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Find and Keep the Customers You Want: The Customer Insight Mandate

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After a half-decade of inward focus, companies are awakening

to the need to shift from customer retention to acquisition.

In fact, executives we’ve spoken with roundly agree that

their company’s success—in some cases, survival—is directly

tied to their ability to more effectively acquire new customers

and subsequently develop much more intimate relationships

with those customers.

Yet we’ve also heard and seen the frustration that companies

experience in addressing this challenge. In many organizations,

despite several years of Customer Relationship Management

(CRM) investment, capabilities for developing insights on

customers—and successfully acting on those insights—are

still lacking.

In this paper, we share our thoughts on how companies

can transcend the obstacles to generating deeper insights

into their customers. We explore how to use customer

insight to dramatically improve both the quality of sales

and marketing campaigns, as well as customer loyalty

and lifetime value. And we provide examples of leading

companies that are using customer insight as a key tool

in their journey to achieve high performance.

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Customers are key, but capabilities are lacking

As companies continue their quest for growth, the need to build stronger, more profitable relationships with customers assumes greater importance. Accenture research shows that growth is, indeed, on the minds of many executives as the economy improves. An Accenture survey of 244 executives around the world found that 42 percent will be focused primarily on growth in 2005 and an additional 32 percent will attempt to strike a balance between growth and cost control. 1

In a second survey of more than 800 global executives conducted by Accenture, 32 percent of respondents said acquiring new customers is one of their top business issues—just behind changing organizational culture and employee attitudes (33 percent) and attracting and retaining skilled staff (35 percent) (See Figure 1). The focus on customers is especially strong among

executives in France and Japan. French executives cited increasing customer loyalty and retention (56 percent) and increasing customer service capability (50 percent) as their top issues, while in Japan, acquiring new customers (45 percent) was tied for second on the top-issues list2 (See Figure 2).

However, many companies—despite making significant investments in CRM over the past several years—still aren’t well-positioned to connect with cus-tomers in ways that maximize loyalty and repeat business. This is reflected in a number of industry statistics that speak to consumers’ ongoing frustration or dissatisfaction with various product and service providers. One such statistic is the American Customer Satisfaction Index created by the University of Michigan. The most recent edition of the index found that consumers grew less satisfied with product and service providers in the past decade. In the past year, satisfaction with retailers dropped 3.2 percent (and just over 4 percent from 1994), while satisfaction

with finance and insurance companies fell by 1.7 percent (and 6.5 percent since 1994). Furthermore, for the first time ever, consumer satisfaction with e-commerce providers dropped—by 2.7 percent from 2004.

Another well respected barometer of consumer attitudes—this one involving the automobile industry—is J.D. Power & Associates. In a recent study, they discovered what should be a troubling trend for automakers: 17 automobile companies retain fewer than half of their customers when they buy a new car, with many of these companies only holding on to one-third of their customers.

Churn is an accurate gauge of customer displeasure, as the telecommunica-tions sector knows all too well. Most, if not all, of the major telcos and cable television providers have struggled throughout the past decade to retain their customers as the industry has undergone significant technological and market upheaval. Cable companies,

Find and Keep the Customers You Want: The Customer Insight Mandate

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1. “The High Performance Workforce Study," Accenture, 2004.

2. "Accenture Global Awareness Tracking Survey," January 2005.

3. "2004 Customer Experience Management Global Survey," by Strativity Group.

for their part, continue to lose large numbers of subscribers to hard-charging satellite providers, while traditional and mobile telephony companies seem intent on fighting a price war that no one can win. The vast majority of customers switching telco and cable providers typically cite poor service as their top reason for making the move.

No insight equals no connection

Why are companies continuing to struggle building strong and lasting relationships with their customers? Based on our research and work with leading companies around the world, we believe the root of the problem is that most companies still lack the capabilities to develop and act on robust customer insights—and that shortcom-ing is preventing them from using customer interactions as opportunities

to engage customers with offerings that more closely meet their needs.

For example, it is well documented that to generate true insights into customers’ behavior and preferences, a company must have a complete view of each customer’s interactions and history with the company—whether those interactions were via a store, website, catalog or call center. Yet, according to an Accenture survey of global marketing executives, only 29 percent of companies surveyed have a single, consistent view of all customers across all business functions.

