CEOs believe that the time has come to reinvent customer relationships. That’s one of the key findings in IBM’s 2010 CEO Study titled “Capitalizing on Complexity”. This belief is based on the following observations:
- The world is massively interconnected, thereby making customer intimacy a priority
- Customers have more options due to globalization and dramatic increases in available information
- Differentiation will come from innovation and co-creation with customers
- The information explosion presents a great opportunity to develop deep customer insights
The fact that innovation and the customer are at the top of the CEO priority list is not new. According to the study, over 80 percent of all CEOs picked getting closer to the customer as the most important factor in realizing their strategy over the next five years. There is a growing realization among top executives that we have the means to reinvent customer relationships.
These CEOs understand that knowing more about the customer leads to better innovation. In our interconnected world, it’s not enough to collaborate – companies must co-create with their customers. Yet, as the study points out, the environment is more dynamic and complex. Social networking channels capture a greater share of customer attention and more companies feel customers pulling away rather than getting closer.
So what’s a CEO to do? The study indicates that high performing companies are leveraging new channels to engage with customers and drawing more insight from all available data. These leaders have tapped into previously undiscovered insights from vast amounts of data and used that insight to deepen customer relationships.
Recent research from Forrester seems to support the notion that companies are embracing new channels and leveraging available insight. Their study notes that many products and services are highly commoditized and a growing number of companies compete on analytics. They also indicate that social technology adoption has increased tremendously during the past 12 months. Much has been written about the expanding number of new channels and the need for actionable insight. In fact, most recent studies and research coalesce around these common themes:
- The need to innovate tops every list
- Customer focus has never been more important
- Social technology plays a key role in getting closer to and innovating with customers
- The information explosion places a premium on analytics
Let’s focus on these themes through the lens of the critical business challenge outlined in the IBM study: reinventing customer relationships. As CEOs embark on this mission, they do so with the same traditional list of critical business objectives:
- Acquire new customers
- Retain existing customers
- Increase customer share of wallet
- Improve customer profitability
- Reduce the cost of marketing, selling, and serving customers
- Protect and manage brand and reputation
- Improve the customer experience
- Offer new products and services
- Improve the quality of products and services
However, achieving these objectives is much more challenging today. The information explosion presents an opportunity – we’ve never had more available data – but the challenge lies in effectively harnessing the insight and identifying action. Social technology allows customers and prospects to interact with companies in many ways, through many different channels – but how do we effectively deal with all these channels? An effective strategy addresses all relevant channels, applies advanced analytics to all relevant data, and automates the process of getting from data, to insight to action. Identified actions need to be prescriptive – optimized to drive the right outcomes.
A common element of each of the objectives discussed here is optimization. The more accurately we answer the questions associated with each of these desired outcomes, the more effectively we attain them. There are three critical steps required to harness the power of social technology and analytics: 1) acquiring relevant data from all relevant channels, 2) ensuring the right form of analytics is applied to deliver the right business outcome, and 3) enabling the right actions. Let’s look at each business objective in this context.
Acquire new customers – in an effort to get closer to potential customers, companies are leveraging new channels (e.g., FaceBook, Twitter, company-sponsored forums, etc.). The data from these channels when combined with data from traditional channels, provides new insights that help answer these questions: What do prospects want to buy? How do I reach them – through which channels? When should I reach out? How do I improve the probability of a prospect responding to a campaign? How do I acquire profitable customers? Acquisition models help determine the propensity of a prospect to buy, while value models project the lifetime value of a customer. Linguistic analysis effectively leverages text-based insight from various channels and quickly identifies the desires and sentiments of prospects. As these models become more accurate, actions become more prescriptive.
Retain existing customers – Why do customers churn? What are their issues? Who is most likely to churn? How do I retain them? How do I get those answers in real-time and at the point of interaction? With computing power ever-increasing, computationally intense analysis is feasible at the point of interaction. Attrition models focus on predicting churn – but the wealth of customer insight trapped in text fields within a customer service database, or email or social media has gone untapped. That’s changing as more advanced forms of analytics include the insight from these text sources, thereby driving more accuracy into our analysis.
Increase customer share of wallet – what other portfolio products or services can I sell to existing customers? What products do customers typically buy together? What products can I combine to create new attractive offerings? Which customers are likely to upgrade? What new products do our customers want? Mining structured data produces actionable insight, but traditional manual reviews that look for insight found in text won’t scale. Call center notes, Internet dialog, customer emails, and other forms of text contain considerable insight about customer wants and desires. The automated extraction of this insight when combined with insight from structured data provides answers to the questions posed, and creates cross-sell and up-sell opportunities.
Improve customer profitability – three key components of customer profitability include attracting the right customers, retaining their business, and increasing their value. Using advanced analytics to monitor customer behavior helps with each component. With analytics, we can better understand why customers take particular actions and anticipate what actions they might take next. This enables the action needed to acquire the right customers and make them more loyal and more profitable.
Reduce the cost of marketing, selling, and serving customers – a great example of how analytics is used to reduce marketing costs is in the area of campaign effectiveness. A marketing organization can use response models to determine which customers and prospects are likely to respond to a campaign. In addition, automating the analysis of customer feedback following a product launch can help adjust marketing campaigns and improve their effectiveness. From a sales perspective, models can help optimize sales force activity by targeting prospects that have a high probability of buying. The accuracy of models is enhanced by insight from text. In the customer service area, the automated analysis of text from various sources brings better clarity to customer issues and drives a more intelligent workflow. It can enable the capture of issue resolution so that similar problems can be rapidly addressed the next time they occur. Issue resolution generated through peer-to-peer support forums can be captured, validated and included in knowledge repositories.
Protect and manage brand and reputation – with the proliferation of Internet dialog, brand and reputation can be damaged rapidly and on a broad scale. Monitoring this dialog and proactively managing potential impact is critical. Current monitoring tools do not have enough analytical depth. Insight that is truly actionable goes beyond the notion of mentions or sentiment. Future and emerging solutions find tangible actions and enable those actions – the effective marriage of analytics and workflow.
Improve the customer experience – according to the IBM CEO study, organizations will increasingly need to follow the customer, as customers communicate with or about them through all possible channels. The focus in the next several years will therefore be on developing new and different channels. As the study points out, this opens up new ways to engage with customers to collaborate across different channels and harness their creativity to create new products and services.
Offer new products and services – as mentioned earlier, innovation is at the top of the list of business priorities. The impact of social technology will be felt most strongly here. The notion of collective intelligence or the wisdom of crowds, speaks to an ability to leverage the creativity and ideas of customers, prospects, employees and others. The challenge is to effectively harness these ideas as part of the innovation process. We’ll see more companies adopt an approach that automates the analysis of text to quickly find and act on these innovative ideas.
Improve the quality of products and services – emerging quality and safety issues can be found in warranty notes, repair notes, call center notes, Internet dialog, and other forms of text. Companies can get early warning signs by analyzing these text sources using linguistic and statistical approaches. Rapidly detecting and proactively addressing these emerging product issues can help a company avoid expensive recalls and lawsuits, potentially saving companies millions of dollars.
This list of nine business objectives touches on critical challenges that each company faces. Many initiatives in the next several years will combine social technology and analytics to address these objectives. In order to effectively reinvent customer relationships, these initiatives must be viewed and managed holistically. Insight obtained through the efforts of one initiative could have a meaningful impact on another. Getting closer to the customer – a priority for 80% of the CEOs in the IBM study – cannot happen through disjointed efforts across these business objectives. Reinventing customer relationships will not be easy, but we have the means to make it happen.