Marketing Productivity Blog

The following Q & A is from the June 2009 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?  Here’s the blog archive; the pre-blog newsletter archives are here.

Q: I received this article (Norms of Reciprocity) via a friend’s Twitter account.  Very interesting.

A:  Glad you enjoyed it!

Q:  It has made open up my ACT! database, and my Outlook databases and add the metric of Growing / Strong / Weakening / Failed to my normal Sales and Business progress metrics.  If I group those categories and correlate to traditional metrics, it’s impressive how they reflect each other.

A:  Yes, most people are surprised.  It’s a very, very simple idea that seems to work across just about any human activity including crime, attendance, and so forth.  

The more Recently someone has done something, the more likely they are to do it again.  Conversely, the longer since an activity last took place, the less likely the person will do it again.  Often called Recency in Psychology and studied quite a bit.

Q:  Now I have to think about how I really use and apply this. : )

A:  Well, if I can guess you are in Sales from your title, typically one of the best applications is in what Strategic Marketing folks might call “allocation of resources”, which probably translates into “lead nurturing” for you.

Most experienced people in Sales have a sort of “sixth sense” when it comes to thinking about the likelihood of a close happening.  They worry about certain prospects more than others, and a sort of “ranking” or “scoring” happens in their mind.  One of the triggers that frequently comes up in this is “how long” it has been since there was any contact activity with the prospect, and the feeling the longer it has been without sales activity, the less likely the sale is to close.  Sales Managers will often allocate resources based on these kinds of “feelings” they or salespeople have.

The problem with all this “gut feel” is, newer sales people don’t have it, and so probably are not as productive as they could be.  The other is since a lot of this is not tracked in any way, there aren’t any firm “guideposts” and it may be that sales are lost that otherwise could have been made due to a lack of urgency or misdirection.

So, given limited resources, a sales force would generally like to focus on the leads most likely to close, and not work on the less likely leads until the most likely leads have been addressed.  This is the idea of scoring, let’s rank all of our prospects by likelihood to close.

Now, as far as what you might do in ACT! or similar (and knowing nothing about your business), here is what I would do.  Just start informally comparing prospects that close and those that don’t close in terms of these timing issues, “how long since contact” or “how long between contacts” for each case.

Typically you will start to see patterns of some kind, for example:

1. “Prospects who have not made it to 2nd sales appointment within 30 days of 1st contact are less likely to close”

2. “Prospects who take longer than 25 days to respond to proposal are less likely to close; prospects who take less than 10 days to respond to proposal are very likely to close”

and so forth.  Look at important events in the sales process and note the “time since” or “time between” and look for such patterns.

Now, as I said, many salespeople, especially experienced ones, have some sense of these ideas, but they have never been quantified. The advantage to quantifying them like this is you can move to a “trigged contact system” based on them, which I think you can do in ACT! if you have the data.  This conserves salesperson resources and helps them always be focused on where they are most likely to close the business.

So, for example, salespeople (sales managers, if more appropriate) receive a communication each day about any prospects who are coming close to any of these triggers above.

In scenario 1 above, a counter starts on 1st contact and if another sales call has not been scheduled within 20 days of 1st sales call, a reminder goes out saying “you have 10 days to get a 2nd appointment or you may lose this sale”.  In scenario 2 above, sending the proposal triggers the counter, and a sales contact is suggested at 7 days later and 15 days after that.

The optimal timing of these contacts is something discovered over time, and of course depends on the business. But having these triggered messages available to guide salespeople towards which contacts they should be most focused on that day or week is a lot better than nothing.

So instead of a salesperson thinking this:

“Gee, it’s ‘been awhile’ since I talked to prospect George. Maybe I should call him”.

you get this thought:

“I sent the proposal to prospect George 7 days ago, and I need to close him in 3 days, or he becomes less likely to close at all.”

The difference in those two thoughts and the action taken can be a lot of sales - especially with newer sales people, who don’t have enough experience to understand the “rhythm of the sale” in this specific business yet.  If you’d like a more detailed example, there’s one here: B2B Software - Latency Tripwire.

Spreadsheets are usually a great tool for this kind of discovery work.

Hope that helps!

Jim

——————————-
If you are a consultant, agency, or software developer with clients needing action-oriented customer intelligence or High ROI Customer Marketing program designs, click here
——————————-

Social Marketing Doesn’t Rely on Social Media

Do you believe human beings share certain fundamental traits that define “being human”?

If so, do you believe that human beings tend to behave in certain ways under certain circumstances?

If so, do you then believe since human behavior has these tendencies, it can often be predicted?

If so, then do you think perhaps the study of Psychology and Sociology might provide you some clues to creating successful businesses, campaigns, products, and services?  While your friends and competitors are all iterating their way into oblivion?

On the web, time and time again, we see the same themes repeating.  Yet with each introduction of a new technology, these themes tend to be treated like a new discovery, even though the theme has been well established in the past.

