Carlo Gagliardi, a partner in Accenture's Customer Relationship Management (CRM) Global Service Line, leads the Marketing Transformation Practice in the United Kingdom and is a member of the global CRM leadership team. He has led dozens of client engagements and has gained a wealth of experience in linking strategy, finance and CRM/marketing to quantify and drive value. His client work includes CRM strategy, business-to-consumer (B2C) and business-to-business (B2B) segmentation design, strategy and operations; exploring the linkages between customer needs, customer experience, customer loyalty and share price; effectiveness of customer-facing operations; market-entry strategy; CRM capabilities assessment; and roadmaps.

One of Accenture's global thought leaders, Gagliardi is author of Accenture's Needs-Based Segmentation Methodology and co-author of Accenture's research-based "Loyalty Dynamics Methodology." He also wrote the paper "How to Reduce Your Churn Rate by 7% in Half-an-Hour," and developed the Accenture-proprietary "CRM Share Price Simulator." Gagliardi holds a master's degree in electronics engineering from Politecnico di Torino—Italy and a specialization in cryptography and game theory.

Q How have consumers changed over the past several years?

A In developed countries, the needs of consumers have been met in absolute terms, meaning most people have the items they want and need—cars, dishwashers, televisions and so forth. So, the needs of these consumers have become more sophisticated in three ways:

	Expecting more choice
	Expecting price options
	Emotional investment

To expand on these points, expecting more choice really means more fine-tuned options, such as an offer for just the right upgrade or added features, at just the right time.

In terms of pricing, consumers have been educated to almost continually expect to receive discounts, promotions and special offers. However, while some consumers are sensitive to this, others aren't moved by pricing and want other incentives, such as feature upgrades, or information on how to get more value and usage from their purchases.

Emotional investment means some consumers move beyond simply, well, consuming products or services, to becoming so passionate about them that they behave as evangelists for the products and services they most care about.

And yet consumer emotional investment is often misunderstood, underplayed or overplayed by companies. A first consideration should be, "What is emotional loyalty, and what drives it?"

According to Accenture's "Loyalty Dynamics" thought leadership, emotional loyalty is driven by brand affinity and/or category involvement. What this means in practice is that a customer could feel an emotional bond with the service because he or she clicks emotionally with the brand values the company stands for (and delivers), or feels passionately about the product/service in itself, or both.

What we observe over and over again is that most businesses immerse themselves into the illusion that all customers should become fervent evangelists, becoming fully engaged with their brand, with the category of product/service, and with their current proposition. Companies under this spell have fallen into the trap of believing that it is always possible to achieve a "celebrity customer experience and evangelical loyalty." In reality, this is achieved only by a sheer minority of companies.

Every industry also includes an unglamorous group of customers that are neither passionate about the specific category of products/service nor particularly versed in branding. A subset of these customers will be quite complacent about the proposition they are currently using (i.e., they do not check and re-check it very often). This is the segment that we in Accenture call "Inerts." Although unglamorous, the "Inerts" could be very profitable if 1) companies know who they are and 2) companies actually decrease benefits and incentives to customers of this type, as they are unlikely to either stay or leave based on costly incentives, benefits or bonuses.

Understanding these facets of the new consumer means moving past segment marketing to fine-tuning individual choices—even individual pricing promotions—and finding ways to fuel consumer passion. In some ways, it seems I'm saying today's consumers are more demanding, even fickle, but truly, the flip side of this is saying today's consumers are more sophisticated and savvy, and companies that ignore these attributes do so at their own peril.

Some consumers—particularly older generations—will remain moved by traditional marketing, such as print and broadcast advertising and direct mail, so it's important to use data to distinguish which consumers should continue to get these kinds of communications. But more and more, consumers expect well-timed and well-tuned offers through their channel of preference, whether that's online, text messaging or e-mail.

But increasingly, it's also important to understand how one's brand is being evangelized—or not—through social networks. This is especially true for marketing to younger consumers. And it's important to keep in mind that every day, the shift moves to consumers who are accustomed to social networks and targeted messaging, and who are used to being highly informed about products and services and the choices open to them. The key point here is an increasingly well-defined segment of consumer exists whereby they are more influenced by one another rather than by "classic" marketing media.

Q Building on that theme, how has technology—new ordering channels, the Internet, social networking capabilities—helped the customer change?

