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MC Kinsey-Using Customer Analytics To Boost Corporate Performance
MC Kinsey-Using Customer Analytics To Boost Corporate Performance
MC Kinsey-Using Customer Analytics To Boost Corporate Performance
Using customer
analytics to boost
corporate performance
Key insights from McKinsey’s DataMatics 2013 survey
January 2014
2
Contents
Introduction 4 Cross-referencing tools
Introduction
Key insights from McKinsey’s DataMatics 2013 survey substantiated with objective performance criteria.
The validation phase evidenced a significant
correlation with the companies’ return on assets.
Corporations across the world and across industry
sectors are increasingly approaching their busi
nesses from a customer-centric perspective, Key aspects of the survey Text box 1
amassing vast quantities of customer intelligence
in the process. But harnessing this data deluge is The DataMatics 2013 benchmarking survey was
a huge challenge. Even after drawing on sophisti conducted from May to June 2103 with 418 senior
cated software systems to portion big data into executives of major companies distributed
viable segments, countless companies are finding equally across Europe, the Americas, and Asia.
their expectations dashed. Big data often fails to All the organizations had revenues of between
deliver the big insights that were hoped for because around EUR 500 million and over EUR 50 billion;
companies are not tackling the topic optimally. the majority had revenues of over EUR 5 billion.
To do this, it would be of huge benefit to know Most respondents were from analytics-intensive
whether one can actually identify a correlation be sectors within 10 major industries, including Retail,
tween the use of customer analytics and corporate Banking, Insurance, Media, IT, and Energy. The
performance. And if so, how can this be evidenced topics covered were the objectives and value con
and quantified? Does the impact of customer tribution of customer analytics, its capabilities and Please refer to the
analytics differ by industry? What capabilities and challenges, trends and future investments, and its Documentation section
investments are needed? What is the impact at organization and governance. in Part II for further
stake? What are the most important levers? details on the survey.
To find answers to these questions, McKinsey This report describes the results of McKinsey’s
recently conducted a global survey on big data, 2013 DataMatics survey, explaining the champions’
interviewing over 400 top managers of large inter secrets of success. It is divided into two sections.
national companies from a wide variety of indus The first is a report covering the results of the study
tries. The data obtained consisted of companies’ and some of the learnings that can be derived from
self-assessment of their own position and capa it. The second section is more statistics driven,
bilities. A subsample of these results was then showing the data on which the report is based.
Extensive and best-practice users of
customer analytics outperform their So how do the top performers Outlook – Implications for CEOs
competitors do it? and CIOs 5
of customer analytics are 23 times more likely 2 Based on "Please indicate how much you agree or disagree with the following statement: 'We use customer analytics extensively in our firm/business
unit'." Scale of 1 to 7: 1 = Strongly disagree, 7 = Strongly agree. Comparison of items assigned 1 or 2 vs. 6 or 7.
A third of all survey participants rated customer factors for success – incorrectly. McKinsey’s
analytics as extremely important for business benchmarking has shown that intensive data
success, positioning it among the top five drivers evaluation has the greatest impact on performance
of their marketing. They consider it as important in the retail industry. In the European retail trade,
as price and product management, and only a benchmarking shows that the economic impact
few percentage points below service and actions of customer analyses is in fact more than twice
to enhance customer experience, far ahead of the that in the banking sector, and around three times
management of advertising campaigns (which only higher than in telecommunications and insurance.
