It wasn’t raining when Noah built the Ark.

—Howard Ruff

All enterprises use information about their customers to make smarter decisions. But for most traditional marketing decisions and actions, information is really needed only at the aggregate, or market, level. That is, any marketer needs to know the average demand for a particular product feature within a population of prospective customers, or the range of prices that this market population will find attractive. The enterprise then uses this information to plan its production and distribution as well as its marketing and sales activities.

But building relationships with customers necessarily involves making decisions and taking actions at the level of the individual customer, using customer-specific information in addition to information about the aggregate characteristics of the market population. This is because a “relationship” inherently implies some type of mutual interaction between two individual parties. We cannot have a “relationship” with a population or group but only with another individual. So the competitor trying to win with superior customer relationship strategies needs first to know the individual identities of the customers who make up the traditional marketer’s aggregate market population. Then the enterprise will make different marketing, sales, distribution, and production decisions, and take different actions, with respect to different customers, to create better experiences and increase customer value, even within the same market or niche population.

We can see this in action. Husband asks wife if she saw the additional stories about gun control suggested on the New York Times Web site they each read that morning on their own computers. Wife answers with a laugh that those were the extra stories offered to him; she had seen suggestions for stories about stock market prospects in China. The items advertised were different, too, of course.

Individual Information Requires Customer Recognition

The essence of managing customer relationships is treating different customers differently; therefore, the first requirement for any enterprise to engage in this type of competition is simply to “know” one customer from another. However, identifying individual customers is not an easy process, and too often not a perfect one. It was not that many years ago when a British utility launched a December promotion to acknowledge its very best customers by mailing each of them a holiday greeting card. To the astonishment of its management, nearly 25 percent of these cards were returned to the company unopened in January. Apparently, many of the firm’s “most valuable customers” were actually lampposts. Until that time, this company’s management had equated electric meters with customers, comfortable in the knowledge that because they tracked meters, they also tracked customers. But lampposts don’t read mail or make decisions.

Most enterprises will find it difficult simply to compile a complete and accurate list of all the uniquely individual customers they serve, though some businesses and industries are more naturally able to identify their customers than others. Consider the differences among these businesses, and consider the advantage that would accrue to a company that’s able to identify individual customers and recognize each one at every contact:

• Telecommunications companies sell many of their services directly to end-user consumers. After all, to bill a customer for her calls in any given sales period, a phone company’s computers must track that customer’s calling activities—numbers connected to, time spent in each connection, day of week, and time of day. But even a cell phone company will likely make some sales to prepaid customers whose identities it can’t actually learn, because they buy their top-up cards in convenience stores or through distributors, and often prepaid customers want to maintain their anonymity. Such a firm may also serve a number of corporate clients whose end users are not specifically identified. And some service providers offer friends and family deals that mean one name stands for half a dozen human customers.

• Retail banks must know individual customer identities to keep track of each customer’s banking activities and balances. Historically, banks have been organized along lines of business, with credit cards, checking accounts, and home equity loans processed in completely different divisions. As a result, information about whether a branch banking customer is also a credit card customer often has not always been readily available to either separate division. More and more banks are recognizing the need to coordinate and integrate information across product divisions, to produce a complete relationship profile of the customer accessible to all divisions in real time.¹ Westpac New Zealand Bank is using Bluetooth beacon connections and biometrics such as fingerprints along with traditional account numbers, ATM cards, and caller ID to identify customers in a way that delivers the most complete real-time picture of customer interaction with the bank. In addition, all banking products used by the customer (such as mortgages, retirement, checking accounts, investments, etc.) are tracked in one customer profile. While this capability is available at more and more financial services institutions, the goal for Westpac goes a step further; they want employees to use that data to anticipate individual customer needs.²

• Consumer packaged goods companies sell their grocery and personal care products in supermarkets, drugstores, and other retail outlets. Although their true end customers are those who walk into the stores and buy these products, there is no technically simple way for the packaged goods companies to find out who these retail consumers are or to link their individual identities with their buying histories, except in some cases by using a “loyalty card” or other information-collection program. However, EdgeVerve offers a suite of services called Consumer Connect, a sensor-based way for retailers and consumer packaged goods companies all to monitor and share information about customer movement and what is bought off store display shelves by whom, in real time, if customers have given their individual permission.³ SK Telecom has also recently released Smart Shopper, an omnichannel marketing platform that allows “cartless shopping.” Upon entering the store, customers can use a special barcode scanner to add items to their virtual shopping cart. To check out, they confirm and pay for their purchases at a self-checkout counter, and the items will be delivered to their homes at a designated date and time.⁴

