Spiral Marketing: The More You Know, The More You Can Know

September 7, 2009

Sticky Note: Optimize, Optimize, Optimize

What’s a sticky note – it’s a brief reminder. That’s what my Sticky Notes will be – a tidbit, a concept, a brief reminder to think about something. This is the first.

I just saw an Allstate commercial, that pointed out that they “understand” how it can be difficult to change insurance companies, so they would “help you” work with your current insurance company to change to Allstate. Come on – you’ve made the decision to change to Allstate, and you know you’re going to have to call your current insurance provider to cancel your coverage to switch to Allstate. The difficulty exists whether Allstate helps you or not.

I don’t have the facts to know this, but I know for a fact that what Allstate has done is to look at “abandon rates” – people who have decided to switch to Allstate, call their current providers, and are talked into staying through a combination of buyer’s remorse, counter offers and the FUD factor (Fear, Uncertainty, Doubt). This conversation happens outside of Allstate’s hearing or control. So how does Allstate decrease the “abandon rate” for new policy sales? They insert themselves into the conversation with your existing insurance company, under the guise of “helping you” (reinforcing their brand message – “You’re in good hands with Allstate”). By inserting themselves into the conversation, they to a great extent nullify the advantage your current provider has in a one to one conversation with you.

I saw another concrete example of this when I switched my brokerage accounts from one company to another. I had grown dissatisfied with the “nickel and diming” of my online brokerage, and could get a similar service from a company with which I had significant other dealings; the culminating event was the imposition of a $40 account service fee because I had not made the minimum required trades in a given period of time. So I told the person I was talking to at my previous online brokerage that I would switch rather than pay that fee again; he politely said “tough luck.”

So I called the new company, told them what I was trying to do in order to get bank routing numbers to do a wire transfer; the woman I spoke to volunteered to get my then current online brokerage on the line to facilitate the transfer – she inserted herself into the conversation. And while I spoke to my then current brokerage, they became very apologetic, explained their policy yet again, and tried to suss out why I was leaving. The woman at the new brokerage interrupted this call center employee, informed him I had made my decision, and asked for the bank routing information – she shut the customer retention conversation down cold. And this increased my confidence in my decision, and the woman ensured that the funds were moved as appropriate and the trades I required were made as soon as the funds were available. I have not regretted my decision in the slightest. It also bears noting that since I left, my previous online brokerage has made hundreds of dollars worth of offers to try and reclaim me as a customer. They should have just waived the original $40 tax they put on me for using their service – it is easier and more profitable to keep an existing customer than to gain a new one; it is far easier and more profitable to keep an existing customer than to lose, then try to reclaim one.

This “Sticky Note” is titled “Optimize, Optimize, Optimize” for a reason. What I am making is a very educated guess about what Allstate has done – contradict me with facts if you have them – they looked at their sales cycle, and analyzed customer drop-outs. They looked not just at existing customers that leave, but also at sold prospects that, in the 11th hour, decide to stay put with their current insurance providers. And they built a strategy to minimize those drop-outs – by inserting themselves into the transition conversation.

It’s really quite insightful and outstanding strategy on Allstate’s part, and serves as a good lesson for any business: understand to the greatest extent possible every aspect of your business, and determine where improvements can be made to maximize your revenues or minimize your costs. Then think outside of the box and develop strategies for how you can improve those areas. And once you have addressed one area of potential optimization, move to the next, and the next, and the next.

As a related aside: if you want to get an easy to follow introduction to continuous process improvement, and how improvements can interrelate so that it is theoretically possible to optimize sub-processes while sub-optimizing overall processes (the Theory of Constraints), I recommend The Goal by Goldratt and Cox. And no, I don’t make anything for recommending their book.

Kev

August 18, 2009

Four Questions A CEO Must Ask About Social Media

I’ve read several lists of reasons CEOs are not adopting, and in some cases are “afraid” of social media over the last couple of days – 13 reasons, 11 reasons, 28 reasons the CEO is afraid of social media; I think the purpose of these lists are to help inform and create discussions by describing questions and objections they have encountered.  I am going to add my thoughts to that discussion.

