Mar 1, 2009

Treat your customer data like it matters!

Norman Mayne is the kind of neighborhood grocer presumed to be extinct, except on TV commercials. He claps employees on the back and calls customers by name. Each summer, he hosts a baby derby that crowns Dayton, Ohio's swiftest crawler. When a customer was leaving one of his stores, he insisted on slipping a bottle of garlic-and-vinegar dipping sauce into his jacket pocket. "Try this with a good piece of bread," Mayne said. "You'll love it."

Mayne runs a relatively small business—two upscale grocery stores in suburban Dayton that take in about $48 million a year. But he understands more about the intelligent use of customer data than just about anyone else in the country.

The grocery stores where most of us shop in have asked for some information, enrolled us in their loyalty program and assigned everyone a UPC code that is affixed to my "Preferred"customer card. They also track every purchase. But we get little in return for handing over all that information, other than an imperceptible discount that's pretty much the same regardless of whether we're shopping at Star Market or Stop & Shop. The stores don't get much out of the deal, either. Most people belong to several of these loyalty programs and still shop as they always have at whichever store is most convenient or is offering the biggest discounts that week.

This is called information abuse—a company collects and stores data without treating it like it matters. Granted, information abuse isn't as serious as child abuse or substance abuse. But it is a sign of operational waste, an annoyance to customers and a lost opportunity. If we were to pass a law that would eliminate information abuse, it would be this: Companies may gather and keep only the information about their customers that enables them to deliver a better or cheaper offering.

Most grocery chains and many other kinds of businesses would get dragged into court for regularly flouting that law. Websites track where you came from, what pages you look at and for how long, and what you click on. RadioShack wants your address before it will sell you a battery. Mobil knows about every time you use one of its pumps to gas up. Call center reps ask for your mother's maiden name, your average income and your age. They don't use the data, and forking it over doesn't help you in any way.

As new technologies are developed, vendors promise they'll be able to supply even more information about customers. A company has developed a network of music ATMs that allow anyone with an MP3 player to buy and download songs from "tellers" at the mall or at the airport. What's one big benefit to the record companies? More data about who is buying their products.

But the problem isn't too little information.
It's too much, and not enough energy devoted to using it well.

"Lots of companies give lip service to how important customer information is to their business," says John Hagel, chief strategy officer of 12 Entrepreneuring in San Francisco and the author of Net Worth, a book that posits major changes in the sharing of information between buyers and sellers. "But how many CEOs are focused on turning customer information into tangible value? Lots of people blame the tools, but it just takes time and attention."

Hagel says that when he conducted an informal survey of 40 CEOs at a conference, he found that they had an average of less than one full-time person at their companies dedicated to making sense of the information they'd gathered about their customers. "It's hard to list examples of companies using information intelligently, beyond a few like Amazon.com, which has its recommendation service."

Dorothy Lane Markets, Mayne's pair of groceries in Dayton, is another. Mayne gathers the exact same information about his customers that the big chains do—who they are, where they live and what they buy. The difference is, he actually does something with it. Based on how much they spend at Dorothy Lane, customers get different discounts. For example, high-tier shoppers get a dozen eggs for a penny during Easter—limit three, of course.

Dorothy Lane also does things to curry favor with its best customers—it gives free tickets to summertime concerts, free turkeys at Thanksgiving and free Parmesan cheese and cheese graters at Christmas. Not to mention targeted mailings about new products—like organic canned food—that they're likely to buy. The freebies and the intelligent use of customer data ensure that Dorothy Lane Markets operates with much healthier profit margins than the typical grocery store.

Hertz and Avis are two other excellent examples. Give them the information they ask for, and you're instantly admitted into Hertz #1 Club or Avis Preferred. At most airports, in return for a little bit of information, you get bused straight to your car. In the summer, you'll often find the air-conditioning on and the contract on the dash. They don't yet tune the radio to your favorite station or preadjust the mirrors for you, but I don't think that's too far beyond their abilities.

Why is it so hard for other companies to make use of data in a way that makes customers happy?
Vernon Tirey, CEO of the Boston consultancy DiaLogos, theorizes that many companies have been so focused on building websites during the past few years that they haven't given much thought to how they might leverage the data generated by those sites and by other sources. And as e-business groups have been formed, spun off and folded back into companies, it hasn't always been clear who is responsible for managing customer information. Is it an e-business responsibility? IT? Marketing? Customer support?

Both Tirey and Hagel believe that the harsher economic conditions we're now experiencing could encourage companies to start thinking about using information to deliver more attractive offerings more cheaply.

But Steve VanTassel, senior vice president of products at Edina, Minn.-based Net Perceptions, disagrees. He says that tougher financial times will only encourage companies to look for ways to cross-sell related products to customers and jack up their average purchase size—neither of which build long-term relationships between buyer and seller. "Companies usually go for the low-hanging fruit—anything that produces more revenue per store visit or site visit," VanTassel says.

Instead, VanTassel says it's important to "leverage the data you have about consumers to create a differentiated shopping experience"—your own version of Dorothy Lane Market or the Hertz #1 Club. As a consumer or a business buyer, I'm going to spend more and be more loyal to the companies that use information about me intelligently.

To get started, Tirey recommends doing an audit of the information you already have, developing a strategy for putting it to use (or gathering more), crafting a set of guidelines about how the information will be used to benefit the company and the customer, and training employees to continually track and measure the effectiveness of the system, improve it and guard against information abuse.

"This is one of the defining characteristics of a winning company—building electronic networks with customers and deriving value from information," Hagel says. "The bad news is, it has taken us a long time to get started. But the good news is, there's still a chance for anyone to pull ahead." How are you planning to stop information abuse in your organization, and start using customer data more strategically?

We interested to find out and willing to help you get started. Contact us today to see how we can assist you in evaluating the information you have and turning it into intelligence that can be used to gain competitive advantage over your competitors.

Number of shows: 1554