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Consumer Data Worth Every Penny to High-Ticket Companies

by Louis Lamoureux

August 11, 2009

Accurate, reliable, and timely consumer information can help manufacturers of high-ticket products increase sales and lead-conversion rates. The problem for them is that much of this information resides with third parties such as retailers or distributors. See how you can build a strategy for accessing that data using applications based on SAP NetWeaver.
 

Accurate, reliable, and timely consumer information used effectively in selling and marketing can help manufacturers of high-ticket products (those priced at $5,000 or more) increase their sales and lead-conversion rates. For example, if an automotive company receiving or generating 10 million leads per year can improve the lead-conversion rate by 1%, it would sell an additional 100,000 units. Enhanced consumer data can also improve the effectiveness of an advertising campaign by enabling a company to target consumers more efficiently.

Yet, high-ticket consumer-goods companies (HTCs) face special challenges in establishing and using a consumer database. They sell their products primarily through dealers and other third-party channels, not directly to the customer. Such a sales structure typically dams the natural stream of data that you get when you conduct transactions directly with customers. It also limits the number of touch-points between your company and its potential and existing customers. In addition, HTCs must find a way to manage enormous numbers of customer records — often in the millions.

A good place to start to overcome these challenges would be to develop a shared consumer-data strategy among manufacturers and dealers. This strategy should include defining the consumer and consumer data, establishing data-governance practices, and determining how the data will ultimately be used. You can employ this strategy with a consolidated consumer information-management system that makes it possible to have a two-way information exchange between a manufacturer and its dealers. The primary challenges facing HTCs trying to execute this strategy are collecting and consolidating huge amounts of consumer information from heterogeneous sources and sharing it among multiple channel partners.

Some HTCs have effectively met these challenges using an SAP consumer data-management system. In fact, an HTC could design several different application architectures around mySAP CRM and the SAP NetWeaver toolset to support HTC consumer data-management initiatives. I will describe them later. First, let’s look at the consumer information challenges HTCs face in more detail.

The High-Ticket Dilemma

Although HTC products include luxury items such as boats, motorcycles, and power sports equipment, they also include items that the average consumer may buy occasionally such as cars and high-end electronics. Altogether, HTC products account for more than $1 trillion in sales in the United States alone.

An HTC typically has several million customers and prospects. Maintaining records for each of them can create substantial organizational and technical hurdles. Also, HTC products often require one or more of the following after-market services: repair centers, service depots, installation, training, or warranty tracking. Since these consumer interactions can take place at a distance from the manufacturer, the associated data may not naturally flow to the HTC (see “Seeing Both Sides of the Coin” below).

Seeing Both Sides of the Coin

HTCs’ perspective on data management: In addition to the consumer information they can collect from dealers, HTCs acquire a large amount of data from third parties. They also have their own sources, which could be of reciprocal use to the dealers. For example, HTCs typically maintain multiple databases that house information collected from product registration and warranty cards, product shows and exhibits, external listing agencies and research companies, Web site registrations, and membership programs.

Because their data comes from multiple sources, it is typically scattered across disparate systems. This can create challenges in consistency (missing attributes) and completeness (not all customers fill out registrations or warranty cards). Reliability is also an issue because consumers sometimes give fake names, addresses, and other false information. With data housed in multiple silos, it may be impossible for an HTC to implement and enforce quality standards, eliminate duplicate consumer records, or develop controls to improve reliability. These challenges collectively may result in too much data containing too little information, creating an untenable basis for analysis to support more effective marketing and sales.

Dealers’ perspective on data management: The situation is not much better from a dealer/distributor perspective. Although they are reluctant to share information with HTCs, dealers struggle with their own data-collection and management issues. Unlike HTCs, they have the benefit of collecting the bulk of their data directly from first-hand consumer interactions such as walk-ins, phone inquiries, and sales transactions.

However, dealers rarely have the economies of scale they need for the computer systems and applications required to collect and manage the data. Consequently, data-collection efforts are often manually done on paper or spreadsheets, and the records are typically not consolidated. Sales agents typically have their own customer files and lead lists that they are reluctant to share. If and when these agents leave the company, their data often goes with them.

Because of these difficulties, dealers and distributors lose many sales opportunities. In addition, data overload can lead to sub-par customer service, ultimately affecting brand loyalty and repeat purchases.

