Give big data the heave-ho for now and get a birds-eye view of your business without a single nosql database.  

Lernaean Hydra, your time is up.

Good management strategy and practice supported by intelligent modern systems

Two question must be answered up front :
1. What value does your business delivers best?

2. What do your customers think of it?

Let me explain. One enduring rule of business is “find a hungry mob and feed them” and the other one is “stick to what you do best”.  You’ve probably spotted the potential for a mismatch here. I am assuming that when you find that hungry mob you are very good at feeding them. We are just talking about things like menu, ambience, pricing and how you operate in the kitchen and waiting departments here. We are also very aware that value is in the eye of the beholder, that is why we are asking the second question.  The answers to these questions are deeper than you may have thought and understanding the cause and effect relationships within the business requires an organised approach, yet you’ll be surprised how simple it can all be made.

Lets begin with; what value do you deliver and where it comes from.
Perhaps you believe you know the answer to this; We provide widgets
For the sake of argument: You are a Gas supplier and you are relatively successful but you have known for some time that you are at risk from bigger chains and you need to differentiate and to up your game. Your profit margins are less than they might be.

Lets take the Porter view. ( “Competitive Advantage” Michael Porter ) First we break the activities of the business into Primary and secondary activities. Primary activities are engaged in providing value to the customer e.g.  Receiving and distributing internally -> Making stuff-> Delivering -> Marketing and Sales -> After Sales Service. This is the coal face. Each step, even Marketing and sales adds some value for the customer and your business is able to capture this in profit after paying for the cost of delivering it.

Secondary activities are engaged in helping run the business, e.g. HR, IT, Finance, etc. Trimming and improving secondary services can improve bottom line, but it will have minimal impact on the core of a business according to the theory, but when you are able to see the direct links between supporting services and the value or lack of it that you deliver to the customer and your costs incurred, then you may look at some of these secondary activities in a new light.

Furthermore, it is clear that since Porters book “IT has moved to straddle the two categories and then onwards to dominate the Primary classification for an increasing number of businesses. (Successful ones)
Porters strategy firm “Monitor” went out of business in 2012 unable to pay it’s debts. To quote Steve Denning in Forbes it was “killed by the dominant force: the customer“ The model below is focused primarily on the customer.

1. Each primary step in the customer journey needs to be understood in terms of the actual activities that deliver value for the customer and in this way you be will be able to quickly see what adds value and what is letting you and your customer down. Value for a customer is seen in terms of what the customer is doing and what that customer is thinking, feeling and experiencing while in the process.  Remember that experience is a very important or even crucial part of the value proposition with both positive and negative propensity.
2.  It can be remarkably enlightening to see the customer journey alongside of the disconnected systems, functions, departments and cultures within your business (sometimes described as a back journey).
3. No solutions of any value can be outlined until the true impacts and interrelations of actions are understood.
Below is a combination of examples from actual projects I completed in various sectors, but I have changed some of the details and left out a lot to hide the client identity, only including enough data to demonstrate the principal.
For arguments sake, let’s assume the client was a Telco and the product area was Domestic Mobile Phone packages in the UK with the usual blend of calls, texts, internet and hardware. In the background to this small piece of customer focused work, there was a backroom battleground involving the shut down of call centres resulting in the resignation of a C level executive, firing of a senior manager and outsourcing of remaining call centres to India in an attempt to reduce the cost of customer service. There latter was a hot potato being bounced back and forth and where it fell it was felt/left, not sure which one I meant.

For the sake of argument let’s say the customer lifetime was 4 years and the cost of customer acquisition was £240.00. Average revenue per customer was £600 a year. Immediately you can see that customer acquisition cost 10% of revenue. We wish!
-Each year a customer remains the annual profit margin on that customer increases.
-Another way to look at this is: every time a customer needs help and can’t get it there is a 25% chance (p(churn)=.25), they will leave and the cost of replacing her will be £240.

That means £240 * .25 = £60.00 down the pan for each frustrated customer.
Bear in mind now that reducing costs in order to declare increased earnings was the main goal of the business at this point in time. Perhaps you already see an anomaly here?
Some research done with a small number of focus groups and some with customer services people

demonstrated very clearly that:

a) Customers shopped around as their current contract came to an end and were mainly driven by the best handset they could get and often focused on the current most popular handset.

b) Many customers were on mailing lists of competitors who knew when the contract would end and mailed them with offers ahead of this date. Good offers.

c) Customers who had received unexpectedly large bills recently (last three months) were much more likely to leave, they hated surprises even more than they disliked the nuisance of changing supplier.

I proceeded to map some of this information in context as per example below.

