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Home Depot: Say it ain’t so! November 5, 2007

Posted by Elana Anderson in Customer Analytics, Database Marketing, Marketing, Marketing Measurement, Marketing Strategy.
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Home Depot Kids WorkshopIf you have kids, maybe you’ve heard of the free workshops that Home Depot runs the first Saturday of every month. My kids just love these events. When we go, they don their bright orange aprons (courtesy of Home Depot) and announce that they are going “to work.” This weekend, as the remnants of hurricane Noel hit our coastal town, my husband and I decided to head over. While he shopped, the kids and I built pirate ships (I only suffered a few hammer bruises). I also chatted a bit with the employee running the workshop who told me that corporate is planning to cancel the program. NOOOO!

Why are marketers forced to be so short sighted? 

Please keep in mind that I don’t have confirmation that the program is indeed being canceled – my intel here is a short exchange with an employee who may have been misinformed. But, it did get me thinking about marketing and how focused on the short-term marketers are forced to be. Sure, measuring the impact of a marketing program like this is hard. Maybe the short-term ROI of program is limited (although our exit bill was ~$120), but Home Depot execs shouldn’t discount the fact that the program fosters a bunch of little do-it-yourselfers who become Home Depot brand advocates at the tender age of 5.Before canceling this program to save costs, Home Depot needs to examine the impact:

  • According to Home Depot’s website, an average of 75 kids/store attend the workshops each month. With 2100 stores (and an average of 1.5 kids/adult), that’s 105,000 adults in the store on the 1st Saturday of the month that likely wouldn’t have been there otherwise. Now assume that 10% of those adults spend $100. That’s $1,050,000 each month. Now, consider the flip side, cancel the program and the parents don’t come in and spend – that’s an annual loss of $12.6 million.

  • It’s also not unreasonable in the least to think that the program has some additional brand impact on the parents of these kids. Again, let’s conservatively assume that 10% of the parents make one additional trip to Home Depot and spend $100. That’s another $1,050,000 per year.

  • Home Depot says that over 17.5 million projects have been completed in the workshops since 1997. I’m sure there are quite a bit of repeat visitors so let’s assume that the program has reached 6 million kids since it was initiated. That’s a lot of brand advocates with future purchasing potential. Once again, take a conservative assumption: let’s say 1% of those kids grows up to spend $300/year. That’s $18,000,000 per year (in today’s money).

Starts to add up, doesn’t it? Now, I don’t know much about Home Depot’s business or have any insight to average order size and that sort of thing so it’s hard to go on, but I think I’ve made my point. I wonder if the execs are evaluating the program based on costs and fluffy returns or quantifying the fact that the program:

  • Drives traffic into the store.

  • Yields (by my back of the napkin estimate) $13.7 million/year now.

  • Creates future buyers.

I sure hope the marketing folks at Home Depot are presenting the powers that be with numbers and not just shrugging their shoulders about the value of the program. Even though some of the numbers may not be auditable based on available data, I’ve always found that presenting numbers based on realistic (i.e., totally believable estimates) is a very powerful tool for getting senior executives on board with a marketing strategy or a program idea.

Net Promoter Score is not a customer metric October 31, 2007

Posted by Elana Anderson in Customer Analytics, Customer Experience, Database Marketing, Marketing, Marketing Strategy, Marketing Technology.
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Did the title attract your attention? Good! I’ve heard a lot of people talking about Net Promoter (NPS) as the “one metric” – the “killer metric” – that marketing needs to worry about. This concerns me!  I’m not here to bash NPS, there are others who are taking that on. As for me, I think Net Promoter is indeed a useful metric – primarily because it is so simple. And that simplicity is what has the marketing community falling head over heels over it. Well folks, let’s not go too gaga.

Why do I say NPS is not a customer metric? At an aggregate level, according to the research led by Fred Reichheld, a high NPS score correlates to business growth. But, aside from a segmentation of promoters, passives, and detractors, it doesn’t tell you much at an individual customer level. Most importantly, it doesn’t give you any insight into your customers’ needs, desires, and motivations or help you determine what to do or how to treat individual customers. Sure, you might think, “we need to turn the passives into promoters,” but how are you actually going to do that when what motivates one passive is completely different from what motivates another?

