Challenging assumptions is a good business practice.

As a marketer, one of the highlights of the SAS Financial Services Executive Summit has been the interactive session titled "Exploring and Exploiting Trends to Really Understand Today's Customer." The session involved all participants engaged in case studies, which included a facilitator and graphic artist from Matter Solutions.

This session provided the attendees with the ability to explore a common challenge we face as marketers - that our customers and their buying behaviors are moving targets, changing as quickly as the times. So how can we anticipate shifting market segments so we deliver relevant and timely products and services that meet their needs?

One important step we can take as marketers is to pay close attention to our assumptions, because in a world with so much uncertainty, it's important to know the difference between facts and assumptions in our models, and also whether the facts are accurate and that the assumptions are valid. It sounds like an academic exercise, but it is definitely rooted in everyday practicality because we all make assumptions whether we are conscious of them or not. One mentor in my early career once told me, "I pay you to manage, because if we had 100% of the data needed, then I wouldn't need to hire you. We're lucky if we have 60 - 70% of the information needed, so you have to fill in the missing 30 - 40%." In that case, of course, the 30 - 40% are the all-important assumptions.

With a room full of banking and insurance executives, our facilitator gathered examples of assumptions that included factors such as home ownership rates, rational regulatory frameworks, stable energy prices / predictable natural resources, the shift from analog to digital communications, etc. For marketers, examples of assumptions include segmentation factors, accurate model scoring, open rates and click-throughs. And while we do our best to know what resonates with our audience, we even make assumptions about the relevance of the content we create.

Marketers are asked to paint a picture of the world our company operates in, so how can we do that when there is so much change going on? One approach to envision clusters in our data that form the segments we use to guide how we interact with our customers.  There are usually outliers in our models, and then there are areas between the identifiable clusters, so the gaps between the outliers and the clusters are potential areas that can be arbitraged as you refine your model. Translated to the baseball world of Billy Beane, those are where the undervalued players are. It follows then that if you are re-segmenting frequently, then you are arbitraging the assumptions in your previous model.

As I absorbed the lessons of this session, I kept thinking how important it is for marketers to hone their skills in discovery and exploration. It's really all about critical thinking that has you asking the right questions and never taking anything for granted. I also think its about developing the right instincts for filtering out the noise from the signal, and that's certainly one place where customer analytics can help. Considering how much of the big data issue facing most organizations is customer data, and that some of the most important data are hidden in the vast tsunami of unstructured social media information, that's where social media analytics, customer experience analytics, marketing automation and other tools can empower the marketer to achieve some balance with empowered consumers.

What if this were really true? Check assumptions to find out.

Earlier in the day, Billy Beane gave an example of a bunt ball as a baseball tactic assumed to be good for getting on base. In Financial Services, a painful equivalent of the bunt ball is that subprime borrowers are fit to hold mortgages, built on the assumptions that home prices are ever-spiraling upward, and that people will always pay their mortgage even when financially strapped. The fallacy of those assumptions is well documented, including the latest reports showing that as many as 30% of borrowers, or 16 million homeowners, currently have negative equity.

Fortunately for marketers, not all the bunt ball equivalents facing them are as potentially catastrophic as the subprime mortgage crisis, but as we look to be sure we understand the customer, it behooves us all to check our assumptions.

Do you know what your bunt ball equivalents might be?

Panel discussion: How well do you know today's customer?

Today's second annual SAS Financial Services Executive Summit included a great panel discussion moderated by Lori Bieda from SAS, and featuring Greg Holzwarth, SVP and Managing Director, Customer Information Management at SunTrust Bank, Harvey Koeppel, former CIO and SVP of the Global Consumer Group at Citigroup, and Joseph Grillo, VP of Direct Marketing, Global Accident and Health at ACE Group.

The panel explored how they have used analytics to better understand their customers in today's digital world. Along the way, they touched on key topics critical financial services industry marketing, such as the need to focus on customer experience and challenges in getting complete customer profiles considering the veritable explosion of big data.

In terms of customer experience, Greg offered that SunTrust seized the opportunity to focus on customer experience during the most recent financial crisis by building their own loyalty model, called Live Solid / Bank Solid.  They based the program on what they know about their own customers, as opposed to using a generic industry model, and they centered the program on customer experiences, and based it all on analytics.

