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Zoom in on your customers

The latest customer-intelligence tools leverage both human smarts and processing power.

Customer intelligence. The term has a high-tech, slightly ominous ring, conjuring up images of hidden microphones, secret codes, and white lab coats. But to the hapless consumer or B2B prospect, resistance is futile: We know who you are, where you live, and which buttons to push to make you reach for your wallet.

Sadly for marketers (and perhaps happily for customers), customer intelligence (CI) has had trouble living up to its name. Past attempts to divine the will of the people and profit from that knowledge have not been wildly successful, with businesses too often substituting dumb technology for intelligence. And why not? Technology is indeed seductive, promising revolutionary ways to gather massive amounts of customer data, analyze that data in exquisite detail, and forge new modes of communication and means of motivation.

But relying on pure technology in marketing exacts a high cost: lost business potential. While e-businesses wave loyalty programs and personalized pop-ups at their online visitors, opportunities to woo customers with more appropriate targeting, more appealing promotions, and stronger campaigns slip away. The consequences of this misapplication are written on the Nasdaq tickers.

But recently there have been signs that software vendors are getting a clue, deploying CI tools that leverage both human smarts and processing power. These new CI applications, more attuned to consumer desires and sensitivities than their predecessors, enable companies to sharpen their sales focus and craft more productive and less annoying marketing campaigns. Implemented correctly and fully supported within the organization, CI can sustain and deepen a company’s web of customer relationships.

Smarter intelligence

Fundamentally, intelligence is applied information. Customer intelligence, then, applies customer information to improve business. Combining business strategy, data, and technology solutions, CI is a continuous loop of gathering customer data, analyzing and modeling the data, applying those analyses to business and marketing practices, and measuring the impact of those applications on customers. “Customer intelligence allows you to understand who your customers are, who they should be, and what the value of your relationship means from a profitability perspective,” says Lynne Harvey, senior analyst with the Patricia Seybold Group, an e-business consulting firm in Boston.

Businesses gauge their relationships by building 360-degree views (e.g., composite views based on all customer contacts) of individual customer actions and values; calculating customer profitability and liability; and gauging the effectiveness of sales channels, cross-selling and up-selling, marketing promotions, and other sales and marketing tools.

CI encompasses more than traditional marketing, giving companies that master it a competitive edge. For example, says Harvey, CI can reveal hidden customer-value drivers, such as the number of referrals a given customer makes, or the amount of live support she requires. “When direct marketing practices are used,” Harvey says, “they don’t take into account this notion of added value. They don’t take into account the way you interact with a company that drives up costs.”

Customer-support costs are another key factor that can be quantified with CI technologies. A financial-services company may discover that a day-trading client with an active account of $1 million is a less valuable customer than John Smith, who maintains an account balance of $100,000, because each of the day trader’s frequent interactions with the company carries a cost.

Knowledge like this speaks to the current state and goals of a business. In its ability to describe individual customer value in exquisite detail, CI is most valuable as a strategic vector, helping companies design long-term programs that optimize their customer relations. CI can accomplish the following: Improve customer loyalty, per-customer sales, and frequency of customer interaction Retain more customers at lower costs Make Web sites stickier (encouraging visitors to linger) Enable powerful one-to-one marketing campaigns Increase profitability and market valuation

While such goals are not new, several factors are now making CI a top corporate priority. Chief among these is investors’ insistence that e-businesses get a grip on conventional business practices, such as making a profit. Meanwhile, new business-intelligence products and services, a better understanding of the Net’s role in business relationships, and a willingness to become genuinely customer-centric are empowering businesses to answer investors’ demands.

The growing importance of the Internet as a sales and marketing medium is a particularly powerful driver in CI development, says Jay Henderson, product marketing manager for NetGenesis, a Cambridge, Mass.-based provider of e-analytic products and services. “As the stock market goes through this correction, and investors become more demanding, companies need to understand where the money they’re throwing into the Web channel is going,” he says. “With products like [NetGenesis] they can optimize where they’re spending that money and provide a better return on investment.”

Hungry for data

At its core, customer intelligence is about data–data that is sucked in by applications such as Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) and channeled into a central data mart. This first step, systems integration, is a relatively new phenomenon in many companies. Even dot-coms, which have implemented independent solutions to support rapid growth, use it.

“Just now, from an operational standpoint, organizations are becoming mature enough that it’s more feasible for us to be doing some of these data integrations,” Henderson says. “It’s a matter of being able to get physically at the data.”

CI programs develop detailed customer profiles from the information flowing into these data marts, information that includes online data gathered implicitly (with cookies) and explicitly (through forms and e-mails); inputs from call centers, sales presentation, and other offline contacts; and data such as credit reports gleaned from third parties. Data integration gives a business instant, 24/7 access to profiles, helping it communicate with customers as individuals rather than types, and making possible seamless interactions with customers, both online and offline.