• Insurance companies can nearly always tell you how many policies they have written, but many still cannot tell you how many customers they have or even how many households or businesses they serve. This is changing, of course, as more and more insurance companies recognize the need to base the organization and the reward structure for policy sales on customers.⁵
• A computer equipment company selling systems to other companies in a business-to-business environment may be able to identify the businesses it is selling to, but it is much more difficult for the firm to identify the individual players who actually participate in each organization’s decision to buy, and then to repurchase. Yet within any business customer it is these players—decision makers, influencers, specifiers, approvers, contract authorities, purchasing agents, reviewers, end users—with whom the selling company should be developing relationships. Thus, some Web-based selling and contact-management tools are now able to help keep this information in a way that’s useful to the selling company.⁶
• Carmakers, as well as state and local governments, have for decades recorded the current owner of each registered automobile by the vehicle identification number (VIN), visible through the front window of any car. However, even though the owner of each car can be determined this way, the cars belonging to each owner cannot. More recently, carmakers have created smartphone apps that allow customers to digitally access their owner’s manual, dealership service options, and appointment reminders, and control remotely certain aspects of their car, in exchange for their contact information, car make and model, and permission to collect data from their device.⁷
• Cable and media entertainment companies often have unknown customer prospects use their website. How does the company actively reengage a customer after she leaves the site if it doesn’t know who she is? Some companies are implementing customer data technology to identify that Web site visitor, determine whether she is a hot prospect, and send a follow-up e-mail specific to the interest of that individual customer.⁸

Identifying customers, therefore, is not usually very easy, and the degree of difficulty any company faces in identifying its own customers is largely a function of its business model and its channel structure. But to engage any of its customers in relationships, an enterprise needs to know these customers’ identities. Thus, it must first understand the limitations, make choices, and set priorities with respect to its need to identify individual customers. How many end-customer identities are actually known to the enterprise today? How accurate are these identities? How much duplication and overlap is there in the data? What proportion of all customer identities is known? Are there ways the enterprise could uncover a larger number of customer identities? If so, which customer identities does the enterprise want to access first?

With the explosion in customer touch points, slight variations in a customer’s profile can easily result in fragmented data about that customer. Furthermore, the data is constantly in flux. According to Neustar, each year,

• 75 million Americans change phone carriers.
• 45 million change phone numbers.
• 40 million relocate.
• 2.1 million legally change their names.

Meanwhile, with rising privacy rules, publicly available information on individuals is declining, and therefore it’s harder to use public data to create and maintain a customer’s information file.⁹

What Does Identify Mean?

Given that the purpose of identifying individual customers is to facilitate the development of relationships with them individually, we are using the word identify in its broadest possible form. What we are really saying is that an enterprise must undertake all of these identification activities:

