Monthly Archives: November 2007

Al Gore & Warren Buffet: Marketing Gurus

Um, following up on the post Research for Press Release, we have this gem from eMarketer and Anderson Analytics, who apparently did not even read the results of the survey they conducted.

Some highlights from this group of “Senior Marketers”:

Most important thing they are concentrating on:

Mastering the Basics

Seems unusual for Senior Marketers, to me.  

My guess: the members of MENG are not Senior Marketers, and should not be referred to as such.  Of course, nobody would pay attention to a press release about a survey on a “bunch of pukes”; this is the Source of Sample problem.

Asking “which demographic segment is most important to target” generically without supplying the product to be marketed is a ridiculous concept.  “Senior Marketers” probably wouldn’t even answer this question.

And the biggest gut-splitter: the list of “Most Important Marketing Gurus” includes Al Gore & Warren Buffet.  Now, these are both smart gents in their own ways but I’m not aware of their status as Marketing Gurus.

Of course, an alternative reality is possible: the members of MENG are Senior Marketers.  If that’s the case, I simply don’t know what to say, other than Marketing has probably already Deconstucted.  Or Imploded.  Or something worse.

You can learn a lot more from this really useful Research for Press Release (RFPR?) piece here.

Comments?

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Commerce Channel Management

The following is from the November 2007 Drilling Down Newsletter.  Got a question about Customer Measurement, Management, Valuation, Retention, Loyalty, Defection?  Just ask your question.  Also, feel free to leave a comment. 

Want to see the answers to previous questions?  The pre-blog newsletter archives are here, “Best Article” reviews here.

 Q:  We are a manufacturer with a cool product not really on the net and right now, but we are entering stores.  I wonder, is it wise to try to sell on the net before retail markets have the products or not – is it better to hold off until the retail markets first have the products and then launch them onto the net?  Does the net really help sell products or does it create copy cats?  Trying to find the best way to go – any advice would be greatly appreciated.

A:  Great question.  Answer is “it depends” and it’s difficult to be more specific without knowing more about the product and your marketing plans.  But in general, if you want to optimize the profitability of the product launch and you are paying for media, you should think about these choices as a “chain” or series of events each with a specific but interconnected strategy for each channel.

An example would be DRTV or infomercial products, which generally are launched at a higher price into the spot TV channel (cable networks, etc.).  Here sales are made at a very high margin but the volume is generally low; the Objective is to generate awareness and hopefully make a profit, but breaking even is OK because you essentially have the media “free” and that will help drive the next step.

Based on all the awareness you have generated with TV spots, you then can go to the TV shopping channels and say, “Look, people know this product because we have already pre-sold it for you.  We will let you sell it at a lower price if you will drive volume”.  And that’s typically exactly what happens; most of the profit on the product is made here.

From the spot TV, the audience knows the product sells for $19.95 or whatever, so when it is offered at $14.95 on the shopping channel they think it’s a great deal and the volume is tremendous.  Typically, the spot TV would still be running at this stage, though sales from that channel will have peaked.

Once sales get soft in the TV shopping channel, you then introduce the product online and in stores.  This is essentially “end of lifecycle” for the product, where you are simply trying to make sure you don’t get stuck with any.  You sell that at cost plus to the onliners / retailers and they blow them out at $9.95 or so.  You don’t end up wearing the inventory and everybody is happy because the spot TV / TV shopping has generated plenty of awareness, people pounce on the product, and it moves very quickly through retail.  Typically no TV would be running at this stage because you couldn’t sell any at the original price.

Now, I’m not saying you should follow this model.  But what I am saying is the decision you are trying to make is more complex than “should we”, it involves understanding which channel can do what for you and at what price.

For example:

You said you are “entering stores”, but did not say if you / the stores are running any media to support this effort.  If you are not running any media then I would get on the web and sell the product for retail price or higher.  This generates some awareness / demand / trial but preserves the margins of the retail partner, and hopefully your direct profits will cover costs.  You basically get “free media” from the web (as in the spot TV example above) and the retail folks will love it because it will drive sales in their channel.

