Aug 11, 2021 | Customers, Marketing
I like the word ‘Sticky’ it resonates somehow, and says, ‘hard to get rid of’.
As a kid, we had a ‘sticky’ dog in the family.
I remember we once left the dog by accident at a relative’s place across Sydney after a visit. When we realised we had left the mutt, Dad had to drive all the way back, and; no dog. About a week later, ‘Sticky’ turned up home, hungry, bedraggled, and obviously on the losing end of a fight somewhere, but the tail was wagging madly as he stumbled through the gate. Sticky. Don’t you wish customers were similar?
What makes a “sticky” customer?
How can you measure ‘stickiness’?
Customer loyalty, repeat business, lifetime value, brand building, all sorts of cliches refer to the central notion of a “sticky” customer.
A ‘sticky’ customer is someone who for one, or a range of reasons, strongly prefers to buy your product over alternatives.
We all know it is more expensive to find a new customer than it is to sell to an existing one, so it is paradoxical that many businesses spend more on finding new customers than they do on retaining existing ones.
So, what makes a sticky customer should be a subject of some consideration.
Some ideas.
Barriers to exit.
Once you have a customer, create high barriers to exit. Love them to death, remove friction, ensure that you are anticipating their needs.
Amazon is an exemplar.
I am a customer, I buy lots of books, and other odds and ends from them.
What I look at, then buy, and at what price is all recorded, and based on the history, they recommend other things to me, that are often very good recommendations.
Last Christmas, my wife was moaning that she had no idea what to get me, and while I was saying a good business shirt would be nice, my mind was recalling the recommendations I had just received from Amazon. It occurred to me that, holy cow, Amazon knows what I would like better than my wife of 40 years!
High barriers to entry for competitors.
The music industry has been disrupted by digital, the old model no longer works, as the barriers to entry that were high, became low. Anyone could publish their music online. Lady Gaga created new barriers to entry by building a “personal” relationship with a highly targeted audience, “live” on digital platforms. She has replaced one high barrier, the cost of creating and marketing a record with another, the cost of creating a ‘sticky” fan, who shows the “stickiness” by buying, online.
The further from commodity you can take your product, the better. Price does not play a role in the purchase decision, so long as it is in the bounds of the customers’ expectations.
Technical excellence on some key parameter.
Porsche has consistently demonstrated engineering excellence, but was going broke in the 80’s relying on the 911 exclusively. They took the strategic decision to leverage that technical excellence into adjacent areas. The entry level Boxster, then the Cayman, less entry but not the 911, then the 4 X 4 Cayenne, then the four door Panamera, and now is flooded with money.
Reducing customer churn usually offers huge benefits, and now Porsche is delivering a range that meets the preferences of all those who valued the engineering excellence and power of the Porsche brand, across a range of life stages and styles.
KPI Index
It is in this context that I use “the KPI Index.’ This is not your usual key performance indicator, of which customer churn and cost of new customer acquisition should be key ones, but ‘Kept Promise Index.’ The main reason an existing customer will move elsewhere is because you failed to meet their expectations in some way.
The product was not to specifications, delivery was slow or not to promise, there was damage, the price crept up, or the communication was messed up somehow. There are many reasons businesses fail to keep their promises, explicit and implicit to customers, and eliminating them will increase ‘stickiness’.
Detailed understanding of customers.
Some years ago, I worked with an insurance broker on this very topic.
Insurance is not a happy purchase, it is purchased reluctantly, grudgingly. Almost all the brokers marketing effort to retain clients, which on first glance should have been effective, was in the last few months of a contract, but his churn rate remained stubbornly high, squeezing profitability. I spoke to several former clients who had not renewed to try and figure out why, and the picture became clear very quickly.
