Retention and Relationships

Just read an article about Oracle in an IT trade mag, focused on Oracle’s drive to provide comprehensive integrated software solutions. What struck me immediately is how unrealistic this objective is.  Why?

1. There’s always something new.  A work environment doesn’t stop at the desktop any more, so virtually anything can be part of the workspace.  Twitter is now a work tool.  So is IM, Expensify, and Tripit.  Any worthwhile marketing solution these days is web-based (excluding analytics, more on that some other day), and with improved integration options, these solutions can be part of the workspace in minutes.
2. Someone else does it better.  Expensify is a great example of this as well.  Fast, easy, inexpensive, and I can (and have done) expense reports while waiting to board a plane.
3. It’s virtually impossible to change everything.  Ripping out one system and replacing it with another is tough enough.  Doing that to every system is essentially impossible.  A long-term migration plan to consolidate on one platform is great, but by the time its done, most of the apps will be obsolete by someone else (see #1 and #2).

Why is this on my mind?  I’m seeing big companies (and I mean really big) try out ideas for the first time in a long time, using tools that would never have been considered just a few years ago.  It’s great – finally the SV mindset of using right tool for the job is gaining acceptance everywhere.

I think the separation between mission critical and not so mission critical is allowing interesting ideas to flower, extending, improving, and leveraging the talent already on hand.  While my area of interest is focused on marketing, this trend seems to be everywhere now, and bodes well for the future competitiveness of US companies.

…is my latest post at VentureBeat’s Entrepreneur Corner.

My intent was to make sure entrepreneurs confronted the fact that in the vast majority of cases, they are taking market share or spending from someone else, so must plan accordingly. Start with a great product or service, but understand how to keep customers engaged.

If there’s one unexpected mental shortcut I’ve learned from examining dozens of corporate loyalty efforts and customer databases, its that just about any idea will work for 20% of customers. The problem for marketers? You can’t predict which 20% with a lot of certainty, and there’s only partial overlap between any particular 20%.

Price promotion? 20% (probably more, but you get the point)
Loyalty program? 20%
Recognition? 20%
Special event? 20%
Early access to new releases? 20%

The list goes on. A few get more, many get less, but 20% is a good rule of thumb. Why 20%? Hard to say, but that’s what the data says.

The takeaways?
1) Incorporate as many interesting ideas as you can manage effectively, since each will produce results. But don’t stretch too thin, or all of them will drop off.
2) Choose ideas that do not overlap, to ensure maximum return and responsiveness.
3) Budget has an impact, no doubt. Stack ranking from cheapest to most expensive isn’t a bad idea.

There’s a whole separate group of initiatives that only 1% will respond to…that’s for a later post.

Did an interesting interview with the CMO Council as part of their loyalty research initiative at loyaltyleaders.org, which will show up in their report in a few months.

As with most interviews, some stuff comes out that wasn’t planned ahead of time. But what stuck with me were my comments to focus on just a few social media/marketing options vs. going after many. So I wanted to expound a bit.

Many companies are paralyzed by social media and how it relates to customer retention. Like anything else, start simple. Pick one area and start, learning more and determining how to incorporate the results into daily operations. Over time, the relationship between actions and results will become clearer, and you can make the business case for increased (or decreased) investment.

Once you master one, add another and go through the same process. It doesn’t have to be difficult. What seems to cause so much uncertainty is the proliferation of options that all appeared at once. So my guidance is to simplify, start narrow, and expand over time.

My latest article for the web channel at Multichannel Merchant.

I think my point didn’t really get across, but its mostly my fault.  The bigger point here is the separation between loyalty and value, and that customer experience is a great driver of loyalty, which in turn improves value.  Since this is part of a longer series of columns that will eventually tie together, I’ll back and rethink this one.

…is my latest article at Chief Marketer.  Here’s an excerpt:

“It’s inevitable that customers leave.  Your customer base is constantly evolving, and your customer loyalty and retention metrics likely hide that natural dynamic. Traditional measures look at full attrition and ignore shrinkage, maintenance, and growth. Savvy companies look deeper and respond to incremental behavior changes within their customer base.

