Why Does My Wife Get (So Many) Duplicate Catalogs?:  The High Cost of Low Quality Customer Data

By Michael Lowenstein

  Michael Lowenstein, CPCM, is managing director of Customer Retention Associates, a customer and staff loyalty program development, research, and consulting firm located in Collingswood, New Jersey (www.customerloyalty.org).

  With over thirty years’ management and consulting experience in customer and staff loyalty research, CRM, loyalty program development and refinement, customer win-back, service quality, customer-driven corporate culture, and strategic marketing and planning to draw on, he is an active speaker, workshop facilitator, and trainer, and he is a regular featured contributor to three customer loyalty newsletters.  His keynote, general session speaking, and workshop facilitation assignments have been in the United States and Canada, Europe, South America, and Africa.  He also provides expert customer loyalty commentary and articles for several professional CRM sites on the Internet.  

   Michael is the author of two widely-regarded books:  Customer Retention: Keeping Your Best Customers (1995), and The Customer Loyalty Pyramid (1997).  He is also co-author of Customer WinBack: How to Recapture Lost Customers – and Keep Them Loyal (2001).   Additionally, he is a contributing author to Redefining Consumer Affairs (Society of Consumer Affairs Professionals, 1995), The Answer Book for Customer Service Managers (Bureau of Business Practice/International Customer Service Association, 2000), and Customer.Community: Unleashing the Power of Your Customer Base (Jossey-Bass, 2002)

   He has been a customer loyalty instructor for Pennsylvania State University and the American Management Association; and he holds an M.B.A. degree in marketing from the University of Pittsburgh, and a B.S. degree in economics and marketing from Villanova University.  He is listed in several international, national, and professional Who’s Who directories.  His clients include First Union, Toyota, Prudential, Westvaco, Cigna, Charles Schwab, Borg-Warner, Sygma, Comcast, Baptist Health Care, Metropolitan Life, Microsoft, Alliance of Community Health Plans (ACHP), Daimler-Chrysler, and Georgia-Pacific.  

   Customer Retention Associates specializes in helping clients optimize customer loyalty and value through customer and staff loyalty research, loyalty program development and refinement, loyalty action training for front-line staff and management, and customer save and win-back protocol development.  The company is a founding member of the CRM International Consortium (CRMIC), an affiliation of independent CRM and customer loyalty practitioners from around the world, which is based in Europe.  The mission of CRMIC is to offer leading-edge customer loyalty and value solutions.

   First off, let me admit something:  in my household, we do our share of direct response shopping.  A wrought iron floor lamp from Morocco and a wall clock from France for the kitchen, a cast brass walking stick holder from New Zealand for the foyer……well, you get the idea.  As a result, our family, especially my wife, gets a ton of catalogs and other promotional mail.  Not a day goes by that she doesn’t get two of the same catalog, one addressed to her name when she was previously married and one addressed to her name now.  Even though we’ve been married for several years, these catalog companies are obviously using databases that are neither clean nor current.

   Clean and current data are but two aspects of data quality.  According to the Navesink Consulting Group, data are of high quality “…if they are fit for their intended uses in operations, decision-making, and planning.”  That means the data:

1. Are free of defects:  accessible, accurate, timely, complete, consistent with other sources, etc.
2. Possess desired features:  relevant, comprehensive, proper level of detail, easy to read and interpret, etc.

   Using these criteria, no customer database is error-free, and the high level of erroneous data has become a high-cost problem for suppliers and an annoyance for customers.  In a recent study, close to 80% of consumers polled said they dislike receiving duplicate pieces of mail for the same promotion.  But, names can also be misspelled, or mail pieces can be sent to former residents or the wrong address.  High quality data and the sophisticated statistical techniques to analyze this information are absolutely essential for successful customer programs and processes.  Everything is potentially important in customer relationships - historical purchase data, essential demographics, and life style characteristics – so suppliers are becoming increasingly concerned. 

   The range of estimated errors in most databases is quite broad.  I’ve seen percentage figures that go from the low single digits to forty percent, and higher.  Errors can come as a result of keying errors, misheard names and addresses, or straightforward multiple entries of the same data.  They can also arise from poor list merge-purge programs, errors when data streams are integrated, infrequent cleaning, and so on.

   Costs associated with poor data quality go well beyond the easily identifiable, and obvious, waste from mailing duplicate merchandise catalogues.  They include dealing

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with customer complaints caused by data errors, and the staff costs involved in checking
databases, finding missing data, and fixing incorrect data.  Order entry staff, for example, may spend up to 25% of their time performing these tasks.  In a company with 20 people on this staff, that would equal 5 effort-years annually.  Further, if the loaded cost for each of these staff members is $50,000 per year, the annual cost associated with data errors – in just this one area – would be $250,000!

   Lutheran Brotherhood, a member-owned fraternal benefits organization (mutual funds and annuities, insurance, estate planning, college and retirement programs, etc.) has over 2 million member names and addresses spread across several product and service line databases.  In addition, they have 6 million names in their prospect database.  They often ran into customer service problems, one of which centered around delivery of their bi-monthly magazine.  If a household had multiple members, and they requested multiple copies, there were questions about why they were getting only one copy.  Also, like my wife with merchandise catalogues, the same member might get multiple copies of the magazine even if they should have received only one.

   The organization was principally using front-line staff to rectify member data quality problems, but this was both expensive and inefficient.  Lutheran Brotherhood undertook a process to centralize all member information into one database (customer data integration), so that employees would have a complete view of their members.  This was a proactive and positive first step, but it didn’t eliminate the bigger problem of duplicate names and addresses.  Staff were still responsible for the searching and matching process, functions that were costly, time-consuming, and negative for morale.  According to JoAnne Gibbs, business analyst for Lutheran Brotherhood:  “We were spending too much time entering and cleaning duplicates.”

   Lutheran Brotherhood solved this issue by using advanced linking software, in this case provided by Innovative Systems, Inc., to de-duplicate member and prospect names from the database.  Their entire file of 8 million names can now be cleaned for duplicates in four hours; and, as Gibbs concluded:  “Our use of the product saved us from duplicating a total of 482,000 customers and prospects.”  Much of the problem surrounding magazine delivery evaporated as a result.

   Data quality upgrade efforts such as these are usually transparent to customers, and they should be.  The real rewards of higher quality data, however, are improvements in areas of customer relationships such as service and market research, and greater efficiency in marketing and other customer-related processes, making CRM activities more productive and consistent.