Focussing on the customer

Transcription

1 Conquering convergence: Focussing on the customer A briefing paper from the Economist Intelligence Unit sponsored by Oracle

2 Preface Conquering convergence: Focussing on the customer is an Economist Intelligence Unit briefing paper, sponsored by Oracle. The Economist Intelligence Unit executed the survey, conducted the analysis and wrote the report. The findings and views expressed in the report do not necessarily reflect the views of the sponsor. Research for the report was conducted in July The Economist Intelligence Unit surveyed 164 executives worldwide using an online questionnaire. To supplement the survey results, we also conducted in-depth interviews with senior executives familiar with the subject. The author of the report was Jeanette Borzo and the editor was Winter Wright. Richard Zoehrer was responsible for layout and design. February 2008

3 Conquering convergence: Focussing on the customer Meeting the challenges There is nothing new about the need for companies in the IT, telecommunications, media and entertainment industries to focus on their customers. Indeed, the notion of customer centricity has been around for ages. But several trends in these industries are causing companies to focus on customer preferences and patterns as never before. Everyone is talking about customer centricity and analytics now, confirms Eric Kintz, vice-president of global marketing strategy and excellence at Hewlett-Packard Co. Does your company have a strategy for staying focused on its customers? Yes 92% No 8% New research produced by the Economist Intelligence Unit and sponsored by Oracle surveyed companies in the so-called ICE industries: information, communications and entertainment (the ICE designation includes telecoms, broadcasting and publishing). The research shows that nearly all firms surveyed in North America, Europe and Asia already have customer-centricity strategies in place and more than two-thirds plan to increase their customercentric efforts even further. What s the reason? In part, two other trends are driving this renewed customer focus: the rise of usergenerated content, and the ongoing convergence of products, companies and customer groups. Thanks to the rapid rise of the Internet, for example, today s consumers can easily talk back to companies Who took the survey If so, how successful do you feel this strategy has been over the past 2-3 years? Highly successful 14% Successful 43% Somewhat successful 35% We don t have formal customer-focus goals 6% Don t know 3% In July 2007 the Economist Intelligence Unit conducted an online survey of 164 executives worldwide to determine how they approached the task of developing and maintaining a customer focus strategy in an environment of technological convergence. Of the respondents to our survey, 42% were senior executives (board-level or C-level), and 58% were directors, business unit heads, and other managers. Worldwide, 24% of respondents were based in North America, 21% in Western Europe, 38% in the Asia-Pacific region, and 17% from Latin America, eastern Europe, the Middle East, and Africa. More than half of the respondents (53%) worked at organisations with annual revenues of more than US$500m, while half came from organisations with revenues below that amount. In addition to the survey, qualitative interviews were conducted with senior executives familiar with the topic of achieving customer focus. The Economist Intelligence Unit

4 Conquering convergence: Focussing on the customer through user-generated content in blogs, homegrown commercials and personal videos. A single customer voice can reshape a company s place in the market (as in the case of Jeff Jarvis s Buzz Machine blog, which inspired Dell Computer to spend an extra US$100m to improve its customer service). The rules of engagement have changed, notes Ilkka Raiskinen, senior vice-president for multimedia experiences at Nokia. Even an individual complaint can have a global impact. even find the right tools. A full 46% of companies say that they have trouble identifying the best emerging technologies to use in achieving customer-centricity goals. One problem may be a technology glut: companies are often inundated with the market s many new products, along with new versions of software tools that they already own. There are many and they are changing all the time, notes Mr Raiskinen. We are spending more and more time to understand the customer better. It s becoming a very competitive market. Peter Skarzynski, senior VP strategy, Samsung This rising consumer power, in turn, is pushing convergence. People don t want to carry too many devices, and want to have constant access, adds Mr Raiskinen. Consumer pull is the key. As a result, the ICE industries are trying to serve consumers needs across a range of areas including technology, communications, news and entertainment. It is a challenge that confounds even the most tech-savvy companies attempting to keep focused on their customers: less than 15% of survey respondents rate their customer-focus strategies as highly successful. Much of the trouble stems from insufficient technology. One-quarter of companies surveyed say that the technology they use to gather customer feedback is inadequate for their needs. Many admit to confronting obstacles such as incomplete and inaccurate customer data. And while companies may want better technology to address these shortcomings, they often find it challenging to Increasingly customer-focused While customers have always been king, today they sit more solidly on their thrones than ever. Companies recognise this and are trying to keep pace. While 92% of companies surveyed say they already have a customer-focus strategy, nearly 70% plan to increase their customer focus. Customer centricity is becoming more important now, confirms Peter Skarzynski, senior vice-president for strategy at Samsung Telecommunications America. We are spending more and more time to understand the customer better. It s becoming a very competitive market. Indeed, competition to achieve customer centricity 4 The Economist Intelligence Unit 2008

