ROMI, a Love/Hate story.

7 Apr

ROMI. Return On Marketing Investment. If I drop a coin into something, what do I get out of it? Many marketers, like myself,  have a love/hate relationship with measuring ROMI. We are unsure about what to measure, how to measure and how much weight to give to what the data tells us versus our gut feeling. The question pops up every day when we ask ourselves how to spend our budget. But, there are two big problems with ROMI today. The first is that understanding roi2how effective your marketing tactics are, is a humbling experience. We like to think that we have massive impact on the market but the reality is that we do not. Marketing is about giving nudges here and there. While these nudges and small pushes are very important to start moving a mountain, you will most likely start small. Truly changing preference is a long term and difficult challenge and short term impact measurements are often very sobering. So it takes a certain kind of attitude to appreciate what ROMI measurement will tell you. Not everyone is ready for that.

The second problem is that marketers don’t always know what to measure. The reality is, marketing in the digital age allows you to measure just about anything. But if you don’t know what you want or need to measure – you won’t learn anything from all the available data. There are also many examples whereroi marketers or agencies will simply take the numbers that look best on paper and use them to explain to their boss or client that they have been doing an amazing job. If none of the parties involved want to or can understand the numbers, this type of behavior will allow them to pretend all is great for a while. Allow me to introduce a rule that works very well when starting out with ROMI: “Isolate the effect of what you are doing to the nearest possible point of impact”. When you know what the customer journey is for your product or service, think about how far your marketing tactics can help your potential customers along on that journey. Start measuring the journey to the nearest possible point of impact. If your end goal is increased sales but you don’t have the ability to tie everything to closed deals, work with an assumption on conversion of leads to closed deals and measure the effectiveness of your marketing tactics in the number of leads you generate. While this is very straightforward advice, it is astonishing how many marketers choose to overstretch and try to measure much more than really makes sense. The result is that the contribution to the business of marketing tactics remains fuzzy at best.

Another important thing to keep in mind is to not give up when your data set is incomplete. While it is true we can measure so much more than our colleagues in earlier times could, we still may have holes in our dataset. Don’t let that stop you from using what you do know. If there is no or untrustworthy data available – take a wild guess, start executing and fine-tune your initial guess as you go along (Bayesian method)

I found there are two types of marketers when it comes to ROMI. One group, the ‘learners’, will embrace what analytics are telling them and adjust their tactics to be more successful. The other group, the ‘confirmers’, are only taking data serious that confirms their conviction about the success of certain tactics versus others. They will dismiss any data that tells them otherwise. Obviously, if you see people in your environment that are a member of the second group, I advise you to help them find a career elsewhere. ROMI is about learning, if you don’t want to learn anything then you might as well not measure anything and save yourselves a lot of money. Ken Robinson once said “If you are not prepared to be wrong, you will never come up with anything original”.

After reading this post, take another look at how you are measuring the effect of your marketing tactics. Are you really interested in the outcome or are you looking for confirmation of your existing convictions? And are you really measuring to a point that makes sense or are you overstretching?

Good luck letting your potential customers tell you how much they like engaging with your marketing tactics through ROMI data. And let’s make sure the Love part wins out in the end.

Anticipation Marketing

7 Mar

I don’t think that Hans Monderman ever anticipated to be named in a blog post about marketing. Monderman was a road traffic engineer who is most known for his ‘shared space’ concept, an urban design approach that tried to remove things like kerbs, road surface markings and traffic signs. Letting cars, bikes and pedestrians mingle in open spaces without any rules. While that sounds like a recipe for chaos and accidents, both traffic efficiency and safety improved where this concept was implemented. It seems that people will find their way if you build a space that allows them to do so. Monderman believed (he passed away in 2008) that people pay less attention when there are traffic signs and road markings and so on. He felt that people would be lulled in a false sense of security, relying completely on the road signs instead of thinking for themselves. His philosophy was literally ‘less is more’, by removing as much as he could from the road, people would actually look around and find their way through traffic.

