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Using customer information effectively. (Data Management).

Many corporate structures today focus on product management as the key to revenue growth. Yet product sales are only one means, albeit an important one, to attain revenue objectives. Providing for customers' needs and/or desires is a common-sense business practice that often eludes even seasoned executives.

In reality, the customer is a company's only strategic asset. Selling products and services is simply a means to an end. Calculating the long-term value of future returns from the customer supports this notion. Additionally, this exercise leads to a simple conclusion: customers provide the revenue stream, not the products. Thus, providing the proper solution set and service level to each customer becomes today's challenge, and product management is only the catalyst.

Customer relationship management (CRM) strategies support efficient growth and have become a focus for many businesses. CRM emphasizes customer satisfaction, and rightly so: It is a generally accepted axiom that it costs 10 times more to get a new customer than it does to keep an existing one. Moreover, anecdotal evidence suggests that companies focused on their customers are achieving higher growth rates than competitors who aren't.

However, many CRM projects fail. There are many variables that can contribute to failure, but some critical ones appear more salient than others. In particular, one key differentiator between success and failure in CRM is customer information management (CIM).

CRM and one-to-one marketing strategies are completely dependent on the underlying information source and its quality. Storing and managing customer information such as products or services purchased, time of purchase, method of purchase, purchase history, requests for service, complaints and third-party demographics form the foundation for interfacing intelligently with a customer. Customer information becomes a competitive advantage in a marketplace of myriad communications and parity products.

By leveraging CIM, management can control the necessary information resources and make confident decisions on issues relating to the customer or business activity. However, effectively wielding and managing information is still very much of a new discipline for many corporations.

Most view the data center as a cost center, but this couldn't be farther from the truth. The data center is the most important profit and risk center in a company. Any inaccuracies or lack of complete information there can result in increased costs, lost opportunities and penalties for violating protocol dictated by government legislation or administrative departments, such as the Office of Foreign Assets Control.

The Finance of CIM

Effective CIM is critical to managing the seeming paradox of "efficient growth." Research studies suggest that failure to actively manage information can result in substantial losses and opportunity costs. For instance, some experts suggest that poor data quality can result in losses of 10 to 25 percent of a company's revenues or total budget. Overall, poor customer information quality costs U.S. businesses $600 billion a year, according to a study conducted by the Data Warehousing Institute.

To truly use CIM effectively, companies must treat data as a product with enormous benefit or consequence for end users. A critical goal is to create a holistic view of the customer and relate appropriate events and transactions to customer definitions, so the information can be used in future interactions with the customer.

Indeed, integrating and organizing information around customers is crucial to managing growth and risk. Without a strategy to integrate and maintain a complete representation of the customer, the ability to capitalize on revenue opportunities is diminished. A complete customer view also reduces corporate exposure or redundant marketing efforts that waste company resources and may repel customers.

While the "customer" is usually an individual, savvy managers strive for a complete picture, including the context of a "household." In the business world, however, the definition is much more complicated. There, a customer can be rolled up to a corporate parent, a subsidiary, a branch location or an individual; it can be all of these or one, depending on the information need.

Each constituency within a company (i.e. marketing, accounting, credit) requires a different view of the customer. For instance, marketing may want to see customers based on industry or geography, or both. Accounting may need to see all customers based on accounts receivable to understand exposure to any one of them. Senior management may have yet another view of the value of a particular customer.

Multiple customer views must be maintained, supported and related back to a common grouping. Companies must recognize that there is no one best view of the customer, but several. At the heart of effective CIM in the business-to-business arena, however, is organizing the "corporate household."

The corporate household defines a customer not only by the corporate hierarchy but by inter-organizational relationships and the need to create unique customer views based on factors such as industry or geography. This makes it easier to grow revenues from core customer segments while minimizing total retention costs, not to mention the waste associated with marketing efforts and reworking the data.

The crux of corporate householding is in the identification structure. The customer identity scheme must be constructed to support an identifier that builds mass, much like an atom contributes to some substance that is tangible. For example, the scheme must support identity at the employee level, then build upward and outward to support and integrate the corporate hierarchy, establish inter-organizational connections and support definitions based on specific analytical needs. From this structure, all customer-related interactions can be connected to create a better understanding and identification of customer opportunity and risks.

Effective CIM allows companies to accomplish more with less. Companies need CIM to ensure that decision-making is not thwarted by poor information quality or lack of sufficient information.

Corporate householding is the tie that binds competing customer definitions together so that the company can associate events and transactions while supporting and servicing customers more effectively. Whether that means operating more efficiently or uncovering previously overlooked growth opportunities, the key is corporate householding, supported by a strong CIM strategy.

Krishna Chettayar is an assistant vice president for customer information management services at D&B Sales & Marketing Solutions in Naperville, Ill. He can be reached at 630.717.2007.
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Article Details
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Author:Chettayar, Krishna
Publication:Financial Executive
Article Type:Column
Geographic Code:1USA
Date:May 1, 2002
Previous Article:Making pro forma information more useful. (Corporate Reporting).
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