Marketers, Go Back to Basics

"There's so much that's sexy in social media and in mobile right now," he said. "Anyone who's bought a smartphone in the last 18 months is doing some things they hadn't imagined yet." When they read about a big company launching a cutting-edge initiative, they want in — but the economics usually only make sense for large companies that have experimental budgets. Instead, he says it often pays to focus on bread-and-butter marketing (like direct mail) or even on technical innovations of the past few years that are effective, but less novel (like mobile websites).

In the gaming industry, direct mail is still king.  In fact, it's not really close with a response rate of over 4X then email alone.  Yet, many marketers get caught up in the sexy new marketing trends.  Social gets more attention than direct marketing, even though direct marketing brings much more profit.  Likes are revered, yet direct mail is boring and so yesterday.  Sometimes whats worked in the past is what will work in the future.  

Best Time To Send Email

Interesting article on times to send emails.  The research included 21 million different emails and the findings are similar to what I have seen in my career.​

One of the most important conclusions is that sending newsletters during readers’ top engagement times of 8 a.m. – 10 a.m. and 3 p.m. – 4 p.m. can increase their average open rates and CTR by 6%.

However, optimizing email timing takes more than awareness of top engagement times. As our research points out, it’s a combination of many factors, including knowledge of time zone differences, your subscribers’ daily routines and the practices of other marketers. Find out more for yourself:

Remember to test on your own data.  I have seen different optimal open rate times between properties in the gaming industry, so test many different times and days and determine what the optimal time for your organization.

Emails have the best results within the 1st hour after delivery. This is when 23.63% of all emails are opened. But 24 hours after delivery, the average open rate is close to zero.

Almost 40% of all messages are sent between 6 a.m. and noon. This can result in inbox clutter, and significantly decrease results for these emails.

Messages sent in the early afternoon have a better chance of being noticed and consequently achieve better results: up to 10.61% open ratio and up to 2.38% CTR.

Subscribers’ top engagement times are 8 a.m. – 10 a.m. and 3 p.m.- 4 p.m. with up to 6.8% average open rates and CTR.

​I like the afternoon hours.  It has a high engagement rate and most emails are sent in the morning hours.  The more you can stand out, without being too late to be stale, the better success your email campaigns will have.  

Remember, once an email sits for 24 hours, there is hardly any chance you will get a conversion.  ​

The Four Basic Forms of Customer Loyalty →

Great article about the types of loyalty you can achieve as a business.  It really shows there is only one form of loyalty, because the other forms are not lasting and don't represent a sustainable business.​

Purchased Loyalty

The best example of purchased loyalty is a customer rewards program. Other examples include memberships, coupons, and rebates.

Basically, purchased loyalty pays customers to be loyal, and there is nothing wrong with that practice. In many industries and market sectors the purchased loyalty strategy works extremely well.

The main problem with it is that purchased loyalty can be easily stolen because the customer is loyal to the program, not the company.

Purchased loyalty is a portion of the loyalty program, but can't be the basis for the business.  Someone can always come over the top and create a richer loyalty program and forces you to squeeze your margins even more to compete.​

Convenience Loyalty

The local market, the corner dry cleaner, the coffee shop on your way to work. You might be loyal to those businesses simply because they're convenient. You're likely to remain loyal unless competitors come along who are equally or even more convenient.

Location, location, location.  This loyalty is a great advantage as a business, but doesn't mean the guest will be truly loyal because of it.  When you have a convenience advantage, it takes a lot more for a customer to defect, but don't give your guest a reason and this advantage can be sustained for a long period of time. ​

Restricted Loyalty

Restricted loyalty exists when there is no other game in town. Your cable company may enjoy restricted loyalty, especially if you live in a rural setting and there is no competition. (Although it is easy to argue that other options do exist, like online services.)

Utilities tend to enjoy restricted loyalty. Most cities do not have multiple electricity providers.

Monopoly's are a wonderful thing if you find yourself in one.  They make life very easy as a business.  However, they rarely last for any period

of time because once someone else sees they can steal your market share, they will.​

Also, businesses tend to get lazy when they have a monopoly.  They don't take care of the customer and deploy strategies that are more bottom line ​driven, instead of customer focused.

True Loyalty

True loyalty is earned loyalty. True loyalty is undying allegiance to a brand or product based on an incredible level of satisfaction.

Customer satisfaction breeds true loyalty. When you are highly satisfied, when your needs are completely met and your expectations are consistently met and even exceeded, you simply cannot imagine using another product or service.

