Oct 26, 2022 | Customers, Marketing
We live in complicated times, none more disturbing than the now regular breaches of data privacy and subsequent risk to the financial and personal security of individuals.
The recent spate of data breaches is probably just the beginning, but we, the general populace in the absence of any deep technical knowledge about data security, assume that those who collect our data do so for good reason.
Silly us!
This should never, but it seems always does include, ongoing marketing, and selling of personalised data, even well after we cease to be customers.
I have been a customer of Optus since their first days. I switched the day there was a competitive market born in 1993. They have all my communications business, which may be chook feed to them, but is a substantial hole in the monthly household budget.
The best Optus can do in the face of the breach, presumably enabled by minimum level investment in security, is send a form letter, full of assurances that all will be well. However, if we want to phone them, here is a number, but there might be a wait.
While the letter was addressed to me, at my residential address, the header was ‘Dear Customer’. They know my name, email, and phone numbers, and certainly can aggressively ensure bills are paid, so no detail goes unnoticed.
Surely Dear Mr. Roberts instead of Dear Customer would have been easy?
It might have been sensible for them to also list the services I hold with them, and give a risk assessment of each? Perhaps I do not deserve such a level of transparency?
Then, the signoff:
‘Sincerely. Your Optus team’.
No names, not even a duplicated signature of the cleaner, let alone anyone on a huge salary who might be taking any responsibility for this marketing clusterfuck.
I guess I will have to bite the bullet and change, be a part of the great communications customer churn. These nignogs spend tens of millions tapping into this churn, rather than shoring up the customer base they already have and reducing the churn. As an advisor to SME’s my advice is to cherish your existing customers, particularly those who are unlikely to change, even if just for the avoiding of the inconvenience involved.
When your business faces a crisis brought about by external factors that will impact customers, rule number one is be up front, take responsibility, accept the shortcomings that led to the crisis, articulate a recovery plan, and most importantly, personalise it to those affected.
Optus has done none of those things.
I am glad my super fund that also hides behind barriers I struggle to breach, does not hold any Optus shares. Presumably it is unable to given Optus is 100% owned by a Singaporean billionaire. Is this ownership, and the key place Optus holds in the communication infrastructure of this country a part of the problem?
Oct 24, 2022 | Customers, Marketing
Following on from a previous post about the value of information, it seems relevant to ask how long any value created lasts.
We are all familiar with the notion of the ‘1/2 life’. The time it takes for radioactivity of an element to decay by 1/2. Uranium 238 has a 1/2 life of several billion years.
What about the 1/2 life of information?
The 1/2 life of a daily newspaper is arguably 1 day, today’s news is ‘tomorrows fish wrapper’, and for 99.9% of blog posts, and most other so called ‘content’, it is about 2 seconds. This seems odd in what is supposedly the ‘Information age’. Why is the life so short, in most cases, and what make the difference for the 0.1%?.
The answer seems to be: It depends on the value of the information, and the ‘friction’ or resistance which is applied to its transmission.
Businesses, and most institutions are structured to be top down, in functional silos. This is a system that evolved before digitisation of information, which enabled the scaling of effort and the most efficient allocation of resources. A 20th century solution to the challenge of information transfer and leverage.
In the 21st century, with digitisation, the structures of the 20th century are redundant. They are simply too slow to be competitive in an environment where the action happens at digital speed on the ‘front lines’ of customer interaction. It takes too long for the siloed decision making processes to work, the customer has moved on to someone who is able to satisfy their need on the spot.
This change requires a wholesale change in the way our organisations are structured and the tactical actions that take place every day are managed.
What happens on the ‘front lines’ evolves quicker than the siloed information and instruction exchanges that worked well last century. We must turn our power structures upside down, and give the front lines the authority to make on the spot customer focussed decisions within a much broader remit than was previously the case. The risk if we do not is that customers will simply go down the road to someone more responsive.
This creates huge complications for organisations, as the status quo is upset. The power people at the top have worked for all their lives is diluted, and for those at the bottom, suddenly they are being tasked to take decisions that last week were being referred up the chain.
There is a driver of activity, always present, but to date well in the background for most, being the ‘operating rhythm’ of the market in which they compete. When their decision cycles are slower than the operating rhythm of the market, the market will go elsewhere, or at the very least, opportunities will be lost.