I’ll preface my comments, however, with the observation that I don’t believe that CEOs are “afraid” of social media.  I do believe that some might think social media is just a “flash in the pan” (I think these CEOs underestimate the sea change that is occurring – disregarding social media, the effectiveness of virtually all other forms of marketing have been in steady decline for years).  I also believe others see social media for what it is – a potential game-changing “disruptive” model for integrating one’s customers into the business.  If the latter is true, as I believe it is, then there is tremendous organizational complexity in adopting this game-changing model – complexity not just in fitting social media into the marketing mix, but integrating it across customer touchpoints, all the while addressing the uncertainty, ego issues and performance management questions that will inevitably arise.

First Principles

In thinking about the core “first principles” for adopting social media, I believe there are four key questions the CEO is concerned about, and these, as in any highly functioning and complex business, are all interrelated.  These questions aren’t in any particular order – in fact, they relate to each other, and a key goal when discussing social media with a CEO is to first figure out which question is most important to him / her as an entry point into the conversation.

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How does Social Media fit within our company?

One question a CEO must answer is “How does social media and social marketing fit within my company?” If one seeks to implement an overarching social media strategy for a company of any size and complexity, this is no small question: in large companies, this might extend across multiple departments in marketing alone – marketing communications, PR, investor relations, and any number of product marketing groups.  Forgetting about social media, most companies have a difficult time getting their sales and marketing functions to get along, and then, expanding this to all customer-facing functions?  There is tremendous coordination and effort in getting key stakeholders all in the same tent at the same time.

Adding to this complexity is that in the vast majority of companies there is not a single officer dedicated to “owning the customer relationship.” That’s right – the customer, the fundamental source of value in all companies, has no single champion, and instead is usually passed from one functional silo to another.  It is possible to trace the path that led corporations toward managing activities, such as sales, marcomm and support, and away from managing relationships, but the implication is that, while social media and social marketing is and should be about engaging customers, most companies are not yet very well organized to support that conversation.  To embrace the potential of social media to its fullest, a company must rethink its way back to relationship-based management.

How do we control the message?

Another question a CEO is concerned with is “How do we control the message?”  There is an internal aspect to this question – “how do I control internal communications and proprietary information?”; and an external aspect – “how do I manage my brand if I don’t control the message?”  Breaking this down a bit further, the potential for unauthorized disclosures of proprietary and confidential information exists with or without social media.  Social media does not create the motives to share this information, or the carelessness that leads to leaking it.  Whether a company embraces social media as a key component of its strategy, it does at least need to update its HR policies regarding treatment of confidential information to incorporate appropriate uses of social media.

The external component of this question is perhaps the more difficult for CEOs to come to terms with.  After spending considerable time and effort crafting a finely honed, targeted message, on the face of it social media would appear to be a threat to that effort.  Of course, there has always been information from customers that has contradicted the marketing message of a given company, but never before has one voice had the power to amplify and repeat a message to so many than with social media.  But to effectively use social media and marketing is to engage with and embrace the customer’s voice within a company, and by doing so, a company opens itself to the bad with the good.  Although perhaps obvious, a company must remember that negative comments will be put forth, whether the company likes it or not.  It is therefore in the best interests of the company to be engaged in a conversation, rather than letting a monologue propagate without the company’s voice.  And the company must be prepared to respond quickly to any negative or off-point commentary in this environment where damage accrues in minutes and hours, rather than the days and weeks of the past.

How do we measure results?

A third question is “how do we measure results?”  This is a weakness in the social media landscape – being a relatively immature discipline, metrics that have evolved over decades of direct mail marketing, print and broadcast advertising, etc. and many years of online advertising have not yet evolved for social marketing.  There does exist, however, various techniques for linking social media efforts with strategic social marketing goals.

