Marketing Productivity Blog

Now that we know how to Measure Desirability, we need to act on what we learn.

Many web Analysts and Marketers are pretty hip to Optimizing for Actions.  What they have a hard time thinking about is Optimizing Against in-Action.  It’s the mirror image of what people usually pay attention to.  If you’re having a hard time wrapping your head around this idea, try this analogy:

In the early days of web site funnel analysis, most people focused on the Active traffic, that is, the traffic making it to the next step, ”step conversion”.  The focus was always on optimizing “for Action”, on getting people who made it to Step 2 to Step 3, etc.

One problem with this mindset, of course, is that the percentage of traffic making it through the funnel steps is often quite small.  So by optimizing “for Action” you are dealing with a small, probably biased group and the potential impact versus total traffic is going to be relatively small.

At some point, people began to realize the tremendous value of the mirror-image question - this traffic that is falling out of the funnel, where did it go?  Because if you could optimize against in-Action you would hit a much larger cross-section of the population and have a larger total impact.

In other words, the most important question to ask is not “Why is this small group of visitors converting”, it’s “Why is this huge group of visitors not converting?”  Further, if you knew what non-converting traffic did just before the in-Action, you could infer from this “Previous Action” why they were not converting.

This thought process is what convinced the web analytics vendors to start creating the “leak diagram” version of the Funnel, where you can see exit paths by funnel step.  This functionality allows you to target efforts not based on what people were doing, but what they were not doing, and infer why they were not doing it by looking at the Previous Action (funnel Exit path).

I challenge anyone to argue it’s easier or more effective to optimize a funnel by Action rather than by in-Action with Previous Action.  Previous Action shouts “why”.  Knowing that 80% of the Funnel Abandonment at Step 2 goes to the “Shipping Policies” page is like all those visitors screaming at you “I need more info on Shipping!” 

It just makes too much sense.

Likewise, when we see dis-Engagement we should read un-Desirability.  And we should look to the Previous Action for clues on what is un-Desirable.  Previous Action Clues such as:

a.  They bought the same product or products
b.  Products bought were from the same vendor or category
c.  Responded to same campaign / traffic from same source
d.  They talked to the same salesperson or service agent
e.  They were formally Engaged with the same kind of content

and on and on.  Find the dis-Engaging visitors or customers, then cross-tab by Previous Action.   Just like a Funnel Analysis with Exit Paths.  Attack the high volume ones first.  If you need help starting, perhaps you should ask Customer Service for a whole list of un-Desirability opportunities.

Here’s what needs to be understood.  Interactivity demands that these issues are somebody’s problem.  For as great as Interactivity is as attracting customers, it tends to be quite weak at holding them.  There is a tremendous ramp in Engagement early on in the cycle, which drops off just as fast on the other side for most participants except the very hard core.  Why?  Interactivity drives very high expectations on the visitor / customer side, and it doesn’t take much to screw up that relationship.

Interactivity is relentless like that.

So somebody has to do this job: finding the root cause of dis-Engagement and fixing it.  Why?  Because even more than with the typical web site optimization, very small changes can produce enormous increases in Profits.  Why?  Because you are dealing with much larger populations - those who did not Act, as opposed to those that tool Action of some kind.

What does this all mean on the ground level?

For Web Analysts: There is an exciting and challenging world waiting for you in this dis-Engagement data.  You may or may not be able to access this data through your web analytics tool.  If you can’t, find out where it is - in the customer service systems, help desk systems, commerce systems - and start exploring.  If you have a BI unit, find somebody in BI who wants to work on these ideas with you.

For any given free cycle, you should resist the natural tendency to “Go Deep” in your own world, spending your precious time probing the inaccurate.  Instead, “Go Broad”, and try to start connecting some of these un-Desirability ideas.  This can be hard work, but I know you’ll enjoy it, and the payoffs in terms of profitability are huge.

For Strategic Marketers:  Somebody has to do this job.  Will it be you or the “Chief Customer Officer?  Given Marketing causes a lot of these un-Desirability problems in the first place, it seems to me the Root Cause folks should be in charge of this effort, rather than those catching the flack.

Now I know what you’re thinking - this Desirability thing ain’t my job.  I Push.  I generate Sales, Awareness, etc.  “Desirability” is not on the List.  Poor service?  Not on the list.  Faulty products? 

Please, not my area.

OK.  Let me ask you something.  When you lose a customer, what needs to happen on your side?  You have to replace that customer just to stay even, right?   So, to grow sales - which I think you are in charge of - you have to not only replace the lost customer but also add another customer.  That means, for a fixed budget, that you’re not going to be able to grow sales as fast as you could if you were better at keeping customers, if you were attacking un-Desirability.

