On Friday, October 10, 2003, Dan Power, Editor of DSSResources.COM, interviewed Ron Swift, Vice President of Strategic Customer Relationships for Teradata (http://www.teradata.com), a division of NCR. The phone interview lasted approximately 45 minutes and the following comments are excerpted from that interview.
Dan Q1: How did you get interested in decision support and especially customer relationship management?
Ron's Response: Well, going back over the years, I had a great career at IBM for 22 and a half years. During the second half of that career, I got very involved in executive marketing, executive management information strategies, worldwide architectures for information interchanges, and financial management systems that crossed organizations. As an outgrowth, it is obvious that there was a whole area of reporting and executive information systems that developed in the mid-1980s. I got involved in a project out of Raleigh, NC while I was with IBM which was an Executive Information System that required an analytical decision support system (DSS). IBM built many DSS tools, screens and systems which today are the norm. In addition, my interests lie in the area of managing processes, information resources and multiple levels of management using personal computers to help make decisions. I participated in worldwide projects for "Managing End User Computing" and also the "Office of the Future" during the 1980's.
As the early 1990's came along and several Executive Information Systems (EIS) were developed, I gathered customer and channel partnership requirements for EIS, DSS and database requirements. I took a brand new job that was created and called the Decision Support Systems Product Manager for all of Europe for IBM. And, we had about 6 or 7 products at that time; none of them worked together. In the early 1990's, I came back from Europe and was promoted into a job in the United States, as the National Marketing Programs Manager for IBM for Decision Support Systems. That included EIS, Decision Support, query systems, QMF, a lot of different things that were available at the time. As time passed with IBM, I realized that very detailed data cannot be thrown away. You cannot just summarize data and put it on balance sheets.
Later when I transitioned from IBM, I continued in DSS as senior partner in a consulting firm of former IBM employees. About 3 years later, Mark Hurd asked me to join his new management team at Teradata. So I joined Teradata in January 1996, just as AT&T was divesting NCR Corporation and its Teradata division. Mark Hurd had a vision; he wanted to transform Teradata into a great organization. And subsequently, we have achieved that vision.
Dan Q2: I'm sure that broad background in decision support still serves you well. But you have focused on CRM for a number of years and wrote a book about CRM, how did you move to Customer Relationship Management and how do you define CRM?
Ron's Response: During the middle 1990s, we saw quite an emergence of a large number of organizations that had either collected or were starting to collect customer data, and I don't mean just sales data. I mean product data, use data, delivery data, timing data, payment data, behavior data, needs data and so forth. Teradata immediately became one of the leaders because of the type of customers that we had. I was one of the 5 or 6 people who jumped into CRM based on our backgrounds. We saw that it was a whole new challenge and a real opportunity that people haven't truly tapped yet. We started talking about plan of action, and entered discussions with our customers and of course we had built a partnership and a friendship with the Peppers and Rodgers Group. It was obvious to me that there was a great match of the knowledge we had, the products we had, the people we had, and the customers we had. Our challenge was to figure out how to put the theory into practice.
CRM is not a sales program. It is not just intended to automate a call center or a sales force or touch points. CRM is an enterprise-wide strategy to first understand your customers -- to truly understand them, their needs, their wants, their desires, their actions, and their behaviors. And second, CRM is intended to reinforce and influence customer behaviors; third, CRM is preparing and sending relevant and timely communications; and fourth, CRM improves customer profitability, customer acquisition, customer retention, customer satisfaction and obviously improving the effectiveness of the entire organization in handling its markets and channels. This approach will also encompass the employees, by empowering them and involving them in the external interactions with customers.
Dan Q3: I understand that customer relationship management is an "umbrella" term and process, but an important part is the computerized decision support and now Teradata is talking a lot about active data warehousing for customer relationship management. Is that right?
Ron's Response: Well, the whole area of active data warehousing was actually needed many years ago, but for a number of reasons companies were limited in the scope of implementation and the use of analytical systems. Active data warehousing is the enablement of an organization to become very dynamic and timely. Timeliness is the issue here. It drives processes and workflows, communications, messages and actions inside an organization and through an organization to its customers, suppliers and business partners. Active data warehousing doesn't necessarily mean subsecond response, but it means providing a service in a very timely manner to meet a specific business need.