Identification Activities

• Define. Decide what information will comprise the actual customer’s identity: Is it name and address? Mobile phone number? E-mail address? Home phone number? Account number? Householding information?
• Find. Our customers are out there—if we can see them properly, we can see a lot that helps us serve them better. An omnichannel approach, which includes information from every possible channel, such as call centers, Web sites, interactive voice response (IVR) systems, instant messaging, social, and in-store interactions, is crucial.¹⁰
• Collect. Arrange to collect these customer identities. Collection mechanisms could include frequent-shopper bar codes; credit card data; paper applications; Web-based interactions via Web site, e-mail, blog comments, Facebook, Instagram, or Twitter; radio frequency identification (RFID) microchips (such as E-ZPass and Exxon-Mobil’s Speedpass); or any number of other vehicles.
• Link. Once a customer’s identity is fixed, it must be linked to all transactions and interactions with that customer, at all points of contact, and within all the enterprise’s different operating units and divisions. It is one thing, for instance, to identify the consumer who goes into a grocery store, but a frequent- shopper program is usually the primary mechanism to link that shopper’s activities together, so that the enterprise knows it is the same shopper, every time he comes into the store or makes an online purchase.¹¹ Also, if a customer shops online for a product but then contacts the company’s call center to order it, the relationship-oriented enterprise wants to be able to link that customer’s online interactions with her call-in order. The goal is to see each customer as one complete customer, and not as a series of independent events, people, or contacts.
• Integrate. The customer’s identity must not only be linked to all interactions and transactions; it must also be integrated into the information systems the enterprise uses to run its business. Frequent-flyer identities need to be integrated into the flight reservations data system. Household banking identities need to be integrated into the small business records maintained by the bank.
• Recognize. The customer who returns to a different part of the organization needs to be recognized as the same customer, not a different one. In other words, the customer who visits the Web site today, goes into the store or the bank branch tomorrow, and calls the toll-free number next week needs to be recognized as the same customer, not three separate events or visitors.
• Store. Identifying information about individual customers must be linked, stored, and maintained in one or several electronic databases.
• Update. All customer data, including customer-identifying data, is subject to change and must be regularly verified, updated, improved, or revised.
• Analyze. Customer identities must serve as the key inputs for analyzing individual customer differences (see Chapter 12).
• Make available. The data on customer identities maintained in an enterprise’s databases must be made available to the people and functions within the enterprise that need access to it. Especially in a service organization, making individual customer-identifying information available to frontline service personnel is important. Computers help enterprises codify, aggregate, filter, and sort customer information for their own and their customers’ benefit. Storing customer identification information in an accessible format is critical to the success of a customer-centered enterprise.
• Secure and protect. Because individual customer identities are both competitively sensitive and threatening to individual customer privacy, it is critical to secure this information to prevent its unauthorized use.

Technology is enabling enterprises to identify customers in ways never before imagined. Many businesspeople still hand out business cards, but computer contact databases and sophisticated customer information cloud-based data warehousing are far more important than physical cards for the same reason that public libraries long ago abandoned their card catalog systems: because card catalog systems cost much more than their electronic counterparts and are available for search only in the physical library building. Sophisticated electronic data systems allow library patrons to search a library’s holdings from anywhere and help the library cut its own costs at the same time.

Integrated computer databases don’t just reduce costs. More important, they also help identify patterns that aren’t visible when the data is kept in filing systems or in separate data silos. The more the company integrates data from all corners of the enterprise, even including the extended enterprise, the richer in value the customer information becomes in planning and executing customer-focused strategies.

The end customer of an enterprise is the one who consumes the product or service it provides. That said, sometimes it is more of an indirect relationship, which makes it more difficult to tag the customer and link information to her. Sometimes, a product or service might be purchased by one customer and used by another member of the household or by the recipient of a gift. And as we discuss later, sometimes an end user will be an employee of a company while it is the company’s purchasing department that actually buys the product. Regardless of these intermediary relationships, however, it is the end user who is at the top of the food chain and the end user whose relationship with the enterprise is most important, because this is the person whose needs will or won’t be met by the product.

Customer Data Revolution

Clearly, in the Information Age, an enterprise can reach and communicate with individual customers one at a time, it can observe as customers talk to each other about the company, and it can follow strategies for its customer interactions that are based on relevant, customer-specific information stored in a customer database. The computer can now store millions of customer records—not just names and addresses, but age, gender, marital status and family configuration, buying habits, history, devices, and demographic and psychographic profiles. Individuals can be selected from this database by one, two, three, or more of their identifying characteristics. CRM expert Stan Rapp has said that the computer has brought about “three awesome powers”: the power to record, the power to find, and the power to compare.¹⁴

• The computer’s power to record. In precomputer days, there would have been no point in recording by typewriter dozens of bits of information about each customer or prospect on thousands of index cards. Without the computer, there would have been no practical way to make use of such information. As computer data storage rapidly became more economical, however, it became possible and desirable to build up and use a prospect or customer record with great detail.
• The computer’s power to find. Selections can be made from the prospect or customer file by any field definitions or combination of field definitions.
• The computer’s power to compare. Information on customers with one set of characteristics can be compared to customer information using a different set of characteristics. For instance, the computer can compare a list of older people and a list of golfers.

