Category Archives: Analytical Culture

Book: Managing Customers as Investments

Analytical Culture, DataBase Marketing

Are You Spending More on Your Customers than They are Really Worth? authors Gupta and Lehmann ask.

Based on my experience, Why Should We Care? is the return question.  Lots of companies apparently do not care, at least not yet.  But someday these companies will “hit the wall” with the traditional focus on acquiring new customers, and then they will care.  Just a Case of History Repeating, don’t ya know.

When I published the 3rd edition of my book, I was pretty sure the business world had finally made it past “Why Should We Care?” and would be on to “How Do We Do This?”.  Wrong, as Ron constantly remind me.  Before the book reviewed below was published, I was using what I called the “portfolio approach to managing customers” idea to set up the Current Value / Potential Value model.  Spent an entire chapter on the idea.  Apparently, that was not quite enough to answer the “Why Should We Care” question.  My bad.  Turns out the same idea is worthy of an entire book.  Sigh…

So for those of you who are more interested in the “Why Should We Care?” (90% of You?) as opposed to the tactical “How Do We Do This?” presented in the Measuring Engagement Series, I give you the following book:

This is a 6 Chapter, no nonsense, 165 page book that is heavily annotated with the kinds of “proof” you need to potentially get your Boss to care about this topic.  I mean, the boss-person can just hit the EndNotes (another 33 pages with the Appendix) and find out how the theories, formulas, and examples in this book have all been well documented by a slew of hard core academics and Consultainers alike.  These references to various studies, books, papers, and so on probably have more impact than say, sending an e-mail to the boss titled “Interesting Stuff” with a link to my blog…

The book is easy to read and shoves all the “Math” into the Appendix so whether you’re using the right or left brain you can follow right along – ignore the math and just Grok the pictures, or get right down into full-blown proofs with your Calculus shoes on.  Have it your way, as they say.

Just look at these Chapter Titles:

1.  Customers are Assets – no argument there from me.  Want definitive proof?  Here it is.

2.  The Value of A Customer – do you know the value of yours?  Here is an easy – and I mean easy – way to estimate this value.  Call it Lifetime Value “Light” –  it’s way better than what you have now, I bet.

3.  Customer-Based Strategy – Oh, to develop Strategy and actually do something based on the Value of the Customer, as opposed to whining about how they are “in control”.  This is the best chapter in the book.  Customers can only take control if you give it to them, you know.  And that’s a Strategy problem.

4.  Customer-Based Valuation – they’re talking firm valuation here, for the purposes of acquiring companies or selling them.  As I said before, Wall Street uses the Current Value / Potential Value Model.

5.  Customer-Based Planning – as in building Customer Value right into the Business Plan, so the execution is rock solid.

6.  Customer-Based Organization – sure, the tough one.  How you make it all work in the org.  A bit of the Analytical Culture thing.

The Gupta and Lehmann book is great because it takes what I’ve learned through 20 years of “exposure” (Why You Should Care) and explains it in corporate speak, creating links to stock prices and all kind of other good stuff the CFO would really like to hear about, like projecting future sales, estimating the buyout value of the firm, evaluating acquisitions, and so forth.  All from the same kind of customer analysis we just worked through in the Measuring Engagement series.  Really.  Except they hide all the numbers from you – unless you go looking for them.

Oh, and did I mention this info is all well documented by a slew of hard core academics and Consultainers alike?  Seriously though, there are over 120 footnotes that at the very least provide you a library of solid references and case studies on the topic of using customer value data to drive increased profits.

So, if you’re a Marketer trying to create a bridge to Finance, get a copy for your friend over there.  If you’re an analyst trying to get a deeper understanding of why customer analysis matters to the business side, get a copy for yourself.  If all of a sudden you are in charge of “CRM” or “Customer Experience” or whatever they are calling running a business that doesn’t shred its own customers these days, get this book for the sake of your company.  The book really is a great read and might help you make sense of all the disparate and seemingly conflicting marketing and service ideas you read about today.

And while you’re at Amazon, get a guide for the people who will have to turn all this Customer Value Data into Profits for you – mine.

The Analyst’s Enigma

Analytical Culture

Some of you might know that I produced the Web Analytics Association’s continuing education courses on Web Analytics (with Co-Chair Raquel Collins and a ton of great contributors).  One part of this project I am very proud of is the 4th Course, Creating and Managing the Analytical Business Culture.  This course was a real “stretch” goal because initially, the Education Committee thought there simply would not be enough material to create an entire course on this subject.  But we did it, and more importantly, the students really love it, because it addresses the “politics of analytics” they face every day.

One of the exercises in this 4th course is called The Analyst’s Enigma.  It always generates a lot of intense discussion and without giving away too much of the actual exercise, I thought you might like to either comment o how you would handle this situation or share your own similar war stories and how you handled them.

By the way, it’s based on an actual situation you may well have experience with (or will in the future) as web analytics folks spread their wings and bring their business optimization skills to the rest of the company. Here goes:

The Analyst’s Enigma

You are the manager of web analytics at a large public company.  The “web stuff” in the company started out in IT, so due to legacy reasons you are part of IT, but your internal client is really the marketing department, who is now in charge of the web site.  About 95% of your time and effort is spent working with marketing to optimize the web site, a project that has been very successful.

Over time, your success with the web site optimization process and as an analyst has been recognized in the company, and you occasionally get requests to do “problem solving” sessions with other parts of the company.  Typically, you run these projects through the same analytical process you used with the web site: Define objectives, create / get buy off on KPIs, measure baselines, develop ideas for testing, test and measure the results of those tests.

