With the recent interest in customer relationship management (CRM) solutions, the data warehouse has once again been thrust into the limelight. The focus of a CRM solution is on knowing as much as possible about your customers: who they are, what they buy, what influences them, how valuable they are to your organization, and so on. But, the information about your customers is spread throughout numerous disparate operational systems scattered throughout your organization. In a typical enterprise, it's not easy to discover for a particular customer what goods or services they've purchased, what marketing campaigns they've responded to (and which ones they haven't), which salespeople or telesales people they've spoken to and when, or how many times they've called customer service. This is where the data warehouse comes in as the optimal solution: it can consolidate all this information into one holistic view of your customers, allowing you to gain a deep understanding of your customers (commonly referred to as "customer intimacy").
While the ultimate goal is to have all relevant and valuable customer information in your warehouse, it is unlikely (and not even recommended) that you build such a warehouse all at once. It is much more preferable to build it in a scalable, incremental fashion. That way, you can start with something fairly small which will be low cost and quick to deploy and then iteratively and incrementally build on it. Each iteration of your warehouse will bring you one step closer to fully understanding your customers and will move you along the various stages of customer intimacy. But, that raises an important question: what are the various stages of customer intimacy? What level should you be targeting first, and what are the subsequent levels? To answer this question, my colleagues and I have developed the Customer Intimacy Maturity Model. It contains four different stages of customer intimacy and will help guide you as you develop and enhance your data warehouse as a part of your CRM solution.
Stage 1: Customer Identification
Before we can really start to understand our customers, we must first know: who they are and what they're buying. Even though we're just talking about having this basic information, you probably won't find the following observation very surprising: a great number of organizations are far from being at stage 1. These organizations (which I call "stage 0" organizations) don't have any easy way of identifying their customers. A mail order catalog company where I recently consulted could only generate their customer list by accessing their accounts receivable application, printing all the invoices they had sent out and then removing the duplicates. Another organization (a large car manufacturer) had one list of customers in their warranties database had another list in their sales database. About 10 percent of the names in each database did not appear in the other database. Which database was right? Who were their actual customers? The unconsolidated and inconsistent data made it impossible for them to really answer the question. But, organizations that are at stage 1 don't have this problem. They know their customers' names, their addresses, what they bought and when they bought it. They know how much these customers buy from them each year and how long they've been customers.
Stage 2: Customer Differentiation/Segmentation
Once you know who your customers are, you're ready to stop treating all customers in the same fashion. The first step is to start differentiating between your customers via customer segmentation. For example, a certain group of customers will be more inclined than others to buy certain products. Also, certain customers are more valuable to you than others. For example, some customers may be long-term customers who spend a significant amount of money with you each year. These customers have a large amount of loyalty to your organization and, therefore, should be put into your "gold" customer segment.
To successfully reach stage 2, you must identify those characteristics that can help you pinpoint how to best segment your customers. You must, therefore, add customer demographic data to the other customer information put into the warehouse for stage 1 and then leverage this information by using OLAP and data mining tools.
Stage 3: Mass Customization/Segment of One
Although segmentation is certainly a step in the right direction, it's even better to treat customers as individuals rather than as part of a group. That's the goal of stage 3, where the concept of "mass customization" or "segment of one" comes in: each customer is his or her own segment. This allows you to further tailor the customer's experience with your organization. One of the most common mediums for seeing this mass customization in action is the Web. Once the user logs on to your Web site, you can present them with the specific information that they are interested in. If you're a financial institution, you can show them the stocks they're interested in tracking. If you sell flowers online and you know that a customer sent flowers to his mother last year for her birthday, you can remind him that his mother's birthday is coming up again. But, the Web isn't the only place for mass customization there are several apparel companies that have mastered the ability to mass produce clothing that is customized to fit an individual's specific measurements.
To be able to achieve stage 3, you need to put even more detailed information about your customers in the warehouse. Whereas you needed to know only a few key indicators about a customer to achieve stage 2, you need to know much more for stage 3. You want to capture every interaction; and this involves not only information from your marketing, sales and customer service applications but also integration with information from your back-office applications. By integrating the accounts receivable system into your warehouse, you can identify which customers pay promptly and which do not. Or, by integrating your product shipping system, you can tell which customers received their products on time and which customers received late shipments. All of this information is useful in understanding your customers and enhancing their loyalty to you.
Stage 4: Predicting/Influencing Customer Behavior
Once you are able to treat customers as individuals and understand their behavior, the next and final step is to be able to predict (and even influence) their future behavior. You want to be able to proactively sell, market and service your customers. If you identify that certain clients have predictable patterns of buying large quantities of supplies from you, you can use that information to predict sales levels and more effectively manage your inventory to make sure the product is in stock when the customer requests it. In another vein, imagine how powerful it would be to know that a certain customer is very sensitive to shipments being on time and to have customer service proactively call that customer (before they call you) if you know a shipment will be late and offer some form of compensation.
Achieving stage 4 usually involves heavy use of data mining against large amounts of detailed data in a data warehouse. Using sophisticated analysis tools will allow you to model, predict and ultimately influence your customers' behavior.
So, following this Customer Intimacy Maturity Model, where would you place your organization? Are you at stage 0? Or maybe stage 4? Regardless, any organization can use this model to help them define an incremental approach to achieving true customer intimacy.
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