Make Better Decisions Using Customer Data

Gathering data is not enough--it's what you do with it that drives profitable growth.

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Never underestimate the power of your business's database or customer relationship management (CRM) system. These tools hold valuable information that will help you understand your customers, better meet their needs, improve your service performance, and expand to other, underserved customer segments.

Our work with a large client underscores the importance of mining customer data at a granular level in order to create profitable growth. The client had an abundance of customer and market data but very limited insights into those customers and markets. The management team had a view of performance only at the business-unit level, so it was nearly impossible to identify individual segments that were strong or weak.

We quickly saw a need to shift from this high-level financial view to a more granular view of profitability and growth by customer, market, product, and geography. To do this, we had to clearly define the problem we were solving, the questions we needed to answer to get there, and where to find the underlying data. From there, we needed to develop insights that made sense to business users--and that were actionable.

Uncovering Trends

By analyzing the information in our client's database, we were able to identify a number of trends that had been buried in the numbers. After piecing together data from many different systems to get a complete picture of a customer, we noticed that significant pools of profitability were concentrated in just a few key segments, products, and customers. However, our client's resources and incentives were not aligned with these key segments. The sales team was not incentivized to attract and maintain the most profitable customers, management teams were aligned with the wrong segments, and resources were not distributed across the highest-growth geographies.

Additionally, the client had a few large customers that were wildly unprofitable. These customers were valued internally as the highest revenue generators, but what our client didn't know was that it was losing money by serving them each year.

By updating these customers' outdated systems and renegotiating contracts, our client was able to save millions of dollars in costs serving them. Armed with more granular information, our client was able to make better business decisions about its customers, products, and markets.

Gathering a lot of customer data doesn't directly translate into meaningful information. You need to know what business problems your teams are looking to solve and how to use the data to find the solutions to those problems. Many companies make uninformed strategic decisions because they don't have clear visibility into their customers, products, and business segments. It is critical, therefore, to get your arms around the data you have, translate it into meaningful information, and distribute this information across the organization to drive more informed decision making.

Please send us your thoughts at karlandbill@avondalestrategicpartners.com

Associate Lindsay Comstock contributed to this article.

Karl Stark and Bill Stewart are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree. @karlstark