20 percent view as a key driver of success).
performance is average view general marketing, 2 Based on "Please describe the performance of your firm/business unit in the following areas relative to your average competitor." Aggregate index
derived from the dimensions Sales, Sales Growth, Profit, ROI. Comparison of bottom vs. top quartile.
pricing, and campaign management as the key SOURCE: McKinsey, DataMatics 2013
Extensive and best-practice users of
customer analytics outperform their So how do the top performers Outlook – Implications for CEOs
competitors do it? and CIOs 7
8
Extensive and best-practice users of
customer analytics outperform their So how do the top performers Outlook – Implications for CEOs
competitors do it? and CIOs 8
Exhibit 3
Analytics is not an IT but a strategic business topic Having a culture that appreciates and acts on Execution and organization
to swiftly translate data into concrete action SOURCE: McKinsey, DataMatics 2013
Extensive and best-practice users of
customer analytics outperform their So how do the top performers Outlook – Implications for CEOs
competitors do it? and CIOs 9
mented across multiple levers and channels, contributed to making the company a trail-blazing
which led to a positive earnings impact of around pioneer in the industry, epitomizing the “data to
EUR 1 billion per annum. This has substantially strategy” shift.
The key capabilities for creating value from customer analytics are
integrated deployment of IT systems, targeted analytics skills, and
smart execution/organization.
Ideal IT setup
The six elements in this chain are data, analyses, is the top trend to focus on
software, capabilities, processes, and strategy. Respondents perceiving the trend as "extremely important"1
Any chain is only as strong as its weakest link, Percent
and that they are optimally interlinked. The data Frontline embedding of analytics 28
have to be appropriately adjusted, structured, and Expanding customer analytics across the
27
value chain
enriched. The analyses also need to be reliable,
Processing real-time data 24
supported by interactive and scalable software.
The findings should not be bundled at one central Generating automated commercial actions 21
Some aspects of the integration that participants 1 What trends do you consider most important for customer analytics within the next 5 years?
CEO 15 49
173
High performers hire C-level executives with the Other C level 25 54
“data gene” in their DNA
2nd level 20 53 +394%
that of laggards at companies where senior While it is crucial that management walks the
management is intensively involved in analytics, talk, it is also essential to anchor a culture of
while the probability of generating above-average customer data management throughout the entire
profits is more than twice as high (Exhibit 6). Sales company, ensuring that analytics tools and their
growth is another key area where champions results are always connected to the right data,
with senior-management involvement in customer the right people, and the right marketing strategy.
analytics have a clear advantage, with almost three Everyone in the organization should understand
times the likelihood of outperforming competitors the topic, and all decisions should be supported
who do not give importance to this factor. by analytics.
Profit1 +91%
82
43
Sales +86%
80
43 Companies with
senior-management
involvement in
Sales growth +161% customer analytics
81
31 initiatives are more
likely to outperform
the market
ROI +113%
81
38
No senior management Senior management
involvement in involvement in
customer analytics2 customer analytics
1 Based on "Please describe the performance of your firm/business unit in the following areas relative to your average competitor". "Above competition"
defined as 5 to 7 on a 7-point scale: 1 = Well below competition, 7 = Well above competition.
2 Based on "To what extent is senior management involved in customer analytics initiatives?". Scale of 1 to 7: 1 = Not at all, 7 = To a great extent.
Comparison of items 1 or 2 vs. 6 or 7.
DataMatics and big data in action: that statistically links marketing expenditure and Text box 4
All systems go other drivers to sales (Exhibits 7, 8). This is not
just historical, but can also estimate the sales
A consumer goods retailer had a CRM organiza impact of any stimulus, whether promotional
tion, but was using this on a reactive, ad hoc price, halo advertising, social media or competi
basis, only occasionally mining big data. The tive advertising. Pricing initiatives covered differ
analyses were primarily descriptive – no use was entiation by price zone, and the optimization of
being made of advanced analysis techniques such price guidelines for each category. Data-driven
as customer value models or data mining.
Exhibit 7
McKinsey’s holistic diagnostic and subsequent Target picture of big data competences after implementation RETAIL EXAMPLE
Embed-
Processes 4 +3 4 0 2 0 3 +1 3 +1.5 3 +1.5 2 0 3 0 3 0
Other measures were target group programs, ding
introducing guided selling devices for branch staff, Strategy 4 +3 4 +1 2 0 3 +2 3 +1.5 3 +2 1.5 0 2 0 2 0
evaluation and development of categories was Multiple actions are being taken to anchor this
combined with out-of-range enquiries to produce transformation into the organization on the
leading-edge category and inventory management. dimensions of mindsets and behavior, skills and
The integrative aspect was key: the client found organization, tools and process integration, and
the EBTDA improvements that this initiative was data, IT, and analysis methods. Strong top-
likely to yield extremely compelling. management commitment is particularly crucial,
as well as ensuring that the analytical findings are
woven into decision making at every level.
