The Customer Insight function as a growth engine

customer insights
data science

30 August 2016

Consumer-facing companies in developed economies have experienced little or no growth since the global recession of 2008 and 2009. This is the damning introduction to a recent (August 2016) article from Boston Consulting Group. Consider it for a moment. It has been eight years. During that time we have seen an explosion of data becoming available about our markets and about our customers and their behaviours from a multitude of channels and devices; this includes both data internal to the organization and information from third-party providers. Cloud computing platforms are now readily available from vendors like Amazon, Microsoft, and others, making storage and analysis of this data possible for everyone. Data mining and analytics software and has progressed tremendously making everyone a potential data expert. And yet we have seen no growth? Not even from the very companies that should have benefitted the most from these changes. What has gone wrong? BCG points the finger at the immaturity of the Customer Insight function.

Consumers are demanding information, newness, and meaningful interactions like never before. This renders previously stable sectors volatile and companies know they need to look outwards to meet these changes but often fail to do so. Customer Insight (CI) is the key outward looking function, and yet it has barely evolved since 2009; the pace of change has been glacial, says the article based on a survey of 640 respondents.

Developing an external orientation is a struggle for most and integrating a CI function into a company’s core processes and decision making has proved to be extremely difficult. BCG identifies four stages of Customer Insight maturity which we will summarize as

  1. Traditional provider.
  2. Business contributor.
  3. Strategic partner.
  4. Source of competitive advantage.

BCG provides an online assessment tool for evaluating your Customer Insight function. It is not very different from our methodology so we thought we would test it against a recent project.

Capability assessment of recent Customer Insight function

We recently established the Customer Insight function for the leading provider of international health insurance, and our case study is freely available as CYBAEA Bupa Case Study (along with our other case studies). Testing the BCG assessment tool on this Customer Insight function gives a result that is where we would have placed it.

Results from BCG’s online assessment tool places the function as a strategic insight partner. Source)

The tool places the function firmly in the ‘Strategic partner’ maturity, which is exactly right. If you look at the case study you will see that the primary objective was to define and execute on an ambitious new growth strategy which involved defining and launching brand new propositions targeting new customer segments using new distribution channels. As the new propositions were launched, the old were withdrawn so this was truly bet-the-business strategic change. For this, the organization needed to develop a deep understanding of their target customers, of the products and services they would value, and of the markets in which they live.

Primary research of over 3,000 individuals and group decision makers in five continents defined the customer segmentation and identified value and purchase drivers to directly inform propositions design and distribution strategy. Insights from the Net Promoter System directly informed and shaped the service design of the new propositions.

Secondary research supported an aggressive programme of obtaining admitted status in priority markets with detailed but practical market analysis, including competitors, products and features, prices, regulatory environment, and distribution options.

Analytics developed a practical Customer Lifetime Value model which was adopted across the business. The model directly informed and supported a major strategic shift in the business to focus on new customer segments with new products.

Along this process the Customer Insight function had direct and regular access to the CEO and the entire executive team. At this particular organization we established a Customer and Propositions Committee which formally was a board-delegated function responsible for customer value, customer experience, and propositions development. It met regularly and consisted of the board plus key functional directors, including Customer Insight, Marketing, Propositions, and Customer Service.

Improvement assessment

The assessment suggests improving in Resources and Talent Management. An over-simplification that still highlights important issues. (Source)

The online assessment tool from BCG, when populated with our evaluation of the Customer Insight function against the dimensions of their model, proposes that the main areas to improve for this function to move up the maturity model to become a ‘Source of competitive advantage’ is in Resources and Talent Management. There is some truth to this, but it does not tell the whole story.

For sure, when you operate in an organization that is in the midst of re-inventing itself and executing on an ambitious bet-the-business strategy there are going to be challenges. Budgets are based on best available view and drawn up several months before the start of the year, but when the business is entering uncharted waters you can expect the sea to be rough in places and the journey bumpy. In other words, you have never done this before so your budgets will be wrong. The only question is how much and in which direction.

So there were challenges. The function had a headcount of 7 reporting into the Customer Insights Director but in the two years we were there the team was never at full capacity due to long-lasting headcount freezes. That’s OK. Seven isn’t much to start with so we clearly went for quality over quantity. And we delivered in spades. In our copious free time while defining and launching new propositions in 195 countries to new customers through new distribution partners and -channels we also managed to deliver many critical business improvements, including

  • Demonstrated we could cut 1.8% off the Claims line and delivered much improved claims management and -forecasting tools.

  • Developed descriptive and predictive models for churn to enable the business to optimize Loyalty and Win-Back processes and to put in place differentiated churn offers.

  • Built the first central database containing data on all our global customers, their insurance products and medical history, with full support from the Compliance, Risk, and IT functions.

Anyone who has ever worked in global health insurance will appreciate the magnitude of the last challenge, and the case study has more examples.

So, yes, the function needed stable budgets and the right teams to be sustainable over time, but it delivered both tactically and strategically in challenging circumstances. The savings from a single project to improve our Claims process would pay for our entire Customer Insights function, noted Robert Lang, Managing Director of Bupa Global Market Unit, but more important is the growth of the business and our robust insights gave us the confidence to make the right choices and stick with them.

What you need to do

[CYBAEA Bupa Case Study]

Please do take the assessment to get an idea of how you stack up. Better yet, have several people in the organization take the assessment to get different perspectives. You may well be surprised at how different the executive team and the Customer Insight team views your situation.

And then come to us if you want quick change. We can get you going, quickly and in the right direction. We have done it before for companies big and small in many different industries. In a follow-up article we will consider the structure of an ideal Customer Insight function.

Companies whose CEOs and executives are not committed to a fundamentally different CI operating model should not undertake the hard work of CI transformation, warns Boston Consulting Group in the article. Perhaps. But our view is a little more nuanced:

It may be that you are not (yet) ready for a level-4 maturity of your Customer Insight function. But you may still want a high level for a time. In our case study, which we have used in this article, the organization needed a high level of maturity to execute on an ambitious and risky strategy. So they brought in CYBAEA as the experts to get them through this, build a function, and hand it over to the business once confidence in the strategy and ability to execute had been established. That, too, is a valid approach. Do what you can right now.

Developing a truly external orientation is a struggle for many companies. Taking a hard look at the maturity of the CI function may be a good place to start. But a CI function that’s treated simply as a provider of traditional market research can’t become a strategic player on its own. The effort to tap this overlooked source of competitive advantage must begin at the highest levels of the organization, with executives setting the tone for the process. By measuring, interpreting, and applying knowledge from customer experiences, and using this information to fuel decisions, companies can elevate their CI function—and their own position in the marketplace.

Contact us now to transform your Customer Insight function and deliver breakthrough business results. And remember that our CYBAEA Bupa Case Study is freely available for download without registration or any other hurdles. Learn from us.