Recently, you were working on a project for customer service, trying to develop / improve KPI’s for the measurement of performance in the call center, which has a very rich data set.  This data is surprisingly similar in many ways to the traffic data set from the web site.  A phone call is very much like a visit; it has a duration, it typically has a number of steps like a web site funnel, and the steps end with accomplishing or not accomplishing a goal.  The call center is trying to evolve from relying on simple metrics that score only “efficiency” to a KPI that better balances efficiency and a good customer experience.

Your web site work has lately focused on a new campaign that the marketing folks are very proud of.  It’s blowing the doors off anything they have ever done in terms of response, thanks in large part to your analytical work on promotions.  The success of this program is widely known throughout the company, as is your role in the success.

On a Friday afternoon, you find yourself with some free time to devote to the customer service KPI project.  While examining the call center data set, a remarkable possibility presents itself.

Using a new, experimental KPI you have developed that balances efficiency and customer experience in the call center, it appears that every time marketing drops this new, highly successful campaign, there is a dramatic negative spike in this new call center KPI.  The correlation between the marketing campaign drop and negative spike in the call center KPI is extremely high, leaving no doubt in your mind that that there is a causal relationship between the two events.  There is always some negative impact on the call center when a campaign drops, but nothing like the magnitude of the impact caused by this most successful campaign.  Nothing about the campaign execution – for example, the volume of the drop – would lead one to conclude it should cause problems in the call center.

What would your next steps be?  What should you do with this knowledge that (as far as you know) only you possess?  The topics below might be worth touching on:

Topic 1.  You work for IT, and your main internal client is marketing.  The customer service analysis is a side project.  What responsibility do you have for resolving the apparent conflict between optimizing marketing and optimizing the call center?  Is it your responsibility to try and “optimize the company” across all the business units by providing this kind of information?

Topic 2.  One alternative would be to try and alter the new KPI (which you feel is very, very good) so that it masks the effect of the marketing campaign on the call center.  This would reduce potential internal conflict, for sure, but would result in a weaker, less trustworthy KPI for the call center.  Would you consider this route? What if your main client (Marketing) suggests you “tweak the customer service KPI a little bit to help us out on this”, what would you say?

Topic 3.  What kind of action plan can you imagine for trying to resolve the apparent conflict between the success of the campaign and the performance of the call center?  Would you call a meeting first or speak privately to some folks and discuss a potential meeting?  Who would you speak to 1st, 2nd, and 3rd given your ties to IT, marketing, and customer service?  Who would be invited to the first meeting?

Looking forward to hearing your ideas on this or similar situations you have faced.  If you’re relating a real analytical culture war story, you might think about changing the names to protect the innocent!

And / Or, if you’d like to share your story interactively with the Course 4 students in their Cafe’ (chat), we’d love to have you as a guest.  FYI, the students are primarily adults who are already working with web analytics as part of their job who now are faced with a need to upgrade their skills.  Let me know if you are interested in sharing your story with them - you can use the ”Email Jim” link below to contact me.

CRM, Chief Customer Officers, and XXM of the Month

Analytical Culture, DataBase Marketing, Marketing / Tech Interface

In response to my comments on the potential for Marketing to lose a seat at the strategic table, Curtis Bingham comments on the difference between a Chief Marketing Officer and a Chief Customer Officer.  It’s not that I am opposed to the idea of a CCO, I’m just wondering, why are they needed?  I asked the same question about CRM when it came on the scene.  I mean, to me, CRM is Marketing; what would Marketing do if CRM was in charge of the customer relationship?  So then Curtis puts forth this gem:

“In some companies I’ve worked with, the CMO is so myopically focused on outward – bound marketing and “pushing” information on the customers that it takes a CCO to bridge the gap between what marketing hopes customers want and the customer reality.”

And then it hits me.  That’s really what is happening from a macro organizational perspective; it answers the question of “why” people are Deconstructing Marketing. Current CMO’s can’t do the job I used to know as “Marketing”.

As someone who came from the database marketing side, all my experience has been in industries rich with customer data, and in these industries, the CMO is the CCO, performing all those functions, because that is simply the nature of the business, it is all about the customer and always has been.  I think what we are seeing is as more companies get access to their customer data and want to act on it, the skill sets of the CMO’s in those companies are lacking relative to the financial opportunity presented by having the data?  This conflict results in functions like “CRM” and “CCO” being stripped out of what I know as Marketing and created as new functions to address the new opportunity that “outward focused” Marketers don’t have the skills to address.  Unless, of course, the CMO steps up to the challenge of a data-driven organization and grabs hold of it.  Otherwise, the CEO simply fills the gap with another position. 

And that squares with the idea database marketing folks would make great Chief Customer Officers – they have both the Marketing skills and the Customer-centric empathy, plus a knowledge of process optimization all in one package.

Another issue of course is one of scale.  Not that HSN was a huge company at 2 billion in sales or so, where I managed to handle all the “Customer Centric” functionality as well as the Marketing.  But compared to Sun Micro or Cisco, I suppose at some size a single function like Marketing simply cannot pay enough attention to everything that is going on so you have to break it up – or do you?  I suppose that depends on the kind of talent you have access to.

Either way, at some level, as companies become more data-driven and so customer-centric, the traditionally trained “outbound CMO’s” are going to have to get with the customer-side program or will lose a lot of their power.  They will have to, because the financial leverage in customer marketing / analytics / accountability is so huge it’s bound to dwarf anything an “outbound CMO” can come up with.

Plus, the pressure to improve process optimization / accountability is only going to get more powerful as our friends over in IT keep rolling out their favorite XXM (Xxxxx Xxxxx Management) flavor of the month.

This all begs a larger question for me: If the above is true, then is there a market for training “outwardly-focused” CMO’s in the art of customer-centricity?  Or are they simply going to “let go” and cede control to the CCO’s because Customer Marketing is just too hard?

A pithy question we can perhaps discuss at the Don, Ron?