5 Conquering convergence: Focussing on the customer has become so fierce that nearly three-quarters of businesses are working with external partners such as business consultants, PR firms and advertising agencies to develop a customer-focus strategy. Even so, challenges abound. Many companies rely on technology to measure their customer focus but are dissatisfied with the results. In our survey, 46% of companies say they use customer relationship management (CRM) software for measuring customer focus, whereas 22% use analytics software for the same purpose. Yet only 6% believe that such technology is excellent. More specifically, incomplete customer data plagues 41% of industry firms, while a lack of clarity about exactly what customer data to measure troubles 32%. Even companies that get all the data they want often have difficulty interpreting that data, observes Mr Raiskinen of Nokia. He adds that such data must also be collected and analysed quickly. For example, a company dealing with shifting customer preferences may be unable to wait for the results of an analyst s three-month field study before taking action. Only one-quarter of survey respondents agree or strongly agree that their companies have developed predictive customer-buying models. Perhaps even more surprisingly, only about one-quarter (26%) agree or strongly agree that they can produce great analytics about customers to enable real-time up-selling or cross-selling. The goal, of course, is to use technology not only to gather data, but also better to manage, analyse and act on that data. One of the key challenges of being customer-centric is how to integrate all your sources of customer data into one view of the customer, says Mr Kintz of HP. You have to have the right technology infrastructure. Mr Skarzynski of Samsung adds: We are trying to create as many touch points as possible and then integrate all that data. The challenge is significant. For 2 of companies, customer preferences are so fragmented One of the key challenges of being customer-centric is how to integrate all your sources of customer data into one view of the customer. Eric Kintz, VP global marketing strategy, Hewlett-Packard that firms consider them too difficult to track accurately. Inaccurate customer data plagues more than one-quarter of companies (27%). According to Mr Kintz, data quality is another challenge: You have to have clean data to feed the data warehouse. Finding mathematicians and statisticians who can crunch the numbers effectively presents yet another task: You have to have the right skills internally. Less than one-third of companies (32%) agree or strongly agree that they have a 360-degree customer view comprising customer purchase and contact histories, preferences and demographics. And only 3 agree or strongly agree that they have a clear scorecard for measuring customer focus. Please rate your level of agreement with the following statements about your company. (Rate on a scale of 1 to 5 where 1 = Strongly agree and 5 = Strongly disagree) We have actionable insights into customer needs/preferences 15% 54% 1 7% 2 2 We have a clear understanding of customer needs and preferences across the entire life cycle of our products/services 56% 15% 4 24% 10% 1 2 We give customers many integrated channels through which to interact with us 1 42% 22% 14% 2 2 My company has a clear scorecard for measuring its customer focus % 17% 7% 2 My company has a 360-degree view of customers, including purchase/contact history, preferences and demographics 24% 33% 28% 4% 3 My company has developed predictive customer buying models 4% 21% 25% 31% 14% 4 My company can produce great analytics about customers, enabling us to up-sell or cross-sell in real time 7% 1 30% 2 13% 3 1 Strongly agree Strongly disagree 6 Don t know The Economist Intelligence Unit

6 Conquering convergence: Focussing on the customer Today s phones double as TVs, PDAs function as cameras and music players make fashion statements. Companies believe that customer demand for an expanded product or service line is the key external driver of such crossover trends. Converging challenges Convergence further heightens the impact of these data challenges. Retaining a sharp focus on customers while customer groups, companies, devices and platforms are converging and transforming is like changing the tyres on a moving car. Just when you believe you know what your consumers want, you can bet you are behind, says Mr Raiskinen. After all, today phones double as TVs, PDAs function as cameras and music players make fashion statements. Companies believe that customer demand for an expanded product or service line is the key external driver of such crossover trends. Will convergence ultimately help companies or hurt them? Many firms are not yet sure. They view it as a double-edged sword offering both opportunity and risk. For example, they cite convergence as both the greatest threat to and second-greatest opportunity for increasing their revenue and/or margins. Forty-four percent of companies see convergence as a way to become more customercentric, yet more than one-third (34%) say that convergence threatens their ability to do so. Firms seem to see convergence as a binary, win-lose opportunity with no grey area inbetween. Whether they win or lose depends on whether they can identify consumer trends and then deliver converged devices and services that suit customer preferences. People aren t going to walk around with seven different devices, points out Mr Skarzynski of Samsung. But there is an equal and opposite danger: that of losing customers by offering devices or services that fail to meet customer needs. Putting user-generated content to work To avoid that trap, many firms are looking closely at user-generated content for clues as to what consumers find most interesting. HP partnered with Personiva, a San Francisco firm, to let customers personalise and post customised HP ads (for its campaign, The Computer is Personal What are the main threats/negatives your company associates with the convergence of the telecoms, IT, and media/entertainment industries? (Select all that apply) Threats to our revenues and/or margins Challenges to becoming customer-centric Hindrance to using our resources to expand into new areas 23% Threat of being acquired by or merged with another entity 13% Don t know 1 34% 38% 6 The Economist Intelligence Unit 2008