After they had signed up, often after the broker had made a significant effort, they were left alone until the renewal was becoming imminent, unless they had a claim. They felt they were being ‘used’ by the broker, rather than being delivered a service, and the effort put in just prior to renewal was just a hard sell job, which was resented. We took a portion of the marketing budget and reallocated it to communication in the first 3 months or so of the contract, as well as instituting a regular newsletter type communication which offered all clients a means to stay on top of trends and instances that might affect them and their business. We also amended the renewal communications and spread them out over a longer period. The churn rate dropped rapidly, and the satisfaction scores went up, along with profitability. None of this was rocket science, it was just looking at the problem with a set of outside eyes based on customer experience.
Continually improve your customer interaction processes.
Based on customer feedback and understanding, focus on customer retention, every day.
NPS, and feedback from customers, and former customers, are ways to identify points of potential ‘friction’ in the customer retention processes, and progressively eliminate them.
All the tools trotted out as improvement tools in a factory: Lean, six sigma, and their toolboxes are very useful in diagnosing the customer experience, and improving it.
Generally, these are simple tools, not requiring any sophisticated maths or software, just a bit of simple observation, data collection and analysis.
The very best data source is to ask former customers why they left. That information can give you a wealth of insight into sources of improvement to reduce churn and increase Share of Wallet.
In business, we are faced by the same dilemma every day.
We only have so much resource, time, skill, the question is what do we spend them on?
We can only do so much, way short of everything we can think of, so we all recognise that the trick is to focus on what is important.
The distraction of what is urgent but not important is the greatest threat we have, successful people focus on what is important, but not necessarily urgent, recognising that in doing so they are making choices about what not to do, to the longer-term benefit.
Why would it be any different as we consider how best to retain customers?
Jul 26, 2021 | Communication, Customers
Contrary to much advice, sales is not just a pure numbers game, the quality of the numbers make more difference than the numbers themselves.
Throw the net widely to attract prospects, the more the better, is the common mantra. It implies anyone who shows the slightest interest is automatically in the net, and so becomes a consumer of resources as efforts are made to lead them down the ‘funnel’ to a transaction.
Sound about right?
What nonsense.
If you had 1,000 people and a 1% conversion rate, you would make 10 sales. if you had 100 good prospects and converted 10%, you would make 10 sales. The transaction numbers are the same, but the latter would be far superior, as rather than spend resources chasing the 990 that would not convert, you have cut down to 90, leaving a lot of sales resource to be off doing something useful.
You do need to fish where the fish are, but it helps to make sure that the species around is what you are looking for, and that the bait is right, otherwise, you will just catch a cold.
The lesson is to focus your efforts on your ideal customer, where you will get the most leverage for your resources. This means you do some work up front to identify the characteristics of your ideal customer, then qualify early and hard to husband sales resources and direct them to the point of greatest impact.
Yes, sales is a numbers game, but the quality of the numbers makes the difference between productive and broke.
It reminds me of the legendary copywriter Gary Halbert’s advice when he’d ask an audience for the best way to sell a hamburger.
At seminars, Gary would throw out that question and people would respond:
… Make the juiciest burger…
… Have the best location…
… Provide the quickest service…
… Create a killer sauce…
And so on.
Gary would then give the correct answer, which was…
Find a starving crowd!
When you need a sounding board to find your starving crowd, give me a call, I’ve been finding them for 40 years..
Jul 2, 2021 | Customers, Marketing
Every second self-appointed digital marketing guru who offers to help me, making the offer in a mass email, proves the point in the headline.
They have a list, bought from somewhere claiming to have a ‘relationship’ of some sort with me. However, they still manage to spell my name, or that of my business incorrectly, are mistaken about what my business delivers, or make exorbitant claims about what they can do for me. There are many ways to demonstrate they know nothing about me, my business, or the sorts of challenges I face. ‘Spammy’ emailers seem to find them all.
The money is not in the list.
The money is in the message.
Had they delivered an offer to my inbox that might be of interest, I may have read it, and you never know, taken it up. However, being specific requires work, and the tailoring of the message towards the pain points uncovered by that work.
Doing the work means the collection of data, building a profile of the me and my business, presumably falling into the bucket of ‘ideal customer’ for the specific product being sold. They must ensure there is alignment between the problem the product seeks to solve, the pain points being felt, and the communications being sent. Failing in any one of these means the email recipient falls into the 99.9% who make the 0.1% success rate possible.
