1to1 - Spring 2009 - (Page 37) Customer Strategy for the Next Economy Using Customer Data and Analytics to Transform the Enterprise A recent CMO Council survey revealed that 76% of senior marketing of attrition and to target customers with untapped potential. This technique essentially predicts demand at the customer level. Using a similar approach based on the same data, we can forecast demand at other levels: the entire enterprise, regions, stores, and product categories. This allows a category manager at a retailer to present demand forecasts based on customer insights to manufacturers when negotiating merchandising agreements. CVS is an example of a company using data effectively to integrate customer and vendor management. Their insights about customers allow them to target promotions precisely, while these same insights provide meaningful information to vendors about the customer audience and the ROI for merchandising promotions. Mid Term: Climbing Out of the Valley While it may seem like a dim prospect, the economy will stabilize and then recover. But when? Those companies that can anticipate and plan for the turnaround will be those that achieve the quickest gains. During this recovery, budgets will continue to be constrained. Having a solid, information-driven customer strategy will enable companies to make the most of their resources. In fact, just as in today’s tough times, there will be opportunities to save money in some areas, and redeploy budgets proactively. For example, customer acquisition will return as a higher priority, but we want to ensure that spending acquires high-value customers. executives feel their companies are missing significant revenue opportunities with existing customers. Moreover, less than half of the respondents felt they have the data and insights to understand such important metrics as customer profitability. How can this be? After two decades of ever expanding amounts of customer data and in the face of an economic reality that demands companies respond strategically and rapidly to changing markets, how did we get here? Beyond Database Marketing Database marketing has been one of the genuine marketing success stories over the last twenty years, bringing incremental profits to those companies that managed to use data and analytics effectively. But it should be remembered that many of the most successful companies within that same period—companies like Wal-mart, for instance— are not traditional database marketers, but rather excel at using information to drive decisions in every part of their business. Our view: database marketing is necessary, but not sufficient. But its core aspects— data warehousing, advanced analytics, and integrated customer strategies—need to be leveraged across the entire business in order to transform the enterprise. Retailers can achieve higher near-term financial gains by improvements in pricing and merchandising, areas historically separate from customer marketing. Cutting a favorable deal with a manufacturer can generate more profits for a retailer than even the most highly targeted marketing campaign. Here’s a quick example of what we mean: Several years ago, we developed a new analytical technology that lets us predict “silent” attrition, as well as repurchase rates, at the customer level. This technology was deployed originally in database marketing programs to help retain customers at risk Long Term: Sustaining the Gains While getting an early start in the recovering economy is important, being a first mover does not guarantee sustainable performance. A rising tide will help lift all companies, and some competitors will eventually catch up. The companies that emerge as market leaders over the long term will have learned how to use information about customers and markets to continually improve business performance. The ‘Next’ Economy The companies that emerge as leaders from the current recession will be the ones that use information to infuse their corporate strategies with customer information and insight. What we call the Next Economy is bringing real shifts in commercial and consumer spending and consumption. We see recovery and growth happening in three phases: Near Term: Controlling the Slide Many businesses have cut back strongly in all areas with layoffs and reductions in discretionary spending, including marketing. In many cases, these cuts will not have been data-driven decisions. For instance, a recent Harvard Business School article showed retailers often cut the wrong type of employees, leading to lower profits and worse customer experience. The surprise finding: cutting workers that stock the shelves causes “stockouts,” which means customers are frustrated by lack of inventory and take their business elsewhere1. Here is a case where the customer insights should help drive even such operational matters. About Fulcrum Fulcrum is an integrated marketing company that helps Fortune 1000 marketers develop, implement, and manage customer management programs. It provides large-scale data warehousing, advanced analytics, multi-channel execution, and information-driven strategy. By delivering and leveraging customer insights across the enterprise, Fulcrum drives rapid, sustainable gains in profitability for its clients. For more information, please visit: www.fulcrm.com or call 888-245-9450 1 Julia Hanna. Thinking Twice About Supply-Chain Layoffs. HBS Working Knowledge, December 8, 2008. [http://hbswk.hbs.edu/item/6088.html] BRANDED EDITORIAL http://www.fulcrm.com http://www.fulcrm.com http://hbswk.hbs.edu/item/6088.html
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