Do you think your sales goals for this year are “cake”?  That you have “easy” targets?  That you are absolutely confident you’re going to hit the numbers?  If you answered Yes, then fine, you don’t need to care about Desirability.  Just churn ‘em and burn ‘em, my friend.  I guess you’re not the kind of person who would like to absolutely smash your sales targets to bits.

For Both Analysts and Strategic Marketers:  If you are going to talk the customer experience talk, please start walking the walk.

A couple of suggestions:

1.  Yes, this un-Desirability work often requires (demands?) cross-functional teams, because un-Desirability problems often start in one silo (Sales, Marketing, Product) and end in another (Service).  Is that an impossible barrier to overcome?  Start looking for partners.  Better yet, start formalizing the idea of a Business SWAT team.  More real world examples here, here, and here.

 2.  Wikipedia defines Experience as “observation of some thing or some event gained through involvement in or exposure to that thing or event”.  Event.  Behavior.  Stop with the demographic segmentation already, it’s just obscuring everything that’s important to customer experience.  Save the demographics for the Push end of the funnel where they mean something.  Once you get to Action and move over into Pull mode, you’re now into Behavior. 

Desirability is about Behavior, not Age and Income.

So that’s the whole model, front-end to back-end.  This model incorporates many of the ideas floating around out there right now - Customer Centricity and Experience, Engagement, Reputation Management - into a single Data-Driven, Optimization-friendly, Customer-Aware, Accountable Marketing process.

In short, Measure Customers, not Campaigns.  That’s the secret to unlocking the power of Interactivity and making it work for you.  Otherwise, Interactivity can work against you.

Your Comments and Questions are appreciated.  Your challenges as well - why can’t you do this?  What will it take to change that?

Example: At HSN, I started by forming the Business Swat Team at the Director Level - IT, TeleCom, Customer Service, Marketing (me), Merchandising / Presentation, Fulfillment, Finance, and (of course) BI

Our first mission was this one.

Why do we want to do a 2-Step acquisition?  Because the conversion rate is going to be higher per dollar of media spend.  It’s the equivalent in Online of the difference between buying single words and buying phrases in PPC.  The former generates a lot of traffic, but the latter gets higher conversion and is much more Productive.

In other words, a 2-step customer comes into the Relationship with higher Potential Value and higher Momentum.  And that’s important, because it means you spend less in Marketing over the longer term as the customer will, on average, keep interacting for a longer time.

If you’re not sure what that all means, perhaps it will become clearer as we dissect Desirability (Satisfaction), the last component of the AIDAS model.  Here’s the core issue:

Offline, we know people come back to Brands or Businesses “by themselves” because they like the Product or Experience.  We also do Advertising to these same people, as well as those less likely to come back or not likely to come back at all.

So how do we know what percent of the resulting activity is due to people just coming back because they enjoy the business, and how much is due to the Advertising?  How do you calculate ROI? 

A Very difficult task.  Even if you could identify the “likelies”, you generally can’t exclude them from offline media.  So this whole issue of “likelihood to come back” offline has been completely ignored, because there’s no way to act on it.

Online, and in much of Offline Database Marketing, we don’t have this problem.  It’s a pretty straightforward and common analytical task.

We can measure quite accurately how much of “coming back” is from Advertising and how much is from “Experience” or the more global concept of what Forrester calls Desirability - the fact the customer simply enjoys interacting with the business, and wants to interact again.   And, online we can target specific individuals with specific messages based on their likelihood to come back.

But, most people in Online marketing are not acting on this intelligence or targeting capability; they’re ignoring the idea largely because it didn’t matter offline.  Are these the same people that keep saying “Interactivity is Different”? 

I hope not, because they’re certainly not acting like it is!

Why should this concept of “likelihood to come back” really matter to Online Marketers?  Because it is much, much more powerful than you think it is.  Orders of magnitude larger.  However, once you screw up, the downside is also quite powerful - “not likely to come back”.  This brings up two important and powerful areas to consider:

1.  Over-spending to get people to come back who would have come back anyway
2.  Under-spending to get people to come back who are less likely or unlikely to come back

In most cases, you will find the budget mis-allocated in this way.  To optimize, you will want to reallocate budget from #1 into #2.

Online, there is a powerful ”Pull” that brings people back, over and over - without needing to provide incentives or begging them.  This Pull is the very fabric of Interactivity. 

What’s more, you can measure this Pull quite precisely and take action where appropriate.  Here is how:

1.  If you don’t try anything else new this year, do a controlled test with your e-mail program.  This is the simplest, most direct way to prove to people you’re not (I’m not?) crazy about how powerful this Pull idea is.  Please do not use whatever demo / product segmentation you normally use with e-mail for this test.  If you want to analyze this Pull behavior, you have to segment using behavior.  

