Martech’s Magicians: Microns, Micronbox and µniverse (Part 12)

Summary

Business is about customers, revenues, profits and growth. In recent times, as investors splurge money on B2C and D2C companies, it is easy to forget about the “profits” bit! But eventually, every enduring business grows on the back of profits, not an infinite supply of investor capital. Given that one of the largest costs for most businesses after staff salaries is cost of new customer acquisition, it becomes imperative to start thinking about customer retention, growth, cross-sell and referrals if a path to profitability has to be found.

This is where the ideas of Martech come into play. Martech is about existing customers and building deep relationships with them. In the pre-digital world, this was much harder. It was difficult to identify individual customers (that’s how loyalty programs got started), it was expensive to reach them individually (only option was physical mailers), and it was impossible to do any real-time offers or adjustments. The digital world has changed all this. Data at an individual level is plentiful, storage and computing are not constraints any longer, and the brand’s digital storefronts in the form of websites and apps offer real-time engagement and nudge platforms. Martech software is helping drive the shift from optimising acquisition to maximising customer lifetime value.

Martech 2.0 is upon us and with it comes a view beyond the immediacy of the transaction. Starting with the upstream elements of attention, engagement and habits, Martech 2.0 focuses on creating “hooked customers.” A multitude of innovations are driving Martech 2.0 and solving the ABCDE (attention, branding, churn, data and engagement) problems that plague the customer relationship: Messaging+, Ems, Velvet Rope Marketing, Full-stack and Atomic Rewards. Complemented by the progency and rebudgeting, Martech 2.0 lays the foundation for exponential forever profitable growth and the making of a “profipoly.” It is a strategic inflection point in marketing.

The basis for competition is changing. Marketplaces will create private labels out of categories that are successful. Brands will realise that they will need to create a bypass to marketplaces and build their own websites and apps to own the customer relationship. In a world devoid of third party cookies, first-party (and zero-party) data is the gold that brands must strive for. Sooner or later, every growing business will need its own direct relationship with customers. What marketers need to do is to focus on jobs customers want done and craft defining moments because many of the other levers of competition are going to be less effective in a world where every brand can sell anything to everyone via a ubiquitous and efficient logistics network.

In this world, the three metrics of hooked score, reacquisition ratio, and earned growth rate can be the guiding lights for marketers. Leading the way into this brave new world of Martech 2.0 will be the three magicians: microns, micronbox and muniverse.

Thinks 332

Michael Dell: “”I have this deep-seated belief that a lot of people don’t realize their full potential because they’re too afraid to fail and too afraid to make mistakes. There’s so many ups and downs and twists and turns. In the first couple of years of business [we] could have failed at least 10 times, with all sorts of things that were going on. But that’s reality, and that’s how I think great businesses are built.” [via cnet]

John Chamberlain: “Once capitalism is seen as a profit-and-loss system, with everyone at the mercy of the sovereign consumer’s whims as he balances one marginal desire against another, the incidence of anticapitalistic criticism must shift. The capitalist who can make money in a consumer-oriented system is the one who shrewdly anticipates the customer’s desires, and under such a dispensation profit – far from being “surplus value” – becomes the deserved reward for acumen.” [via CafeHayek]

Donald Boudreaux: “Deficit financing allows today’s citizens-taxpayers to push the costs of today’s government activities onto future generations. Deficit financing thus enables today’s citizens-taxpayers to live at the expense of others. And people able to live at the expense of others will live excessively expensively. Access to deficit financing loosens the limits on government growth. Therefore, a balanced-budget requirement would indeed limit the growth of government…When you buy a car with borrowed funds, you – the same individual who borrows the funds – are the individual responsible for repaying them. So you borrow and spend prudently. But with deficit financing by government, the individuals who borrow the funds (that is, today’s citizens-taxpayers and their political representatives) are not the same individuals who are responsible for repaying them. That responsibility falls on other people; it falls on future citizens-taxpayers, many of whom aren’t yet born. Therefore, access to deficit financing gives today’s citizens-taxpayers (and their political representatives) freedom to spend more lavishly than they would were they required to pay for all government projects out of current taxes.”

