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Monthly Archives
April 30, 2004
Posted by Britton
What's driving all the current interest in customer intelligence? That's the question that Bob Thompson of CRM Guru recently put to an illustrious panel of software executives in the intelligent marketing sector. Their answers were quite interesting.
Ellen Olson, VP of Marketing for E.piphany, contends a "shift" is under way. "A lot of organizations have made, over the last five years, huge CRM investments. They’ve spent a lot of time putting solutions in place, building data warehouses, building data marts, they’ve gathered a lot of information about the customers." 
Companies are now trying to "unlock the value" of these systems, said Olson. "That’s probably the hottest topic that we see happening in the industry. Organizations have cut about all the costs that they can cut out of the equation, so they’re looking for ways to drive revenue. They’re looking for ways to be able to cross-sell, to broaden share of wallet. They’re looking for ways to really understand customer profitability, and at the end of the day, analytics is at the heart of that equation."
It may also be the declining responses associated with outbound marketing -- whether it's telemarketing or direct marketing. "The direct marketers are in a very difficult position," said Court Cunningham, SVP of Marketing Automation at DoubleClick. "Their input costs are going up, postage costs and printing costs are going up, and response rates are declining... and people have finally realized that they can’t just carpet bomb consumers, and they need to become more intelligent about contact strategies. So a lot of this is about being more intelligent with a fixed marketing budget and trying to touch consumers less, but generate more revenue."
Finally, Jim Davis, CMO of SAS, noted that the demand for intelligence-driven action is rising everywhere. "We’re seeing this not only in the customer intelligence area, but in all intelligence areas within organizations right now," he noted. "There’s a real need to optimize processes within the organization, to fine tune the various attributes associated with your enterprise, and obviously, the customer is one of those areas. [W]e’ve got to be smart in what we do, not only in terms of how we personalize the service to the customer, but also in terms of how we spend our marketing budgets."
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April 29, 2004
Posted by Britton
Quantitative customer analysis approaches such as data mining and predictive modeling are valuable for companies with existing products in relatively stable markets, says Wharton marketing professor George Day. However, he thinks companies seeking new growth in rapidly evolving markets may not have the requisite data to discern relevant patterns.
“Even when quantitative data is most preferred you still need the qualitative [approach] to interpret what’s going on, to give it depth,” says Day. “You can’t hand an ad copywriter behavioral data and expect him to do a lot. He needs a more refined, colorful, multi-dimensional picture of the target customer.”
The greater challenge companies face is actually leveraging or operationalizing customer insights. Whirlpool and Procter & Gamble, for instance, are using customer information to build “concept banks” that drive new product development. The companies even mix and match their findings -- such as consumer reactions to certain product attributes -- to develop new concepts. The companies then convene in-house brainstorming sessions to translate those concepts into products. “You still have to get from the data to a creative insight," says Day. "Someone has to have an intuition, a sense that this is worth pursuing.”
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April 28, 2004
Posted by Britton
One grocery retailer that has demonstrated the power of customer intelligence, loyalty and culture is UK-based Tesco. The company's Clubcard loyalty program generates more than a hundred million pounds of incremental sales each year, and has more than 10 million members. Indeed, Tesco has passed up Sainsbury to become the country's number one grocer. 
Tesco "started with a belief that understanding their customers was fundamental to running a successful retail business," explains Clive Humby, co-author of the new book Scoring Points and a consultant to the retailer. "Because they understand their customers, they hope they can serve them better, and so what we’ve done, right from the beginning, is not look at this program as a marketing sales promotion program, but we’ve looked at the program as a way of learning about how consumers shop, and what they want from their retailer, and therefore, not just changing the one to one communication with the customer, but changing the physical retail offer."
In a recent CRM Guru interview, Humby has an interesting way of describing how Tesco profiles its customers: "[W]hen you stand in the queue looking at the guy in front of you and what they’re buying in that supermarket trolley, you form a picture of them, don’t you? The clever thing that we do is see that in the trolley from the items that are there. So, it’s not actually being able to track the items. The items, themselves, are irrelevant. We’ve got this algorithm that allows the items to describe the customer. That’s a clever thing, and that creates all these different languages that we use, these segmentations, the languages of the customer that says it’s convenience-driven, they’re concerned about their health, they’re looking for value for money, they like promotions."