The two measures presented below, dollar retention rate and replacement rate, let you spot issues in your retention and customer development efforts early and focus your decision making on the results you really want – revenue and profit.”

Read the full article at Chief Marketer.

This was prompted by internal research we’ve been doing to identify trends in customer behavior that can help predict larger shifts in revenue in the future.  We’ve found a lot of interesting stuff and spun off many ideas, of which this was one.

Over at VentureBeat’s Entrepreneur Corner I did a guest posting on how entrepreneurs should think about customer loyalty at different stages in their company’s development.  Click here to read it.

I had a conversation with a respected analyst a while ago where 90% of the time was spent on questions that were not part of the original list for the discussion.  Those were the questions that led to the most interesting dialog on her topic.

It led me to think more deeply on the nature of decision making and how asking the right questions leads to better decisions.  (Yes, I do think about this stuff for fun.)  With the coming explosion in data availability, the ability to ask good questions will only increase in importance.

What’s the problem?  Quantity vs. quality.  The underlying task of using information to generate insight and of using insight to making good decisions still takes skill and talent.  Many people have never had to think through how to enable good decision making, and more data won’t change that.

One way to solve this problem is a simple two-part test for any information gathering and decision making process.  It’s not rocket science.  But I see surprisingly few people pay this much attention to the process.

The basic approach has two components:

1. What is the form of the answer?
2. How will you use the answer to make a decision?

Applying these two tests to any inquiry help isolate useful and interesting questions from the merely interesting.  It’s not really meant for a casual conversation, but more for the preparation stage of a presentation or discussion.

Let’s take a simple example.  “Who is your core customer?” is a pretty typical question in my business.  But it’s not a terribly useful question, since the response will likely be a generic description of the largest customer segment, and there isn’t much you can do with the information, since the answer tells you nothing of why they are core or what the opportunity is among the group.

A better way to frame this is to work backwards.  I want to, for example, improve top-line revenue and profitability with minimal incremental spending.  So understanding core customers will lead to decision making around marketing targeting and allocation.  Based on that, what I really want to know is which customers have the highest potential for ROI given increases in marketing investment.  And since that investment will be different depending on their demographics and spending patterns, I really need to look at several segments, not just one. 

Given this need, a better way to ask the question is, “Which customer segments have the potential to grow with reasonable marketing investments?”  Which, of course, means you need to figure out your segments, not just your core segments…which leads to more questions.  You get the picture

Its easy to get stuck applying the frameworks you know to new things. Or worse, to not know frameworks that work.

So when I saw this post at Buzz Canuck, I realized this was a pretty good way of collecting all of WOM into a cohesive framework.  And while I don’t agree with all of the details, looking at WOM in terms of its effective half-life is a good organizing principle, especially when you apply it all the way to customer evangelism.

Many people think of Viral as equivalent to WOM, and try to shoehorn a viral element into every initiative.  Sean’s emphasis on events and high risk ideas is right on – its nearly impossible to light a viral fire without a very, very compelling meme.  Green Day has been selling out their semi-secret local tour in minutes with just a couple emails and a few sentences on their website, powered by fans spreading the word.  Add a few key critics invited to the shows, and the band is building buzz without a whole lot of effort.

Do you think the fans that scored tickets have been evangelizing?  You bet.  And yeah, I went and it rocked.

Amazing how an app can tip so quickly. Maybe its the connectors that let you post to multiple networks, so you only need to write once. Regardless, once Twitter recast itself as a microblogging service (vs. a party/barhopping planning tool) its become the defacto communication standard. I figure it will last about 6 months, since the noise has quickly become deafening.

Facebook is already there. All the extra features that put additional information into the feed have crowded out the really interesting stuff – what friends and acquaintances are really doing and thinking about.

I remain convinced, however, that opt-in peer to peer communication will supplant email as the main communication medium within a couple years. This means the cheapest marketing medium will continue to implode, and marketers will need to keep innovating to stay up with their customers.