The truth is, consumers have always been talking amongst themselves about the pros and cons of specific products and services, but this information has always been shrouded from companies.
Now, the big data paradigm presents an opportunity for companies to mine myriad data sources including social media, the web, call center logs and mobile data for critical information that’s vital for acquiring and retaining customers.
According to a recent report from Forrester Research, 39% of customer analytics professionals say that customer analytics have improved customer acquisition; 34% say they’ve seen a boost in marketing effectiveness; while 32% note improvements in customer retention. More than 80% use analytics to understand customer behavior, according to the study.
Additional highlights from the study include:
- For 51% of respondents, customer satisfaction and retention are the key drivers for using analytics, while 40% hone in on customer loyalty
- Organizations are facing challenges managing and integrating data from a variety of sources, ensuring data quality, and finding the right talent to man their customer analytics teams
It’s not just customer analytics professionals awash in the deluge of customer data who are aiming to gain insight from big data. A recent study by the American Institute of CPAs and the Chartered Institute of Management Accountants finds that three quarters of the world’s CEOs want more emphasis placed on measuring the value of non-financial assets like customer relationships.
Harvard Business Review notes that while companies spend an inordinate amount of time tracking financial assets and liabilities, many devote little energy to obtaining customer intelligence.
“Perhaps that’s the result of customer metrics long being seen as ‘soft’ numbers with little clear connection to ‘hard’ numbers like revenue or cash flow,” according to the HBR post. “Yet companies all over the world increasingly realize they need to correct this imbalance and that customer metrics also must become ‘hard.’”
But some pioneering companies do track this data – just as they do financials – and use customer intelligence to drive operational and investment decisions.
HBR notes that because of the system that tracks customer metrics that Charles Schwab installs when he returns to his ailing company in 2004, the firm no longer struggles with obtaining actionable insight from its customers. The company’s executive committee uses the scores it attributes to its customer promoters and detractors to measure the performance of the business.
Server hosting company Rackspace has launched a broad set of customer-focused initiatives, including building a sophisticated process for gathering and acting on customer feedback, to offset the hit it took during the financial downturn, according to HBR.
As a result, its customer churn rate has declined by more than one third, and the company continues its double-digit growth. The company compares its Net Promoter score (how many customers would recommend your company to their friends) with the scores of its main competitors as a key indicator of the health of the business.
Companies embarking on customer intelligence initiatives first analyze the goals of the business and only consider initiatives that will offer the highest impact, says Thomas Davenport, a visiting professor at Harvard University and an author of several books on using analytics to inform business strategy.
Customer analytics can help a company acquire new customers or keep old ones. Depending on which is a more important goal, different tools and techniques will apply, Davenport says.
The ability to present “next best offers” to customers might offer a large impact to a retailer with a diverse portfolio of products, but not to a financial services company that likely will not entice its customers with impulse buys.
“The problem with customer intelligence is that while everyone wants more of it – and better versions of it – there are many different avenues to take in pursuing it,” according to Davenport. “No organization can pursue all of them at once, so the challenge is to narrow down the options fast.”
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