Article Surfing Archive

*Okay boys it's the first day of school!*

One of my all time favorite movies is the 1977 film Close Encounters of the Third Kind. At the end of the movie, scientists are trying to communicate with the obviously far advanced aliens. One scientist says, *Okay boys it's the first day of school *as they attempt to communicate through a progression of numbers and notes which is described as the universal language.

I believe that in a similar sense businesses also are in the first days of school when it comes to communicating with our own aliens, namely customers.

This may seem to some a bizarre analogy but in a certain way, customers are trying to communicate with businesses in a new universal language.

A fair bet is that most companies do not know much about their customers. Even those companies, who make the concerted effort to get closer to their customers, are still struggling to make sense of the tidal wave of information they are collecting.

Who is the customer, what do they want, when, how, and why do they want it. All companies no matter how small or big should constantly strive to answer these questions.

In today's environment, it has become essential for companies to find new ways to attract new customers, to maximize the value of each customer, and to retain the most profitable ones.

To accomplish all of the above, you need to collect and analyze all pieces of customer information. This allows your organization to understand the customer's profitability, as well as his expectations and preferences.

However, data collection is only half the language. If a business completely trusts their customer data to dictate strategy, they may be disappointed in the results. In one such case, an automobile maker noticed a spike in the sales of one of their green sedans. Because of this information, they quickly responded by increasing production only to find that dealers were slashing prices of their slowest moving models resulting in the spike.

In today's customer focused business era, what the customer is doing is truly the driving force of not only where you presently are, but also where you are going.

Generally, CRM or Relationship Marketing attempts to define customer behavior and then look for variances in that behavior. Predictive modeling and data mining, with their behavioral approach, can be extremely useful in spotting change.

A good place to begin is to try to define *normal* customer behavior. While this is a very subjective task, it must be attempted. Keep in mind there is no truly normal customer across the whole organization, but rather a normal customer within certain guidelines (for instance, a normal customer for a particular product, segment, demographic or any variable that a business chooses to isolate).

Once you have a normal customer (at least vaguely defined), you can then try to measure normal customer behavior. This is no more than recording purchasing, service, or any other customer contact with the business.

The next step is to identify a normal range of behavior. This can be a normal purchasing pattern over a certain period of time, different products purchased, or a normal number of service calls. This attempts to get a handle on the highs and lows of customer activity over a defined period.

The last step in the process is to put up warning signals to alert decision makers when something abnormal is occurring. Of course, this assumes that someone is paying attention to customer information on a consistent basis.

Remember it is not the initial customer behavior that is relevant, but rather the change in customer behavior over time, which will reveal the most pertinent information. The follow up into the actual cause of the customer behavior cannot be overemphasized.

As mentioned earlier, sometimes the underlying cause of a change in customer behavior is not what it appears. A sudden spike in the number of service calls may not necessarily be a bad thing. Customers may be enthusiastically calling to inquire about additional products or accessories.