If you / the retailers are doing a lot of paid media support, then I would not sell on the web until sales through retail get soft.  Then you are in a position to undersell them or liquidate on the web based on the awareness you have generated offline.  This doesn’t mean you should not have a web site, you should, and it should tell people which retail outlets they can buy the product in.

On the other hand, if there is a razor / razor blade model built into the product (think a doll with add-on sets of clothing), you could sell the primary razor product and some of the blades in retail, then develop more targeted / segmented / rare blade offerings that are exclusive to the web for online stores.

Again, it’s very difficult to make the “right” judgment on this question not knowing anything at all about the product, whether there are supplemental / follow-on products, whether there are continuity pieces involved (collections) and so forth; and especially not knowing what the nature of the retail relationship is.

But I think you get the general idea.  You play the strengths of the channels off each other, generally in some sequential way, depending on what the marketing / media plan is and the characteristics of the product.  That is, if you are interested in optimizing media spend versus sales.  If you have an unlimited media / PR budget, then sure, sell it everywhere!

Hope that helps.

===============

Comments?  Questions?  Better ideas?

 

 

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Messaging for Engagement

Or Behavioral Messaging, as we used to call it. 

Much has been written about Measuring Engagement, but once you measure it, then what do you do with this information?  Most folks know the idea driving the Engagement Movement is to make your messaging more Relevant, but how do you implement?  Perhaps you can find the triggers with a behavioral measurement, but then what do you say?

This is the part Marketing folks typically get wrong on the execution side.  They might have a nice behavioral segmentation, but then crush the value of that hard analytical work by sending a demographically-oriented message, often because that is really all they know how to do.  So as an analyst, how to you raise this issue or effect change?

Marketing messaging can be a complex topic, but there are some baseline ideas you can use.  Start here, then do what you do best – analyze the results, test, repeat.

You want to think of customers as being in different “states” or “stages” along an engagement continuum.  For example:

  • Engaged – highly positive on company, very willing to interact – Highest Potential Value
  • Apathetic – don’t really care one way or the other, will interact when prompted – Medium Potential Value
  • Detached – not really interested, don’t think they need product or service anymore – Lowest Potential Value

Please note that none of these states have anything to do with demographics – they are about emotions.  The messaging should relate to visitor / customer experience as expressed through behavior, not age and income.

These states are in flux and you can affect state by using the appropriate message based on the behavioral analysis.  Customers generally all start out being Engaged (which is why a New Customer Kit works so well), then drop down through the stages.  The rate of this drop generally depends on the product / service experience – the Customer LifeCycle.

Generically, this approach sets up what is known as “right message, to the right person, at the right time” or trigger-based messaging.  Just think about your own experience interacting with different companies; for each company, you could probably select the state you are in right now!

OK, so for each state there is an appropriate message approach:

Engaged – Kiss Messaging: We think you are the best.  Really.  We’d like to do something special for you – give you higher levels of service, create a special club for you, thank you profusely with free gifts.  Marketing Note: be creative, and avoid discounting to this group.  Save the discounts for the next two stages.

Apathetic – Date Messaging: We’re not real clear where we stand with you, so we’re going to be exploratory, test different ideas and see where the relationship stands.  Perhaps we can get you to be Engaged again?  In terms of ROI, this group has the highest incremental potential.  Example: this is where loyalty programs derive the most payback.

Detached – Bribe Messaging: You’re not really into this relationship, and we know that.  So we are simply going to make very strong offers to you and try to get you to respond.  A few of you might even become Engaged again.

Can you see how sending a generic message to all of these groups is sub-optimal?  Can you see how sending an Engaged message to the Detached group would probably generate a belly laugh as opposed to a response?  You’ve received this mis-messaged before stuff, right?  You basically hate the company for screwing you and then they send you a lovey-dovey Kiss message.  Makes you want to scream, you think, “Man, they are clueless!” and now you dislike the company even more.