7 Conquering convergence: Focussing on the customer Again ) on their blogs, YouTube, or anywhere else they wanted. Most companies in our survey recognise the potential impact of these emerging technologies on the bottom line. More than two-thirds of respondents say that emerging technologies offer an opportunity to increase revenue, margins or both. Thirty-nine percent are using emerging technologies to achieve customerfocus goals. As consumers create more content on Seven secrets for successful centricity n Focus on results Don t do customer centricity just because it s the latest fad, advises Eric Kintz, vice-president of global marketing strategy and excellence at Hewlett-Packard Co. Carefully tie this to business results. n Connect with centricity Making the connection between customer-focus and bottom-line results can be challenging, however, meaning that tenacity is required. It s somewhat tedious work, without a silver bullet, says Mr Kintz. It needs to be pieced together. It requires a lot of detailed statistical work. n Listen up If the customer really is king, than you need to hear what your sovereign is saying. A lot of marketers create their own hype and then wind up believing it, says Peter Skarzynski, senior vice-president for strategy at Samsung Telecommunications America. But you have to listen to the consumer. Keep your ears open always. Continue to listen. n But don t believe everything you hear While customer input is critical, not all of it will translate directly into sustainable product strategies. As Henry Ford was putting the finishing touches on his Model T, for example, some consumers were surely asking the transportation market for faster horses, speculates Ilkka Raiskinen, senior vice-president for multimedia experiences at Nokia. It is challenging to translate consumer preferences for the future into something concrete, he says, adding that using customer input successfully is a matter of finding the balance. n Hit the front lines Customer focus is a company-wide mandate. Think about how you inspire your employees to really drive customer centricity, suggests Mr Kintz, adding that even if only once or occasionally, by putting employees in front of the customer, you can have them see how each employee can make a difference. Nothing replaces a face-to-face with the customer. n Put your data to work The best technology tool is worthless unless your staff analyses and acts on the data the tool collects. If people are not actively using the [technology] tools, it does not help that much, notes Mr Raiskinen of Nokia. How you use that data across functions is more important than fancy tools. You should have a passion to take in the message from the consumer. n Try something new There are lots of new tools out there for connecting with customers why not try one? Blogging is a great way to better engage the customer, confirms Mr Kintz, who writes HP s most successful blog, Marketing Excellence, with about 10,000 readers each month. Emerging technologies have been great for us. n The Economist Intelligence Unit

8 Conquering convergence: Focussing on the customer It doesn t matter how fast you run. The competition is running as well. You can never stop. It s an ongoing race. Ilkka Raiskinen, senior VP multimedia, Nokia What are the main opportunities/positives your company associates with the convergence of the telecoms, IT, and media/entertainment industries? (Select all that apply) Increases our ability to expand into new areas Opportunity to increase our revenues and/or margins Increases our ability to become customer-centric Opportunity to acquire/merge with another entity 20% 4% Don t know 10% 44% 56% 55% How important is user-generated content to your company s ability to become more customer-centric? Critical 10% Very important 26% Important 2 Somewhat important 22% Unimportant Don t know/ Not applicable 5% the go, user-generated content can represent an opportunity for firms that sell mobile devices. But user-generated content brings its own challenges. For example, it can be difficult for companies to ease their grip on corporate-controlled branding and enter an unknown world where customers create brand messages. Other challenges abound: getting users to submit content plagues 43% of companies, while making the content commercially profitable troubles nearly as many (42%). Competition is bothersome too, with 32% of firms saying they have trouble differentiating their service enough to obtain more interesting usergenerated contributions than competitors. Concentric solutions Without doubt, these trends require a shift in how firms interact with customers. But solutions exist for many challenges, and enterprising firms may even harness the power of these trends to overcome the very obstacles they create. For example, many see user-generated content as playing an important role in helping companies to become more customer-centric. Nearly two-thirds of our survey respondents say user-generated content is important or critical to their ability to become more customer-centric. Emerging technologies have been great for us, especially considering the shift in branding that we have made, responds Mr Kintz of HP. A case in point is HP s heightened focus on the gaming market after it acquired Voodoo Computers, a PC game-maker, in The Economist Intelligence Unit 2008

