Counting customers to monitoring firm performance in attracting and retaining customers

Recently, many marketers are being worried about developing metrics that focus on individual customers. Increasing usage of CRM tools are indicator of such efforts/worries.

In order to begin thinking about managing individual customer relationship, a company must be able to count its customers. Definition and counting of customers will be different in contractual versus non contractual situation.

In contractual situation, it is relatively easier to find out how many customers are under contract at any point of time. Typical example could be a mobile company who are able to report almosyt exact number of direct customers. However, even such situation involve some amount of complication specially in situations where a contract covers two or more individuals. For example, does a family plan that inclused five phone but one bill be counted as one or five? Does a b2b contract with one base fee and charges for each of 1000 phones in use counted as one or 1000 customers? Does answer to these previous two questions depend upon whether individual users pay to vodaphone, to their company, or pay nothing? In such situation firms often select a standard definition of a customer (policy holders, members) and implements it consistently.

Another complication arises when an individual has multiple relationship with a single firm. typical example could be on individual having multiple insurance policies with same company. Many companies tend to give a unique membership number to a customer for all his relationship with company. This allows a company to know how many members it has at any given point of time. At the same time there are organizations who are interested in counting policies than actual number of customer although they do have personal informations of policyholder and they can derive actual number of customer. This depends upon strategy of the company - for example companies reporting (and maneging by) number of policies are more interested in selling policies than building customer relationship. A company has to prioritise as per their situation/strategy.

Another example of double counting could be electricity suppliers counting number of meters than number of customer. Counting number of meters could be good if your job is to install meter. But for a marketer that may not be the good way to view things. You market to customer and hence need a customer centric view.

In non contractual situations, the ability of the firm to count customers depends on whether customers are identifiable. If customers are not identifiable (like many retail store), firms can count only visits or transactions. This is somewhat similar to website page visits. Such transaction are not good representative of acual number of customers. In some instances firm do try to identify number of customers through various means - loyatly card, frequent flyier cards, websites that require registration. Even this is not free of problem - purchase behaviour of a customer in this kind of situation is sporadic. A web visit not necessarily mean transaction, person coming to store may not purchase each time and also quantity purchased may not be consistent. Defining current customers in such cases is very very difficult.

In non contractual situation, firms instead count how many customers have bought within certain period of time. This is the concept of recency - length of time since the last purchase. Firms in non contractual situation with identifiable customers will count customers of various recencies. For example, eBay reported 60.5 million active usere in first quarter of 2005. Active users were defined as number of users who bid, bought, or listed an item in previous 12 month period. They went on to report that 45.1 million active users were reported in the same period last year. "active users" suites well in concept of recency. Increase in active customer from 45.1 to 60.5 million could be seen as a good measures of how well firm maintained existing customer relationship and also, that there has been good amount of customer acquisition.

Market Research - Moving on to Internet

Importance of market research for any business can never be underestimated. Both users and providers of market research service understand it. The industry has undergone evolutionary change as has been the case with businesses in general.
However, emerging technologies have accelerated the pace of change to such and extent that some of the development seems to be a game changer in short run (as opposed to a largely classical industry that marker research is).

Technology has brought in many changes
- reduced the timespan of product lifecycle - development testing and launch (and why not?! demise);
- the way consumers/customers receive information (media vehicle). See exponential rise in broadband usage and also, revenues of wed based advertising platform.

Therefore, both consumers and producers are in never before state vis-a-vis consumer - producer information flow. Web evolution, promising unimaginable possibilities is trying to provide some possibilities in this areas as well.

Data collection in market research has seen transition from a paper and pencil questionnaire - to telephonic interviews - to computer aided telephonic interview (CATI) - to online data collection. Evolution also marked reduction in cost and more importantly increase in speed of data collection.

Today there are host of companies which provide online data collection services. Many softwares are available in the market which facilitate online data collection. I had opportunity to work on a couple of software like Perseus and Zoomerang. While many features are really user friendly which may come handy for researchers, in some instances I did felt constrained while making a questionnaire online especially in the area of complex branching. At the same time online questionnaires gives excellent option of online calculations, juggling of questions, rotation, masking and if and then type of conditions which we are very used to in a normal paper and pencil questionnaires. Online questionnaire tend to be quicker to answer if a respondent is willing to. Certain programmability is also available with some online data collection tools available which enrich questionnaire.

However, these do require a researcher to understand capabilities and limitations of these tools. I think this is still in the evolutionary stages. This evolution along with the growing usage of internet and broadband have potential to change the cost and revenue model of market research industry. Its better to keep a close eye on the developments.

What I have mentioned here is mainly in context of quantitative research (online survey, online panel etc). Wait for web 2.0!! high broadband speed and increasingly interactive web is going to make a foray into qualitative research also. Increasing usage of online (social networking) communities have started facilitation of discussions on diverse topics among community users. Such discussions do have potential to develop into a platform for group discussion. And don't you have a moderator in such communities.

Beware qualitative researchers! hitherto intense use of individual judgment, insightful observations, reading faces of participants etc may in future transition into a more standard based moderation starting with product classes which do not have too close linkage to touch and feel. And, web is continuously evolving as an marketing/advertising platform striving to provide more and more king of touch and feel feature. Some of the vendors playing in this space are Market Tools, Passenger, Lithium, Communispace among many others coming to play in this area.

The Converging World. Thanks to IT

World is converging! Thanks to emergence of web and advancements in Information Technology.

Impact is not limited to business efficiency. More important is increasing availability of advanced technology to common people what we call in business language as consumers. It has brought people from all corner of world together at one platform which is being used not only for business purpose but also for social networking, exchange of ideas/culture across borders of nations.

People are learning from each other all across the world, values are changing and hence the way to provide it, generating new concept of business, social network and political games. No surprise, technology, social moves, political moves are being obsolete like never before.

Now power is again in the brain of an individual; no matter where he is, how rich/poor he is. Technology has ingrained aspiration even among the poorest. This grass root level of awareness keeps technology companies at their toes. A new startup can topple leaders, threaten to change the rule of game in mere few years.

Big tech companies find it hard to focus in limited number of areas, some players are dumping their hardware business for software, some are dumping software business for services, some are mixing software and services and some are even mixing hardware software and services. Where these are headed to?

One key trend that we might see is if big companies have cash, they are purchasing whatever they feel could threat in future. Even creating a company and selling it has become a thriving business.

Exciting world, integration followed by disintegration and again integration. In other words focus followed by diversification and again focus. The cycle is big enough to gobble up active life (till working professionally).

So ride the wave and enjoy beauty of the changing world.