Uncategorized

Finding the gold in your data

finding the gold in your data

Niles Howard

Niles Howard. Formerly an editor at Money and Business Month magazines, he is president of Niles Howard Associates, a Connecticut consulting firm.

Identity your best customers. Figure out what they need. Understand what motivates mem. Those are the keys to marketing success. Fortunately, most of the information is already in your company’s computers. Here’s now to get it out.

“Know thy customer” may be the first commandment of selling. But in an era of mass production and product standardization, that rule is sometimes hard to follow. The commoditization of many products and services often leads companies to conclude that they have no choice but to price aggressively and hope that will be enough to lure customers. Of course, that puts them at the mercy of their dumbest competitor — the company that’s willing to price itself almost out of business in return for market share.

Fortunately, technology offers a way out of this marketing dead-end. A new breed of high-powered computer programs, some growing out of e-commerce applications, can paint a remarkably detailed portrait of your customers’ wants, needs, and buying patterns.

To a degree almost unimaginable five years ago, these complex systems can help you fine-tune the design of your products and services, sharpen your sales tactics and forge stronger customer relationships. This makes possible what consultant George Pepper calls “one-to-one marketing” — figuring out what every customer needs and delivering it on a customized basis.

Precision data collection analysis underlies some of the big Web success stories like Amazon.com, CharlesSchwab and IBM. It’s also being use successfully by more traditional consumer and business-to-businesses marketers, from Wal-Mart to Consolidated Freightways. Most companies haven’t yet caught the wave. A recent survey of corporate managers by Computerworld IT Intelligence Unit, a division of International Data Group, found that only 15% have implemented sophisticated information programs. However, half are actively planning them and almost all say they expected to have at least a few such tools in use by the middle of 2000.

Tapping the True Power of the Web

The roots of sophisticated data analysis go back to the 1980s and early 1990s, when the development of relational and multidimensional data base software awakened companies to the tremendous amount of information languishing in their files. But only recently have programmers created advanced algorithms that can draw useful conclusions from disparate bits of data in sales records, credit reports, warranty registrations, telephone product inquiries and other reservoirs of information.

The emergence of the Internet, with its ability to communicate instantly with millions of prospects and customers, has helped awaken companies to the marketing uses of this data. In the past two or three years, several companies have introduced software to gather customer information from the Web and put it to work.

Three-year-old DoubleClick Inc., for example sells a program that enables companies to continually monitor consumers’ reactions to online advertising and adjust their tactics accordingly. Another recent startup, Inktomi, has also developed software that, among other things, gives e-marketers rapid feedback on the effectiveness of online pitches. Yet another new company, Responsys.com, helps its corporate clients track customer purchases and other transactions, then tailor individual email messages to recipients’ buying patterns and tastes.

But the real excitement is in the emergence of comprehensive data programs that grab information from far-flung databases and piece together answers to business questions that, until recently, nobody even though to ask. These programs can, for instance, detect subtle patterns in buying habits, such as the fact that two products, possibly from different catalogs, are often purchased in tandem. Or they might sniff out the fact that customers who get product information from the company’s Web site are less likely to return their purchases than those who requested brochures by phone.

They can also predict how customers might behave in the future — for example, using sales data on past promotional mailings to judge which prospective customers are likely to respond to future offers and what they are likely to buy.

E.4, a program developed by Epiphany a two-year-old Palo Alto, California company, extracts and analyzes information across department boundaries, including finance, sales, product support, marketing and e-commerce. Among other things, it can suggest sales approaches and price proposals that, based on previous transactions, are likely to be accepted by specific customers. It can also calculate the profitability of each customer and forecast whether a particular prospect is worth cultivating.

The Real Profit is in the Relationship

Building happier and more profitable relationships is the ultimate goal of such technology, and is speeding the acceptance of an approach called

Customer Relationship Management. CRM’s main tenet is that every company’s long-term success will depend less on sheer numbers of transactions than on its ability to maintain long-term alliances with the right customers.

“Often, executives find that one 80:20 rule applies — that a relative handful of customers account for the lion’s share of profits,” notes Dale H. Renner, managing partner of Andersen Consulting’s global Customer Relationship Management practice. “CRM strives to identify the customers that provide the greatest return to the company and optimize relationships with them.” A company might, he points out, offer high-value customers extras such as incentive pricing or customized products — and at the same time reduce service to or even “fire” customers who are not so profitable to the company.

Some companies are already looking ahead to how they might take the technology to the next logical step — integrating customer information into enterprise-wide general management systems. There it can be meshed with data generated by today’s advanced electronic procurement software. These programs gather and process detailed line-item information from a from a company’s vendors. For example, the WebPurchasing system, developed by Clarus Corp. in conjunction with MasterCard Microsoft Corporation, offers a robust integrated solution for streamlined purchasing, payment and procurement reporting.

The German software company SAP, known for its powerful enterprise resource planning software, is already creating links among these various systems. SAP’s stated goal: “The ability to capture customer data across the enterprise, consolidate all internally and externally acquired customer-related data in a central database, analyze the consolidated data, distribute the results to the various customer touch points and use this information when dealing with customers.”

In short, companies will have come full circle to marketing rule number one.

COPYRIGHT 1999 CFO Publishing Corp.

COPYRIGHT 2008 Gale, Cengage Learning