Combine this messaging approach with a classic behavioral analysis, and you now have a strategy and tactic map.  For example, you know the longer it has been since someone purchased, clicked, opened, visited etc, the less likely they are to engage in that activity again.  Here’s the behavioral analysis with the messaging overlay:

Click image to enlarge…

Kiss Date Bribe

Please note “Months Since Last Contact” means the customer taking action and contacting you in some way (purchase, click) not the fact that you have tried to contact them! 

So does this make sense?  Those most likely to respond are messaged as Engaged – as is proper in terms of the relationship (left side of chart).  As they become less likely to respond, you should change the tone of your communication to fit the relationship up to a point, where quite frankly you should take a clue from the eMetrics Summit and not message them any more at all (right side of chart).

Example Campaign for the Engaged: At HSN, I came up with the idea of creating some kind of “Holiday Ornament” we could send to Engaged customers.  If the idea worked (meaning it generated incremental profit), we could do it as an annual thing; we could put the year on the ornament and create a “collectible” feel, which is the right idea for this audience.  No discount – just a “Thank You” message “for one of our best customers” and “Here’s a gift for you”.

These snowflake ornaments were about $1.20 in the mail (laser cut card stock) and generated about $5 in 90-day incremental profit per household with the Engaged, test versus control.  Why?  Good ‘ol Surprise and Delight, I would bet.

We had some test cells running to see how far we could take this, and as expected, the profitability dropped off dramatically based on how Engaged the customer was.  If the customer was even minimally dis-engaged – no purchase for over 120 days – there was very little effect. 

Interactivity cuts both ways; it’s great when customers are Engaged, but once the relationship starts to degrade, folks can move on very quickly emotionally.  That’s why it is so important to track this stuff – so you can predict when your audience is dis-engaging and do something about it.

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*** The seven perils of segmentation

Circling back to the idea of Faulty Segmentation Logic as the root cause of “so much data, too little insight”, here’s a recent article from MyCustomer.com outlining 7 common segmentation mistakes:

Article: The seven perils of segmentation

In my experience, #1, 5, 6, and 7 are the ones that really create a lack of faith and lead to that “drowning in data” feeling.  #5 – 7 share an important commonality: the segmentation was done outside the database to be acted on, resulting in no way to tie the segmentation to the database.  This is more common than you think, and often happens when people get “survey happy”.

There’s nothing wrong with gathering survey data, but I strongly urge people to know specifically who they are surveying from a behavioral perspective (new customer, best customer, recent visitor / buyer, lapsed visitor / buyer, etc.) so you can go back and apply your new survey knowledge against specific segments.  Plus, this approach allows you to determine if people act the way they say they will act in the survey – a critical piece of insight.

Quote from peril #7: “I’ve often seen situations where firms end up with customers neatly grouped into segments… and then the marketers ask ‘now what???’”  This is the what to do with “People” as opposed to “Reach and Frequency” Marketing challenge mentioned in the previous post.

Most Marketers got their start looking at their tasks through a demographic lens via buying media, and to be fair, changing that mindset to a more behavioral or people-based view is difficult.  But the outcome is very much in synch with the current trend towards Relevance, Respect, and Relationships that so many folks are clamoring about in all the subcultures of Customer Marketing and Social Media. 

A behavior-based messaging approach can be the glue that binds all of these ideas together if you match the marketing approach with your segmentation. 

For a web analytics oriented / process view of segmentation, see Judah’s post.  The unique thing about segmentation on the web is you are often analyzing the behavior of non-customers, something many off-liners are not familiar with and presents some unique challenges.  But the same behavioral marketing concepts of Relevance, Respect, and Relationships apply. 

More on this concept and a simple model you can use to help with Marketing execution against behavior-based segmentation to come.

