Monday, July 28, 2014
The Rewards of Analyzing Your Customer
A recent report published by the Aberdeen Group presents some interesting statistics regarding the value of customer analytics. The author of the report was Omer Minkara. Perhaps one of the most impressive statistics that was presented in the report indicated that the average year-over-year increase in customer lifetime value was 7.6% for those organizations that invest in customer analytics. The other side of the coin is that the organizations that do not invest in customer analytics see a lifetime value declined in customer lifetime value by 4.3% year-over-year.
There were a number of other specific statistics that have additional impact. They are noted below.
1. The number of positive mentions through social media channels was 14.6% for those who invest in customer analytics and 2.9% for those who do not.
2. The cross sale an upsell revenue was 11.6% for those with customer analytics versus
negative 2.3% for those who do not.
3. Annual company revenue increased 10.5% for those with customer analytics versus 3% for those who do not.
4. The return on marketing investments was 8.3% for those with customer analytics versus 4.9% for those who do not.
5. The improvement in average cost per customer contact was 5.1% for those with customer analytics versus an increase in cost per customer contact of 1.7% for those who do not.
These statistics developed by the Aberdeen group are amazing. To see the dramatic difference between those companies who participate in customer analytics and those that do not paint a picture that is hard to ignore. Even if the sample size and rigor of the analysis that led to these statistics is even close to being true, one would wonder why companies are not jumping on the bandwagon of customer analytics. Of course, the challenge that most companies face is how to acquire personnel with the analytic skills that will lead to the kind of statistical performance noted in the Aberdeen Group report.
There is a new book published through the Harvard business review press titled “Keeping Up with the Quants” written by Thomas Davenport and Jinho Kim. It is an introductory guide to understanding and using analytics in business. This book complements the report noted above and gives further justification for the use of analytics.
The bottom line is the statistical improvement in performance that is consistently demonstrated by companies using customer analytics compared to those who do not is no longer questionable. Companies must learn how to take advantage of customer analytics. Those companies, who either do not want to learn how to use customer analytics or don't know how, will find themselves at a distinct disadvantage in the marketplace.