Again, the money is in the message, not in the list.
Header cartoon credit: Dilbert and Scott Adams. Again. (Sorry, could not resist that one)
May 13, 2021 | Branding, Customers, Marketing
Having a point of differentiation that is sustainable, and sufficiently valuable to customers that they are prepared to pay for it, is marketing’s holy grail.
Everybody seeks differentiation, the challenge is to do it effectively.
It seems to me there are three dimensions:
The first is the product itself, pretty obvious. The benefits that the various product features that add the differentiated value to customers are not easily replicated by competitors.
The second is the means by which you deliver those benefits, which is your business model.
A valuable differentiation is one that competitors cannot or will not replicate without great expense and effort. Some of these evolve out of a significant change in the prevailing business model, such as happened when Amazon started to sell books, but most happen incrementally.
It is relatively easy for a competitor to copy one or two things you do, and usually they will get it pretty right, even 99% right. However, when you do a whole lot of things together, it is harder to copy them all, and even if they do, getting 5 elements of your strategy copied at 99% accuracy, delivers only 95%. Few customers will opt for 95% without a significant discount.
The third is the choices you make that exclude some customers but have an impact on your ability to better service those who remain. This is a strategic choice you make based on the needs of your ideal customer.
Years ago, part of my sales responsibility for my employer at the time was for the regional distributors we used. Across NSW we had numerous small distributors, most of whom took small amounts of product on each delivery. The logistic costs were often more than the gross margin on the sales, but the sales revenue in total was significant. I took the decision to deliver only in 1/2 pallet lots of any product, and put in a staged discount for increased pallet numbers. After the initial yelling finished, most distributors moved to one of our competitors, along with the margin losses. We were able to increase the levels of support we gave to the remaining larger distributors, and they were able to significantly increase their sales, and our costs dropped accordingly. That segment of distributor customers suddenly became profitable after years of losses.
If you cannot figure out how to differentiate in ways that are meaningful to a cohort of customers, you are destined to be defined by price.
No future in that!
May 11, 2021 | Communication, Customers, Marketing, Sales
The old cliché that a picture is worth 1,000 words is disproved again and again, by all the pretty websites and dumb marketing collateral material out there, that is useless.
While pictures have a valuable role in grabbing attention, the real commercial value is delivered by the words that express the value proposition and call to action to the potential customers who turn up.
We are in a competition to gain and keep attention, then to move the reader to a decision. That decision may be that your product deserves a place on the ‘maybe’ list, or to the next point in the sales process. A successful sales process is always moving the potential customer towards the transaction.
Human beings scan their environment, instinctively leveraging their mental frameworks to filter out the stuff that does not matter. Our subconscious organises and filters information, leaving cognitive capacity to deal with the threats and opportunities that emerge. We do not see anything that does not have to do with survival, love, relationships, doing better, some sort of challenge, danger, unless for some reason, it is specifically relevant to us at that moment.
When someone sees our website or collateral material, their brain on autopilot filters out the stuff that is not directly relevant. Somehow, we need to cut through those automatic barriers that exist.
Story is the best way of doing so.
They are the evolved format that can deliver the information that reflects ambition, challenges, a plan to conquer the challenges, unexpected hurdles, and last-minute success. This is the standard format of every story, if you do not use it, or some derivation, the reader will skim over your site and not take in anything at all, effectively not ‘seeing’ it.
Formulas are the assembly of best practise; we use them because they work.
That is why stories work, it is the formula that feeds into the cognitive patterns used by our brains.
The key to a story is clarity. Who is the hero, what he/she must do to win, what happens if he/she does not win, what happens when they do?
What problem do they have, what does the outcome look like when the problem is solved?
Noise kills, the noise from inside and outside our business.
From inside, the clutter we spray around, the ambiguity of what we are saying confuses what others hear.
We need to clarify the message.
How many potential customers go elsewhere because they do not understand how you can help them?
When you need someone to help cut through your clutter, give me a call. It will be a worthwhile investment in clarity.