There is no killer metric

Sorry to say it, but there is no killer marketing metric. Yep, you need to take a balanced approach. You need value metrics to help evaluate the value and impact of marketing investment. You need operational metrics to help run the operation, diagnose issues, and improve efficiency. The way I’ve heard some executives talking lately, I fear they are focusing their marketing team solely on NPS and turning their businesses upside down to turn every customer into a “promoter.” My response? Pull back the throttle and apply a measure of basic business logic – you don’t want to end up with a lot of happy customers and an unprofitable business. If you review the details of what they have to say, this is certainly not what Reichheld and the folks at Satmetrix intended.

NPS, among others, can be a very useful gauge of the satisfaction and general well being of your customer base. But, it must be combined with other customer metrics (like retention, profitability, etc.) and insight (like life stage, attitudes, etc.) in order to effectively inform customer interactions. The bottom line? Business and marketing executives out there need to recognize that building an effective marketing measurement and customer analysis capability requires resources, focus, new skills (analytic and technical), and a lot of elbow grease.

Three key questions differentiate go-to-market strategies October 12, 2007

Posted by Elana Anderson in Marketing, Marketing Strategy, Product Marketing.
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In my last post I kyboshed the blanket generalizations that we – the industry – have created with the acronyms B2B and B2C. So what then are the key differentiators that enable us to break down the marketing problem into a more manageable morsel? I’ve been talking with friends and colleagues about this recently. Here’s my take – at the top level now (I don’t want to create another blanket generalization) – on three key questions that drive marketing strategy, tactics, skills, and technology requirments:

1.       What are you selling? Product vs. service.

2.       How much thought does the buyer need to put into it? Low consideration vs. high consideration.

3.       What is your sales distribution model? Direct vs. indirect. 

Why do these questions matter?

If you are a marketer at a large company, they probably won’t help you that much (this isn’t rocket science after all). For you, the answers are a given — something you already inherently know and take into account when you are defining your strategy. But, keep reading the blog, I’ve got ideas coming for you too!

If you are a marketing services or technology provider, on the other hand, these questions are something you need to consider. I’ve talked to tons of you over the years and I think that you tend to put yourselves in artificial B2B or B2C buckets (and then get pinned there) because it’s easier to do so. IMO, you’re selling your company short and you’re limiting your growth.

Consider these questions in the context of how you are serving your clients. Maybe your clients today are all high-tech software companies today. Peel back the onion… Your clients are selling a product, likely a high consideration one, and the lion’s share of them probably fall into a direct OR indirect sales model. Why am I so sure of this? Well, the marketing strategies, tactics, skills, and technology required to serve these clients are different than they would be for clients selling through an indirect sales model.

So, my recommendation…

When you are developing your strategy for growing your business, don’t assume that the next logical area to focus on is “other B2B (or B2C) categories.” (remember, as a Forrester analyst, I heard many of you say this). Think about categories that have similar marketing requirements – regardless of whether they are B2B or B2C – and use the three questions to guide your thinking.

B2B vs. B2C – humbug… October 11, 2007

Posted by Elana Anderson in Marketing, Marketing Strategy.
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I think that many of us (yes, I’m guilty too) in the industry are too fixated on the differences between business-to-business (B2B) and business-to-consumer (B2C) marketing.

A while back, I was working with a group to scope a peer community for top marketing executives. One argument was that we should only include marketers from B2C firms. “Huh,” I said, “What’s a B2C firm? Do the CMOs at Wells Fargo and P&G really have more in common with one another than they do with the CMO of Cisco?”

I think not.

The CMOs of these firms share common challenges and have unique differences that are more related to the type of product they are selling and their distribution model than the audience that they are selling to. Furthermore, if you step back and look at large companies in North America (and worldwide), you’ll find that most market themselves to both consumers and businesses. The fact is that CMOs from most large companies must focus on issues related to many different audiences including consumers, businesses, investors, etc. – and each group has different needs and expectations. To think of a company – or the CMO job — as B2C- or B2B-focused is too simplistic.

There are a lot of marketing suppliers out there trying to gain entrance to the CMO suite. Most marketing services and technology firms I talk with tell me they want to position themselves “key long-term partners and advisors to the CMO.” Well, you know what? Many of these firms are also focused on tactical issues – like email, SEO, campaign management, content management, etc. — that are only intermittent blips on the CMO’s radar (and if they’re not, I question the longevity of that CMO). If you really have dreams of being the first party the CMO thinks about for most issues then you probably need to reevaluate. But, to figure out if you have a shot, start by understand the challenges of the job. Then, clearly identify where you fit in and whether your firm really addresses one or more of those challenges. If you can’t do this, then don’t bother knocking on the CMO’s door – you’ll be wasting her time.

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