May 6, 2021 | Customers, Marketing
LCM: Lifetime Customer Margin.
There is lots of talk, mostly hype, about Lifetime Customer Value. When you look closely, it almost always means lifetime customer revenue.
Revenue is of little commercial value in the absence of margin, so the discussion is somewhat misleading.
Understanding the margin generated by customer segments, or in some cases, individual customers, is an immensely valuable metric. It enables you to focus activities where there is the most benefit to the enterprise. You can make both strategic and tactical decisions with a great level of confidence based on the margin delivered.
Customer margin is also an enormously useful metric elsewhere.
Salespeople are often rewarded on revenue, which can be gamed. Margin over time is much harder to game, and a far better measure of the effectiveness of a salesperson in delivering value to the enterprise. In any comprehensive key account management process, margin is one of the best measures of the impact of sales and marketing investments made.
Similarly, calculating the cost of acquisition of a customer gains traction when measured against margin rather than revenue.
One of my clients’ businesses relies on referrals as a major source of sales. Increasingly they are moving towards margin on converted referrals as the single metric that best measures the impact of their efforts.
It is proving to be a rewarding strategy.
Header credit: Dilbert and his mate Scott Adams.
Apr 19, 2021 | Branding, Marketing
Customers buy to relieve some sort of pain, or fill a need. Sometimes that pain is real, the need genuine, and sometimes it just takes the form of a psychological itch that needs scratching.
Whatever the form, source or type of the pain, nobody buys without it, so your product is medicine for that pain.
Why don’t you tell them that more often?
Be clear: ‘This product is for people who……..‘
Many years ago, I was the marketing manager of the Dairy Foods division of the then Australian owned Dairy farmers Ltd. We marketed Ski yogurt which had been swamped by the launch of Yoplait. Good advertising, packaging innovation, and a good product had massively increased yoghurt consumption, with Yoplait taking all the benefit.
The manufacturing process installed to produce Yoplait ensured that there were no discrete fruit pieces in the final product. It may have been strawberry yogurt, but the product was completely homogeneous. The process Dairy Farmers installed was different, and we could produce a product with discrete and obvious fruit pieces. (Note: I would like to claim this as strategic foresight, but in fact it was good luck which we aggressively leveraged)
The core of the platform of our marketing and innovation processes became ‘Ski: for people who like to see pieces of fruit in their yoghurt’.
We never used this line, but it was implicit in everything we did.
5 years later, Ski was market leader in a market many times bigger than when Yoplait had launched. While it may not have been painful to buy a fruited yoghurt with no discrete pieces of fruit, when the offer was made, the preference for many became immediately clear.
Sadly, both brands have since lost their way. The businesses that were running them were taken over by multinationals who understood absolutely ‘didley-squat’ about brands, and the need to continue brand building investment. In the face of the aggression of the most concentrated consumer retail market in the world, they surrendered their position by stopping brand advertising and innovation, redirecting the funds to price discounting. They forgot who the products were for, and the role they played.
Apr 1, 2021 | Analytics, Marketing
So called ‘Digital Marketing’ has become an end in itself. Instead, it should be a potentially potent tool in the marketer’s toolbox when used well in the process of delivering value. I see it often spoken of and treated as if it were a separate functional discipline, then it fails. All sorts of rubbish is then wheeled out to explain the failure and move responsibility elsewhere.
It seems to me that the failure of understanding the real nature of digital marketing falls into 7 distinct buckets.
- ‘Digital marketing’ is seen as an event, a set piece, and not part of an ongoing commitment to delivering information and value to customers and potential customers.
- There is no sense of the end point, a vision, the picture on the jigsaw cover. The absence of a clear objective makes consistent production of compelling communication virtually impossible.
- There is a lack of commitment from the top. Many inhabitants of the corner office are older guys trained in accounting, engineering, and the law. Many still consider marketing to be a cost, to be managed short term, rather than an investment in the long term. Often so-called marketers do too little to address this misunderstanding. Instead, they continue to sketch out a few bits of ‘content’ to throw against the digital wall, hoping something works.
- No-one holds accountability for the work, and its results. Digital marketing tends to be a subsection of the overall marketing and sales programs, and it tends to be the least understood. As a result, it is pushed off to the juniors, after all, they know all about this technology stuff.
- All things to all people rather than highly relevant to a few. Digital is mixed up with a mistaken understanding of genuine inbound marketing activity. Inbound sounds nice, but how are we going to set ourselves up as an expert in the face of the competition. Nobody can be all things to all people. If you are a small business, be the expert in your specific niche, your geography, with those on your list of current and lapsed customers. You do not have to be the biggest in the world, just the best to a select few.
- Results are not measured properly, vanity measures are all that are collected, and they tell you nothing about cause and effect.
- The work is done quickly, without thought, passion, creativity, so does not grab a potential customer by the purse. It is just another deadline hit, then move onto the next one, tomorrow. The search for the ‘big idea’ that resonates and differentiates seems to have been replaced by many mediocre bland and ‘safe’ ideas. The big idea remains elusive, and of great value, but we seem to be no longer looking for it as we are distracted by the acceptance of the many mediocre ideas. Not a great exchange. Occasionally you find the big idea, hiding in plain sight, which is where it usually hides, but is so hard to identify.
- A final one. There is no permission, as in Seth Godin’s definition of permission marketing, as requoted in Tom Fishburnes cartoon narrative, with which I absolutely agree. This is all about the consumer, and treating them with respect, something that increasingly many so-called marketers do not do.