Martech’s Magicians: Microns, Micronbox and µniverse (Part 11)

Metrics

How can marketers measure success in the Martech 2.0 era? The Martech 1.0 had the Net Promoter Score (NPS). What are similar metrics for Martech 2.0? There are three metrics we can consider: hooked score, reacquisition ratio, and earned growth rate.

Hooked score: As we discussed earlier, one of the key objectives is to win the transaction upstream game. This means focusing on attention, engagement and habits. A simple way to measure this is to track all the actions that a customer does with the brand communications and properties. Add 1 point for every open and click done by customers over the past 30 days to arrive at the Hooked score. The higher the score, the greater the attention. This can then be correlated with transactions and the forward-looking customer lifetime value (CLV). The Hooked score is a simple metric and easy to track. The software for doing it already exists. Email opens and clicks are already tracked, SMS and push notifications clicks can be tracked via custom links. Code on the website and in the app can track the actions. What’s missing is the scoring. Brands can then even test if offering low or high atomic rewards changes user behaviour.

Reacquisition ratio: My belief is that a third of all acquisition is actually reacquisition. No brand that I have spoken to is actually tracking this. It is not difficult to track. For every new paid acquisition, a brand needs to simply look at its database and see if that email ID or mobile number was in the customer database. The reacquisition ratio is the number of reacquired churned customers to the total acquisitions being done. The higher the number, the greater the waste. Brands should then use reactivation techniques as an alternative to reacquisition via ad platforms.

Earned growth rate: This is an idea that combines the power of retention and referrals. It is mathematically represented as Net Revenue Retention + Earned New Customers (ENC) – 100. Reichheld, Darnell and Burns discuss this in a recent article in Harvard Business Review: “Once you have organized revenues by customer, you can determine your NRR. Simply tally this year’s revenues from customers who were with you last year, divide that amount by last year’s total revenues, and express that figure as a percentage. ENC is the percentage of spending from new customers you’ve earned through referrals (as opposed to bought through promotional channels).” They offer an example: “Company A’s revenues grew from $100 in 2020 to $130 during 2021, or 30%. In 2021 customers who were on the books in 2020 accounted for $85 of revenues. Some of them expanded their purchases by a total of $5, but that growth was more than offset by other customers who reduced purchases by a total of $20, resulting in an NRR of 85%. New customers accounted for $45 in revenues—$25 from earned new customers (referrals) and $20 from bought new customers. Adding the NRR (85%) and ENC (25%) and then subtracting 100% results in a 10% earned growth rate.”

Taken together, these three metrics are at the core of Martech 2.0 – they measure attention, retention, reactivation (or non-reacquisition), and referrals.

Thinks 331

Rita McGrath: “One of the great puzzles in business is why some entrepreneurs benefit tremendously from the unfolding of a strategic inflection point, while others who “saw” it equally clearly disappeared into the mists of forgotten business lore. One explanation is that introducing even prescient innovations into an unripe ecosystem is as much a recipe for disaster as failing to innovate in the face of a pending inflection point. Being ahead of one’s time is as miserable as being too late…A strategic inflection point consists of what Andy Grove called a 10X shift in the forces that affect a business. As he pointed out, such a change represents a technological transition in which an older regime is in the process of being replaced by a newer one. If a business is prepared to navigate such a transition, by retiring older technologies, embracing newer ones, and transitioning their activities, an inflection point can represent a valuable opportunity for growth. It can also presage a decline in business as older ways of doing things are replaced with new ones and revenues erode accordingly.”

Atanu Dey on CORE (a curriculum to learn about the economy): “We have to be taught and we have to learn how to think about our world, just like we have to be taught how to read, write, reason logically and do arithmetic. Unlike comprehending and speaking natural languages, we cannot instinctively read, write, reason or do arithmetic; we have to learn. Reading, writing and doing arithmetic is “unnatural.”… India is what it is (desperately poor) because the vast majority of Indians prefer socialism over capitalism. Indians are not systematically stupider or lazier than other more prosperous collectives; they are just systematically more ignorant. Poverty is not necessarily the result of moral failure; most often it is the outcome of a broad-based societal ignorance of basic truths and principles about human nature and society.”

