Canadian Marketing Blog

Service/Delivery Analytics: A Renewed Frontier?

There has been quite a lot of attention again put on marketing ROI (Return on Investment), ROMI (Return on Marketing Investment) over the past year as companies and practitioners continue to look for ways to demonstrate the impact of their marketing efforts.

The entire space of marketing analytics has seen phenomenal growth over the past decade as more and more companies have sought to refine their marketing activities, especially direct marketing. Thanks to its nature, it is a relatively straightforward thing to apply rigorous testing and analysis to direct marketing efforts to demonstrate the lift and ROI on a particular marketing campaign. As a practitioner myself for the better part of 15 years now, I know that with even a little bit of data I can design and deploy a successful direct marketing initiative and clearly demonstrate an ROI (usually positive!) for a client and repeat that success over time to generate piles of money on their behalf.

However, I’ve recently begun to wonder whether we’ve pushed too far into a cycle of ever-refining our marketing efforts without thinking of the bigger picture in which we are doing it. This has been informed by a recent personal experience that I’ll share quickly to set the stage for the remaining comments:

My roof is missing shingles and part of the fascia on the front gable of our house. It has been for the better part of a month now. I’ve called 5-6 different suppliers to get quotes to fix the situation. Out of the 6, three have actually provided me a quote. One never called back, two (2) told me it would cost me money for them to receive the privilege of a quote.

Of the ones that provided a quote, one said they wouldn’t warranty their work. When I asked “why?” they said it was industry practice on repair work because they don’t want to be responsible in case the rest of the roof has a problem. I tried to explain that I wasn’t expecting them to warranty my whole roof, only the part they fixed in case it has trouble. No deal, so I eliminated them from the search.

I finally settled on the one company that provided a prompt quote and seems to have the experience to do what I needed. They have a great website you can visit to see the type of work they do, how long they’ve been in business, etc. The trouble is, I’ve been waiting for the better part of 3 weeks now for them to actually come and do the work. When I call them to find out why they haven’t come, I get a lot of excuses (the guy is sick; they tried but it was too cold or windy) but here I still don’t have a solution to my problem. The best part is, when I call and am put on hold, they have a lovely-voiced woman who soothes me with talk of how much this company values my business, and how their business is built on referrals and happy customers.

By now I hope you are getting some of the point to come. As a direct marketer and marketing consultant, I am quite confident I could go into this business and help them better target their efforts and make more money doing so, but if they can’t deliver on that business, am I really delivering them a benefit or am I just letting more people experience their terrible service, thereby destroying their long-term referral and growth potential? They have no doubt spent quite a bit of money on building their business and branding it via their website, however their service experience is in direct contradiction to what they promise.

This brings me back to my original point. Perhaps instead of focusing ever more finely on our marketing ROI, we need to step back and think harder about our abilities to deliver our products or services. I still see a lot of companies that are excellent at direct marketing put barriers between themselves and their customers, making what should be simple experiences complex because of “industry standards” or “policies”.

I’m not saying abandon ROI, because it is and should remain the benchmark of evaluation for marketing efforts. However, have you given any thought in the last little while to some of the following questions related to service delivery and fulfilling your promise to customers?

1. Do you know how many times an average customer has to call you to get their problem resolved?
2. Do you know how many of your calls are resolved in one shot vs. the service situations that require repeated call backs on your and the customer’s part?
3. Do you know how much money it costs you in dollars and cents to have to keep going back and forth with a customer to resolve a complaint or improperly fixed problem?
4. Do you have any measures of your service delivery success or failure in terms of how the customer experiences the situation?
5. What are your policies and procedures with respect to customer facing situations? Are they designed to make it easier for you or do they actually make it easier for your customer to deal with you?

When you look long and hard, some of the numbers can be staggering. With one of my previous employers, we went through the exercise of trying to calculate how much money we could save by refining the account opening process. By our estimate, it would have been about $180,000 -$250,000 per year and it would have shaved two days of customer time out of the process.

This type of effort garnered a lot of effort back in the heyday of CRM as companies were looking at automating various capabilities within their organization, but it seems to have waned in recent years, at least in my experience.

In closing, I still believe we do need to keep our focus on ROI and the benefits of our marketing efforts, but perhaps the time has come to target the guns at our service and fulfillment areas as well. It will benefit both companies and customers.

P.S. If you want a list of bad roofers, give me a call.

alan

enjoyed your post
to your point
without a brand promise (rule #`4)
and consistency of service (rule #2)
people (rule #8)
and the other rules

(see: http://www.canadianmarketingblog.com/archives/2007/09/14_rules_that_will_lead_to_a_b_1.html)

there is no point going forward into the market
ROI/ROMI measurement will only give you a 'precise' picture of your failure

cheers
Miro

Allan,

It's interesting that the scenario you outlined lead you to suggest that you not bother with an ROI measurement. Customer service and delivery should, in fact, be part of the ROI calculation.

If you take the perspective of the roofing company, a marketing program that generates leads (such as you), differentiates against the competition, builds preference and actually wins the business (getting you to say "yes") will only be profitable if they complete the sale, deliver the services and get paid by you. To your point, the longer the delay, the more likely you are to cancel the service and they will lose their sale.

Marketing's return on investment is negatively impacted by operational failures, customer service, the customer experience (hurting repeat purchasing and referrals), and even gaps in the sales organization or channel partners. A well constructed marketing ROI framework that maps the buyers' purchase decision from initial awareness to closed sale and ongoing relationship. Understanding and quantifying our performance within this framework enables us to have the dialogue with other parts of our business and clearly show that an investment in operations or customer support will have much greater payback than marketing to generate new leads.