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April 27, 2004
Posted by Britton
It's an elegant piece of thought leadership. Peppers and Rogers have just service marked a new term: "Return on Customer." The point they are trying to make is that the value of a company's customer base should be watched as closely as any other financial indicator -- whether it's moving north or south. 
"Without a handle on Return on Customer, companies frequently end up destroying a great deal of their own value in a single-minded quest for current income," write Don Peppers and Martha Rogers in 1to1 Magazine. "If managers actually tracked their ROC, they would have a whole new perspective on growing their company's value."
They explain that ROC can be measured mathematically: "ROC equals the sum of a firm's current-period profit from its customers, plus any changes in customer equity (the sum of the lifetime values of all current and future customers served by a firm), divided by the total customer equity at the beginning of the period."
As they see it, ROC is "a speedometer for organic growth, measuring the efficiency with which a firm can create genuine value...Tracking ROC allows a business to think about customers as the economic assets they really are, and to start making business decisions based not only on profit, but also on conserving and growing that asset."
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April 26, 2004
Posted by Britton
It's a wonderful term and it was invented by Adrian Slywotzky of Mercer Management Consulting. The term is "Demand Innovation." Interestingly, Slywotzky is not that hot on invention. He contends that, “in most industries, truly differentiating new-product breakthroughs are becoming increasingly rare.” He coined his term to point out that the action is shifting away from breakthrough product innovations to a focus on incremental, customer-focused process innovations. 
As the Economist Magazine notes in its most recent issue, big companies, in particular, are better at "improving the ways in which products invented elsewhere are manufactured, marketed and continually enhanced" than they are at creating the next new thing. "Even Henry Ford, whose name is almost synonymous with four-wheeled transport, did not invent the automobile. He 'merely' invented a far superior way to manufacture it—namely, the mass-production assembly line."
In his recent book How to Grow When Markets Don't, Slywotzky and his co-author Richard Wise point to companies such as Air Liquide and Johnson Controls as examples, noting how they have generated profits “by discovering new forms of demand.” Indeed, they discovered high-value services and solutions around the increasingly commoditized products they were producing. Having sold industrial gases for decades, Air Liquide, a French firm, got closer to its customers and became a provider of high-margin chemical- and gas-management services.
Not an amazing breakthrough -- merely a powerful application of customer intelligence and an impressive show of customer value creation.
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April 23, 2004
Posted by Britton
The contact center can be expected to drive key innovations and advancements in the development of customer intelligence. But it won't be the offshored, cost-sensitive centers that drive these developments. It will be the growth- and retention-focused centers that recognize that profitable customers deserve smart care and attention.
While cost-cutting has been the focus of contact center efforts in recent years, companies increasingly are leveraging predictive analytics for "up-sell, cross-sell, anticipatory service offerings, and emerging revenue opportunities," states Ventana Research analyst Jack Hafeli. "Predictive analytic insights delivered 'in the moment' of the customer interaction are now more doable than ever, and the incremental value-to-cost improves every day. Whether funneled through scripts for the service agent or embedded in self-service web or kiosk applications, insights can be derived from advanced predictive analytics at a fraction of the cost and effort of stereotypical PhD-driven data mining exercises of old."
In the coming years, the contact center increasingly will serve as a key source of information to be leveraged across the organization, according to Ventana Research. "Business intelligence applications aimed at performance management inside the contact center are increasingly common, as are tendencies to integrate contact center metrics into the broader business intelligence data repositories," contends Hafeli. "At the same time, service initiatives are shifting from an internal operations spotlight to one where the customer is the center of attention...organizations are increasingly determined to understand and anticipate customer requirements and motivations. These forward-thinking organizations will initiate the contact, but with the customer's needs and preferences as the trigger."
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April 22, 2004
Posted by Britton
The demand for centralized, business intelligence competency centers apparently is on the rise. Nearly 10% of the world's 2,000 largest companies have some sort of BI competency center, estimates Gartner analyst Howard Dresner.
