Can ex-customers actually be better than new customers?

Well, no.  Obviously!  Ex-customers no longer provide revenue to your business.  In some cases, if the relationship you had with the customer soured to an irretrievable point, an ex-customer could even be detrimental to your business.  If this is the case, a small research project might help you to address some sticky points in your overall customer experience.

Too often your focus will swiftly move from an ex-customer to your newest acquisition.  But there is so much to learn from your old customers that can ensure your new customers are as fruitful as possible.  Perhaps you might even reactivate some of your old customers; what a bonus that could be, in an age where buying lists of data can often have mixed results.

Fundamentally, old customers can tell you a huge amount about not only what you can expect from your new customers in terms of length of loyalty, overall spend, purchasing patterns and even (if you profile the data) who your new customers are likely to be.

Old customer and transaction data is gold dust.  Nothing can tell you about your business more than how your business has performed in the past (although if your business has had a radical brand overhaul in terms of product ranges and targeting, then perhaps the best you can get out of your old data is who not to target).  Too many businesses ignore what they already own.  If you can harness the knowledge that’s trapped inside your old data, then you can make significant savings on marketing and acquisition, savings that will be reflected in a larger profit margin. 

As part of understanding your old data, it can help to amalgamate the data sources together into one customer system.  This will allow you to see which customers flip from active to inactive over a certain period of time.  It will also ensure that when your new data becomes old data, you’re in a stronger position to apply what you have learned and ensure your business is always moving forward.

Why CRM fantasy and reality can leave businesses disillusioned

According to a recent survey carried out by salesforce.com, “73% of CRM users do not use 50% of the functionality available to them in their CRM systems.”

I think it can be true that often businesses buy an off-the-shelf CRM solution almost as a panic buy because they feel they either; need a way to manage their data, (be it customers or prospects, or both) or that they “need a CRM system!”. If a majority of businesses are not using a large amount of functionality to them there could be all sorts of reasons. I’ve encountered a lack of knowledge, a general disregard for a new way of working and even businesses that were sold a toolkit that didn’t meet their specific requirements at the time.

I believe that in the minds eye of any business in question, a  “Data Warehouse”, is envisioned as having one of two capabilities;

• a Lead Management Portal designed for a salesforce
• a Customer Relationship Management tool for Marketing and Analysis

and what you often find is that the term “CRM” is used interchangeably for either tool.  Far-sighted project managers would plan on having both systems interacting – we shall come onto that in a moment.

I'd argue that in terms of implementation of infrastructure, there needs to be a distinct difference between a Lead Management portal and a CRM system.

The portal should work in two ways - assisting the Sales function in storing researched or bought information for cold leads, and as a storage system for existing customers that have been segmented / selected for targeting for a given piece of activity, to be carried out by the sales team.

The CRM should be a data warehouse of existing customer behaviour that (in a perfect world) allows for two-way interaction of data; the customer can see what they’ve bought and when, and the business can see both individual and overall customer behaviour.

If a business chooses to bring both those functions together, to classify them as either a CRM OR a Portal ultimately leaves one aspect of a business poorly served. Both systems should interact and learn from each other, and seen as an overall Enterprise (for want of a better word) solution that both benefits a business in the short term and allows for scalability over time.

That said, as a statistic “73% of CRM users do not use 50% of the functionality available to them in their CRM systems”, it would be interesting to see, over time, if the second percentage begins to fall as confidence and understanding grows within the business. 

The main problem when buying an off-the-shelf CRM is that assumptions are made on behalf of the reseller and the purchaser.  The best, and in my opinion, only way to set up a CRM system within a business is to have any external consultants / service providers working almost as a member of staff, rather than a sales person set to “fire-and-forget”.  That way, the consultant will share the investment into the system, investment that should pay back in the short an long term.  This personal investment should ensure that the second percentage drops in a very short space of time.