True loyalty is the holy grail of customer satisfaction and is something every business should aspire to create.

If you take care of your customer and provide a high level of satisfaction, you can overcome any of the other loyalty forms.  Customers will travel and accept less from you than your competitors if they truly feel cared for.  Always strive to build an organization around true loyalty, it's the only form of loyalty that is sustainable.​

Google, destroyer of ecosystems

The truth is this: Google destroyed the RSS feed reader ecosystem with a subsidized product, stifling its competitors and killing innovation. It then neglected Google Reader itself for years, after it had effectively become the only player. Today it does further damage by buggering up the already beleaguered links between publishers and readers. It would have been better for the Internet if Reader had never been at all.

I think the conversation here is what free does to ecosystems.  When businesses as big as google offer free services, they are killing the value of said services.  When the value of a service is perceived to be 0, it effectively puts everyone out of business who has to make money from a similar service.  Then, because a big company is making no money from the service and every company eventually starts looking for ways to improve bottom-line, they cut the service because it is nothing but a cost.​

I think we see this with the tablet market, even though tablets are being sold and not given away for free, they are being sold at a loss to gain market share.  Eventually that devalues the market for tablets and nobody wins.  The tablet makers who have the market share eventually get tired of selling at a loss and stop innovating and the tablet makers making money will get out of the business because they can't compete.  Of course Apple is more than likely the anomaly in this situation.​

Content providers on the internet already went through this.  They have now seen giving content away for free has devalued the content and trying to charge after the fact remains difficult to say the least.  ​

In my humble opinion I would like to see businesses compete on innovation instead of price (or lack of price).  In this case, everyone wins.  The best services, products and content survive and the companies that are producing them will be around for a long time because they are making profits.  Everybody wins.  Good for the customer, good for the business.

FiveThirtyEight's Nate Silver Explains Why We Suck At Predictions (And How To Improve) | Fast Company

When human judgment and big data intersect there are some funny things that happen. On the one hand, we get access to more and more information that ought to help us make better decisions. On the other hand, the more information you have, the more selective you can be in which information you pick out to tell the narrative that might not be the true or accurate, or the one that helps your business, but the one that makes you feel good or that your friends agree with.

This is a great article on using data and predictions.  I just bought this book as a good friend of mine suggested it is a great read.  I always hear "You can make numbers tell whatever story you want."  Ain't that the truth?  So many times colleagues of mine hold on to a certain part of the data that tells the story they want to tell and soon it becomes truth, however this only helps them look good instead of moving the business forward.  

The Presentation Mistake You Don't Know You're Making - Heidi Grant Halvorson - Harvard Business Review

More is actually not better, if what you are adding is of lesser quality than the rest of your offerings. Highly favorable or positive things are diminished or diluted in the eye of the beholder when they are presented in the company of only moderately favorable or positive things.

This is an intriguing article on add-ons.  It is based on an interview, but there are interesting tidbits later in the article on consumer behavior.

Psychologists Kimberlee Weaver, Stephen Garcia, and Norbert Schwarz recently illustrated the Presenter's Paradox in an elegant series of studies. For example, they showed that when buyers were presented with an iPod Touch package that contained either an iPod, cover, and one free song download, or just an iPod and cover, they were willing to pay an average of $177 for the package with the download, and $242 for the one without the download. So the addition of the low-value free song download brought down the perceived value of the package by a whopping $65! Perhaps most troubling, when a second set of participants were asked to play the role of marketer and choose which of the two packages they thought would be more attractive to buyers, 92% of them chose the package with the free download.

As marketers we tend to find more and more to throw in, we call them soft or no-cost add-ons.  This is intriguing to see that may be negatively impacting the offer.  I guess when I look at it as the consumer, the more stuff there is doesn't necessarily make it worth more in my eyes.  Something to test for sure.

How to Repair Your Data - Thomas C. Redman - Harvard Business Review

No matter what, do not underestimate the data quality problem, nor the effort required to solve it. You must get in front of data quality.

Data warehousing is hard.  To build a model that works for the business users and have data quality that truly delivers "one version of the truth" takes dedication and a group that truly understands the business.

Address preexisting issues.

 There are some problems that have been created already, and you have no choice but to address these before you use the data in any serious way. This is time-consuming, expensive, and demanding work. You must make sure you understand the provenance of all data, what they truly mean, and how good they are. In parallel, you must clean the data.

We are currently in the process of doing this in my organization.  In fact, we are going to rebuild the entire data model.  Sometimes it's easier to start from scratch instead of figuring out what is wrong with the current model.  Of course, our model isn't that wonderful for the business, so this made the rebuild decision quite easy.

