How do you reduce customer churn?

How do you reduce customer churn?

Jun 29, 2016 | Customers, Marketing

Pretty simple answer really; you increase customer retention.

It costs way more to find a new costumer than it does to keep a current one, we all know that, but somehow do little about it. Almost every business I interact with fails to get an optimum balance between servicing existing customers and prospecting for new ones.

So, how do you do it.

Stand for something. I am a great advocate of Simon Sinek’s “Why How What‘ analysis. People buy products, not algorithms, and they buy at least partly with their hearts. Even aggressive  B2B buyers, and  multinationals who put in global sourcing by tender as a means to squeeze price, still buy with their hearts because there are people involved. They are more likely to buy from someone they see as standing for something they can relate to, even believe in, than someone who stands for nothing more than their own success.

Be human. Everyone likes to be treated as important, to know that someone cares. It is more than great customer service, it is genuinely caring about your customer. What a poor cliché it has become when much so called ‘customer service’ has been outsourced to low cost countries, where the so called service people have inadequate product knowledge, and no power to actually solve the problem, assuming they understand it in the first place. I received a parcel of stuff bought on line recently. The packaging was superb, and inside there was a note from the person who assembled the order, with her email address at the supplying company. It was such a unusual thing that I tested the email, saying thanks, and got a warm reply from the person. That is customer service!

Be a tribe. Seth Godin’s articulation of this phenomena is superb, people want to be a part of a group of people who are like them. Do you own a Rolls Royce because you want to pay 100 times more than you needed to get adequate and reliable transport from A to B? No. The ownership of a ‘Roller’ says something about you, and those you know and interact with, and attracts like minded people who want to be like you.

KISS. (Keep It Simple Stupid) Making it simple for customers to stay and interact with you is the key to keeping them. Why do Telcos have so much churn? Because they fail abysmally at customer service, and are so complicated and opaque in what they do that you feel encouraged to look elsewhere. It is only when you move that they come up with the better price, or service package, and make the moving of your account as hard as possible, hoping you will stay because it is easier. However, who wants to keep a customer who would rather be elsewhere? They will be restless and bad mouth you to all the time, rather than being an advocate for your product.

A management that encourages, particularly by means of financial incentive, investment in prospecting for new business, when their service to existing customers sucks is on the road to pain.

My preferred measure of churn and retention beyond the simple numbers is Share of Wallet. I recommend you use it.

7 things business leaders can learn from this election campaign

7 things business leaders can learn from this election campaign

Jun 27, 2016 | Governance, Leadership, Personal Rant

Over the weekend I was talking to my 32 year old son about the coming election.

I thought I was  the quintessential cynical old buggar, while being politically engaged, but I had nothing on my formerly optimistic son.

He is not just a cynical young buggar, he is so disengaged that in the long term, it can only be bad for our economic and social life if he is any way representative of his demographic cohort, and I fear he is.

As he said ‘Problem is that the gap between what the pollies say, and what they do is so wide, they have lost any sort of credibility and moral authority’.

Sadly I agree with his analysis, but the core of the problem seems to me that they claim control over things they cannot control, while ignoring, misrepresenting or pork-barrelling the things they can.

It is the same in business.

Those that promise the world do not have any credibility at all, while those that demonstrate the performance and value of what they can control earn our loyalty and respect.

There is a lot those in businesses can control, and should strive to improve.

You can control the way you spend your time. Every job, even those on a manufacturing line has some level of flexibility in the way the time is spent. In management roles of any type, the discretion is significant. You can choose to do what may be apparently urgent, but is unimportant, or those things that may  not be urgent, but are important. It is those who elect the latter route that will prosper in the long run.

You control the way you  behave. Those who say one thing and do another, or worse, demand behaviour of others  they are unwilling to demand of themselves will be judged failed leaders.

You control your attitude. An optimistic person has an effect on those around them, infecting them with your optimism and enthusiasm

You control your leadership style. Dictatorial, aggressively demanding results without consideration of the personal toll that may take, or you can be a coach and mentor, seeking to improve the results by improving those around you.

You control the way you see opportunities. Often opportunities are in the problems being faced, but if all you see are the problems, the opportunities will pass on by.

You can choose where credit/recriminations are levelled. The best leaders I have seen have a common characteristic: they give credit to others, even when the credit is largely due to themselves, and they take absolute responsibility for the performance within their span of control, never seeking to allocate blame elsewhere.

You can choose to have a clear and unambiguous moral compass, or purpose in your life. Having a purpose, and living to that purpose is empowering for individuals and the groups they interact with. Even when others disagree with you the simple presence of a foundation of beliefs that drive your behaviour will get you considerable credit, loyalty and an ability to get things done.

