Customer centricity part II: Gathering your customer information

 

In my March article, Customer Centricity, the Retail Buzzword of 2009, I wrote that customer centricity would be a hot topic for the New Year. Several popular breakout sessions at this month’s NRF; including Are You Truly a Customer-Centric Retailer, gave evidence customer centricity is a top priority for retail companies.

Last month I discussed the benefits of customer centricity and several critical factors for a successful transformation. I also introduced a four-step transformation process:

•  Gather – bring together your customer information from both internal and external sources.
• Discern – analyze the data to see what it tells you about your customers and their behaviors.
• Engage – your customers in relevant ways based upon their unique characteristics.
• Refine – your customer centric processes by measuring results.  

 Becoming a customer centric retailer does not happen overnight, it is a deliberate process. In this article I’ll focus on the first step; gather, which is the foundation for a successful transformation.

 Gathering means assembling all the information and data you need to know about your customers. Not just the average customer, because there is no average, but individual customers.

 The information you need goes beyond just demographic information. To be a customer centric retailer you need to know more than just who and where your customers are, you need to understand their behavior and what motivates them to buy.

Start with the data you already have

 Every retail organization has data about its customers. This data is found in warranty databases, e-commerce systems, financial, and point of sale systems. All these systems have one thing in common; they were designed for the benefit of the retailer’s operations, not to understand the customer. These systems form the basis of your customer information, but they are incomplete when it comes to gaining insight about the customer. 

Change your perspective

To understand the customer, and gather effective customer centric information, you need to change the perspective about the data you collect. Take a look at your products and services from the consumer’s point of view. What does each purchase say about the customer?

Everything one buys reveals something about them. Every purchase provides insight about a customer’s age, lifestyle, income, family status, likes, and attitudes.

An easy way to start gathering behavioral information is to attribute products and services from the customer’s perspective. With these attributes, every purchase provides another piece of the customer puzzle.

 Putting your customer data together: Customer Data Integration

 

The pieces of the puzzle need to come together to be used effectively. Legacy systems containing customer information only form the foundation. This raw data generally needs significant cleansing to remove duplicate names and to improve the quality of the data itself. A simple example of data quality is formatting the state in an address as two capital letters or making sure the zip-code is valid for the street address.

 External data enrichment provides household information and can help keep track of customer movements. These services are good for adding demographic data to your customer information.

 Many organizations have turned to customer data integration (CDI) to assemble all their customer information into one place. CDI is a combination of information technology and business process to collect all the disparate customer information into a single complete view that is clean and accurate.

 Philip Russom, Senior Manager of The Data Warehousing Institute(TDWI) is the author of an excellent best practice report on CDI. Philip was an industry analyst covering BI at Forrester Research, Giga Information Group, and Hurwitz Group, as well as a contributing editor with Intelligent Enterprise and DM Review magazines. The report is available on the DataFlux web site. Registration is required, but the paper is a must read for any retailer considering customer centricity. Here are some of the highlights from Philip’s paper:

“Customer data is an organizational asset that should be managed broadly yet carefully via CDI if you—and your customers—are to get full value from the data.”

 “Data Quality and data integration are the highest priority for CDI solution features.”

 “Users surveyed pegged Data Quality (DQ) as their top priority, but also admitted the DQ is currently a small part of their CDI solutions. Increase DQ usage accordingly.”

 

Philip makes a critical point in the Analytic CDI and Operational CDI Practices section on page 7 of the report. According to the research conducted to TDWI:

•  26% of respondents said the purpose of their CDI project was for customer analysis.
• 17% responded that their CDI was to share common customer data across internal systems.
• 52% said it was for both.

Avoid the most common mistake in CDI projects

Philip points out that customer analysis and operational CDI require different data models. In my experience this is a critical mistake retailers make when embarking on their customer centric transformation. Most retailers are looking to deepen their customer insight via analysis, yet they spend all of their resources building an operational data model only, thinking it can serve both purposes. It can’t.

One data model cannot support both business objectives. Operational customer data models are well supported with traditional relational database systems like DB2 or Teradata. Analytical data models are better supported with technologies specifically designed for analysis like the SAS Scaleable Performance Data Server.

If your goal of customer centricity is to deepen your understanding of the consumer, make sure to structure your data so that it is convenient for analysis. Failure to create an analytical structure severely limits the insight you gain about your customer. Do not make the mistake of thinking an operational data warehouse can serve both purposes.

Next month I will discuss the second step; discover which relies upon analysis to reveal what your data is telling you about the customer. Before then, if you would like to talk about your customer centric needs, please feel free to contact me at robert.signore@sas.com or by phone 919.531.2246.

 

-Rob