Although survey respondents say the value of customer analytics is declining, our findings show these analytics clearly drive value. Focusing on three factors can help companies reap the benefits.
With the trend toward investment in customer analytics in full swing, this business function
could be expected to rank high on the top management agenda. However, results from a
recent round of the McKinsey-sponsored CMO Survey suggest that while the budget spent
on marketing analytics as well as its application are clearly increasing, the value that customer
analytics is perceived to bring to companies’ success is declining rather than growing.
To clarify the somewhat inconclusive CMO perspective on customer analytics, we surveyed
700 senior marketing and sales executives to shed light on three questions:
To what extent does customer analytics actually contribute value to companies’
What are the key success factors for reaping the benefits of customer analytics?
How can marketers ensure the future competitiveness of their organization’s
The impact of customer analytics on corporate performance is significant—and clearly underestimated
We found that the importance of customer analytics for commercial success is not perceived
as increasing (as would be assumed given that ever more investments are flowing into this
field). In contrast, it is viewed as less important for corporate performance than several other
areas of marketing and sales—even less so than two years ago, when we last conducted our
survey of senior marketing and sales executives. In that 2013 survey, customer analytics was
ranked fifth in terms of importance among 13 areas of marketing and sales, while in 2015 it is
only ranked eighth (among 12 areas) (Exhibit 1).
However, there is every reason for marketing and sales executives (and their chief executive
officers) to reappraise the importance they attribute to customer analytics and adapt the way
they strategize and manage this topic, as customer analytics does indeed create significant
value. As our survey results show, extensive use of customer analytics has considerable
impact on corporate performance. Companies that make extensive use of customer analytics
are more likely to report outperforming their competitors on key performance metrics, whether
profit, sales, sales growth, or return on investment. For example, companies that use customer
analytics comprehensively report outstripping their competition in terms of profit almost twice
as often as companies that do not (Exhibit 2).
2. Three factors are essential for reaping substantial benefit from customer analytics
According to our survey’s findings, marketers should focus on the following key aspects to
leverage their company’s customer analytics potential.
Striving for excellence in customer analytics matters (as opposed to a merely good
average). More than 85 percent of companies that report extensive use of customer analytics
(in terms of IT, analytics, and its execution) claim their company achieves a significant value
contribution from customer analytics. This compares with around 20 percent for low users
of the function, and some 30 percent of moderate users—suggesting that companies start to
reap substantial benefit from customer analytics only when they achieve excellence, i.e., when
their function can be considered state of the art. Just moving from a low to a medium level of
maturity will merely generate limited success (Exhibit 3).
This has particularly important implications for managers and their decisions on what needs to
be invested in their organization’s customer analytics to be competitive in the future. They need
to determine the performance gap between their current customer analytics and state-of-the-art
customer analytics in their industry, and to ensure that their additional spending on customer
analytics stands a fair chance of bridging this gap. Otherwise the additional spending will—despite the best of intentions—turn out to have been a sunk investment right from the outset
(because it will not pay off eventually).
Establishing a culture that values fact-based decision making and analytics. Vital is a
culture that is not focused purely on IT and analytics topics, but approaches customer analytics
holistically. Although investments in IT and skilled employees are important, these investments
alone will not deliver value. Leadership that expects fact-based decisions and an organization
that can quickly translate those decisions into action are qualities more likely to lead to success
than companies focused exclusively on IT.
First, we find that the execution and organizational aspects of customer analytics (such as a
culture of fact-based decision making, analytics valued by the front line, management attitude
and expectations) correlate most with the value contribution of customer analytics (Exhibit 4). This
suggests that IT and analytics expertise are obviously necessary to create value from customer
analytics, but it is the culture and organizational setup that moves the needle.
Secondly, interesting findings emerge when we focus on the subdimensions within analytics, IT,
and execution that are most relevant to ensure that customer analytics creates value. It becomes
apparent (see Exhibit 4) that having pragmatic and actionable foundations with the right cultural
mind-set in place within the organization is more important than the perfect solution.
Within execution and organization, for instance, fact-based decision making and management
expectations are more important than the speed at which these insights are put into
action. Within analytics, the focus is on delivering the right actionable insights, and less on
the fast development of new models. Looking at IT, a similar pattern emerges: a pragmatic
360° data mart that builds the foundation for customer analytics is more important than
the complete (automated) linkage of all IT systems.
A key success factor is therefore to examine customer analytics holistically, including IT,
analytics, and execution/organizational setup, and to pragmatically improve on all dimensions.
Securing senior management involvement in customer analytics. High-performing
companies are led by data-savvy C-level executives who understand the importance of and
involve themselves in customer analytics. We find that of those companies where senior
management is not involved extensively, only 28 percent report a significant value contribution
of customer analytics. This contrasts with 69 percent of companies with senior management
involvement in customer analytics that say that customer analytics drives value (Exhibit 5).
Specifically, looking at the level of management that should be involved, it becomes clear that
what drives the value contribution is top management/board involvement. If the company has
established a role within the top management team (TMT), such as via a chief commercial
officer, more than half of the respondents (53 percent) stated that customer analytics contributes
significantly to value creation. If only senior management is involved but not the TMT, this drops
to just 29 percent, close to the value of no senior management involvement at all (20 percent).
Further organizational setups that increase the value contribution of customer analytics are a
management board that discusses customer-related topics and customer boards that fully
embrace the customers’ perspective. If a company has set up a board of senior management
that discusses customer-related topics and that has the power to take decisions in that realm,
the company is far more likely to reap the benefits of customer analytics. The same holds
true for customer boards. Here it is interesting that while true customer boards (i.e., regular
discussions with a selected group of customers who actually buy the service/product) help
most, even a customer advocacy board is helpful. On a customer advocacy board, employees
put themselves in the shoes of customers and assess the company’s products and services
from a customer perspective. This underlines the importance of mind-set. When employees live
customer centricity and the organization encourages this mind-set, the benefits from customer
analytics are easier to capture.
3. Benchmarking is the starting point for improving the value contribution of an
organization’s customer analytics
Because organizations start to leverage the full potential of their customer analytics only when
they reach a certain degree of excellence, any serious attempt at improving the performance of
an organization should start with benchmarking it against its competitors. This should examine
everything from the contribution and maturity of its customer-analytics efforts to how quickly
data is translated into action, how analytics reach frontline employees, the extent to which
decisions are fact-based, and management’s expectations and attitude.
Benchmarking insights such as these will provide a detailed breakdown of any performance
gaps, areas in which to invest, and a roadmap for taking a company’s customer analytics (and
its value contribution) to the next level.