CRM Success Hinges on Data Quality
Without accurate customer data, implementing a CRM
strategy is like 'walking up a down escalator 

by Kurt Konow 
Customer Marketing Strategist, Document Messaging Technologies 

There's little doubt that the customer is king In today's business world. The 1980s centered on downsizing and cutting costs. Managers in the 1990s focused more on building up core competencies. 

But with the onset of the new millennium, enterprises are clearly recognizing the importance of the customer -- or more precisely, the importance of an effective Customer Relationship Management (CRM) strategy in reaching the customer, particularly as more business migrates to the web and interactions with customers become more automated and more impersonal. 

And for good reason. Customers are the very raison d'etre for business. 

Any sales rep worth his or her salt will tell you that "nothing happens in business until a sale is made." And, of course, a sale cannot be made without a customer. 

Growing use of data as an "asset" 
The real news today is that businesses, which have been collecting customer-related data for years, are now using the data as an "asset" to launch numerous initiatives. The goal? Capitalize on the obvious fact that selling to existing customers is much easier than selling to new ones. 

Airlines, supermarkets, video rental stores and even auto repair shops are just a few of the many businesses that now recognize the extraordinary value of repeat business. In realizing this, they have launched CRM strategies in the form of loyalty programs that reward existing customers for purchasing additional or incremental products and services. 

But what many of these businesses don't realize is that accurate data is the very cornerstone of an effective CRM strategy. And that poor quality or inaccurate data can actually impede customer relations efforts and hinder a firm's overall CRM strategy. 

Data accuracy impacts costs, sales and effectiveness
Three principal reasons underpin the need for accurate and up-to-date data when communicating with customers. They are: (1) to lower costs; (2) to increase sales and profits; and (3) to improve internal effectiveness. Any one of these three reasons should be sufficient to entice a business to assure customer data quality. But when considered together, the three are an overwhelming argument. 

But before looking at the costs involved in using inaccurate customer data, consider just two facts. The first? Americans like to move. An estimated one in five American families -- about 17 percent of the population - move every year. 

And the second? Even when they don't move, consumers are not stagnant. They get married, buy homes, have children, build additions, get promotions, switch jobs, take vacations, buy second homes, invest in (and roll over and draw down) retirement plans, take up and change hobbies, enroll their children in school, and on and on. Any CRM strategy that fails to recognize the dynamic nature of consumers' lives and lifestyles is likely to fall short of expectations. 

Accurate data can lower costs 
The first major benefit of accurate data centers on cost reduction and is most easily understood when the costs are categorized as either "hard" or "soft." 

Hard costs are the most obvious. They involve processing returned mail and include the concrete expenses of postage, paper, envelopes, printing and labor. Additionally, because returned mail arrives erratically, in varying quantities, and without any advance notice, efficiencies are difficult to achieve. The costs for reprocessing are frequently higher than those incurred in processing an equivalent number of first-time mail pieces. 

Soft costs, however, can be even more significant than hard costs, especially for the enterprise as a whole. 

The most tangible soft cost involves the delay in the receipt of revenue. If the original mail piece contained a statement, or an invoice that requires payment, then the delay means cash flow is being negatively impacted. 

Additionally, the delay in receipt of a bill might trigger a subsequent customer service cost. The customer who did not receive the statement as expected might call a customer service center to inquire -- or complain --about the delay.

Or the delay in delivery, and subsequent delay in payment, may cause a customer to exceed a credit limit, resulting in embarrassment and anger when making additional purchases. And once customers are lost, it is very hard to get them back. In fact, it is far cheaper to keep a customer than it is to acquire a new one or especially re-acquire a lost one. There is also the cost of lost sales. Admittedly, it is hard to quantify the true cost of a lost sale or a lost customer. But the costs are real and they do exist. 

Consider the example of a customer who moves to a new residence. An immense amount of buying can occur when people relocate. Home decorations and furnishings, appliances, lawn and garden care equipment, clothing, books, light bulbs, even insurance -- all are often purchased in connection with a change in residence. 

For most businesses, a move is precisely the best time to stay in touch with customers. Yet for many companies, a move is precisely the time that they lose contact with customers. Or they incur unnecessary extra costs and added delays in trying to reestablish contact with customers. 

Accurate data can increase sales 
Perhaps even more significant than the "downside" or the soft costs of using inaccurate data is the "upside" or the potential increased sales that can come from employing only the most accurate and up-to-date customer data. 

It goes without saying that promotional offers that are custom tailored to individual needs or highly targeted to specific customer segments are more effective and generate higher sales than mass broadcasts of generic appeals. 

The experience of one firm engaged in horticulture marketing illustrates the point. The firm mailed the same promotional offer to customers who recently moved and to customers who had resided at the same address for several years. The firm discovered that the mailings directed exclusively to existing customers who moved resulted in a response 1.9 to 2.1 times greater than the same mailings sent to customers who lived at the same residence for many years.

Need more proof of the value of accurate and comprehensive data? Consider the example of Company X, which is satisfied to know that Taylor Smith lives at 123 Main Street in Anytown USA, and that the mail is deliverable as addressed. 

Now look at Company Y, which employs a CRM strategy using the latest technology to append and enhance their customer data. As a result, the savvy marketers at Company Y know that Taylor Smith is actually a young married woman, with two children -- a boy and a girl, age ranges between two and four -- with a household income range of $90,000. 

And that she is the same Taylor Smith contained in two other data bases maintained by the company. Is there any question which company will achieve the better bottom-line results when offering additional products or services to Ms. Taylor? 

Accurate data can improve effectiveness 
The third major benefit of using accurate customer data centers on improved enterprise-wide effectiveness. What does that mean? It means preventing errors before they occur and eliminating unnecessary work.

For example, once a company determines that accurate customer data is a priority worth achieving, the firm usually goes through a period of investigation and analysis to determine where and how errors occur. 

Once the source of the errors is found--such as data entry operators who are poorly trained or motivated, existing customer records that contain outdated information, or customers themselves who are inconsistent when providing information--steps can be taken much like a Total Quality approach to eliminate the errors and their subsequent costs before they occur. 

The use of accurate and comprehensive customer data can also reduce the number of calls to customer service call centers, which will enable those resources to be re-deployed to higher and more productive uses. Don't let the competition win Lastly, even if the opportunity to reduce costs, increase sales and improve overall effectiveness isn't enough motivation, companies can also rely on accurate customer data to help strengthen the customer relationship and "inoculate" customers against the inroads and sales tactics of competitors. 

Because one of the key factors to remember in business is that the customers and revenues you loss generally go directly to and strengthen the competition. The $200 that a customer doesn't spend in Sears doesn't just evaporate. It goes to Wal-Mart, J.C. Penney, a catalog retailer or somewhere else. 

Considering the huge amount of work that goes into attracting customers and sales in the first place, no business can really allow inaccurate or incomplete customer data to undermine and detract from its strategic mission.