Customer Stage 
Forward planning
Researching online and stores
Purchasing
Organising for receipt of product
Getting familiar
Dealing with issues
Renewing
Changing package
Leaving
Doing
Talking to friends/ keeping abreast
Browsing shop windows/ websites
Looking for best deal, least hassle, warm feeling
Waiting for delivery
Struggling to learn new interface and get all songs and contacts across
Getting help with complexsettings
Responding to offer of a replacement handset
Calling to get help changing
Demanding a PUK code
Thinking
I always like to have a phone I can be proud of in my peer group
I wonder if I could be doing better
I don’t want to find next week that my friends are paying less or getting more
I hope everything arrives as planned so I am home to receive it
I must get used to the core stuff quickly so I don’t get in trouble.
Well soon find out if that annoying advert was a lie, I bet they cant be bothered to answer the phone even
-I should be shopping around but the others are probably just as bad and anyhow -I don’t have time right now,I cant wait to get out
Feeling
I need to always  carry the right status symbols
Insecure
Nervous and unsure, in need of reassurance
excited
I love opening an attractive package that’s presented well
Disappointed with the level of support, but not really surprised.I’m frustrated with the difficulty of finding what I need on this website.I don’t have time for this.Angry about a huge bill with no explanation and confusing bill
– Resigned to being let down, or- Determined to leave at any cost Feeling of power and sometimes an appetitie for revenge
Confused, by packages, apprehensive
Experience
Mildly amusing
Interesting but sometimes overwhelming
A nerve wrecking experience for most
Positive
Frustrating for some, annoying for many,Very negative if no help can be had
Generally a negative experience, sometimes very negative
Positive mostly especially when they are a new customer having just left another supplier
balanced
Positive and expecting better things with new supplier
Business function and location
Web services- LondonRetail-  North East
Web services- LondonRetail- North EastDirect marketing- London
Local ShopOnline
Payment provider
Courier -LondonDispatch -North east
Shop- Local
Manual – ChinaOnline support – Outsourced India
Manual – ChinaCall centre –IndiaShop- Local
Call centre-LondonShop- local
Call centre-LondonShop- local
Call centre –Indiaand
Call centre-
London
Systems
eCommerceERP(Two separate systems)
eCommerceERPCRM
Web stats
(Little or no integration between these three.
We don’t know if it is the same customer!)
eCommerceERPCloud service
(Payment system is totally external and data cant be accessed)
Cloud courier apiERP{(No integration available, ERP nows nothing about courier progress)
(Little or no communication happens here.
Call centre handles own training from the manual.All a bit up n the air.)
Inbound CRM is separate to central CRM and there is no knowledge of these inbound calls in other parts of the business for the most part
The local call centre is trained to retain customers when a call is sent to them. Their conversations go in the CRM and others are aware of it
The local call centre is trained to retain customers when a call is sent to them. Their conversations go in the CRM and others are aware of it
Calls are transferred to retention team who try to bribe them. No analysis of this ever happens afterwards
Table 1

 

 

We decided that we needed more detail in some key areas to support our goals and help us solve issues we had identified through the web stats, the CRM and the eCommerce data.
First we looked more closely at the purchasing cycle and here is a representation of what we found.
Purchasing

  1. We have different personas who differ somewhat in their behaviour, but a safe catch all is to say that our customers never stop shopping around for alternatives. Within hours of getting the product they are telling friends and getting comparisons.
    Often they find that they could have done better elsewhere, sometimes via our own channels. When this occurs there is major loss of trust by an existing customer, but when others do it, it drives potential customers to us.
  2. The desire to change product, upgrade, or move may also begin when a new must-have feature hits the market and the customer’s friends are getting it. This can sometimes happen within days.
  3. Loyalty to the actual product brand is strong but loyalty to our brand is weak, we have no kudos like a product maker has. They can have the next version of their favourite cult phone, but still find a new provider.
  4. It was difficult to find any real logic behind most purchases, fundamentally the customer fell in love with a handset and then needed evidence to justify this purchase and the price they would pay. The fear was hidden costs, surprise bills, or looking foolish when their friends got a better value deal.
  5. The channels were confusing them, they saw deals online, but when they went to our shop, either it was not there, or it cost more, or sometimes less. They couldn’t understand this. Once we were losing heavily to an online competitor who undercut us by just £1 a month, wile we had a better deal hidden away in many of our shops. Nobody could explain that.