An example is an airplane that is going to arrive an hour late to JFK airport coming from Europe and there are 65 passengers on that flight that have to make connections. Rather than waiting for the plane to land to make revised passengers schedules, an active data warehouse application could pre-prepare all of their flight schedules, all of their seat assignments, all of their new gates, all of their baggage transfers and even provide flight attendants the information so they could communicate with premier and regular customers.
Another example, is the support of call center staff who are trying to make decisions in less than a minute or two; "Should I keep this customer?" "Should I really bargain with this customer?" In a cellular telephone company or an online clothing catalogue company the analytical active data warehouse environment would inform the salesperson or the relationship manager that the deal would not only be good for the customer, but at the same time here's the profit ratio and here's what you shouldn't give away because if you do we are going to lose money on the deal. Those kinds of analytics are not generally available to sales people on a dynamic basis. Active data warehousing brings an opportunity to be able to understand the business, track the business, take action in the business and perform analytics on-the-fly to let people interact with the data warehouse and therefore respond to their customers.
Dan Q4: Can you generalize what kind of data you think is most important for a company to know about its customers? What are some "big" categories of data that you think managers need to know about their customers?
Ron's Response: Clearly, we need to know their previous purchasing patterns, but not just their purchases. One of the things that we learned 6 years ago from one of our major clients, was that they need to record in their databases the negative responses of customers; the kind of data that says "I'm not interested in that product", or "I'm not interested in that price", or "I'm not interested in that kind of delivery or service or packaging." Then we can save money by not marketing to them again, and/or not putting a window in front of them on the Internet commerce site. We don't call them on the telephone with stupid offers; we don't mail them things that are irrelevant and sometimes irreverent in terms of their thinking or their precious time. In essence, we not only save money but have a positive relationship just like you would in a personal relationship with another human being. When somebody says no I don't like this or I don't want that or I don't prefer that or whatever, we need to record that as a very, very, serious part of the POSITIVE side of understanding somebody. Customer knowledge will be essential for most firms. And those firms that maintain, analyze and use customer knowledge are (or will be) the winners in their markets.
Another kind of relevant behavior data would be payment data. People have very, very interesting habits that we can watch, like: the timing of their payment whether or not it is made routinely, and the method of payment (electronically, personal check or cash). This tells you a lot about their money management and their financial acumen.
Other things you can keep track of are associated purchases (or correlations). Amazon does an interesting job of this and is a premier example in a lot of the press -- if you bought this book, you may like that book. But you have to be careful there. You have to be very careful because things may not always be as they appear. As an example, several years ago, there were 4 or 5 of these large book distributors, Books-a-Million, Barnes and Noble, Amazon, and one of them was featured in an article in the Wall Street Journal where they described how they made a mis-association or a wrong association. A customer ordered a book on a certain health area. Let's say it was on cancer, so you would assume this person has cancer -- that may be a wrong assumption. Perhaps the person is buying the book for their brother-in-law to give him to support him in his newly-discovered cancer. So you have to be very careful in how you associate data and what you do with it. Privacy policies will have to be privacy practices to maintain customer trust and confidence.
It's better to poll a customer about their interests. Asking questions and recording those answers is essential to add to the demographic data, the address data, the purchase data, the payment data, the behavior data, so we get a greater understanding and a better view of the customer's needs and wants. In fact, many of the better CRM implementations worldwide actually ask customer's questions on a continuing basis, collect that data and do the associations from positive responses from the customer. That is a very good way to carry on a relationship.
Dan Q5: So you use customer data for decision support, but decision maker's need to confirm some data before they act on it?
Ron's Response: Absolutely. The best way for companies to use this kind of data is to try to predict the next product purchase. If you've got a million customers in your loyalty program and you observe behaviors over 3 or 4 years, your hit ratio is going to be extremely high using the Teradata data warehouse, and the Teradata data mining offerings to do predictive analysis. We perform these functions inside of our CRM Teradata suite in combination with knowledge of these customers and core attributes of similar customers. At our recent Teradata Partners users group conference, the 3M Corporation provided an example of how they have lots of new products they want to try with their customers. They have lots of products that have been around for a while that their customers have never purchased.
