Category Archives: Analytical Culture

Predicting CRM Payback

Analytical Culture, Analytics Education, Customer Experience, DataBase Marketing, Driller Q & A, Marketing / Tech Interface

Jim answers questions from fellow Drillers
(More questions with answers here, Work Overview here, Index of concepts here)

Topic Overview

Hi again folks, Jim Novo here.

Yea, I know. Boss wants to do smart customer marketing, but also wants to know what the payback will be for the “CRM investment”. Geesh, can’t we just figure cost out later? Sure you can, but might be better to make sure you understand what the “CRM success levers” are before you go spend a ton of money. You mean Drillin’, Jim? Sure, on to The Drillin’ …

Q:  Hi Jim,

Our industry is facility management services where a headquarters with chain locations contracts with us to manage their facilities in all their markets.  The President is interested in a “CRM Solution” but is concerned about the ROI he might expect from implementation.  Do you know of any number that I can pass along to him that would placate his insistence on knowing in advance what the ROI will be?

A:  Bad news: No, not really.

Good news: You can figure it out, which is something often not done.  You might not even need any new software to “do CRM,” though it depends on what you have now and what the objective of the CRM program is (you do have an objective, correct?).  But the software required is likely not millions of dollars and if you only have 100’s of clients you could probably do it with some combination of contact software, MS Access / Excel. 

The key question to ask: do you really know how your customers behave?  In this kind of contract business, I imagine the central issue is this: Can you predict which customers are likely to re-up a contract, and which ones are not?  And then can you use this information to focus on the ones less likely to re-up, and take steps to make them more likely to re-up?

Sometimes it is just a matter of better customer service.  In this case, what you need is better service practices, not “CRM.”  From a distance, it is very difficult to know what the issues might be in your company.

Here’s a test you can do to find out where you might be on the road to answering the CRM question.  If you cannot accomplish one or more parts of the following, you are not ready to even talk about “CRM,” and need to do some more internal research.  These steps, by the way, are the ones everybody skipped on the early rounds of CRM that created so many bad outcomes. Research / Implement / Discuss the following ideas to pave the way for a successful implementation if you decide to go with a CRM approach:

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RFM and Customer LifeCycles

Analytical Culture, Analytics Education, Customer Experience, Digital Analytics, Driller Q & A, Measuring Engagement, ,

Jim answers questions from fellow Drillers
(More questions with answers here, Work Overview here, Index of concepts here)

Topic Overview

Hi again folks, Jim Novo here.

Today we have a bit of confusion between RFM modeling and tracking Customer Lifecycles. Each has benefits and downsides, but the most important idea is to make sure you know what each is best at. Make sense? Let’s do the Drillin’ …

Q:  I have a small sampling of the RFM scores that correspond to the various lifecycle stages.  For instance, 111 & 112 correspond to the acquisition stage, 333 & 443 to the growth stage, etc.  However, I’m looking for a complete listing of all 125 possible RFM scores and their corresponding lifecycle stages.

Can you please send this my way?

A: Wow, I certainly hope you didn’t get this idea from me; if you did, I have done a terrible job of explaining something somewhere. I would be very interested in the source of this idea, that a LifeCycle stage can correspond to a single RFM code or score.

An RFM code or score is the ranking of a single customer against all other customers for likelihood to respond and future value at a specific point in time. High scores equal high future value; low scores equal low future value.

A single RFM score represents this ranking at a fixed point in time – the day the scores were created. There is no “cycle,” which implies “over time,” inherent in an RFM code. Only if you knew the previous RFM code or sequence of codes could you imply a “LifeCycle stage”. This is, of course, what my book is about – using a modified version of RFM to track and profitably act on customer LifeCycle behavior. If you know the LifeCycle, you can predict behavior. If you can predict behavior, you can dramatically improve marketing ROI.

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The Cost of Queuing Customers

Analytical Culture, Brand Management, Customer Experience, DataBase Marketing, Driller Q & A, Measuring Engagement,

Jim answers questions from fellow Drillers
(More questions with answers here, Work Overview here, Index of concepts here)

Topic Overview

Hi again folks, Jim Novo here.

If customers have to “wait” for service, does the inconvenience / possible frustration impact their value? Great question; problem is, most businesses don’t know how to answer it in a way that will be meaningful to the value of the business. You know our Drillers though, they’ll get about it with actionable results in mind. On to the Drillin’!

Q:  Are you familiar with (or can you refer me to someone who is familiar with) customer satisfaction around queuing up for service?

A:  This is a Frequently Asked Question for sure, and not one there is a lot of statistically believable data on…at least that people are willing to release.  Kind of a sensitive subject, as you might think…

Q:  I work for a large bank.  We have perceived queuing problems in some of our branches – generally due to layout restrictions. I say perceived because although a queue is long, it moves fairly quickly with the actual wait time to see a teller often less than 5 minutes (considered at par with our competition). 

However, customers grumble when they walk into the branch and see the line and continue to grumble out loud until they reach the teller  and then continue to communicate their dissatisfaction to the teller.  Do you know if any work has been done in this area with other large companies that tend to have long queues (like airline ticket counters, large retailers)?

Thanking you in advance for your response.

A:  I think this issue can be an illusion; let me tell you what I mean. 

For e-commerce, somebody like Gartner does a survey that says people hate shipping charges, and every web site kicks in “free shipping.”  Guess what? People have always hated shipping charges since 1850 when the catalog business started.  And why not?  It looks like extra cost to the customer.  But if you run your business correctly, you price with shipping in mind and manage costs so that you still make a profit.

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