A The potential magnitude of any one individual's social network can be much greater now, thanks to technology. Conventional wisdom states that traditional networks—in-person connections—tend to top out at about 200 people. But technology and communication platforms such as blogs, Facebook, MySpace and the like now mean that it's possible to have much larger networks.

The younger segments, in particular, have embraced this expanded capability for networking. Some young people have a thousand or so other people identified as "friends" on social networks like Facebook. True, it's not possible to have close, individual relationships with that many people. But these networks emerge based on common interests and needs. Because of this, younger segments—the new, emerging consumer—can go to their "collective" and pose those pertinent questions, like: "What do you think of this product? What worked best about it? What were its flaws?" and base their buying decisions on those answers. And if the network includes a few evangelists for a particular product, that alone can tip the buying decision toward one product and away from another. This is the enormous power of social networks. But there is a catch. Social network behaviors are much more difficult to predict. Companies have therefore to face the dilemma: passively undergo social networks, or facilitate them and participate in them?

So, what we're really experiencing is a shift in balance from product-focused marketing devised by those that run the companies that create the products to consumer-powered marketing.

Perhaps ironically, at the same time consumers want to become their own product designers through the ability to have more and more individualization in their product options, which means enabling consumers to create their own mixes of product features and pricing.

This may seem scary and overwhelming, but the good news is that companies can use this new reality to their advantage. They can tap into what consumers are saying about their products and incorporate it into their business decision making. It's possible to make individualized offers, or empower one consumer to say, "I want the automobile with purple leather seats but I don't care about audio options," and another to say, "I want the automobile with all the audio options but standard brown leather upholstery is fine with me."

And what makes this less scary and overwhelming is knowing that technology is really on the companies' side as much as it is on the consumers' side, if the proper technology tools are in place. For instance, data warehousing makes it possible to track all of these myriad details.

Q What types of new data need to be captured about this new, emerging consumer?

A Of course, the answer will vary in terms of detail from company to company, but generally, companies need to track consumer data on:

	Usage behavior—what consumers buy, as specifically as possible, how often they buy it, how much they buy and exactly how they use the product or service.
	The relationship between the consumer and the company—how the consumer prefers to interact with the company, including preference for channels to receive messaging, and how that relationship might change and grow—or wane—over time.
	And finally, the relationship between consumers within those social networks we just discussed. This is the newest and most novel category.

Additionally, while of course adhering to privacy laws—which vary from country to country—it's important to capture that "emotional" data we've discussed, such as comments or general opinions during call center interactions, for example, or through purchasing interactions. This is real, raw and true information about how consumers feel not just about the product or service, but about every aspect of interacting with the company. And this information is much more powerful—and actionable—than occasional general surveys. The challenge here is that this information is typically unstructured. But valuable analysis is possible, for example, "customer mood analysis" for call center conversations (systematically recorded and analyzed) and e-mail/Internet browsing/blogging behavior.

Q What are some challenges—and benefits—of capturing this new consumer data?

A There are two types of challenges. The cultural challenge within a company is making that shift from traditional, product-driven marketing to consumer-driven marketing, based on the new consumer dynamic we've been discussing.

The technological challenge comes from the fact that most systems and processes have long been geared toward that traditional, product and transaction-driven marketing. But, how to capture—and later mine—text messages sent between consumer and company? How to capture and leverage reactions on a social network to a product? Or on the blogosphere? How to link that data to financial measurements of how well a product is doing—or not doing—in the marketplace?

These are challenges that technology is evolving to address.

However, in the meantime, I believe the foundation to capturing consumer data and leveraging it for the most business value is to establish a primary customer key, a unique identifier for each consumer. An individual consumer's phone number, preferred communication channel or address might change, but the primary customer key should never change. There are technological challenges to this, of course, but data warehousing can help overcome those. Providing those well-timed, individualized offerings is very difficult without this kind of unique customer identifier in place.

Likewise, there are two major types of benefits to making the effort to capture, analyze and use this new consumer data—strategic and financial.

The strategic benefit is that understanding the new consumer data enables not only better real-time decision making but also long-term continuous improvement.

The financial benefit emerges directly from the strategic benefit: identifying opportunities that would otherwise be missed, fostering those product evangelists we've discussed, fine-tuning product offerings to optimize sales and minimize waste.

Q What is "C2C" (customer to customer) marketing?

