Churn Happens as Marketers Don’t Leverage Customer Data and Analytics

Lack of customer data sharing, integration and insight is undermining competitiveness, retention rates, revenue and profitability among global marketers, according to a new study from the Chief Marketing Officer (CMO) Council.

Conducted in late 2007 and early 2008, the audit of more than 450 marketers across the globe found a significant lack of customer knowledge and substantial obstacles and roadblocks to integrating disparate customer data repositories across the enterprise

Among the findings of the CMO Council study, “Business Gain From How You Retain”:

• Over 50% of global marketers report that they have fair, little, or no knowledge of the customer demographic, behavioral, psychographic and transactional data. Just 6% say they have excellent knowledge of the customer.
• Only 50% of companies report having a strategy for further penetrating or monetizing key account relationships.
• Some 45% of companies rate the effectiveness of customer relationship management (CRM) systems as deficient or needing more work. Just 15% rate themselves extremely good or effective at integrating disparate customer data sources and repositories.

Funded by Computer Sciences Corporation, IBM Software and D&B, the study sought to evaluate where and how marketers are “operationalizing” customer intelligence and insight to reduce customer churn, increase lifetime value, improve the customer experience, and increase the effectiveness and targeting of marketing spend.?

Marketers are struggling to gain a true and timely view of the customer due to inadequate or incompatible IT systems and databases, siloed data in functional areas, and a limited strategic focus or management mandate on customer data integration (CDI), the CMO Council found.

Compounding the issue is a lack of formalized data-sharing policies and practices in the organization, combined with internal political or cultural barriers and IT obstacles and objections to data integration, it said.

Other key findings:

• Just 15% of marketers say their companies are doing an extremely good or effective job of integrating disparate customer data sources and repositories; 55% note there is room for improvement or a deficiency in this area.
• More than 31% of companies surveyed have customer churn rates of more than 10%, and 32% report turnover of 5-10%. In comparison, more than 62% say they desire or expect a churn level of less than 5%.
• Respondents say customer churn significantly impacts business performance through revenue loss (59.9%), reduced profitability (39.6%) and greater marketing and re-acquisition costs (36.3%).
• While churn is a big issue, nearly 67% of those surveyed say they have no system for reactivating dormant or lost customers, while just over half of respondents say they have a strategy for further penetrating or monetizing key account relationships.
• More than 35% of respondents report that the CMO or marketing department (38.9%) has primary responsibility for the customer analytics function but are not leveraging its value. Over 31% of those surveyed do no data mining at all and 63% are only doing moderate levels of data mining for intelligence and insight.
• The top six strategic applications of customer information by marketers:
  1. Up-selling and cross-selling
  2. Segmenting and targeting
  3. Driving retention, loyalty and promotional programs
  4. Identifying new opportunities and unmet needs
  5. Improving customer service
  6. Shaping personalized and customized communications
• Key initiatives to increase customer retention include improving customer communications (65.2%); addressing complaints, problems and pain points (51.8%); and enhancing the customer experience (54.8%).

“The study illustrates a disturbing fact: many global companies are doing an inadequate job of integrating and applying customer data to reduce customer defections and increase loyalty,” said Alexander J. Black, a senior partner in the Strategic Services group within CSC’s Global Business Solutions organization.

“Unfortunately, this results in lost opportunities and revenues from up-selling and cross-selling new products – as well as higher costs incurred in replacing lost customers. Most importantly, the inability to leverage data to reduce customer turnover hinders a company’s long-term competitiveness and profitability.”