Marketing Productivity Blog

Friend and fellow blogger Alan Rimm-Kaufman spent some of his valuable time asking my opinion on various online marketing issues in a far-ranging interview and podcast.

We met in person for the first time doing a presentation together at the DMA show in Chicago this fall, and because he used to work at Crutchfield - a truly customer-driven remote retailer - we share some experiences and beliefs.

For those of you who might be wondering where a lot of the Marketing Productivity ideas I post here come from, this interview-podcast is probably a pretty good backgrounder.  We talk about a lot of stuff, including:

Monetizing customer experience

Importance of Control Groups / Source Attribution

Multichannel Marketing Strategy

LifeCycle Contact Strategy versus Calendar-based

Retail Business Models / Lab Store

Search box or not? / Serendipity

How to tell if online customers are really engaged - without web analytics

Here’s another link to the Interview-Podcast.  Enjoy! 

That was lots of fun, thanks Allen!

The average ecommerce / catalog packer can pack about 22 - 25 boxes an hour, depending on the level of automation.  Of course, we don’t have anything like traditional mail order automation in the Lab Store; just a computer, a printer and my wife Barb as Chief Packer & Chief Customer Officer.  I pitch in by assembling products and generally keeping the “warehouse” shelves stocked so the Chief can do her thing with the packages and customers.

For a variety of reasons we got a late start today packing the orders from over the weekend and New Year’s Eve / Day, and had to invoke a “Panic Pack” on these 131 orders.  A Panic Pack is a high speed affair where Barb picks all the orders but leaves some for me to pack (I suck at packing compared with her) while she packs the others.  We packed all 131 orders in 4 hours, just barely in time for UPS pickup.

That might not sound like a big deal versus the 25 boxes an hour, but remember we are also picking the orders and dealing with all the customer service - can you add this to my order, can you change my shipping method, etc.  Most packers simply pack an order that has already been picked for them, and don’t do any customer service.

My point with this post is not that we know how to pack like banshees, but the enabling technology behind this capability.

It would have been impossible to pack and manage the service with this many orders in such a short time without a proper backend order management system - something I see many ecommerce folks go without.  Most web-based cart back-ends are incredibly difficult to deal with, especially on order changes. 

In many web-based order processing systems, it can take multiple steps to make simple changes rather than just a few clicks - add another product to an order, run another credit card charge, reprint the packing slips, etc.  This is because once an order is processed, it’s not meant to be changed; order changes were not taken into account when these systems were designed.  Nobody talked to customer service to get specs, I guess…  

“You mean customers might want to change an order they already placed?  Why?”  ‘Cause most of them are not geeks.  They make mistakes.  They forget stuff. 

Often, when you call companies using these systems to add products to your order, they tell you “we can’t” and to go online and place another order.  Nice.  Great service. 

We actually don’t mind if customers want to add to orders they have already placed with us - silly, huh?  Gee, you want to spend more money with us?  Sure, bring it on!  By the way, Flat Rate shipping encourages this behavior.

If you have a good backend system, you can just add the product and the software does the rest, because the order has not been “processed” yet as it has with web-based systems - you process the order right before you print the packing slips, including the credit card capture.  And, you can do all kinds of customization on the packing slip, like messaging for new customers, repeat customers, and so forth, and automatically interface with the shipping manifest system.

The labor cost savings alone when using these order management systems is huge.  When we moved from web-based “copy & paste” order management to local software, our time spent per order on customer service dropped by 50%.  This kind of gain in productivity is common, as you can see here.

And when you have more time to service each customer, you  can provide better, more customized service.  Simple as that.

Plus, our backend system creates one heck of a customer database, automatically consolidating orders at the customer level and providing one-click access to customer service history, cumulative sales, and so forth.  Whenever we are faced with a complex service issue, the first thing we do is look at the cumulative sales of the customer, and then we act accordingly.  In other words, for proven good customers, we bend the rules.  That’s how you build loyalty.

So you need a customer database to provide great service.  As far as Marketing goes, you need a customer database to measure the success of customer-centric programs like this one and this one.

If you don’t have a flexible and marketing friendly order management system, you really should consider getting one.  We use Stone Edge.

Information Week gives us this article: Step Up - or Step Back.  Before the Marketers in the audience click Back, I think you should read this article. 

Lead Data: From the annual meeting last month of the Society for Information Management, the percentage of CIOs and other top IT executives reporting directly to CEOs had fallen dramatically from the year-earlier survey, SIM revealed.

The premise is basically this: the “Command and Control” CIO is on the way out; these are the folks that are dropping in rank and no longer reporting to the CEO.  At the same time, we find CIO’s that are business oriented and advocates for process improvement are moving up and more of them are reporting to the CEO.

