Customer centricity has become a watchword for major corporations worldwide, but a recently released survey has revealed that many enterprises are lacking in the basic knowledge of who their customers are, not to mention their attributes, tastes, purchasing histories and relationships with other customers.
According to a recent analyst report, the average accuracy of the 443 respondents' master data - the data relied upon by the organization
for everyday operations as well as strategic decision-making - was a shocking 71%. In other words, one out of every four records was either incomplete or quite simply wrong. Nearly one quarter of the companies surveyed reported accuracy levels of less than 50%!
These numbers are of more than academic interest. Companies that have addressed the problem of inaccurate or missing data through deployment of master data management (MDM) technology reported superior business results in areas that are deemed critical success factors to the customer-centric enterprise.
- They were able to respond to customer inquiries 36% faster (10.8 vs. 16.9 hours) than non-users.
- They achieved a 7% advantage in customer satisfaction (77% vs. 70 %).
- Their customer retention rate was 10% higher (87% vs. 77 %).
In addition to providing improved customer-related metrics, the study revealed that MDM enables significant operational efficiencies, with both managers and staff reporting that they spent roughly one-third less time hunting for customer data. While the survey did not attempt to calculate the number of hours managers from various departments spent in meetings haggling over the validity of numbers from different sources, there is ample anecdotal evidence that this is also a significant cause of wasted time.
Managing the Data Challenges of Long-Term Growth
The benefits of MDM are particularly relevant to large companies. Data related to customers and the products they buy resides primarily in CRM and ERP applications (and to some extend, SFAs), and most enterprise-scale companies have several of these applications, either because of acquisitions or because division-level applications have been deployed. MDM integrates the data in these applications to provide:
- A single view of the customer - often referred to as a "single version of the truth." When a company knows that J. Smith, Jon Smith and John Smith are the same customer, it can obtain more accurate statistical segmentation for decision support, and can also avoid expensive multiple communications to the same person. The cost of such multiple communications is not trivial, particularly for financial institutions, which not only waste money, but also create the impression that they can't even keep track of their own customers.
- A 360-degree view of the customer. A customer of a financial institution may have a checking account, a money market account, a mortgage, and a high wealth relative who is also a customer. If a company knows this, it can more accurately calculate any given customer's true value, and, as with the single view, obtain more accurate segmentation. As the Aberdeen data suggest, the 360 degree view of the customer that MDM provides has significant business value when it comes to customer retention.
Crucial Features for Success
In order to deliver these benefits, any MDM solution must incorporate multi-domain technology, that is to say, it must be able to accept the various data domains used by disparate systems so that no piece of information is compromised or lost.
A second important feature is the ability to integrate master data with transactional data. Many organizations have identified specific behavior patterns that, for example, indicate that a customer is at risk of switching to a competitor or closing an account and should be contacted directly.
Finally, there must be two-way communication between source systems and MDM solutions. For example, when transactional data indicate that a customer has deposited a very large sum in a checking account, this data could trigger an alert which would lead to a personal call suggesting that the money could be better placed in an interest-bearing account.
MDM in Action
Unfortunately, some companies only become motivated to implement MDM as a result of a crisis. One major manufacturer of imaging equipment discovered a problem with a $1 million product and had to spend more than six weeks locating all the customers who had purchased it. (The company has subsequently deployed MDM and eliminated the possibility of a recurrence, while obtaining numerous other benefits, such as improved ability to manage its premier accounts.)
It is somewhat disheartening that, although CRM has been around since the early 1990s, it has never lived up to its promise of providing comprehensive customer data. MDM, however, does deliver on this promise - and delivers a measurable competitive advantage as well.