Harvey described the approach they took at Citibank when they merged with Traveler’s in 1999 to become Citigroup. The consumer group was then a $14B business, servicing 150 million customers in 54 countries around the world. Identifying customer experience across all channels was recognized as being fundamentally important, so their strategy was based on both experiential data and behavioral data that informed next best conversations. As the different bank operating units had interactions with the customer, they updated profiles in real-time and then shared the data across all channels.

Joe brought an interesting perspective from the insurance industry, and he said that the largest insurers are all comparable in terms of analytic capabilities, but how they differentiate themselves is in terms of the implementation.

Our digital world and the advent of social media have clearly changed the rules for customer valuation and customer interactions. Harvey described how the approach at Citi was focused on the conversation and maximizing the value for the customer. As a global bank serving global customers, they knew they should take steps to be sure for instance that a New York customer could walk into a branch in London and be treated as if they were dealing with their home branch in the big apple. Not an easy task, but certainly enabled by technology.

As they looked to the future, these industry leaders considered the impact of both social and mobile on the expectations that customers have, and the necessary changes to meet those expectations. Harvey cited location-based services and how they would play a big role in real-time customer interactions in banking, with possibilities such as competitive geo-fencing so mobile customers receive your offers when they check in at one of your competitors.

One thought raised is a recurring theme recently on this blog, which is the idea that all marketers today have to balance how they use social media data and customer data with avoiding being creepy. It's interesting how everyone can relate to the bad feeling they might get when they realize they're being stalked or followed, so it will be interesting to see if consensus develops over time regarding the limits of creepiness or if limits will change over time once the use of customer analytics becomes more universally apparent.

The discussion ended with the idea that big data is unavoidable when considering the role of analytics and social media in helping marketers know their customers . Harvey noted that the amount of video content uploaded to YouTube in any given week is more content than was produced by TV and movies for the entire history of analog video recording.

Considering all these possibilities and constraints, it seems the question, "How well do you know your customer?"may not always be an easy one to answer with certainty, but considering ever-changing customer expectations and empowerment, it's a question worth asking over and over again.

Billy Beane, General Manager of the Oakland A's

SAS is hosting the second annual SAS Financial Services Executive Summit today at SAS global headquarters with executive leaders from the banking, insurance and capital markets industries. The theme of the show is "Ignite," which references coming together, sparking innovation and inspiring change. The keynote speaker is a very well known change agent - Billy Beane.

Billy Beane is the general manager of the Oakland Athletics baseball team, whose story is told in the book and film "Moneyball."  Billy is known for bucking conventional wisdom regarding success in baseball and by finding value in undervalued assets. And it turns out that a key part of his strategy has been to use analytics, and his approach has now become a best practice in sports franchise management.

My colleague Waynette Tubbs summarized his key points in her post on the SAS Knowledge Exchange, and my goal here is to build on Waynette's post to call out the main lessons for marketers. Here are my top 5 "Moneyball" lessons:

1. A good way to drive innovation is to be clear about what you want to accomplish and do not get stuck in the rut of doing things the way they've always been done. This is surprisingly harder to do than it is to say, but worth the effort. It applies to almost any situation in marketing or business in general - start by defining your end goal, and then make sure you can measure the results. We've all heard it before, but it's worth repeating.
2. Filter out the noise and stay focused on what you're trying to accomplish. Billy referenced how for baseball, the chatter in the daily press and broadcast media can be easily distracting and "you're kidding yourself if you think 'the noise' doesn’t affect you." This is where marketers may need to focus on finding the right filters because the nature of our jobs is to be engaged and keep a pulse on our market - that unfortunately puts us in the prime position to be bombarded by noise. What's the "noise" in your part of the business?
3. Business is like baseball in that there are finite, measurable business parameters that make great candidates to apply analytics and derive insights not readily apparent. Understanding which of those parameters relate most closely to your core business is a key success factor in applying customer analytics.
4. Go ahead and take risks, but contain them. Billy pointed out how most players at Oakland are only on one year contracts because that’s a key way they balance the risk of getting players that are undervalued.
5. Healthy teams are successful ones. In baseball, there’s a correlation between incidence of injuries and sub-optimal team performance. Since great marketing is almost always the product of collaboration and other team efforts, it's not a far stretch to see how this one also applies to marketing.

Billy Bean's story which became the movie, "Moneyball" was all about maximizing limited resources. In that regard, it's a great story about optimization, for which the key is to find the one factor that matters most and focus on optimizing that. For Billy, the question was, "Which skills correlate most strongly to winning games?" The answer he found was getting players on base, so the Oakland As focused on that skill to drive their success.