CRM – Why it works, or why it doesn’t

I’ve recently been wrestling with the the whole idea of CRM implementation and usefulness.  Fundamentally, I feel that the concept of a Customer Relationship Management process is sound.  It allows for co-ordination of data pools into a single centre which can be interrogated as required.  This seems a logical and sensible step for any business – a cleansed, centralised dataset of all customer touch points.   However, I feel that from this point in, the idea of CRM starts to become tarnished.

CRM doesn’t work because it ascribes a set of values to a customer.  It doesn’t work if it fails to work for customer.  Once data is mined, then the customer can be spammed with tenuously-linked offers, potentially placing their business at risk.  Even if automated buffers or triggers are in place, then the likelihood is that unnecessary contact is minimised.  At this point, businesses lose faith in CRM, and CRM doesn’t work.

CRM does work if it isn’t treated as “fire and forget”.  Automation doesn’t mean that the requirement to think is removed.  Too often, the implementation of a CRM system is seen to suggest that there is now less requirement to work with customer data.  The opposite is true.  Successful implementation of a useable, and (and this is incredibly crucial) regularly maintained and updated CRM system means that much more work is now required. 

The establishment of a centralised base should be planned not to simply amalgamate as much data together as possible, but built with a clear purpose in mind.  Data should be structured so that access to data is not compromised (a user should be able to “roll up” and “roll down”).   Most importantly, the base should be built so it lends itself to strategic thinking.  It isn’t enough to identify customers who spend the most; you need to know what their story is, and be able to tell this story with the data.  This is the central premise of the “R” in CRM.  Empathise with your customer, provide them with information; help them use their account history, for example – neatly implemented recently by Tesco (external link).  Irrespective of near-Orwellian approach to grocery shopping that the ClubCard has provided, the tying up of offline and online that Tesco constantly works towards would be impossible without a fully functioning centralised database and a huge amount of thought.

Ultimately, I believe that CRMs do work.  But they don’t work by themselves, and they certainly don’t work in just one direction.  They work for the business, but for the customer too.  They should be scalable, and built with the companies current and future aims in mind; as such simply lumping all data together and then using it as a contact / mailing list is a certain route to failure.  Use it to create discussion, generate true customer insight and improve planning and communications, and it will eventually become indispensible.

Decrease spending, increase efficiency

Happy New Year!  Marketing Week, (4 Jan 2010) has again given me a juicy topic for Momentum Analytics’ first blog post of 2010.  It argues that campaign targeting will take centre stage in 2010.  Throughout the majority of these posts, I’ve discussed approaching data as a ”business critical resource” in a relatively abstract manner.   A colleague of mine consistently hammered home the point that when it comes to data, analysis and genuine, revenue-driven insight; “Garbage in, Garbage out”. 

So.  How do you justify outlay on something relatively intangible?  Marketing Directors, media planners, Direct Mail marketeers can all justify thousands of pounds (even hundreds of thousands of pounds) on creative and copy, because it is possible to interact with it, to visualise it.  Investment in data and analysis is much more difficult to come by.  This can have knock on effects on campaign monitoring - how often is campaign activity

• quantified (either as stand alone performance, versus previous performance or versus a prediction)?
• tracked back to customer data?
• fed into the next piece of activity?

All this campaign activity is designed to increase revenue – often seen (correctly) as a measure of success.  Yet it should not be the only measure of success.  Indeed, if a campaign budget can be reduced by 20%, with a loss of 2% to the standard response rate (i.e. 2% response drops to a 1.96% response rate) then this should be deemed a success also.  And the most effective way to achieve wins at the beginning and end of a campaign?  Analysis.

Efficiencies of campaigns has always been a constant metric on which performance has been measured.  With a difficult, pressured and stressful 2009 still fresh in the memory, we should press for an increase in campaign efficiency by smashing down knowledge silos that build up in businesses of all sizes.  The emphasis should now be on joining up internal resources to best benefit the business.  You quite probably already hold information in your business that can save you thousands of pounds and make cost-per-response work in your favour.  Use what you already own to make make sure that your business only receives one form of successful CPR this year.