9 Conquering convergence: Focussing on the customer Companies also believe that getting a single view of the customer and then organising the company around that single view is a key to success. When asked to choose one action that would make their company more customer-centric, the greatest number of companies (30%) said creating a central customer view across product and division lines; 28% chose organising the company around customer, rather than product, lines. Technology, of course, plays a key role in how companies generate that complete view. Nearly one-half of the companies surveyed chose direct customer feedback from call centres, websites and other channels. Forty-three percent cited CRM software, while 41% employed customer surveys. But respondents mentioned other tools such as focus groups and analytics software, saying those tools were important for clarifying who their customers are and what they want. The more touch points you have with consumers, the better, reckons Mr Raiskinen of Nokia. Even when armed with the best technology, companies should recognise the depth of the challenge before them. Only through continuous upgrading and redefining of their systems can they hope to achieve customer centricity in an age of convergence. It doesn t matter how fast you run, says Mr Raiskinen. The competition is running as well. You can never stop. It is an ongoing race. What does your company consider most important for getting a complete view of its customers? (Select up to three responses) Direct customer feedback from call centers, Web sites, and other channels 4 Customer relationship management software 43% Customer surveys (online or by phone, SMS, or post) 41% Focus groups 2 Analytics software 22% Feedback gathered at customer conferences 1 Customer-generated content 18% Open architecture permitting data exchange among disparate applications 13% Self-service applications for updating customer data, such as personal URLs 10% 1% Don t know 5% The Economist Intelligence Unit

10 Appendix: survey results Conquering convergence: Focussing on the customer Appendix: Survey results In July 2007, the Economist Intelligence Unit conducted a global online survey of 164 executives. Please note that not all answers add up to 100% because of rounding or because respondents were able to provide multiple answers to some questions. Does your company have a strategy for staying focused on its customers? Yes 92% No 8% If so, how successful do you feel this strategy has been over the past 2-3 years? Highly successful 14% Successful 43% Somewhat successful 35% We don t have formal customer-focus goals 6% Don t know 3% Which statement best describes your company? We plan to maintain our investment in customer-centric efforts 26% We plan to increase our customer-centric efforts 6 We plan to reduce our customer-centric efforts 1% Don t know 4% Who is your company s main external partner in developing a customer-focus strategy? Marketing or business consultancy 2 PR agency 10% Telecom and/or media partner 8% IT vendor 7% Ad agency 6% 12% Don t know/not applicable 27% 10 The Economist Intelligence Unit 2008

11 Appendix: survey results Conquering convergence: Focussing on the customer Which of the following tools does your company use to measure its customer focus? (Select all that apply) Please rate your level of agreement with the following statements about your company. (Rate on a scale of 1 to 5 where 1 = Strongly agree and 5 = Strongly disagree) Market research Win/loss analysis Customer relationship management software Analytics software 22% Not applicable/don t know 12% 46% 4 5 We have actionable insights into customer needs/preferences 15% 54% 1 7% 2 2 We have a clear understanding of customer needs and preferences across the entire life cycle of our products/services 56% 15% 4 24% 10% 1 2 We give customers many integrated channels through which to interact with us 1 42% 22% 14% 2 2 My company has a clear scorecard for measuring its customer focus % 17% 7% 2 My company has a 360-degree view of customers, including purchase/contact history, preferences and demographics 24% 33% 28% 4% 3 My company has developed predictive customer buying models 4% 21% 25% 31% 14% 4 My company can produce great analytics about customers, enabling us to up-sell or cross-sell in real time 7% 1 30% 2 13% 3 What are the main obstacles preventing your company from being as customer-centric as it would like? (Select up to three) 1 Strongly agree Strongly disagree 6 Don t know Incomplete customer data Lack of clarity about what customer data should be measured 32% Customer preferences too fragmented to track accurately 2 Inaccurate customer data 27% Customer preferences change too quickly 22% Growing competition is diverting resources from customer focus 1 Legacy IT systems can t adapt to changes/it switching costs too high 18% Proponents at our firm have not created a compelling case for change 15% A merger or acquisition is distracting us from customer focus 12% Our executives do not promote a customer-focused approach 7% Don t know 4% 41% What are the main threats/negatives your company associates with the convergence of the telecoms, IT, and media/entertainment industries? (Select all that apply) Threats to our revenues and/or margins Challenges to becoming customer-centric Hindrance to using our resources to expand into new areas 23% Threat of being acquired by or merged with another entity 13% Don t know 1 34% 38% The Economist Intelligence Unit