What drives your marketing success? I'll bet that customer analytics can help you find the answer.  Check out this paper for a great story about how marketing optimization makes a difference.

Charlene Li, founder of Altimeter Group a leading research-based advisory firm with a focus on disruptive technologies, and the author of the New York Times bestseller, “Open Leadership”, believes that conversational marketing will soon become as natural as the air we breathe.

It won’t be an easy journey.  Your CRM (Customer Relationship Management) system will be of little help.  According to Charlene, CRM systems are about managing the transaction – not the customer.

If conversational marketing becomes mainstream, and more to the point “as natural as the air we breathe”, then the focus switches to your ability to fine tune a conversation (mid-flight) adjusting to the needs of your customer as they introduce new variables or topics.  Relevancy becomes key.

While finding someone that has kissed the blarney stone might seem appropriate, there is a better way – one that can help the masses.  If you want to master all that free flow of information, to understand how, when and where you should interject – you are going to have to get very structured and highly analytical.

Charlene Li, Founder of Altimeter Group

Check out what Charlene had to say on:

• The capabilities required
• The challenges marketers will face
• How everything will evolve
• And her own, jaw dropping personal story that changed her expectations for all other marketers

Want to learn more?

Visit the driving profitable growth site on our Customer Intelligence Knowledge Exchange.

As good marketers do everywhere, they meet their customer on their preferred channel and make the most of it by focusing of offers that get the best response rates.  In their case, they send money in the form of "free play," as opposed to "percent" off coupons. Perhaps more importantly, they have a complex segmentation strategy focused on over 10,000 segments, to which they typically extend over 30,000 offers to those segments. (!) Like many places nowadays, the stakes are high at Seminole Gaming for marketing to perform, so that's where having customer analytics enables them to identify such a large number of segments and also to manage the effectiveness of tens of thousands of offers.

Ralph's description of how they deployed their customer analytics solution illustrates a growing trend where the marketing department establishes internal relevance by focusing on data and using it to drive strategy. Ralph detailed how they first focused on establishing credibility with their operating units, and once they gained the trust of those key stakeholders, they were able to make the case for the investment in customer analytics. It would certainly be hard to argue with an approach that shows how marketing uses data to:

• Identify which segments are profitable,
• Decide whether or not to send mail to certain customers,
• Dictate the nature of the engagement with the customer,
• Track, measure and report customer visitation trends, and then
• Further refine meaningful segments in an ongoing loop of improvement.

Delivering integrated marketing campaigns that stand out from the pack while measurably driving business results has never been more challenging.  Hearing how Ralph and his team at Seminole Gaming implemented customer-driven, cross-channel campaign management initiatives to grow the business was a great example of the power of customer analytics to improve marketing.

Ralph closed with a forward-looking acknowledgement that Seminole Gaming is the business of selling entertainment, so they do compete with online gaming and other entertainment options. As a result, locational analytics will play a role in the future of their business. Considering the potential for location based-interactions to change the customer experience, I expect the story of how Seminole Gaming harnesses customer analytics will only get more fascinating. Stay tuned for updates, which I will gladly share as they become available. In the meantime, if you would like a deep-dive into the math behind the gaming industry look no further than this book that Ralph co-authored and published through Casino Enterprise Management.

As always, thank you for following and please share your thoughts with a comment, or share this post with others.

Helena Schwenk, Principal analyst at MWD advisors

Helena Schwenk, principal analyst at MWD advisors, a European IT advisory firm who consult with organizations to create tangible business improvements from IT investments, talked to us about the:

• Capabilities
• Issues
• Technology and
• Other considerations required to find profitable growth

She started with a focus on leadership, and then went on to discuss how issues will shift – from a single channel to multi-channel; from creating a picture of what’s happened to predicting what will happen in the future.

Helena walked us through the technology required – from data management to high end analytics and everything in between.

When focusing on other considerations, skills were top of her list – not just the skills required for analytics, but the changes that could ripple across your organization – wherever a staff member interacts with a customer.

Want to learn more?

Visit the driving profitable growth site on our Customer Intelligence Knowledge Exchange.

Profitable. How do your solutions help my company generate profitable growth? Not just value for one group, but profitable growth throughout the organization. I’ll provide some specific examples here of how companies move from just deriving value into sustained profitable growth.

