It is clear we are racing head first into a data rich world, meaning businesses cannot afford to mis-manage their customer data.
Customer data management is a fundamental part of a company’s marketing strategy, as 83 percent of companies expect data and analytics to become more important in the business decision making process over the next five years. Optimal data management practices equip a company to gather insights which can be used as the cornerstone for Customer Experience improvement initiatives.
Improved Customer Experience is a clear-cut way to keep customers buying, thus increasing businesses’ revenues. However too many businesses are struggling with how to make sense of the available customer data; they lack the ability to merge cross-channel data thus hindering their ability to draw meaningful insights and consequently optimise revenues.
Therefore, it is of paramount importance for investors to include searching questions on good data practice as a standard part of their investor briefing. Asking the right questions will elicit the necessary insight for investors to determine whether the data management practices embedded at the target business are as mature as they should be and whether they will have an influence on the return on investment.
Here are five crucial questions which (institutional) investors can pose to corporations to better understand how well a business is managing customer data and whether or not their investment is well placed.
1. What is your share of customer?
It is crucial for investors to understand whether the target company knows their customers’ spending profile, the reason being to understand what potential ‘share’ of the customer’s wallet the target company holds. Customers split their spending across varying providers on a day-to-day basis therefore knowing the share the target company has of each of their customers will help investors determine the growth potential for those customers.
If a target company is able to demonstrate to an investor where the growth potential lies, it will show investors that the target company has access to fundamental insights on customer data and thus are well placed to grow the share of customer further.
2. Are newly acquired customers still buying a year later?
Continuously putting effort into acquiring new customers can be an expensive undertaking for some businesses, especially if those customers are not staying for the long-term. Investors need to look past whether the target company is offering sufficient customer acquisition incentives and focus on whether newly acquired customers are still buying a year later (and more). Customers who disappear shortly after acquisition highlight to investors that marketing spend is being wasted.
The target company should have the necessary data to highlight to investors that they have a proper grasp of their customer insight. Therefore questioning whether a recently acquired customer is still spending a year later will show whether the target company is using customer insight properly and will help gauge how the company will fare in the long-term.
3. Who are your best customers?
Collecting and analysing the right customer analytics will arm the target company with the crucial information needed to see if it is recruiting the best customers to fit the business’ priorities. Typically there is a key group of customers who contribute the most to profits; usually they buy high-margin products, don’t alter or abandon an order, pay on time, and don’t require much attention post-sale.
It is important for investors to ask this question so they can see whether the target company is wasting its time on a cohort of customers who in actual fact turn out to be the least profitable. If investors have clear evidence that the business knows what type of customer profile to keep targeting then they can be reassured about long term growth.
4. Which customers are in growth or decline?
A critical question not to be ignored. If the target company can report that its best customers (high value, high loyal) are in decline, then it is important that customer data is being used appropriately to reverse the trend. It may be the case that these customers are demanding discounts or are just looking elsewhere in the market.
The key for investors when asking this question is to determine whether the target company is using customer insight to pursue look-alike customers. Has a particular group of slightly less valuable customers been targeted with internal growth strategies to replace the declining group with potential high value and high loyalty contenders?
5. Do you have an integrated online and offline view of your customer behaviour?
When it comes to enquiring about the target company’s marketing strategy, the key for understanding marketing success is seeing how much incremental revenue a company’s marketing activity is generating. Any savvy investor will know that incremental revenue trumps isolated marketing campaign measures such as response and open rates.
Customers are influenced on a day-to-day basis by a variety of channels, and as confirmed by our latest research it is companies who combine online and offline methods who produce the highest commercial results. There are now a variety of techniques for harmonising all behaviour/transactions of a given customer into a single, integrated, 3600 view, and only if the target company can achieve this (and demonstrate this) will customer insights be valid and actionable.
Deciphering whether a business has a well-implemented and well-managed strategy for managing their customer data is critical for any investor, as the potential for future growth will be apparent. More and more customer data is becoming accessible and it is up to businesses to collect, analyse and use it to bolster their marketing strategies. Investors need to probe the business for their key customer figures to establish how advanced their customer relationship strategy is, as well as identify which tools are in place to effectively manage and analyse the plethora of available multichannel data for future growth.
Using the above five questions will help investors to get a feel for how mature a company’s customer insight management processes really are.