Makes sense to me.

There seems to be a lot parallels between what is going on with CIO’s and CMO’s; both are looking for a seat at the strategic table.  And both need to become more business-oriented to do it.  I think “business oriented” here is probably just a code word for “more accountable for what you contribute”.  In the case of CMO’s, this includes reaching out into the operational side of the business and finding out how operations affects the success of Marketing.

To go a step further, wanna-be CIO’s and CMO’s not afraid of an accountable orientation would do themselves a huge favor by reaching out to each other; otherwise both or either may be “absorbed into the Network“. 

This pattern playing out over in CIO-land has some lessons for those (mostly analytical) Marketers who aspire to the CMO seat.  If you do aspire to be CMO, read about the CIO’s who do report to the CEO and the business attitude that got them there - the same attitude you need.

Here’s that article link again: Step Up - or Step Back

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…

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.

Seems like every day I hear about a new way to stick ads in front of people online or through a mobile device.

Every new business model is advertising-based and is going to attract billions of dollars.  Companies are out there buying other companies that are basically worth nothing for billions of dollars based on the promise of ad revenue.  This despite the fact (for example) social media advertising has really sucked - and is getting worse.  Plus, there’s the fact nobody will pay for social media services.

Further, ask yourself this question: what if social media advertising does suck and will always suck because it is simply always out of context?  To be clear, by context I mean not the content surrounding the ad, but from the end user perspective.  If people hate seeing your ads while they are trying to do personal stuff, won’t the advertising always be ineffective?  That fundamentally, the advertising model for this kind of content is flawed and will not get better? 

Can you say GeoCities?

This situation reminds me of the dot-com “ads on your car” thing, which got so ridiculous that companies were actually giving away FREE CARS to people as long as they drove them around with ads on them.  How do you ever pay that back?  And how are those ads effective?  I guess there are a ton of marketing rubes out there who will buy any ad just to get the “exposure” - regardless of how out of context the exposure is.  Do they still sell ads on matchbooks?

But let’s not stop there.  For some reason I can’t get the economics of supply and demand out of my head.  If every single display surface online becomes a display ad, doesn’t that mean there will be an unlimited supply of online display advertising and so the value of online display ads will drop close to zero?  Perhaps a lot closer to the economic value most of these ads provide?

You tell me.

At least with eyeblack advertising, there is a limited supply - teams on televised sporting events (TV is actually the media, not the eyeblack).  That is, until somebody comes up with the idea of paying people to wear eyeblack ads - which can’t be too far away, can it?

Hey, I have an idea…want to make a billion dollars?  Know any marketing people just dying to buy this kind of “walking around” media?  Fortunately, I think the buy side has pushed back and is a lot smarter as a whole.

The above is not to say that specific exotic media will not work for certain very targeted applications.  The problem is in thinking any of this media is “mass” in nature, that it will be able to move the needle.  If the applications for this advertising are very narrow, then only certain narrow portions of the inventory have value, meaning the value of the companies is a lot lower than what is perceived.

Personally, I think the same thing will happen in mobile.  The killer advertising app for mobile is search, not display or audio, whether geo-intelligent or not.  Search fits the context of the user, just as search does online.  Free mobile services if you listen to an ad first?  C’mon folks, that model has been played and played online and it never works.  The combination of audience quality and the notion of being “forced” to pay attention do not equal great advertising results.

Your Ad Everywhere, as a whole, is an economically broken business model that delivers little value to either the advertiser or the audience.  Let’s just stop creating business models based solely on delivering display ads to people.

I suggest to you the test for the viability of an “network effect” display ad business model is very simple: ask the audience, would you pay for this service / application / access?  If the answer is no, the audience is not a viable advertising audience.  If the answer is yes, then you can look for ways to reduce billing by introducing the right kind of advertising.  This means, of course, that these networks will be much smaller, but have a high quality audience worth advertising to.

If you start with free, you have already poisoned the audience for any ad model relying on “impressions”.

Yes, I know for many marketing folks this seems to be an oxymoron, but the fact is that Marketers - especially those with some understanding of business process and the IT world - can influence the direction of IT and generate genuine customer-centric wins.  This in turn makes all your marketing efforts more productive. 

Web analysts, this is the kind of work you will be supporting with analysis in 5 years…it’s just a much larger version of optimizing a web site, isn’t it?  And in many ways, a lot more fun…

Requires a different mindset?  Sure, it’s not buying media or developing creative or analyzing response.  But these are the kinds of projects Marketing folks (especially data-driven ones) should be championing by providing the customer models for IT to base a plan on and forge ahead.

