Customer World

When new customers get more than old customers!

I was reading a post by Seth Godin on embracing lifetime value. He mentions in his post on the value of a two year contract for AT& T or Verizon as worth as more than $ 2000 in lifetime value of a customer to them. And he writes asking companies and professionals to embrace this thinking.

It's funny and I fail to understand how many companies don't understand this and still continue to acquire new customers by extending significantly higher promotional freebies than to their existing customers. The question really is, if am an existing customer, should I not expect better renewal privileges than a new customer rather than go to a new service provider?

This experience happened to me last week, when I tried to renew my broadband account of Tata Indicom, a leading ISP in India. I have been their customer  for over a decade now! They are currently running a new customer acquisition program, where new customers get 3 months of broadband free plus one month( T&C incl.) and a laptop sweepstake thrown in!  When I enquired, if there was anything of similar value, they did not have anything to offer for me to renew!! It made sense to let the existing relationship die and start a new relationship afresh!

The key here is designing and extending a customized tariff plan to such customers. It starts with the following steps:

1. Bring a culture a "customer-driven pricing" into the company. Rather than think pricing only for unknown customers, they should think pricing for known customers too. 
2. Banks have perfected this for years with credit scores driven differential pricing for customers. Similar thinking need to be extended to such service-driven businesses too. They should bring customer value-score driven pricing to existing customers.
3. Value scores can be built very easily.They know their vintage, usage, approx monetary value, cost-to-serve etc. to them as subscribers but they fail to take account of the relationship customers share with them. 
4. Online recharge and newer channels of customer interaction provides an excellent opportunity to bring this differential pricing to execution as they can really customize the pricing offers.

The question really is the intent and appreciation of this I presume!
 

Driving relevancy in customer communication

CMO council has come-up with an interesting report that many marketers have faced as consumers themselves - irrelevant communication!  Many of these marketers talk about it but do nothing about it for their own brands or products. Here are some startling facts to think about:

• While 64 percent of consumers say promotional offers dominate both the email and traditional mail they receive, only 41 percent view these as must-read communications.
• 91 percent of consumers who opt out or unsubscribe to emails, 46 percent are driven to brand defection because the messages are simply not relevant.
• The threat of customer churn and disconnection intensifies as 41 percent of consumers say they would consider ending a brand relationship due to irrelevant promotions.
• An additional 22 percent say they would definitely defect from the brand!
• Nearly three quarters of consumers have received promotions for products they have previously purchased from the company
• 73 percent of consumers would be open to receiving print statements if mailed materials were recyclable or part of a sustainability program
• Nine out of ten consumers open monthly bills delivered via traditional mail, compared to 72 percent who open bills delivered via email
• When given the opportunity to choose, 51 percent of consumers prefer to receive product or service promotions via traditional mail while 44 percent prefer email.

It's really true esp.for myself  as a customer(as the report highlights)- I have seen many companies calling me to buy the product when am already their customer!

There is a need for marketers to add a relevance filter to their customer management process. It's high time they start integrating the channels of customer interaction & communication to make this happen.

Poverty of attention

I often wonder as we have access to more or more information, why is it that it is getting more and more difficult to take decisions ? Jeffery Phillips had a very interesting perspective on the same.Jeffery writes:

"I spotted a statement on a whiteboard that's stuck with me for a few days.  On the white board, in big, messy handwriting, was the statement:

A wealth of information leads to a poverty of attention.

The point of the statement is that what we are missing - what many of us lack in today's working environment - is not enough information, but enough attention to the important things.  We've migrated from decision makers who had to "go with their guts" and could focus their attention on important things, to those who simply cannot (and will not) get enough information and who are distracted by the search and analysis of information, rather than focusing the right amount of attention and effort on any particular problem."

We just need as much minimum information as possible( or just the right information)  and enough  time for attention amongst ourselves to make the decisions.

 

What's your company's listening quotient?

Best Buy recently launched Idea X - a platform for customers to comment, express and share their ideas to help Best Buy get more customer-centric.

