Hidden Gold

Your customer data holds the key to business success

 

Every company has hidden gold.  This vein usually lies somewhere in the data or information that the company captures from their interactions with customers.  Too often, we fail to put on our hard hats, don our forehead lamps and mine for the precious metal that will make us successful.

Take, for example, this case of untapped gold.  A mid-sized company in the wholesale distribution business has done well over the past five years – despite the downturn.  They’ve managed to keep their customers happy, maintain their 12 percent margins and generally make the owners comfortable.  So why think about “gold”?   This company, like many others, lost one customer two months ago and with that one customer 20 percent of its business.

Do you know on how many customers your business depends?   Is 80 percent of your revenue being generated by only 20 percent of your customers?  Do you know?

Mining your customer data – extracting the gold of understanding – lets you know where you need to develop customers, acquire them or simply retain them.

How do you tackle this mining job?  Where do you start?  How do you start?

It’s best to begin with a simple inventory.  What system, database or ledger keeps the latest customer transactions?  Even if you don’t have thousands of customers or you don’t have an automated system for managing customers, you can still take this inventory just as you would inventory other assets.

Accumulate customer records.  This is easy if your companies has one central database of customer transactions. But remember, you want all the touch points within your company.  Doing the inventory with just the order entry system may not help you understand all the different types of customers you have.  Make sure you include the services data as well as the call center information and marketing data.  Collect at least 3 years of records so that when you analyze the data you can pinpoint trends.

  1. Evaluate the type of information you have on each customer.  Most companies find that when all their customer records are accumulated that they still have a very sketchy view of their customer base.  For example, the shipping department may not keep any information about customers other than their addresses, because that’s all shipping needs.  Marketing may have complete information on the company, but not have a way to associate what the company spends to this market-oriented record.
  2. Evaluate the accuracy and quality of your customer information.  You have found all the customer data scattered in your systems, but how good is that data?  If your data sits in various databases around the company, you may not know how “fresh” it is or what levels of care were taken when it was acquired.  This means that you are probably unsure about its overall level of quality.  Sample the quality level by either calling a few of the customers directly, or by comparing your data with data from a company that specializes in providing quality information such as Dunn and Bradstreet (D&B), Worlddata , Axciom or Jigsaw.  If these comparisons show great differences, consider starting a program to correct your data.
  3. Count your customers.  This may be harder than you think because you first have to decide what a “customer” is. Is a customer the company that buys from your company?  Is the customer the individual that buys your products or services?  Is the customer someone who has purchased from you once or someone who buys repeatedly?  Is there a purchase level that would help you differentiate one customer from another?  How about those individuals or companies who you service?  Are they the same as the ones that purchase from you?
  4. Analyze your customer base.  Evaluating your customer base begins with knowing who those customers are who have spent the most with your company.  Having done this exercise many times with many companies, we’ve never seen a company that was not surprised by this analysis. Usually the top spenders are customers who spend a small amount over many months or years.  They are not usually the ones associated with the last big order.  Because most companies are focused on either the quarter or the fiscal year, analyzing your customer base over time also produces eye-opening insights.  You can find out which customers bought last year, but not this year and which haven’t purchased for three years. (Remember that you started with 3 years of data for this purpose.)
  5.  

But the real power of having this customer data lies in its ability to predict what might happen next.  With some expertise in statistical analysis, you can actually start to predict which customers will buy next quarter or next year, which customers will spend the most and which will spend the least.

This ability to predict what will happen is the GOLD in your business.

Maria Villar and Theresa Kushner are co-authors of “Managing Your Business Data:  From Chaos to Confidence.”  Both are active data managers.  As a vice president at SAP, Maria is responsible for data governance for this worldwide software company.  Theresa is the director of customer intelligence within marketing at Cisco Systems.
 

About the author

Theresa Kushner

Theresa Kushner is a journalist-turned-marketer and Vice President of Enterprise Information Management at VMware.  She is responsible for master data management, business intelligence and advanced analytics.  She and Maria Villar co-write a column for LatinBusinessToday.com. They are co-authors of Managing Your Business Data: From Chaos to Confidence, published by Racom Books in 2008.