Planning a
Customer
Analytics Initiative
Topics 1 Methods and metrics for
customer insights
2 PLANNING A CUSTOMER
ANALYTICS INITIATIVE
3 CUSTOMER ANALYTICS INITIATIVE
OVERVIEW
4 COMPILING BIG AND SMALL DATA
After the discussions,
Objectives students are expected to…
combine methods and
metrics for customer
insights; and
examine big and small
data using customer
analytics
multidisciplinary.
Abstracti
on:
The purpose of business is to create and keep
a customer. This statement was made by Peter STRENGTHS
Drucker, the acclaimed 20th-century
management consultant. A simple statement
THREATS
that reveals in just a few words that the long-
WEAKNESS
term viability of a company is not just about
maximizing revenue and minimizing costs.
OPPORTUNITIES
Long-term viability is about
understanding what it takes to
attract customers by continuing to
meet and exceed their physical and
psychological needs.
Good customer management comes from
good customer measurement. Metrics are
numbers assigned to everything from
website visitors, same store sales, and profitSTRENGTHS
margin to call-center wait times. Analytics
are metrics plus the methods that drive
THREATS
WEAKNESS
meaningful decisions. You can think of
metrics as “informational,” while analytics
are “strategic.” So while not all metrics are
OPPORTUNITIES
analytics, all analytics come from metrics.
You need metrics to get analytics.
Increasingly, decisions are made on
numbers. If you know the numbers
better, and can articulate what those STRENGTHS
numbers mean and how you can
differentiate a product, organization,
THREATS
WEAKNESS
or brand, you can distinguish yourself
from your competitors.
OPPORTUNITIES
Customer analytics is different from many of the
other metrics within an organization. The four
critical ingredients of customer analytics are:
Customer focused: The first word in customer
analytics is customer. This means that the metrics
collected need to come from customer actions or
attitudes, or are derived in some way that’s
connected to customers.
At the individual customer level: You need
access to the lowest level of customer
transaction data, not data rolled up at the
product or company level.
Longitudinal: Customer analytics involves
looking at customer behavior over time.
Behavioral and attitudinal: You need a mix of
what customers do and what customers think.
Although customer actions (purchasing,
recommending) are ultimately what you care
about, attitudes affect actions — so measuring
and understanding customer attitudes helps to
predict future behavior
In the following sections, I go more in-depth about the data you collect with customer
analytics.
MULTIDISCIPLINARY
The realm of customer analytics crosses
departments, skills, and traditional roles. It’s
multidisciplinary and typically involves input from
and output to:
Marketing: This encompasses the messaging,
advertising, and the customer demographics and
segments.
✓ Information Technology (IT): The IT
department usually has access to the databases
of customer transactions and data.
Sales: Front-line contact with customers,
knowledge of pricing, revenue, transactions, and
reasons for lost customers are included here.
Product development: This includes product
features, functions, and usability.
MULTIMETRIC
No single metric can define customer analytics. It
requires a combination of both behavioral and
attitudinal data. Some common ones include:
Revenue: Simple enough, this is your top line and
you’re probably tracking this for your accountant
already.
Transactions: How many transactions are you
completing in a given time frame? Digging deeper
into the data, transactions become important for
finding patterns.
Customer Lifetime Revenue: The total top line
revenue a customer generates over some
“lifetime,” which can be days, months or years
Future intent: Will your existing customers buy
from you again
Likelihood to recommend: How likely will
customers recommend your company and
products
Product usage: Which features are your
customers actually using
Website visits: Are potential customers finding
your website and doing what you expect —
finding information or buying a product
Return rates: How many products are being
returned due to dissatisfaction?
Abandonment rates: Did a customer start a
transaction and then quit before completing?
Conversion rates: How many potential
customers do you convert into actual customers?
Usability: Do customers have problems using
your products?
Findability: Can customers find the features
they’re looking for in your products, or find what
they’re looking for in your website?
