The measurement of customer management ROI must evolve


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We’re lucky in that our SCHEMA Customer Management Benchmarking database allows us to formally analyse how large companies manage customers. One observation is that although customer management models are evolving, measurement approaches are not changing at the same pace and a step change in thinking is required or model evolution will stall.

1. Companies are improving the way they manage customers
We can see that in almost all sectors, the locus of control in relationships between organisations and customers is moving firmly, but not completely, towards the customer. In response, organisations should, in theory, be becoming more customer-centric (i.e. doing more to listen to, understand and engage with customers). But are they? Our Schema benchmarking shows that, on average, they are (details may be provided on request). In companies which are rich in customer data (e.g. financial services, telco, utilities, auto), the process of customer management has undoubtedly matured, although marketing thinking has been de-stabilised to some extent by all the talk about social media. In companies which do not have much detailed customer transactional data (e.g. fast moving consumer goods), social media is beginning to revolutionise how some companies are engaging and interacting with their consumers, customers and agencies because of the one to few or one to one engagement possibilities these new channels can provide. Some companies are even seeing social as transforming their businesses into ‘social businesses’ in which social media are used to engage and improve trust through more honest and transparent interactions. Customer journeys are being transformed and customer experience improved. ‘Trust barometers’ are twitching upwards as a result. There is also some public research that shows that companies that integrate social will see an increase in customer engagement and an increase in sales.

2. There is resistance to integrating social with more traditional models of customer management. In most large organisations we know, there is a resistance, outside of the specialist teams (e.g. Digital marketing), to consciously embed social within whatever models of customer management are being applied. This resistance is partly due to lack of a clear, aligned vision (of the future) combined with lack of evidence about the efficacy of activities.

3. A lot of hype…but some reality too. Much nonsense is talked about ‘social’. We are probably close to the peak of the ‘hype cycle’. This hype creates a scepticism in some experienced marketers. However, we have worked with leading companies in many sectors and integrated social techniques and technologies into a variety of customer management models (e.g. key account management, relationship management, brand management, retail management, auctioning). This has allowed us to see the financial benefits gained from improved effectiveness and efficiency in sales, marketing and service (as well as PR, product management and HR). However, companies that embark on this change lightly will burn money and lose the faith of their leadership team. Companies must think carefully about how social can be applied to their business and what investment they must make in it, but they find this difficult because of, lack of evidence of success.

4. Measurement approaches are sophisticated but need to be even more customer focussed. The intuition of some of experienced marketers that social, digital and 1:1 marketing can lead to more engagement and more sales at scale is being confounded by the lack of evidence provided by established measurement tools. To understand why, let’s remind ourselves how marketing activities are measured in consumer organisations. Almost all reporting tools correlate promotional spend (e.g. TV, radio, press, sales promotion, digital, social) with sales (customer awareness, share of voice and intention to purchase). These tools can clearly show that a big boost in TV spend leads to more sales, or account openings etc. but then they also show that if TV spend declines then so do sales or account openings, sometimes drastically. Measurement models have become very sophisticated and offer refinement about selecting the best advertising slots, media and timings (sometimes to the minute) for maximum impact on sales. But if customers were better engaged, sales would not fall off as fast as they do now, we would invest less on TV and more on other engagement mechanisms such as social’s role in the path to purchase. If a big TV campaign was stopped sales may still fall but would they fall so far if customers were engaged with the brand, especially if high spending customers were more engaged with the brand? Traditional quantification measurement tools are not designed to isolate the impact of media spend on influencers or high value customers who provide a disproportionate contribution to net sales value and gross margin. They do not have the data to look at acquisition and retention of these customers or the impact of engagement on portfolio sales, selling multiple brands to an engaged consumer. Neither can they properly analyse the role customers have in recording advocacy to smooth the path to purchase for new customers. Therefore they cannot recognise the unique role digital, social and CRM can play in generating customer interactions, participation and engagement. Even if consumer goods companies gather research data to try and understand at least some of these dynamics, the issue is the time lag between cause and effect. But because the tools do not have the data to analyse this, does this mean that the customer dynamics do not exist? Of course not. We need to look more deeply at how we can obtain data to supplement existing measurement models – the selection and role of panels for instance, the role of both consumer and shopper research, the role of social listening in understanding more rapidly, almost in real time, how purchases are made The fact is, in most companies there is no demand for this type of analysis which is surprising. With one client, we clearly showed the possible impact on market share and sales if some of these dynamics were measured and acted upon – and showed that brand economics could change beyond recognition. The challenge for marketing and finance leadership is to evolve measurement systems to provide a clearer, quicker view of what is really happening in the marketplace so they can make the right marketing investments.

Republished with author's permission from original post.

Neil Woodcock
Neil is Chairman and CEO of The Customer Framework Ltd. and visiting Professor at Henley Business School. An honours graduate, he worked in B2B sales & marketing with Mobil Oil, B2C marketing with Unilever and consultancy services with Andersen Consulting & McKinsey. Neil has written 5 books on customer management, is on the editorial board of leading journals and is an Honorary Fellow of the IDM.


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