Norms of Reciprocity is a constant human theme.  You may know the expression of these norms as ”Sharing”.  Web old timers will probably recognize this idea as “Give, then Take” from the I-Sales discussion list as early as 1995.  In various forms, this theme goes back to the beginning of human history, all the way back to the handshake and other greeting gestures.  This same theme is embedded in countless Religions all over the world: “Do onto others as you would wish them do onto you”.  At least a couple centuries old, this idea.

Norms of Reciprocity simply means this: When you do something nice for a human being, help them in some way, this human tends to feel Gratitude towards ”the doer” and tends to do something nice back.  Gratitude drives the desire to Reciprocate, because it’s just what humans do, it’s normal, a “norm”.

Norms of Reciprocity.

(more…)

The following is from the May 2009 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?  Here’s the blog archive; the pre-blog newsletter archives are here.

Q:  First of all thank you for your help.  I have some questions I would be pleased if you answer them for me.

A:  No problem!

Q:  1. RFM analysis - is it possible to use some other ranking technique rather than quintiles? Using quintiles for bigger databases will cause many tied values, isn’t it a problem?

A:  Sure, you can use it any way it works best for you.  There is no “magic” behind quintiles, you can use deciles or whatever works best. It’s the idea of ranking by Recency, Frequency, and Value that is the key concept in the model.

I’ve seen dozens and perhaps hundreds of variations on the core RFM model, depending on how you classify a “variation”.  One change that’s common is changing the scaling, as you mention above, to accommodate the size of the database.  Smaller databases use quartiles or even tertiles.  Larger databases, choose the ordered distribution that meets the need.

(more…)

Discount Proneness is what happens when you “teach” customers to expect discounts.  Over time, they won’t buy unless you send them a discount.  They wait for it, expect it.  Unraveling this behavior is a very painful process you do not want to experience.

The latest shiny object where Coupon Proneness comes into play is the “shopping cart recapture” program.  Mark my words, if it is not happening already, these programs are teaching customers to “Add to Cart” and then abandon it, waiting for an e-mail with a discount to “recapture” this sale - a sale that for many receiving the e-mail, would have taken place anyway. 

The best way to measure this effect is to use a Control Group.

When I hear people talking about programs like this (for example, in the Yahoo analytics group) what I hear is “the faster you send the e-mail, the higher the response rate you get”.

That, my friends, is pretty much a guarantee that a majority of the people receiving that e-mail would have bought anyway.  Hold out a random sample of the population and prove it to yourself.  There is a best, most profitable time to send such an e-mail, and that time will be revealed to you using a controlled test.  The correct timing is almost certainly not within 24 or even 48 hours.

That is, if you care about Profits over Sales, and trust me, somebody at your company does.  They just have not told you yet!

When you give away margin you do not have to give away on a sale, that is a cost.  Unless you are including that cost in your campaign analysis, you are not reflecting the true financial nature of the campaigns you are doing.  If you are an analyst, that’s a problem.

If you are using cart recapture campaigns, please do a controlled test sooner rather than later.  Because once your customers have Discount Proneness, it will be very painful to fix.

(more…)

Another eMetrics (Toronto) has passed and I have to say this:  Web Analysts and Marketers proved once again they are up to the task of continuously improving the Productivity of their efforts!

At the same time, (and as I expressed during the sessions on the analytical culture), I fear that many in the web analyst community are becoming very “inwardly focused”.  They tend to talk more among themselves about the pennies they are making / saving while tripping over the dollars that are right there to be had if they reached out to other analytical disciplines in the company or measurement community.

Many among us knew this was a danger from our BI experiences.  If all you ever do is talk to each other about new shiny objects, your contribution to the business effort can suffer.  BI struggles every day with this weight, the challenge of being labeled “really smart but irrelevant”.  I don’t think we want this to happen to WA.

So with this backdrop, some of the conversations I heard at eMetrics Toronto about certain measurement practices were disturbing.  For example, it seems very few people are measuring their customer contact efforts properly, and in time this lack of analytical rigor is going to damage the WA effort for all practitioners.

(more…)

The following is from the March 2009 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?  Here’s the blog archive; the pre-blog newsletter archives are here.

Q:  Most CRM experts agree that discount is a terrible way to attract new customers.  They seem to all agree that these “transaction buyers” are money-losing customers and have no loyalty.

A:  I think using discounts profitably for customer acquisition depends a lot on your “Brand Personality” and your business model.  That said, often people screw this up and attract the wrong kind of customer.

Q:  But, I have seen a  lot of different opinions on the use of discounts to increase loyalty and retention among current customers.  I have seen experts contradicting themselves on this subject saying that discount is a terrible way to reward gold customers or to move up customers to a “better segment” and after some time they contradict themselves mentioning a successful discount case study (points are a common method used).  Jim, what is your opinion about using discounts as a weapon in a retention program?

