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Straightforward Analytics: Finding the Missing Customers

Originally published July 26, 2012

Who are the individuals that we are not engaging as prospective customer? This is a question that came up in more than one recent conversation. In some of the cases, the directive for getting an understanding of those “missing customers” was driven directly by the CEO of the organization. The idea is to better understand market penetration at a very granular level, granular enough to be able to reach out directly to the unengaged individuals for direct sales purposes.

Interestingly, in some cases this request from the CEO was met with less enthusiasm by other key members of the senior staff, sometimes for more or less obvious reasons. First, the idea of the determination of market size could be perceived as a way of pointing out shortcomings of many of those same managers. One prime example: If you were able to determine that the number of unengaged individuals is much bigger than estimated, that could only lead to questioning the sales and marketing team’s deficiencies in reaching individuals.

There is one question that immediately comers to mind when I hear about requests for metrics and measures like the “missing customers”: What are you planning to do with this information when you get it? This goes beyond the simple response of reaching out to those individuals, for a few reasons, such as:

Clearly defined expectations for change: Even if you knew who those non-customers were, what would expect to happen as a result of this knowledge?

Modifications to the business processes: Let’s take the next step – if you knew what you wanted to happen, what business process changes need to be instituted to make sure it happens?

The deliberateness of non-engagement: This last point was the elephant in the room during one of the discussions, especially in the situation where the products being sold are typically sought out by the prospective customer. In many cases, if the individual is interested in the product, he/she reaches out to the vendor. If the individual has not “self-revealed,” then that non-engaged individual is likely deliberately not interested in the product.

Coupling these last few questions with the lack of senior management enthusiasm actually pointed out something quite different: The measurement desired by the CEO did not carry a lot of meaning from a business performance improvement perspective because the information was not directly actionable. But more interestingly, what is the possibility of deriving this measure, and how do you figure any of this out? This exposes the biggest problem (and one that, naturally, was shared by many of the dubious senior managers): If you have no specific information about the individuals that you don’t know, there is no effective way to determine who they are!

However, that allows us to be more creative in considering the potential measure and corresponding opportunities for improving the outcomes. First, we can change the concept of “missing customer” to “hidden prospect” and soften the question as to whether any individual that is not engaged is an actual failure on behalf of sales and marketing or presents an opportunity for differentiating those that are never going to become engaged from those that might eventually convert to being customers. That leads to the next idea, which is to determine whether the hidden prospects are deliberately hiding or are inadvertently missed.

While difficult, this is not impossible. Rather, it involves finding the right data to ask a different question: If we had data about the total population of individuals within a region and could identify key characteristics about the customers we did know, could we identify the set of individuals that share those characteristics but are not customers? We could certainly purchase data sets that enumerate a list of individuals within a specific region – those are pretty easy to get. At the same time, could we examine the set of prospects that had been engaged by sales and marketing yet never converted to becoming customers? Let’s call those folks the “failed prospects” for the purpose of this discussion.

This analysis is a more digestible task for two reasons. First, it provides an enumeration of individuals that have profiles that are similar to our target audience but remain unengaged. Second, it helps us to identify potential correlations across the profiles of the unconverted prospects. The next step is to do a comparison of the characteristics of the non-engaged people to those of the failed prospects to see how much overlap there is.

This is not exactly what the CEO wanted, but enables us to provide some baselining of the success of the current activities and, at the same time, allow us to craft different stories that can point to opportunities for business process improvement. For example, if we can examine the pool of non-engaged individuals and see that their profiles resemble the failed prospects, we could make an argument that the marketing and sales processes are more efficient than originally thought since they accurately avoid seeking out individuals with a very low probability of conversion. Alternatively, it might point out the differences between the non-engaged and the failed prospects to help the marketing and sales teams adjust their processes in classification and segmentation and change the ways they reach out to potential customers.

Either way, there is a need for adjusting the CEO’s expectations of the desired measure. Here, the key lies in understanding the desired outcomes, revising the desired measure, and then realigning the methods by which the desired outcomes can be achieved. This approach will help bring the necessary enthusiasm to the senior managers and engage their interest in using reporting and analysis to find the missing customers.

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