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My new favorite YouTube video December 5, 2007

Posted by Elana Anderson in Marketing, Web 2.0.
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No commentary required. Enjoy!

Five steps to understanding customer retention December 4, 2007

Posted by Elana Anderson in Customer Analytics, Database Marketing, Marketing, Marketing Measurement, Marketing Strategy.
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 I recently responded to a question from a network that I participate in.

What is achievable customer retention and is there a level of customer retention that is not profitable to reach?

I’ve talked with a lot of marketers about this question and, frankly, there is no easy bake answer. It’s easy to look for a quick published statistic or benchmark and call it a day. But, how much does knowing that your retention rate is better than your competitor’s really help your business? It may help CYA, but it doesn’t help your bottom line.

IMO: marketers rely way too much on benchmarks (open rates, click rates, retention, etc.). Rather than rely on industry benchmarks (I don’t even know of a comprehensive source for retention by industry), I encourage marketers to:

  1. Establish a baseline for current average retention. Examine your customer base to understand average retention. Better yet, do it by customer segment if you can.
  2. Understand the timeline to customer profitability. Every business has different acquisition and services costs so if you don’t already know how long it takes for a new customer to become profitable, then you need to figure it out. Subtract your costs to acquire and serve the customer from average customer revenue over time. Companies that are really good at this use individual customer revenue and get into cost minutia to attribute costs at an individual level and even include costs like physical plant and electricity. But, if you’re just getting started, keep it simple and stick with averages.
  3. Set a target retention rate. The longer it takes to become profitable, the higher the retention rate needs to be. Establishing and monitoring a retention KPI will tie retention directly to business performance.
  4. Define marketing tactics to improve retention. If current retention is not at the target level, then set improving retention as a key business objective and drill down into a series of tactics aimed at moving the needle. Don’t shoot in the dark though. Engage a statistician to do some data analysis to better understand what key factors that correlate to longtime customers or customers that attrite. Then, establish marketing and customer service practices and campaigns that are specifically focus on encouraging the factors that are correlated with long-term customers.
  5. Measure results consistently. Periodically, reevaluate the retention rate to see how what you are doing is impacting customer retention. Make sure you are also considering metrics that help you tweak your programs at a tactical level too. Specifically, are the tactics you have implementing really encouraging those factors that correlate with long-term customers?

Early New Year’s Resolution December 4, 2007

Posted by Elana Anderson in Marketing.
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I will post at least once a week on my blog. I will post at least once a week on my blog. I will post at least once a week on my blog. I will post at least once a week on my blog. ETC…

Some friends have asked me why I “stopped” posting – they said they like my blog. Yippee! Sorry, I got caught in the holiday rush and I got busy with some end of year BILLABLE deliverables. Hardcore blogger friends tell me that I should post on a regular and consistent basis.

Moving forward, I commit to post to the blog at least once a week — on Tuesdays (seems like a good day).

My strategy work at the moment is focused on a few areas of current passion:

1.       Technology Enabled Marketing and the consolidation in the online marketing technology sector

2.       What’s next for web analytics

3.       Automating mid-market marketing

Please reach out through the blog or via email if you are interested in connecting on these or related topics.

Direct mail: Not dead yet (and won’t be any time soon) November 12, 2007

Posted by Elana Anderson in Customer Analytics, Database Marketing, Integrated Marketing, Marketing, Online Marketing.
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Thank goodness it’s Veteran’s Day — I have a USPS-free day to clean up all of the mail that is piling up all over my house. Must be the season, but I’ve dedicated a few posts to the direct mail industry lately (I promise that I’ll find someone else to pick on once we get through Christmas). Just to give you some more proof that direct mail isn’t going to die on the vine any time soon (article from Direct Magazine):

Early next year, Neckties.com going to make its first foray into direct mail, says Herschberg.

We have a direct mail campaign we’re going to be working on after the fourth quarter,” he says, noting that while the firm’s younger customers prefer to shop online, they tend to spend less than their older counterparts.

“People in 50s and 60s more likely to be swayed by combination of online and direct mail,” says Herschberg, conceding that the direct mail effort is “something of an experiment.”

Neckties.com is not alone. Per my previous assertion that ecommerce is actually responsible for increased direct mail circulation… I get a ton of mail from Netflix. If Netflix bothered to match its rented list to its own customer database, they would find that my household (thanks to my husband) is already one of its most active customers (my husband rents movies weekly and has rated over 1900 movies Netflix.com to date!). I have also recently received mailings from online mailings from ecommerce stalwarts like Overstock.com.   