I quite love the transparency and openness of Best Buy folks to admit that this is a learning phase which will evolve, for the better, over a period of time. Here's what they say about this initiative:

"We're new at this. Its probably going to be messy for awhile. We'll probably miss stuff. We'll probably screw up. But we'll learn and get better as fast as we can. We'll blog every two weeks with updates at first. Then we'll build in new and better ways to talk to you about your ideas - when we're reviewing them, or implementing them or when we decide we just can't do anything with them. We'll always be honest. We can promise we're all going to do our best. That means listening closely, talking openly about the ideas that you've shared. And trying our hardest to make it happen."

The most interesting comment regarding this, is of Barry Judge, CMO, Best Buy - " Robert Stephens, the founder of Geek Squad, once told me “the easier you make it for customers to complain, the better your product will become...These days, it’s easy to be more accessible. Truly, the only limitations are cultural. We are doing a lot of experiments in being more accessible. Our latest test, Best Buy IdeaXchange, is a web site that is intended to enable consumers (and employees) to give us feedback on what they would like to see us do to make Best Buy a better place to shop."

Results: Over the last 2 weeks, Best Buy seems to have received over 200 ideas!

My view

Engagement is the new branding. The more companies become accessible to customers, the more customers will trust them. Opening-up newer and newer channels is critical. It is important to behave openly and be able to let your customers know that as a company you are trying your best and there will be mistakes but you will definitely improve as you go along.

Remember, customers only punish indifference but they forgive mistakes.

Some questions you may want to ask yourselves to increase your Listening Quotient:

1. Are you as a company accessible to millions of your customers and do you have channel to start a dialog and hear them?
2. Do you as a company and management team have the maturity to listen to customer problems, new ideas and learn from them?
3. What's your company management team's Listening Quotient? Do you measure them?
4. How do you convert the Listening Quotient into top priority for action across the company? 
5. Is there one member of your company's various departments in charge of taking action on these priority areas?

Managing data across the enterprise- How semantic web is changing the game

Most often enterprises struggle with siloed data. It's no surprise that integration of data across enterprise is a nightmare. PWC technology report provides some interesting perspective on how semantic web can make it real and ensure it can be done easier than ever before.

Here are some interesting facts contained in the report:

How is semantic web a game changer for data integration?

The disparate data feed into a mashup—a Web application with highly configurable data display capabilities—that updates each time you add a new store site or remove an old one. Other data in the mashup arerefreshed whenever the original sources are updated. By combining various data, regardless of their formator source, you have a wide range of possibilities forgreater insight and context.

The challenges with traditional data integration vs semantic web:

Generally enterprises don't make the best use of their data.

Given the disparate systems and multitude of vintage of technologies( old and new), it is always very difficult for business managers to use multiple source of data for decisions.

 

Getting internal and external to handshake with each other can help trigger power decisioning within organizations

 

.....empower your business users...

with exploration tools that they could use with existing internal data and with external data of their choosing. These tools would let them find the best business cases and make immediate use of the Linked Data technologies at a low cost to IT, since most of these tools are reasonably priced.

Read more

Learning customer-centricity from ING Direct

ING Direct is one of the few successful financial services companies in the US with an unique business model. In this environment of financial meltdown in the US, ING Direct has practiced & built a bank with a difference. There is a lot to learn from them. Lots of things that I have read and heard in the past but here is a first account of an interview with Arkadi Kuhlmann, CEO, ING Direct:

In a candid interview with Bill Taylor, Co-founder and Founding Editor of Fast Company, Arkadi shared his business ideas and here’s a rough summary of the conversation( Thanks to Swift Community for this content):

Bill Taylor: how did you build this bank?

Arkadi Kuhlmann: There are 9,600 banks in the USA so who needs another one? That was the challenge we had and we thought that if you do everything like everyone else, how can you expect the results to be different? This meant that it was time to look at the business model to see if we could do things in a different way. A way that may be counter intuitive.

So we focused upon building liabilities rather than assets. 

We know that banks create assets and fund them as cheaply as possible and enjoy the margin. So we said let’s do this the other way, and grow liabilities first. So we focused on gaining deposits, and finding assets as the second step. Many say that is nuts, as you are funding liabilities and so how are you going to find the assets but, if you are going to be different and try something to see if it works, you have to change the definitions.

Bill Taylor: how did you find the innovation to be different?

Arkadi Kuhlmann: The best way to find innovation is to look at other industries.

