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

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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