Furthermore, the same survey found that companies are not regularly capitalizing on customer interactions as selling opportunities (typically because they lack a complete view of their customers). Only 39 percent of partici-pating marketing executives said their companies offer additional products and services each time a customer contacts the company.

Another study, conducted by Strativity Group, reinforces Accenture’s findings. In this research, 54 percent of execu-tives said their company’s relationship with the customer is not well defined. Even worse, fewer than 20 percent had data on key aspects of their customer relationships, including the cost of new customers, customer complaints and even average annual customer value.3

Clearly, companies must do a much better job of knowing who their customers are and what motivates them if they are to stimulate the strong customer loyalty that is the foundation for business success.

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Customer insight unlocks the door to profitable growth

Where does such knowledge begin? It all starts with customer insight. The logic really is quite simple: unless a company fully understands key aspects of a customer—including behaviors, attitudes, and perceptions of the com-pany’s offerings relative to competitors’ products and services—it will be unable to take the steps necessary to create a strong bond with that customer.

Of course, the simplicity of the concept often clashes with the reality of managing thousands, hundreds of thousands or millions of customers and their multiple interactions across numerous touch points. This is especially true with industries such as telecommunications and financial services, which often have different types of relationships with customers depending on the particular service or product being purchased.

A consumer may have a home mortgage, savings account, credit card, and investment portfolio with the same bank. Yet, because these products often are sold and managed separately, the bank has no way of knowing the true value of that customer across its product lines. Similarly, telcos have millions of customers, each of whom purchases some combination of broadband, wireless, local, long-distance and entertainment-content services. The big challenge is to know what that specific combination is for each customer and treat them accordingly.

To be sure, the challenge companies face is quite significant. But it can be solved. A number of organizations —including a country’s postal service, an energy company, a telco and a large retailer—have taken major strides toward generating and acting on strong customer insights. In the process, these organizations are building better relationships with their customers, becoming more competitive and achieving higher performance overall.

Creating a single view of the customerThe capability that is at the core of customer insight is the single view of the customer. Without such a view, it is impossible to paint a complete picture of customers and their needs and preferences. Gaining a single view of the customer begins with the implementation of a data warehouse into which all relevant internal customer data—often widely dispersed throughout the organization—is fed. This data includes customer contact information, products or services purchased, mode of purchases (Web, store, call center, catalog) and monetary value of purchases. Importantly, this information must be augmented by external demographic data on customers. By teaming a customer’s transaction history with key data such as number and ages of people in the customer’s household, median income of the customer’s neighborhood, and customer’s ethnic heritage, a company can transcend the one-dimensional, internal picture of a customer that purchase history alone provides.

33%

35%

32%

29%

29%

29%

28%

27%

27%

26%

26%

0 5% 10% 15% 20% 25% 30% 35%

Attracting and retaining skilled staff

Changing organizational culture and employee attitudes

Acquiring new customers

Develop new processes and productsto stay ahead of the competition

Increasing customer loyaltyand retention

Managing risk

Improving workplace performance

Increasing shareholder value

Using IT to reduce costs and create value

Being flexible and adaptable to rapidly changing market conditions

Developing employees into capable leaders

Business issues ranked by order of importance

Figure 1. Survey of 800 executives conducted by Accenture.

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Just as important as getting the right type of data in the data warehouse is ensuring the data’s quality and accuracy.

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Just as important as getting the right type of data in the data warehouse is ensuring the data’s quality and accu-racy. As the old saying goes, “Garbage in, garbage out.” We have seen many companies spend considerable time and money implementing a data warehouse, but fail to take the necessary steps to ensure that what goes into the ware-house is clean and consistent. Tools and governance processes must be put in place to maintain data integrity and, hence, its value to the organization.

One country’s postal service has experienced firsthand the value of a single view of the customer. Facing formidable competition in the express mail segment, the organization was in trouble. It not only was losing money on various customer segments, it was losing customers to competitors better equipped to understand and meet their needs. Agency executives knew that the organization needed to develop deeper insights into its customers to create more relevant service offerings, ensure a level of service for customers appro-

priate to the amount of business they do with the postal service, and grow its overall customer base. However, they also recognized that their existing customer-facing database systems were holding them back. These systems were spread throughout the postal service, had their own set of business rules and view of the customer, and had no link-ages to each other.