Read: Never by Ken Follett

Martech’s Magicians: Microns, Micronbox and µniverse (Part 10)

Reimagine

Let us reimagine how our shopping experiences can change in the coming Martech 2.0 era.

Consider buying a book. Today, Amazon is the sole arbiter of what gets recommended to us and the reviews. But there is a world beyond Amazon. We don’t explore it because of the friction involved. Imagine being able to see the book on a shelf in a virtual library – so one can see other similarly themed books nearby. That is what one tends to see in a physical bookstore. When I am at Strand Book Store in New York City, I spend a lot of time going through shelf by shelf of books on a specific topic. (The Dewey Decimal System does a great job of allocating a unique number for each book which determines its place on the infinite shelf.) If I show interest, then for the next few days, a daily micron into my micronbox brings forth additional information – table of contents, reviews, author background, excerpts, and more, with each message a carrier of atomic rewards to nudge me towards the purchase.

Consider buying a phone. The post-purchase period is a void where the phone manufacturer is losing an opportunity to know me and engage me. Imagine offering me an incentive to register the phone and then opt-in to a 20-day micron series telling me the new features about the phone. The manufacturer would then also know the date of my purchase and could at a later point of time offer me an upgrade, thus building a longer relationship. Given that phones are also becoming windows to services, the manufacturer could get additional revenue once the relationship is activated.

Consider booking a movie ticket. The multiplex or the booking platform could drive excitement by sending me snippets about the movie. It could also create an interactive chat once I reach the multiplex with the food menu, remembering what I ordered the last time. After the movie, it could offer me incentives to rate the movie and share the experience on social media. It could also let me know what movies will be releasing the next weekend, and offer to book the same seats at a similar show time for one of those movies. By doing so, the multiplex is making me into a “subscriber” – driving repeat purchases in a frictionless manner.

Consider buying a dress. The µniverse would offer an AR view of me in that dress, and I could solicit feedback from close friends if I chose to. For Best customers, there could be a hassle-free returns policy. For ethnic wear, there could be a back story on the making of the dress. Post-purchase, suggestions of accessories could be sent to me.

These are just a few examples. The combination of microns, micronbox and µniverse open up a new world of brand-customer engagement possibilities. It is like the early days of the Internet – what could be created was only limited by our imagination. The digital world is our future, and we are all just getting started. Businesses which can wipe the slate clean and rethink customer experiences in the Martech 2.0 will end up with a significant competitive advantage in the future.

Thinks 330

Shane Parish: “There is nothing that gets in the way of success more than avoidance. We avoid hard conversations. We avoid certain people. We avoid hard decisions. We avoid evidence that contradicts what we think. We avoid starting a project until we’re certain of the outcome…Everything becomes harder until we stop avoiding what’s getting in the way. The longer you wait the higher the cost.”

James Buchanan: “Persons, whether they be scientists, moral philosophers or ordinary folk, can be roughly classified into two sets – those who are described as having a liberal predisposition and those who do not. And by a “liberal predisposition” I refer, specifically, to an attitude in which others are viewed as moral equals and thereby deserving of equal respect, consideration and, ultimately, equal treatment.” [via CafeHayek]

Read: The Judge’s List by John Grisham

 

Martech’s Magicians: Microns, Micronbox and µniverse (Part 9)

Moments

During the pre-Diwali cleaning at home, Bhavana (my wife) brought down from one of the storage compartments many of our son Abhishek’s firsts: his first shawl, his first set of clothes, the first toys, the first books. Each of them brought back memories – still images of a world I had almost forgotten. (Abhishek is now 17 years old.) Many moments from my past life flashed by – playing with Abhishek, reading to him, wrapping him up in that towel after a bath.