Here is the journey simplified

  1. In contract but keeping abreast of new stuff and new deals
  2. Close to time for a new deal and really researching online and asking friends and social media connections ( 20% will call or to cancel )
  3. Nearing decision time, has a strong preference that she can’t really afford and a second preference and shopping around for the best possible deal
  4. Decision time and now in a blind panic. What if it is cheaper next week?, Should I go for the cheaper of the two or indulge myself?
  5. Trying to place the order and the quirky ecommerce system keeps complaining and asking her to re-enter stuff. (38% leave at this point according to our records –in fact we know the precise page and we have found out why)
  6. Order placed and still wondering if she should cancel before it arrives (Another 12% will cancel)
  7. Package arrives and enjoying the quality of the packaging and the beauty of the new phone. Upset by the dreadful manual and having to learn a whole new set of menus etc. ( 30% end up calling in for support and waiting up to 15 minutes before spending a further 40 minutes on the phone)
  8. Nervously transferring data and hoping not to lose anything ( Only 5% now lose data and support can usually help them)
  9. Ok happy customer. Along the way we lost 70% of those who started and made ourselves very unpopular with about 20% of the remainder i.e. 6% overall.

Causes of Churn

In simple terms, although there are several problems identified, we found three causes of people calling in to end a contract.
i. The 6% we annoyed by giving a poor experience when they received the last product.

ii. Receiving unexpectedly high bills that left them suddenly short of cash at the end of the month. This caused particular and lasting annoyance, especially when the bill was incomprehensible.

iii. The 18% who called customer services and had very poor experiences ranging from incompetency, to occasional lack of sympathy to confusing IVR and unacceptable delay times.

In addition, although we couldn’t quantify the affect, we found those who had bad experiences talked about it publicly in social media while the others were silent and the overall appearance was of a lot of unhappy customers. This was very imbalanced and clearly damaging.

To keep this simple and get the most holistic view, we used two problem solving techniques to get to the bottom of things and prioritise our actions.

Problems  don’t happen in isolation, nor do solutions act in isolation, therefore a holistic view is a critical starting point. Below, I recount two simple techniques I frequently use when solving systemic problems like those we discussed last week Click here to open last weeks instalment in a new tab.

We identified problems and sub problems:
The technique is simple; ask why and to the answer ask why again. Do this five times before you accept the explanation. At this point you will have a new insight and abetter understanding
Propositions struggling to compete and losing grounds.

Caused by:

Positioning on price point + struggling to compete on cost

High cost per customer = low margins

i.e. We could accept low service, or we could lose in the battle on price or margins.
We drew an affinity diagram to track the interconnections between these problems and sub problems.

Pretty early on it became evident that the quality of the customer experience was core to the customer churn which in turn had impacts not just on customer numbers, but subsequently on our ability to offer a competitively priced proposition. A classic vicious circle.

diagram1

Diagram 1

To focus on the key aspects and explore the causal route a little more we took the key causes out of the affinity diagram and used them to build a cause and effect illustration.
As you will probably notice this helps remove some of the noise and focus in on more critical factors. The relative  importance of the various factors was tested with high level business cases that demonstrated in very clear terms what the financial implications of each issue and potential negative impacts where relevant.

 

The result looked like this;

diagram2

 

 

Diagram 2

The figures demonstrated clearly that improving the product and delivery especially at Moments of truth and   becoming customer focused would reduce the traffic to the call centre sufficiently to counter balance the cost of a decent service and still improve the margins enough to give us the option of being more competitive.

Problem 1  High costs
What our research also told us was that with an improved service and happier customers we would be under far less pressure to compete with the cheapest competitors,

Problem two dwindling sales

The second primary cause of High customer acquisition costs and dwindling sales was weak marketing

Our research into the causes of weak marketing highlighted a systems issue. In simple language, marketers had insufficient access to key customer data and live systems like eCommerce and “myaccount” lacked the information needed to offer the right help to customers at the time they needed it i.e. when they were on our site seeking it.

 

The underlying causes was totally technical. The entire business had been migrated to run on SAP at a cost of obscene numbers of millions and reputations were at stake so no hint of deference could be entertained. Frankly it didn’t work and this was mainly down to being implemented without full understanding of the business need.

Within a year of implementation it became clear that accessing SAP to get basic information about a customer for another system such as an eCommerce site cost an unbelievable 1 million plus per interface.
Not only that, but the levels of traffic to SAP from a busy eCommerce site would have driven a further investment in licenses and hosting beyond most people’s imaginations.

On top of this round trips to SAP in its current implementation was slow even when available.

We could have a website and customer services with no customer knowledge or fork out millions on upgrading an already obscenely expensive piece of technology.

We needed a way access key  data that was in SAP about our customers in high volume and with very fast trip time in order to answer questions on the customer service desk and to serve intelligent web pages on our sites

 Porter

 

 

2 thoughts on “Give big data the heave-ho for now and get a birds-eye view of your business without a single nosql database.  

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