McKesson Corp. set up a BI center of excellence six months ago. "The driver behind this is making sure we're maximizing the value of everything we're investing in," says Stephen Zander, director of business-intelligence operations, at McKesson Corp., a large drug and medical-supply company.
Aviva Canada Inc., a property and casualty insurance company, relies on its Information Management Services department to bridge the communications gap between business-intelligence-tool users and the IT department. "Business intelligence isn't a technology issue. BI is a business issue," says Gerry Lee, VP of information management services, pointing out that most of the center's 17 staffers are business analysts.
Launch costs for a BI competency center can be $1 million to $2 million, according to Gartner's Dresner. So what's the attraction? Overall cost reduction as companies move an array of BI tools onto standard platforms. But also the centralization of skills, expertise and resources. "We couldn't get into CRM until we had solid data-management and business-intelligence capabilities," says Lee.
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April 20, 2004
Posted by Britton
It's the most compelling, powerful and suspenseful show on television. Anyway, that's the way I see (and watch) it. The show I am speaking of is 24 -- the path-breaking series starring Kiefer Sutherland as intelligence agent Jack Bauer. One reason the show is so gripping is that it all takes place in real-time, hour-by-hour.
While "reality television" is all the rage on today's airwaves, I am pleased to see 24 continue to thrive. Unlike Survivor and The Apprentice, this show is real, reality television. That's especially true if you look ten years into the future based on today's trajectories. 
This season -- the show's third -- finds Bauer attempting to thwart the evil actions of a former British intelligence officer who is threatening to release a weaponized virus on the major cities of the US. The show dramatically goes where television almost never does. It depicts mass murder in stunning detail (and bloody, agonizing gore) as the virus is released into the ventilation system of a Los Angeles hotel.
What's so hard to believe about this scenario? I think it's eminently believable, particularly as murderous technologies become more accessible.
So why am I going on about this here? Because this show is the most vivid portayal of the interplay between an intelligence organization ("CTU") and its field officers in the intelligence-driven war on terror. While it's hard to imagine a real-life scenario playing out quite as, well, dramatically, the horrors that are dramatized in the show seem plausible enough.
And here's where it gets interesting. Expect to see an increasing amount of overlap between the intelligence-based innovations that drive customer value and those that are developed to fight the war on terror. Big-name, customer data and technology companies such as Acxiom and SAS already are being actively drawn into the loop of intelligence-related, domestic terror agencies. Why? Because there is a great deal of consistency between the strategies, skill-sets and technologies necessary to profile a customer -- and those necessary to profile a suspected terrorist.
You might be creeped out by that fact (I am), but that's where things are headed. Jack Bauer's team simply demonstrates how all these innovative capabilities might be applied. And as fans of 24 (and folks who regularly read a newspaper) know quite well, the survival of many now depends on accurate and actionable intelligence.
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April 19, 2004
Posted by Britton
Ace Hardware is leveraging customer intelligence to compete with big box stores such as Home Depot and Lowe's and other cooperatives such as TruServ and Do it Best. The Oak Brook, Ill.-based has primarily functioned as a wholesaler in the past — purchasing merchandise in volume and redistributing it to its 5,000 independent stores. Unfortunately, that approach gave it little visibility into retail operations. Now, the company is drawing on a data warehouse to collect and analyze point-of-sale data from stores that agree to share it.
Ace's data warehouse includes information on competitors' prices, regional prices and promotions, enabling the company to optimize pricing approaches to increase profitability. Ace now advises retailers on pricing structures, which can help them raise or lower prices in certain product categories to optimize overall revenue and profit. The company also uses its data warehouse to target mailings at existing customers. Mike Altendorf, Ace's vice president of information technology, says response rates for such campaigns run between 6 percent and 20 percent -- much higher than industry averages between 2-3 percent.
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April 16, 2004
Posted by Britton
Current approaches to customer data gathering may not elicit the insight we need to be truly effective over the long-term. The limitations of technology may be particularly problematic.