Most of the big e-mail vendors can do this for you, tell them you want to do a “Recency Test with 30-day segments and a Control Group for each segment”.  The most universal “last interaction” (the base for Recency) for many folks will be “last open”.  You could also use “last click-through”, but of course you will have smaller active base.  If you’re in commerce, use “last purchase date” if you can, since that is what really matters.   Just send whatever your default creative is so you keep a baseline with prior campaigns.  You will probably end up with results that look like this.

If you want to know more about these ideas or set the test up yourself, there are detailed explanations  in this series and this series.  Questions?  Just comment below.

2.  Perhaps more importantly, you can measure the decline of Pull, the absence of Pull, and take action on that as well.  Pull is your measurement of Desirability.  Where you find lack of Pull, you will find un-Desirable experiences you can take action on. 

Now, a lot of people talk about being “customer-centric” and customer experience and all that.  Makes perfect sense, and has made sense since probably the first barter transactions, right? 

What you don’t hear people talk about is how to measure the profitability of a customer experience or Desirability effort.  How to identify Desirability problems - even if the customer doesn’t say a word about them.  How to isolate and fix these Desirability problems.  And how to measure the increased profitability directly attributable to fixing these Desirability problems.  Wouldn’t you like to identify these un-Desirability problems before they go Social on you?  Why be reactive when you can be proactive?

That would be a pretty neat trick, don’t you think? 

Here’s how you do it.

Once you have proven how powerful this Pull (come back by themselves) concept is with your own data - and it is especially powerful among your best, most Engaged customers (is that a surprise to you?), start asking why, for other groups, Pull is declining or absent.  What is the commonality among visitors or customers with the lowest “”likelihood to come back”, where Pull is declining or absent?

Here’s what you will find:

a.  They bought the same product or products
b.  Products bought were from the same vendor or category
c.  Responded to same campaign / traffic from same source
d.  They talked to the same salesperson or service agent
e.  They were formally Engaged with the same kind of content

and on and on.  Behavioral segments. 

Visitors or customers who “did the same thing”.

Basically, you will find out where Desirability is lacking, literally, what you are doing every day in Sales, Marketing / Product, Service, or Operations to drive away customers and prospects.

And then you can decide what you are going to do about it.  That’s a whole other challenge I will address in the next post.

Your feedback and questions are appreciated.

To summarize, there are significant forces in play that require Marketing folks to realize that optimizing Marketing goes far beyond media, message, response, and all the traditional MarCom stuff. 

To take advantage of these changes, there has to be a Strategic admission that Sales, Marketing, and Service are all parts of a customer-centric whole.  Interactivity forces this on you; it’s a Relationship Marketing environment.

CMO’s have an opportunity to step up and take control of this situation.  If they don’t, the job of integrating these disciplines will be handed to a Chief Customer Officer, Chief Experience Officer, or some other needless C-Level fabrication.  And that’s not really going to work, it’s a partial solution.

For those of you with Brand as your current primary focus, it should be easy to make the argument about why this integration matters and why you should be in charge of it.   If you don’t do something about really integrating all the customer facing disciplines, examples abound of the Brand damage that can occur. 

No amount of “Advertising” can fix Brand rot, you have to get to the Root Cause, which is probably cross-functional in nature.  It really doesn’t make sense to ignore excellence in execution and then react to the problems caused when you can discover, address, and fix these issues before they happen.

Here are some ideas to think about on the Tactical side:

1.  Don’t use Mass Media to try and build / close Relationships; that’s a waste of time.  Use Mass Media for what it’s very efficient at - creating Awareness and Intent.  The first step of the 2-step, it’s the Push part.  If Push sounds like it’s intrusive, remember people expect Push from Mass Media to begin with.  You have the proper context; that’s why Mass Media can be effective for Push.

Use unique taglines and phrases in the execution, knowing a search on the web is a high probability next step.  Google just released a study on what this looks like for newspapers, complete with a neat PDF diagram (see page 2).  Make sure the web team is prepped for the Mass Media, that they have optimized the unique taglines and phrases for Search, both Paid and Organic.

2.  Make sure the copy directly implies you are open for the Brand Promise to be tested in an interactive environment, where Brand Proof will take place.  This will usually be the web, but it could be a call center or other venue.  Invite those with Intent to convert this Intent to Desire through Interaction with you; this is Pull. 

