Marketers Must Use Their Data More Effectively

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In today's tough global economy, businesses focus more than ever on retaining existing customers and lowering operating costs. Customer relationship management strategies and systems, which only recently held the promise of higher profit and improved relationships, face increasing management scrutiny.


Many issues surround CRM. Some companies mistakenly thought all they needed was high-priced software to evoke CRM and solve all their problems of waste. But with today's economy, can a company afford to build a relationship with its customers if the customers are not paying for the effort through higher margins or improved lifetime value? Many companies have found that there are serious problems with identifying the "right" customers.


First, most databases have incomplete values in their characteristic tables. This means that conventional software overlooks some customers during searches because it's been programmed to find customers with specific attributes. A second problem is the lack of serious metrics to prove that CRM is working. Many companies don't take the time to identify critical metrics such as lifetime value, share of wallet and cost of acquisition or retention.


The most important issue is that customers don't just want to be marketed to, they want to be well served. Most companies are notoriously ill-prepared for the challenges posed by increasingly demanding business and consumer customers.


Compounding these problems is that a company's systems often don't talk to each other, which makes a 360-degree view of the customer impossible. The more realistic 180-degree view means that only about half of the potential customer interaction with the company is tracked. Most automotive companies, as sophisticated as they are, still don't have their service data integrated with their customer data, and many don't share the information with their dealer organization.


Pulling together customer information and mounting better marketing campaigns won't make it easier or more enticing for customers to do business with a firm. Companies are looking everywhere to find efficiencies and budget-stretching measures. According to a recent Advertising Age poll, ad budgets are getting tighter and measuring results is more important in this down economy. Fifty-five percent of agencies and marketers think budgets will decrease in the next 12 months.


The ability to target a client's best customers was rated an important media attribute by 85 percent of respondents. The ability to document a campaign's effectiveness and to negotiate cross-platform deals was mentioned by 50 percent and 49 percent of respondents, respectively.


On the upside, DM activities continue to surge forward. Marketers want to have more accountable forms of customer contact. They know that selling to their best customers is the key to success. However, finding the customers will become increasingly difficult without the proper metrics.


Where should you invest your scarce marketing resources? How can you transform your business from a collection of data silos and separate departments into a streamlined, customer-driven pipeline where customer needs and requests appear at one end and product development, delivery and service take place in a transparent and dynamic environment?


It is more important than ever to adopt a new policy of being customer-centric, where the entire company is focused around the customer, one customer at a time. "OK," you say, "but we have 15 million customers in our data files, some haven't made a purchase in more than a year and we don't know if others are even at the same addresses."


Your company is hooked on the drug called "sales at any price." To overcome this unprofitable addiction, you need to work on two levels.


First, you need to sell upper management on identifying your best customers. Don't worry, your CFO and CEO will be eager to help pay for customer portraits. We have never heard of an instance where the top guy has not agreed when a marketer said, "If I knew who our customers were, I could advertise and communicate to them more effectively by leveraging and maximizing our communications investment."


While this is going on, start with the metrics of lifetime value by identifying the cost of customer acquisition and the cost of customer retention. Find out where your revenue really comes from. It is not unusual for a company to find that 25 percent of its customer file produces 70 percent to 80 percent of its revenue. It doesn't take a rocket scientist to realize, "Let's focus our investment dollars where we get the biggest bang for the buck."


It's always surprising that even today, many companies still send direct mail pieces to their entire data file. Some even do 24 mailings a year to their entire file.


If you listen to your customers, or at least pay attention to their behavior, you'll find that mass mailings are wrong. What all your customers want is for the company to communicate with them when they are in the market. To do this, you need improved metrics that can measure customer value. Then you can market to your best customers one at a time, in a relevant and timely fashion. It's not a dream. The technology is available.


Already there are enlightened customer-centric companies that use all the media channels to market intelligently to their best customers and simultaneously find new buyers who look the same as their best customers.


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