The second reason Monderman was not a fan of excessive road signs and other objects to regulate traffic, was that he felt they made people look rather stupid because all the signs would give the impression people would not manage without this signaling overload. And when you treat people like they are stupid, they will behave that way.

The foundation Monderman’s work was built on was to treat people with dignity first, and then to build roads that anticipated people’s behavior. And this is applicable in other areas as well. Many companies today don’t seem to respect their customers very much, launching mindless campaigns after another that treat people like idiots. This page on Facebook captures many of these for you for your daily entertainment.

But there are also bright spots. Companies that do their best and really think about you, what you would prefer, how you would behave and they try to anticipate this by building their products and services in a way to respond. In a non-creepy way. Virgin Atlantic is a great example here. When you fly business class you get a nice meal and on your tray you will find pepper and salt dispensers, shaped like a little airplane. They look damn cute. Virgin Atlantic brings back its often-stolen plane salt shakersAnd so Virgin Atlantic knows that many people will ‘steal’ them and have the bottom of the dispensers engraved with ‘pinched from virgin atlantic’. Because they anticipated you were going to take them and then turned that into a great little thing. People love the dispensers and this is what creates brand loyalty. Virgin Atlantic is an airline that markets itself as slightly different from other airlines and this fits that profile perfectly.

It is also a proven strategy that delivering beyond what the customer expects at key times in their engagement with you will result in great customer satisfaction and long term loyalty. Seeing that Virgin Atlantic understands that you want to take these dispensers home and gives you the ok to do so in this funny way is exactly the right thing to do. You pay for the damn things through your business class ticket anyway but that is completely beyond the point. They’ve shown that they ‘get’ you and respect you and that is a pretty cool and rare thing these days.

Both Monderman’s roads and Virgin Atlantic’s salt and pepper dispensers have one thing in common that sometimes gets lost between the walls of the offices we marketers work in; they know their customers really, really well. So let this be a reminder to not forget to always go out of our way to really understand the people we work for (and no they are not the bosses or shareholders of this world, they are our customers) and deliver great products and services that surprise and delight.

The fallacy of the hunt for new customers

17 Feb

Finding new customers is something everybody wants, right? New customers means more business and that is a good thing. While in essence this is true, there is a deep risk embedded in going after new customers. The risk, a very obvious one, is that you forget to pay attention to your existing customers.

It’s  a trap every company can fall into. Obviously, when you are a startup you need to find new customers more than anything else. But even in a startup the risk is always there that you are ignoring your existing customers. This maybe even more an issue because, as a startup, your existing customers need to be kept even closer abreast because they believed in your new company and took a risk themselves. In a startup the impact of neglecting your first customers can put you out of business very quickly. In a larger company, or one that has been around longer, the impact may take some more time but the risk of neglecting customers is inherently higher here than in a startup because customers tend to become anonymous revenue streams that just seem to happen. So why focus on them, let’s go find us some new customers!

Just turn on the television or browse the internet and you will see what I mean. Companies offering all kinds of products or discounts in the hunt for you as a new customer. These offers and discounts can be split into two types of purchases;

  1. Transactional purchases: you are buying a new TV and the retailer is offering you an Xbox with it for free in order to win your business
  2. Subscription purchases: you are buying an insurance/mortgage and so on or Phone/Internet/TV/ etc. subscription and the company offering the service will offer you a discount and/or a free product with it.

Number one is a relatively harmless phenomenon because of the transactional nature. There is no after-effect as there will be no direct follow up. You may return to this retailer in the future but that is not relevant for now.  Number two is  the risky piece. Essentially, you are entering a longer term relationship with the company offering you the discount and/or free product for the service you are subscribing to. In other words, after you subscribe to the service you are turning into an anonymous revenue stream. Every month/quarter or year, money flows from you to the company. Just like that.

For a while, things are just fine. You have had your welcome gift and slowly you are fading to the background from the company perspective.  Once they have you established as a regular revenue stream – they will want to move on to find more like you. So, the company throws out more free products and discounts to attract new customers and you will start to pay the premium. tumblr_lwerjg7Cg91qfzjwwo1_500_jpg(imagenJPEG,467×700píxeles)After a while you’ll feel you may be paying too much as you will see the free products and discounts from competitors of the company you are purchasing a service from. And so you jump from one company to another. And the story begins again. If companies and customers keep doing this dance and switching partners it will result in focus on the lowest price and biggest give-away only and all meaningful connections between customers and companies will have been annihilated.