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Data, Analysis, Insight

Poor BI; still struggling with broader adoption – as outlined by Ron in the post Four BS BI Trends (And One Good One).  So Gartner identifies BI as the “number one technology issue for 2007″ then immediately pulls out this old chestnut as BI Trend #1: There’s so much data, but too little insight.

Sigh.  

Then I get this comment by Ron Patiro asking: Besides simply not being actionable, what are some of the common pitfalls and tangles of metrics that analysts get themselves into in the pursuit of engagement?

These two ideas are closely related.  The “common pitfalls and tangles of metrics” are often the reason people get a “so much data, but too little insight” experience.  Let’s explore these issues a bit.

The primary reason you get a “so much data, but too little insight” situation – if you have an analyst to work with the data – is indeed the actionable analysis problem, as Ron P.  points out.  But, there are at least 3 versions of the actionable analysis problem, one obvious and two not so obvious:

  • Producing analysis that isn’t actionable at all
  • Producing analysis that is valid but too complex to be actionable, and
  • Failing to act correctly on a valid and easy to understand analysis 

And often, I find the Root Cause of these three problems (to answer Ron P’s question) to be faulty segmentation logic.  This condition in turn often is born of a situation many web analysts are familiar with by now: No Clear Objective.  But let’s leave the segmentation discussion for later and examine each of three cases above.

One cause of the “too much data, no insight” experience is producing analysis that isn’t actionable at all; it’s literally worthless and cannot be acted upon.  This is the most common vision of the actionable analysis problem – but probably not the one causing the majority of the negative outcomes.  Analysis can be “actionable” from the analysts’ perspective, but not the business perspective.  And if no actual business action takes place, no real insight is gained.

In my experience, people spend an incredible amount of time analyzing things that will never create impact.  Even if the analysis produces something that looks actionable, often the execution is impractical or financially irrelevant and so is not acted upon.  Just because you can “find a pattern” does not mean the business can do anything productive with that pattern.  Randomly “mining for gold” is one of the biggest time wasters around, and why people are often dissatisfied with the result they get from black box data mining projects.  You have to start with an actual business problem of some kind, preferably one that if solved, will increase sales or reduce costs, or no action will be taken.  Otherwise, you have simply created more data to add to the “too much data” side of the problem.

The bottom line for this slice of the problem: The intent and result of the analysis might be actionable, but unless there is a clear business case for acting, you have just contributed to the actionable analysis problem.  In other words, there is a difference between an analysis being “actionable” and having people actually act on it.

The 2nd slice of the “too much data, no insight” problem occurs when the analysis is too complex.   In Marketing at least, complexity introduces error, and probably more importantly, hinders the explanation of the analysis to people who might take action and gain insight.  If a Marketing person can’t understand the analysis, how are they going to formulate a campaign or program to address the problem, never mind get budget to act on the analysis?  Please note I’m talking about the analysis, not solving the problem itself.  Often, an elegantly simple analysis uncovers a problem that will be quite complex to solve.  These are two different issues. 

In fact, I would go as far as to say the more complex the problem is to be solved, the more elegantly simple the analysis needs to be.  The reason is this: the most complex Marketing / Customer problems are usually cross-functional in nature, and to drive success in a cross-functional project, you need rock-simple analysis that galvanizes the team without a lot of second-guessing on the value of a successful outcome.

The bottom line for this slice of the problem: An analysis might be correct and even actionable, but too complex to be acted on.  Complexity opens the analysis up to (often accurate) disbelief in the conclusion, action never takes place, so insight is lost.

The 3rd “too much data, no insight” problem is failure to translate a valid and easy to understand analysis into the correct action.  Here, we are finally moving out of the analytics side of the problem (delivering actionable analysis) and into the Business side.

Why is there failure to act correctly?  I’d submit to you it goes back to the Deconstruction of Marketing – most marketing folks simply don’t understand what to do with “people” as opposed to “Reach and Frequency”.  In other words, they can’t conceptualize how to act successfully against the individual or behavioral segment level as opposed to the nameless, faceless demographic level. 