Complete implementation of the big data road map has a RETAIL EXAMPLE Exhibit 8
significant EBITDA impact
EUR millions, Germany Low High
Generation of insights
Pricing
Promotion
Range
Space
Availability
Purchasing
Targeted marketing
Marketing mix
Total
Documentation
analytics to be competitive in the future?
The sample covered key customer analytics topics … as well as a broad range of industries and
(Exhibit II) … geographies (Exhibit III).
Documentation
challenges in ▪ Biggest challenges and opportunities Telecom IT/Software
customer analytics
▪ Industry leaders in customer analytics 5 5 16 5 4
6 6 22
29
39 7 6
Trends and future ▪ Most important trends 15
investments ▪ Customer analytics as a share of the overall marketing budget 9
10
18
▪ Changes in spending 13
10 14
32 12 17
Organization and ▪ FTEs in customer analytics
governance of ▪ Level of senior management involved ▪ Equal distribution of responses across Europe, the Americas, and Asia
customer analytics ▪ Majority of respondents from analytics-intensive industries
▪ Performance indicators for customer analytics ▪ Strong focus on C-level executives
1 E.g., Hospitality, Logistics, Agriculture, Education.
2 Automotive, Manufacturing, Construction.
3 E.g., Sales Director, Head of Marketing Analytics, Manager, VP.
Exhibit IV
Share of overall
FTE employees marketing budget
actively supporting spent on customer
customer analytics Employees Revenues analytics
Percent Percent EUR millions Percent
≤ 500 16 0 - 10 29
< 50 66 ≤ 500 21
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11 - 20 11
501 - 1,000 13
< 500 22 501 - 5,000 28
21 - 30 11
1,001 - 5,000 27
31 - 40 8
< 5,000 6 5,001 - 50,000 27
5,001 - 50,000 31
41 - 50 2
McKinsey’s detailed survey results address Percentage of companies above competition1 No extensive use of customer analytics2
these topics, broken down into four categories: Extensive use of customer analytics
Documentation
Sales Extensive users of
50 customer analytics
+131% are more likely to
15 outperform the
Sales growth market
43
+186%
20
ROI
45
+132%
1 Based on "Please describe the performance of your firm/business unit in the following areas relative to your average competitor". "Above competition"
defined as 6 to 7 on a 7-point scale: 1 = Well below competition, 7 = Well above competition.
2 Based on "Please indicate how much you agree or disagree with the following statement: 'We use customer analytics extensively in our firm/business
unit'." Scale of 1 to 7: 1 = Strongly disagree, 7 = Strongly agree. Comparison of items assigned 1 or 2 vs. 6 or 7.
Successful companies are more likely to The more mature the customer analytics
outperform competitors across the full customer approach, the stronger its contribution is likely to
lifecycle (Exhibit VI). be to corporate performance (Exhibit VII).
Performance index1 Low performer2 The use of customer analytics contributes significantly
High performer to our firm's/business unit's performance1
Strategic KPIs Tactical KPIs Percentage of respondents who strongly agree
3 Sales to 10
Customers
existing
acquired 43
69 customers 74
+37 The highest absolute
x 23 x 7.4 increase is at the last step
percentage points
Documentation
Customers 11 Customer 4 (+19%); excellence in
High performance
retained profitability customer analytics drives
71 75 on all dimensions;
24 disproportionate value
x 6.5 x 18.8 goals need to be
contribution
Value set for both
Customer 9 5 18
delivered to strategic and
loyalty 13
80 76 tactical indicators 11
customers
x9 x 15 5
14 Migration to 3
Customer
profitable
satisfaction Analytics
81 segments 63 Low … High
maturity2
x 5.8 x 21
1 Based on "Please describe the performance of your firm's/business unit's marketing group in the following areas relative to your average competitor
(consider the immediate past year in responding to these items)". Above competition defined as 6 to 7 on a 7-point scale: 1 = Well below competition, 1 Based on "Please indicate how much you agree or disagree with the following statement about the contribution of customer analytics to your
7 = Well above competition. firm's/business unit's performance: 'The use of customer analytics contributes significantly to our firm's/business unit's performance'." Scale of 1 to 7:
2 Based on "Please describe the performance of your firm/business unit in the following areas relative to your average competitor". Aggregate index 1 = Strongly disagree, 7 = Strongly agree.
