Chapter 1
THE MASTERS
The customer masters are the Information Masters.
They are not the high-profile firms that first come to mind.
They are not the firms touted by learned authors in the leading trade and business journals, nor do they publicly proclaim innovations in marketing sales, customer loyalty or technology.

On the contrary, they are the quiet ones.
They have a hushed appreciation for being on a steady trajectory toward the Holy Grail of business — to efficiently produce a win–win proposition for customers and shareholders simultaneously.
Their successes are deep, inconspicuous, and difficult to replicate by competitors.

Beyond this recognition is an awareness that information competency is primarily non-technological in nature and requires a balanced investment across the seven information competency determinants of people, process, organization, culture, leadership, technology, and information itself.

As a result, the masters are acquiring and retaining the best customers and repelling the worst.

They are shrouded by their competitors’ blindness.

They are quick and iterative.

They are obsessed with customers.

They are obsessed with information.

They are dangerous.

They are the future.

They are the Information Masters.

But they are the lucky ones.

The information masters represent roughly five percent of the world’s firms who have achieved long-term success with customer relationship management. The rest are caught in its paradox.

They are the lucky ones in a business world increasingly driven by Hollywood business approaches and ever-accelerating technologies.

The corporate world, intoxicated by business gurus and technological advances, has desperately lurched toward quick fixes for waning customer loyalty and shrinking margins, as if the underlying causes of such ills would somehow magically resolve themselves through superficial antidotes.

Attentions have been focused on high-level marketing, sales, and service functions rather than concentrating on the more difficult challenges of an underlying information competency upon which those functions rely.

Firms have looked toward technology to create the supporting information capabilities required by these customer-focused approaches, assuming that technology is the primary determinant of information competency.

This research clearly shows that technology is only one of the seven factors which determine information competency. Empirically, firms have applied 82% of the investment in their ability to apply information toward technology, yet technology only determines 10% of a firm’s information competency.

Such myopia has only created further confusion and paradox, paralleling our non-business world.

In our non-business world, are declining birth rates, yet ever-increasing population.

In our non-business world, are record harvests, yet persistent hunger.

In our business world, there are technological advances for storing massive amounts of customer buying behavior, yet relatively less customer knowledge.

In our business world, there are radical technological advances to analyze customer information yet customer loyalties spiral downwards.

Despite exponential technological advances, the complexities of our world have engulfed business in a flood of customer information far beyond the competency to use it.

We are not in the Information Age but in an age of information.

This lack of a true information competency has forced business to summarize and aggregate information about customer needs, behavior, and relative profitability.

This aggregation has produced detachment.

Detachment produced a culture.

The culture became tradition.

Both corporation and customer progressively became hardened to this emerging culture of remoteness and indifference.

As if to torment, the gurus of marketing, sales, service, and loyalty have offered intoxicating answers to our conundrum of the ever-distanced customer.

Their mesmerizing approaches offer sound strategy but executable success is continually restricted by one irrefutable fact.

Returning to the levels of intimacy and loyalty created by the quaint corner grocer under the burden of today’s complexity and scale requires a broad and deep information competency far beyond what exists today in most firms.

In response, firms have quickly turned toward technology believing that technological competency is the major determinant of information competency.

It is not.

Paradoxically, this unbalanced bias toward technology is only one small element of the predominantly non-technological determinants of information competency. Such non-technical elements range from an employee’s skill to apply information to the willingness of business units to share information.

The vicious cycle is perpetuated.

Based on research of firm’s CRM initiatives over time, here is the paradoxical cycle of most firm’s pursuit of the elusive ‘profitable’ customer:

1. Competitive realization that firms need to get closer to our customers.

2. Expose themselves to all of the latest marketing, loyalty, and services ideas.

3. Attempt to implement those ideas and find that they all require a higher information competency.

4. They make major IT investments believing that this will create the required information competency.

5. The marketing, loyalty, and services initiatives make small gains but remain relatively anemic because IT is less than 10% of the information competency equation.