For example, if you’re looking for innovation, why look at other banks? You just get the same old thinking. So we looked at hotels, airlines and more, and the model I liked the most was fruit and grocery stores. These stores are running a 1% margin business, with limited shelf space and trying to attract customers, and are challenged by that because they all look the same. We thought: “what if we were in that environment as bankers?"

You can then put down some key drivers, and ours were that we needed to deal with high volumes at low margin in a commodity business on a large scale.

Bill Taylor: and so you then need to advertise that message too?

Arkadi Kuhlmann: Every bank has ads with kids running through wheat fields and saying “we love our customers”, but everyone realises that that is BS. Stop advertising “we’re there for you”, and focus on delivering on the things that customers really care about. That’s why we focus upon the causes we promote, and the advertising and promotions are all about what mainstream America cares about and what customers care about, not what bankers care about.

BT: and what do customers care about?

AK: if you could build a bank just functionally or technically, people would have done that, but you need to understand how customers are technically interwoven with money. Our rates are not the highest, and we are not the best at services, so why do people stay and why do they come? It’s about the beliefs and values of our bank and how we convey that to them.

Mainstream America is looking for people to validate their beliefs and for authenticity. That is why I make a phone call every week with a customer: to understand them better. And those calls are a bit about the transaction, but mostly about money and their views about money. You must understand how customers see money, as this is powerful.

BT: so do you categorise customers based upon limits and values, as you don’t appear to?

AK: I have no minimums on our accounts, we only have maximums, and I don’t like and don’t want rich Americans. I don’t want all their bitching and moaning. They come in and say, “I’m willing to give you a million dollars, what are you going to do for me?” and I say, “Nothing”.

There’s no hierarchy here. It’s a democracy and we’re all level. I sit in the call centre. We have no titles on business cards. You have to get rid of all that hierarchy stuff to do this business model. That’s why we all sit together.

That’s why I tell the rich guys to go down the street and leave. I don’t’ want them.

BT: Do your staff get worried if you’re on the phones?

AK: We have 8 million customers, and about 5,000 customer account closures a month. But those closures are because this bank is not right for them. I actually want to get rid of those account and we do select some where we know we are just not right for them. To close someone’s account this way, you have to do it with compassion. So we call them and tell them they’re in the wrong place. Not all customers are right for ING Direct and you just happen to be one of them.

For example, 7% of Americans change their accounts every year. 3.5% of them do this because they are looking for a better deal. The other 3.5% are manic depressives. They’re unhappy people and they switch to us to say, “Make me happy”. We can’t do that.

BT: How do you get everything to work together in alignment?

AK: Do you know how easy it is to run a bank when you only have one interest rate? Ask any employee and they know the rate and 40% of customers come by word of mouth. How is that possible? Because folks say they know that they will get the same rate you got. You won’t get a better deal or a worse deal. You get the same deal. That’s why neighbours recommend us because they know they’ll all get the same deal.

And all this cross sell stuff is over hyped. It’s cheaper to get a new customer than to sell the existing customer a second product. In fact, much of the stuff banks talk about is wrong.

Folks say you cannot run a bank without fees, but customers don’t believe it. So you shouldn’t charge fees if people don’t like them. Just roll them into something else and say you’ve done away with them. That’s why one of our slogans is, “Bank fees are like sand in your bathing suit”.   Customers like that.  They understand it.

BT: I understand you’ve written $26 billion of mortgages, with only 15 foreclosures. How did you avoid the problems?

AK: Most of us know that in 2002, we needed to get assets and get mortgages. But the mortgages business in the USA I knew was just not right.

We think we’re the largest community bank in the country and, with that mentality, we also think we have to keep our mortgages on the banks’ books. Selling our mortgages on Wall Street was just nuts. I mean I don’t know anyone out there with a 30-year CD account, so why sell 30-year mortgages? That’s why we offered a five-year fixed rate mortgage. We service them for six basis points, and we do a billion dollars a month of them even now.

In fact, Bill, we now have $35 billion mortgages on the books. The average 30-year mortgage lasts for seven years and you cannot guarantee thirty years in life. We don’t know if we’ll still be healthy and married in five years, let alone thirty.

If we had kept mortgages on the bank balance sheets, we would not have the problems we have today. We need to keep mortgages on the bank balance sheet. That was our view. If we cannot cover the mortgage with deposits, we don’t take them.

I want Americans to be in their homes and to be able to keep them. A home is a place you hug your wife and raise your kids. It’s not a financial asset.

