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GUEST COLUMN: Todd King and Ken Wells

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These days, when budgets are often stretched beyond recognition, business marketers can't afford fuzzy logic. The more clearly you can discern potential opportunities and threats, the more effectively you'll drive marketing strategies and tactics.

That's why customer scorecards are an integral weapon in the marketing arsenal. These valuable measurement tools keep your finger on the pulse of critical customer behavior-revealing trends that help you learn from the past, respond to the present and prepare for the future. Scorecards deliver one-stop access to standardized, quantitative customer knowledge you can easily share throughout your organization.

To develop a scorecard that steers your company in the most profitable direction, follow these guidelines:

  • Identify precise segments. All customers aren't created equal. Therefore, carefully segment your customer records into a manageable number of discrete groups whose members share similar tendencies. Typically, statistical analysis is necessary to create a robust segmentation scheme.

You can derive customer classifications from any combination of demographic, geographic, firmographic or purchase data. There are many approaches available that can accommodate your business goals and data set, from relatively simple segmentation or cluster analysis to sophisticated applications of regression modeling techniques.

The metrics you choose should be linked with behaviors you plan to influence, so you can periodically measure progress and react appropriately. Also, whenever possible, apply the same set of key performance indicators (KPIs) to all customer segments. This lets you track trends among your best customers and calibrate how other segments compare. For example, the right KPI can help you determine when-and at what rate-loyalty is slipping among your most valuable customers. You can then respond with targeted retention programs or pursue other potentially high-value segments.

  • Understand your data. Data are the lifeblood of every customer scorecard. It's vital that your underlying data support the measurement of your organization's KPIs. To ensure success, communication and planning between the marketing and data management teams is absolutely vital. The data experts need to consider how marketing intends to use scorecard data, while the marketing team must learn how the data are captured, compiled and maintained.
  • The data managers, be they internal IT or external partners, need to include the company's marketing representatives in data manage-ment and quality meetings. Similarly, marketing must share and explain its business plans to ensure that the appropriate rules for collecting, managing and manipulating data are established. Ultimately, early information sharing and consensus building pay off with more accurate, valid and enduring marketing performance measures.
  • Sharpen your focus. As you specify scorecard KPIs, it's tempting to become overzealous. However, remember that with KPIs, less is more. Aim for a collection of five to 10 core metrics. Also, strive for your measurement data elements to be mutually exclusive of each other, which creates a more accurate, uncompromised view of your business.
  • Rely on thoughtful analysis and business knowledge to center your scorecard on genuinely meaningful metrics. This enhances the value of your customer data and avoids drawing attention away from information that matters most.

By creating an effective customer scorecard, you can set more realistic expectations for initiatives, gain stronger support for priorities and realize greater return on every marketing investment.

Todd King is director-analytic services and Ken Wells is VP-business development at Database Marketing Solutions. They can be reached at info@database-marketing.com.

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