6. Because the major determinants of their information competency are non-technological and are the more difficult ones to address (people, process, organization, cultural, leadership, and information itself), they remain ‘in the closet’ and under-invested.

7. The firms cycle back to #2 and #4, i.e. pouring water into a leaky bucket.

Firms continue to pour significant investments into tactical marketing, sales, service, and loyalty initiatives to address their weakness, which actually stems from an underlying weakness in information competency.

At the same time, firms continue to pour significant investments into information initiatives centered on technological capabilities in the belief that technology itself creates information competency.

As a result, marketing departments continue to perpetuate failure rate ‘norms’ from direct mail campaigns in the ninety percentiles while damaging brand and further alienating customers. Cost of customer loyalty incentives is on the rise. Sales departments experience continued productivity erosion, forcing cost reductions in core sales-support areas. Customer loyalty indicators show customer churn rates escalating toward twenty to fifty percent per year.

There are a number of firms who have broken free.

At the epicenter of these progressive firms is a handful of corporate heroes or ‘information renegades’ whose corporate bravery and vision have propelled their firms beyond the riptide of legacy information approaches.

It is these renegades who had the fortitude to run the rapids of corporate denial and drive their firm kicking and screaming into uncharted waters. The essence of their journey is eloquently captured by this Machiavellian wisdom: ‘There is nothing more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things, because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new.’

This is the story of their journey to information mastery.

THE CUSTOMER RACE IS AN INFORMATION RACE

The firms who have made this perilous journey began with the understanding that unless a firm has fewer than one hundred customers, the race to acquire and retain the best customers is not a customer race but an information race.

Understanding customer needs and making decisions to profitably serve those needs is derived primarily (80–90%) from a firm’s recorded information.

Therefore, the ability to apply this information is probably the single most important factor in acquiring and profitably serving customers and shareholders.

Yet, as firms were caught up in the latest frenzy of innovations to marketing, sales, and service, they continued to support these innovations with information by focusing on technological capabilities merely to tactically analyze and apply current information to specific initiatives.

This biased approach reveals that most firms view their ability to optimally apply customer, operational, and financial information as a technologically based proficiency rather than as a broad, underlying competency determined by elements ranging from employee information skills to business unit politics.

The typical firm invests in massive customer databases and networks without investing in the other elements which determine a true competency in information:

1.Employee skills to apply it.
2. Processes by which to efficiently deploy it.
3. Organizational structures and rewards for effective use in and across functional areas.
4. Culture to perpetuate the use and appreciation of its value.
5. Leadership to fully understand and support its role and investment.
6. Information itself relative to its value and accuracy.

CART BEFORE THE HORSE

The inspiring goals of today’s segment-of-one marketers, sales leaders, and customer loyalty gurus are possible only when firms first focus on developing a broad and deep information competency in support of such goals.

The firms who are well on their way to near information mastery levels have found that their previous efforts to implement segment of one marketing failed because they did not have systemic information competency to adequately execute the promises of segment of one marketing. They also came to realize that as they evolved their levels of information competency, they gained the inherent capability to implement segment of one marketing as a competency, not a tactical business initiative — a subtle but profound distinction.

The current obsession of many of the world’s largest firms with executing a customer-focused business model without first addressing the information realities of complex and intimate customer approaches is premature.

For firms with less than one hundred customers, information competencies can exist more naturally within their business, as this environment is inherently less complex. As firms move beyond this number of customers, they are forced to proactively manage customer behavior in the context of operational efficiencies and financial performance in an increasingly complex environment. This complex business environment creates a dependency on the ability to apply massive amounts of detailed customer information in concert with operational and financial performance measures.

While many firms believe they are on a competitive trajectory for developed information competencies in support of customer focused initiatives, their investments are biased toward technological investment rather than addressing the more difficult areas that represent the greatest inhibitors of creating customer and shareholder value for information.

