Theodore Levitt said many years ago (to the chagrin of his finance professor colleagues) that the purpose of a business is not per se to make money. After all, he reasoned, “How does one make money?” Levitt said that the purpose of a business is to find and keep a customer and making money is just a byproduct of doing well at finding and keeping a customer. In today’s era, these ideas are increasingly embedded in the notion of customer experience and increasingly this represents the distinction between companies that will win or lose in their markets. The question that CEOs should be asking of their CMOs is, “Are you ready to engage with our customers and are they ready to engage with you?” I like to call this notion being “customer ready”.
Earlier this year I got to meet with an insurance company that demonstrated that they understood what it means to be customer ready. And more importantly, they showed that they understood that they need to use data and analytics to drive business competitive advantage. As it turned out, this company had recently conducted a SWOT analysis as a part of their annual strategic process. The result being that management decided to launch a full scale digital transformation. Most interesting was the fact that their transformation was aimed at establishing a fundamentally new set of business capabilities.
What spurred a 100+ year old company to take such action? They viewed their go forward “right to win” by the quality of customer experience they delivered through their traditional channels and through what were increasingly becoming “digital channels”. The marketing and business leaders that I met with made it clear their sense of urgency to respond to what they saw as significant market changes on the horizon. Specifically, the leaders feared being disintermediated or the company becoming less relevant as significant Internet players started vying for their customers and market.
To respond, this company wanted to achieve a single view of each customer across each of its distribution channels as well as its agent populations. Typical of many businesses today, they had determined that they needed an automated, holistic view into things like customer history. They also wanted to marry the existing customer data with customer leads.
Taking this step would allow them to understand when an existing customer is also a lead for another product. With this knowledge, they wanted to provide existing customers with special offers to accelerate their conversion from lead to closed sale with more than one insurance product. Their reason for taking this step was described recently by Gartner Inc. Gartner suggests that increasingly, business success is determined by what they call “business moments”. Without a first rate experience that builds upon what this insurance company already knows about its customers, the company feared it could be increasingly at risk from Internet pure plays. Equally as important, they had found that the degree of cross selling can be a determinant of whether a customer is profitable or not.
To drive a first rate digital experience, this insurance company wanted to apply advanced analytics to a single view of customer and prospect data. This would allow them to do things like conduct nearest neighbor predictive analysis and modeling. In this form of analysis, “the goal is to predict whether a new customer will respond to an offer based on how other similar customers have responded” (Data Science for Business, Foster Provost, O’Reilly, 2013, page 147).
What has limited this business, like so many others, is that their customer data is scattered across many enterprise systems. For one division, they have more than one ‘Salesforce instance’. Yet this company’s marketing team knew that in order to retain its customers, it needed to be able to service them across all channels and establish a single unified customer experience. To make this happen, they needed to create and share holistic customer information across their entire ecosystem. This firm saw potential threats either as taking market share from them or effectively disintermediating them over time as more and more consumers move their insurance purchasing to the Web. Given the risk, their competitive advantage would be knowing their customers better and being able to respond to them better on the web.
In sum, this insurance company realized that they needed to be customer ready by having a complete and accurate view of their customers including addresses, connection preferences and increasing social media responses. This means competitively responding directly to those whom have honed their skills in web design, social presence and advanced analytics. To do this, they will create predictive capabilities that will make use of their superior customer data.