What is the difference between a company that is awash with customer data and one which has none at all? Less than you might imagine. Both have to persuade their board to invest in the resource necessary to bring raw data together into a meaningful view of the customer. Then they have to exploit it and deliver back some benefit.
These similarities in how to manage customers in environments that are either data-rich or data-poor were underlined across the presentations at this year’s Data Summit. While American Express, Lloyds Banking Group, O2 and Orange lined up on the side of the “haves”, National Express and Vertu represented the “have-nots”.
And for everybody who was not able to join Data Strategy this year in Brussels, the lessons both sides had to teach are summarised below.
The Business Case for Privacy
Dr John Leach, director, John Leach Information Security
One of the most useful publications for all data professionals came out in March of this year when “The Privacy Dividend” was launched.
Commissioned by the Information Commissioner and seen as a follow-on to the previous “Privacy by Design” report, it was intended to unravel a paradox. “We have had data protection legislation for 25 years. So why aren’t organisations doing a better job looking after personal data and privacy?” said Leach, co-author of the report.
With the landmark of 1,000 data breaches to the ICO having been passed, it seems a reasonable question. Unfortunately, as Leach discovered through the research carried out for his report, “no-one has sat down and distilled the business case, as opposed to the case for compliance.”
While it is easy to demonstrate the potentially negative effects of losing data or having it stolen, together with the financial consequences, proving that the business performs better by managing personal information well is harder. Nor was Leach able to uncover enough hard data to build a generic business model.
“We found two categories of company. The first were positive towards privacy and had already decided that protecting it was the right thing to do. They just thought that way. The second were negative and thought about privacy primarily as compliance and didn’t believe it played into their business,” he revealed.
In the first group, privacy is seen as more than just data security – it encompasses how the company collects data, what it uses it for and how the risk of a data breach is consequently reduced. Even so, none of the organisations interviewed by Leach had based this decision on hard evidence. At best, they were using “medium-firm data with no proven correlation between privacy and competitive advantage. It is just a top-down decision.”
Building a Customer Intelligence Centre of Excellence
James Morgan, head of CIC, Telefónica O2 UK
Many brands have set out a vision of their destination. Few have an actual picture of it. O2; is the exception, however, with its O2;Ville map of what it hopes to look like by 2014. The cartoon illustration of an imaginary town contains all the elements of what it might mean to be “THE leading connectivity brand”, from O2; Money through to O2; Car Club.
If that seems fanciful, then consider that the O2; Arena is already the biggest music venue in the world. With the launch of its pre-loaded money card, the company has entered financial services. It even has a foothold in online dating through its acquisition of Jajal. Making that journey is essential given the saturation which the mobile market is seeing.
Enabling that vision is customer data. “We have got to look at what customers expect us to do and deliver it. The biggest opportunity is to leverage that. We know if we use data effectively, give them the right products, services and added value, it will turn our customers into fans,” said Morgan. “If we don’t, we will lose them.”
The brand is driven by this customer insight, which also makes the company more cost-effective. One strand of this is understanding the associations customers have with the brand, taking a customer-centric view.
Morgan admitted that there are problems in achieving this. “We may not know when a customer upgraded their phone or had call drop problems,” he said. With over 500 data feeds from more than 300 operating systems and 18,000 files a day, O2; is certainly data rich. At the same time, it has problems making sense of that data. “We have 19 copies of every call data record across the business,” he noted.
The customer-centric enterprise data warehouse at O2; is intended to ensure that the right data does get delivered to the right place at the right time. At the same time, governance structures are being put in place, like the Information Council. Out of this is being driven a suite of policies to ensure that people and processes are aligned.
The goal of all of this is to make the organisation “self aware”, stage five in its information management maturity model. And the deliverable for the business? “One million more fans by 2011,” says Morgan. “If a customer is a fan, they will take more products, be more loyal and invest in you. So we have to be careful and look after their data.”
Using data effectively to drive profitable customer acquisition
Stuart Lewis, director – planning, targeting and partnership acquisition, American Express Services Europe, international consumer card and small business services
American Express starts its customer journey at an advantage over other card issuers – it has a “closed loop” of information. The brand is both an issuer of cards (competing against the likes of Barclaycard and Capital One), an acquirer of merchants (competing against CardNet and others) and a processor of retail transactions (competing with Visa and Mastercard). As a result, it is able to build end-to-end spend information and use it to drive member and merchant acquisition.
“Our other difference is our focus on spend. American Express makes the majority of its money on transaction fees, so we have an incentive to drive spend, especially by high value members,” said Lewis. This focus on the loyalty of high spenders yields greater returns and allows the company to invest in its products and rewards, incentivising cardholders to spend more often.
These are the rational basis for the brand’s goal to become “the world’s most respected service brand”. It is also working to build emotional bonds with customers through service, experience and exclusivity. These have contributed to the brand being valued at $14 billion.
For Lewis, the challenges are the same as in any other company. “As a data practitioner, the question is how to add value to the data and the business. That is my bread and butter,” he says. This involves taking a broad view of the data necessary, from macro-economic trend data on GDP, inflation and unemployment, through national surveys on consumer confidence, to attitudinal data gathered via customer satisfaction surveys and focus groups, down to highly granular personal information.