Header cartoon credit: Tom Fishburne at www.Marketoonist.com
Mar 22, 2021 | Communication, Marketing
Several of the advertisers who bought large packages of advertising in association with the recent Australian Open did themselves a massive disservice.
The ‘Exposure Effect’ is a double-edged sword.
We are more likely to be positively impacted by things with which we are familiar and comfortable. That is how advertising works. However, the flip side is that we also become bored and potentially contemptuous of those things with which we are extremely familiar and dismiss them.
Colloquially, we refer to this as ‘Familiarity breeds contempt’.
The marketing wallies at ANZ ignored, or perhaps more likely did not understand, this flip side of the ‘exposure effect’. They were persuaded to spend up big on ad spots by channel 9 sales executives in the mistaken understanding that ‘more is better’.
Those who watched the Open were probably at least sports fans if not specifically tennis fans, and they probably watched a lot of the tennis.
The negative impact of the exposure effect can come into play as early as after 5-7 exposures to an advertisement. Most of the viewers would have got that in the first hour or so of watching, after which, the familiarity desired by the advertiser, risked becoming something else entirely.
Diminishing returns from the advertising investment.
The ANZ advertising was grossly overexposed. The use of Dylan Alcott being introduced by the hosts ‘mucking around’ with his phone, seemed to be in almost every ad break.
Clearly the ANZ made a significant investment. It would have been much better used if some of that investment had been directed towards a variety of creative executions of their brand, rather than being all the same quickly boring, becoming really annoying, execution.
Personally, I became so annoyed, had I an account with the ANZ, I might have run down to the branch and closed it, as doing business with a bank that wasted so much money does not seem to be a good idea.
Not the impact I assume their naive marketing people were hoping for.
Mar 16, 2021 | Branding, Communication, Marketing
Is it wider distribution, provocative headline on a Facebook ad, play with price, or find a celebrity to endorse it for free???
It is not any of these, or many other options that probably sprang to mind.
The answer is both simpler, and way harder than any of these, and very few do it well
It is defining the problem you are solving in a way that adds value for a customer.
Unless you define the problem, how can you propose/define a solution that someone is prepared to pay for?
People buy solutions to the problems they see and feel, but often go unrecognised before they are pointed out. Those solutions to unrecognised consumer problems are always the outcome of deep research, creativity, and usually experimentation by the marketer.
Who knew we needed a better MP3 player before Apple produced one?
Often the challenges we face as marketers are hidden deep in our psychology
There are the functional problems we solve, which is where most of us stop.
Then there are the deeper psychological needs that are met in some way by the stuff we buy, that do not receive the same consideration, but they are the real drivers.
It is in that intersection of the functional and psychological that the gold lies hidden.
Who really needs a Rolls Royce to get from point A to point B?
Nobody.
Functionally we do not need the Roller, a battered up Hyundai will do the job. However, arriving in a Roller says something about us, it sets a frame by which many others will judge us, which fulfils deep psychological needs.
Food, shelter, community, reproduction, safety, status, these things all play a role in the things we surround ourselves with.
You go out and buy a Harley Davidson, you are making a statement, not buying a bike for transport.
Does the person who joins Weight watchers join just to lose weight, to fit into last year’s dress, or to feel better about themselves, to attract a mate, impress their friends and peers with the great new bod?
Untangling this can lead you to your value proposition, but it is a tough road, and not often travelled well.
How do you define the hidden problem that has your product as the only solution?
Combine the ideal customer profiling, the typical ‘who, what, where, and why’ analysis, with a ‘Pains, Gains, Jobs to be done’ analysis.
Then work, test, research, iterate, and with patience, you may end up with the profile of a customer that when they hear your pitch immediately thinks: ‘they are talking to me’.
2 examples from my personal experience.
Meadow Lea margarine. Meadow Lea was one of many margarine brands launched after the regulations dictating what could and could not be added to vegetable oils to make a spread, and production quotas, were finally removed in 1975. Initially the brands concentrated on the obvious benefits of margarine: spread-ability, price, and a healthy low cholesterol alternative to butter, and the market expanded rapidly. Meadow Lea marketing management spent a lot of time and effort really understanding the drivers of the choice of brand, while competing with everyone else. In the mid 70’s, women were entering the workforce in large numbers for the first time, combining the paid work with the traditional roles of housewife, cook, cleaner and mother. The result was an exhausted and frustrated cohort of younger women wanting their effort to be recognised. ‘You ought to be congratulated’ expressed that psychological need exactly. It resulted in Meadow Lea rapidly going to market leadership by a very wide margin at premium prices.
Local bookkeeper. An acquaintance who ran a local bookkeeping service for small businesses was having real trouble gaining clients. He tried all sorts of tactics from local advertising, networking at every opportunity, to bashing the shoe leather door to door. Nothing worked. Over a coffee one day reflecting on this, we arrived at the conclusion that his service was not about book-keeping, but about saving the owners of small businesses the time and frustration they were expending on their books, that could be better used elsewhere. To him, this seemed like a revelation. The next time I saw him was at a local networking event, at which, when his turn came to spend 30 seconds spruiking his business, his opening line was ‘My job as a book keeper is to help my clients get more sex’. Once the laughter died down, he explained that owners of SME’s had much better things to do with their time than book-keeping, so why not let him do that for them while they spent their time in other ways. He remains successful, although, sensibly, there is no reference to sex on his website.
When you need assistance digging down to the real motivators of activity, call someone who has done it before, successfully.
