In my latest post at VentureBeat’s Entrepreneur Corner, I look at why forecasting customer growth is so important for valuation, venture capitalists, and cash management.
I like writing for them since they have a very different approach to content than other places I’ve published. They are on a high volume, short attention span schedule, so content must be punchier, tighter, and very focused.
If there’s one writer I never tire of, its Seth Godin. Yesterday’s post on Brands That Matter was a perfect case in point. Seth’s been banging on the “be different” drum for a long, long time. But judging from most marketing today, he needs to keep pounding on the idea. He’s still making the case for brands to stand for something, to make sure the customer experience is consistent with the brand identity, and to continue to come up with ways to stay fresh. I’d argue that resource constraints often get in the way, but deep down I know that’s no excuse.
On that note, today’s post on Not So Good At Math shows the other side of the coin – that many marketers aren’t necessarily strong mathematicians. That begs the question – if they aren’t good at creating interesting and distinctive brand identity, and aren’t good at generating insights from underlying data, what are they doing in marketing to begin with?
…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.
Pandora Radio logo
I love Pandora. Pandora rules. I wish everything was like Pandora. I don’t really have to think or do much, and an incredibly accurate stream of stuff I want to hear just appears like magic. I can tweak it to get it dialed in to my tastes. And I now buy MUCH more music than I used to, discovering new music and buying on Amazon so Pandora gets a little affiliate revenue.
The closest we see to this ideal today is Amazon and a few other online retailers. Borders appears to be using my purchases (finally!) to tweak the email they send me, which is great.
This is the next frontier for retailers and manufacturers. A whole generation has had their priorities reoriented, much as the Great Depression did 70 years ago. Consumers will think a bit more before buying and will be much less willing to use credit to finance their lifestyle. So selling will need to move to a more relevant, customer-specific mindset if a retailer wants to succeed over the long term.
There are already many companies focusing on this space, but it will be a long time before clear winners emerge. I think the winners will likely be those who can distribute the experience wherever customers want to consume it – which means we still have a ways to go.
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:
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
Good piece at Harvard Biz Publishing today, but most of the community commentary misses the point. Offering price promotions to all customers isn’t loyalty marketing, its price promotion. Some customers respond only to this message, but many would be just as responsive to a different message (new product intro, local event, cross-sell to a recent purchase), to great service, or to the brand as a whole.
The authors rightly point out that usually only 20% of customers are profitable. But its not that simple, since what matters is the marginal profitability of the last dollar sold. You have to cover those fixed costs somehow.
A different interpretation of the tactic they criticize might be:
Resources are limited, so focus on the most profitable customers. If you have the resources to focus on unprofitable customers too, go for it, since they help cover fixed costs. But try to allocate your overall resources based on potential for future profitability, not evenly across all customers. Only when you are totally out of time, creativity, and employee bandwidth should you shift to pure price promotion.
I try to help a non-profit ”international neighborhood micro-center for artistic and intercultural life in San Francisco” with operating and marketing advice. They put on 120 events a year and I’d always advocated getting the word out about individual events. We looked at email, and while it would probably work, the overhead for so many was relatively high. (Almost everyone is a volunteer and resources are scarce.)
Enter Facebook Events. Set up the event, send an invite, and voila, there’s your email notifications. Its timely, professional, and useful. Now I know what’s coming up and can make quick decisions to change my schedule. It doesn’t feel obtrusive, since I joined the group of my own volition and can control messaging. It shows the intersection of time-based content, opted in peer to peer communication, and user-controlled media streams (i.e. I still choose email over text) can and will be incredibly powerful.
I expect to see attendance max out going forward.
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.