Focus on driving curiosity and peaking Interest rather than selling, e.g. “Want to Know More?  Here’s our web site…”

3.  Pull is self-service, it’s about proper execution - consistency with the Mass message, ease of use, transparent, Relationship building.  Potential customer is now driving, you are awaiting response.  Answer the questions raised by the Brand Promise (on a web site or in the call center), allow them to be tested. 

Don’t simply repeat the Promise - that job has already been done, it’s a waste of time, it’s redundant, not respectful. 

Instead, fully and completely Expose the Brand Promise, let it stand for testimony.  Allow Brand Proof to take place.  This is not the time to be Intrusive; that’s out of context.  Make it easy for the prospect to feed back the experience, and be ready for the dialogue.  Relationship Marketing is an Exchange, a dance, two-way, back and forth.

React and Respond.  Be “Social”, if you want to call it that.

This portion of the program - which might consist of many different campaigns driving traffic into it - is where failure most often occurs, and where you get into this whole “customer is in control” thing. 

Like that’s a negative?  What they are in control of is their own process, and what’s the matter with that?  It’s enabling, empowering for the customer; it builds the Relationship.  Hopefully, what you have done here is given control; as opposed to having it taken from you.  There is a very big difference between the two.

If the customer has to “take control”, you’re doing something wrong.  You have broken processes, you have cross-functional chaos, you’re not enabling a dialog.  Or you’ve inflated promises, created false expectations, at worst, told half-truths.  You’re creating frustration.

That’s when customers feel like they have to take control from you.

That covers the Tactics for Aquisition (AIDA), I’ll tackle Retention (S) in the next post.  As always, Comments on are appreciated.

Forrester’s Marketing Forum this year covered Engagement, but not the kind of Engagement so often discussed in web analytics. 

Nope, Engagement from a Marketing perspective, you know, surprise and delight leads to better customer experiences leads to better customer retention and higher profits.

The presentation came complete with some nifty offline Engagement examples, e.g. the more a patient is Engaged in their healthcare the better the result.  The improved results came from, get this, “improving doctor usability”.  And yes, there was a test on this business optimization effort with tangible results generated.

You can get a good feel for where this conversation is headed from Jeremiah Owyang’s blog by listening to the 2 Forrester keynotes, each about an hour long.  For those short on time, pick one, depending on your interest:

Strategic Level: platforms, frameworks, etc. from Brian Haven

Tactical Level: examples, “how to” etc. from Kerry Bodine

No time for a video? 

For a bulleted list of the key points you need to understand in order to optimize your Marketing model, see the “Five Fundamentals of Integrated Marketing” ClickZ article here.

I’ll have more to say on why these ideas are so important in the next couple of days.  For now, I will leave you with this:

If the customer is taking control, it’s only because you’re using the wrong Marketing model, maybe one like this one.  No customer wants to have to “take control” in the first place. 

The more Engaging you are, the less old-school “pray and spray” Marketing  - online or offline - you should have to do. 

That’s the whole point of Engagement.

Comments on the videos or article?  Anything ring a bell for you?

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!

Here’s another Customer Experience kind of test that proves you can generate incremental profit by improving the Experience.  You just have to make sure customers want the experience “improved”.  This example is from the Lab Store and the ROMI on this little program is a real eye popper.

Back in the old days (meaning the 80’s), what I guess is now called WOW was referred to as “surprise and delight”.  Essentially, this 2-step idea works like this: when you surprise the customer, you really get their attention.  If you can get their attention by surprise and delight them at the same time (instead of pissing them off with your surprise), then you are going to have a more loyal customer.  The trick, of course, is to somehow make more money doing it…

New Customer Kits are a very simple way to do this, and in my remote retailing experience, it works every time.  First impressions, in case you didn’t know, are really important - and especially so in remote retailing, where there is no way for the customer to get any tangible “feeling” for the company.  Sure, you have copy on the web site that paints a picture.  But how many times have people read all this wonderful copy only to be screwed when delivered the tangible experience?

The challenge is to design a kit that is relatively inexpensive yet packs an emotional delight.  Lots of people toss extra stuff for the customer in the first order, but that stuff is usually company-centric, for example, “Here is a magnet with our URL on it” or “Here is a catalog of our other products”.  That’s fine, but it’s neither surprising nor delightful.

Here is what makes up a good New Customer Kit, based on years of testing:

1.  A letter or other message from the company that Welcomes the customer, talks about the people and philosophy behind the company, and reinforces any guarantees or promises that are part of the Brand.  This piece must be written carefully, and from a customer-centric point of view.  No “we we” stuff.