Prevent the problems that haven't happened yet.

...build controls (such as calibrating test equipment) into data collection; identify and eliminate the root causes of error;

Data warehousing efforts also fail because end users find the errors most of the time.  When this occurs, getting the organization to trust the data becomes a challenge.  There is always the questioning of if this data is right.  Proactively fix data and let end users trust the data, they will spend more time discussing strategy instead of fighting over data quality.

David Allmark: What do you tell a team that has failed? | 30 Second MBA

I have always believed you don't celebrate the victories and punish the failures.  It leads to everyone focusing on the outcomes, instead of taking calculated risks and innovating.  When failure is punished, teams tend to lean towards conservative programs that are sure fire, but minimal growth.  This leads to a stagnate team that doesn't drive large incremental value.

Is This Driving Incremental Revenue?

So I went to lunch with my daughter today.  We were out and about and she loves Tony Roma's, saw that we passed one and asked if we could go to lunch there.  When walking up to the door there was a "check-in with foursquare" sign on the front door.  So I did.

Mind you I was already there, already made my decision to eat there, was going to pay full price before I saw this sign.  I checked in and they gave me 10% off of my meal, for essentially doing what I was already going to do.  So why is this a good strategy?

I understand the whole social aspect of this check in.  This goes to all of my "friends" and they get to see I ate there.  But how many of my "friends" are paying attention to what I am doing, aside from those stalkers I have, by the way, stop reading this, but I digress.  How many people am I really influencing, enough to make up 10% for a meal I was going to pay full price?  I don't see it.  That is a lot of cost to overcome to drive something that can't be measured.

Am I crazy?  I just don't see this as a good business decision.  Just my thoughts.

In Search of the Ideal Groupon Discount - Rafi Mohammed - Harvard Business Review

50% off discounts attract the wrong customers, who I call uber-deal hunters. These deal-maximizers come simply for the big discount with little intention of becoming full price patrons.

This is exactly what I thought when Groupon first came out.  I remember doing 2-for-1 coupons at my families restaurant in California when I was a kid and we were very busy, but the customers never came back.  I quickly came to realize that the customers who look for those deals are always looking for the next big deal, not the next best product.  I like what Rafi has to say, ​smaller discounts for trial has a better opportunity for repeat guests.

Big Data's Human Component - Jim Stikeleather - Harvard Business Review

Machines don't make the essential and important connections among data and they don't create information. Humans do. Tools have the power to make work easier and solve problems. A tool is an enabler, facilitator, accelerator and magnifier of human capability, not its replacement or surrogate ... That's what the software architect Grady Booch had in mind when he uttered that famous phrase: "A fool with a tool is still a fool."

From my last post, I talked about humans being able to make the data actionable.  The understanding of the data that is used for the model is more important than understanding the ​math behind the algorithms.  Algorithms can find the patterns humans can't, however the algorithms can't determine if the answers are relevant. 

We forget that it is not about the data; it is about our customers having a deep, engaging, insightful, meaningful conversation with us

Exactly.​

Understand that expertise is more important than the tool.  Otherwise the tool will be used incorrectly and generate nonsense (logical, properly processed nonsense, but nonsense nonetheless).

The answers will be fancy, but will not help make decisions for frontline or CRM more effective.​

When we over-automate big-data tools, we get Target's faux pas of sending baby coupons to a teenager who hadn't yet told her parents she was pregnant, or the Flash Crash on Thursday May 6, 2010, in which the Dow Jones Industrial Average plunged about 1000 points — or about nine percent.

Humans should always be paying attention to the outcomes and put parameters around the use of automated answers.  Answers should be used in conjunction with other factors for the best decision.​

Although data does give rise to information and insight, they are not the same. Data's value to business relies on human intelligence, on how well managers and leaders formulate questions and interpret results. More data doesn't mean you will get "proportionately" more information. In fact, the more data you have, the less information you gain as a proportion of the data (concepts of marginal utility, signal to noise and diminishing returns). Understanding how to use the data we already have is what's going to matter most.

​

The Power of Subtraction →

This is something I try to subscribe to everyday.  While I don't necessarily agree with all 5 of his subtractions, I do believe that maniacal focus is what it takes to be the best at what you do.  To focus, one needs to subtract all of the noise that consumes businesses.  ​

Customer Experience Should Be Part of Your Business →

Appoint a chief customer officer

Over the past six years, we've seen an increase in the number of companies that have a single executive leading customer experience efforts across channels and business units. Whether firms call them a chief customer officer or give them some other label, these leaders sit at high levels of power in organizations...