If HTCs could provide a secure technical solution that helped dealers to sell more and spend less, it would go a long way toward strengthening the relationship between them and their external channels. It would also reduce the nervousness that often surrounds information-sharing efforts.

Sharing Consumer Data

HTCs need to find alternative methods of obtaining consumer data such as:

1] Develop a shared consumer-data strategy, which includes determining how the data ultimately will be used and defining the consumer (not an easy task). As “The Entire Consumer Data Universe” graphic below, illustrates, there are many ways in which to consider and group the consumer universe.

The universe of consumers for a high-ticket consumer-goods company can be grouped in various ways according to your company’s needs and desires.

2] Track those who are highly likely to purchase or who have purchased in the past. This is the most manageable and cost-effective approach. You should track at least the individual records of:

  • Target consumers: Those whom the company deems to have the potential to purchase, or who have expressed interest in future purchases

  • Past consumers: Those who have purchased in the past

  • Excluded consumers: Those who have opted out of communications

In addition to the obvious information such as name, demographics, and contact information, these records should typically include the following key categories of consumer information:

  • Groupings/relationships: Household, relationships to other consumers or companies, group memberships

  • Habitual and preference information: Preferences and interests, usually self-reported, could be determined automatically based on past transactions

  • Company/industry-relevant information: For example, for a boat or motorcycle company, is the customer licensed to operate? Or, for an appliance company, is the customer living in an apartment, a condominium, or a house?

3] Understand how to use each attribute of consumer data effectively to gain business advantage. To be successful, the manufacturer and its dealers must share this understanding. In other words, it’s not about collecting consumer data just for the sake of collecting it; it’s about making use of the knowledge that you gather.

For example, one manufacturer established a data-governance board to help determine what information to collect, and to gain a thorough understanding of how to use that information. This board was composed of executive sponsors, representatives from major sources of consumer information, and the end users of the information including members of the marketing department and the dealer network.

The board facilitates workshops to determine what attributes the company wants in its consumer database and what privacy or legal restrictions must be considered. It also solicits input from information providers that it uses to modify its data-collection processes and systems so the information is gathered in the desired format.

Success Is a Matter of Trust

Once an HTC develops a long-term data strategy, it has to find ways of obtaining the desired information. Typically, HTCs and dealers maintain their own consumer databases. Sharing between the two is minimal for several reasons. In most cases, integrated consumer data applications and related services are not available. If they are, you may have to consider legal and contractual issues when sharing sensitive information.

However, the most formidable hurdle is the issue of trust. Dealers may be unwilling to share or contribute consumer information because they see little benefit for themselves and may perceive risk or danger in the data being misused. For example, the HTC may communicate directly with the customer in a manner that cuts the dealer out of the equation. That said, most HTCs collect whatever data they can from their dealers (see “The Relationship Matters,” below).

The Relationship Matters

A sound data strategy and robust technology solution aren’t enough. HTCs must allay dealer concerns about possible misuse of the data and be sure that the dealers receive real benefits. You can help make dealers more amenable to this approach by doing the following:

  • Communicate with the dealers to help foster a clear understanding of joint data-sharing guidelines and objectives.

  • Provide the dealers with more attribute information about customers by investing in a market-research study that boosts the volume of customer-survey responses or by hiring a third-party company to add other attributes after the dealer has captured customer names and addresses.

  • Be sure that the leads passed to dealers are of high-quality by qualifying them through an outbound phone or email survey.

  • Put the customer data-management system within economic reach of the dealers by giving them the system as part of their contract or by selling it to them for a price that’s competitive with other niche-dealer/lead-management systems.

Manufacturers build trust with their dealers by communicating early and often about the benefits of a shared consumer data-management system and committing themselves financially to develop it. Dealers are small businesses, so they typically can’t make large investments in a consumer data-management system. For example, one HTC provided its dealers with a mySAP CRM system by investing in the licenses, installation, and hardware. This approach can be economically feasible for both parties. You can either give the dealers the mySAP CRM system as part of their contract with the manufacturer, or sell it to them for a price that is competitive with other niche-dealer/lead-management systems.