To continue my rant… The most ridiculous catalog I’ve gotten so far this holiday season is the one that was entirely dedicated to field hockey from Longstreth. I’m sure it’s a fine company, but my household has no interest in field hockey (I’d love to know where the shoddy analytics that determined I am into field hockey came from)…. The connection must have been that mouth guard I ordered for my daughter (as required by her SOCCER coach) through one of Amazon.com’s merchants…. My request to Amazon: Don’t just pass me off to the to the privacy policy whim of your partner merchants! Take some ownership and add functionality to your ecommerce site to allow customers to opt-out of catalogs and email when they buy from a partner. 

“Relationship” Marketing November 9, 2007

Posted by Elana Anderson in Customer Experience, Database Marketing, Marketing, Marketing Strategy.
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I just started cross posting some of my blog entries on the CustomerThink site. This week’s post generated a lot of discussion about misguided attempts at relationship marketing. Here are some of the examples that were raised (I’ll summarize from the comments):

  • T-mobile birthday card (with balloon): Described as an “expensively produced standard letter,” the birthday greeting reached a customer with a record of service issues and it arrived late! The customer’s reaction? Not impressed — probably not upset enough to quit T-mobile, but upset enough to blog about it. (example from Graham Hill)

  • Pet birthday card from insurance company: According to Gywnne Young, who submitted the comment, “The card wasn’t edible and it didn’t squeak. So it went in the recycling bin. And far from the warm fuzzy feeling I’m sure the company meant to give me, I was left with a feeling of disgust.”

  • Got you back: “A major electronics retailer regularly sent a birthday card to individuals from a database of prospective customers. One recipient was so incensed over this invasion of his privacy that he took action. After a little Internet sleuthing, he found the name of the company’s CEO, and then found out his wife’s name and HER birthday. Then he sent the CEO’s wife a birthday card, and asked her how she felt about receiving the card, including the obvious insincerity of the sentiment inside the card. The program was immediately pulled.” (example from Andrew Rudin).

Now, let me share a couple other examples with you which had a totally different effect.

  • Recognizing a personal milestone:  When Scotiabank customers pay their final mortgage payment, the bank sends out a letter thanking the customer for her business and congratulating her on reaching the milestone. Internally, bank employees have dubbed the letter, “the wedding invitation,” because it is printed on fancy stock and doesn’t include the typical marketing speak, colorful logos, or offers. Two weeks later, the branch follows up with a phone call: again congratulations, thanks for business, anything we can help you with in the future (no pressure, no pitch)… According to individuals I have interviewed at Scotiabank, this program has yielded an incremental balance lift of $500 per contact (that adds up).

  • Birthday greetings from Bill: For as long as I can remember, I have received birthday cards from Bill. The cards were always handpicked and contained a personal message from Bill. I had never met Bill. Who was he? He was my grandfather’s financial advisor.  My sisters and my cousins all got cards from Bill. And, when several of us had enough means of our own, we too became Bill’s clients.

  • Mom loves the holiday wine and cheese: My mom (a science professor at William and Mary), is very skeptical of marketing (and doctors). She doesn’t fall for anything. That said, she literally gushed over the wine and cheese basket that she received last Christmas from her financial advisor. The basket came with a card and a personal note. She knew it was “marketing,” but it succeeded in giving her the “warm and fuzzies” nonetheless.

What’s different about these examples and what works?

The examples that work are:

  • Between parties that have a significant relationship: What kind of relationship do you have with your mobile company or insurance carrier? Probably not a personal one.  

  • Not a marketing pitch: What!?! Can marketing be subtle? In fact, Scotiabank’s restraint in foregoing the glossy insert or list of latest offers significantly contributes to making these communications more real and sincere for the recipient.

  • Personal and sincere: Scotiabank’s restraint contributes to the sincerity of the message as do the handwritten notes or even just the signature from the financial advisor.

Relationships come from sincere interactions

Maybe we’ve all gone a little too cuckoo over the term “relationship” marketing. Let’s be clear, relationship marketing IS NOT blasting a message to a semi-targeted list. And, I don’t think I’m in the minority here, but most customers really don’t want to have a relationship with the company they buy their toilet paper from.

Here are my top line recommendations to would be relationship marketers:

  • Only be personal when you have a right to be: I plan to crack a bottle of champagne if I ever pay off a mortgage! And, I wouldn’t be upset at all if my bank sent me a card recognizing my achievement. However, if the envelope was stuffed with glossy pitches aimed at securing more of my money, I think I would be a tad perturbed.

