Analytics in Action

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Analytics In ActionOvercoming the Top Analytics

Tuesday, October 20, 200911:00 AM Eastern, 8:00 AM Pacific

Challenges to Turn Data Into Dollars

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Analytics In ActionOvercoming the Top Analytics Challenges to Turn Data Into Dollars

Susan Jacobs

Don Peppers, Founding Partner


Director,Marketing & Client Services

Onder Oguzhan, Partner

Topics of Discussion

Today’s agenda

Harness customer insight Make strategic, marketing, and operational decisions faster, easier and more efficientlyOvercome cultural and organizational barriers to enable analytics success

Q&ASurvey

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Competing in a different dimension

Customer Needs

Satisfied

Product CentricityProduct Centricity

SatisfiedShare of customer

mer

Cen

tric

ityMarket share

Customers Reached

Cus

tom

Customer Needs

Satisfied

Maximizing the value created by each customer


Product CentricityProduct Centricity

SatisfiedShare of customer

mer

Cen

tric

ity

Maximizing the value created by each product

Market share

Customers Reached

Cus

tom

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First, they generate current-period sales and costs

Customers create value in two ways

, y g 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…


Customer Needs

Satisfied

Product Centricity

Satisfied

mer

Cen

tric

ity

Relationships are required

Share of customer

Customers Reached

Cus

tom Market share

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Classic framework forcustomer relationships

Identify Differentiate Interact Customize

…customers as unique addressable

individuals

…by value, behavior and

needs

…more cost -efficiently and

effectively

…some aspect of the company’s

behavior, offerings, or communications

Classic framework forcustomer relationships

Identify Differentiate Interact Customize

Customer ExperienceCustomer Insight


individuals


needs


effectively



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Profit from customer + Change in value of customer

Profit from investment + Change in value of investmentStarting value of investmentROI =

Return on customer

Profit from customer + Change in value of customerStarting value of customerROC =

ROI answers the question: How much value can I create for the money I have to use?

ROC answers the question: qHow much value can I create for the customers I have to use?

Which metric to choose depends on what resource is scarcest

Total lifetime values of all current and future customers

Enterprise value and customer equity

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 equityROC = Starting value of customer equityROC =

= Company profit + Change in company’s valueStarting value of company

= Total Shareholder Return

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LTV driversChurn rate, frequency of purchase, share of customer, service contract, account penetration level…

Leading indicators of LTV change include:

contract, account penetration level…

Behavioral cuesChanges in account profile, interactions, sales, referrals, returns, complaints…

Lifestyle changesN j b ti t d ti i iNew job, retirement, graduation, marriage, moving…

Attitudinal indicatorsWillingness to recommend, customer satisfaction, brand preference, level of trust and confidence…

Major European Wireless provider running dynamically

Multiple connected media and platforms1

Technical enablers

personalized and linked offers through PDAs, Web, VRI, Call centers

Better technology and newer modeling techniquesMajor retail bank treating each customer based on their LTV, Ch d ROC d i ll l l t d d di l d

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Churn and ROC scores dynamically calculated and displayed on customer service agents’ monitor

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Data sources & trends

1 Access and use of new data formsCombination of transactional, online click-stream, POS, and customer demographic data with marketing research provides

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customer demographic data with marketing research provides opportunities for determining customer needs with significantly higher accuracy

Rising customer powerSocial media and network analysis require new models for predicting customer value

3p g

Search for a new competitive advantageFinancial crisis forced many firms to further optimize retention efforts, cost management, and differentiation in service levels

All-State Legal analytics program

GoalGaining actionable insight into customers to improve marketing ROI and sales performance

ResultsQuicker and more targeted decisions with a lower marketing investment

Next stepspUse segmentation to redefine the sales model and prioritize operational processes

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DataData ACCESSIBILITY, CLEANLINESS and ACCURACY

Challenges that companies face include:

Support

Having and LEVERAGING the right data for HIGH-VALUE activities

Mission

Ability to GAIN CREDIBILITY for the ROI of the program - especially calculating the softer benefits

BREAKING SILOS of conflicting responsibilities, lack of accountability, etc.

Organizational Structure

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 employeesdepends on the employees

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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 businessanalytically answer business gaps in way for us to take sales or marketing action

Framework for customer relationships

CustomizeInteractIdentify Differentiate

Customer Insight Customer Experience




effectively


individuals


needs

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Integrate all customer-

Managing the customer experience

gfacing operations

Optimize by customer, not by product or channel

Align enterprise-wide metrics and incentives…more cost - …some aspect of

Interact Customize

metrics and incentives

Ensure cultural “buy in” by all employeesCustomer Experience

efficiently and effectively

pthe company’s


US long-distance market, 1992:

Long distance is a commodity like business

Customer experience at MCI

Long distance is a commodity-like business

MCI saw itself as having a parity product, differentiated only by perception of value

10 million retail consumers

Aggressive “check in the mail” campaignsAggressive, check in the mail campaigns

Serious retail customer retention problem

Source: Enterprise One-to-One, 1997, Peppers and Rogers

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Marketing task: Get customers in win them back

Retention is seen as a service issue

Get customers in, win them back

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

Top 5% of MCI customers regularly accounted for 40% of revenue

Differentiating the customer experience

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

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Customer recognition, membership

Response required to initiate program

“Customer First” program

p q p g

Staged incentives, benefits, special call center staff

Mechanics

Mailing solicitations to most valuable customers

C t t t d f li it tiCustomers protected from program solicitations

Outbound calls to confirm participation

Customer attrition falls measurably, d t t l

“Customer First” is a great success

compared to control groups

Millions of dollars in increased customer revenues projected

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Organizational and compensation conflicts:

Product managers need access to best prospects in order

And then “Customer First” is killed

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

Aligning metrics and compensation with customer optimization is vital

What should MCI have done?

Customer management: Responsibility for optimizing by customer must be clear

Fix conflicts between product, channel, and profitability management

P tt ti t t lt d th ittPay attention to corporate culture, and the unwritten career-makers and breakers

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Steps to creating an analytics ready organization

Building blocks

1

2

3

Setting up the data driven decision making culture

Aligning to internal suppliers and customers

Hiring and retaining the right people

4 Getting the right tools and resources

Gaining buy-in across the organization

MarketingC-Suite MarketingC-Suite

Sales IT

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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 processg g y p

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 inconsultants and systems integrators – outsourcing broadens the pool of potential resources

Cost Savings:O t i ff t ffi i t lt ti f b th h d t h i lOutsourcing offers a more cost efficient alternative for both human and 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

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First and easiest to measure is cost savings

Focusing on cost savings and value creation is crucial

How to make a strong case

First and easiest to measure is cost savings

Value creation is more difficult to measureFind 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

Get a champion at C level (with an influence on key

Find political and financial support


Get a champion at C-level (with an influence on key executives)

Create allies in other divisions by aligning interestsand objectives

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Start small and grow carefully

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 helpConsider outsourcing and get help

This isn’t mass media – you don’t need to gamble everything with each campaign

Don’t try to “boil the ocean”

Instead, devise and assign pilot projects, and publicize successes

Visualize this as a series of “experiments” using customer-specific communications

Educate your company public

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&Questions Answers

Susan Jacobs

Don Peppers, Founding Partner


Director,Marketing & Client Services

Onder Oguzhan, Partner

For additional informationplease contact

Onder [email protected]

Don [email protected]

Ginger [email protected]

Susan [email protected]

Analytics in Action

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