Superstah! SAS and Customer Experience Analytics - Customer Relationship Management

What products are out there that do this well? I’ve already spoken of ResponseTek. I’ve mentioned SAP’s flirtation with these new analytics using Business Objects Insight to analyze Twitter feeds for the emotional content of customer service tweets. But it’s North Carolina– based SAS that wins the coveted Superstah! designation because of their superb customer experience analytics tool, which can quantify the interactions and engagement of the customers.

Mission 21st Century
Before we get into what the tool does, let’s chat with Jeff Levitan, general manager, SAS Customer Intelligence, on their mission with this application:

SAS’ mission in the CRM arena is to enable organizations to deliver customer experience excellence. We’re working to achieve this by providing organizations with solutions to improve their customer-focused, cross-channel marketing process. This process, which ensures a positive experience for an organization’s customers, hinges on three core technology enablers, dubbed the three I’s of marketing: Insight, Interact, and Improve.

One key focus area will be to look beyond outbound marketing to a broader “intelligent decision management” platform within marketing and sales organizations. This encompasses not only traditional campaign management, but also more interactive marketing activities driven by analytics and optimization. These activities must be focused on providing a single, current “profile” view of every customer. The profile encompasses the decision support needs of not only marketing but also other parts of an organization that assess customers for various purposes (e.g., risk, fraud, customer service), and can provide the specific information needed for any given interaction in real time. Another quality of this kind of next-generation solution is a single point of control for synchronizing and managing to the “treatment profile” of every customer. Our most recent solution release marked a milestone in reaching this goal by providing a single point of control for inbound, outbound, and interactive marketing.

A second key focus area will be a continual deepening of the ability for companies to transform online interactions into relevant customer insight and action. Ranging from capturing customer interactions with company web sites to mining blogs to understanding social networks, SAS will help companies integrate this insight with other channel views to provide companies with a more complete picture of their customers. This approach allows organizations to more efficiently and effectively understand, model, and ultimately market to these same customers.

What Does It Do?
SAS for Customer Experience Analytics was developed because the SAS customer base insisted on a product that would help them get more out of their web channel. Companies that have invested heavily in the web channel and are becoming increasingly multi-channel were the targets for this application. Essentially, what it does is capture web-based customer interactions and integrate them with other channel views to provide a more complete view of their customers. Through the integration it allows the users to create new models of these customers. The integrated view is seen via the dashboard shown in Figure.
integrated view
Figure: SAS Customer Experience Analytics Dashboard;useful and pretty too

Case Study
SAS told me of a case study for your perusal, though they couldn’t tell me which global bank this was. But you’ll get a great idea of what this product really does when you read the story.

The bank started by installing SAS for Customer Experience Analytics on their investment website. Up to that point, the information they captured from this site was limited to transaction insights, such as which pages received the most hits, which documents were downloaded the most, and so on. The bank had no knowledge of how specific customers or groups of customers used their site. Once the installation was completed, the bank began streaming web usage data to their data collection server. Next they converted the usage data into a data model for analysis and subsequent creation of a user history profile. As a result, for the first time ever, the bank could view profiles of specific investors visiting their investment site.

As a test to understand the impact of this Technology, the bank started tracking an individual investor who had logged in that day. The data showed that the investor worked for JPMorgan Chase and that he had last visited their site three months before, downloading specific reports. The goal of this test was to illustrate that the technology could capture and measure the complete picture of the customer’s web interaction. Ultimately, the test led to the idea of defining a scoring system on the site so that each individual customer record was scored based on their level of engagement. For example, if a customer downloaded one report, they got 3 points; if they came back multiple times, they got 10 points, and so on. In this way, the customer became the center of how the site activity was measured. With this information, the bank began asking questions like “Are we picking up return visits from investment bankers?” They could also begin distinguishing between prospects and actual customers coming to the site.

Because of this insight, the bank learned that advertising they thought was effective on a particular site, due to thousands of hits their web analytics package reported, had actually driven fewer than 10 “investors” to the site. The bank’s quote on the ad effectiveness was that it “would have been more effective to hand out $100 bills on Wall Street” than to continue using this online ad. For the first time, the bank could understand the quality of the leads being sent to their site, and not just the raw number of people going to the site.

Armed with this new information, the bank was able to go back to their advertiser and renegotiate their contract based on the low number of quality leads that were being generated, saving enough money on future ads to pay for the cost of the software three times over. As a result of using the solution, the bank realized a 300 percent ROI in just three month and a 15 percent reduction in their annual online media spend by weeding out advertising initiatives that proved to be ineffective.