Productive. How do your solutions make my entire organization more productive? The mandate going forward will be to simplify my processes, provide a superior product, and tackle tough day-to-day issues that my organization faces with simple user interfaces. How can SAS Customer Intelligence solutions make the individuals inside my organization more productive? With higher productivity comes improved business processes.

Pervasive. – Are your solutions pervasive? When I say this I mean are your solutions a staple or a “go-to” when needing to solve an issue (marketing/customer/marcom/brand) across the enterprise. Do your solutions provide results and information that can be leveraged across the organization by departments outside of marketing – in order to further the overall prosperity of the business?

I’d like to touch on each of these and tell you a bit about how SAS is providing solutions that help generate profitable growth, increase productivity, and can be used pervasively across an organization.

Stay tuned for more details coming soon!

Many business segments provide services similar to health insurance to consumers on a renewable, annual contract basis. However, the understanding that those other industries have of consumers is different and more advanced compared to a health plan’s understanding of its customers.  This panel explored how rising health care costs and consumer value priorities are affecting how health care is sought and provided, and how health plans are looking at new ways to engage with their members to retain them and attract new ones.

A recurring theme in the sessions at this event is that the individual plays a critical role in any potential "fixes" to spiraling cost of healthcare. Another recurring theme is that technological advances in recent years provide the possibility of harnessing various forms of technology to drive innovation and positive change, including customer analytics among others.

Michael Parkerson from BCBSNC began with an optimistic view of our exciting times in terms of technological innovation as being a potential source of the problems we face in our current healthcare situation.

UNC Healthcare's Dr. Rubinow emphasized the potential of the individual patient as an interested stakeholder in helping shape what the future looks like for healthcare.  He proceeded to highlight the new collaboration between BCBSNC and UNC Healthcare, called Carolina Advanced Health, which not coincidentally differentiates itself as being patient-centered. The emphasis at Carolina Advanced Health is on one-stop shopping, access and convenience, self-management and technological support, effective encounters and coordination of care.

Ron Smith from the Physicians Pharmacy Alliance highlighted problems with information and communication as one source of issues.  Healthcare information is often incomplete and it's fragmented. Their observations from studying patients with complex medication regimens showed a significant disconnect whereby patients are generally doing what they think they are being asked to do, but they don’t generally understand what they are being asked to do.

 The view from the panel is that analytics can play a key role in helping change the system from one where the patients with conditions have to seek the solution providers to one where the solutions are instead provided in ways to meet the patients where they are. Marketers, of course, recognize that kind of talk as "music to our ears." It's all about customer centricity, which is not a simple matter in an industry where the patient as a consumer of healthcare services deals with health insurance companies, healthcare providers, pharmaceutical companies, pharmacies and other entities. Not simple at all, but decidedly necessary and perhaps long overdue.

More broadly, we need to have a cultural change away from the idea that there's a relationship between good quality care and a large number of tests and procedures. Other good nuggets from this panel included:

• A statement that UNC's Dr. Rubinow made that HIPAA has been one of the biggest obstacles imaginable to enabling an integrated healthcare system.
• Social Networking holds great potential to drive desired behaviors and cultural change. Dr. Rubinow highlighted an "offline" example of a boomerang club in Chapel Hill and how its members all had life-altering weight loss experiences.
• Incentive systems can be very powerful at driving healthy behaviors.

Closing thoughts includes the idea that individuals, data, communications and driving understandings with patients are together what holds the most promise for driving positive change. It all comes back to the patient/member /customer.  Customer-centricity certainly sounds good to most marketers. What do you think?

Christine Colombo of Independence Blue Cross

Colombo leads a team that consults with functional areas within Independent Blue Cross (IBC), as well as customers and providers, to improve performance using data and analytics. This includes program design and evaluation, risk stratification, marketing models, predictive modeling and analytics, and return on investment studies. Sickler is responsible for marketing analytics and has experience in data mining, predictive analytics and segmentation analytics. Since joining Independence Blue Cross, she has helped increase membership by building and implementing predictive models. 

The path to using customer analytics began with a request from the marketing department, hoping to gain a profile of individuals most likely to enroll in individual coverage. Their initial models used a combination of both internal and external marketing data, with the goal to improve on the previous work done by an external vendor.  That project resulted in driving enrollment rates that were double of what the vendor was getting.

Those encouraging results paved the way to applying the same methodology to the small group segment.  In that market, customer retention rates had been declining, so the goal was to create a model that would predict the likelihood of small group customers to terminate.