So you find that many of the CRM pieces of data in a Teradata data warehouse are not just about mail and communications and touch points, but about knowing what customers do in "replenishment" cycles. I'll give you one example of an office supplier. They discovered that one of their customers who was buying 100,000 sheets of paper a week, was actually using 1 million sheets of paper a week. They only had 10 percent of the business. So what you have to do here is to prepare a value proposition to sell the company more paper. Can we make an offer that will meet their needs? We can use the online system as a trigger to even manage the quantities of papers in the store rooms, so we'll be able to tell you when we are getting low, and when we need paper that is outside of the normal delivery cycle. By the way, the next question would obviously be: can I sell you some ink for all of these printers? By the way, since we sell you paper and ink, are you aware that we are in the printer servicing business?
Dan Q6: For senior managers like yourself, is there any computerized decision support that would help you manage your own customer relationships?
Ron's Response: Well, there's good news here at Teradata. We actually use an enterprise data warehouse positioned in Dayton, Ohio to bring in service data, payment data, and product data for our customers. We've been building this data warehouse for several years. The data warehouse was originally built based on finance data. We wanted to get our arms around finance worldwide. NCR used to be a country autonomous organization, every country made their own decisions, bought their own products, handled their own finances, reported to us up through a chain of command. Senior managers wanted to get their arms around finance first as we divested from AT&T in the mid-1900's. That took them a couple of years, now the data warehouse has service data in it, including satisfaction levels, service problems, technology problems, so we are very well aware of what is going on with the customer. We also have a worldwide marketing database that's been converted into that data warehouse over time as we bring data in from the different markets. In fact, any salesperson can go out and look at their customers. The executives along the value chain at the highest level have access to detailed data on every single customer, not just the summaries, not just the finance, not just the service, not just the product data. So they can see what the relationship is, where there are any problems, any recent communications with the customer, positive or negative.
In the CRM world, what you want to do is make marketing campaigns more effective. You want to sell to the right person, the right product at the right time through the right channel, at the right offer, at the right package and so forth. That's the true CRM solution. Companies need executives who see what is working and what is not working and that goes far beyond finance and supply. They have to see how the business is growing, where the business is growing, what industries it is growing in, who is doing the better job.
Dan Q7: To summarize, what is the future of customer-focusd decision support? Where are we headed?
Ron's Response: I think, Dan, we are at the beginning, let's say the second round of customer-focused decision support, of maybe 5 rounds. I don't know how long into the future these rounds will stretch. This phase is one of not only collecting more detailed data and understanding it, but of companies realizing what they have in these data warehouses and becoming even more customer-focused. Companies will be using customer-focused decision support to drive their strategic, tactical and operational decisions all at the same time.
I think the future will be more dynamic, I see operational data flowing more and more over to the analytical database or data warehouse. The whole idea of capturing data once and using it many times, the whole idea of enterprise-wide data being shared across organizations, with people in different disciplines, across different models, across different technologies is right here at the doorstep. It's growing right now; we are at the center of it. We're just at the beginning stages of the real use of CRM.
About Ron Swift
Ronald S. Swift is an internationally-known consultant, visionary, strategist, and author in the areas of CRM, analytical marketing, customer knowledge systems, data warehousing, decision support, and real-time enterprise "infostructures." Mr. Swift is vice president of strategic customer relationships for Teradata, a division of NCR, with more than 30 years of experience with hundreds of clients on six continents to achieve their business strategies and goals. Mr. Swift is the author of the book, Accelerating Customer Relationships. He also is a frequent lecturer at major universities, conferences, symposiums, and executive forums worldwide. Ron can be reached at email@example.com.
Power, D. J., "Interview: Ron Swift comments on Decision Support and CRM", DSSResources.COM, 11/07/2003.
Dan Conway, Director, Public Relations, Teradata, a division of NCR Corporation, reviewed the final version of the interview prior to publication. This article was posted at DSSResources.COM on November 07, 2003.