A It's really the answer to the question, "What can the consumer do for your company?" And that means engaging in the kinds of activities we've just discussed: discussing your product or service on a blog, or in social networks or on online forums. In a sense, it's just good, old-fashioned word-of-mouth promotion, but technology makes this exponentially more powerful. Instead of telling a few friends, "Hey, this service has really helped me save time," or "This product has helpful features its competitors' products don't," consumers can share this kind of information with literally thousands of other people, each of whom can in turn share it with thousands more, thanks to the way we currently communicate.

It's up to companies to enable this kind of C2C marketing, such as through brand portals on their Web sites, in which customers can discuss the various products. But it's just as important to capture what the consumers are saying and use that data to fine-tune and improve not only the product or service but their own marketing efforts. For example, if this kind of data shows that a certain demographic prefers specific features, the company can use that information to create offers for the product to that specific demographic that focus on those particular features.

Q How must the marketing department change with the emergence of C2C?

A It's really important to understand that information is free, and there is really no way to control the flow of information about your products and services. Instead of trying to control or manipulate the dialogue about your product or service, tap into the information flow and use it to gain insight, for example, to sharpen up your ability to understand how new features will be received. At the same time, know that there is no perfect way to forecast how a new product, feature or offer will be received, even when incorporating this data into your business decision making, so continue to listen in, and if the offering goes wrong, have a contingency plan in place about how to handle it. It's really about making the corporate-wide cultural shift to understanding that consumer experience—both how an individual consumer experiences your product, service or offering, and, ironically, how the collective consumer conscience feels about your product, service or offering. This is what will increasingly drive products and marketing in successful companies in the future.

Q What is needed for real-time decision making—based on these new types of consumer data—to be effective?

A Decisions must be made not only on more data, but also more quickly. Because of faster communications, thanks to social networks, online forums, blogs and tools like e-mail and text messaging, the newer, younger, emerging consumers expect their concerns and expectations to be met quickly.

This also means creating opportunities for dialogue. Even simple actions, such as providing call center numbers on outgoing communications, can be effective. Consumers today—and especially consumers tomorrow—really care about dialogue.

They also care about being able to communicate via whatever channel is most convenient to them at any given time. For example, a consumer might contact a company via the call center in the morning but contact the company again via a Web portal in the afternoon. That consumer is going to get frustrated very quickly if the company doesn't realize the consumer is trying to continue his or her dialogue, just via different channels, and treats the second contact as if the first one hadn't happened, forcing the consumer to restart the dialogue. Avoiding this kind of confusion—and consumer frustration, which will end up being discussed in many cases on those social networks I've mentioned—means having an infrastructure in place in which data about these contacts is captured cross-enterprise. It means really getting that 360-degree view of the consumer, having a consumer primary key and using data warehousing to piece together all consumer interactions.

The trick is understanding the difference between customer communication and customer dialogue. The truth of the matter is that customer communication can be colder and more mono-directional. Customer dialogue is warmer, more emotional, more bi-directional and intrinsically closer to simulating a human-to-human interaction. In the frantic vortex of the short-term cost-cutting, companies can indeed trim operating expenses by reducing call center interaction and forcing customers to more mono-directional channels.

But saving operating expenses today might trigger share-price loss of performance tomorrow. The issue is that expectation of future customer revenues and loyalty are baked into a company's current share price. If you destroy customer dialogue today, you might well save operating expenses, but you might equally be jeopardizing future loyalty and cash flow. Therefore, it is crucial to enable as much as possible dynamic customer dialogue on the Web and other non-call-center channels.

Clearly, in a world that studies five-year net present value in academia yet manages its businesses on a quarter-by-quarter basis, desiring and delivering customer dialogue for the longer term is easier to say than to do. At the end of the day this is really a matter of executive team leadership, not just marketing initiatives. I'd go so far as to say that the time range a company's leadership uses to look over the horizon is in itself a measure of leadership.

Q Any final thoughts?

A Companies that ignore the changing dynamics of consumer data do so at their own peril—the peril of missing opportunities, of losing consumer loyalty, of stretching in ways that might be surprising and challenging but ultimately rewarding. The new breed of consumer—one who expects individualized choice, who makes decisions about products and services based on discussions with other consumers, who can be a positive evangelizer for a product or service, who demands that the company will engage in dialogue through a variety of channels—is not only here to stay but will become a greater and greater share of the marketplace. Understanding the new breed of consumer—and capturing the data that defines the consumer—is key to successful marketing strategies in the future. T

Sharon Short is a freelance writer who specializes in high-tech topics.

Teradata Magazine-March 2008