When you think about it, politicians have exactly the same choices we in business have.

Perhaps it is their collective failure to adhere to the basic tenets of leadership that has us so disillusioned with them all.

I predict that come next Sunday, there will be a narrow Coalition win, but the outstanding feature will be the percentage of the first preference votes that go to other than the two major parties, particularly amongst those under 30 whose expectations have been shaped by different factors to those that shaped their parents. This group will also exercise their compulsory obligation to vote by deliberately voting informal. This will not be a ‘donkey’ vote, it will be a vote against what these youngsters see as the irrelevance, hubris and self interest of the political class. It will be fascinating to watch the spin  the major parties put on this disaffection, assuming that both, somebody does the analysis and I am right.

5 things to avoid to do better consumer research

5 things to avoid to do better consumer research

Jun 24, 2016 | Customers, Marketing, Strategy

I sat through a qualitative research (focus) group a few weeks ago, recruited over the phone against a specific demographic list.

On the odd occasion I receive these calls, my stated occupation is never associated in any way with marketing, as that always disqualifies you, the excuse being you might learn something, which in my experience is pretty unusual.

Anyway, are we not consumers?

The moderator was a nice woman, probably had a psychology degree or something similarly disassociated from the tough task of creating value for money, and proceeded to make every research mistake in the book.

Taking ideas as gospel. Instead of digging around to understand why we said the things being tested would work, she just took the blanket statements as fact. The reality is that nobody knows for sure if something will work or not, so gathering opinions without the supporting attitudes and reasons why is dumb.

 Asking questions we could not answer. This often happens, I have seen it and fired researchers for doing it. Why waste time asking a question, then debating the silly answers when there is no way the group could know  the answer, as it requires some specific knowledge which was not in the filtering questionnaire.

Is it better? Collecting quasi quantitative data with questions like this can lead to gross misjudgements. Just ask Coke if they had the research assuring them that ‘New Coke” was better than ‘old Coke’.

Crystal balling. Asking a group to rub their crystal balls and tell you the future is dumb, dumb unless corralled by a statement such as “if A and B were to happen, what do you think would happen next?”

Defining behaviour by Demographics.  This is a general mistake in recruiting groups. Defining your target markers, which is what this is, by demographics alone went out with the turn of the century when we recognised and were able to track the impacts of the drivers of behaviour beyond simple demographics. Just because you might live in Blacktown and do not have a degree does not mean you cannot own a BMW, purchase expensive wine and go on holidays. Our cultural and social life is far more fragmented and eclectic than in past decades that demographics are now only a small part of the picture of who we are, what we want, and how we behave.

When you spend the money on consumer research, it pays to really consider the problems to be solved and how the answers might be used. If the answer to those is: ‘what problem’ and ‘To convince the boss’   or ‘because I do not what else to do’ it is better to save the research money and do something useful with it.

Do we still need books?

Jun 22, 2016 | Marketing, Personal Rant, Strategy

In a world of abundance, we are desperately in need of depth.

Skating across the surface of the ice is fine for a while, but at some point you need to be able to recognise the weak spots, and figure out how to avoid them before you drop through and drown, just after you freeze.

A book does that for me in a way that an e-book does not, neither does a blog post, or a tweet, they are not physical, they have no intellectual or physical weight somehow. A ‘real’ book still does it.

The other thing is that when you find a book that ‘speaks’ to you, it is easy to walk into someone’s home or office, and plonk it on the desk, and say, ‘read this, it will change your life’ or even be just interesting.

A mate of mine who makes his living researching and writing complicated tenders for large projects, also writes a blog on words, their use and misuse, origins, and various meanings. One day he will assemble it all into a book, as he has done with an collection of illustrated verse he wrote for his kids, personal stuff that he has shared with them, now in a tattered book they have all loved.

It is hard to love an e-book in the same way.

I love books, perhaps scarcity is just making me realise how much.

 

How to calculate a Return on Marketing Investment

How to calculate a Return on Marketing Investment

Jun 20, 2016 | Governance, Management, Marketing, Strategy

 

Marketers being belted around the ears to produce a marketing budget before  June 30 is disturbingly common.

It is a clear sign that the marketing group is acting as a co-ordinator of ad hoc activities, rather than being a disciplined, repeatable, and continuously improving process of revenue generation over the longer term.

Nevertheless, it is happening everywhere as you read this, as June 30, and a new financial year is looming.

A common approach to alleviate the belting is last year + 1.5%.