This lack of integration and pervasive data integrity issues resulted in serious operational problems for the postal service. Because the organization didn’t have the tools in place to handle variations in the name or address of the same customer, a misspelling of a customer’s name could lead to the same company being counted as two different entities. This was especially problematic when it involved a major customer, because reports based on such data would not provide an accurate picture of just how much business that customer conducted with the postal service (and, consequently, the importance of that customer to the postal service).

At the call center level, lack of integra-tion prevented call center agents from detecting the difference among various callers—for instance, a corporation that did $10 million worth of business with the postal service versus an individual who did $10 in shipping. Because they had no way of knowing how much business each person calling the postal service was responsible for, agents treated every caller the same way—whether it was the $10 million customer complaining about recurring service problems or the $10 customer claiming his package was not picked up on his doorstep. Besides the obvious implication—that the more valuable customer was not receiving more attentive and urgent service— this situation also resulted in missed opportunities for cross-selling and agent follow-up to ensure that the problem has been resolved satisfactorily.

The postal service eventually decided it had to act. The organization first designed, developed, tested and deployed a technology solution that automatically cleanses and standardizes the data in

One telecommunications company knew that the only way to grow was to convince customers to switch from its competitors.

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all the postal service’s systems, and uses advanced matching capabilities to link corresponding customer entries across the disparate organizational systems to one unique identifier (a customer identification number). Next, the agency created a central repository of the 16 million uniquely identified postal service customers, as well as a cross-reference capability that allows the postal service to know which systems are storing transaction information for each of these customers. The various source systems can access these capabilities, in batch or in real-time, depending on their business needs. Finally, to improve the quality of customer data stored in the source system databases, the project team worked with each source system business owner to assess data quality and address issues such as duplicate customers, bad address data and missing customer information. The resulting data consistency across all systems gives the postal service a clear and accurate picture of every way in which the organization serves a customer—and opportunities to enhance that service.

As a result of this initiative, the postal service team now has the capability to target marketing, sales and service ef-forts to specific customer needs, as well as identify new revenue and cost-cutting opportunities. Whereas in the past, the organization was centered on products and services, its new customer-centric model enables postal service employees to cluster products by particular customer segments, thus resulting in better service for these customers.

Executing more precise targeting and superior campaignsWith a single view of the customer, an organization can take the next step toward building stronger customer relationships: executing more precise targeting and superior campaigns. Using a variety of analytical tools and processes to deeply analyze customer and prospect data, the company can conduct strategic market segmentation to understand its relative position in the marketplace; strategic customer and prospect segmentation to understand

the behavior and value of customers; and tactical customer and prospect segmentation to continually improve marketing campaigns based on initial response.

Building on effective segmentation, the company then can take advantage of best-of-breed marketing practices and a more rigorous, scientific approach to customer interaction to plan and coordinate multi-channel campaigns that reach customers with the appropriate offers via their preferred channel. And by using advanced technology to automate the campaign development and execution process, the company can capture information on campaign performance to continually improve campaign effectiveness.

The experience of one global telecom-munications company illustrates the impact more precise targeting and better campaign execution can have on a company’s marketing efforts. Facing a saturated mobile phone market and stiff competition, this company knew

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that the only way to grow is to convince customers to switch from its competitors. Doing so hinged on the ability to under-stand customers’ lifestyles—and then to more effectively communicate how its offerings fit into those lifestyles.

To address the challenge, the company streamlined and automated a large number of activities associated with the planning, execution and evaluation of marketing campaigns. The company’s existing marketing campaign design and implementation process was actually quite mature and effective. But the process of identifying campaign targets and evaluating campaign effectiveness required considerable time and effort to gather and cleanse data from disparate systems, as well as to collect customer feedback. Also, necessary adjustments to the campaign could not be implemented quickly because of the lack of an appropriate online analytical tool.

To improve its campaign management process, the company first built a campaign data repository in which the

customer data would be consolidated. This repository enables the company to quickly pull relevant data for specific campaigns. It also allows the company to conduct complex analyses that often require cross-referencing with different data sets. Next, the company implemented a new campaign management system that would access the data in the repository for analysis, segmentation and list generation by marketing personnel. This system is critical to the marketing team’s ability to more efficiently and effectively launch campaigns to the right audience, and to evaluate the effects in time to make necessary adjustments.