"CRM tools enable you to collect a lot of rich data about a customer's frequency and time of purchase, the size of her orders, and what she thinks of your company," says Harvard Business School marketing professor Gerald Zaltman. "That's necessary but not sufficient data: It doesn't tell you anything about why customers do what they do, think what they think, and why they like or don't like your products. Getting that level of insight requires more intensive interactions with customers than CRM tools permit."
Zaltman contends companies need to develop "poetic insight into customers — a deep knowledge that enables you to intuit their answers to questions you haven't even asked them."
As he explains in his recent book, How Customers Think: Essential Insights into the Mind of the Market (Harvard Business School Press, 2003), Zaltman conducts one-on-one interviews with customers to elicit beliefs, emotions, intentions, and often unconscious attitudes that people have about a product or brand. He uses this information to create a "a consensus map" -- a framework to illustrate customer experiences and emotional connections in relation to a company's offering or offerings.
General Motors used Zaltman's "metaphor elicitation approach" to learn, as expected, that customers associate GM products with quality and competitive price. However, GM also discovered that customers have a "patriotic" connection to the company. Purchasing a GM car is related to their desire to support American jobs and fulfill larger obligations to their country.
Based on the consensus map, GM's managers in the US redesigned the customer experience at dealerships and incorporated new patriotic messages into company advertising. Overseas managers appealed to patriotic associations in their own countries. Such actions, apparently, are poetry in motion.
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April 15, 2004
Posted by Britton
The Internal Revenue Service handles more than 100 million phone calls every tax season -- and, having just placed one of them, I admit I was impressed with the care and courtesy with which I was handled. 
"Customers expect 24/7 customer service, and they want quick, accurate information without going through 'touch-tone hell,'" says David Madison, an information systems engineer with MITRE's Center for Enterprise Modernization, which has created a specialized research lab focused on contact center infrastructures and is working with the IRS. "Yet running call-centers is very labor-intensive, and many of them need modernization. That's not unique to the IRS, but the IRS and other government agencies do have unique challenges that differentiate them from commercial companies. For instance, the IRS's call-center work is very peak-demand oriented, specifically between January 1 and April 15 of each year. You need to build infrastructure to support that peak, but without spending so much that you have enormous excess capacity the rest of the year. Also, there are special privacy issues. Tax and social security data are very sensitive and must be secured."
Considering the massive amounts of information handled by the IRS and the sheer complexity of the US tax code, it's an extraordinary challenge. The IRS has about 10,000 customer-service representatives and each has access to different information; no one can be a specialist in every aspect of the U.S. tax code. That means the system must direct callers to the right expert.
"We also must consider the different channels for getting and receiving information, including phone—both speech and touch-tone menus—human interaction, mail, and the Internet. Providing consistency of customer service, regardless of the channel, is a clear challenge," Madison says.
Of course, we could make this whole effort a hell of a lot easier if we simply adopted the same "flat tax" that made Hong Kong such an impressive Asian power. While the folks at the IRS seemed pretty friendly, I'd prefer to do my taxes on a post-card, and place fewer calls to the government
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April 14, 2004
Posted by Britton
Customer intelligence is a powerful tool for building loyal customer relationships. However, companies often misunderstand the meaning and relevance of customer loyalty. Sometimes, for instance, they strive for the loyalty of unprofitable customers. Other times, they reward their best, most profitable customers in ways that undermine profitability. 
“Rewarding them by giving discounts is very expensive,” says Harvard Business School professor Rajiv Lal, who recently has studied the impact of Frequent Shopper Programs on grocery retailing. “The best way to reward your best customers is by making them an offer that is highly valued by them, but doesn't cost you a lot of money. For example, allocate more services to good customers. This could mean a designated line at the deli counter, or a ten items or less checkout line. You already have the buying behavior you want. So think about your costs, and make sure you aren't changing good behavior."
Lal also cites the powerful example of Harrah’s Entertainment – profiled recently in this space – to illustrate how to smartly use a rewards program to affect customer behavior: “They ask a) How much is this customer potentially worth? and b) what would it take to make the customer spend more? It isn't about rewarding existing behavior. It is about using the loyalty program—the data you collect—to affect customer behavior in ways that are rewarding for both the customer and the store. Unfortunately, most retailers do not have any sense of wallet share.”