A Consumer Data System

The data challenges facing both HTCs and their dealers can be addressed in a mutually beneficial manner. HTCs should develop a consumer-data strategy and build a consolidated consumer database that can be shared with their dealers, enabling two-way information exchange. To be effective, this database system should include:

  • Efficient and effective extract, transform, and load (ETL) processing and the ability to consolidate consumer data from various sources, both in batch and real time

  • A reliable and scalable system infrastructure that supports terabytes of data and hundreds of concurrent users

  • Collaboration among HTCs, dealers, sub-dealers, and consumers

  • A strong security mechanism to protect consumer privacy and dealer interests

  • Seamless integration with other back-office and front-office systems and functions

  • The ability to use consumer data in various business processes, such as lead and contact management, marketing campaigns, customer services, and product sales

  • Ease of use. Dealers aren’t likely to take valuable time away from selling to learn how to use a complex computer system

  • Scalability to accommodate future system growth, both from data volume and functionality perspectives

  • High performance, which is essential not only to manage millions of consumer records, but also to aid the efficient and effective use of a system by its end users

Certain SAP NetWeaver components address specific HTC requirements:

  • SAP NetWeaver Portal: The portal provides Web-based presentation, transaction, and collaboration capabilities between the HTC and its channel partners (including dealers and consumers).

  • mySAP CRM: This module serves as the back-end business engine that supports all the customer-facing business processes, such as sales, marketing, and services, which are essential for efficient interaction between the HTC and its channel partners.

  • SAP NetWeaver Master Data Management (SAP NetWeaver MDM): This tool provides a single repository for key business master data, such as consumer data and product data, facilitating a “single version of the truth.” The power of this tool is its integration with other SAP components, such as mySAP CRM and SAP ERP Central Component (ECC) or R/3 to provide enterprise-level data services.

  • SAP NetWeaver Exchange Infrastructure (SAP NetWeaver XI): HTCs can use this module to bridge and connect heterogeneous application environments to allow full integration at both the master-data and business-transaction levels. Since HTC consumer data comes from heterogeneous systems, SAP NetWeaver XI can solve a long-standing integration challenge.

  • SAP NetWeaver BI: HTCs have exacting requirements for analysis capabilities to support highly targeted product marketing. SAP NetWeaver BI provides the ability to extract consumer data from various SAP and non-SAP systems, and to analyze and report on it in the extreme detail that HTCs demand.

The illustrations below offer suggestions as to how SAP NetWeaver and mySAP CRM can resolve data-management problems for three types of HTCs:

  1. The targeted HTC is relatively small in size and has no SAP R/3 back end.
    1. mySAP CRM standalone architecture for a relatively small HTC with no SAP R/3 back end

     

  2. This targeted HTC is relatively large in size, but still has no SAP ECC or R/3 back end.
    2. mySAP CRM with SAP NetWeaver MDM architecture for a relatively large HTC with no SAP ECC or R/3 back end

     

  3. The targeted HTC is relatively large in size and has an existing SAP ECC or R/3 back end.

    3. mySAP CRM with SAP NetWeaver MDM and mySAP ERP architecture for a relatively large HTC with an existing SAP ECC or R/3 back end

Big Gain for Small Investment

Although SAP offers the components needed to create a powerful consumer data-management system, the technology solution is only as good as the underlying data-governance model and business processes. Successfully implementing and deploying an HTC consumer data-management system requires technical know-how, business-process expertise, project planning, and execution experience, as well as solid change-management skills. By bringing these skills and capabilities together to construct a shared, central information database and a strong, mutually beneficial relationship with dealers, all the parties win:

  • HTCs gain from more accurate consumer data that they can use for enhanced market analysis, product design, promotions, and sales.

  • Dealers gain from having more accurate, reliable, and timely consumer information and more reliable leads, which can help dealers to improve service quality and generate additional sales of high-ticket items.

  • Consumers gain because dealers can provide better service and an improved customer experience, encouraging greater attachment and loyalty to the HTC’s brand.

There seems to be a direct link between enhanced consumer data strategies and increased revenues within HTCs. The more you make use of your consumer data, the better your revenue picture is likely to be. Best of all, the cost of managing your data more effectively can be small when compared to its benefits.

  

 

Louis Lamoureux is a principal with Deloitte Consulting. He specializes in helping companies improve their customer-facing processes through the application of IT. You can reach him at lolamoureux@deloitte.com.

Wenxiong (Raymond) Hu is a manager with Deloitte Consulting. He is a system architect who specializes in SAP technology and mySAP CRM. You can reach him at whu@deloitte.com.

John Jones is a consultant with Deloitte Consulting, specializing in CRM. You can reach him at joajones@deloitte.com.

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