Guest Post: SAP on really understanding your customer

One of our Telco 2.0 themes is how telcos need to become better retailers. At a client workshop last week with a major mobile operator we were pointedly asked how to go about achieving true customer intimacy. We believe that one key element is to tie analytics to business processes. This topic is covered in our current bedtime reading which explains how data warehouses and CRM systems typically live in different universes. We are not alone in thinking this. In this guest post Mark Johnson, Global Marketing Director at SAP, explains his view on how we will see a shift from reactively managing interactions with customers towards proactively seeking value to bring to customers - something called 'Customer Value Enhancement'. (Ed - Mark will be stimulus presenter at the Telco 2.0 executive brainstorm next week).

6.30 pm, Miles Davis is about to shut down his PC and leave the office. One last thing - he opens his personal homepage to check the traffic on his route home and, being a sports fan, to take a quick look at the teams for tomorrow's football match. Miles' Service Provider pings him a message:
"Hi Miles, coming up - Finals Frenzy - live coverage of FA Cup Final, Heineken European Rugby Finals and the Final deciding Test Match between Australia & India from Delhi - see them all live via IPTV this month for £14.95".
He clicks through to view details and is offered to view an interactive billing dashboard where he can simulate in real time the impact to his monthly direct debit and can simulate "what if" scenarios in graphical form - what if I wanted an extra 100 texts this month to text friends while watching the matches?
"Hey Miles, you're booked on a flight to San Francisco which clashes with the Heineken Cup Final - would you like to receive live updates on your mobile and timeshift the full game to watch on-line from your hotel the following morning?"
Miles clicks on "run real-time billing simulation" and decides it's worth the extra £2.95.
"Miles, other members of your family calling plan have downloaded sports coverage from us in the last 3 months. Why not upgrade your calling plan to include "sports special" - £12.00 per month additional for live scores & updates from all featured events direct to up to 3 mobile numbers and half price pay-per-view offers on all premiership football matches - click to run a billing simulation".
Miles' service provider uses predictive modeling to simulate a 12 month view of spend based on upcoming programmed sports events and compares that to the uplift in monthly subscription.
"you could save £35 this year if you upgrade now - click here to upgrade & renew for a 12 month period".
From the graphic on screen it's an easy decision for Miles.
"James is on-line now, would you like to send him a personalized text message to give him the good news?"
Done.
"Miles, before you go, since there are 30 minutes of delays on your route home tonight why not download the new "soothing classics Vol 3" album from our music store, direct to your mobile to listen to in the car? One-time download & play for only £3.99".
Miles clicks to check the track listing before purchasing.
"Volvo Cars would like to offer this download for free - just take their short interactive voice survey whilst in the car-park - click here to participate"
6.40pm - Miles leave the office feeling happy -
"it's nice to know that my service provider knows what I want and keeps me updated with special offers to save me money.....Beep Beep, you have one new message "thanks Dad!"

Miles' Service Provider has pioneered the concept of Customer Value Enhancement (CVE) - a predictive, adaptive approach to linking front and back office functions through advanced business intelligence and analytics. CVE provides a customer's-eye view of the world, powering the development of new offers that can be served up in anticipation of customer needs, and in ways that promise to delight the customer, promote loyalty, and improve margins.

That may all sound like years away from reality but today's analytics platforms offer sophisticated capabilities which, if deployed in the context of customer-driven, closed loop business processes can deliver CVE as a natural evolution of systems & processes already running today - in fact outside of the Telecommunications arena many Retail & Consumer Products companies already utilize these capabilities to great effect.

Customer Value Enhancement (CVE) is the end point along an evolutionary scale begun nearly 20 years ago with Customer Relationship Management (CRM) and fostered by more recent developments in Customer Experience Management (CEM) as shown in figure 1 below. It has as its goal long-term, profitable business relationships that are valued by both customer and supplier.

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In a CVE environment, business functions are proactively initiated by the Service Provider based on who the customer is; the products and offers to which they subscribe; the performance of those products and services; the customer's usage levels; and other attributes and behaviors. CVE also employs demographic and psychographic insight from sources outside the Service Provider world, often provided by third-party data sources. Lastly, CVE gives the ability to predict future behaviors, facilitating the recommendation of the best combinations of services, features, content, and equipment for that consumer.

To further understand CVE, consider the historical context: During the 1980s, telecom operators embraced CRM (Customer Relationship Management) systems to mechanize order taking, and later multiple processes were added to the scope. More recently Service Providers have begun to consider Customer Experience Management (CEM) as the next step beyond CRM. CEM seeks to facilitate better overall understanding of the customer's end-to-end experience by gathering data from multiple touchpoints, including CRM, billing, and marketing systems and correlating that with fulfillment, inventory and service assurance systems1 to ensure up-to-the-minute status of the complete customer-affecting environment. This is still a bit new, but it holds the promise of making providers better "listeners" to the needs of their customers, and presumably, better suppliers as a result.

CRM and CEM both add to the communications service provider environment in a positive way. The orientation, however, is largely supply-driven ("Here's what we have to sell today") and focused on prevention of loss ("If I have data on how well we do, I can understand your behaviors better and compensate you if we fail."). Instead, CVE is oriented toward anticipating customer demand and building a relationship with the customer to satisfy that demand for the long-term.

Delivering Customer Value Enhancement

In a recent report published by leading Industry Analyst firm Stratecast, a division of Frost & Sullivan, they define five critical ingredients for CVE success:

  1. CVE Mindset - Provider recognition that they are in the business of retailing, not technology. With a retailer's point of view, the Service Provider will organize business functions according to well-researched customer needs and behaviors.
  2. Executive Commitment - This is a well-documented phenomenon in project success and a critical factor in moving companies to more fact-based decision making cultures.
  3. Back-office/Front-office Operational Integration - Back office operational systems (e.g. ERP, inventory, fulfillment, service assurance and billing) need to communicate to front office (CRM, CEM) systems in a manner that is as near real-time as possible, based on updates that affect customer touch-points.
  4. Robust Business Intelligence (BI) & Analytics Environment - An important part of CVE is the ability to sift through large volumes of operational data, to identify patterns that may reveal business opportunities. Enterprise-caliber business intelligence platforms will be required to deliver the capabilities considered essential to CVE.
  5. Strategy - Operations Linkage - This is the key, the essential ingredient to moving into the realm of CVE. Theoretically, all organizations process customer feedback as a critical input to offer improvement, so what is new here? The differences for a CVE-driven company are many: the decisioning process is fact-based and analytically sophisticated; these decisions are powered by input from all points of the customer experience; and they result in proactive (and in some cases real-time) outreach to customers resulting in a closed-loop process.

Conclusion

Today's consumers demand more than the standard supply-driven service bundles based solely on their service provider's internal perspectives. They expect their provider to interact with them in real time to offer highly targeted & relevant products & promotions, based on a deep understanding of each individual customer taking into account the timing, context & format of each individual transaction.

Those Service Providers that can utilise the goldmine of analytical intelligence available in back office & front office systems, as well as 3rd party sources to close the loop between strategy & execution in order to proactively reach out to individual consumers in real time will lead in the field of Customer Value Enhancement and, in turn, reap the rewards of increased loyalty, reduced churn and increased margins.

[Note: the concepts discussed in this article are further explored in a recent report "Customer Value Enhancement: Linking Strategy & Operations for Better Loyalty and Margins" published by Stratecast, a division of Frost & Sullivan]