Tuesday, April 22, 2008

5383: Client Cluelessness Continues…

This Brandweek story appeared at Adweek.com last week. Scan it quickly to read the MultiCultClassics commentary immediately following…

Study: Marketers Flunk CRM
Only 6% of marketers have an excellent understanding of their customers

By Kenneth Hein, Brandweek

NEW YORK Marketers, who spend millions to gain data about their customers, generally fail to use it properly, according to a new CMO Council study.

Only 16 percent of companies rate themselves as effective or extremely good when it comes to customer relationship management. Forty-five percent said they are deficient or need more work at integrating and leveraging customer data.

The “Business Gain From How You Retain: Addressing the Challenge of Customer Churn and Marketing Burn” report polled 450-plus marketers globally. The CMO Council teamed with Computer Sciences Corp., IBM Software and Dun & Bradstreet to conduct the research.

“There is a lack of focus as to how to optimize revenue from existing customers,” said Donovan Neale-May, executive director of the CMO Council, New York. “In a year of economic restraints, marketers should be more concerned with cross-selling and upselling.”

Too often marketers are enamored with chasing new conquests, said Loreen Babcock, CEO of direct and relationship marketing agency Unit 7, New York. “Let’s be honest. It’s sexier to bring new customers in, but that whole marketing model is broken because there is no accountability.”

Only half of the marketers said they have a strategy in place for further penetrating and monetizing key relationships. Not surprisingly, nearly a third of respondents (31 percent) reported customer churn rates of more than 10 percent. Roughly another third (32 percent) reported turnover of 5 to 10 percent. Two-thirds said they have no system in place for reactivating lost or dormant customers.

Nortel has made great strides in improving its CRM efforts, said Heidi Lanford, its global leader for marketing analytics. “We’ve formed more of a partnership with our customers. They help us innovate faster by helping us target what their needs are. Leveraging the customers we have is critical to us.”

Still, like many companies, Nortel has difficulties with data collection. “Since we’re a business-to-business company we struggle to get data from our channel partners that gives us a true view of the customer,” Lanford said.

Integrating a wide variety of siloed data sources across often inadequate IT systems is a challenge for many companies, said Alexander Black, senior partner in the strategic services group at CSC, an IT services company based in Falls Church, Va. “There can be as many as 20 to 25 different sources of data.”

Wealth management companies like Charles Schwab and Fidelity are the best at CRM “because they have the biggest risk if they lose their wealthy customers,” Black said. Internet retailers like eBay and Amazon are also tops because “they started with a clean slate. They don’t have the heritage of all those legacy systems.”

For many, however, “the landscape is a mess in terms of how data sources are linked,” said Babcock. As a result, 31 percent of respondents said they don’t do any data mining at all.

In the end, the number of respondents claiming to have excellent knowledge of their customers when it comes to demographic, behavioral, psychographic and transactional data—only 6 percent.

This report is yet another addition to the growing series of revelations that industry people don’t know what the hell they’re doing.

However, there are some key considerations regarding this latest study.

For starters, the results were offered up directly by the clients. In other words, clients seem to openly admit they are clueless about their own customers. What makes this so outrageous—at least for adpeople—is that clients still insist on criticizing and rejecting work aimed at customers.

So why do clients get away with killing campaigns when they are clearly lacking the intelligence to understand what might motivate and persuade the targeted audiences? Well, mostly because the only ones more ignorant than the clients are the advertising agency representatives.

You don’t have to conduct a survey to quickly realize that agencies—especially the BDAs, as George Parker calls them—do a lousy job of gathering and defining consumer insights. For confirmation, simply read the typical strategy brief given to creatives on any assignment.

Perhaps our collective stupidity ultimately ignited consumer generated marketing, as well as the paradigm shift of consumer control seized via the Web.

Apparently, customers didn’t need to collect research to conclude we weren’t doing our jobs.

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