  • Look for opportunities that positively impact customer experience:  Think about marketing from the perspective of service. Part of marketing, by it’s nature, will always be to inform but more marketers need to seek our opportunities to offer proactive service and pleasantly surprise their customers. Rather than sending an insincere birthday card, another wireless carrier called customers that had experienced a series of dropped calls to APOLOGIZE and offer a break on the monthly bill.

  • Expand your definition of “relationship marketing” to include community: What can a firm that doesn’t have a substantial — or even direct – relationship with its customers do?  Recognize that it’s not about the toilet paper! Take a look at P&G’s Home Made Simple. Note that the site isn’t simply hawking products — in fact, you won’t even see a single product above the fold. Customers get tips on managing their household, decorating, and healthy living as well as coupons to try new products (but, again, the product marketing appears secondary). P&G gets valuable market research information and a group of customers that are convinced that the P&G is genuinely interested in them. Del Monte’s social community of dog lovers is another good example of how a firm can engage and build relationships and gain insights that allow the company to better understand customers and innovate (see the case study).

Let’s gather some more examples

I’d love to further peel apart the good examples from the bad so, please, add comments here or send me your examples as well your reaction (positive or negative).

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.

The weekly catalog take in my household October 26, 2007

Posted by Elana Anderson in Customer Experience, Database Marketing, Marketing, Online Marketing.
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Catalogs                    Catalog Poundage

To further the points I made in yesterday’s post, I thought I’d display the volume of catalogs that come into my household on a weekly basis. I get rid of them every weekend so the picture shows what arrived in my mailbox between Monday and Thursday. The stats: a grand total of 41 catalogs weighing in at 12.2 lbs. And the holiday season is just getting started!

 Why do I get so many catalogs? I am an avid online shopper. It is a matter of pride to me that I haven’t set foot in a store (other than Costco) to do any holiday shopping since 2000. But, I don’t think that individuals that shop online expect — or want — to be overwhelmed with catalogs as a result. To my point yesterday: we in the direct marketing industry need to be leaders in driving the solution. Starting with opt-in (or at least opt-out) to catalogs is a reasonable place to start.

Catalogers, green is in! October 24, 2007

Posted by Elana Anderson in Customer Analytics, Customer Experience, Database Marketing, Integrated Marketing, Marketing, Online Marketing.
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Last week’s article in the New York Times about Catalog Choice got me thinking about the catalog industry.

Now a new online service called Catalog Choice (www.catalogchoice.org) is facilitating attempts to unsubscribe. The site was developed by three nonprofit environmental groups — the National Wildlife Federation, the Natural Resources Defense Council and the Ecology Center — to relay requests en masse to specific retailers. Since it was introduced last Wednesday, more than 20,000 people have registered.

Now, I know a little something about how a catalog operation works because I ran very large database marketing technology projects at Staples and Eddie Bauer in the mid-late 90’s. So, here’s my take…

The Internet is partially to blame for increased catalog circulation

Despite predictions that the Internet would decrease direct marketing postal mail volumes, a 2005 study by Forrester Research (disclosure: I edited the report) showed that 60% of high-volume direct marketers (those that mail 50M or more pieces annually) planned to increase their mail spend. What that report didn’t say is that the Internet is actually deserves some of the blame for the increase.

Maybe this bucks conventional wisdom, but think about it. In the old days, catalogers could only build their house file by buying lists and participating in cooperative data sharing initiatives like Abacus. Now, if someone comes and buys on my site, then of course I’m going to add them to my house file. And, I’m also going to add them to my list for my sister brands too. It’s a no brainer. So, today, catalogers still use tools like Abacus and they also assume that every online shopper also wants a catalog. Pretty presumptuous, don’t you think?

Well, today’s over marketed and increasingly environmentally conscious consumers won’t have it. That’s what gives rise to organizations like Catalog Choice. And, this is just the beginning.

The industry needs to take action

I definitely don’t have all the answers here. Catalogers are in a tough place and I sympathize. When each catalog turns a profit, it’s hard to come up with a business case to stop. But I think the industry needs to take the lead and start working on the problem. Here are a few ideas to get the ball rolling:

  1. Enable online customers to opt-out (better yet, IN) of catalogs on your site. You do this for email right? Technically you don’t have to –the CAN-SPAM law only mandates that you honor an opt-out. But, you do it because consumers fought back against email spam. So do it for your catalogs too (catalogs are a lot more expensive than email after all). It’s not hard to add another flag to your database that you check in your campaign list pull process. I am not aware that any retailers are doing this today – it’s time to start.

