September 11, 2006

Four Questions With David Raab, President, Client X Client

This week, I am pleased to have David Raab take part in our "Four Questions" segment on MineThatData.

David is President of Client X Client, a company that provides technology, analytics and services designed to achieve optimum yield per customer. David is one of the leading minds in the Database Marketing field, with nearly one hundred contributions to DMNews.

Let's begin the interview.


Question #1: You are one of the most respected analytical minds in the field of Database Marketing, having consulted with many great brands. Now you are President of Client X Client. What are some of the new challenges you now experience?

The industry has changed greatly since Database Marketing first became identified as a discipline fifteen or twenty years ago. Back then, we spent a lot of time explaining the basic concepts of how to build and use a marketing database, particularly when talking to people outside of traditional direct marketing. Today, the basic premise--that assembling information about individual customers lets you build more profitable relationships--is conventional wisdom across many industries. Similarly, in the early days, people were just starting to develop software to implement Database Marketing principles, so much of my work involved examining the different products and helping people to understand which capabilities were truly important. Today, the core functions of a good customer management system are widely understood and many marketers have hands-on experience with them. So, although I still spend a great deal of time looking at software and talking to vendors, the real challenge is helping clients make the best use of system capabilities. This means dealing more with marketing and business management issues, and less with technical concerns.


Question #2: Your company links the customer experience to actual business results via something called "The Customer Experience Matrix". Can you explain how this product helps businesses understand how customers behave?

The key point about the Customer Experience Matrix is that it gives companies a comprehensive overview of how they are treating their customers, across all channels and all stages of the customer life cycle. That's much harder than it sounds, because most companies are organized into functional groups responsible for a particular type of activity--say acquisition or customer service--and often further divide responsibility by having separate groups for each channel such as Web or direct mail. Each group does the best job it can, but without understanding its overall impact on the customer, all it can measure are internal metrics like response rate or cost per call handled. The Customer Experience Matrix uses all the database technology we've built in the past two decades to finally tie together all the interactions so companies can see how a change in one activity in one channel has an impact on later activities in other channels. The concrete example I always use is how a change in customer service levels has an impact on future sales--something that Dell Computer has recently illustrated in real life. What the Matrix does specifically is to measure the change in each customer's future value after a given type of interaction, so the company can assess whether the net impact of the interaction is positive or negative. But, to tell the truth, we're finding that companies get excited about the Matrix even without the detailed financial analysis because it lets them see, for the first time in a single place, the messages and business rules they're delivering across all their different interaction points. This lets them spot inconsistencies and opportunities that would otherwise remain buried.


Question #3: Put on your "consumer" hat. Are there companies that you believe do a really good job of building a relationship with you, personally, and why do you believe they do a good job?

Interesting question. Marketing is all about segmentation, and I happen to fall into the segment of consumers who are extremely utilitarian in most business relationships. This means I have almost no interest in building a "relationship" with most companies, at least in the conventional sense of an emotional commitment that would lead me to go out of my way to use one company's products over another's. There have been particular companies I have been very enthusiastic about at particular times--I can think of specific airlines, telephone companies and auto manufacturers--but only because they had products that happened to meet my needs very well at a particular moment. There are other companies in those same industries that have treated me so poorly I will never do business with them again unless I have no choice. But in both kinds of situations what drove my "loyalty" was the products themselves, not any type of personalized relationship. It's theoretically possible that I could enter into a "learning relationship" with a company that would know enough about me to make them eaiser to do business with than a competitor, but in practice I haven't seen anyone offer service that's customized enough to make much of a difference. In other words, for me at least, a company is only as good as its last interaction: while I'll cut an incumbent vendor some slack just to avoid the effort of making a change, there is very little else to hold me in place.


Question #4: In what ways would you say that consumers have benefited from advances in analytics and CRM software?

Notwithstanding my previous answer, there are consumers unlike me who do value personalized business relationships, and they have benefited from the analytic and CRM software that lets companies develop and maintain such relationships with them. But I think the more common value is the ability of companies to use such software to predict consumer actions and needs, and to make offers that are tailored to them. I have certainly appreciated and responded to product offers that reached me at appropriate moments, and many studies have shown the value of targeting based on detailed analysis of customer activities. Yet the biggest benefit of all, I think, is one that has become so common we almost take it for granted: we expect companies to have CRM systems in place that make our transaction history and account information instantly accessible should we need them for some form of service such as tracking a package or changing a reservation. Perhaps the best evidence for that expectation is the annoyance we feel when a company fails to meet it. The fact that we actually feel annoyed--instead of just surprised--shows it's a real consumer benefit. Again, this comes down to the point that value is based on operational performance, not better marketing or emotional relationships.

And that concludes our interview with David Raab. Thanks, David, for providing us with great comments and insights!