2.  A free gift.  This gift must be related to the merchandise or general category being purchased, and must not be discards, seconds, or defective merch.  Giving a new customer something that is dented or discolored is not a gift, it’s an insult.  Giving a new customer something that is promotional (magnet) may be a gift, but it is expected and not particularly delightful.  Giving a new customer a “gift” because they made a first purchase (Buy today and we’ll include a…) might be delightful but sure is not surprising.  Ignore the above cautions at your own peril.

3.  Free Samples, if relevant to the business.  Anything that is consumable and generates repeat purchase is ideal.

Anyway, I suppose you’re expecting some kind of numbers to go along with all the fuzzy-wuzzy “Oh, if we just make their experience better, they will be more loyal” drivel you hear all the time online.  This is the Marketing Productivity Blog, after all, right?  OK, here are the stats on this technique from the Lab Store.  As usual, this promotion was tested versus control (new customers who did not receive a New Customer Kit are control) and we compare sales activity of both test and control over the next 90 days.  Why 90 days?  Well, if it makes money at 90 days, it sure makes money at 120…

Average cost of New Member Kit (there are several versions) - $.74

Increase in 90-day second purchase rate, test versus control - over 30%

90-day ROMI - 4,891%  ($36.68 in net profit for every $.75 spent)

Surprised and Delighted Customers - Priceless

Now that the bottom line has been presented, the black box folks simply interested in the “what happens” can skip the next part.  If you want to know why it works and maybe learn something useful you can port elsewhere, read on.

New Customer Kits are a great way to shape Theatre of the Mind. 

What you have with a remote retailing customer is a ”theatre of the mind” scenario, much like you have in radio advertising.  Customers can’t see or touch you, so “Cues” become extremely important; if you don’t populate the theatre of the mind for the customer, the customer will go ahead and populate it themselves.  If you want some control over the image of your company people create in their head, you need to be proactive.  Theatre of the mind, folks.  Very powerful stuff. 

Our New Customer Kit generates absolutely tons of “Thank You” e-mails from new customers who want to tell us all about how great the experience was purchasing from the Lab Store.  Now, I think you’d agree that purchasing from a web site isn’t a particularly thrilling experience in any way, but if you really listen (and understand a bit of Consumer Psychology) these customers are not really talking about the web site, or even our company.  

What they really are saying is they are very happy with themselves for making a first purchase from us; our actions have confirmed they made a good decision.  Remember, this is remote retailing.  There is risk to the customer, especially on that first purchase; they have no idea if their expectations based on the web site copy are going to match the reality of delivery.  They are concerned about what might happen - will they be proven smart or dumb for taking this risk?

When we deliver the products they ordered in a timely way we meet expectations.  When we deliver these products carefully packed in a pristine new box packed with fresh blank newspaper, we probably exceed expectations by a bit.  But when these new customers get to the Welcome letter, the free gift, and the samples, we blow out their expectations. 

The picture these new customers had in their mind of our company based on the web site experience is then permanently altered; we’re doing brain surgery for 74 cents a head.

Now, I have a question for you - is this program Marketing or Customer Experience Management?

I’m going to preface this piece by saying I don’t really think “Customer Experience Management” is anything different from smart, integrated Marketing and Customer Service.  If there isn’t an actionable framework for it, like Ron, I’m not sure CEM has a future, other than to create something for people to talk about, and maybe sell some software…

Whichever direction you believe in, here is an interesting case that makes several points about this area of discussion.

The Nice to New Customers test was conducted at Home Shopping Network in 1994.  The idea came from the annual survey of all customers that indicated that the “average” customer felt the “new customer experience” was “as expected”.  Given the high percentage of 1x buyers we were experiencing (as do all interactive remote retailers), I thought, “Hmm, maybe if we deliver a customized first purchase experience and process, these new customers will be more likely to make a second purchase”.  Sounds logical, right?  This was a Business SWAT case since it involved Marketing, Customer Service, IT, and Telecommunications, all working together to set it up, determine the metrics, make sure Management understood the impact of the test on existing silo Scorecards, etc.  In other words, I sold my soul to get this test to happen.

We set up a pretty elaborate test where a random sample of new customers (about 100,000, a solid test group) were shunted to our “best agents” and given a new ”Welcome Treatment”.  Instead of the general “get them off the phone as fast as you can” attitude prevalent in the network, these reps had permission to spend as much time with the customer as the customer wanted and generally customize the experience.  There was a lot of role play and monitoring connected to this effort, and the service managers on the project were convinced these new customers were in fact treated to a much better initial experience than the average new customer.  In fact, the customers seemed thrilled.  So far, so good. 

Problem was, this test group of new customers exposed to a better “Customer Experience” ended up generating no incremental sales versus control.  Well, there you go.  We lost a ton of money on this test, a stellar -118% ROMI, because we literally had to pay back customer service out of the marketing budget for the lost productivity in the network due to the test.  Hey, that was the deal I cut to get this test done.  You win some, you lose some.