Why some people really are more important

When a client undertakes analysis of their customer data for the first time, it can be genuinely unnerving.  They are entering into an area of which they may have no previous experience.  As a result, they may find it difficult to pass responsibility onto the agency guiding them through the process.

This inability to trust is both good and bad.  Good as it shows the client genuinely cares about their customers, the processes and changes being implemented to help move their business forward.  Bad because it can give rise to a need to appear more knowledgeable than they may be about their customers – an attempt to retain ownership.

A consultant has to navigate these waters carefully.  The most effective way is to ensure that the client is a true stakeholder in the whole process – they bring ideas and approaches to the table that are critical for success.  However, because of their trepidation with the whole process, there is a real danger that a client will “chase the money”.

If it hasn’t been introduced prior to this point, then a discussion about the implementation of an RFM model should be undertaken.  With the intricacies explained, a client will see a marketing focus on high revenue clients placed in sharp relief with how often and how frequently they interact with their business.  This will lead to a more effective approach for customer contact prioritisation, and a more customer-driven communications experience.

Approaches such as RFM modelling or using Lifetime Value are the very bottom rung of analytical complexity.  But for a client that has little knowledge of how to best develop their data, they can be revolutionary.  Indeed, if the consultant can fully involve the client in the process, then these concepts can be the foundations for long-term growth of the client’s business and their own knowledge.

Technorati Tags: Recency,Frequency,Monetary,RFM,Prioritisation,LTV

Relevancy in contact strategies - from registration to loss

A recent article in Marketing Week touches on an important aspect of effective customer management; relevancy. The initial excitement with which marketers and businesses embraced email as a new channel for contact, gave way to disillusionment from both the consumer and the service provider. On the one hand, the customer faced an onslaught of unsolicited marketing materials. On the other hand, despite the volume of broadcasts, businesses were struggling to see any trickle-through to their business.

Over the past few years, as opt-ins and tailored mailing lists became the norm, the volume of “solicited spam” (unwanted emails, but from businesses where a customer currently has or has historically had a relationship, rather than boundless offers for Viagra) the industry has come to the realisation that the opportunity for direct contact needs to be tailored. The initial approach was to be frugal with broadcasts, but general with content. And there is some success with this approach.

However, true email-based customer service comes from timely, relevant and pre-emptive contact. By examining customer data, a consultant can help your business translate patterns that exist in your data, and ensure that email broadcasts are:

• targeted to portions of your base (rather than the whole base)

• contain relevant offers and information (know what your customer wants before they do)

• due to their specificity, can be fully quantifiable – true end-to-end ROI

• If used correctly, can assist in arresting churn

By knowing that that less really can be more, a move towards a data-driven customer service approach can help a business generate revenue for a relatively small level of investment.

Can 80/20 ever become 60/40?

A general rule of business is that 80% of your revenue comes from 20% of your customers. It's a naturally occuring rule, and even has a name (the Pareto Principle).

However, such a hard and fast rule may cause you to ask "Well, why should we waste time recruiting more business? We can afford to lose our smaller clients and coast on our bigger ones!". I'm sure you see the flaws in this logic. However, there are a couple of important points that not only address this misguided approach, but could actually give your business a shot in the arm.

100% of your clients have something in common. You. And although they may differ in a number of ways, you (as a service provider) are who they choose to fulfil their needs.

Also, because they have chosen you, they are comfortable to build a relationship with you, and you have their trust. However, the 20% that spend the most with you don't trust you more than the other 80% of your clients. They may simply have understood quickly that you can fulfill more of their needs.

The way to level up the Pareto Principle is to ensure that the further 80% are having all their needs met by your company, and also are aware that you can help them as service providers.

There are a number of ways to do this, and a consultant can help to implement a number of methods to address customer optimisation. However, by being intelligent with your up-sell and cross-sell offerings, whilst at the same time having effective retention strategies in place and (most importantly) learning from the data you own, you can begin to tip the balance in your favour.