CRM - November 2007 - (Page 19)

by Colin Beasty P rofitability is the ultimate determinant of a company’s success or failure. Yet as crucial as this measure is, it remains a mystery to many management teams, especially at the level of customer profitability. Those assessments are only as good as the metrics or methodologies you’re using to measure them with, and those have historically differed from department to department, from company to company, and from industry to industry. Enter the new age of profitability analytics. As customer-centric strategies and their accompanying software solutions have gone enterprisewide, so have profitability analytics—though now retooled and redeployed to meet the needs of all employees. One major advance is the ability to go beyond old data and to look ahead, allowing enterprises to take a more predictive look at which customers will be their most profitable going forward. “Profitability analytics have come a long way, and companies have hit plenty of roadblocks,” says Gareth Herschel, a research director at Gartner. “But now the boundary is being crossed, and companies are learning how to truly leverage profitability analytics.” FINANCE…MEET MARKETING Early customer profitability systems bubbled out of the finance department, but as businesses began to embrace customer-centric strategies, marketing embraced profitability analytics as the vehicle by which to measure success. That’s the friction point inherent in any enterprisewide profitability strategy. Finance has traditionally focused on cost-andrevenue analysis, with the end goal of assigning profit and loss (P&L) across multiple lines of business and allocating revenue across different product lines or services, typically relying on data from general ledgers and ERP systems. On the flip side, marketing has taken a more customer-centric focus, looking to segment an organization’s most profitable customers via CRM data to develop campaigns and identify cross-sell and upsell opportunities. But as finance has begun to aggregate and analyze profitability data on a more granular level, and as the marketing and sales departments look to make good on their growth and churn predictions for the coming year, the goals, methodologies, and agendas of disparate departments collide. As a result, the company is caught in an analysis paralysis. “It’s the convergence of two worlds,” says Jeff Lovett, director of finance and performance management for Teradata. “Today, organizations want the big picture, the corporate performance management picture, so to speak. The problem becomes, ‘Whose methodology do I use?’” The resulting fallout can land with a resounding thud in corporate board meetings, and leads to a top-to-bottom approach in which corporate is attempting to appease all the hands in the profitability cookie jar. “It happens all the time,” Lovett says. “Finance is snickering and writing notes because they don’t believe in the methodology, and vice versa. The result is key metrics are sidetracked and business opportunities are lost.” The solution to this mayhem, and the way to keep all parties satisfied, is to take a bottom-to-top approach, Lovett says. A perfect example of this comes courtesy of the financial services industry, which typically struggles to allocate costs across millions of customers and thousands of varying transactions. Historically, banks have allocated the revenue generated from prepaid interest or mortgage After years of trial-and-error, enterprises are finally developing innovative strategies and incorporating new software to allow them to identify—and sell to— THEIR MOST PROFITABLE CUSTOMERS CUSTOMER RELATIONSHIP MANAGEMENT | NOVEMBER 2007 19

Table of Contents Feed for the Digital Edition of CRM - November 2007

CRM - November 2007 Contents Front Office Reality Check Customer Centricity Have You Caught It? The Mother of Enterprise Information Market Focus: Technology: The Simple Truth about Complex Manufacturing Q&A: Gianforte Talks CRM Required Reading Predicting Profitability Checking the Pulse of the Contact Center Cast a Narrow Net Modern Times, Modern Methods Primos Hunting Calls Snares Efficiency Nailing It Down Moving in on Mortgage Delinquencies RDS Delivery Delivers on Service Secret of My Success Re:Tooling The Tipping Point Pint of View

CRM - November 2007

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