There it is again, that title of Chief Customer Officer.  ​It makes a lot of sense.

Marketers Flunk the Big Data Test →

This is a great article on making data actionable in marketing.  This is the toughest part of Customer Intelligence.  Creating reports is so much easier.​

On average, marketers depend on data for just 11% of all customer-related decisions.

This is a disturbingly low number, but one that does not surprise me.  ​

But in today's volatile business environment, judgment built from past experience is increasingly unreliable. With consumer behaviors in flux, once-valid assumptions (e.g., "older consumers don't use Facebook or send text messages") can quickly become outdated.

In my industry what worked 10 years ago has no bearing on what works today.  Even what worked before the recession does not translate.  What your customers are doing today is more relevant than what they used to do.  ​

When we tested marketers' statistical aptitude with five questions ranging from basic to intermediate, almost half (44%) got four or more questions wrong and a mere 6% got all five right. So it didn't surprise us that just 5% of marketers own a statistics text book.

Marketing analysts don't even have statistics backgrounds.  Analysts who have SQL background and can get data are usually the ones that shine, however they usually don't make the best analyst.  Analysts are supposed to analyze data, not pull data.​

...dashboards often capture response-based metrics such as clicks and open rates that aren't tied to more important measures such as customer loyalty or lifetime value — and yet, marketers are rewarded for improving the response metrics.

Defining the right metrics are so important.  Marketers have to look at the long-term value of guests and resist the temptation to micromanage individual campaigns.​

​

Why Email Marketing is King →

A retailer I've worked with which has 900 stores and is very active with email campaigns recently did a great study. It took a group of 105,000 customers in its loyalty club database, divided them into three groups of 35,000, and marketed to the three groups differently, as shown in the chart below (click to see a larger version). Thanks to the loyalty program, it was able to see all subsequent purchases by these customers.

Direct mail has a higher response rate than email. But note that direct mail costs about 100 times as much. Meanwhile, the data collected by the retailer allowed it to calculate its off-email multiplier (a simple matter of dividing the percentage of online sales by the percentage of in-store sales generated by email-only marketing). It is 3.76. In other words, for every email shopping cart sale, this retailer gets 3.76 other, typically non-tracked sales due to the email.

There are a couple of things I have a problem with that logic.  

1. The logic takes every single transaction from either mail or email used with a loyalty card as 100% because of the way they were marketed.  My guess, there's plenty of transactions that happened regardless of the marketing
2. The direct mail and email made nearly $135,000 more than just the email alone.  This well covers the 100 X multiplier of the direct mail and made more profit.  So why is email and direct mail together not king?​

Now don't get me wrong, I like email, but it is a tough channel these days with many businesses flooding the inbox of the customers.  Savvy customers have a separate inbox for businesses because they don't trust they won't get spammed.  ​

Just don't discount direct mail in this day and age.  These days your message has a lot less competition in that channel.

Three Myths about What Customers Want →

Most marketers think that the best way to hold onto customers is through "engagement" — interacting as much as possible with them and building relationships. It turns out that that's rarely true.

Myth #1: Most consumers want to have relationships with your brand.

Actually, they don't. Only 23% of the consumers in our study said they have a relationship with a brand. In the typical consumer's view of the world, relationships are reserved for friends, family and colleagues.

The debate about whether social media and brands can really co-exist.  Do customers really want a message from a brand right after viewing new baby pictures of their niece?  These may be separated out in the future, a la foursquare.  ​

Myth #2: Interactions build relationships.

No, they don't. Shared values build relationships. A shared value is a belief that both the brand and consumer have about a brand's higher purpose or broad philosophy. For example, Pedigree Dog Food's shared value is a belief that every dog deserves a loving home. Southwest Airlines' shared value revolves around the democratization of air travel.

Customers can turn on a dime.  Southwest has such a loyal following because they made traveling something for the rest of us.  Brands like Apple bring people in to what they can do with their devices and how it can enhance ones life.   ​

Myth #3: The more interaction the better.

Wrong. There's no correlation between interactions with a customer and the likelihood that he or she will be "sticky" (go through with an intended purchase, purchase again, and recommend). Yet, most marketers behave as if there is a continuous linear relationship between the number of interactions and share of wallet.

This I have seen time and time again.  It amazes me how many emails I get from large brands on a daily, sometimes more than a daily basis.  ​I start to ignore these emails, as they tend to start offering the same thing over and over.  Even for large retail brands, there are only a few items that they can target to my specific wants and needs, so many communications will see my interest wane.  Make communications worth opening, it is much better to send an email that the customer will always open than an email they may just delete because they don't have time or they have become immune to too many communications.