derived from the dimensions Sales, Sales Growth, Profit, ROI. Comparison of bottom vs. top quartile. 2 Based on "Please indicate which of the following best describes the level of analytic development of your firm/business unit."
Also, companies that actively measure their The competitive and market context is a hugely
campaign performance with quantitative metrics important driver: the stronger the related external
are more profitable (Exhibit VIII). factors are perceived to be, the more intensively
companies apply customer analytics (Exhibit IX).
Exhibit VIII Exhibit IX
Performance of companies using different metrics Not using metric2 Companies stating Top2Box No extensive use of customer analytics
Share of highly profitable companies, percent1 Using metric2 Percent1 Extensive2 use of customer analytics
25 35
Campaign ROI Diverse customer
41 base 70
23
Response rate
3
Documentation
42 Change of needs
and wants Extensive use of
Companies applying 52
31 customer analytics
quantitative marketing
Reach is primarily driven by
39 campaign metrics are
0 the competitive and
more profitable Used extensively market context
29 in industry 100
Profit uplift
42
47
28 Competition
Revenue uplift
40 87
1 Based on "Please describe the performance of your firm's/business unit's marketing group in the following areas relative to your average competitor 1 Based on "Please indicate how much you agree or disagree with the following statements: 'Our customer base is very diverse'; 'Our customers' needs
(consider the immediate past year in responding to these items)". Scale of 1 to 7: 1 = Well below our competition; 4 = About equal; 7 = Well above our and wants change frequently'; 'Customer analytics is used extensively in our industry'; 'Our firm faces intense competition'."
competition. Values 6 and 7 are classified as "highly profitable". 2 Based on "We use customer analytics extensively in our firm/business unit". Scale of 1 to 7: 1 = Strongly disagree, 7 = Strongly agree. Definition of
2 Based on "Which campaign performance metrics does your firm/business unit use?". extensive use of analytics: comparison of items assigned 1 or 2 vs. 6 or 7.
Documentation
To better understand the needs and wants of customers 51
Having a culture that appreciates and acts on Key challenges can be grouped into five
customer analytics is critical for value creation areas: costs and markets, data, capabilities,
(Exhibit XI). implementation, and company culture (Exhibit XII).
Documentation
Method Broad use of customer analytics 91
Correlate level of capability Analytics valued by the front line 91
to perceived value Management attitude 91 The biggest challenge is to build analytic capabilities and
contribution of customer Capabilities
In-house expertise 84 integrate them into the demand generation process.
analytics and index highest Quality management of analytics 82
correlation of 65 to 100% 81
Automated analytics
Speed of model development 77 The issue we are facing is to embed customer analytics
77
Implementation
Automated data processing into everyday frontline operations.
360°perspective 73
Software accessibility 72
59
It is vital to embed a culture of customer analytics across
Interlinked IT systems
Company culture the organization and enable users to easily access
customer analytics relevant to their functions.
Average for category 72 86 94
1 Pearson correlation of respective capability with value contribution of customer analytics (based on agreement with the statement "The use of customer
analytics contributes significantly to our firm's/business unit's performance", with the highest scaled to 100%). 1 Based on "What do you see as the greatest challenges that your firm/business unit will face within the next 5 years in the area of customer analytics?".
