Internet portal Yahoo! records every click made by every visitor, accumulating some 400 billion bytes of data per day — the equivalent of 800,000 books.1 Direct marketing giant Fingerhut has 4 million names of repeat customers and stores up to 1,000 attributes on each one. Its data warehouse can hold 4.5 trillion bytes.
Can even a fraction of this data find its way into a thoughtful analysis of customer needs or more personalized, innovative services?
The answer is “yes,” but it may be a mere fraction. Companies are rushing to invest in technologies that enable them to track patterns in customer transactions. Yet when the transaction collection-and-tracking dust settles, most firms have a larger data warehouse but very few additional insights into their customers. In other words, they may know more about their customers, but they don’t know the customers themselves or how to attract new ones.
Interviews with 24 standouts in customer-knowledge management, including Harley-Davidson, Procter & Gamble and Wachovia Bank, reveal that a firm needs more than transaction data to gain such insight. Many of the executives interviewed say that their companies succeed because they consider the person behind the transaction — recording what customers do during sales and service interactions. By examining this “human” data, they can better understand and predict customers’ behaviors, and they can rely less on technologies to collect, distribute and use transaction-driven knowledge.
Not that the transaction data isn’t important. It’s why a firm can flash “Hello, Mary Jones” on the screen — along with a set of suggested products customized to her preferences —when Mary enters its Web site. But the smart firms realize they can’t just collect data. The data has to translate into something meaningful about existing or potential customers. This requires first understanding which transaction-based approaches will provide the right data.
It may also mean mixing transaction and human data, a strategy that the customer-knowledge management leaders say gives them the best results. However, having a mix of approaches doesn’t mean you have to integrate the data. Even the most successful firms seem unsure about how — or even whether — to integrate data types into a comprehensive customer database.
Clearly, questions and uncertainties abound. We have a long way to go in capturing a customer’s psyche. But to compete for customer satisfaction, firms must work harder to collect, distribute and use the right data.