Do you know who your customers are? Do you really understand why they buy from you rather than your competitors? Could you describe their buying process and history with your company?
Comprehensive customer intelligence is a critical element of any successful CRM initiative. While it may seem like an obvious necessity, many organizations face several challenges in just getting started.
Getting Started: Creating a Customer I.Q.
Comprehensive customer intelligence is not developed overnight. And, it is certainly not a one-time analysis. Rather, it is an ongoing, iterative process.
A first step should be the collection, cleaning and consolidation of individual, customer-specific information, including customer contact details, promotion history, behavioral history and relevant firmographic/demographic information. A data audit can identify quantity and quality gaps in this information, and data refinement should be an ongoing iterative process.
Then, you can follow a logical series of analyses to create a solid foundation of customer intelligence and to develop the processes to grow and expand your customer I.Q. over time.
1. Customer Profiling. Profiling is a core knowledge discovery process that serves as the bedrock for all subsequent analytical efforts. Profiling will provide strategic insights into the most fundamental issues of relationship management. Profiling typically looks at customer firmographics, demographics and geography, tenure, purchase recency and frequency, and channel and media usage for both sales and service transactions.
2. Customer Segmentation. Using profiling results, customer segmentation is a disciplined method of identifying unique customer groups that have different product needs, expectations and purchase relationships. Once identified and scored on the database, each resulting segment can then be described both quantitatively and qualitatively in terms of product usage and other purchase behavior and profiles. Try to create a resume for each segment of customers: What would you say about them? What is most notable? These narrative resumes will allow you to deliver relevant, customized marketing messages and appeals. More importantly, the credentials of each segment will enable you to set quantifiable goals in terms of future purchase activity and profitability.
3. Customer Valuation. Marketers have long understood that all customers are not created equal and have used customer value to guide all acquisition, retention and customer development efforts. Beyond current revenues, there are three measures of value that should be evaluated at the individual and customer segment level:
- Profitability which nets out all costs of providing goods and servicing customers.
- Long-term potential which forecasts future revenues from anticipated customer activity. Long-term potential may also evaluate expected changes in customer life stage that might indicate increased or decreased propensity to buy.
- Share of wallet which is a measure of customer loyalty. Share of wallet estimates the percentage of business a customer is giving you versus your competitors.
4. Customer Life Cycle. This analysis looks at segment-specific purchase behavior over an extended period of time and identifies product affinities, sequencing and timing of purchases and typical migration paths between product categories. The goal of this analysis is to pinpoint specifically what customers will be interested in and when.
Expanding the Picture
Successful CRM also requires a thorough understanding of the needs, values, images and expectations that shape customers' purchase decisions. While some information can be inferred through purchase activity itself, attitudinal information can best be gathered through primary research. A combination of focus groups and detailed phone or mail surveys targeted at representative samples from each customer segment will expand your customer I.Q.
The results of initial primary research can then provide guidance on the types of information to capture from individual customers at the point of contact through informal surveys at the time of order entry, online at the Web site or at the customer service desk.
Customers change. Their families grow or contract, their earnings increase or decrease and their needs, attitudes and preferences shift overnight or over time. Processes must be put in place to continually reevaluate customer profiles, segments, behaviors and valuations.
This continual change is something that most marketers would prefer to forget. It can mess up strategic plans, annual budgets, approval processes and all other aspects of what may happen in most marketing environments. Yet keeping your customer I.Q. current is a baseline requirement of CRM.
Using Customer Intelligence
It's clearly not enough just to collect, create and maintain your customer I.Q. Customers are tired of telling companies more and more about themselves without seeing any change in corporate behavior. They will only continue to reveal attitudes and preferences if the company demonstrates that they are listening by tailoring communications and offers based on the information provided. This means that organizations must provide access to critical customer information at all points of contact. Everyone within the organization must embrace customer intelligence as a means of ongoing survival.
Expanding your customer I.Q. is a strategic necessity for CRM. While it is only a part of the picture, organizations that do not begin to build and expand this intelligence will not be able to successfully execute on the promise or the premise of managing customer relationships. On the other hand, organizations that aggressively pursue customer intelligence will maintain a significant competitive edge.
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