25
Opening Keynote The Strategic Value of Measuring Customer Migration Alok Shende Vice President Frost & Sullivan
Opening Keynote
The Strategic Value of Measuring Customer Migration
Alok Shende
Vice President
Frost & Sullivan
Trend I
The Changing World of Telco
• From waiting lists to 20 need and value based segments
– Discreet offerings have ballooned– Prepaid, Postpaid, Family-friendly, night and weekend
schemes, Text, data, messages, music
• Customer touch points– Company owned stores, web, shared and exclusive dealers,
telemarketing agents, affinity partners
• Communication channels– Television, print media, bill boards, event marketing, viral
marketing, Product placements
Fulfillment
Unsure
Web
Generational Beliefs Demographics
Market Place Dynamics
Not Interested
Consumer trends
EngagedWorld ConditionsTelemarketing
Desire to Interact
Political Trends
Peer Influence
Consumer Stage
Emotional State
Trends
Proliferation
•Information
•Distribution
•Communication
•Sales & Service channels
•New customer segments
•Media
•Marketing Approaches
•Products
•Technology
Trend II
The Income Demographic Shift
Income Group (2000 - 2001 Prices)
2001 2005 (E) 2010 (F)CAGR %
(2005 to 2010)
Under 36,000 60,060 46,743 34,169 (6.07)
36,001 - 72,000 76,918 97,327 130,614 6.06
72,001 - 108,000 30,036 37,729 50,173 5.87
108,001 - 156,000 11,764 14,655 19,287 5.65
156,001 - 300,000 8,031 11,231 17,080 8.75
300,001 - 720,000 2,882 3,808 5,394 7.21
Above 720,000 599 813 1,191 7.94
Total 190,290 212,306 257,908 3.97
Auto industry Trends
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
2003 2004 2005
Small Cars Mid Sized Cars Large Cars
CAGR 11%
CAGR 16.9%
CAGR 22.4%
Telivision Industry Trends
0
50000
100000
150000
200000
250000
300000
350000
2006 2007 (E)
LCD Plasma
Polarization
• For many industries including cars, Consumer durables, clothes, computers, retailers, growth is higher at high end and lower end
• “Should we relinquish one segment for another?”
• “How do we separate the price, quality, brand and delivery in the emerging paradigms’
• “How does this translate into sales force, organisational hierarchy….”
Tiers
High End
Mid End
Low End
Nominal growth relative to average growth
AverageGrowth
Customer Equity
Customer Equity• “The total lifetime value of a firm’s customer base“• Customer Equity => Shareholder Equity• Data driven analytics can measure customer equity
to high degree of accuracy• Managers can manage the current and future
customer value and it’s likely impact on the share holder value
• Firms such as Dell, Royal Bank of Canada and Best Buy concentrate on raising their ‘returns on specific customer segments.
• RBC share value increases in the past one, three and five years (and through the last "recession" or downdraft in the stock markets.)
Customer value matters
• Customer profitability management is an integral feature of effective customer relationship management (CRM)
• Understanding customer profitability is an essential element in building customer value and through that share holder value
• The benefits for effective profitability management are not restricted to high value customers
• Critical when developing client value propositions that will improve revenues and /or costs
• Corner stone for sales performance management and benchmarking reports
• Feeds financial management reporting and risk management decisions
• Informs product design/management
Engaged Customer Model
Awareness Consideration Conversion Loyalty
Unaware
Aware
Unaware
Relevant
Non Relevant
Converted
Not Converted
Loyal
Not Loyal
Engaged
Not Engaged
Evangelist
What customers really want
• Show me that you care• Appreciate and value my business• Treat me as an individual, not a member• Demonstrate that you know me• Anticipate my needs
– Regardless of where and when I interact with you
Analytical prerequisite
• A level of detail sufficient to document how each customer comes into contact with the company plus the associated revenue and costs;
• A comprehensive view of the customer’s relationship with the company so that the true, holistic contribution or cost is understood;
• A consistent view over time so that changes in the relationship can be properly understood;
• Timely information reporting so that the company can act promptly to seize the opportunity while risk is minimal;
• Flexibility so that as the business environment changes, the measurement process can smoothly adapt.
How comfortable are you with your measurement
today
• In 1999 we replaced our original model with a behavior based profitability model
• Averages hide insights. Actual account data resulted in 75% of our customers shifting 2 or more profitability deciles
• Given that we know 90% of profitability comes from 20% of our customers, accuracy matters
– Quote from a leading bank
What do you do with the information
• How do we go about designing a customer experience and ensure consistency at all touch points
• Use our customer information and decision technology to– Segment Customers– understand profitability– predict preference and behavior
• Create personalized strategy for each customer
Challenges
Lack of Historical Customer Track Records
• Traditionally been low on customer focus, resulting in the least customer-tracking systems in place
• Limited or scant customer behavior information and trends have been captured in systems in the past
• Almost zero historic records of customer trends and reactions to many marketing and promotional schemes
• Level of digitization of processes and value chains of suppliers, customers, and partners is very low
• Lack of real-time, authenticated, and exhaustive information poses a strong hurdle for BI
Integration Bottlenecks
• Indian businesses have adopted automation and business solutions at
various speeds based on their requirements and understanding of the
solution
• The overall technology adoption has been so diverse, with large and
disparate systems that the systems are difficult to integrate
• Systems integration is a major problem for a BI which has to extract
information from various sources and across different business
departments and functions
Summary
Over all key Success Factors
Start with the client• Clearly defined sub segments• intimate knowledge of client needs• n depth competitor assesment• identify gaps and client unmet needsDevelop Fact Base• Determines if gap is product, process, policy, training or
communication• Quantify size and opportunityEngage partners• Business leads with client / identify desired client experience• partners determine desired product, process, communication plan or
solutionEnable sales force
• "Companies that measure profitability by customer have a distinct advantage over those that don’t. They can more intelligently manage their customer-facing processes. But even more important, they can identify and strip costs out of processes that do not add strategic or economic value to the relationship. They can then reinvest in processes that are mutually valuable to the relationship. That leads to profitable growth.“
Capgemini Profitability Practice Leader Marc Shingles