In my opinion, this is the primary reason why demographics are so overused in customer analysis, especially online – the marketing folks simply can’t get out of that box, it’s where the “actionability” starts for them.  The problem with this thought process, as has been pointed out, is that demographics often have little to do with behavior.  Behavior predicts behavior; demographics are mostly coincidental.  Yet the analyst, looking to produce a successful project, often will allow themselves to be dragged into endless demographic segmentation that is primarily a waste of time (unless you are a media site and sell demos) and leads to false conclusions, which lead to failed or inconsistent implementation.

The bottom line for this slice of the problem: the analysis identified a problem or opportunity, but in the end, the execution against the analysis was flawed and ultimately delivered poor or no real insight.  By the way, I think this third form of failure to deliver insight is the most common – much more common than most people think.  Why?  It’s the hidden one, the one that’s not so obvious and much easier to push under the table.

So there you have it.  Three versions of the “actionable analysis” problem that lead directly to the “so much data, but too little insight” issue.  I think #3 is probably the most prevalent; a lot of analysis “fails” not because of poor analysis, but poor execution against the analysis.

What do you think?  Have you delivered a clearly actionable analysis, one that is capable of real business impact, only to have the execution against the analysis botched?

Perhaps more importantly, were you able to do anything about the botched execution?  Were you able to turn it around?  How did you make that happen?

Or, is execution not really your problem – if Marketing (or whoever) screws it up, then they screw it up?

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KFI’s: Key Forecast Indicators

As I said in my presentation at the eMetrics / Marketing Optimization Summit, if you want to get C-Level people to start paying attention to web analytics, you have to get into the business of predicting / forecasting.  Let’s face it, KPI’s are about the past, right?  You don’t know “Performance” until it has already happened.

But C-folks don’t really care much about what has already happened, because they can’t do anything about it.  What they really want to know is what you think will happen.  For example, ideas like “sales pipeline” – a forecast.  If you start forecasting – and you are right – you will get attention from the C-folks pronto.  The web is a great forecasting tool because it’s so frictionless; it tends to provide tangible signals before many other parts of the business.

So: Do you have any KFI’s – Key Forecast Indicators?

I have one for the Lab Store, and it tripped about 2 months ago.  It’s the Unwanted Exotic Index (UEI).

As part of the Lab Store, we run a moderated board where people who want to give up exotic pets can post the availability, and people looking for exotic pets can post requests.  Typically, the ratio of people giving them up to wanting them is about .25 – for every post looking to give an exotic up, there are 4 posts looking to adopt.

A couple of months ago, this ratio starts popping higher.  A couple of weeks ago it hit 1.25 – for every 5 posts looking to give up an exotic there were 4 posts looking to adopt.  The last time something like this happened was prior to the mini-recession of 2004, when the Unwanted Exotic Index tagged 1.0 for a short time.  After this happened, our sales got soft about 2 – 3 months later.

Why is the UEI predictive?  Let’s go through the logic – my logic, anyway!

Keeping certain types of exotic animals can be a strain on a family, both from a time and money perspective.  They can be high maintenance.  On the margin, as the economy gets tougher and people look to manage household budgets, these pets can get some scrutiny – particularly if kids have lost interest or gone off to college.  So more go up for adoption.  At the same time, requests to adopt fall, as families who might have considered an exotic pet put the “owning decision” on hold.  Taken together, these decisions cause the UEI to spike higher.  Both giving up and deciding not to own exotic pets affects Lab Store revenues “expected” in the future.  So the UEI ends up being predictive of future demand.

Makes sense to me.

Now, I’m a pretty good student of macroeconomics and pay attention to many economic indicators, especially predictive ones like the ECRI’s US Weekly Leading Index.  If you’re an analyst, you should too; economic indicators provide context for any analysis you might have to do, and clients often want to understand the impact of these external issues on their business.

