Tune into your Customers and Prosper

White Paper

Predictive analytics allow you to tap into all of the interconnected streams of data that reveal customers’ beliefs, preferences, opinions and behaviour. This gives your organisation the knowledge to predict and the power to act: you can capture critical details about people’s attitudes, predict how they are likely to behave and act in the right way, through the right channel and at the right time. The answers you find will help you establish dialogues and forge lasting relationships with your most profitable customers while minimising business risks. This paper will help you better understand how you can gain the knowledge to predict and the power to act through the implementation and deployment of predictive analytics.

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To develop greater customer intimacy, join the conversation

In the past, customers and other stakeholders could voice their opinions of your organization by letters, emails or phone conversations, but their ability to influence others was rather limited. With the growth of Web 2.0 technologies, customers’ ability to reach and influence others has increased exponentially. Consumer reaction to an ad campaign, service glitch or cool new product feature can reach tens of millions of people within hours, even minutes. And this trend is on the upswing.

Business leaders recognize that these new webs of influence present challenges to traditional sales and marketing methodologies – and, at the same time, present powerful opportunities to develop more satisfying and profitable customer interactions and even to turn former critics into supporters or proponents.

“What if we knew what customers wanted ... and could offer it to them?”

Dell is perhaps the poster child for a company that has turned critics into collaborators. After being criticized by a prominent blogger for poor customer service, the company took a series of steps to engage in frank, open conversations with its customers, as described in a 2007 BusinessWeek article, “Dell Learns to Listen.” Its conversational initiatives include IdeaStorm.com, a site on which customers give (and rate) advice on how Dell can deliver the kinds of products they really want.

Because the array of personal interactions made possible by Web 2.0 technologies is still relatively new, many organizations are still experimenting with what works best in their market and with their particular customer base. Here are some of the realities we’ve observed in this new web of relationships between companies and their customers.

It’s noisy out there

People have a dizzying array of choices when it comes to the sources they turn to for information and the channels they use for communication – and these channels generate massive amounts of information. To complicate things further, people communicating online may have a number of different personas and roles: the same individual may be a “netizen” in SecondLife, an avid fan of a local sports team and a hobbyist chef. In some interactions, he or she may be a consumer; in others, an influencer; and in others, simply an observer.

“What if we knew where to find our next product advocates ... and how best to engage them?”

The channel people use to interact with you online provides clues to the role they are assuming in that interaction. If they seek you out from a company site or a professional networking site, they may be looking for a solution to a business problem. But if they reach you from a gaming site or a site like Facebook, they may be looking for diversion or entertainment. A number of companies have studied customers’ channel preferences and then planned campaigns that delivered timely messages in ways that customers find convenient and will respond to.

You can have a voice, and a presence

Scanning and analyzing blog posts, text messages, wikis and other communications can uncover previously unsuspected issues customers have. When companies promptly address these issues, through the same channels, they build trust – and a reputation of listening to customer concerns, and acting on them.

“What if we could anticipate which profitable customers might leave ... and design programs to keep them?”

Effective organizations are adept at keeping their good customers and selling more products or services to them, which directly impacts the bottom line. For example, in industries rich with customers and customer data (financial services and telecommunications, for example) successful firms are combining textual data of all types with demographic and transactional data to generate predictive models. By doing so, telecommunications or firms worldwide have markedly reduced churn and achieved a cost advantage over their competitors.

Watch for “moments of truth”

Once you are engaged in conversations with your customers, you have the opportunity to capitalize on “moments of truth” – those interactions that can disproportionately affect the customer’s view of your organization, positively or negatively. Often these interactions have a strong emotional component. For example, if a flight is delayed and communication falls short of expectations, or an important shipment is lost, the customer’s emotional response will, understandably, be negative. But negative emotions can be turned to positive ones, with an appropriate and timely response.

“What if we could predict the outcome to a marketing campaign ... every time?”

Procter & Gamble masterfully uses a variety of communications channels to build a following for its products. For example, to create a buzz about a campaign for its Pantene line of hair care products, the company sent individual hair treatment tips to consumers by SMS in exchange for information and concerns about their hair type. As described in a 2008 report by Forrester Research, the campaign grew in popularity, sales rose; and Procter & Gamble gained valuable insight into consumer preferences for use in planning future campaigns.

Timing is crucial

As you engage in multi-channel conversations, what and how you communicate is important, but when you communicate is crucial. Certain customer life events suggest that certain types of messages are relevant. In addition, there are long-held passions that aren’t swayed by obvious life events: one person may be a lifelong fan of anything related to space exploration; another may respond strongly to messages tied to a favorite sports team. Often, those passions are born out of events that cannot be found in a customer history or buying patterns; you will need to ask them about their interests.

Developing an awareness of your customers’ core concerns is not always an easy or short-term proposition, but it’s the only way to build the sort of customer intimacy that fosters strong loyalties. Getting to know customers’ passions and patterns of activity has another advantage: it helps you evaluate risk more precisely and identify potential fraud in time to contain the damage.

“What if we could spot fraud early ... and minimize the damage?”

Credit card fraud, insurance scams, retail theft, healthcare doublebilling and other forms of fraud are costly to business and government and, in the end, to consumers. Fortunately, such schemes tend to leave detectable trails. And through predictive analytics, companies are able to build models that allow them to predict which types of activities are likely to be fraudulent, embed scores and rules into operational systems, focus investigative efforts and take more effective action.

The end of the “average” customer

At the highest level, organizations are aware that they cannot rely on selling and marketing to mass audiences – at least, not in the way they have in the past. Today, customers have the power to assert their individuality, and they know it. They want to engage in personal relationships that extend beyond the point of purchase, however and wherever those interactions occur.

In that huge worldwide cacophony that is taking place totally outside of your organization’s control, a few conversations are useful; and a few voices might determine the success or failure of millions of dollars spent on your marketing campaigns, product development or operational efficiencies. Do you know which ones? Do you know why? To answer those questions, businesses must stop being obsessed with products or logistics and instead become customer intimate.

To develop a competitive advantage, deploy predictive analytics

Predictive analytics is the defining capability that will enable you to develop customer intimacy and use it to differentiate your business from your competitors.

Because predictive analytics allows you to integrate sophisticated analytics with business knowledge, you can begin with what you already know about your customers, develop descriptive and predictive models, and then build on these as you expand the depth and breadth of your understanding of your customers. You can:

  • Combine data from internal and external data sources to capture critical details about customers’ attitudes
  • Use sophisticated statistical techniques to predict how customers are likely to behave
  • Deploy insights and recommendations to strategists, to customerfacing staff and to automated systems – so that the right action is taken, through the right channel, at the right time

In increasing numbers, leading organizations are doing this. When conducting interviews for The New Voice of the CIO, IBM found that many CIOs recognized the importance of extracting value from data as fully as possible. However, those in high-growth organizations crafted data into actionable information 61 percent more often than their counterparts in low-growth organizations did. In the case of Infinity Property and Casualty Corporation, for example, its subrogation rate increased by 30 percent for a gain of an additional $10 million per year.

By implementing and deploying predictive analytics, your organization can join these forward-looking organizations – and be confident that you truly have the knowledge to predict, and the power to act.

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