  2. Allow customers to limit the number of catalogs they receive. Some retailers I’ve worked with send as many as 60 mailings a year to a single household – that’s a lot of paper! Take the catalog opt-in a step further and give your customers a choice to limit the number of catalogs their household receives every year. Now, it’s up to you to figure out – through modeling and contact optimization techniques – which catalogs will drive the most return from that household within the customer’s set limit.

  3. Tighten up the deduplication rules. So, my husband and I don’t have the same last name. That doesn’t mean that we want duplicates of every catalog in our house. I had this argument with a client in 1995. The response I got was, “The catalog could be going to a sorority house or an apartment – we want to get as many eyeballs on each book as possible.” Well, with a little external data and a tad more technical elbow grease, you can easily determine that I live in a residential suburb in a single family home. So, please, don’t send me two catalogs and save yourself a tree and a few bucks in the process.

Sure, the ideas I’m proposing will limit your reach, but they WILL help the environment and be viewed as a step in the right direction by your greening customer base. You can get some leverage from this – publicize the fact that you are committed to being more green and helping the environment. But be careful with this part, don’t say you are green and fail to walk the talk – today’s consumer is watching and now has plenty of channels through which to be heard.

How [poorly] integrated marketing impacts experience October 23, 2007

Posted by Elana Anderson in Customer Experience, Integrated Marketing, Marketing, Marketing Technology, Online Marketing.
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I recently treated myself to a new laptop. A Sony Vaio – it’s chic, sleek, and tiny. After I got rid of all of the marketing crud – you know, the start up gobbledygook and free trial software, I fell in love with it. I love it so much that I also fell for the “Register and save 20% on accessories” offer that came in the slick little catalog insert in the box.

Sony Discount
 

 

 

 

 

 

 

 

 

So, I went to the Sony registration site, fully expecting that after I provide a few nuggets of personal information I would be launched directly into a shopping experience worthy of Sony Style. Unfortunately, that was not my destiny…

First off, the entry form breaks all kinds of standards. For example, the birthday field isn’t marked as required but must be because, after several failed attempts with no error messages, I finally entered it and my registration was accepted. Whew! Now I’m ready for my Sony Style shopping experience…. Sadly, I was disappointed again…

Sony Confirmation

Now what? How do I get my discount? After three days, my hunger for the cool accessories had not abated so I called the 800 number provided on the catalog. The polite individual I spoke to informed me that I should receive an email with a discount code. “No ma’am, you can’t order the accessories now and get the discount. If you ordered online, you should receive the email in a few days. If you don’t get it, give us a call back.” Sigh…

Finally, after 11 days (!!) I got the long awaited, “Thank you for registering” email. Here’s what it had to say:

Thank you for registering your Sony product on our web site. This email confirms you have successfully registered the following Sony product on our web site: VGNTZ150N

Name: Elana Anderson
Issue Date: 9/25/2007
Model: VGNTZ150N
Serial Number: N/A

A Special Offer from Sony Card:
1500 Reward Points after your first purchase*
http://www.firstusa.com/cgi-bin/webcgi/webserve.cgi?partner_dir_name=sony_1500&page=cont&mkid=6RS3v

No, I don’t want a credit card! I want my 20% discount! Refusing to relent, I called the 800 number again. This time I explained my situation and the service representative agreed to take my order and give me the discount. Mission accomplished – FINALLY! What should have been a simple seamless process took two weeks.

Lessons learned

What does the Sony brand engender for you? If you are like most then great design, high quality, stalwart brand probably top the list. But my experience gives me a view into the inside: big organization, internal silos, and politics. The campaign I described here doesn’t have that many components — it shouldn’t be THAT hard to get right. But, this kind of campaign does touch different parts of the marketing department (people who probably don’t know each other and sit in different offices) and the broader business.

My advice? If you can’t get a simple integrated program like this right then don’t do it at all. Why? It damages your brand when you mess it up.

If you are running campaigns with multiple components that cross organizational silos then you need to organize the stakeholders and nail the process down. Understand the steps, define the handoff points, map the time between them. In the end, it’s all about the process. Ideally, a campaign like this is automated. But, sufficient testing is required up front to make sure it works. And, don’t forget to put some process checkpoints in place so that if something breaks along the way you get an alarm bell. You can have great creative (Sony does) but if the process is disjointed you lose business and look foolish.