An increasing number of CI solutions from vendors such as Oracle and Siebel Systems feature data and channel integration. Back-end integration e-sourcers such as Scient, Viant, and Razorfish often act as partners to CI firms, supplying crucial system linkages through custom applications and platform extensions.

Customer intelligence used to mean gathering and crunching data. Today’s solutions add business intelligence to the mix, extracting meaning from raw data and distributing it to the places in the enterprise where it can do the most good. Customizable e-analytic applications–from companies such as Digital Impact, NetGenesis, and Netegrity–mine, analyze, model, and even predict customer behavior based on captured data. Many companies have also built custom analytical tools for their unconnected legacy systems.

Ultimately the digested information is fed into CRM, personalization, campaign management, and other front- and back-office applications for distribution to actual humans-business managers, customer-service personnel, distributors, and business partners. The result is “markets of one” campaigns and customized content and promotions, delivered online through dynamic Web pages and offline through traditional media such as print advertising, radio, and direct mail. Comprehensive CI solutions encompass personalization, CRM, traffic metrics and analysis, data mining and consulting, campaign management, and live and electronic customer-service tools. A critical component of the new CI is multi-channel “touchpoint” integration–pulling in data from such non-Web sources as call centers and point-of-sale promotions as well as emerging channels like PDAs and smart phones.

Although many products and services address one or more facets of CI, several recent acquisitions reflect CI’s rise from a CRM component to the eyes of the enterprise. E.piphany’s purchase of RightPoint Software, a real-time personalization engine, and Octane Software, a developer of e-analytics tools, positioned the San Mateo, Calif., company as a one-stop shop for CRM packages. Acquiring Digital Archeology put the power of analytics behind Toronto-based Delano Technology Corp.’s robust campaign- and response-management tools. Other software and service providers have achieved similar potential through partnerships. NetGenesis, for example, has joined forces with e-content king Vignette of Austin, Texas.

A few vendors offer integrated, soup-to-nuts packages sporting most of the CI technology components. Art Technology Group of Cambridge, Mass., is a prime example, backing such heavyweights as J. Crew, Herman Miller, and American Airlines with its Dynamo e-Business Suite. Including a scenario server, personalization server, and commerce server, Dynamo automates nearly every step of the CI process, from seamless back-end database integration to multitier, multichannel marketing-campaign management.

Redwood City, Calif.-based BroadVision and BEA Systems of San Jose occupy the same CI space, each offering data mining and analysis, personalization, content management, event management based on customized business rules, e-commerce support, dynamic content, and much more. Through strategic partners, BroadVision also offers a host of integration, extension, and support services. Oracle also offers a complex CI solution, centered on its Oracle Customer Intelligence product, which features data integration, warehousing, analysis, and distribution.

The people factor

It’s ironic that even as software solutions for customer intelligence have matured, the role of people and services in the process of getting to know customers has become more, not less, important. No matter how much data you gather, you can’t know your customers until you know your own business and your market; human intelligence is the key to business self-knowledge.

Because CI spans the enterprise, it affects, and is affected by, non-technical processes such as business intelligence, customer service, and business and marketing development. In practical terms, humans close the loop in the CI cycle, providing the critical high-level thinking that transforms data models and analyses into business strategy and action. Software-based modeling and predictive analysis cannot entirely replace human insight and experience when it comes to understanding customer trends and responses. “Customer intelligence is more than just measuring,” Seybold’s Harvey says. “It’s a set of best practices that focuses on the analysis mode. Measuring customer information derives insight toward applying those best practices.”

In reality, some types of information are easier (and ultimately cheaper) to acquire through human agency. Regular, personal contact with your customers can help you identify trends, wins, and failures relating to customers. While online surveys are effective at gauging customer opinions, questions posed on the phone are more likely to elicit better, richer, and more honest responses. Moreover, live customer research at any point in the CI process gives your company greater opportunities to interpret and further probe customers’ responses.

A catalyst for growth

Acquiring a new customer costs five to 10 times more than retaining a current customer. Clearly, focusing on the existing customer base makes economic sense. But in today’s fragmented e-marketplace, in which marketing messages and sales pitches bombard customers around the clock, maintaining a customer base has never been more difficult. The answer to this challenge has always been customer intelligence. Once characterized by a marked lack of intelligence, CI has finally acquired the technology, maturity, and tactics to affect business at every level. Every company’s business potential rests in its customers’ hands; customer intelligence can be the catalyst to transform that potential into higher revenues and profits.

Contributing Editor Cass Brewer is a Web developer for Boston-based PlanetSoft.

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