For all its power, however, the truth is that when it comes to customer-oriented activities, the computer is an underutilized technology at most businesses—not because companies don’t want to use it but because most customer data are simply not fit for use in an analytical database. The development of a database of customer information requires a data model—the tool required to bring data complexities under control. The data model defines the structure of the database and lays out a map for how information about customers will be organized and deployed.

Summary

The first task to accomplish in building relationships with a customer is to recognize each one at every point of contact, across all products purchased or locations contacted, through every communication channel, over time, and link the information so that one view of each customer is established. Doing this requires knowing the identity of each customer at every contact point in the organization.

Food for Thought

1. Describe and name two companies you have done business with as a customer.
2. One of them treats you as if you are a new customer every time you show up, or at least any time you show up anywhere you haven’t done business with the company before. At the other company, you are recognized as you, every time you have any dealings with the company. What’s the effect on you of these disparate approaches? How would you guess each company manages its data, given their different approaches to customers?
3. How can a company identify customers when those customers don’t talk to its representatives very often, if at all—at least not individually? (Consider a pet food manufacturer that sells to retailers, not directly to consumers. Or a convenience store that operates on a cash basis. Or a fast-food chain. Or a business-to-business company that doesn’t have a human sales force.)

What will encourage customers to “raise their hands” and agree to be identified and recognized?

Glossary

Attitudinal data

Directly supplied data that reflect attitudes about products, such as satisfaction levels, perceived competitive positioning, desired features, and unmet needs as well as lifestyles, brand preferences, social and personal values, and opinions.

Behavioral data

Directly supplied data that include purchase and buying habits, clickstream data, interactions with the company, communication channels chosen, language used, product consumption, company share of wallet, and so on.

Business model

How a company builds economic value.

Customer relationship management (CRM)

As a term, CRM can refer either to the activities and processes a company must engage in to manage individual relationships with its customers (as explored extensively in this textbook), or to the suite of software, data, and analytics tools required to carry out those activities and processes more cost efficiently.

Customer service

Customer service involves helping a customer gain the full use and advantage of whatever product or service was bought. When something goes wrong with a product, or when a customer has some kind of problem with it, the process of helping the customer overcome this problem is often referred to as “customer care.”

Customize

Become relevant by doing something for a customer that no competition can do that doesn’t have all the information about that customer that you do.

Data warehousing

A process that captures, stores, and analyzes a single view of enterprise data to gain business insight for improved decision making.

Demographic data

Directly supplied data that include age, income, education level, marital status, household composition, gender, home ownership, and so on.

Differentiate

Prioritize by value; understand different needs. Identify, recognize, link, remember.

Enterprise customer

A business that buys goods and services from a business-to-business (B2B) vendor, characterized by complex “relationships within relationships” often involving specifiers, approvers, reviewers, and other individuals within the customer organization who all have varying roles and degrees of influence over the purchasing decision.

Identify (see also Recognize)

Recognize and remember each customer regardless of the channel by or geographic area in which the customer leaves information about himself. Be able to link information about each customer to generate a complete picture of each customer.

Information Age

“A period in human history characterized by the shift from traditional industry that the Industrial Revolution brought through industrialization, to an economy based on information computerization.” [Wikipedia]

Internet of Things (IoT)

A term describing the network of products and other objects that have intelligence or computational capability built into them, along with interconnectedness to the Web, via Wi-Fi or other technology. As defined by the ITU, a UN agency, the IoT is “a global infrastructure for the information society, enabling advanced services by interconnecting (physical and virtual) things based on existing and evolving interoperable information and communication technologies” (http://www.itu.int/en/ITU-T/gsi/iot/Pages/default.aspx, accessed April 6, 2016).

Omnichannel marketing

A marketing buzzword referring to the capability of interacting and transacting with customers in any or all channels, in order to ensure that every interaction takes place in the channel of the customer’s own choice.

Recognize (see also Identify)

The ability to identify an individual customer as that customer through any shopping or buying channel, within any product purchase category, across locations or geographies, and over time. These individual data points are linked for a universally recognized, or identified, customer.

Zero latency

No lag time required for the flow of information from customer, to database, to decision maker (or to a rules-based decision-making engine).