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Leveraging Customer Information: Driving Strategic Direction and Marketing Profitability

  • ID: 42727
  • Report
  • January 2000
  • 151 pages
  • American Productivity & Quality Center, APQC
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There was a time in the not-too-distant past when an organization could be
successful by concentrating on the traditional “4P’s” of marketing: product,
price, place (distribution and channel relationships), and promotion. However, in the overcrowded, hypercompetitive, interactive marketplace of today, the 4P’s have become merely the cost of entry into a business category. To stay in business, marketers must have a quality product that is conveniently available at a price customers feel is fair and supported with some level of brand or product communication and promotion. In most cases, however, an organization can no longer look to any of the 4P’s to provide a sustainable, meaningful advantage over its competitors. Instead, it must find alternative means to differentiate itself and its products and build strong, ongoing associations with its customers.

The information about customers that organizations gather, capture, manage,
and store is a valuable resource that, properly applied, can help them address today’s marketing challenges. Never before have organizations been able to amass so much information about their customers and prospects. Information and the use of that information can provide the necessary competitive advantage most firms are seeking. The very nature of the 21st century marketplace, with its convergence of traditional and e-commerce business models, makes it imperative that organizations get maximum value from the information they have available to them. To do so, however, they must shift from the product-driven methods of the past and approach their markets and their customers in new and innovative ways. Some leading organizations have shifted their focus beyond the traditional 4P’s and have begun to address what we call the “5R’s” of marketing in the interactive age:

- Relevance:How is information about customers’ needs, behaviors, attitudes, and perceptions applied to develop messages, products, and communication tactics that will have greater relevance, and therefore greater impact, among selected audiences?

- Receptivity: At what point will customers be the most receptive to information or offers? How can firms apply what they learn about customer preferences in terms of how to buy, where to buy, how to get information, and the like? How can the firm know about customers and their points of greatest receptivity, and then manage those contact and delivery points for greater effectiveness?

- Recognition: In a cluttered, crowded marketplace, how can organizations be sure customers recognize the brand, impute some value to it, and therefore select it above others? As recognition is a two-way street, organizations are also challenged to develop systems that enable them to immediately recognize a returning customer and tailor customized messages or offerings to them based on stored information.

- Responsiveness: How can companies be more responsive to customers’ changing
needs and wants? Also, how can information technology best be used to make it
easier and more convenient for customers to respond—that is, to take advantage
of special offers or make a purchase at the time most convenient to them?

- Relationship: How do organizations apply everything they know about customers
in a comprehensive customer relationship management framework to nurture
and enhance customer relationships as well as implement the best metrics to track the health of those relationships?

The best-practice organizations profiled in this study have a number of
characteristics in common. Each seeks to marshal its data resources so that it can fully leverage the investment made in gathering, capturing, and storing information about customers and prospects. While some are more advanced than others in addressing the 5R’s described previously, each organization has begun a journey to build itself around its current and future customers—that is, each seeks to be a truly customercentric organization, with the requisite communication, information, customer service, and management systems in place that such an orientation entails.

STUDY FOCUS

The focus of this study was to examine how organizations capture, manage, and
integrate various forms of customer information (attitudinal, behavioral, customer satisfaction, etc.) and use it to shape strategic direction and business operations. This study was preceded by three consortium benchmarking studies devoted to uncovering processes in the area of customer marketing, communication, and knowledge management:
- Integrated Marketing Communication (1997),
- Transforming Customer Data into Information (1997), and
- Brand Building and Communication (1998).

OVERVIEW OF FINDINGS

This report is organized around the Customer Data Leverage Model that contains
three main components that tie together:
- the types of data organizations gather on their customers and prospects,
- the processes used to manage and integrate the various types of data, and
- the tactical and strategic application of such data to business operations and decision making.

Just how heavily organizations rely on customer data in strategic decision making depends to a great extent on the firm’s corporate culture, the orientation of senior management, and the nature of the company’s business. Firms with a broad universe of customers tend to use integrated data somewhat less intensively than those with a limited pool of end users or consumers. For some firms, integrated customer data have been used primarily to enhance their database marketing activities. On the other hand, companies offering a portfolio of products and services to niche markets or narrowly defined groups of customers have tended to apply customer data in more far-reaching ways. That is, they use them to accomplish each of the preceding purposes. They use them to shape their marketing and communication efforts (i.e., to be more relevant). These companies have embedded the use of integrated data into their customer service touch points (becoming a learning organization), and they use them as a key measure on their corporate scorecard, where the data influence resource allocation and decision making at all levels.

Organizations hoping to emulate the success of best-practice partners profiled in this study should consider the following guidelines:

1. Treat integrated customer data as a strategic asset that can be used to help drive and support a customer-centric corporate culture.

2. Include systematic customer performance metrics on the corporate scorecard.

3. Encourage cross-selling across all units by linking compensation to achieving companywide customer goals.

4. Make integrated customer data widely available to analysts and customer service representatives to enable them to better understand customers’ needs, while still respecting customers’ right to privacy.

5. Use customer data to understand all “touch points” and to improve the quality of the customer experience at each.

6. Use internal and external data to develop rich, predictive models that anticipate customer needs.

7. Develop customized programs, offers, communication, and products based on
past behavior, customer profiles, preferences, and anticipated needs.

8. Build a strong business case. Use integrated customer data to link attitudes to past and future behaviors and understand what that relationship can mean to the achievement of future sales, service, and bottom-line success.
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- Sponsor and Partner Organizations

A listing of the sponsor organizations in this study, as well as the best-practice (“partner”) organizations that were benchmarked for their innovation and advancement in using customer information to achieve a competitive
advantage.

- Executive Summary

A bird’s-eye view of the study, presenting the key findings discovered and the methodology used throughout the course of the study. The findings are explored in detail in following sections.

- Study Findings

An in-depth look at the 20 key findings/observations of this study. The findings are supported by quantitative data and references to the partner organizations’ practices.

- Best-Practice Organization

Case Studies
Background information on the partner organizations, as well as an in-depth look at the innovative ways they leverage their customer information.
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