But it gets worse.  When we started dicing the post-analysis of the test down to behavioral groups based on the details of the first transaction, we found there was actually some incremental sales lift among new customers with “light buyer” initial profiles.  This is good.  Problem was (and you know what is coming, don’t you?), new customers with heavy buyer profiles were negatively impacted, and because the Potential Value of this group was so huge, the losses versus control in this relatively small number of folks far outweighed the gains in light buyers, causing the net effect of the promotion to be negative.

Isn’t that a fine kettle of fish?  Being Nice to potential Best Customers killed the test.

When we surveyed these customers in the test after we knew their behavioral profiles (to make sure we knew the behavioral context of their answers) they basically told us this: they were expecting a very operationally efficient transaction and we provided them a customer-centric one.  Cognitively, they were making an impulse purchase and they wanted an impulse transaction, not an empathetic one.  This disconnect caused post-purchase dissonance and reduced intent to purchase.  Using today’s language, we were basically “spamming” them; we were overstepping any Permission we had to engage them at a more personal level.  And this negative effect was most pronounced among new customers with high Potential Value.  In hindsight, knowing what we knew about the psychological profile of Best Buyers, this made all the sense in the world and was an interesting confirmation of the test results.

The CFO, well, he didn’t think this result was so interesting…but did applaud the idea that we would step up to the plate and actually pay back customer service for the losses related to decreased productivity in the network out of the Marketing budget.  It was the first time anybody had done this kind of intra-silo payment and really paved the way for tighter integration between Marketing and Service.

You might consider this test result when evaluating your e-mail contact strategy, at least for new customers.  Are you sure you are generating maximum revenue?  What if the half percent or so that unsubscribe each month are future Best Customers with high Potential Value?  Do you use control groups, do you know the answer to this question?

Interactive behavior provides a very special backdrop for Marketing and Service; be careful what you ask for. 

I’m not saying if you did this test you would get the same results.  What I am saying is you cannot assume all the stuff you read about “Customer Experience” online is going to work with your customers.  You simply have to test these ideas with real customers and measure the results.  And if you are dealing with interactive customers, keep in mind that “Customer in Control” is something you might not want to mess with.  In other words, sometimes Control is the Experience, particularly if the general Marketing / Brand backdrop is Operational Efficiency.

It’s one thing to start a company saying you are going to deliver some kind of superior Customer Experience and embed this idea in your service delivery model.  We all know these kinds of companies.  It’s a completely different idea to think that you are going to improve the current experience at your company, and this effort is going to have positive effects for both the customer and the company because it sounds logical to you.

Lessons learned:

 1.  The bottom line lesson here really was about a poorly constructed test based on a faulty customer survey methodology.  Without the customer opinion first tied to an actual behavior, we had no option other than to use the opinion of the “average customer” as a base to act against.  Because of this, the only action we could take was against  ”all new customers”, and ended up shooting ourselves in the foot.  Based on the post test dicing, we later retested and found (surprise, surpirse) a program like this could be extremely profitable when we treated targeted new customers differently based on their Potential Value. 

If we had this behavioral information (the initial Light Buyer / Best Buyer profiles) tied to the survey responses from the beginning, we would have understood these segments were different and designed the test accordingly.  Make sure if you are going to take some kind of action on a survey, you first understand a behavior and then survey the people with that behavior.  To do it the other way around, trying to “back into the behavior”, wastes a lot of time and money just in the data gathering and processing itself, never mind in the “re-testing” we had to go through once we knew what was really going on.

2.  It doesn’t always pay out to be Nice to New Customers.  Sometimes they simply want what they expect.

This is a great B2B example of a Marketing / Customer Service program operating in Fulfillment from a vendor of ours.  It drives profitability on the vendor side as well as increased satisfaction on the customer side.  Simple as a rock, effective on a number of levels, and measurable.

When we open a carton (usually 6 or 12 items in a carton) from this vendor, the first thing we see printed on the inside lid of the box is this message:

Remember
Our Customer is the
Next Inspector

Think about that message.  If you are packing the vendor boxes, you see this message every time you start to seal the box.  Every time.  How much “training” would it take to have the same effect?  In addition to the more direct message it sends to a packer about quality control at the carton level, it also sends a broader message to employees concerning customer experience and care.  After all, the employees know customers see the same message.

Simple, direct, impactful.