Ring fence it and stop the Wall Street guys mucking around with the American homestead.

When you talk to Main Street, we say if you want a mortgage, you have to be able to afford it. That’s why I want a down payment. If customers come in saying they want 100% loan to value, I say who’s doing the maths here?

We can change behaviours and this country but it won’t be by Wall Street, it’ll be by Main Street.

BT: On the one hand you’re a start up but you have a big parent company – how does that work?

AK: Most of the time it doesn’t work, for the reasons of the parent being a big old company. Think of Star Wars and the Empire Strikes Back. We are Luke Skywalker in the orange jumpsuit. That’s us.

The culture and the way people engage are radically different to the rest of the group, but there’s something unique about ING. They’re very long-term focused and open to new ideas. They are in an environment that tolerates differences of opinion and friction. And there’s an overall broader thinking.

BT: What about hiring staff. Do you have any criteria?

AK: We don’t hire bankers, because bankers come in with their DNA and they have their legacy which won’t fit. Instead we hire dancers, musicians and artists.  People who can deliver a great and different experience. 

Focussing on what's good for the customer is good for companies!

What's the lesson for banks and financial services companies in this hour of financial crisis?

Thad Peterson has lovely post on topic.He writes:

The lesson…when you start and finish by thinking of the best interest of the customer, and you manage your business prudently, you rarely go wrong. So, what now?

A few banks, the banks that you don’t see in the headlines, have been focusing on that all along. This idea was brought home to me by a person from one of the banks that’s actually doing just fine right now. One of the key reasons that they’re doing just fine is that they didn’t make high risk mortgages. Why? Not because they thought the risk was too great, not because it wasn’t in their strategy, but BECAUSE IT WASN’T IN THE BEST INTEREST OF THEIR CUSTOMERS TO MAKE THOSE LOANS. Think of it, bankers realizing that putting a customer in an over-leveraged loan was a bad idea for that customer. No doubt a lot of those customers ended up with loans from other institutions, but this bank didn’t make that loan.

The customer will re-emerge as the center of the banking universe. Banks will realize that core deposits and basic lending products are the most important assets on their balance sheets, that their customers are the ones who own those products, and there will be a shift to acquiring and retaining customers as a core strategy.

Then, it’s about execution. Some banks will decree a "focus on the customer" and continue to deliver lousy service at a high price. A few will take a hard look at their organization and realize that they need to completely re-align, re-train their customer service teams and aggressively coach their front-line managers. And one or two will continue to do exactly what they were doing before because they never stopped thinking about what was best for the customer.

A.P. Giannini, the founder of Bank of America said, “If an institution becomes great, it is usually by the consent of the people it serves.” At this time, in this place, truer words were never spoken.

Moving from Supply Chain Management(SCM) to Customer Chain Management(CCM)

In the last one or two decades, enterprises have been focussing on the supply side of their business. This was primarily related to reducing inefficiencies, extracting more value out of leakages in supply processes, shaving-off wastages thro' better logistics & distribution, managing inventory in near real-time and hence improving margins by reducing capital employed.

As companies continue to implement many of these SCM initiatives, in the next decade or two, what will drive value for companies? I believe they need to shift their focus to Customer Chain Management(CCM). Here's where maximum value can be created for companies.SCM can only squeeze incremental value for companies.That may not be just enough. Hence, they need to adopt CCM to gain market leadership and to improve market capitalization.

Let's take an example of Apple. They have excelled in managing the customer chain better than any of their competitors. The iPod is a great example of best practice CCM. Here the premise starts with customers wanting to hear great music. The customers just  didn't need only a product.There were thousands of them to choose from. The way iPod organized the music for them, iTunes as a  service where they were given "pay-as-you-go"  flexibility, accessories that made it possible for them to hear "on-the-move"  and " in-the-room"  to enhance their lifestyle made it a compelling proposition.

Take a look at what are the various elements of the customer chain that they have brought together in the diagram below. The "value creators" of tomorrow will be ones who can bring various parts of this customer chain together. There is value to be " added" at every part of the chain and CCM has the ability to significantly multiply the revenues for companies.