Pin Down Your Customer Intelligence Objectives →

The problem with customer intelligence is that while everyone wants more of it — and better versions of it — there are many different avenues to take in pursuing it. No organization can pursue all of them at once ... so the challenge is to narrow down the options fast. You need to reflect on your business situation and goals and consider only the initiatives that will offer the highest impact.

​The common mistake of customer intelligence is companies want to do everything all at once.  Rarely is there enough resources or technology to make this strategy a reality.  Start from the basics, which I believe is the data warehouse, and then attack the items which will provide the highest return on the time and investment.  Focus on becoming great in each area before attacking the next.  

Too Much Data? →

When data is missing, we overestimate its value. Our mind assumes that since we are expending resource locating information, it must be useful.

We're fascinated with filling information gaps and that obsession can lead us astray. Especially today, when reducing uncertainty has become all too easy.

An interesting study on how our minds work utilizing data.  I see this everyday.  People are more fascinated with the information they don't know, rather than looking at what is known and making a solid decision based on the facts at hand.  So many times a report is issued and there are thirty questions, most of the time the questions are deflecting making a decision.  The lack of some piece of data is reason enough to put off the decision and look for further validation.    ​

I believe there is a combination of data and experience hat goes into making a qualified decision.  ​Validation of whether a decision was right or needs to be tweaked happens after the fact.  There is never going to be enough perfect data to make a right decision 100% of the time, so trust your experience and the data you have.  

No Change Fees, No Duh

Southwest Airlines has just started airing commercials talking about how other airlines charge for changing your flights. This comes after a year of pounding home the "Bags Fly Free" messaging. I think this is a brilliant move, but of course this is Southwest.

I used to be a fairly frequent traveler and many times I would have the need to adjust my original flights at the last minute. Fortunately I flew Southwest most of the time, so when I did this it didn't cost me $100 just to make a couple of clicks on the website. There were times I had to fly other airlines and it cost me as much as $150 to change a flight. Luckily for me I wasn't picking up the tab, but if I was I would not be a happy flyer. So again Southwest is hitting home with a problem in many of our industries.

Ask a customer what they hate the most and at or near the top would be nickeling and dimeing. This flies in the face of the ultimate goal of business, building a loyal customer base. Why when I stay in a hotel do I have to pay a resort fee for things I either do not use or should be free. For instance, the gym, if I did use the gym on my trip, shouldn't that just be included in the price? It's not like the hotel has figured out the cost of the gym and reduced that from the room price. Also, when I am flying, shouldn't my bags have already been calculated in the cost of the ticket?

Customer centric businesses focus on the customer. Customers hate add-on fees that should already be factored into pricing. The last thing I want to worry about when I go on vacation is how much extra am I going to be charged for everything on my trip. Companies like Southwest make the most profit in their industry because they have the most loyal customers. My guess is if Southwest were to start charging fees for all of these things, then they would be in the same place as their competition, going out of business. Remember, always have the customers best interests in mind and loyalty will follow.

CES Thoughts

In reading all the articles and great new products at the Consumer Electronics Show this week in Las Vegas, something struck me as interesting.  These companies have very extensive organizations and huge resources in R&D, yet nothing seems to be truly innovative.  Why is that?

I used to work in a technology company for the gaming industry, technology was even in their name.  Seems a majority of these companies are engineering and sales focused, this particular company sure was.  Now I am not saying that as a slight to engineers, it is just that engineers tend to be, well, engineers.

Engineers build cool stuff.  They believe most people think like them, but the truth is most people don't think like an engineer.  Consumers want technology that is intuitive and they want to be guided through user interfaces and hardware.  Engineers want complex and open.  

The products that I saw at CES were all in response to competition.  It seems like a "we need that too" mentality that puts these companies in a catch-up position.  Why is everyone after Apple?  Why is Apple so successful?

Apple is so successful because they put themselves into the shoes of the consumer.  Steve Jobs is obsessed with UI and customer interactivity.  How ill a consumer use this device, what buttons will they hit, how would a normal everyday Joe think when presented with a particular screen.  Engineers don't do that.  Engineers are obsessed with creating something technologically amazing.  The problem is most of the time it makes it very hard for the consumer to use it.  Apple takes that great thought and says, how can we make this easy for 98% of the people and use cases.  Sure, the 2% think it is terrible, but the 2% doesn't pay the bills.