So I would suggest that the roofing company and other companies with the same challenge should consider abandoning portions of their marketing and not the ROI analysis. They can do so with confidence as they recognize that service failures prevent marketing from generating a positive return and communications alone cannot solve that problem.

You did a great job with a thought-provoking scenario. The conclusion that both of us have in common is that the role of marketing must be broader than just executing communications across our standard media channels.

I'm interested in your thoughts on this response.

Best regards,

Jim Lenskold
Author of the book "Marketing ROI: The Path to Campaign, Customer, and Corporate Profitability"

Jim,

Thank you for the comments. Ultimately, I think we are saying the same thing. My point was not that there be no ROI measurment in this case, but that as marketers if we are only looking at the campaign component or are busily evalutaing the hits to a website, brand impressions, etc., we will miss the delivery side of things which, to your point, are a key component to the equation.

Most marketers are still, in my experience, only looking at a campaign result or something simiilar when they talk ROI, so my points were directed in that context. Despite our best efforts and intentions, most folks are not thinking about the broader context of marketing actions and their impact on ROI.

I agree with Allan's observation that there's been a plethora of interest and attention on the subject of ROI in recent years including sub-topics such as ROC (Return on Customer) and ROMI (Return on Marketing Investment).

From my professional perspective, the key to companies creating and sustaining long-term profitability is rooted in customer value or ROC, which at the higher order, supercedes ROMI and other performance metrics. However, in my experience, companies have not yet closed the gap between the academics of the subject and its practical business application for reasons that I would attribute to as being a failure in their creative thinking and corporate culture.

In simple terms, ROI is a measure of cash (or potential cash) generated by an investment, or the cash lost due to the investment. It measures the cash flow or income (profit, interest, dividends, or capital gain/loss) stream from the investment to the investor.

CRM thought leaders, Peppers & Rogers, have written extensively on the subject of ROI in their book, "Return on Customer". In the book, they pose the question, "What’s the right balance between current profit and long-term value?". It is every CEO's primary responsibility to answer this single question. Pepper & Rogers maintain that both short-term and long-term value come from the only business asset that ultimately matters: Customers. According to Peppers and Rogers, a customer can create value for a business in two ways: by increasing the company’s current-period cash flows, and by increasing its future cash flows.

In response to this question, Peppers & Rogers developed a tool and simple formula for measuring the rate at which overall enterprise value is created by customers - Return on Customer (ROC).

ROC is equivalent to total shareholder return or value, except that ROC can be divided and sub-divided into smaller and smaller groups of customers, right down to the molecular level of the individual customer.

By first understanding the value of its customers, a company will then be empowered to make informed decisions where managing relationships are concerned.

Customer value is a key and fundamental input into a company's overall CRM business strategy which includes strategies for customer lifecycle management (acquisition, growth, retention, exit, and winback), customer segmentation management (behavioural segments, value segments, attitudinal segments), and customer contact management (channel, frequency, offers).

Analytics also plays a significant role in calculating and determining customer value or ROC.

In his book, "Competing on Analytics", analytics guru Thomas Davenport speaks to the commoditization of products/serices and the use of comparable technology and high-performance business processes as being among the last remaining points of differentiation. He advocates the need for companies to compete with a distinctive capability, which he cites as being analytics.

Davenport defines analytics as "the extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions.".

Analytics are a subset of what has come to be called Business Intelligence: a set of technologies and processes that use data to understand and analyze business performance. Business intelligence includes both data access and reporting, and analytics. Each of these approaches addresses a range of questions about an organization’s business activities. The questions that analytics can answer represent the higher-value and more proactive end of this spectrum.

Once again, in my professional opinion and experience, companies have failed to understand, adopt and embrace analytics as a strategic differentiator. The challenge is getting companies to shift their corporate and cultural paradigm from historical reporting that has a low degree of competitive advantage and intelligence to holistic analytics that provides a high degree of competitive advantage and intelligence.

In closing, companies should first get their heads around customer value as a strategic indicator of performance and embrace analytics as a strategic differentiator before worrying whether they are getting a return on their marketing investments.

Phil

Excellent points!

P&R and the points they make about ROC and customers being the firm's scarcest resource is an exceptional overview of how one must look at the longer term customer dynamics.

The only thing I would add is that the enterprise must also leave room for the things it can not measure (perhaps because it is a current technological/data capture constraint - or perhaps because it will never be measurable - Moments of Truth that are nonetheless important and perhaps may be the ultimate deciding factor the customer uses to differentiate between brands.

Not sure how many would agree but I think all to often - CRM is used to support tactical programs and not enough expended to further strategic programs.

"There are more things on Heaven and Earth...Than that are dreamed in your philosophy" Hamlet, Shakespeare

Miro:

I agree with your position and comments that pertain to companies also needing to be mindful of and taking into consideration those "moments of truth, which I classify as the qualitative, intangible or softer elements of the customer experience.

I do also agree and intended to make the point in my previous post that the majority of companies all too often use CRM tactically and should take a step back to look at the bigger, holistic picture and leverage CRM strategically.

Phil

Thxs Phil

What I hope to communicate with that closing quote of Shakespeare is that a brand requires an understanding and management on many different dimensions at the same time.

I love numbers - spent most of my life hip deep in them
but I have also seen many who rely upon numbers as a crutch in their decision making. And also seen once great brands destroyed because of their tactical (price) focus - that is why I rant so much on the necessity of balance - the soft and the hard metrics, the rational and the emotional, the strategic and the tactical, the things that are measurable and those that are not.

P&R were right on the money - and ironically so was Hamlet.

Miro