The shortfall of a technologically based approach to information competency stems from the unresolved issues of business not looking beyond their narrow focus of their corporate database prowess, beyond the barriers of organizational agenda and politics, and beyond the information skills and processes optimized for business in yesteryear. This competency must exist at the heart of every breath the firm takes relative to creating value for customers and shareholders simultaneously.

The leading firms who have truly focused on the long-term development of information competencies in support of a customer-focused business model have achieved unparalleled levels of marketing effectiveness, sales performance, and customer loyalty.

Applying information to customer-focused business models continues only superficially in most firms, who take premature solace in their ability to apply information to current profitability, corporate databases or data warehouses. While most firms claim information competency, the results of their marketing and service initiatives prove they’re getting only a fraction of their true potential.

While most have made some progress toward information competency, the concept of rich individual customer understanding coupled with financial reality still does not exist for most firms today. Instead, information is simply glorified record keeping and administration rather than a profitable value-creation tool.

Much of this legacy has developed over years of informational myopia; information was viewed as an operational necessity rather than as the primary tool for creating value for customers and shareholders. Firms undervalue information because their ability to apply it is so intertwined with and fundamental to every aspect of business that it is simply taken for granted, and overlooked as a distinctive competency.

A firm’s information level may be ubiquitous to the point of obscurity, yet it is the vehicle through which all other competencies travel and the conduit through which all business initiatives must pass. Ultimately, there is no business without information.

As we view the so-called Information Age, we find a world whose information competency has not advanced but actually degraded over the 20th century: for example, we accept that ninety-seven percent of mailed solicitations are unwanted, don’t pay off, and are a source of consumer irritation. Although this particular statistic is currently considered an acceptable business norm, a business proprietor of one hundred years ago would have considered this absurd.

THE MCKEAN PARADOX

After studying many firms around the firm who had implemented major information initiatives, a curious paradox was uncovered. Most firms believed that the majority of drivers of information competency were technological, while the reality was that these drivers were of a non-technological nature.

Operating under this false belief, a majority of firms have invested in developing customer, operational and financial information capabilities with an unbalanced bias toward technological elements rather than the non-technological elements of these capabilities, which actually determined the majority of a firm’s information competency.

Table 1.1 reveals the paradox between the historical investment by percentages compared to the actual information competency determinants.

Table 1.1 Historical Investments vs. Competency Determinants

Ironically the firm’s resources, which could have been reinvested more efficiently in the other six areas, were being consumed by downstream costs created by the very weakness of their own information competency.

Examples are:

 

• lowering prices to compensate for weaknesses in product competitiveness, rather than lower prices created by operation efficiencies;
• raising customer incentives to compensate for poor customer understanding;
• raising sales commissions because of poor marketing segmentation;
• increasing advertising to compensate for a weak value proposition;
• increasing the size of marketing campaigns to compensate for poor analysis;
• cutting the services because of poor sales resulting from poor targeting.

While the majority of the efficiencies in a balanced investment approach are long-term in nature, the reported short-term gains registered exponential ROIs.

The facts bore out the following conclusions:

• The firm’s view of information as a tactical support element rather than as the primary factor determining a firm’s customer, operational, and financial decisions, drove the respective unbalanced investments in technology.

• A firm’s downstream weaknesses in areas such as customer loyalty, operational inefficiencies, and financial ambiguity consumed the firm’s resources with reactionary fixes caused by an inherent information weakness.

• This cycle perpetuated a narrow view, creating a narrow investment, and thus a low level of information competency.

The most brilliant strategies or initiatives in marketing, sales, customer service, and customer loyalty remained anemic when the other six elements of information competency did not have a balanced investment.

This anemia plays out in marketing departments who continue to generate failure rates from direct mail campaigns in the ninety percentiles. Cost of customer loyalty incentives is on the rise. Sales departments experience continued productivity erosion, forcing cost reductions in core sales support areas. Customer loyalty indicators show customer churn rates escalating in almost every industry by five to twenty-five percent.