Getting ‘inside’ the operating rhythm of your competitors and the market more broadly, being able to respond quicker, is an emerging key to strategic success.
The 1/2 life of information is now in the hands of others, those who really count, by being customers.
Sep 12, 2022 | Customers, Marketing
What we purchase and what we pay for it can be a deeply psychological process.
The cost is one element, the value or utility delivered is often an entirely different matter.
The vast majority of purchases of a car represent a mix of the rational with the irrational, heavily weighted to the rational. Reliable transport to get to work, meet the specific needs of the individual and family, and take the kids to soccer safely. Some cars absolutely defy this rational logic. Why would you need to pay a million dollars for an Aston Martin, or $23 million for a Rolls Royce boat-tail, with plenty of options between these two if the rational was to prevail?
Economists who work with mathematical models have trouble reconciling the irrationality of behaviour with their rational models. This is why the seminal work by Daniel Kahneman, published for public consumption in ‘Thinking fast and Slow’ is so important. Important enough to win him the Nobel prize in Economics when he is a psychologist.
It is also why your value proposition and the definition of your ideal customer are so intimately entwined.
Your ideal customer will find some mix of objective and subjective utility in your product not available elsewhere, and be prepared to pay for it.
The cost in dollars is the same for everyone, and everyone understands it. The utility derived from ownership is entirely personal.
Peter Drucker said many things, amongst which was ‘The only purpose of a business is to create a customer’
And he was right.
To create a customer, you must offer them value they cannot get anywhere else.
To create value, you must understand ‘Utility’: the physical and psychological benefit customers receive from owning and using your product.
Utility is highly personal and context sensitive, driven by psychology.
Germans are stereotypically rational, process oriented people. It seems unlikely that they would be as susceptible to emotional purchases as say, Italians, who have the opposite stereotype.
Not so. Two classic examples from Frederick the Great of Prussia, and his great great grandson, also Frederick.
The first Fred, king of Prussia from 1740 until 1786, saw the potato’s potential to help feed his nation, and lower the price of bread. In 1774, he had issued an order for his subjects to grow potatoes as protection against famine. The refusal was absolute. Nobody wanted potatoes, nobody liked them, even the dogs would not eat them, so why should they? Faced by this general refusal Fred had to use psychology.
Trying a less direct approach to encourage his subjects to begin planting potatoes, Frederick got creative. He planted a royal field of potato plants and stationed a heavy guard to protect this field from thieves.
Nearby peasants naturally assumed that anything worth guarding was worth stealing, and so snuck into the field and snatched the plants for their home gardens. Of course, this was entirely in line with Frederick’s wishes.
Fred number two needed to fund the war against Napoleon. In 1813 he urged all families to donate their gold and silver jewellery to the cause, and replicas were given to them made from caste iron, by a specific iron foundry in Berlin. The wearing of caste iron items became the symbol of the sacrifices the family had made to the war, and was highly valued.
When you can articulate and reflect the utility your ideal customer will receive from you in terms unmatched by competitors, where else would they go?
Is the price simply a reflection of the exchange of value made up of both rational and non-rational componets?
Sep 5, 2022 | Customers, Innovation
Some weeks ago, I found myself as a participant in a workshop touted to be one that was focussed on solving a problem by use of ‘design thinking’
Unfortunately, it was a waste of everyone’s time. Partly this was because the problem we were supposed to be solving was inadequately and inaccurately defined, and partly because the person running it had no practical idea of what ‘design thinking’ really was.
Spoiler alert: it has nothing to do with the visual definition of ‘design’
‘Design thinking’ is no more than a process that starts and ends with delivering value to the customer.
The typical stages are:
- Understanding of customer behaviour.
- Ideation based on that understanding
- Prototyping and testing of solutions to the challenges faced by customers
- Continuous and Intense feedback during testing and prototyping
- Integration of the finished prototypes into the final product offering
- ‘Shipping’ the solution to customers.
The greater the involvement of customers during this process the better.
Simple to say, very hard to do well.
PS. The fails in design thinking are rarely as obvious as the example in the header.
