The economic downturn is having a substantial impact on the needs, preferences and behavior of customers. Companies need to tap into their customer intelligence to ensure they adapt as well to these changing conditions.
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An unintentionally overlooked area during this economic downturn by most companies is customer intelligence, an oversight that can have severe repercussions. Understanding the impact of the economic downturn on the overall customer portfolio (such as on product and service usage behavior, brand loyalty, or payments risk) is mission critical, considering how significant the downturn has affected their lives. Companies should ramp up their focus on customer intelligence during these turbulent times to minimize the impact of the downturn on their customer portfolio while also identifying opportunities to scale back costs.
Today, most leading companies make use of customer analytics on a regular basis. When there is little change in the market, the task is relatively easy: by using the proven tools and techniques, data mining experts produce fairly static segments of customers and accurate predictions about them on a given basis. But, in times like these, when the market is significantly volatile, companies need to rely on more frequent and unique methods of assessing and utilizing customer data.
Here is a list of key reasons why companies should be revisiting their customer insights and giving them more attention during the economic downturn:
• Reordered Priorities: The most effective customer intelligence is the one that serves business priorities and strategies the best. As the downturn is changing agendas, it is necessary to see if the new priorities are best served with existing intelligence. For example, companies that never before invested in financial risk or churn prediction models should consider doing so in light of the changing market conditions.
• Downscaled Budgets: Inevitably, many companies are trying to find effective ways to reduce their operational expenses. A detailed understanding and analysis of customer intelligence can lead to a decrease in the cost of servicing low value customers by allowing marketers to identify such segments; further, it also enables one-to-one targeted campaigning (below the line marketing), thus leading to a significant reduction in the costs associated with mass marketing.
• Volatile Customers: The economic downturn is causing customers to be more frugal about their spending, directly affecting their consumption patterns, and, sometimes, their likelihood of paying. Companies need to more closely follow the behaviors of their customers so as to identify pattern changes and allow for pre-emptive intervention (i.e. cancel customer account to prevent an escalation of debt).
• Expired Facts: Most customer analytics models are customized and relevant to given business models or market conditions, meant to serve best under the conditions they were developed in. During major changes such as economic downturns, new segments appear in the market and some become insignificant; under such conditions, the models in place can become invalid. This applies for models around such topics as churn prediction as well, as the profiles and reasons of customers churning during a downturn can be completely different than from the reasons presumed before.
In order to make best use of customer intelligence during the downturn, companies should simply; collect, understand, beware and refocus:
• Collect (tactical and critical info): As priorities and business needs change, the customer data which should be considered as vital also changes. For example, during a downturn, contact detail data becomes extremely important, as churners can then be won-back after the crisis through various methods of outreach efforts.
• Understand (changes in your customer portfolio): During the downturn, the priorities of customers change, with new needs replacing old ones – all of a sudden, a customer’s most important need becomes value rather than quality. These changes in needs prioritization cause some customers to migrate towards different segments or even require the creation of new ones. Companies should reassess customer needs and behavior to be able to come up with the most relevant offers under new circumstances.
• Beware (of the increasing risk): Most companies are fighting heavily against three types of risks today: defaulting customers, increasing churn rates, and decreasing value per customer. In order to be successful in this fight, companies need measures for effectively predicting which customers carry these risks, so that they can take proactive measures. And, once again, predictive models built before the downturn can prove to be useless, as the factors used to predict such behavior as churn or payment default may no longer be the right ones.
• Refocus (for new conditions): As business priorities change, companies need to revisit which segments and profiles they should be focusing on. For example, with increasing default risks, companies could consider focusing more on silver customers with low financial risks rather than gold customers with high financial risks. Similarly, changing priorities call for changing reporting requirements. Companies need to follow additional and different key performance measures these days, which calls for adapting their dashboards and reports.
We recommend that companies take a pragmatic approach in realigning their customer intelligence practice in this downturn, creating impact from day one. Instead of undertaking traditional large scale customer analytics initiatives which would deliver results only months later, companies should follow cycles of analysis and actions with a modular structure. To learn about our 360 degree customer intelligence enhancement for the economic downturn addressing these challenges, please contact us at email@example.com. Our service offerings include not only alignment of your existing models, but also creation of new ones as per business needs.