A:  First, we have to define “discount”.  Price discounts have the effect of reducing margins, but so do “better service” ideas like “VIP phone lines” and loyalty programs.  So you can take your discount on the top line or the operational line, the fact is it costs money to provide good service to best customers in hopes of keeping them.  I mean, what’s the $10 million you spent on a CRM system?  Choose your poison, it costs money to retain customers.

(more…)

The web analytics conference season is upon us and I find myself sitting on several panels dealing with analytical culture issues.

“The Culture” is a tremendously important issue and am pleased to see the progress since developing the Creating and Managing the Analytical Business Culture course for the WAA.

At eMetrics Toronto, I will be moderating a Round Table discussion group called “Getting Buy-in and creating an Online Analytics Culture” and on a panel moderated by Jim Sterne called “From Web Analytics to Online Intelligence“.  At Webtrends Engage, I’ll be on a panel called “Socialization of Data” moderated by Barry Parshall.

With all this activity surrounding the Analytical Culture, I can’t help but suggest 3 books for those of you who are interested in / struggling with these analytical culture issues.  The first book you probably know about, but for the sake of providing a complete toolkit, I include it - best book for “CEO buy in” I can think of. 

The 2nd two books are probably off your radar screen because they deal with organizational issues, but trust me, these are the concepts the senior people need to understand to get any action going.  I find the biggest impediment to creating a proper analytical culture is the “roadmap” problem, and these two books together pretty much spell it out for you, including lots of tools to get you moving.

Here’s the list:

(more…)

The following is from the February 2009 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?  Here’s the blog archive; the pre-blog newsletter archives are here.

Q:  Do the principals in the Drilling Down book apply to manufacturing?  I was first introduced to Relationship Marketing in an MBA course years ago.  I have been looking for an opportunity to test these ideas and now find that chance in this job (I was and still am a foot soldier, but now have more responsibility in these areas).  

Manufacturers typically look at the highest revenue-producing customer, then pull out the manufacturing directory and start calling every company in the same business.  Not really marketing.  Can CRM be used to mine the data we need to be predictive and focused on the value of customers and retention?

A:  Sure, same core issues and metrics apply:

1. Retention: Identify best customers, determine order cycles, set up a report that tells you who “should have” ordered but did not based past on past history, either market to them or send this info to sales, depending on the value of the customer.

2. Recapture / Defection: Identify best customers who have stopped purchasing and find out why, take action aligned with the value of the customer.  You may not get these customers back, but you will learn critically valuable information that will help you retain customers in the future - is there reason in common why these customers left you?  Was there a common Salesperson?  A common Product line?  A common type of Machine used?  A common Material?  Take these findings back into Operations and find out if the issue can be corrected.

(more…)

Man, what a month in Marketing land.

First, you have one of the largest Ad Agencies in the world admitting their business model is broken, because agencies are not in charge of the fundamentals of Branding - service, innovation, engagement, and execution.  I would add the same thing could often be said of the client side; MarCom people spend way too much time on ”Com” and not enough on ”Mar” - is it time for a realignment?

Then, in an even more spectacularly unexpected move, you have C-Level folks at 2 gargantuan Advertising Agencies (though both part of WPP) co-writing an article declaring that Brand and Response are the Same.  Here’s the opener: “the value that brands bring to a company’s total business value is exaggerated.”

Holy Branding Batman, that’s one heck of a thing to say for an Ad Agency, know what I mean?  But they are absolutely right, the nature of a Brand has changed, this ain’t the 1960’s.

This is how they get to “the singularity”:

“What was once sales is now enhancing the brand expe­rience, because through direct marketing technology and strategies, a brand can reinforce its ability to listen, customize and learn from the consumer. This is not just direct marketing, its direct engagement with every potential customer, sometimes at the moment they’re introduced to the brand.  In fact, in a world of compressed consumer decision-making, direct response is now a potent form of brand­ing.”

I love it when you talk that way.

Let’s be clear on this.

(more…)

Electronic keyboards were expensive in the 80’s and early 90’s, especially good ones.  Then came Casio, and the whole business changed.  At HSN, we loved the electronic keyboard business.

The category was made for TV shopping - the demonstrations were killer, and with all the new-fangled automation on board, “anybody can play the keyboard”.  In HSN language, “keyboards screamed” and you always got a call center “whoosh” - the sound you hear when inbound calls ramp from 100 to 1000 in 30 seconds.

So I’m talking with the keys merchant, and he says they’re having a supply disruption, and there will be challenges keeping the keys in stock because they sell so well.  This is a problem for me, because I’m publishing the monthly customer (offline) magazine and we’ve got some layouts and articles on the product.

I ask for a simple merchandising run on the SKUs to get a feeling for product in pipeline, to see if maybe I have to kill the spread.  We’ve sold 45,000 of the little beggars, which is pretty good for (what was then) a $500+ item.  It averages about $1,000 a minute in Margin, which is great versus network overhead cost of $300 per minute.

Problem is, we’ve only ever purchased 17,000 of them.

(more…)