Quality, quality, quality

Keeping and growing customers in a recession, and the importance of data quality to CxOs, by Navin Sharma, Director of Global Product Strategy – Data Quality, Pitney Bowes Business Insight

To learn more read Master Data Management: In search of data’s Holy Grail, a white paper by Bloor Research.

There is now little doubt that the financial markets crisis is having a substantial effect on the real economy. Every major European country is on the brink of recession, and at least one has officially moved into this unenviable position with two consecutive quarters of contraction. In such an economic climate, the major question occupying the minds of CxOs will inevitably be, “how can we do more with the same, or less.” Business processes will be tightened, ‘nice to have’ staff positions will be cancelled, and business retention and development activities will come under fierce scrutiny. Marketing and customer service will be expected to demonstrate and prove their return on investment, and it is with this latter area that our article is mainly concerned. In straightforward terms, businesses need to improve return on customer strategies, using quality information to deliver more targeted customer communications, resulting in improved customer retention and a greater ability to sustain and grow revenues.

The right information – a CxO issue

Extracting improved best value from marketing and customer service initiatives is largely a matter of data quality. On face value, this seems like a technical issue that should remain firmly in the hands of the CIO. In reality, nothing could be further from the truth. Understanding the importance of data quality throughout all management functions is a board-level issue like no other. It is an old adage in the data industry that “if you put garbage in, you’ll get garbage out”. In the past, the attitude of many main boards has been to be largely unconcerned about even a proportion of data inaccuracy, because they perceived that it only affected marketing campaigns. Now the world has changed, with customer data underpinning a wide range of corporate functions.

First, some elaboration is needed on the importance of underlying data quality – not just for marketing, but also for business analyses that guide the decision making of CxOs.

Ensuring quality information

Starting with marketing and customer retention, a regular European research series from Pitney Bowes Business Insight has shown that customer churn rates (the proportion of customers switching suppliers) have been steadily rising across Europe over the last five years. Utility companies see one in every seven customers switch suppliers annually. European ISPs and mobile phone switchers have reached almost one in every three annually. Yet, it is in this most volatile of sectors – mobile telecoms - that change seems to be on the way, possibly indicative of a reversal in the general trend. Preliminary findings from Pitney Bowes Business Insight's 2008-9 investigation into churn rates indicate that in the UK, Germany, France and the Nordic region, customer defections have started to fall for mobile phone operators.

It is our belief that any slowdown in customer defection is the result of effective customer retention and loyalty strategies, based on the intelligent use of customer information. Any reduction in churn has, surely, to be a good thing. However, companies need to know which customers it is important to keep, and which they can afford to lose. To make this judgement, those companies need to understand the revenues and margins associated with each customer. They also need to understand what additional business may be at risk – a process that requires data linkages that at least give a 360o view of the customer’s total products, holdings and transactions, and at best bring in data associations that reveal such relevant relationships as whether other members of the family are also customers.

In addition, the analysis of data and customer spend patterns is now regarded by many businesses as a strategic asset rather than a financial burden. Many organisations use the rich analysis of customer groups and their transactional behaviour – something that CRM and loyalty programmes enable – as critical management information. In telecoms, IT, financial services, utilities and travel, this management information is used to inform new product market analysis and scoping, distribution strategies, customer service provision, technical support distribution, outlet management and cross-selling opportunities. Therefore, where such a range of corporate decision making relies on the analysis of customer data, that data must be as accurate as possible.

Information quality in action

A few examples of the importance of customer data quality are illustrative of the task in hand. Address and postcode are frequently the common data piece across transactions, loyalty schemes, logistics, customer service, product warranty, lifestyle and geodemographic data, order processing, call centre, campaign responses, and many other pieces of information that go to make up the 360o view of the customer.

However, there are other validation and standardisation functions that are also important. Fuzzy matching techniques are used to recognise different versions of the same person’s name – such as John Reynolds, Johnny Reynolds, J Reynolds, etc – or even misspellings. Synonym databases help overcome the fact that different people use different words for the same thing:  such as mail, post, letter, note, notice, etc. This is important when, for instance, linking channels, so that common preferences or attributes, expressed slightly differently, can be spotted and acted upon. Another example of data enhancement is provided by gender and ethnicity databases, which help identify whether a name derived from a different geography is masculine or feminine, thus avoiding embarrassing moments through the post and in the call centre.