I’ve spent a lot of time taking you through the measurements of social customer value, long term and real time. I’ve covered some of the analytics tools and the vendors that provide them. But all of this would be useless without discussing the return on investment. ROI is not immune to the transformation of the customer. Companies are being forced to re-evaluate how they measure value, results, and success.

Business gurus extraordinaire Martha Rogers and Don Peppers, long-time thought-leaders, took this head-on as a mission. Voilà, a book and concept called Return on Customer, which provides a much truer way of balancing shareholder and customer value to benefit everyone concerned.

Not only are they business leaders and prolific authors, but they are good human beings who have been tied at the hip for many years. They have made their mark on American business for the past two decades.

Mini-Conversation with Martha Rogers and Don Pepp ers
Next December, your stockbroker will report to you what your dividends and interest payments were for the year, from your investments under his management. But dividends and interest payments won’t give you a complete picture of your true investment results. You’ll also need to know what happened to the underlying value of the stocks. Up or down? If your stockbroker refused to tell you this, insisting that you only need to know your “cash flow, ” you’d fire the stockbroker. And yet many companies content themselves with knowing how much they made from their customers in the current period, and never try to find out the underlying value of these customers, even though this value itself is constantly changing. Up and down.

The fact that a company cannot see or manage the value of its customer base often leads to inordinately risky and sometimes stupid or even illegal behavior. To avoid these mistakes, companies should be managing their customers as the financial assets that they really are, and Return on Customer, or ROC, is a metric designed to help them do this. It is based on three fundamental principles:

  1. Customers create the value for an operating business.
  2. The value customers create is realized in the current period (short-term value) and in future periods (long-term value).
  3. Customers are scarce. You can manufacture more products, but you cannot manufacture more customers.

Given these three principles, a company should always try to create as much value as possible from every current and potential customer available to it.

Customer scarcity, and the conflict between short-term and long-term value, are universal marketing problems, especially now that interactive and computer technologies allow companies to treat different customers differently. You encounter these issues in a variety of situations:

  1. What business rules should apply to your website or contact center to ensure that the right offers are communicated to the right customers, across several different product and service lines?
  2. What is the right balance between customer acquisition and customer retention efforts, and how do you know?
  3. What is the appropriate experience for a customer to have, across all different channels, in order to create the most value for the firm?

To address questions like these, you need to be able to measure the efficiency with which your customers are creating value for your firm in different situations, and this is the purpose of the Return on Customer metric. In the same way that return on investment (ROI) measures the efficiency with which a firm uses its money to create value, Return on Customer measures the efficiency with which a firm uses its customers to create value. Each metric provides important feedback, and they are easily understood, side by side.

For instance, suppose we have a stock that is worth $100, and over the course of a year the stock pays us a dividend of $5, while also appreciating in value to $110. The ROI on that stock investment for the year would therefore be 15 percent.

The same exact methodology applies to ROC. If we start with a customer who has a lifetime value (LTV) of $100, and during the course of the year we make a $5 profit on the customer, while by the end of the year we estimate that the customer’s LTV has increased to $110, then our overall ROC on that customer would be 15 percent.
overall ROC

Note that the ROC metric includes both the short-term and long-term value created by a customer. The actions a company takes to achieve its marketing objectives often have conflicting effects and tradeoffs, requiring a balanced approach. For instance, a higher promotion budget might improve customer acquisition. But each new acquisition will be more expensive. It’s possible to wind up spending more than an incremental new customer will ever be worth. Or a bigger variety of products might appeal to a wider group of customers, but represent a disproportionately high per piece production or distribution cost. Or an extra service might boost customer satisfaction, but at a cost that will be a drag on current earnings.

Clearly, creating value from customers is an optimization problem, which is something every business manager already knows. Often, however, the tradeoffs occur in terms of increased future cash flows at the expense of reduced current cash flows, or vice versa, and this creates a serious problem when a firm is focused exclusively on current-period sales. A short-term focus prevents a firm from making optimum decisions. If a company fires off a truckload of direct mail or e-mail to generate more current sales from its customers, for instance, it might also erode their willingness to buy in the future, or even to pay attention to future solicitations. Similarly, although a cost-cutting effort might not damage current customer cash flows, it could undermine future cash flows.

Reconciling the conflict between current profit and long-term value is one of the most serious difficulties facing business today. Failing to take a properly balanced approach not only penalizes good management practices but also undermines corporate ethics, by encouraging managers to “steal” from the future to fund the present.

Return on Customer can help a company optimize its marketing activities against a fixed supply of customers or prospective customers, and in a way that properly balances long-term and short-term value.

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