail customer retention problem
Source: Enterprise One-to-One, 1997, Peppers and Rogers
11
12. Retention is seen as a service issue
Marketing task:
Get customers in win them back
in,
Keep pouring customers into the top of the bucket
Sales and Service task:
Hang on to customers
Serve them well, keep them happy
Fix the leaky bucket
Differentiating the customer experience
Top 5% of MCI customers regularly accounted for 40% of
revenue
Roughly $75 a month in long distance
Three needs-based groups of these MVCs, based on
transactional analysis
Frequent travelers
Ethnic callers
Work-at-homes
12
13. “Customer First” program
Customer recognition, membership
Response required to initiate p g
p q program
Staged incentives, benefits, special call center staff
Mechanics
Mailing solicitations to most valuable customers
Customers protected from program solicitations
C t t t df li it ti
Outbound calls to confirm participation
“Customer First” is a great success
Customer attrition falls measurably,
compared t control groups
d to t l
Millions of dollars in increased
customer revenues projected
13
14. And then “Customer First” is killed
Organizational and compensation conflicts:
Product managers need access to best prospects in order
to make product sales goals
Mail and outbound calling channels belong to the
Marketing Department
Customer acquisition rates affect bonuses
Significant cultural obstacles, also
What should MCI have done?
Aligning metrics and compensation with customer
optimization is vital
Customer management: Responsibility for optimizing by
customer must be clear
Fix conflicts between product, channel, and profitability
management
Pay tt ti t
P attention to corporate culture, and the unwritten
t lt d th itt
career-makers and breakers
14
15. Building blocks
Steps to creating an analytics ready organization
1 Setting up the data driven decision making culture
2 Aligning to internal suppliers and customers
3 Hiring and retaining the right people
4 Getting the right tools and resources
Gaining buy-in across the organization
C-Suite Marketing
Sales IT
15
16. The outsourcing option: challenges
Identify and hire the right analytical talent to do the
analytical work
Acquire the technical tools necessary to meet all
requirements of the analytics program
Manage all operational costs
The outsourcing option: drivers
Global Interconnectivity:
Improvements in technology and communications systems allow the integration of
a high-skilled, low-cost, remote workforce with an organization's analysis p
g g y process
Efficient Sourcing:
According to Forrester, through 2008, 25 percent of CRM projects in the U.S.
are estimated to be cancelled or postponed because of the skills shortage in
consultants and systems integrators – outsourcing broadens the pool of potential
resources
Cost Savings:
Outsourcing offers a more cost efficient alternative for both human and t h i l
O t i ff t ffi i t lt ti f b th h d technical
resources.
Cultural Acceptance Shift:
A recent Forrester Research survey of 650 B2B marketing executives in the U.S.
found that 53 aimed to outsource more than half of their marketing activities in
order to focus on their core marketing and operational activities
16
17. How to make a strong case
Focusing on cost savings and value creation is crucial
First and easiest to measure is cost savings
Value creation is more difficult to measure
Find quick wins to gain and keep support
Relate to benchmarks (different or similar industries)
Conduct competitive analysis
Run Voice of Customer studies
Run experiments to prove the point
Or provide sample results, creating the need for more
Disseminate preliminary results even if conflict is on the horizon
How to make a strong case
Find political and financial support
Get a champion at C-level (with an influence on key
C level
executives)
Create allies in other divisions by aligning interests
and objectives
17
18. How to make a strong case
Don’t let the best get ahead of better
Start small and grow carefully
Measuring ROI may necessitate:
a sophisticated information management
a disciplined and focused organization
committed to fact based results and timely deliveries
Consider outsourcing and get help
Don’t try to “boil the ocean”
This isn’t mass media – you don’t need to gamble
everything with each campaign
Instead, devise and assign pilot projects, and publicize
successes
Visualize this as a series of “experiments” using
customer-specific communications
Educate your company public
18