Another afternoon around the same time, I was clearing up a lot of old magazines at home from 2018-2020. Many cover stories brought back memories, especially the political ones when I was working on Nayi Disha.

And then, I got an email from Dan Heath (sent to his mailing list) to a webinar about his book, “The Power of Moments.”

All this, as I was putting the finishing touches to my IAMAI and ET Martech Asia presentations on the coming Martech era.

And that is when it struck me: Martech 1.0 was about transactions, Martech 2.0 is about Moments. Moments are upstream of transactions. Moments are what capture our attention, drive our engagement, and make up our habits. And moments are where microns, micronbox and the µniverse work their magic.

Think about the moments we remember in our engagement with brands. The “It’s a Small World” ride at Disneyland. Sitting in the cockpit and watching the tricky landing at Hong Kong airport. The always welcoming smiles at Shangri-La Apartments in Singapore. Visiting Swati Snacks at Nariman Point for the first time after the pandemic and being greeted by the manager. When we sit and start to think, many moments will flash by. Some joyful, others not so.

Dan and Chip Heath write that a “defining moment” is one that is meaningful and memorable. They are the ones that endure in our memories. Such moments comprise one of more of four elements: elevation, insight, pride and connection.

ELEVATION: Defining moments rise above the everyday. They provoke not just transient happiness, like laughing at a friend’s joke, but memorable delight.

INSIGHT: Defining moments rewire our understanding of ourselves or the world. In a few seconds or minutes, we realize something that might influence our lives for decades.

PRIDE: Defining moments capture us at our best—moments of achievement, moments of courage.

CONNECTION: Defining moments are social: weddings, graduations, baptisms, vacations, work triumphs, bar and bat mitzvahs, speeches, sporting events. These moments are strengthened because we share them with others.

They add: “When people assess an experience, they tend to forget or ignore its length—a phenomenon called “duration neglect.” Instead, they seem to rate the experience based on two key moments: (1) the best or worst moment, known as the “peak”; and (2) the ending. Psychologists call it the “peak-end rule.” … What’s indisputable is that when we assess our experiences, we don’t average our minute-by-minute sensations. Rather, we tend to remember flagship moments: the peaks, the pits, and the transitions.”

They elaborate in an interview in Forbes: “Great experiences hinge on “peak” moments. Think of the way you might recall a vacation to Disney World. You don’t tend to remember the long lines and the sweatiness and the irritability. You remember the special moments: The adrenaline rush after riding Space Mountain. Or the time your kid beamed with delight because Goofy gave him a hug. Those peak moments dominate our memory of the experience. But those moments don’t make themselves! To improve the experience of others, we must create moments that matter.”

So, when brands think of experiences, they should think of creating defining moments – “peak” moments. And this is where they can get help from martech’s magicians.

Thinks 329

Tyler Cowen: “It’s…important to understand that the payments market in the United States is a $100 trillion dollar market. Yes, $100 trillion. Any firm that captures even a small share of this market is going to be big. Credit cards are actually a small part of payments, about $7 trillion with roughly a 2% transaction fee or a $140 billion market. (Quick check. Credit card companies had 2020 revenues of $176 billion).  ACH debit and credit transfers are the big market, $65 trillion, which at a .5% transaction fee amounts to a $325 billion market (this is retail price, wholesale is lower). Thus, payments revenue is on the order of $465 billion. A small share of $465 billion is a very big market (and that is just the US market)…. Crypto payments are in principle at least an order of magnitude cheaper than ACH payments…Crypto payments are the future.”

Michael Munger: “The argument for markets is not the perfection of markets or of the price mechanism. It’s the imperfection of the world, in which this is the best system for elaborating division of labour to foster specialisation. Of course division of labour also existed in Pharaonic Egypt. But in free markets you break out of the small command economy and don’t need to know the person that you’re buying things from. It cuts the transactions cost of impersonal exchange. There is no alternative system that increases the wealth of most people, most of the time, by more. Or that reduces poverty by more, not even close.”