All this is awfully inefficient and only drives short term satisfaction for the customer and short term revenue predictability for the company. Why does this happen? In essence, because companies know customers are lazy. We may have better things to do than check whether we are getting enough value out of our subscription. So we leave it. And companies make money like this. Not being taken advantage of like this takes time and effort from customers.

One example I had myself was with American Express. I had a credit card (so I had the kind of service subscription as described above) and did not have to pay for this in the first year (the discount). After that I paid the premium price. A couple of years later I realized I did not need the credit card since I had another one and I called them to cancel. Then something funny happened. The customer service rep told me: ‘oh, so you want to cancel the credit card? Why don’t I just give it to you for free for the next year?’. Basically, I became a new customer to them. They offered me the disc0unt I had in the first year. Obviously, they would hope I would forget about it again and start paying the premium again the next year. The bad thing about this is that if I would not have called to cancel my credit card nothing would have happened. Nobody inside that company would have called me and offered me to cancel my subscription fee for a year. So I told the customer service rep that I was insulted by the offer and cancelled my credit card. I felt I was being treated like crap and it seriously impacted my view of American Express. For years now, I keep getting mail and direct marketing emails to sign me up as a customer again. Offering free products and discounts….. And there is no way I will sign up with them. I think there is something fundamentally wrong about this picture.

Why not do this differently? Why not invest in existing customers more and keep their long term business? The concepts of Customer Lifetime Value and Customer Attrition are well understood and everyone seems to agree with the theory that it is harder to get new customers than to make money from existing ones.

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However, this seems to be one of these things that companies talk about but don’t really embed in how they do business. Because they are too busy getting new customers while their existing customers are too lazy to run out the back door. But more and more are starting to find their way out. Some will say this mobility is a sign of healthy competition and I say they are wrong. I say it is much more healthy that customers stay with companies longer without being exploited.

In this time of crisis and downturn I think it is good for companies to really embrace customer lifetime value. The short term focus that has led to the current crisis has all cost us dearly. It is time to invest in long term. To invest in loyalty. The end result will be better for customers and companies.

A good example of how small things can increase loyalty is Nespresso. As you may well know, they track all coffee purchases through a membership card. Because of this, they know exactly when and how much coffee I bought, or the last time I used a cleaning pack for the coffee machine. This means they know what the right moments are to show me that they care about me as a customer. So they call me proactively to tell me that my coffee machine may be up for another cleaning pack. Or they give me a box of cookies, completely unannounced, as a token of gratitude for my loyalty to them. Nice work. These are great examples of how to retain customers. And as a result, I am spreading the word about how much I like Nespresso and thus helping them find customers for them.

Another company that seems to have gotten the point is Obvion in the Netherlands (you can auto-translate the page if you need). They provide mortgages and do so with a focus on customer loyalty and long term relationships. Their setup is based on certain principles like Interest rates should not be set to lure in new customers’. And also existing customers are more valuable to us than new customers’. They actually call this out.

Founded in 2002 and bought by Rabobank in 2012, they have worked their way, slowly but surely, to servicing 5% of all mortgages in the Netherlands. Ha! You may say – so they are focused on new customers! Well, yes and no. They get new customers because they are not fixated on getting new customers. This may sound like a paradox but the incoming new customers are attracted by the fact that they go for a long term approach. And thus, the back door stays shut, resulting in healthy long term growth. For Obvion and its customers.

I’d like to see more of that.

Bankers and Bikers

3 Jan

What could possibly be the link between bankers and bikers? And I mean the Lycra wearing skinny ones on bicycles, not the leather jacket wearing ones on motorbikes. Well, more than you might think. Recent history shows a very interesting parallel between these two very different worlds. And it all has to do with basic human emotions. As it always does.

