Notes On Digital Transformation: The Customer

According to the late Peter Drucker, as he wrote in his book The Daily Drucker, there is one valid definition of business purpose, which is to create customer.

He explains this more by emphasizing that “it is the customer who determines what a business is. For it is the customer, and he alone, who through being willing to pay for a good or for a service, converts economic resources into wealth, things into good.”

However, historically businesses focused more on selling rather than on customer. Even their marketing efforts were more about attracting more eyeballs, clicks, views, and feet through the door with minimum attention to who is actually looking, clicking, walking into the store, and most importantly buying. We have encountered many businesses that were generating millions in revenues and millions of transactions but with no clue about who they were selling to and without any way to know if those transactions were generated by one customer or a million customers.

With today’s very competitive landscape, very demanding customers, and the spread of technology, it is more imperative to focus on the customer and to identify who that customer is. You probably heard all the buzz words about businesses trying to be Customer Centric, Omni-Channel, 360 degree view of customer, Customer Experience, etc. and unfortunately, yet once again, the focus has been on IT systems with over hyped expectations.


Creating the Customer from Customer Data

If the purpose of a business is to create a customer then it comes without saying that the foundation, for any solution that the business can build on, is customer data. So as a result the starting point for digital transformation should be customer data, not the CRM or marketing system or the E-commerce platform or robots.

Now it is important to highlight that the online business is to a certain extent ahead of the brick-and-mortar one because it is easy to collect customer data online than it is offline, for two simple reasons: delivery and payments. Customers shopping online must provide some personal details to receive the goods and to pay, a requirement that does not exist in the brick-and-mortar world. In other words, online customers are easy to track while offline ones can be totally anonymous.

This is why most of the advancements related to customer data collection and analysis is actually for the online world. That is not to say that no data is being collected offline but that effort is dwarfed compared to the capabilities that exist online. Also this created another challenge for businesses, which is the huge gap between online and offline and the ability to bridge that gap. The same customers shop online and offline, one of the challenges that businesses face today is how to connect the two and create a seamless journey for the customer.

If you are thinking that online shopping is the dominant one then why worry about off-line customers then it is important to highlight the fact that, according to stats published on Digital Commerce 360, e-commerce in the US accounts for 16% of total retail purchases after factoring out the sale of items not normally purchased online, such as fuel, automobiles and sales in restaurants. That is in the US, while in many parts of the world that number is still in the single digits realm. What we have seen in the past few years is a blending of the channels and a realization from retailers that to properly compete they need to have a presence everywhere, online and off.

Even with the COVID-19 crisis, which eventually will subside, and where a lot of retailers are now scrambling to establish or ramp-up their e-commerce presence, that number is forecasted to jump to the mid twenty and it is yet to be seen if it is a long term up-tick or a temporary one.

This brings us back to the concept of customer data, which for the most part still lives in silos, out of date, and in a lot of cases hard to reach. Customer data by nature is system agnostic, my name does not change if it was captured online or offline, on a piece of paper or on social media. As a result, the customer data system, if we want to call it that, should not care about where the data is coming from, as it will be coming from different channels that are known today and many more that will be created in the future. Its sole purpose is to store, unify, and organize the customer data in a way that can be used for “marketing” purposes, pure and simple.

A business should not only focus on building a proper structure to store and organize data today but also one that is scalable and flexible to accommodate new trends in the future. WhatsApp, Facebook, Instagram, Pinterest, and SnapChat did not exist a 15 years ago and now businesses, online and offline, are struggling to accommodate the influx of data that is flowing about customers from social media.

The mistake that businesses make is they look at customer data as part of a product while it is completely independent of any product and/or vendor. Customer data structure should be completely independent and should be able to accept data from any product or channel as long as it adheres to the structure designed to meet the specific needs of the business.

Once the proper structure, for data to be collected and organized, is established then the business has the flexibility to leverage the unique advantages of different systems to collect different pieces of customer data. On top of that, the business would have a bigger flexibility of leveraging different marketing and customer engagement systems to serve its needs because they have the data that they can feed into those system to engage with their customers properly.

If the primary goal of a business is to create a customer then it goes without saying that the first thing the business needs to do is to know what kind of customer they have and that can only be done by properly planning to collect and organize the “right” customer data that is “relevant” to your business.


Customer data creates opportunities and optimizes your marketing efforts

The power of data is that it allows businesses to have visibility about potential opportunities, ideas, and ways to optimize their spend. For example, businesses can send smaller marketing campaigns to a specific target with relevant content, which would reduce marketing cost while increasing revenues. Data becomes more critical on social media as you want to make sure not to target your own customers when you are looking for new ones.

Data creates opportunities as it reveals trends and sometimes a segment of customers that your marketing team never thought about. This would would enable the business to create different engagement campaigns to maximize the revenues from the newly identified segments.

Data is like the fuel that the business needs to operate whatever customer experience systems they get. The cleaner the fuel the better those systems would operate but without it, no matter how sophisticated the technology is, you will only achieve a fraction of what you should.

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