Paul Bloom: “The simplest theory of human nature is that we work as hard as we can to avoid such experiences. We pursue pleasure and comfort; we hope to make it through life unscathed. Suffering and pain are, by their very nature, to be avoided. The tidying guru Marie Kondo became famous by telling people to throw away possessions that don’t “spark joy,” and many would see such purging as excellent life advice in general. But this theory is incomplete. Under the right circumstances and in the right doses, physical pain and emotional pain, difficulty and failure and loss, are exactly what we are looking for…The importance of suffering is old news. It is part of many religious traditions, including the story in Genesis of how original sin condemned us to a life of struggle. It is central to Buddhist thought—the focus of the Four Noble Truths…In the search for a meaningful life, simply seeking pleasure isn’t enough. We need struggle and sacrifice.”

Martech’s Magicians: Microns, Micronbox and µniverse (Part 8)

The Magical Trio

Microns are push messages with rewards that create moments of delight. The micronbox is a single repository for microns – think of it as a Gmail or WhatsApp for brand communications. The µniverse is a futuristic world – metaverse – where the physical and virtual worlds come together – where our digital avatars interact with virtual manifestations of brands to create unique experiences. This is the trio which can come together to transform the brand-customer relationship, much like social networks and messaging apps have transformed our personal relationships.

Over the past year, I have written extensively about microns, micronbox and µniverse:

While each of them is a big step forward, the real magic will happen when the triad works together as one. Brand messages stream into the micronbox – all with our permission and personalised with the preferences we have chosen to give. These microns value our time and reward us to pay attention. Most microns are not “salesy”; instead they are informative, interactive and fun. They fit on a single mobile screen and are consumed quickly. They come into our life daily – becoming a habit and utility, offering something useful. We look forward to them – much as we once looked forward to (and some of us still do) to reading the comics or solving the crossword in the morning newspaper.

The rewards earned provide entry into a new world, the µniverse. With the metaverse now becoming a buzzword and a possible future after the mobile internet, it borrows from the world of gaming, AR and VR to create experiences that create a deeper connection with brands. Buy a book, answer a few questions, and get invited for a virtual session with the author. Sign up for a movie and get behind the scenes to its making. Buy a product and become part of a community. Of course, not every purchase and brand needs to be thought of like this, but just as Zoom bridged distances for employees and kept business humming during the pandemic lockdowns, the µniverse will open doors to passionate advocates who want more. Many of these ideas have been done in the 2D world of the Internet, but what the metaverse will do is to make it come alive in the way watching an IMAX movie does.

This is of course out of my imagination and extrapolation from reading and thinking about what can be done differently in the brand-customer relationship. Much the way Isaac Asimov imagined the “Foundation” world many decades ago and Apple TV brought it (or at least a version of it) to life in its web series, it is our imagination working with the three magicians – microns, micronbox and µniverse – than can bring forth new experiences. Central to this world is thinking about the power of moments.

Thinks 328

BizReport: “The granddaddy of digital marketing – email – is getting renewed interest from several sectors. That is a key takeaway from new LiveIntent data. Their researchers are linking this renewed interest in upcoming changes in data collection, usage, and storage that make it more important than ever for businesses to own first-party data.”

FT: “Proponents of mRNA argue that combating Covid-19 is just the start and that its wider adoption heralds a revolution in modern medicine. Cures for some forms of cancer are among several areas being explored. Pharmaceutical companies are now turning their attention to the power of mRNA to tackle a range of illnesses from flu to heart disease and HIV. Very early vaccine trials are also under way for the Zika virus, yellow fever and rare diseases such as methylmalonic acidemia, where the body is unable to break down proteins.”

Donald Boudreaux: “Deficit financing – by enabling people today to free-ride on people tomorrow – allows government to expand its size and reach beyond that which would be obtained if government were required to fund all of its current expenses out of current revenues, with no opportunity for deficit financing. In short, deficit financing paves a path for the unwarranted and wasteful expansion of government activity. Only someone who is convinced that government will undertake only economically worthwhile projects regardless of the means of financing – or someone who doesn’t understand economics – can look favorably upon deficit financing by government.”