As far as the Lab Store specifically, I don’t usually pay much attention to the macroeconomic cycles.  The pet business tends to be insensitive to the economic cycle; people don’t stop caring for pets as the economy wobbles up and down.  That’s why it’s such a good business – if you can find a niche.  So I don’t get too concerned when I see these predictive macroeconomic indexes forecasting a slowing economy.

However, what we have here with our Unwanted Exotic Index is a confirmation of the broader economic forecasting tools that is specific to our exotic pet business.  That makes me sit up and take notice!  Looks like our business is setting up for a repeat of the 2004 slowdown – the last time the UEI spiked like this.  Why is this important?  Because I can do something with this knowledge.  I can re-allocate and re-prioritize based on this knowledge.  For example, I can move from a “grow bigger” to a “grow smarter” mode.

And please note: this KFI has nothing to do with traffic or sales on the web site; traffic and sales are “rear view”.  By the time you see the sales slow down it will be too late to do anything about it.  And that’s why the C-folks don’t care much about web analytics reports.  

You could track an index like the UEI with a web analytics tool, but you’d have to come up with the idea first.  My point is you will probably have to look outside the usual “rear view” metrics to find one with forecasting ability.  I caution you not to substitute a “survey” for a predictive model; people’s opinions are a notoriously lagging indicator.  You’ll be up to your ears in the slowdown before people start turning bearish.

So: Do you have any KFI’s – Key Forecast Indicators?  Tell us about them. 

If you don’t have any KFI’s, now is the time to start looking for them.  What can you see now that predicts what will happen in the future?  Think about the business, think about the data sources, and put together a bunch of different ideas.  Track them back a couple of years and post them monthly going forward.  You’re bound to find something predictive.  Perhaps something about posting, like the UEI.  Recommendations / comments as a percent of visitors or something like that.

If you’re stuck, start with a simple “engagement” idea – percent visitors / members / customers who visited / logged in / bought in the past 90 days.  If this percentage is falling, so will your business in the next 3 – 6 months.  If your business has a lot of seasonality in it, look to year-over-year comps of the same metric.

If you’ve never played this game before, you won’t have proof your KFI’s work until after the business is in the soup, but you’ll be ready with accurate and actionable KFI’s the next time around!

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*** E-mail Delivers

Great article on what’s happening with the more advanced e-mail marketing programs out there courtesy of Direct Magazine.

Here’s the link: E-mail Delivers

Particular ideas of note:

1.  Behavioral Targeting / LifeCycle Management is starting to happen.  Not the so-called Behavioral Targeting they use for display advertising online; I mean real BT based on customer behavior

“Blasting” e-mail is starting to be recognized for what it really is – a waste of customer value and an opportunity cost.  This specific topic is what I covered in my eMetrics and DMA presentations last month.  Start using Lifecycle-based segmentation in your e-mail programs and you will see what I mean!

No resources? Please just try something!  For example, divide the list into those who have purchased / opened / clicked (your choice) in the past 90 days and all others.  Compare per e-mail stats from the drop by these 2 segments – deliverability, opens, clicks, whatever you like. 

Now, can you tell me you should be saying the same thing to / speaking in the same voice to these two groups?  Trust me, if your boss is unclear on why “measuring engagement” matters, the stats from the simple test above should start a conversation!

If you have the chops / tools, do the same thing only break it by 30-day groups: < 30 days, 31 - 60 days, 61 - 90 days, etc.  You will see the Customer Lifecycle play out right in front of your eyes.  Honestly, this should be standard reporting for e-mail; the powerful behavioral details that lead to higher ROI messaging are being hidden by lack of proper behavioral segmentation.  If e-mail is a retention device, then this standard retention reporting approach should be applied. 2.  List purging is becoming mandatory because it improves e-mail deliverability.  This was a main takeaway of mine from the eMetrics Summit based on several presentations.

How about your e-mail program?  Getting any traction with the more advanced behavioral techniques?  Or can’t get the support to try?  Or not your job to improve Marketing Productivity?  

Or just don’t care (and tell us Why)?

Check out the article here: E-mail Delivers

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