North America

So how do NAFS companies perform in the top three areas associated with business performance? The best North American score is in Measurement, but this is 10 per cent below the European average and 17 per cent below the best performing country in Europe.

North America is weak in People and Organization (46 per cent, 21 per cent below European average, and 28 per cent below the best the best performing country in Europe) and Customer Management Activity (41 per cent, 15 per cent below European average, and 24 per cent below the best the best performing country in Europe).

The area where performance is most similar to Europe is in Analysis and Planning: determining customer worth, behaviour, attitudes and segmentation. We believe this similarity indicates a standard global approach to this area, typical of a 'first-pass' approach. In other words companies appear to carry out certain types of analysis, sometimes with the help of companies that supply services or software for customer analysis. These companies thereby gain insights into customer behaviour, but because of their lack of investment in data, analytics and deployment, these analyses do not really add strategic value to the company. Typically, this first-pass analysis makes use of a partial customer dataset available within the company. This normally includes basic customer geo-demographics, product sales volume, and revenue. Sometimes gross profit is included, but the data used for this is often incomplete and error-ridden. This analysis may involve some data cleaning and enhancement (although the company rarely carries out enough of this) and may include a first set of customer behaviour analysis. This may range from simple counts and rankings to the use of regression models, propensity modelling, CHAID and clustering techniques. This analysis tends to throw up some interesting observations around customer value groups and basic retention/acquisition issues. It may begin to offer insight into what 'best customers' look like. These analyses may be strongly orientated towards optimising the results of individual campaigns, rather than longer-term optimisation of customer management.

Identification and analysis of best customers is rarely combined (where appropriate) with attitudinal (for example, satisfaction/commitment), activity (for example, marketing, service, complaint, credit) or prediction of future customer value, to develop real insights. The first-pass analysis often focuses on definitions (for instance, how do you define a lost customer? What is margin? What is a customer?) and data integration (Why haven't we got this data? Why can't we pull customer data together more easily? How do these data sources relate?) and may lead to the definition of data enhancement projects. However, data enhancement projects rarely use the most effective and automated data profiling techniques, and are often not built upon over time. Instead, first-pass analysis is carried out again the following year, or in the next project stage, with the same incomplete observations.

Companies that progress beyond this first pass will obtain a more realistic view of the customer profitability of different segments: They are characterized by:

• better understanding of the impact of cost to serve on customer profitability;

• additional insights into the role of different channels;

• identification of potential high value segments in their base (amongst lower deciles);

• understanding and management of retention of different types of customers (different needs groups), including prediction of defection, subtler acquisition and targeting approaches;

• quantification, understanding and prediction of switching behaviour, and understanding of its impact on the quality of the customer base;

• the existence of programmes to manage customers over time, often using behavioural feedback;

• an understanding of the relationship between behaviour and attitudes;

• understanding how their customer management processes affect customer attitudes and behaviour (for example, the impact of sub-standard delivery of 'moment of truth' areas) and hence acquisition, retention and penetration.

A small number of financial institutions have shown that doing all the above provides an excellent return on investment.

The Proposition score for NAFS overall is low (although this is misleading because for Canadian companies it is much higher). This indicates that propositions (a set of brand values transformed into an intended customer experience and specification of how the company must behave to deliver the experience) are undefined and no doubt similar, with mainstream organizations offering much the same undifferentiated product and service. Customers no doubt have little loyalty to this approach, with any apparent loyalty probably being apathy or inertia-based.

The score for Information and Technology is also low, but this is acceptable considering that the other scores indicate a relatively undefined CRM business model and poorly defined processes. A key learning outcome relating to CRM systems is that they will not add value unless the business model and processes they need to support are well defined.

Although the picture of customer management in North America is a disappointing one, our research work offers hope for those enterprises that are prepared to invest in practical customer management. Substantial change and investment is required to improve scores to European levels, but the rewards will be great in terms of increased business performance. Most companies were quite consistent in their scores, so if they take a balanced approach to the development of their customer management capability, our evidence is that they will be able to get significant gains in the areas of competitive advantage, growth and profit.

Our recommendation is therefore that these companies should aim to develop competence across the CMAT model, improving the relatively good performance in Analysis and Planning and Measurement, and investing heavily in people and organizational development and implementation of customer management activities, supported by using appropriate information and technology enablers.