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The best practices in customer intelligence

Customer intelligence management can help improve acquisition, retention and profitability. A study describes the best practices of early adopters and offers recommendations.

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If your organization is struggling with customer intelligence management (CIM), you're not alone.

CIM is a set of business intelligence tools and practices applied specifically to customer data. An independent study by the Aberdeen Group, a Boston-based research firm, finds that only 48% of the 125 companies it surveyed have actively managed customer intelligence for 12 months or more. That puts effective CIM in the early adopter stage. Study author Leslie Ament, director of customer intelligence research with Aberdeen, initially thought companies would be further along with CIM by now. Still, she's not entirely surprised at what she's learned.

CIM can be a challenge, she said, "because it's cross functional, because information is siloed and because it's difficult … and you need to do it while running your day-to-day businesses."

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The study, released in December 2005, focused on what "best-in-class" CIM leaders are doing differently than the average company or "laggards" in the market. Best-in-class leaders reported using CIM to attain greater than "25% year-after-year performance improvement in customer retention and customer acquisition rates, and revenues," according to the report.

A major factor that sets the leaders apart is an enterprise-wide commitment to customer centricity, Ament said. Best-in-class companies also stated a desire to provide a 360-degree view to all customer-facing functions, the study reported.

"[CIM leaders] are creating a cross-functional ownership team. They understand that it's not one department's problem or goal; it's an enterprise-wide endeavor," Ament said.

CIM combines technology, people, process and data, but technology is a key enabler of successful initiatives, the study noted. Best-in-class companies are more likely to use customer data integration (CDI) tools prior to analysis, according to the study. These leaders are also more likely to use operational and predictive analytics to better understand their high-value customers. However, for the majority of companies, the study found that just getting the right data to the right place is challenging enough.

The results from "all participants" (not just best in class) find that siloed data and lack of effective CDI is the biggest CIM technology challenge for most companies and maintaining data quality is the second greatest challenge. This is an area where the majority might be able to take a tip from the leaders.

Selectively outsourcing CIM processes, which may include data management, and analysis and application of customer intelligence, was more prevalent in best-in-class companies than Ament had expected. Of the best-in-class companies, 50% used outsourcing for some part of their CIM process.

"I did expect companies to selectively outsource, but I didn't quite expect it to be at the range it came in at. It's a very healthy sign," Ament explained. "Companies recognize that they need to bring in experts and service providers with expertise."

Best-in-class companies reported turning to outsourcers for persistent managed services or for CIM system and process development. That frees up employees to focus on more specialized analysis and application of customer intelligence.

The issue of metrics development is also a major challenge. Of all respondents, 30% "did not know or did not have" the data to provide "more than basic" performance metrics of CIM initiatives, the study found. They may be overcomplicating the issue.

As the industry matures, more detailed and holistic metrics will likely be determined, the study predicted. But for now, best-in-class companies reported that they generally base their metrics on customer retention rates, return on marketing investment and revenue growth. The study recommends that metrics-challenged companies follow suit, and measure the success of CIM initiatives with basic performance indicators like customer retention and customer acquisition rates combined with annual revenue growth.

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