Putting it all together

Data not only needs to be accurate and timely, but it also needs to be integrated into a single, common repository if the company’s various systems are to access it for analysis and to implement effective management, service, operational and marketing strategies. A few years ago, the cost and inflexibility of performing such data integration often made the process unaffordable. From the CxO’s point of view, it is important to highlight how radically this has changed. There have been significant advances in cheaply and quickly drawing customer information out of legacy systems (billing, finance, order management, EPOS, stock management, etc). Formerly, pulling such information was cumbersome and expensive. Special interfaces had to be programmed in to extract the data without causing the legacy line-of-business system to fall over (and result in, say, bills not being sent on time). This was a particular problem for volatile industries (such as mobile phone, ISP or banking) where the customer data you needed to analyse and apply to campaigns today might not be the same as your requirements six months later. That barrier no longer exists thanks to a software category called ‘extract, transform and load’ (ETL). In layman’s terms, this software allows non-technical people to build new data input filters on the fly, and inexpensively.

Delivering efficiencies and new opportunities

Once data accuracy has been assured, and data access affordably and flexibly implemented across a range of corporate management, operational and marketing systems, CxOs are then looking for real life applications that can deliver efficiency along with improved customer retention and relationships. Two such applications are worth highlighting – call centre (customer service) efficiency, and transpromotional advertising.

In a tight economy, as many calls as possible need to be resolved in a single conversation. Inefficient customer service, resulting in multiple calls, rapidly destroys customer profitability. Single call resolution demands that the call centre system can access all sorts of data and documentation from across the enterprise (such as customer transactions, customer profile, customer service letters, bills, statements, and so on) to satisfy an enquiry straight away. This requires a flexible enterprise-wide data integration function that can gather, standardise and combine all those key customer data pieces and present them to the call centre agent in the same format the customer has received them.

At the same time, automation can now provide a level of control over how call centre agents deal with the customer, especially in the form of follow-up correspondence (mail or email). Workflow solutions allow the organisation to ensure that certain pieces of text are always included (this often is important to regulatory compliance requirements), but leave the agent free to personalise or tailor other parts of the communication to reflect the conversation that has taken place. At the same time, the system can also trigger additional cross selling offers and messages for inclusion in the correspondence, according to the customer’s profile and recent transactional history.

The subject of cross-selling also raises a relatively recent marketing technique that the technology analysts have christened “transpromo”. This refers to the ability to include personalised cross-selling offers on a customer’s bill or statement. Again, the effectiveness of such advertising is reliant on segmentation underpinned by rich, relevant and accurate customer data. The fact that this technique is now possible, and being practised by a handful of pioneer organistions, is very interesting to CxOs in the current economic climate, as it can serve to boost sales, increase share of customer wallet, and thereby subsidise the cost of mandatory customer communications, not just in the form of bills and statements, but also statutory notices, customer service letters, order confirmations, and many other examples. One or two organisations, working with list management suppliers, are even managing to monetise their bills and statement runs, selling the available white space to appropriate third parties to deliver targeted, relevant offers to customers.

Summary

In these tight economic times, CxOs are looking urgently for process efficiencies and improved return on investment from their customer retention and development strategies. Since not only marketing, but also management analysis, operational efficiency and corporate strategy development are reliant on high quality, comprehensive customer data, then it is a board level issue that this such is accurate, up-to-date, rich and accessible throughout a variety of corporate systems. CxOs should be aware that recent techniques have been developed to ensure data quality and to affordably and flexibly draw it out of legacy and line-of-business systems. In terms of just one example of process efficiency, this enables call centre agents to ensure a higher level of first call resolution and rein in customer service costs. Better and more timely data quality also enables more accurate and appropriate target marketing, both through traditional channels and through emerging media such as transpromo. In short, customer data quality, access and implementation is an issue to which CxOs should pay the closest attention in the next 12-24 months, as it holds the key to sustainable and growing revenues through a difficult economic period.

To learn more read Master Data Management: In search of data’s Holy Grail, a white paper by Bloor Research.