The more interesting point regarding metrics for marketing spend is that, across the board, the effectiveness of traditional marketing techniques is rapidly declining.  It is also true that early adopters of successful strategies benefit disproportionately from those strategies than do “me-too” adopters.  So the conundrum is whether a company stick with easily measurable media with appreciable and consistent long term declines in effectiveness; or it takes an early adopter position, build in the appropriate goals, benchmarks and controls, and trust that the anecdotal evidence of social media success, combined with tangential but highly relevant metrics of word of mouth marketing effectiveness, audience growth, adoption, mindshare, etc. lead to early adopter success?

How do we overcome “Cultural Inertia” in adopting Social Media?

Finally, the CEO has to ask “how do we overcome ‘cultural inertia’ in adopting social media?”  This is perhaps one of the most problematic questions because it is where social media touches employees: one has to understand that companies have ingrained processes, defined roles and responsibilities, established budgets and resources, and performance plans / incentives for existing functions.  By introducing social media into the marketing / sales / support mix – bridging all customer-facing functions – a company must deal with tough questions of where social media fits within the organization, who is responsible for it, how it impacts other functions, and how it will be funded through the budget.  These are important questions that relate directly to established departments’ and executives’ sense of security and of delivering value to the organization. These topics are very sensitive on many levels, and must be addressed carefully to ensure the entire organization adopts and is aligned with the success of social media and marketing, and the new customer intimacy that results.

There are clearly many tactical questions a company must ask and answer in developing and implementing a social media / social marketing presence.  The questions above are, however, “first principle” questions from which I believe all others will derive.  CEOs, and those that seek to promote a social media strategy, must address these questions, and address them carefully; if properly implemented, I believe it inevitable that social media will be a valuable and increasingly important component of a company’s marketing mix and customer support capability.

August 9, 2009

If you say bad things about me on social networks, I’ll pack up my coffee shop and go home!

I was reading an article in the online Wall Street Journal entitled “No More Perks: Coffee Shops Pull The Plug On Laptop Users” (see http://online.wsj.com/article/SB124950421033208823.html – it was brought to my attention by @enthused).  The meat of the article is that coffee shops, particularly independent coffee shops, are beginning to limit and even ban laptop users.

I am a fan of the the indie coffee shops – I think they can be gathering places for vibrant neighborhoods, and I’d like to see more of them survive.  To survive, though, is to embrace your customer, and I’d be very interested to see the financial analysis of allowing versus limiting or banning outright laptop users.  My intuition and experience tells me that this is in general a very bad idea for these indie coffee shops, but I am open to a financial analysis that proves me wrong.  I believe that there are a tremendous number of patrons who go to their favorite coffee shop to work, and are paying customers; unless you are standing room only, a customer in your shop is a whole lot more valuable than a customer who finds an alternative place to work (and caffeinate).

But that’s not what this particular blog post is about.  Buried in the story is what I consider a little gem of a cautionary tale about how not to handle social media.

As a preface, I believe one of the key “transformations” companies need to make in adopting social media is

Broadcasting (Controlling) Your Message >> Influencing The Conversation About You

I don’t think Masoud Soltani, one of the owners of Cocoa Bar in New York, shares my opinion.

So here’s the background: Hannah Moots and her boyfriend stopped in to Cocoa Bar in Brooklyn (of which Soltani is an owner) on a Friday night to do grad school apps.  It seems there was only one other couple in the place at the time – according to Ms. Moots, she and her boyfriend were going to do the apps, then have a glass of wine or two afterward.  They were turned away because they would ruin the ambiance of the place by bringing out the laptops (although apparently their table wasn’t in view of the only other occupied table in the house).  So Hannah and her boyfriend went elsewhere.  That’s where the social media story starts.

