Executive summary of “Reverse use of customer data: implications for service-based business models”

Journal of Services Marketing

ISSN: 0887-6045

Article publication date: 7 October 2014

435

Citation

Beal, B. (2014), "Executive summary of “Reverse use of customer data: implications for service-based business models”", Journal of Services Marketing, Vol. 28 No. 7. https://doi.org/10.1108/JSM-09-2014-0306

Publisher

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Emerald Group Publishing Limited


Executive summary of “Reverse use of customer data: implications for service-based business models”

Article Type: Executive summary and implications for managers and executives From: Journal of Services Marketing, Volume 28, Issue 7

This summary has been provided to allow managers and executives a rapid appreciation of the content of the article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefit of the material present.

In George Orwell’s novel “Nineteen Eighty-Four”, citizens were frequently reminded that they were under constant surveillance with the warning “Big Brother is watching you”. For them it was the ruling party of the totalitarian state which was watching. Today, it is firms which are competing with one another for our business who provide the surveillance, and it is amazing just how much stuff these big organizations collect about us from watching and weighing up our purchasing habits.

This is all well and good if it is to better serve customers and in doing so ensure the survival of the business (not so good if the motives relate to financial exploitation, information misuse and invasion of privacy). However, this customer data usage – often referred to as customer relationship management – supports firm’s internal processes, including segmentation, cross-selling, identification of the most profitable customers, supply chain management and rewards for the most loyal or profitable consumers. Through the use of this customer data, firms have been able to adapt to fluctuating market demand, understand rising consumption patterns and manage their customer loyalty programs.

Companies’ traditional use of customer data can also be useful for customers but in an indirect way through, for example, category management (better fit between customers’ needs and the company’s product categories) or direct marketing campaigns (customers are provided with targeted promotions of products that they find relevant). In these cases, of course, customer data is subordinate to the firms’ interests. But what if the use of customer data was reversed – in other words if a firm could convert its customer data into information that directly supports customers’ value creation?

In “Reverse use of customer data: implications for service-based business models” Hannu Saarijärvi et al. provide examples to illustrate the concept as they explain how firms’ roles in customers’ value creation might be reconfigured.

Fortum, a major Finnish energy supplier serving both residential and business customers, launched its Fortum Home Device to offer customers accurate, real-time energy consumption data, enabled by remotely readable electricity meters. Customers buy a device that helps them access their own data conveniently. Accurate electricity consumption data, combined with technology and suitable metrics, then get refined into meaningful and value-supporting information for customers. The service is targeted at customers who want to monitor and track their own energy consumption, set targets for daily energy consumption and learn to conserve energy. In this case, the customer data (i.e. electricity consumption) is not only used for the benefit of the firm, to better serve its purposes, but also refined and returned to customers through a device installed in customers’ homes. Consequently, the firm offers electricity as resource, and then through the device, the firm provides customers with additional resources that support their value-creating processes, related to economical and environmentally sustainable living.

In Finland, Kesko Food and Tuulia International combined to introduce Nutrition Code, an Internet-based application which combines point-of-sale data generated by Kesko’s customer loyalty program with nutritional information about groceries. This nutritional input is collected from a food content database maintained by the National Institute for Health and Welfare. To calculate customer-specific nutritional profiles, the service compares customer-specific purchasing data with nutritional recommendations provided by the National Nutrition Council. Customers can monitor how healthily they are eating and even get expert advice on how to enhance the quality of their diets. This is another example of customer data being used not just for the benefit of the retailer but also the customer.

Fiat has established a service application called Fiat EcoDrive, which helps customers drive their cars more economically. The car manufacturer gathers every piece of data that is generated as customers drive, then converts it into meaningful information before giving it back to customers for their use. The data is stored on a USB memory stick, then transferred to the customer’s computer and analyzed further by the service application. The application uncovers interesting aspects of the customer’s driving style, helping him or her identify opportunities for driving more economically. Customers can also set targets for their personal carbon dioxide emissions, and they receive updates about how much money they have saved with their changed driving style.

From the managerial point of view, reverse use of customer data reconfigures firms’ roles in customers’ value creation. This reverse use of customer data introduces new revenue models either through embedding reverse use of customer data into the existing set of service offerings or through establishing new service concepts with their own revenue logics. It is a mechanism through which service firms’ reposition themselves more favorably in relation to competitors; basing competitive strategy on serving the customer with their own data is a unique competitive advantage that is hard to imitate. Additionally, reverse use of customer data enables access to specific market niches whose needs could otherwise be out of reach and underserved.

To read the full article enter 10.1108/JSM-05-2013-0111 into your search engine.

(A précis of the article “Reverse use of customer data: implications for service-based business models”. Supplied by Marketing Consultants for Emerald.)

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