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April 12, 2004
Posted by Britton
The customer is not always right. Not when he or she (or it) is an unprofitable customer. Unfortunately, few companies have yet come to grips with the strategic, organizational and cultural challenges that must be addressed to take a thoroughgoing approach toward customer profitability. Such an approach would certainly raise serious questions about the vast resources now being turned over to mass advertising firms in the name of product-based, brand-building -- efforts that revolve around faceless indicators like market-share and voodoo linkages to shareholder value rather than segment- and even account-specific measures based on real customer value.
Ventana Research contends "customer profitability will be an important differentiator of performance over the next three years." The research firm is advising its clients "to address customer profitability at a corporate level instead of taking a silo approach. In our judgment, CFOs should take the lead in shaping, organizing, and coordinating these efforts to give initiatives a senior level focus and because the resources required for analysis and implementation can be found in the finance organization. Information technology will be one of several key components to the success of customer profitability initiatives, enabling corporations to gain important insights into what drives margins and allowing them to measure how well the initiatives are paying off."
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April 09, 2004
Posted by Britton
It’s an intriguing hypothesis. Michael Carter, co-founder and EVP of a new company called CXO Systems, is convinced the “death of the data warehouse” is upon us. He estimates that more than 80% of all organizations over $500 million in revenue currently have data warehouses, but contends that as much as 93% of the information in them goes unused in any given month. As he sees it, the post-Enron, post-WorldCom imperative to obtain increasing visibility, transparency and insight will force companies to essentially relegate their centralized data warehouses to “information filing and post-mortem analysis.” 
“Since the information is contained in application-specific formats, the data has been rolled up into large data stores or warehouses so that traditional business intelligence tools can access it and run complex, technically administered reports,” Carter explains. “Therein lies the problem. The data and information contained in the traditional data warehouse environment is difficult to get at, can't be easily created or administered, and is not in real-time.”
Ok, then what’s next? The emergence and widespread use of real-time, “distributed intelligence.” As Carter puts it: “The technology standards movement brought on by web services (XML over HTTP) will enable organizations to apply the principles of ‘distribution’ in the form of portable and real-time business information networks (BINs). In these BINs, organizations can attain new levels of business visibility that will enable them to more nimbly react to market and business changes, and more profitably serve their employees, customers, and shareholders. Business challenges will be brought to light not at the end of a quarter, but on a daily basis, and communicated from the BINs directly to the business managers that need the information.”
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April 08, 2004
Posted by Britton
The intelligence community responsible for assessing and identifying terrorist threats may have some interesting lessons for the other intelligence community – the one responsible for analyzing customer relationships.
At a CIA-sponsored conference in Rome earlier this week, members of US intelligence agencies got together with their foreign counterparts in some 30 countries. “We are in a world where transnational terrorist threats exceed the ability of any one nation to deal with them,” said Carol Dumaine, the conference organizer and a 24-year veteran of the agency, in the opening keynote. 
As reported by David Ignatius of the Washington Post, Dumaine and her team has spent two years organizing a set of gatherings that are designed to provoke new thinking in the intelligence field. One of the key concerns being addressed by the endeavor is the perception that the “closed and bureaucratic world of intelligence” has failed to adapt to the mounting threats posed by modern terrorists. The CIA's deputy director for intelligence, Jami Miscik, discussed "the cognitive rigidity of analysts" and "the parochial effects of experts." Indeed, she concluded that "the biggest danger is inherited assumptions that get handed down from generation to generation [of analysts]."
What’s extraordinary is the CIA’s willingness to open itself up in this way, revealing its weaknesses and limitations for all to see. Having failed to “connect the dots” prior to 9/11 or to adequately assess the situation in Iraq, the agency seems prepared to acknowledge that new approaches are necessary. In a way, the CIA is addressing the same types of limitations that often prevent companies from understanding and adapting to the demands of their customers in these dynamic, often unpredictable times.
