 Doing information badly
If you are feeling insecure, now is
probably not the time to read “Information Masters”
by John McKean (Wiley £18.99) because in comparing how the very
few top companies have achieved mastery of technology, and
therefore knowledge of their customers, the rest of us are shown
up to be hugely inefficient, and inept.
While companies
have invested over 80 per cent of their relationship budgets in
technologically driven marketing, loyalty and service tools to
develop better understanding of their customer needs, recent
evidence, says McKean, shows that technology only determines ten
per cent of an organisation's ability to apply its customer
information.
Among the masterful companies that have
been examined are Wal-Mart, Tesco, First Direct, The GAP and
Chase Manhattan Bank. "They have broken the
self-perpetuating cycle of price and promotion schemes to
develop an iterative system of customer and operational
understanding and value creation."
The information master, says the author,
plunders the best customers through understanding them better
and quicker; embraces them through value rather than short term
incentives; teaches the less profitable customers to interact
more profitably, and encourages the worst customers to patronise
competitors.
Arguing that loyalty is an outcome rather
than an initiative, he believes that speed of action accounts
for roughly half of the entire benefit of a sales lead. Leave an
initiative for a couple of months, he says, and you might as
well not bother.
Information Masters is full of wonderful
soundbites.
ü
"90 per cent of a firm's resources are
dedicated to proactive initiatives based on predictive
capabilities."
ü
When a telecoms firm took six weeks to respond to
a sales lead (with a volume of 90 million records a year, the
cost was $0.35. When they could respond in two hours, (with a
volume of 150 million records per year) the cost dropped to
$0.04 per lead.
ü
Taking the 80/20 profitability rule further, he
suggests that many firms have found that less than five per cent
of their customers represent the majority of their total
profitability.
Retaining the
fight customers is an inherent by-product of a deep
understanding of customers and markets, not an isolated
initiative. As they become more efficient at mastering their
information, companies found they could steadily ratchet down
their customer chum levels. One East Coast bank did this at a
rate of at least one half of one per cent a year, to a current
six per cent chum rate by comparing economic cycles and customer
behaviour with appropriate product and service offerings.
Information mastery can be bad news for
marketing, sales and service departments though. A leading US
investment banking firm found it could redeploy roughly 45 per
cent of staff in these areas because the time required to
complete activities was significantly reduced under higher
information competency. While this particular firm wouldn't
contemplate reducing the workforce, the attitude of corporations
to downsizing is changing rapidly.
Information-related
work is almost 90 per cent of the average employee's productive
time. The inefficiencies of information work at inappropriate
levels quickly add up, says McKean so that the market
opportunity costs from a director not operating at appropriate
levels far exceeded the raw cost inefficiencies.
The hardest step, says McKean, is starting
the process of reevaluating your company's ability, or lack of
it, to manage and use information.
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