Hannah posted a review of Cocoa Bar Brooklyn on Yelp.com – it currently has a 3.5 star rating (http://www.yelp.com/biz/cocoa-bar-brooklyn) discussing her experience.  She gave it a less than stellar review – as, might I add, did quite a few others.  This is where it gets good.  According to the Wall Street Journal “Masoud Soltani, a Cocoa Bar owner, confirms that he sent her a Yelp message: ‘I remember you very well…I would not think you would write such bad stuff about us.'”

This is one of the great worries every owner or CEO has about social media, right?  The fear that someone will say something negative about the company, or off-message, or inconsistent with their brand.  And guess what?  This story proves they are right to be afraid – there are actually people out there saying bad things about the Cocoa Bar!  This is no phobia – this is a rational fear.

But at the end of the day, Hannah Smoots didn’t need Soltani’s permission to post her opinion in an open forum – Soltani couldn’t stop that message any more than Horizon Realty or Alliance Property Management can try to quash negative opinions about their properties.  The negative review of Cocoa Bar was out there, and at this point the company only had three options: ignore the message; engage the customer (presumably in hopes of turning a negative into a positive; try it sometimes, it works!); or nullify the message (by proving the information false or biased in a level-headed manner).

Soltani apparently thought “self-righteous indignation” was a fourth option . . . it really isn’t.

The customer may not always be right, but the customer is always the customer.  The customer has a voice, as she always has had, but social media provides the means to amplify her message, and deliver it to a potentially large audience.  Whether you, as a company, choose to participate in that conversation is up to you, but to ignore social media for fear of these situations is a lot like hiding under the blanket when you hear a scary noise in the dark.  Turn on the lights! Face your fears, embrace the voices of your customers, and you might be surprised at how much better your business can be for the effort.

There is, though, one other option that the ever entrepreneurial Masoud Soltani has discovered as well: according to the WSJ, “Mr. Soltani says [Hannah Smoots] is no longer welcome in his store.”

So if you find yourself in front of the Cocoa Bar in Brooklyn at 228 7th Ave (3.5 stars on Yelp.com), you might consider whether you would prefer a coffee shop that believes you have a voice worth listening to.  Might I suggest

Southside Coffee, 652 6th Ave (4.5 stars on Yelp.com)

Root Hill Cafe, 262 4th Ave (4.5 stars)

Cafe Grumpy, 383 7th Ave (4.5 stars)

Et cetera, et cetera, et cetera . . .

(http://www.yelp.com/search?find_desc=coffee+shops&find_loc=228+7th+Ave+Brooklyn+NY&ns=1&rpp=10)

You’re welcome.

Kev

June 24, 2009

Sbarro Isn’t Listening To Its Customers (A Cautionary Tale)

There is really no specific reason this blog post HAS to be about Sbarro Italian restaurant – there are plenty of other brands out there that are ignoring a great deal of interesting and even actionable information about brand perception, consumer experience, quality, etc.  It’s just that, coincidentally, several factors converged today to bring Sbarro to mind: 1) I used to like Sbarro’s quite a lot; 2) I have noticed that the quality of Sbarro’s has declined considerably – undoubtedly a result of the “franchise” effect – and so I almost never go there anymore; and 3) I noticed the following post on Twitter:

“Sbarro’s – never, ever, ever, EVER again. Never, not ever. EVER! #cardboard.”

So I searched Twitter to see if Sbarro has a Twitter account – apparently not.  I then searched Twitter for “Sbarro” and found comments that ranged from good, to OK, to bad – some examples:

mulebennett: @williamfleitch [Michael] Send ’em to Sbarro‘s for an authentic NY slice [/Scott]”

mohalen: @Arrens i thought i heard sbarro‘s was going out of business; i dont believe I have seen any in Ca.”

tastynsweet: sigh im at the mall right now eating sbarro they got good pizza but exspensive lol”

lynnsmithtx: Sbarro‘s pepperoni stromboli has 44g of fat & 2,470mg of sodium – a day’s worth of each.”

tiffany_dorrin: Ate at Sbarro for the first time in a very long time. I felt like I was in high or middle school again.”