As a result of its efforts, the company has reduced by 25 percent the cycle time of marketing campaigns from initial data sourcing to final evaluation of campaign performance. In fact, the telco’s campaign process has become 32 percent more efficient, as measured by the amount of time that the activities associated with the campaign are actu-ally adding value. Through automation,

the company has improved the speed of campaign creation and execution and has strengthened its analytical capabilities and on-demand evaluation of campaign performance. Company executives believe the new campaign management capabilities give the telco a strong competitive advantage not only by solidifying the company’s current market leadership position, but also by laying the groundwork for future efforts that are expected to include real-time personalization capabilities that can help the company boost revenue through increased cross-selling and up-selling.

Boosting customer loyalty and lifetime valueHistory and conventional wisdom tell us it is much cheaper to keep a customer than get a new one. So while organizations make a pronounced move toward more aggressive customer acquisition, they must not do so at the expense of existing customers who are a prime target for competitors. As customers become more informed and competition intensifies, leading

Organizations are becoming experts at learning what their customers want and need, and then giving it to them.

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companies have recognized the necessity of instilling discipline and rigor in their customer loyalty activities and boosting the lifetime value of their most profitable customer segments. The key to managing and growing loyalty is developing specific experiences for each customer segment that are unique to those customers and their specific needs. By analyzing patterns of churn on a segment-by-segment basis, an organization can develop a deep understanding of the reasons why customers defect. Once a company has identified its most important sources of value, it then can develop specific loyalty programs that have the highest chance of being enthusiastically received by the most profitable customers.

A major provider of gas, electricity and a variety of home heating and plumb-ing services faced a loyalty crossroads of sorts. The confluence of three key challenges—intensifying competition, increasing customer churn and heightened investor pressure for growth—made it

clear that the company no longer could pursue business as usual. One of the company’s biggest problems was that its product orientation, coupled with a number of process and technology shortcomings, made it extremely difficult for employees to understand—and, thus, effectively market to and service—customers. Company executives recognized that incremental fixes and process tweaks would not be sufficient; nothing short of a complete transformation in the way the company dealt with customers—including marketing, sales, service and billing—was needed.

The company ultimately embarked on a multiphase project, the first phase of which involved creating a common CRM technology layer on top of the company’s legacy systems for gas, electricity and home services customers. By aggregating the separate sets of product-based information into accurate comprehensive customer files, the company could provide its

customer service agents, marketing and sales specialists, and other parts of the business with complete views of customers’ product/service holdings and their contacts within the company.

On the heels of the successful rollout of the new CRM system, the project team moved to phase two: adding an enhancement to the system that would help call center agents become more successful salespeople. These enhancements included “campaign prompts” that are marked against each customer’s record in the CRM system, which is linked to a data warehouse that contains more detailed information on customers such as complete transaction history and demographic data. Another improvement is a product configuration tool that enables employees to select the different types of options on a product (payment methods, rates, etc.) along with a common three-step process to configure, price and submit a sale. And a number of automatic and integrated validation steps have been added as part of the sales process

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Targeted campaign prompts in the CRM system have delivered uplift in sales conversion rates.

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improvements, including address and payment validation and credit vetting.

As a result of the project, the company is enjoying numerous operational and financial benefits. All sales agents in the company now have a single view of its customers—and all the products they hold—over its three major business areas (gas, electricity and home servicing). This single customer view has improved sales people’s efficiency because they are entering fewer duplicate sales, no longer wasting time trying to acquire customers that already are won, and spending much less time recontacting customers for more information.

Because the CRM system supports a common process and front-end interface to energy and servicing sales, all call center agents can easily generate quotes and create customer orders—which has greatly increased agents’ ability to carry out cross-sales, and has spurred agents to actively look for cross-selling opportunities. Furthermore, the customer-centric nature of the CRM system gives the company a unique ability to generate deeper customer insights and marketing programs based on the actions and life events happening to its customers. These operational benefits have led to some dramatic, measurable improvements in the company’s business. For example, sales conversion rates have increased

dramatically. Following the completion of the second phase of work, average handling time for energy customers increased from 4 percent to 11 percent, but sales conversion rates rose by as much as 30 percent. Similarly average handling time for home services customers jumped by 3 percent but was accompanied by an increase in sales conversion rates of 7 percent. Targeted campaign prompts in the CRM system have delivered uplift in sales conversion rates. A pilot of the campaign prompts functionality across four different sites demonstrated an average uplift in conversion rates of 7.3 percent. Rejection rates on sales made by field agents have been reduced from 60 percent to 25 percent due to improvements in the automatic validation, credit vetting and address verification processes implemented. And, within just a few months of operation, the CRM system significantly stemmed the company’s loss of gas customers.