Aug 17, 2022 | Customers, Marketing
In many major companies, there has been a number of new positions created in the last decade to try and accommodate the changes in the strategic and competitive environment.
Among them has been the ‘Chief Revenue Officer’ (CRO)
In some cases, this reflects the need for increased collaboration and sometimes convergence of marketing and sales. In others, it is just the fashion, the latest management fad.
This seems to be particularly the case in businesses where another of those-acronym driven fads has evolved, ABM, (Account Based Marketing)
The barriers to the integration of Marketing and Sales are high, deeply set into the functional status quo of most organisations, and resistant to change. However, the emergence of digital tools has accelerated the trend, and the recent Covid challenges have been a catalyst for further and quicker evolution than would otherwise have been the case.
For years I have been advocating ‘Alignment’ of marketing and sales to the needs of specific customers, and ways to achieve that outcome.
Removing the Marketing and Sales labels has proved to be useful to the integration. The emerging combined function recognises that the responsibility of each is simply Revenue Generation, or ‘RevGen’
The first substantial consulting assignment I had, well over 20 years ago introduced my client, a domestically owned multinational supplier of ingredients to the food industry, to Strategic Key Account Management. (Try the acronym, always got a chuckle)
We went through a process of identifying the specific needs of key customers, and tailored our marketing and sales effort, to the expressed and often jointly uncovered needs of customers, with whom we engaged in the process.
Those workshops and subsequent implementation efforts are as relevant now as they were 20 years ago, probably more so. It has just been renamed Revenue Generation.
SKAM required that the marketing and sales personnel collaborated and engaged customers at decision making levels to identify how my client could add value to their customers businesses. The core assumption was that only by doing one or more of the following, could we be successful.
- Assisting our customers to increase their sales,
- Actively reducing their costs or
- Increasing their productivity.
We set ourselves the task of identifying how we could achieve at least one of those three things, preferably two, and focussed our efforts on delivering those outcomes.
Predictably, it was a successful initiative. Customers loved the collaboration. Inventory levels reduced, as customer service levels and responsiveness increased, generating increased trading profits.
I had a coffee with one of the managers from that business, now a very senior bloke in a multinational organisation a couple of weeks ago, during which he told me that he still uses the three-part test, and insists his team use it. The longevity of the idea, and the impact it has had is gratifying!
Header comes from the extensive StrategyAudit slide bank.
Jul 4, 2022 | Customers, Sales
We understand that the behaviour we reward is the one we get. It is the way we train our pets.
Many also tend to overweight commissions when we pay salespeople, rewarding a set of behaviours, some of which may not be what we want.
Years ago, we learnt that paying piece rates in a factory resulted in quality problems, and myriad ways of ‘gaming’ the system to the detriment of the overall numbers.
Why have we not applied the same lessons to sales commissions?
I will not argue that the best salespeople do not deserve to earn more than the average. The question is how much more, and how do we increase the overall productivity of the investment in sales so that there is more to share?
The answer lies in the results of the enterprise, and the way the enterprise then shares those outcomes across all stakeholders.
Collaborative teams work in factories, we have used them successfully to improve productivity and quality while reducing costs for 40 years. It makes sense to deploy similar tactics in your sales force.
Sharing customer, competitor and market information, and the best practice sales techniques amongst all salespeople, learning from each other, will lift the average without compromising the best.
Not all salespeople need to be on the same salary, but they should all have a common interest in making the enterprise successful by maximising the impact of the investment made in generating revenue.
Bonuses paid to salespeople tend to be tied to volumes, and/or profitability of the sales they make. However, all sales are not equal.
Let’s assume the strategy calls for expansion into an adjacent market. There is marketing expenditure directed towards generating awareness of the enterprise, and the value it delivers in that adjacent market, but there are established competitors whose best interest is to see you fail. In that case, you need your best salespeople on the case, but they may be reluctant if most of their income is tied to commissions on the same calculation base as the easier sales. In that case, there needs to be recognition of the greater difficulty, as well as the strategic imperative.
There is no one size fits all template that will be useful to you.
However, starting by tying remuneration of the individual to the outcomes of related work groups, strategic priorities, and enterprise outcomes is a start.
Header cartoon courtesy of Scott Adams and Dilbert.