BabyFresh360: Just ate some pizza from Sbarro Ewwwwww it was Sofa-King Disgusting…I Feel Sick my Fellow Twits : (“

GoodStuff4Free: Free pizza at Sbarro‘s for students with good grades June 23 http://linkbee.com/70IT

gadbearr: @joshuaharrell Sbarro…. yummmm!!”

So since Sbarro doesn’t have a Twitter account, I went to their corporate website, finally found the “contact us” link in the bottom navigation bar, and clicked on it to get a contact form.  There were 3 choices for my stakeholder role – Consumer, Franchiser and Real Estate Developer.  So I selected “Consumer,” added contact information, and in my message said that I noticed they were missing out on a lot of very useful information, including the original post: “Sbarro’s – never, ever, ever, EVER again. Never, not ever. EVER! #cardboard.”

This is where the story gets very interesting: I posted this comment, and got a rejection message back from the Sbarro’s website saying something to the effect that the “Contact Us” page should not be used to send messages it perceives as negative.  Are you KIDDING me?  Just tell me before I spend the time writing a comment that “We are very interested in anything you have to say, as long as it conforms to our vision of ourselves.  Any observations that do NOT conform to this viewpoint are out of line, and we will reject them out of hand.”

Good to know . . . now.

I am, as I would guess are the majority of you, of the school of thought that believes 1) ANY information or feedback is useful; and 2) I would rather hear negative comments that will help me improve my product or service, rather than flowery platitudes.  I JUMP on any hint of negative commentary, and try to get to the bottom of it.  In fact, some of the strongest client relationships I have ever developed have had a critical juncture, where the client perceived us in a negative way, and by rapidly addressing their concerns in a proactive, forthright and honest manner, I’ve ended up with a much better client relationship and a much stronger advocate of our services as a reward.

Now, it is clear Sbarro doesn’t belong to this school of thought, and while ultimately I believe that to be a fatal arrogance, I am not going to try to fight through the layers of bureaucracy they’ve built to ensure they don’t hear the voice of their most important asset: their customers.  I think, though, that there is a clear lesson for companies a little less vested in viewing the world through their own pre-determined lens.  While the dynamics are different for various sectors and industries, customers keep you in business; in the consumer world, you have an incredibly diverse, mobile and judgmental group of stakeholders that you ignore at your own peril.  And through emerging social media, the ability for those consumers to share good or bad information or experiences is incredibly rapid and remarkably efficient – the tweet that started this whole situation was sent by someone with 750 followers; through that one tweet, she told 750 people to never eat at Sbarro’s.  And that is just one of the 200 Million+ Facebook users and the 35 Million+ Twitter users (to name only two of the social networks out there).

The lesson of this cautionary tale?  There is more information about your brand than you could possibly imagine being shared on these social platforms.  You have two choices as a consumer retailer (or any business, for that matter): you can adopt and adapt your customer-facing processes to gather, assess, and act upon this vast reservoir of information, and through that process refine your view of your strengths and weaknesses, your opportunities and threats, the perceptions and misperceptions about your brand that you need to identify and act upon.

Or you can adopt the second option – the Sbarro option: only listen to what you want to hear, and filter and tune out the rest.  I would not recommend this option, but if you take this course, understand that you do so at your own risk.

Kev

January 31, 2009

Acquisition or Loyalty?

I was asked recently whether, in this economy, one should focus on retaining existing customers or acquiring new ones.  If you are in a forced-choice situation, you should choose loyalty – there have been many studies across many industries that validate the fact that a follow-on sale from an existing customer is 5 to 11 TIMES more profitable than the first order from a new customer.

Ideally, though, you wouldn’t have to choose, because if you want to estimate the lifetime value of a customer, over time you will almost always find that a decent, close-enough estimate for lifetime value is 3 to 4.5 times annual profit earned from that customer.   Therefore, not pursuing acquisitions for too long a period of time will start to erode your profitability.

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