USING
CUSTOMER
ANALYTICS
Customer analytics are used across industries in
both small and large organizations. Examples of
customer analytics at work include:
✓ Retail: Targeted promotions based on past
purchase for individual customers mean retailers
anticipate needs and send coupons for things like
home improvement or diapers.
✓ Finance: Credit card companies can understand
when customers are more likely to cancel
their account based on non-usage, as well as
detect fraud based on unusual purchases.
Online: An understanding of which designs,
layouts, navigation structures, and even
how the color of buttons affect customer
purchases (called conversion rates) is used
extensively across most Internet retailers.
Software: Customers who need sales force
automation software often also need
accounting software and human resources
software
Professionals who specialize in customer analytics
typically have a background that includes a mix of
mathematical and software skills. These individuals
typically go by titles such as:
✓ Data scientist - turns raw data into valuable insights that
an organization needs in order to grow and compete. They
interpret and analyze data from multiple sources to come up
with imaginative solutions to problems
✓ Statistician - gathers numerical data and then displays it,
helping companies to make sense of quantitative data and to
spot trends and make predictions. Typical responsibilities of
the job include: designing data acquisition trials. assessing
results.
Professionals who specialize in customer analytics
typically have a background that includes a mix of
mathematical and software skills. These individuals
typically go by titles such as:
Database Analyst - maintain data storage; assess database
design; and gather, organize, and interpret statistical information
based on the data in the database.
Just as most organizations are already
measuring customer analytics, most
businesspersons also can use customer
analytics. You don’t need a PhD in statistics
or even a specialization in math. All you
need is some desire to better understand a
customer and a willingness to answer
business questions with data.
Customer analytics is therefore also done
by:
✓ Business analysts
✓ Project managers
✓ Product developers
✓ Designers
OMPILING BIG AND SMALL DATA
Customer analytics is often associated with big
data. Big data refers to extremely large data sets,
often containing millions or billions of customer
transactions or records. These large datasets are
analyzed with sophisticated software to reveal
patterns, trends, and associations. Big data allows
you to detect very subtle trends and patterns that
may have a large impact on revenue.
COMPILING BIG AND SMALL DATA
But customer analytics is also about small
data. While not as trendy as big data, small
data refers to finding insights with datasets
that often contain less than 30 customers.
With small data, you’re limited to seeing
larger patterns in attitudes.
While the field of customer analytics is still
being defined and varies across organizations
and industries, it usually involves some
combination of the following:
✓ Past behavior: Customer analytics is about
using data from the past to predict future
behavior.
This is both a definition and a warning.
What customers did in the past is no
guarantee of what they will do in the
future. If a certain type of customer
purchased one type of product in the past,
he is probably more likely to do so again in
the future; however, there’s no guarantee.
✓ Predictive modeling: Software programs are able
to detect patterns in behavior, even subtle ones that
are difficult for humans to detect with intuition or just
inspecting data. For example, software can determine
quickly that a certain segment of customers, such as
higher-income mothers, are more likely to purchase
certain products and aren’t sensitive to changes in
price.
A model is a description of a customer
interaction, process, or behavior that can be used
to predict future outcomes. For example, the sales
price of a house can be estimated by its total
square footage. In general, bigger houses sell for
more than smaller homes in the same
neighborhood.
What-if scenarios: Customer analytics allows you
to test “what-if” scenarios by looking at past
customer data and estimating how future data may
change based on manipulating things like product
features, prices, messaging, or some combination of
those elements.
Customer experience: While customer analytics
often involves the hard numbers of transactional
data, sales, and profitability, it also involves
understanding the customer’s experience with a
product or service.
Measuring the customer experience
involves collecting metrics for the entire
journey a customer has with a brand or
organization — including awareness,
purchasing, and long-term usage. This
involves collecting a mix of metrics about
behaviors and attitudes.
PLANNING A CUSTOMER ANALYTICS INITIATIVE
Customer analytics includes the metrics for the customer
experience. It’s as much about how the customer uses a
product as it is about what goes into the product.