They focused on 2010 customers with a group size of 2 - 50 individuals, and they found that the segment had about 24,000 customers.  They approached their model with two samples - one for development and one for validation (which is used to show the true results) and they were able to identify key predictors of their cancellation. Membership metrics were averaged at the customer level, and then they used a logistic regression model and group customers with membership in 2011 were scored and used as targets.

The models had seven variables, and two variables were found to be significant when predicting termination: group size (lower number of subscribers had a higher rate) and lower risk scores.  Other factors showed that customers with lower premiums and lower tenure also had a higher attrition rate.

As a direct result of using customer analytics, marketing at Independence Blue Cross will be more effective because they will drive forward-looking behavior.  They will score customers with upcoming renewals and communicate it through regular reporting.  Once they have the data, they will be able to identify the target segments and tailor the communications with those segments with meaningful messages.

They will be able to tailor their marketing in this way through indirect channels, such as brokers and producers, as well as direct channel outreach with messages that might highlight different products, or emphasize value, based on the profile of the segment. 

 The experience of Independence Blue Cross is a great illustration of how the use of customer analytics can drive excellent business results. During the Q&A at the end of the session, one audience member said that as a marketer, if they were able to achieve a doubling of results with this kind of collaboration with their internal analytics group, they would quickly become their new best friends.  I'd love to hear any other stories of data-driven friendships marketers are building.  I know they're out there...

Office Depot is well known as a large retailer of office supplies and services, and earns over $12B in annual sales.  About 43% of their earnings are from B2C retail operations and the rest is from B2B and international. Other impressive facts about Office Depot is that they operate 1,100 stores in the USA and they are among the top 5 of online retailers, with about $4B in online annual revenue from that channel. Based on those numbers, their company would be described as large and complex no matter how you categorize it, and it should come as no surprise that they are sophisticated users of customer analytics.

Marketing's delicate balancing act

Alan shared a view that many marketers can appreciate, that their customer landscape has changed radically in recent years by the shift to search-driven online activity. As a result, there is a great deal of effort put into making sure their audience can connect with Office Depot content. And in so doing, he described a business environment known to most marketers today where the online experience holds great promise, but also presents new risks that need to be managed. The result is a delicate balance that includes:

• Being where the customer is, at the same time respecting their desire for privacy.
• Being available and top of mind for the customer, but not intrusive.
• Knowing many details about the customer, but not letting them know how much we actually know because that could become creepy.
• Justifying how we have the customer relationship and also making sure we provide real value and treat them as special.

The bottom line, Alan acknowledged, is that at any point, the customer is one click from gone so they recognize the need to manage the many balancing points carefully.

Office Depot has multiple channels for customer engagement, spanning their own website, social media, email, texting and a YouTube channel. They have customer service on the phone and via chat, as well as a loyalty program. They give customers multiple options to engage, and they use SAS to analyze all the data from all these channels for an informed strategy based on customer centricity.  Their goal is to achieve a level of customer centricity that optimizes each and every customer interaction.

Changes made during the "Great Recession"

Like many forward-thinking companies, Office Depot made changes to how they conducted business during the recent “Great Recession.”  They focused on small wins that were tied to business benefits, standardized campaign activity with Marketing Automation, standardized their segmentation with Enterprise Miner and then re-aligned incentives around new business paradigms. Their new constructs focused on quality and complete data capture that ensured contributions toward enterprise goals.

In addition, the contact center was redirected to focus on quality of engagement and stop incenting reps to minimize call durations. Other key changes was to have everyone start encouraging multichannel engagement with the customer, and a new lifecycle stage strategy that got emphasized ways to move the relationship along in the lifecycle. Some of these changes were significant, and many challenges they faced involved the human side of process changes.  As a result, they placed emphasis on changing behaviors, encouraging accountability and building trust. And access to data and trusting in it became critical success factors.

Benefits from those changes

All these changes have enabled Office Depot to reap many rewards, including globally standardized campaigns and segmentation, high growth in social engagements and heavy referral traffic from social vehicles to their website. Their view of customer activity across channels has helped to improve personalization and contact offer strategy, reduce duplicate touches across channels, and overall greater effectiveness enabled by a calculated migration from higher-cost touches to lower-cost touches.

To me, those results show that the Office Depot way of taking care of marketing provides a shining example of the strategic value of applied customer analytics, and also a winning formula to meet the expanded mandate of marketing to drive profitable growth.