Customer Chain Management

View SlideShare presentation or Upload your own. (tags: customers)

Great marketing is great storytelling

Tom Asacker writes about the fact that great marketing is all about brilliant story telling. In my view, it is extremely true. Just go back and think about the companies, products or brands that you remember. You will have a great story to tell. It could be an interaction, a product experience or even some small incident that caught your attention. Take a look at what Tom has to say and the key question that you should ask yourself, when you are marketing your brand is -"Do I have a great story to tell?"

Great marketing is great storytelling. All great religions are sold via storytelling, or parables as they are often called in Christianity. This is a good strategy; people are inherently interested in stories, whether in films or novels or, even, brands. The problem is that the stories often go untold. If you're still a skeptic, let me tell you some amazing stories you've never heard about some very well-known companies and brands. Let's start with the world's largest company.

Wal-Mart: Founded by Sam Walton in 1945, this company now has 1.3 million employees and is the largest retailer in the world. While everyone knows about its low prices, very few know the story behind them. To deliver these prices, the company uses some amazing technology and computer systems. It encourages suppliers to shrink package size to reduce shipping weight to save money; it buys local produce to avoid transportation costs. Sam's Club buys coffee directly from growers to avoid costly middlemen. The company works hard to save people money, but it's a story never told.

Southwest Airlines: Herb Kelleher set out to launch a different kind of airline. He flew out of secondary airports as a way to avoid costly hubs. He flew point to point so his customers didn't have to change planes. He flew only one kind of airplane to reduce training and maintenance costs. He decided not to have expensive, lousy food. This saved money so customers could go to a better restaurant when they arrive at their destination. He replaced costly reservations systems with re-usable boarding passes. Herb turned the airline industry upside down, but it's a story never told.

SKF: This is a 100-year-old Swedish company that has quietly made an enormous difference in the way the world runs. Year after year, it has come up with new innovations in its family of bearings, large and small. Its basic technology can be summed up in a simple motto: "Making things run better." Efficient machines use less energy than inefficient machines, and SKF's innovation has made it the world's leader in bearings. It's a story never told.

Betty Crocker: This is a lady you'll still find in spirit out at General Mills, working in her kitchens. Years and years of recipes, cake mixes and prepared food of all kinds have emerged from these kitchens. (You can even have a kitchen tour if you want.) Betty has forgotten more than Martha Stewart ever knew about cooking. It's a story never told.

Papa John's: Not that many years ago John Schnatter was making pizza in his uncle's store. He was buying his pizza sauce from Dino Cortopassi, the gentleman that supplied sauce to most of America's small, independent pizza restaurants. Since many were Italian, they appreciated Dino's real Italian fresh-packed sauce. Since there was a limit to how much sauce he could pack, he didn't sell to the big chains. But John decided to become a big chain and Dino kept selling him his sauce. Meanwhile, the big chains continued to re-manufacture sauce from concentrate. That sauce is the cornerstone to John's motto: "Better ingredients. Better pizza." It's a story never told.

How are you taking care of your data in your organization?

There's an interesting report by Experian on how organizations are ignoring basis steps in taking care of their data. The report entitled, ‘Contact Data: Neglected asset seeks responsible owner’, surveyed 2,078 organisations worldwide, and revealed that the overall approach to data quality and integrity around the world is at best half-hearted and, at worst, cavalier.

Take a look at the topline of the report:

• Nearly a quarter of organisations (23 per cent) use data for strategic planning and decision making every day, responsibility for the upkeep of this data is passed from pillar to post.

• 59 per cent of respondents said that responsibility sits with middle management, from a CRM Manager through to an IT or Sales Manager.

• Only 50 per cent of organisations went on to say that data quality is championed by someone at board level.

• Organisations admitted that only half (52 per cent) of their employees have bought into the importance of data quality, revealing a lethargic approach to an issue that affects business success on a day-to-day level.

• Only 46 per cent of the same sample said they have a documented data quality strategy in place.

• 34 per cent said they do not validate any of the information they collect on their customers and prospects, whether that be name and address, contact number, e-mail address or bank account information.

My take: Looks like in many organizations, while customer data is touted as the most important asset, the efforts taken to  upkeep the quality leaves much to be desired. It needs commitment at the C-level, else it is not seen as priority by many operating managers. This must become a part of the KRA or KPI of every operating business head and CXOs must ensure compliance if they want their organizations to succeed in the future by leveraging this information.