As a customer, when we opened these cartons for the first time, we thought, “Wow, that is pretty neat.  These guys really give a crap about what they do.”  Whether they really do care or not, of course, is up for speculation, but that is not the point, is it?  We think they care.  In fact, my wife’s response to this message was to cut off the carton flap with the message on it and put it over the packing station.  Not sure they planned for something like that, but a nice “halo effect”.

And, unlike most of the vendors we deal with, we have never received a mis-packed box from these folks in 6 years.

I talked with the vendor about this and he filled me in.  The idea came out of Marketing as a potential solution to a packing error problem that was causing nasty-gram traffic in Customer Service and the hard loss of customers.  An Operational defect that had a direct and trackable negative effect on both Customer Service and Marketing - as these process problems almost always do.  He doesn’t know what the ROI is because it’s silly to even calculate it - the incremental profit generated by decreased packing errors (cost reduction in “make good” shipments and returns processing) since program implementation is so large relative to the cost of printing the message on the box that the ROMI would have 8 or 9 figures to the left of the decimal point.

That’s not including any customer metrics like slowing of customer defection rate and halo effects, because those are obvious to them.  Customers simply stopped defecting due to mispacked packages.

Period.  Do you need to run a lot of math on a result like that to figure out if it’s profitable?

When Ron wrote this great post on Marketing’s responsibility for managing customer experience (more on process improvement from me here), I thought I would relate this simple example from the Lab Store.

We sell some exotic pet food that is meant to be a continuity item - the customer buys it every 3 months or so.  This product offering is, of course, designed to extend the Customer LifeCycle.  The food is a “staple” meaning it is generally kept in the cage at all times to supplement the fresh foods fed to the animal.  This food is not as appealing to the anlmal as say, fresh fruit, but it’s an important part of a well rounded diet for the animal.  The feeding instructions on the web site are extensive - portion size relative to fresh food, when to feed, amount to feed, etc.

So we start analyzing the repurchase rate of this staple food that is supposed to be our “back end” and it is dismal relative to expectations.  Why?  Have the customers switched to a different, cheaper source?  Are they not feeding the diet plan we suggest?  Is this even a “marketing problem”?  Well, in the Lab Store, anything related to customer behavior is a marketing problem.

So we grab a sample of the customers who passed the re-order point Tripwire of 3 months without ordering again and ask them, Why aren’t you ordering the staple food?  And the answer is “The critters don’t like it”.  Really?  That’s a surprise; we know the animals generally eat the food.  So we ask about portion size, are they following the diet plan?  And they say, “Not really, when they didn’t eat the staple food, we thought they would be hungry and so we gave them more fresh food.  They never ate any of the staple food”.

And there you have it.  We don’t need to ask any other questions.  The animal is not going to eat the boring staple food when they are being overfed the fresh food.  This is like asking a kid if they would rather have spinach or candy; one is good for them, the other tastes better.  And the customer isn’t going to buy staple food the animal will not eat. 

The problem is, this “fresh food only” diet is unhealthy for the animal; they are not going to get critical nutrients they need from the staple food.  But, this exact feeding scenario is covered on the web site; we’re already communicating this issue to the customer.  So it’s not a marketing problem, right?

Wrong.  That is the marketing problem - the information is on the web site.  We started including a package insert with the staple food containing the very same info as on the web site, except now, of course, it was “contextual”; delivered in exactly the right place and at exactly the right time - when the customer opened the staple food package.  And magically, the repeat purchase rate on the staple food increased 32%. 

The point is, if we had been off “marketing” and not paying attention to the Potential Value of the customer by setting up the Tripwire, we’d have never found this flaw in the process.  And by fixing it, we increase the return on all the acquisition marketing we do, because the LifeCycle of the customer has been extended.

Marketing Productivity, indeed.  More Lab Store tales to come.

Most remote retailers have problems with processing checks, or more accurately, the lack of processing them.  People place orders using “check” or “money order” as method of payment - then simply fail to send in the payment.  This of course creates all kind of waste in the system, from order taking and customer service through inventory management, stockout and available for sale.  “Check fallout”, as we called it at HSN, was a problem that if it could be minimized, would drive cost savings in almost every silo of the company, in addition to increasing revenue.

It was my job to “fix” check fallout.  Yea, not exactly a “traditional” marketing thing, but I was game for trying it, because I knew it impacted the overall financial success of all my marketing programs.

First, of course, the analysis.  It ends up (surprise, surprise) that 90% of the check fallout was generated by 10% of check buyers.  These “sport buyers” as we called them simply were placing check orders to fulfill an interactive shopping need of some kind with no intention to ever send in the check - much the same way as people “Add to Cart” with no intention of checking out.  This behavior is non-controllable and so from a marketing perspective, there is really nothing marketing can do - but that doesn’t mean we ignore it.