This approach can be a powerful indicator of future trends. In 2009, for example, the number of consumers saying they planned to use more credit in the next three months fell by 20 per cent, while the number worried about their ability to make debt repayments rose by 19 per cent. “So if our lending balance had gone up in 2009, those might have been debts people couldn’t pay back. It is a ground-up sense check,” said Lewis.
How to be data driven when your organisation is data poor
Chris Dobson, head of CRM, National Express
“When you don’t have the best data or the best analytics function, how do you do something interesting and develop it from the ground up?” That is the challenge being faced by Dobson and his team of six. Having moved from data-rich environments at CapitalOne and Boots, he is now working in a large organisation – 18.5 million coach passengers each year travelling 151,000 miles per day – which does not have the same information to work with.
A pragmatic approach has been adopted to leverage data where it exists and can be put to work effectively. One key area has been using customer preferences within a dynamic weighting rules engine to decide the next best action. “It is about using as much data as possible to get a better relationship with the customer,” said Dobson.
Pulling together content from HTML sources, fare databases and even UGC, these rules push out relevant messaging via the call centre, direct mail, website and email. “We are looking to get to where we are using CRM and our rules engine to give personal-level pricing without giving away value,” he said.
“We don’t want to get to the top of the data mountain – it is very steep up there. We are in the foothills where there is a lot we can do. We are looking at what value real-time data and social networks might deliver to the company,” said Dobson.
One striking view to have arisen out of this pragmatic use of data is that the company “is not about coaches – it is about thousands of different products. Every journey is a product and every journey is different.”
Is mood marketing the key to the customer experience?
Peter Crayfourd, head of customer experience lifecycle, Orange – France Telecom Group, group sales and customer experience
“It’s all about the emotion.” While companies put a lot of emphasis on fixing the basics in order to keep customer satisfaction levels high, less effort is applied to creating an emotional bond with customers. Yet this is what leads to the deepest level of lock-on loyalty and therefore value to the brand.
Crayfourd notes that in telecoms, customers are more likely to be locked-in through contracts. The first steps towards creating lock-on commitment can already be seen in initiatives like Orange Wednesday. He has been working on how to understand consumer mood and how to align this with operational efficiencies and business transformation.
One of the challenges is around which metrics to use. “There are issues with customer satisfaction, net promoter scores and brand trackers. They look like they are measuring emotion, but they may not provide an understanding of what the customer is going through,” he explained.
Call record data and reason for call information may indicate that a customer has just experienced a service failure and may therefore be feeling strongly negative towards the business. If this could be identified and trigger appropriate service actions, it might transform those feelings into a positive.
“You need a way to categorise mood into key performance indicators around offer, adopt and serve. That allows you to identify where a customer switches off or engages. If you do that well, it drives value creation,” said Crayfourd.
Some companies are already pursuing this emotional dimension, such as O2; with its pursuit of fans or BMW with joy. The goal for Orange is to be the best loved communications brand by 2011. “That means a different approach to understand the customer’s overall engagement,” he said. “It is about tracking unhappy customers and making them happy.”
Building a customer view and management process from scratch
Sarah Keyes, head of global CRM, Vertu
Like other speakers, Keyes has moved out of a highly data-literate business (BA) into a small operation that did not even know what CRM was – Vertu, the luxury handset brand of Nokia. Yet many of the lessons learned in one world can be transferred into another.
“What hit me was, where is the customer in the business? At BA, it was at the heart. So internal PR was important to get the business to align with CRM and its benefits. I had to articulate the vision to get stakeholder buy-in,” she said.
Building customer data has been done in a pragmatic way, persuading existing data owners that putting their records into a single customer view will enhance their ability to manage customers, rather than interfere with it. Auditing data to understand its completeness and compliance is then essential, as is feeding those findings back into business processes. “You have got to stop the rot and prevent bad data getting into the system,” said Keyes.
As a small company with limited resources, using outsourced services was essential to avoid tying up limited IT capabilities. “They have the flexibility to build the SCV,” she said. What is critical, however, is to understand that the customer view is a resource, not an end in itself. “Focus on the value of SCV and CRM, not whether the data feeds are right,” advised Keyes.
The role of insight in driving financial services marketing
Paul Laughlin, head of insight and innovation (GI), Lloyds Banking Group
One of the challenges of trying to make a company become customer-centric is that the concept of CRM has lost its sheen. “But people are getting on with making it work. And data is the key to that,” said Laughlin.
To ensure that the right data is being used in an appropriate way demands consistent data quality routines and robust data protection. Laughlin also argued that metadata is critical to ensure data items are properly understood and the same language is used to describe them by all users.
He has spent eight years building the customer insight function within the general insurance division of Lloyds. An important learning from this is how essential good data management is to using that data for insight. That also means using the right skills base.
“People who are drawn to data are vital subject matter experts. Don’t let marketing managers alter data without the involvement of your customer insight team,” he warned.
Applying the CI resource to marketing measurement is where the function makes the most difference, points out Laughlin. “We put 25 people on it because the payback is tenfold. The big reward is making marketing spend accountable and showing if it added value.”