Here are 3 great examples, case studies from CIO Magazine:

Washington Mutual  - a classic example of cross-functional teams looking at “how we sell” versus “how they buy” barriers; reminds me a lot of the Check Shredding Example.  I wonder how many online Marketing folks at banks have asked “why do we need signature cards?” in the past 5 years - what is the Root Cause?  Ron, make sure you check this one out, especially given your post - what do you think?

Best Buy - the offline retail version of “people who bought this also bought that”.  I’m sure this one will sound simple to many folks - all except those working in offline retail analysis and store logistics, that is.  A tough, messy business to optimize and even small wins are remarkable.

Hilton Hotels - another seeming no brainer, just let people order online.  But not just any people, we’re talking about event / conference planners ordering meeting rooms, food and beverage, A / V etc. not to mention guest rooms for thousands of people.  This is not a small deal on the infrastucture side, with plenty of politics to go around.

Check the cases out here, and let me know what you think.

Interesting to see what our friends in IT are working on this year:

I would not have guessed Business Analytics / Intelligence was the Number 3 priority.  Good thing for analysts, someone is going to have to make sense of all that data and provide concrete direction…which seems to be the part hanging people up these days, not the analysis.  I imagine this BI activity has a significant role in driving success for #1 - BPM.

Full article with spending estimates and more details at Innovations Magazine here.

WAA BaseCamp and Gurus of Online Marketing Optimization Tour

I’ll be giving an all day workshop on Web Analytics for Site Optimization as part of the WAA BaseCamp series in Los Angeles on 7/23 and Chicago on 8/22.  More details, other courses and cities for this series are here.

The BaseCamps are built on the course material I produced with help from many others for the Web Analytics Association.  This effort resulted in the 100% online Award of Achievement in Web Analytics offered by the University of British Columbia.  The Award of Achievement is four courses with 96 hours of content, so you’re not going to get all of that content in a one day event.  You will get a great “flyover” of all the material in one of the courses in a day long BaseCamp Session - plus the fact it’s live and interactive with the Instructor and peers in the class.

The Gurus of Online Marketing Optimization Tour is also a very interactive presentation plus Q & A event put together in conjunction with the WAA BaseCamp courses.  I’ll be one of the Gurus on the panel in Los Angeles 7/24, Boston 8/21, and Chicago 8/23.  This should be a lot of fun and maybe even a bit of a wrestling match in some cases with fellow gurus Eisenberg, Peterson, Sterne, & Veesenmeyer. 

More info here, hope to see you there!

Timing, Counting, & Choice.  “Most real-world business problems are just some combination of those building blocks jammed together” - Peter Fader

Over at CIO Insight we have this very practical article on Data Mining by Fader.  What it’s good for, what it’s not good for.  If you have wondered how you might use this tool, especially if you are a Marketer, you should read this article. 

I say the article is practical because even though there are many ways to create mathematical models of customer data, if the end result is not something a Marketer can use to actually increase Marketing Productivity, then you really cannot do much with the output.  The models have to create leverage of some kind that can be used to take real world action.  In other words, a model can be “technically correct” but completely useless to a Marketer.

For example, just because you can identify a segment doesn’t mean it is practical or viable to address that segment with a unique marketing treatment.  And just because the segment has unique characteristics doesn’t mean those characteristics create any real marketing opportunity.

Key takeaways for Marketers from this article should be:

1.  Too much data tends to mess up a model.  This is especially true if you try jamming all kinds of demographic crap into a model that is trying to predict behavior.  If you want behavior as an output, use behavioral variables in your models.

2.  Data mining is a great classification tool; it is good at telling you why segments are different.  But in order for this to be useful, you need actionable segments to begin with.  For example, data mining can tell you the demographic differences between people likely to respond versus people not likely to respond - if there is a demographic difference.  But you have to know this “likely to respond” element first.  While we’re on this topic, the same idea holds true for surveys.  If you want the survey output to be actionable, get to known behavioral segments first, then do your surveys of each segment.

Often, people use technical tools for the wrong Marketing reasons.  I see this problem coming down the tracks in web analytics, people are getting so wrapped up in the minutia and the automation of testing they are missing out on the basic stuff.  Just like the data mining wave got people off track and into the bushes with “collecting all the data so we can mine it”.  But it doesn’t matter how much data you have, the tool does what it does and doesn’t do what it doesn’t do.

Check out the article What Data Mining Can and Can’t Do here.

Any thoughts from the Data Miners out there on this?

According to AdWeek, CMOs with agency backgrounds (code for Brand-ing folks?  As opposed to real Brand Managers) are being replaced by those with a broader career experience across several disciplines.  Folks at the top want CMOs that can actually drive change down into the operational organization and quantify the results of their work.  That’s what a Product or Brand Manager, in the original meaning of these phrases, would do.

Sounds like a good idea to me.  The source for all this press commentary is here.