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Everything You Ever Wanted to Know About Your Customers but Were Afraid to Ask

Published
  • April 06 2000, 1:00am EDT
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Many business analysts are afraid to ask certain analytic questions about their customers because they know they can never receive an accurate answer. For instance, consider the classic analytic question, "Who are my best customers?" The issue here concerns how the criteria for "best" are defined. In most companies, "best" is defined as the "biggest spenders." Many business analysts and decision-makers adopt this definition because they have access to only their customers' financial data. Most executives understand that "best" should be defined as "most profitable." For example, a key account may rack up several big-ticket sales, but then erode the profit margin with excessive customer support, product customization or other hidden costs.

THE HURWITZ TAKE: The equation for calculating profit is simple arithmetic. The business problem is that the ideal profit calculation must draw data from every customer touch point or source of customer information – known as "channels" – and factor these into the evaluation of each customer's profitability.

Achieving a cross-channel analysis of customers is a worthy goal that few companies can approach at this time. One barrier is that many touchpoints are not yet digitized; the number of hours an account manager burns up on the telephone with an account is seldom recorded electronically, although it is a payroll cost that erodes profit. Even when a channel is recorded electronically and is easily quantifiable (e.g., man-hours devoted to an account via a help desk), this data is too often stovepiped and unavailable to business analysts and decision-makers. Another barrier is that cross-channel customer data can quickly add up to gigabytes, which requires a highly scalable data warehouse environment; the more channels there are, the more complex are customer data movement and integration.

These are all daunting IT implementation issues. Yet, customer analysis with cross-channel data has compelling benefits. It can enable a company to draw a complete picture of an individual customer, which is key to understanding customer profitability, providing good customer service and developing one-to-one marketing promotions. Collecting, preparing and managing multichannel customer data are also prerequisites for mining a customer base to develop segments for direct-mail campaigns or for up-sell recommendations in a real-time e-commerce setting.

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