There are a number of ways of thinking about goals,
methods, and outcomes. Your organization may already have
a project scoping process that you can adapt for your
customer analytics initiative. In this chapter, I use an
approach based loosely on the Six Sigma methodology,
tailored to customer analytics. It’s a framework that’s flexible
and familiar and works across
disparate products and companies.
PLANNING A CUSTOMER ANALYTICS INITIATIVE
The basic framework is to define what
you want to do, find the right ways to
measure it, do something about the
measures, and put processes in place
to continue using customer analytics
to make better business decisions
A CUSTOMER ANALYTICS INITIATIVE OVERVIEW
Before you start on your initiative, keep these
four things in mind:
Access to the right data: It’s hard to
increase the frequency of customer
purchases, conversions, or attitudes if you
don’t know what customers are purchasing,
when they are purchasing it, or what they
are thinking. Be sure you know that the
data you need exists, or that you’ll be able
to collect and analyze it.
Customer level data: To do the most
with customer analytics, you’ll want to
gather data foreach customer, not
aggregated data at product or company
levels.
Because customer analytics is about
understanding the customer from past data
to predict future data, you need to identify
transactions, revenue, and survey data for
each customer. You can then roll this lower
level customer data up to product or
Analytics that focus on the customer: The
“right” analytics depend on the method. But one
thing that all good customer analytics have in
common is that they are meaningful to the
customer. Just like airlines should care more about
on-time arrivals than on-time departures, your
analytics should be felt by customers at all phases
of their journey.
If you want to improve the customer support
experience, customer satisfaction with the call
outcome is a better metric than the number of calls
answered in an hour. The latter is an example of
company centric and the former is customer centric
Getting buy-in: Planning, collecting, and
analyzing data is only good if something is going
to be done about the insights.
All too often, I see organizations spend a lot on research and
customer measurement projects but the results stop at the
executive presentation meeting. Unfortunately, insights aren’t
acted upon because the people who can change the product,
price, or experience aren’t involved with the data collection and
planning. They are naturally resistant to outsiders telling them
what to do. This can happen with both internally and externally
collected data. Get buy-in from the people you need to implement
your insights and minimize the “not invented here” attitude
Customer analytics should be shared with not
only executives, but also with product
development, sales, and support staffers. As
part of the planning and getting buy-in, be
sure the analytics will cross customer
touchpoints and be accessible across the
organization.
A lot of creative thinking goes into making a
plan. Don’t feel like you need to fit every
project into this process. That’s especially
the case if your goals and methods are
narrow in scope. The rest of this chapter
covers the details of putting together your
customer analytics initiative.
DEFINING THE SCOPE AND
OUTCOME
The first stage is goal setting: where you define
the scope and outcome of your project.
Don’t overlook or rush through this stage.
Collecting customer analytics takes time and
money. You
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compiled the wrong data
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1. State the goals of the initiative.
Think in terms of the intended outcome (for
example, an increase of 10% in revenue of
a product line over the next year). The
more specific you can be, the more
attainable the endeavor.
DEFINING THE SCOPE AND
OUTCOME
2. Write down the questions you want to
answer. Data is meaningless unless it’s collected
for a reason. Articulate what business questions
you’re hoping to answer. Avoid being vague and
large in scope. Start small and specific and
itemize your questions.
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Some examples of questions customer
analytics can answer include:
• Which product feature should I add to this
product?
• What is preventing customers on the
website from completing a purchase?
• What labels should I change in the website
navigation?
• Why are customers not recommending a
product and how can I improve positive
word of mouth?
• What percent of high-income mothers are
aware of the brand and website?
• Who are the most profitable customers?
• How long until a customer makes a repeat
purchase?
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There’s a good chance you aren’t the first
person to collect and use customer analytics
in your organization. Look for past initiatives,
past projects, and what worked and what
didn’t work. The documents, results, and
people involved in past initiatives will save
you a lot of effort and prevent you from
reinventing the wheel.
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