12 Appendix: survey results Conquering convergence: Focussing on the customer What are the main opportunities/positives your company associates with the convergence of the telecoms, IT, and media/entertainment industries? (Select all that apply) Increases our ability to expand into new areas Opportunity to increase our revenues and/or margins Increases our ability to become customer-centric Opportunity to acquire/merge with another entity 20% 4% Don t know 10% 44% 56% 55% What is the main external force causing convergence at your company? Customer demand for an expanded product or service line 35% A corporate strategy requiring us to better monetise our existing customer base 1 Increased competition from companies outside our primary business sector 16% A need to reduce overhead costs 12% A merger or acquisition involving our company 11% 2% Don t know 6% What single primary action do you think your organisation would need to take to become more customer-centric in an environment of convergence? Create a central view of the customer across product and division lines 30% Organise the company along customer lines rather than product lines 28% Compete in new industry sectors 13% Update our information systems to accommodate converged products and services 11% How would you rate the technology your company uses to gather customer feedback on its products and services? Excellent 6% Good 27% Adequate for our needs 38% Inadequate for our needs 25% We don t use technology to gather customer feedback 5% Understand the strengths and weaknesses of new competitors 10% Consider a merger or acquisition 2% 1% Don t know 4% 12 The Economist Intelligence Unit 2008

13 Appendix: survey results Conquering convergence: Focussing on the customer What does your company consider most important for getting a complete view of its customers? (Select up to three responses) Direct customer feedback from call centers, Web sites, and other channels 4 Customer relationship management software 43% Customer surveys (online or by phone, SMS, or post) 41% Focus groups 2 Analytics software 22% Feedback gathered at customer conferences 1 Customer-generated content 18% Open architecture permitting data exchange among disparate applications 13% Self-service applications for updating customer data, such as personal URLs 10% 1% Don t know 5% How important is user-generated content to your company s ability to become more customer-centric? Critical 10% Very important 26% Important 2 Somewhat important 22% Unimportant Don t know/ Not applicable 5% Please rate your level of agreement with the following statements regarding emerging technologies at your company. (Rate on a scale of 1 to 5 where 1 = Strongly agree and 5 = Strongly disagree) Our executives write or contribute to a company blog to complement our marketing/branding strategies 8% 20% 15% 28% 25% 4 My company has a system to leverage user-generated content 6% 27% 23% 2 13% 4 My company has a system to leverage on-line social networks 3% 26% 22% 30% 16% 3 My company uses emerging technologies to achieve customer-focus goals 5% 34% 33% 17% 4 3 My company wants to use emerging technologies to achieve customer-focus goals, but has trouble identifying the best technologies to use 7% % 7% 3 My company sees emerging technologies as an opportunity to increase revenues/margins 24% 44% 21% 6% Strongly agree Strongly disagree 6 Don t know The Economist Intelligence Unit

14 Appendix: survey results Conquering convergence: Focussing on the customer What are your company s key challenges regarding user-generated content? (Select up to three responses) Getting users to submit content 43% Making the content commercially profitable 42% Differentiating our service so we get more interesting content than competitors 32% Screening out inappropriate content 27% Finding the resources to support user-generated content 22% Ensuring content works across multiple platforms 21% Mitigating the creation of damaging or negative content 12% Establishing procedures to pay users for content 11% 2% Don t know/not applicable In which region are you personally located? Asia-Pacific 38% North America 24% Western Europe 21% Eastern Europe 7% Latin America 6% Middle East and Africa 4% What is your primary industry? What are your organisation's global annual revenues in US dollar Information technology 44% Telecommunications 15% Media 12% Entertainment 5% Publishing 2% Broadcasting 1% Networking enabler 1% Other 22% US$500m or less 47% US$500m-$1bn 11% US$1bn-$5bn 18% US$5bn-$10bn 6% US$10bn or more 1 14 The Economist Intelligence Unit 2008

15 Appendix: survey results Conquering convergence: Focussing on the customer Which of the following best describes your title? What are your main functional roles? (Select up to three functions) Board member 4% CEO/president/managing director CFO/treasurer/comptroller 2% CIO/technology director 6% Other C-level executive 7% SVP/VP/director 10% Head of business unit 10% Head of department 10% Manager Other 7% 21% 23% General management Strategy and business development IT Marketing and sales Operations and production 16% Finance 13% Customer service 12% Information and research 11% R&D 10% Risk 7% Human resources 6% Legal 3% Supply-chain management 3% Procurement 2% Other 1% 23% 30% 40% 40% While every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out in the report. The Economist Intelligence Unit

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