It was time to call in the cross-functional Business SWAT team.

The business SWAT team heads over to customer service and IT to explore the potential benefits / downsides of creating a “threshold” program of some kind which would prevent sport buyers from placing too many check orders.  We’d simply base it on history: when a customer hit (for example) 60% of check orders falling out, we would prevent them from placing a check order.  When we’ve built the idea, it’s off to Finance with an impact model - sure, we may lose some sales, and sure, we may generate some additional customer service calls, but the savings in order taking time / inventory turns / sales opportunity costs outweigh the downside and the program is approved.  IT builds it and creates a monitoring facility / reporting tic in rep screens so we could keep track of calls generated due to the implementation.

OK, so what about the controllable fallout?  We built a regression model that did a pretty good job of predicting who might be prompted to send in the check and created a marketing package for testing. 

Essentially, a lot of these controllables switched back and forth between credit card and check payments, so the thesis was they were simply “forgetting” and the marketing package would be a “reminder”.  Make it easy to send in the check by providing an “invoice” of sorts and a pre-addressed envelope.  Since the target group were generally good customers, position the package as an “additional service for our good customers” kind of thing.  The tests went well on the ROI side (random sample versus a control group) and so we rolled it out.

Rollout did not go well on the ROI side; after costs, control was more profitable than the test group.  So we start with the 5 Why’s, and (as we often did) went directly to the customer for some answers, starting with those that had a very high predicted response but did not respond (send in the check).  The majority of these customers told us they did send in the check, and “appreciated the reminder”. 

OK, so the copy works (customer finds the “service” a good idea), but what’s up with these checks, is the customer lying about sending them?  Possible, but the consistency of the “appreciated the reminder” response doesn’t really head you in that direction.

So the business SWAT team played what became one of our most popular problem-solving games: “be the problem”.  In this case, “be the check”.  This game involves following the entire process for a check through every potential place it could go and be touched, no matter how small, no matter what silo.  Mailroom, everything.  This leads to the discovery, in a remote area of customer service, of the “check shredding group”.  These people are tasked with shredding checks from customers every day - checks these customers sent in to pay for orders. 

Talk about your 5 Why’s.  Why are the checks shredded?  Because the customer did not sign the check.

Um, can we hold it right there?  I’m not sure I need any more Why’s, but I do have “1 WTF”: Where is the business rule that says “customer did not sign check, we should shred it”?  

And a few clarifiers: Do we notify the customer that we shredded their check (of course not).  Do we post anything to customer service screens to provide a “status” on the order of “shredded check” so agents know what is going on?  (Of course not).  Who owns this rule?  (Finance).

So it’s off to Finance.  How do we get them to play?  “Um, guys and gals, we have about $500K in check payments for orders we are shredding every week and the people doing the shredding say they’re doing it because you told them too.  Could we review this little ‘ol business rule with you folks?

First, is it against the law to deposit an unsigned check? (No, not if it was sent to you to pay for an order).  So there is some other kind of risk, a financial one? (Yes, what if the customer disputes the order, they can say they didn’t sign the check, and we’d probably be out the merchandise due to “unsolicited merchandise” law.)  OK, let’s say that would even come into play, what is the financial risk relative to the potential gain? 

Given the target group are some of our best customers, and given the customer service problems (Where’s my package?  I sent you a check weeks ago!) this causes, do we have a feeling for the real financial risk versus the benefits of simply depositing the checks and shipping the merch?

This is, of course, an answer a mid-level Finance person is not going to give on the spot, so he gets it on the agenda with Finance, which then needs to go to Legal. 

But the word comes back down the line a week or so later: stop shredding the unsigned checks.

And as if by magic, all of a sudden the check fallout marketing program we designed starts pulling in a 30-Day ROMI of 58% (measured versus control group).

Lessons:

The success of Marketing programs and Marketing in general is often determined by factors outside the control of “Marketing”.  This means the highest ROI customer marketing projects are typically cross-functional in nature, because they usually represent process problems that have been ignored due to “not my job”-ism.  Any Marketer who wants to step up to the plate and get a seat at the strategic table should analyze these problems and work out solutions.

Cross-functional SWAT teams that are “pre-built” and ready for action are a tremendous asset to a company.  Usually made up of middle-level managers, these people have deep connections into their departments and know where the answers are.  Most importantly, they do no seek “to blame” but “to fix” and this is well understood in a company with a healthy analytical culture.  Managers do not fear the arrival of the business SWAT team at their office door, they welcome it.

Homework for Marketers who want to be more Productive:

Do you know the business rules surrounding payment processing at your company?  These rules can affect the success of your marketing programs.