Exhibit XIII
Documentation
We definitely have opportunities to increase our customer expe-
rience with a focus on the long-term value of individual customers.
1 Based on "What do you see as the greatest opportunities ahead for your firm/business unit within the next 5 years in the area of customer analytics?".
Respondents perceiving the trend as "extremely important"1 Expected increase in spending over the next 12 months
Percent Percent1
Documentation
across the value chain important IT (software, hardware,
15 16
licenses for software tools)
Processing real-time data 24
Data acquisition (fees for
Generating automated commercial actions 21 acquisition of third-party data 13 13
and data collection)
Automating of customer analytics 21
Human resources
11 13
Analyzing unstructured data 19 (customer analytics staff)
Acquisition of additional
Including third-party/external data 17 data sources is viewed
Use of external consultants 11 10
as less important
Sharing data in strategic alliances 14
1 Based on "Compared with the past 12 months, how will your company's/business unit's customer analytics spending change (as a percentage) over
1 Based on "What trends do you consider most important for customer analytics within the next 5 years?". the coming 12 months?".
Exhibit XVI
Share of marketing budget spent on customer analytics Low tier Middle tier Top tier
Percent1
26 25 25 23
19 21 18 19 19 21
21 21
13 11 13
9
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Customers acquired2 Sales to existing Customer profitability2 Customer satisfaction2
customers2
28
25 24 24
21 22
18 21 18 21 19 21 18 21
11
9
1 Based on "Considering the immediate past year, what percentage of your firm's/business unit's overall marketing budget (excluding sales force
expenditure) was spent on customer analytics?".
2 Based on "Please describe the performance of your firm's/business unit's marketing group in the following areas relative to your average competitor
(consider the immediate past year in responding to these items)". Scale of 1 to 7: 1 = Well below our competition; 4 = About equal; 7 = Well above our
competition. Values 6 and 7 are classified as "top tier"; 3, 4, and 5 as "middle tier"; and 1 and 2 as "low tier".
Having data-savvy C-level executives at the Companies that involve their senior management
forefront of their customer analytics activities is extensively in customer analytics are almost
perceived as key to company performance three times as likely to find it makes a significant
(Exhibit XVII). performance contribution (Exhibit XVIII).
Exhibit XVII Exhibit XVIII
76 76
+69%
+162%
Documentation
High-performing companies
45 are led by data-savvy C-level
executives who understand 29
the importance of customer
analytics and take a hands-
on approach to the topic
No extensive Extensive
senior senior
Low High management management
performers2 performers involvement2 involvement
1 Based on "The use of customer analytics contributes significantly to our firm's/business unit's performance". "Significant performance contribution
1 Based on "What level of senior management is involved in customer analytics?". Answer categories "CEO" and "Other C-level executives". through analytics" defined as 6 to 7 on a 7-point scale: 1 = Strongly disagree, 7 = Strongly agree.
2 Based on "Please describe the performance of your firm/business unit in the following areas relative to your average competitor". Aggregate index 2 Based on "To what extent is senior management involved in customer analytics initiatives?". "Extensive involvement of senior management" defined as
derived from the dimensions Sales, Sales Growth, Profit, ROI. Comparison of bottom vs. top quartile. 6 to 7 on a 7-point scale: 1 = Not at all, 7 = To a great extent.
Contacts
Documentation
is a Senior Expert in is a Practice Manager
McKinsey’s Chicago office. in McKinsey’s Chicago office.
marcus_roth@mckinsey.com julie_f_hayes@mckinsey.com
Matthias Kraus
is a Practice Specialist
in McKinsey’s Munich office.
matthias_kraus@mckinsey.com
Methodology and sample structure Detailed survey results Contacts/Academic advisors 30
Academic advisors
Gary L. Lilien
Distinguished Research Professor of
Management Science at Penn State
and Research Director at the Institute
for the Study of Business Markets
(ISBM)
Frank Germann
Assistant Professor of Marketing
at the University of Notre Dame
Documentation
Marketing Practice
January 2014
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