Analyse this – DIRECT Magazine

Identifying, acquiring and retaining profitable customers are critical to business success. To meet this demand, high performing marketing functions have shifted offerings from list suppliers to the provision of true customer insight.

Smart executives understand the value of customer insight and the need for data and analysis to drive this outcome. In fact, a survey conducted for Accenture revealed that nine in ten top executives place strong analytical and business intelligence capabilities at the top of their list in preparing them for the challenging business environment.

Despite this awareness of the benefits of business intelligence, only a very small portion of businesses use data in a sophisticated manner. According to a Harvard Business Review survey, only 23 per cent of businesses use customer data to quantify the relationship between its business drivers and financial outcomes. This 23 per cent however, had an average 2.9 per cent higher return on assets and a 5.1 per cent higher return on equity, demonstrating that good quality data is a corporate asset that has positive financial impacts.

Regardless of the numerous examples that demonstrate the positive impacts of good quality data, marketing functions within a number of organisations have not transitioned from list providers to a business intelligence service. Many even lack confidence in the data they use to produce these lists. In fact, a Pricewaterhouse-Coopers study revealed that only 40 per cent of respondents were “very confident” in their own data quality.

Good data vs. bad data

So how can businesses ensure their data is high quality?

Depth and breadth are of paramount importance. This means data should come from a variety of sources, it should be updated regularly and there should be a significant number of records available. The other side of the equation, the cost of bad data quality, is also significant. It prevents businesses from developing a comprehensive understanding of customers, limits the possibilities of identifying new business leads and inhibits the establish-ment of authentic customer relationships.

Many businesses have been affected by poor quality data. The Pricewaterhouse- Coopers study referred to earlier revealed that 75 per cent of respondents had been negatively affected by defective data.

One of the key drivers of bad quality data is data decay. Data decay is directly linked to data age—the older the data, the increased presence of data errors. To put this into context, in Australia:

• a new business is formed every 54 seconds

• a business files for bankruptcy every 29 minutes

• a company address changes every 5 minutes

• a company enters external administration every 15 minutes

• a company name change occurs every 22 minutes.

In addition, a study conducted by Dun & Bradstreet in the US revealed that on average, business data decays between 1-3 per cent each month, demonstrating that the timeliness of updates to your database is absolutely critical to establishing authentic customer relationships. Based on this rate of decay, if a business waits three months to use a file more than five per cent of the contact names will have changed.

Get the right tools

But having good quality data is just part of the process—to achieve positive outcomes a business must also have the tools required to leverage its data and turn it into a wealth of valuable information. Without this capability companies find themselves data rich, yet information poor.

Utilising analytical, predictive and profiling tools to segment data in a myriad of ways is the key to informed decision making. Truly sophisticated organisations don’t stop there—they go even further to understand the behaviours of profitable customers and to help the business make informed decisions about the customers it chases. They examine the likelihood that customers will still be there in 12 months and, whether the customers have the capacity and propensity to pay on time.

We operate in an environment where lists are no longer enough to drive growth; an environment where data, analytics and behavioural modelling are a must. The shift from the provision of lists to business intelligence has begun and it must continue. If your business is not utilising quality data and analytics you are wasting valuable resources and risk being left behind by your competitors.

Christine Christian (pictured) is CEO of Dun & Bradstreet.