Not much use if last year was a bummer, especially if you are not sure why.

The other way is  that the ‘boss’ starts at the bottom right hand corner of the P&L and works backwards

Revenue  = X, Market share = Y, Therefore marketing budget = z.

Alternatively, some arbitrary percentage can be applied to projected sales as a marketing budget.

What a load of crap!!

The reality for a marketing budget is that to be productive, marketing needs to be way ahead of the tactical implementation that generates immediate revenue.

Marketing needs to be considering and implementing the strategies to generate revenue tomorrow and the next day, determining where that revenue is going to come from, which products, customers, geographies, and channels, and giving customers reasons to be committing their scarce dollars to whatever it is  that  you are selling.

Constructing a budget without all that strategic information clear and agreed is like taking off on a journey without deciding the destination: any road will get you there, and most of the time and money spent will be wasted.

As an alternative, start to see marketing as an investment.

That discipline of seeing marketing expenditure as an investment requires a longer term view. It also requires an acknowledgement that not everything works as expected, a capacity to learn from experience, and driving the processes is a cultural recognition that the organisation requires a return in its investments in marketing activity.

Calculating a return on marketing investment is not easy, and has rarely been attempted until recently, as the numbers were simply so rubbery (a technical accounting term for crappy and just plain unreliable). However, that is changing rapidly, so the best time to start developing a regime and capability of measuring and optimising the return on marketing investment is now, the beginning of the year, while in ‘budget mode’

It is a six step process driven by the four stages of strategy development:

  1. Have in place a ‘planning rhythm’ strategic cascadethat starts with the long term strategic and cultural challenges and progressively becomes more detailed and tactical.
  2. Recognise the connection between marketing and the long term financial returns from the enterprise.
  3. Collect data on a routine basis that delivers the insights necessary to measure both efficiency and productivity of the investments, and the cause and effect chains that link an activity to an outcome.
  4. Develop the analytical means to generate the insights.
  5. Make the enterprise sufficiently agile to adjust in the light of the insights generated.
  6. Report marketing ROI as the operational people report the ROI on the investments made in equipment, so that the activities have the credibility and weight in the boardroom that the expenditure deserves.

 

Calculating the return on investment is essentially a simple equation.

Cost divided by value derived.

The challenge has always been to attach a value to the various outcomes of marketing expenditure, including the organisational costs and overheads. That task is becoming progressively easier with the digital and data analysis tools now available, and there is no longer any excuse not to at least start the process, and with time and effort improve it so that it is a reliable indicator and tool to determine the value of future investments.

As with any calculation, the result is determined by the input assumptions, parameters and values, so there is considerable opportunity for judgement and change.

Following are a few of the obvious ones;

  • Time frame over which the return will be measured. Budgets are annual, while marketing investments tend to be cumulative over a long period, sometimes decades.
  • The means by which you judge the revenue to be a result of marketing activity. The demarcation between marketing and sales is often an entertaining debate, which I tend to finish by removing all direct sales costs, particularly price discounting activity which is generally brand destructive, and counting everything else,  but allocating a weighting.
  • The components of the cost equation, such as product development costs, customer service, and logistics that are included, and their weighting, which is also a challenging debate. Standard accounting packages are poor at collecting and consolidating this information, it usually takes a tailored process to gather and record the data in an easily reportable format.

Reporting requires metrics that build a picture of the processes to which the activities all contribute.  Every business will be different, but a few of the metrics that have served well for my clients are:

  • Sales of new products across timeframes, 1,2 & 3 years, with some calculation of the losses from cannibalisation, although it is absolutely wrong to use this as an argument to not take an action. Better you cannibalise your sales than a competitor eat them for you.
  • Value and number of prospects at each stage of the sales pipeline
  • Velocity through the sales pipeline
  • Conversion measures at each point in the sales pipeline
  • Share of wallet, for individual customers, and various groups of customers
  • Customer longevity and churn
  • Market share
  • Geographic measures
  • Gross margin and GM ratios
  • Sensitivity to competitive price promotion
  • Customer satisfaction scores
  • Net promoter scores
  • Various social media measures (not likes)

It is also a mistake to measure everything, you will just drown in reports and minutiae. Report on the items that can be demonstrated to move the performance needle, where there is a demonstrable cause and effect chain in place that is connected to strategy as well as revenue.

Finally, make ROMI a core performance measure of the enterprise, everyone in an organisation has some influence on the outcomes that can be connected to marketing success. Expose those connections at every level and make people responsible and accountable.

Need some help with all this, find someone with the experience and wisdom to deliver.