Banking is an essential part of a healthy economic system, it provides the money that fuels new growth by lending out money to entrepreneurs that is placed under it’s guard by others. The simple business model of a bank is that is charges more for the money it lends out than it needs to pay in interest to the money it is asked to store for its customers. Banking has been around for centuries and throughout its history there have always been moments where this simple business model has been overstretched causing massive economic crashes like in 1929 in the US and the world.

Without going too much into detail, there are plenty of excellent books for that, banking has had its ups and downs but the last fifteen years have been different. Banks have overstretched their leverage before but in the late 1990’s a new way of creating more profit was found by introducing derivatives in many different forms of which CDO’s (collateralized debt obligations) are the most famous. These derivatives were built on very complex packaging of different financial products. They promised to give bankers the ability to spread the risk associated with sub-prime mortgages to name one example, and stretch their leverage to make more profit. These complicated products were developed in the nineties, and in the early years of this decade everyone was trading them and making huge profits. The trade in derivatives exploded. And then, it blew up. In a way, derivatives are like dominos. If the domino that started the whole thing (in this case mostly bad mortgages) falls, it takes down everything. We all know what happened next; bailouts, big banks collapsing and a worldwide economic crisis ever since. John Lanchester has written a very readable book about the financial breakdown which I highly recommend. It’s also very funny, believe it or not.

What does all of this have to do with biking?

Bikers, like bankers, are subject to the same ‘sin’ we all feel every now and then; greed. And where hopelessly complex products built on the concept of derivatives were a way for bankers to increase their profit and bonuses, doping has always been around in biking. But, similar to the developments in the financial industry, like the 543609_2794785767634_1917114292_nprofit built on derivatives, doping in the cycling world leaped to a whole new level in the late nineties. The same time when derivative-based products were developed and started to be traded.

Blood doping through EPO and blood transfusions opened up a whole new way to increase riders performance with staggering results. Average speed during the Tour de France increased dramatically in this period and riders took minutes off existing record times ascending some of the classic mountains like Alpe d’Huez.

EPO, transfusions, human growth hormone, testosterone and much more were driving this artificially. The 2012 USADA report on Lance Armstrong and many more riders together with Operacion Puerta popped the doping bubble. And only after dramatic testimonials by professional cyclists like Tyler Hamilton did we see how widespread the doping use was and how much it had permeated every aspect of competing professionally.

It was Tyler Hamilton’s book ‘The Secret Race’ that made me see the parallel between the explosions in the banking and biking world. He doped himself and does not make any excuses about it but he does try to shed some light on why he did it. It was a combination of a couple of things that did the trick and I think they are very similar to what happened in the banking sector. If I look at both developments, I think there are a couple of underlying factors worth noting:

First – the ability to dope or tweak financial assets must be available (I will call what the bankers did doping from now on as well) . If there is no magic potion (like EPO) to dramatically increase your oxygen intake or a way to spread the risk behind bad mortgages in such complex ways that they seem secure, this would not happen. The ongoing progress in the three-way-bond between finance, computing and mathematics created the ability in the banking world. More widespread access to medical equipment and progress in drugs (developed for other uses) did the trick in biking. If Murphy’s law in engineering is that ‘when something can go wrong, it will’ then I would say the law for doping is ‘when doping is available, it will be used’.

Second – the reward for doping must be high enough. In other words, if the ‘return on investment’ is too low, i.e. the risk is too high, people won’t take the chance besides a few opportunists. Bonuses and the honor of winning races are what drives riders in professional sports like biking. In banking, it’s the possibility to make millions. It’s very hard to say no to a podium place or a fat bonus.

Third – doping and outcome need to be very closely coupled. If you try to tweak your performance in general and you get a slightly improved performance but you can’t really pinpoint what did the trick, you will abandon it. But because the use of doping is so directly coupled with reward, the psychological impact of this is that it will make you want to do more. The work done by Daniel Kahneman and Amos Tversky has opened up new ways of looking at why people act this way. ‘Thinking, Fast and Slow’ is an excellent book to start reading about this topic.