Secrecy may no longer be the best weapon in this era. Now, it’s about innovation and risk-taking, openness and change. It’s also about collaborative learning and action. As one Italian participant put it: “To fight a network, you need another network.”
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April 07, 2004
Posted by Britton
That’s the message on the cover of Reason Magazine’s forthcoming, mass customized June issue. Nick Gillespie, the magazine’s editor, says that Reason’s 55,000 readers (mistakenly listed as 40K in the New York Times) will receive a special issue that marries database technology and satellite photography to provide a personalized cover that actually circles the subscriber’s home. 
It’s a provocative idea – and brilliant marketing. Indeed, I hope it boosts circulation. (Full disclosure: I have contributed to the magazine in the past including a cover story on the promising future of home schooling.) The package was made possible by Rodger Cosgrove, president of Entremedia, a direct marketing firm, and a member of Reason's board. He developed the program that enabled the subscriber list to be integrated with satellite photos and worked with printer manufacturer, Xeikon, which customized the pub for all subscribers.
I am also pleased to discover that the cover story writer, Declan McCullagh, will offer an alternative to today’s privacy scare stories -- exploring the “unsung benefits” associated with proliferating database applications. We are, of course, surrendering elements of our privacy in exchange for the extraordinary conveniences that customer intelligence delivers. "Our story is man bites dog," says Gillespie in the Times. "Everybody, including our magazine, has been harping on the erosion of privacy and the fears of a database nation. It is a totally legit fear. But they make our lives unbelievably easier as well, in terms of commercial transactions, credit, you name it.”
Even-handedness is the only reasonable approach as I see it. After all, the key issue here is not really about the expanding knowledge of marketers and lenders. It’s about the delicate balance of liberty and security.
While we should certainly be concerned about infringements on our civil liberties and even develop new bulwarks of freedom, I am personally more concerned about the possibility of some entrepreneurial and unflagged terrorists manufacturing hell in the safety of an unmonitored garage. Perhaps the "transparent” future can't come soon enough.
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April 06, 2004
Posted by Britton
Houston-based Continental Airlines is making some interesting moves to win loyalty. In fact, flight attendants are now handed in-flight reports prior to take-off that flag the airline’s most valuable customers -– recognizing any delays or inconveniences they may have experienced en route so they can be treated with special care. Such treatment is paying off. The airline has earned an extra $200 in revenue on 400,000 of its top customers, and another $800 in revenue on 35,000 customers in its most profitable tier, according to a recent article in CIO Magazine.
That wouldn’t be possible without a system to analyze customer data, and the operating processes necessary to leverage it at the gates or in the skies. Relying on insight from its enterprise data warehouse, the company identifies valued customers that have experienced delays, and then sends them a letter of apology and provides some kind of compensation (such as a free cocktail or frequent flier miles). Research suggests that passengers are far more likely to simply forget the incident as a result of such actions.
Continental has even determined how to automate the rebooking process should a connecting flight be missed. The airline’s most valuable customers may even find themselves on a competitor’s plane – all an effort to recognize that individual’s long-term value and keep it. “Before the data warehouse, the person who yelled the loudest got the best service,” says Alicia Acebo, Continental's data warehousing director. “Now our most valuable customers get the best service.”
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April 05, 2004
Posted by Britton
IBM has been through a remarkable turnaround over the past decade. However, it may merely have recovered the spirit it lost. Consider the visionary leader who propelled IBM from being a respected maker of punch-card tabulators to a powerhouse of modern information technology. What’s remarkable about Thomas Watson, Jr. was his humility.
According to Time Magazine, he grew up “tortured by self-doubt. He suffered bouts of depression and once burst into tears over the thought that his formidable father wanted him to join IBM and eventually run what was already a significant company.” 
Interestingly, IBM’s spectacular growth in the ‘60s and ‘70s can be attributed not merely to its dominance of computing, but its deep understanding of its customers. It knew the clients it served often better than they knew themselves. To them, IBM was a provider not of mainframe computers, but rather, “management information systems.”
