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Turducken (Slicing customers differently)

February 26, 2008

Talk about complexity, I will never forget the day that I first learned about Turducken! For those of you who don’t know, a Turducken is exactly as it sounds; a chicken stuffed in a duck, stuffed in a turkey (http://en.wikipedia.org/wiki/Turducken). You know, the classical hierarchal relationship of meat taken to the extreme. They go for about US $100 after shipping, but the adventurer can stuff their own. When I think of customers I sometimes think of the Turducken – Let me break this down a bit.

I have always thought that the most important thing that a company can do is to keep their customers. Makes sense to me, after all there is that great concept that its “X times as expensive to attract a new customer than to keep one”. Now don’t get me wrong, I would walk on broken glass without shoes uphill in the snow to help my customer with their Oracle Forms 4.5 on top of a My Sql implementation in a Citrix environment running off of a 1982 walkman radio. But when businesses say customers, they know what they are really talking about. But let’s decompose this a bit more.

You all know those sayings – the ones we all know and love…

  • Customers are great!
  • The customer is always right!
  • Customers may not be right but they are never wrong!
  • Our Customers are number 1!

Well, over the years I have come to modify that statement a bit and here’s why. “Customer” is a large group to take into analysis at face value. Customers are a complex group. Companies shell out a lot of moolah to understand this group. After all, this group is responsible for the business’ inertia. When companies wish to understand who their customers are, they don’t simply run a ‘customer listing’ and read through it while attending some boring IT meetings about data governance. They spend big money and they head down the road that ultimately leads to … Segmentation.

Segmentation is the classification or taxonomy of the business’ customers. They are usually based on habits or lifestyles plus some kind of loyalty factor. This data is usually derived by their purchase behavior – at the purchase or cart level. There you go; you now have X-subsets of customer. The theory is that each has their own set of core beliefs, common principles and behaviors. The goal is to then approach them in a more intimate manner, allowing both a level of customization and attaining some economies of scale.

However, let’s take another look at customers. This time lets add two driving forces; Business Intelligence and a potential recession. The impending economic fear will be the catalyst for innovation, as it always is. To maintain market share or to at least out pace our competition, companies will need to do something different and the conditions seem to be perfect. Lets pick up the story from above and write the ending.

Tom is returning from lunch when he just happens to walk past the marketing folks. They are talking about how to approach the “young and fun city dwellers” segment and how that must be different than the “impoverished with kids in college” segment. As he rounds the corner, he passes the finance folks as they make mention that yesterday’s margins are down 3.2% and that translates to a need for some kind of new report because it will impact profitability. Almost back to his office, he passes the sales folks who are chattering about how the “young and fun city dweller” are buying more and that even the “impoverished with kids in college” seemed to spend their tax refunds this week. And it hits him…

What if we combine this data? What if we work together? What if we look at customer loyalty and segmentation, but we add a dimension called ‘profitability’? Like reading the last 20 pages in a good novel, Tom plays this through and nets out as follows:

If we look at our segmentation of customers, within each group:

  • We have customers who are loyal and profitable – these are out best customers. Our number one job is to keep these customers. Things I can do are; understand who they are and engage them on a more intimate level, customized for them (special offerings, internet bindings, tools, tips, personalized greeting, etc…), surround them with rewards and incentives (redirecting the money spent on the next group).
  • We have customers who are not loyal and not profitable – why do we waste our resources on these folks? Or maybe it makes sense to cut them off completely. Recently Sprint gave their top 1,000 problem customers the boot (http://www.washingtonpost.com/wp-dyn/content/article/2007/07/06/AR2007070602131.html). I’m not going to mention the online movie delivery service I use, but it seems the more I rent the longer it takes to get my movies. If I rent only a few, I get really good service. Coincidence?
  • Now we need to understand how to make our profitable but non-loyal customers more loyal. How can we deliver better service, what promotes loyalty, maybe we should ask this subset?
  • And we need to understand how to make our non profitable but loyal customers more profitable. Can we push higher margin items, does it make sense to engage them with alternatives, blend costs/products to move margin?

Of course this is only the beginning. BI can bring a depth of understanding to those who look across the enterprise to bring data together. The above scenario is only the tip of the ice berg – it’s the beginning point of an in-depth analysis that will deliver real and actionable information. Look for information to unhide and your customers will flock to your side!

Now for the perfect customer saying, feel free to quote me on this:

“Our best customers are best!”

It’s the perfect storm out there and BI just might be the generator that keeps your business’ lights on. If you do lose power, please make sure to eat up that Turducken – it only lasts a day in the fridge!

~ Scott Felten

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Written by Scott Felten · Filed Under Information Technology 

Comments

2 Responses to “Turducken (Slicing customers differently)”

  1. David E. Bowman on February 26th, 2008 4:00 pm

    Scott,

    First, I love Turducken. I first heard of this masterful poultry concoction courtesy of John Madden, Thanksgiving Day, circa 1995. Not exactly sure of the year, but I think the Lions actually won the game - that should narrow it down if anyone cares to research.
    Secondly, I love the idea that not all customers are the same. It is important to know who your best customers are - and do your best to amaze them. They will then sell and market for you, ideally attracting other people just like them. One must be careful to approach this the right way. It is not always clear how to define “best” and oversimplifying, or viewing this from an isolated perspective can be costly if not deadly to a business. Thus Business Intelligence is critical to the long term survival of any firm.

  2. Dick Felten on February 26th, 2008 8:23 pm

    Well written… gets right to the heart of the matter… kinda like the chicken in the Turducken.

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