A large retailer is another company that has boosted its top and bottom lines on the back of stronger loyalty. To differentiate itself in a crowded market and reverse a serious decline in revenue and profits, this organiza-tion decided to make a major shift in focus. Historically, the company had a very product-centric approach that dominated almost every aspect of its

business. This approach had the retailer carrying a wide assortment that was difficult for its sales force to support and that greatly hindered profitability. The company thought that shifting to a customer-centric business model—a new store layout, selling strategy and operating model geared to the retailer’s most profitable customer group—would restore the organization’s growth and profitability.

The retailer’s first step was to mine its customer database to determine the shopping and lifestyle traits of the company’s most profitable customer group. After conducting a fact-based analysis of historical purchases and primary research, the company realized that it didn’t need such a broad assortment. On the contrary, its most profitable customer group wanted select, fewer items with better sales support and higher-value offerings. As a result of its findings, the company began reformatting its stores to expressly appeal to its most profitable customer segments in various geographic areas. The new-format rollout is still in its early stages, but thus far, the company reports that its new formats are generating sales at twice the rate of the company’s traditional formats.

Current business issues: France

Figure 2. Survey of 800 executives conducted by Accenture.

Current business issues: Japan

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ConclusionTo be sure, building and

maintaining strong, profitable

customer relationships is far

from easy. It requires significant

shifts in organization and culture,

sophisticated technologies and

analytical capabilities, and the

discipline to continuously monitor

and measure the results of all

marketing activities. And, because

of constantly changing market

conditions, “customer nirvana”

is a journey, not a destination.

However, although difficult, it’s a

journey that every company must

take to grow and prosper in the

next five, 10 and 20 years.

Leading organizations such as

those profiled are examples of

how customer insight can be

a powerful tool in the drive

toward more valuable and

lasting customer relationships.

Armed with a single view of

its customers—and leveraging

that capability to segment

customers more precisely,

execute more effective and

efficient campaigns, and drive

stronger customer loyalty and

higher lifetime value—these

high-performance organizations

are becoming experts at learning

what their customers want

and need, and then giving it

to them. In doing so, they are

positioning themselves to make

and strengthen the connection

with customers that is so vital to

keeping revenue and profits high

and leaving competitors far,

far behind.

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Alton L. Adams is the Global Managing Partner for Accenture’s Customer Insight practice in the CRM Global Service Line. Mr. Adams has more than 20 years of experience in marketing, sales and general management. He has particular expertise in the use of information for sales, marketing and risk management decisions. Prior to joining Accenture, Mr. Adams was president of the Database Solutions business at Experian, specializing in customer information, decision support and target marketing services. Before joining Experian, Mr. Adams held several positions in the information services industry, including executive positions with TRW, Equifax and Standard and Poors. Mr. Adams holds an MBA in Marketing & Finance from the Wharton School and a BA in Economics from Georgetown University.

He can be reached at: alton.l.adams@accenture.com.

About the Author

Copyright © 2005 Accenture All rights reserved.

Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

About AccentureAccenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses and governments. With deep industry and business process expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills and technologies to help clients improve their performance. With more than 115,000 people in 48 countries, the company generated net revenues of US$13.67 billion for the fiscal year ended Aug. 31, 2004. Its home page is www.accenture.com.

Accenture is widely regarded as the leading provider of consulting solutions and managed services designed to deliver high performance to your business. The company infuses marketing, sales and customer service operations with strategic insight, sophisticated data analysis, advanced technology and operational excellence. Combining experience, innovation and a global delivery network, our Customer Relationship Management professionals team with clients across virtually all industries to design and implement strategies for creating customer experiences that enable growth, increased profitability and high performance.