IBM’s new direction – under CEO Sam Palmisano (who carries the torch re-lit by Lou Gerstner) – looks a lot like its old one. The company has transformed itself to embrace a “customer-driven” and “services-led” business strategy. Through the 2002 acquisition of PricewaterhouseCoopers Consulting it has consolidated its strengths in management consulting, systems integration and business process outsourcing. Palmisano has distilled the company’s guiding values down to three: customer relationships, innovation and trust.
What is particularly interesting, though, is the way the company has shifted its research spending from the hard science of technology development to the softer science of technology application. The company is getting deeper and deeper into the strategies, business processes and cultures of its clients. Researchers are focusing on “solving business problems and modeling patterns of human behavior, giving their work more of the flavor of social science,” according to a recent article in the New York Times.
Palmisano, an IBM-lifer who is described as having an “understated” style and a “self-deprecating” sense of humor, has turned out to be quite a bold leader. “There is one thing that sets all great companies apart -- they define and lead the agendas for their industries,” he wrote to his employees in an email preparing them for the launch of the company’s innovative, yet risky “on-demand” initiative. "We now see an opportunity to set the agenda again," he added. "I am confident that we are on the verge of the next great opportunity for our company, and for the entire information technology industry."
Watson, who revolutionized the industry in the early 1960s with the daring introduction of the System/360 and built his company through deep customer insight, would certainly be proud of his company’s stunning reincarnation.
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April 02, 2004
Posted by Britton
Behavior trumps demographics in the new era of intelligent measurement. Overstock.com, an Internet retailer of discount merchandise, assesses behavioral clusters to determine where to invest its market dollars.
"When you add up everything you know about your online customers, you can get rid of education, income, children, and the rest of the demographics,” said Overstock CEO Patrick Byrne in a speech at the Web Analytics Summit at eTail 2004. "Demographics are foggy data. You can only guess and surmise why people who live in the same Zip Code might or might not shop the same way, want the same stuff or be willing to pay the same price. But behavior data is sharp. Customers' behavior is a signpost to their needs, so we don't cluster people based on who they are or what car they drive, but by their needs as expressed through their behavior.”
We appear to have entered an era of remarkable customer surveillance and this can be expected to transform marketing as we go forward. As Jim Sterne, president of Target Marketing, puts it at CRM Guru: “How an individual uses a retail site provides more insight into how they might be persuaded to buy than their martial status, age, or whether they bicycle to work or take the bus.”
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April 01, 2004
Posted by Britton
Manufacturers that hope to differentiate themselves from rivals emerging all over the planet might think carefully about ways to integrate their supply and demand chains. Indeed, a few smart companies have linked their supply chain management (SCM) and customer relationship management (CRM) systems in order to provide visibility across the extended enterprise – and compete in an agile, dynamic fashion. 
Critical to success in manufacturing is having insight into customer demand. "By connecting CRM and SCM, you can really change how you do inventory management and how you produce your product," says Steve Pratt, partner and former global CRM practice leader for Deloitte Consulting in San Francisco in a recent story in Industry Week. "In the late 1990s, a lot of companies put in enterprise resource planning, SCM and CRM systems, but they still run their businesses in the same ways as before. We still find islands of activity -- such as people who only deal with customers, and people who manufacture and distribute products."
The objective is to have insights, requests and orders ripple backward into one’s manufacturing facilities and supply network. "You can dynamically configure your production scheduling so that you treat your best customers better," Pratt contends.
Unfortunately, few companies have made all the connections and interconnections necessary to manage customer opportunities with great precision. One of them is Zeeland, Michigan-based Herman Miller Inc. The office furniture manufacturer has tailored its Web pages, called EZ-Connect, to ensure its most valuable customers are able to place orders at special rates.
According to Deloitte Consulting, manufacturers can differentiate themselves and their supply chains through real time response to individual customers based on their profitability and potential value. "Manufacturers that can do this -- and they are a distinct minority today -- are significantly more profitable than those that lag behind," states a report on "Digital Loyalty Networks" by Deloitte Research. "There aren't many companies with this connection," says Deloitte's Pratt. "It hasn't happened yet, but it's inevitable it will happen if manufacturers want to retain their best customers and increase the efficiency of their assets."
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