Fourth – peer pressure is enormous. If you see everyone around you doping, or you think they are, you will feel the need to do the same to create a ‘level-playing-field’. This arms-race dilemma is well-known and applies here as well. The impact of peer pressure is unbelievably large. Humans are social animals and the famous Asch conformity experiments have shown that we would rather lie about something we see than break rank with people around us. So if other riders or banks are doing it, I must be nuts not to do it.

I am sure there are even more underlying factors and I am also sure there are more examples where these factors have resulted in people overstretching themselves like the bankers and bikers above.

So what can we do about this? Or is it just human nature and we will have to live with this boom and bust type model? I personally believe that people will make the same choices the bankers and bikers did under the same circumstances. I think this is is human nature at play.  There is something that can be done about it to prevent things from going too far. Biking is in this sense a harmless example but the impact of the banking crisis is severe and ongoing. I hope that we will study examples like the two cases mentioned here to better understand the conditions needed to derail. It is a combination of different factors together that create a dangerous environment and we need to become better to build in warning signs to detect them.

What is driving you?

19 Dec

Yes, that question again. Often used in manager-employee conversations or during job interviews and so on. Stale it may be but the question is at the heart of the matter behind why you love certain companies, products, services and can’t stand the bullshit of others.

I like to watch bands play live. One of the things I like so much about it is to see people being ‘in the right place’. Hardly ever will you see a musician on a stage being bored out of his mind, looking at the clock and hoping that the gig will end soon. Most of the time, you will see people who love what they do and have a drive to connect with their audience and play their music. Obviously, we can’t all be musicians but that passion, that drive, is visible in other places as well. Go into a bar or a restaurant and immediately you will notice which of the people working in the restaurant are ‘in the right place’. They will notice people with almost empty glasses without asking, will sincerely look after you having a nice evening. The reason behind it is very simple – they love what they do. And if they love what they do, the chances are high you are going to love what they make or deliver.

Ken Robinson has written a great book about finding your passion.

Examples of people having absolutely no passion for what they do are surrounding us everyday. One of those examples rings my doorbell every now and then. There is this guy who works as a parcel delivery man and he absolutely is not ‘in the right place’, He hates what he does and his  bodylanguage clearly shows it. When he hands over a package he is always looking at the ground, mumbling something about a signature and when you ask him how his day has been he barely looks at you and completely ignores you. This makes my package intake experience, as brief as it may be, rather unpleasant. It also makes me project these feelings to the company he works for.

Enter parcel delivery man number 2. Same company, different experience. This man takes pride in what he does. Always has a smile on his face whatever the weather may be. You can see he enjoys bringing people stuff they ordered it makes my experience so much better. I answer his smile with a smile, we have a brief chat and away he goes again. The brilliant thing is that he is not even trying to act this way, it is who he is.

A package exchange only takes minutes so what am I a going on about? It is an example of how far-reaching the impact is of people who care about what they do or make.

My Jeckil and Mr. Hyde parcel delivery man experience always makes me think about my own passion. How much in the right place am I? And in what way will my customers notice this?

My passion flows back and forth but in general I am very passionate about working for a company that enables millions of people to do great things through software.

What is your passion and are you passionate enough about what you do so that your customers will feel the difference?

Welcome

24 Nov

What makes people fall in love with brands, companies or governments? And why is it sometimes so easy to smell the bullshit from miles away?

These are the central questions for this blog. I’ll be writing about the very unscientific field of ‘customer love’. How come you can be loyal to a brand no matter what they do while in other cases you are not even willing to look at another brand? There are some very interesting things happening in this field and some great books to read which I will mention in my posts.

I will be writing about this topic from my own viewpoint. I have a split personality like all of you. I buy things, consume services and I am a citizen. At the same time I work for a company and I am on the other end of that relationship, trying to sell things to people. In my job I have found it is very easy to fall into the trap of producing the same bullshit that I accuse other companies or governments of. Whether you are a freelancer, working for a company, big or small, or own your own business. We have all been there. Why does that happen?

My first real posts will be coming soon. Expect open-hearted questions and answers on why it’s harder to create things you and other people love than creating bullshit.

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