Rethinking Referral Marketing (Part 1)

The past few months have given me a lot of time to think deeply about marketing. Starting with the ideas of Velvet Rope Marketing (VRM), I have had dozens of conversations with CMOs and digital heads of brands in India, SE Asia, Middle East and Africa. The basic problem statements are the same: how to get more from the existing customer base and how to optimise new customer acquisition.

In this context, the VRM pitch works well:

  • All customers are not equal; some have more customer lifetime value (CLV) than others
  • Identify your best customers – say, the top 20% — based on CLV
  • Create a differentiated experience for these customers to maximise revenue and retention
  • Among the rest, use individual customer genomes to identify who could be future best customers
  • Also use the characteristics of best customers to acquire new customers who look like them

On paper, this looks simple. But it is quite surprising how few companies actually do this in a disciplined manner.

I have identified eight problems that handicap the use of VRM:

  • Limited data: Brands are not collecting customer data at every touchpoint
  • No CRM / CDP: The collected data is not centralised into a single place to provide a unified customer view
  • Data not being analysed: If the data is there, then the analysis is either not being done or is very limited
  • No internal team / skillsets: The right talent is missing for doing the analytics and then acting on it
  • Incorrect CLV calculations: Too often, the CLV calculations are done in a very simplistic manner (for example, basing it on the average value of past transactions)
  • No tech platform: Even if all the above is done, there is no tech platform to help implement the use cases
  • Adtech-Martech silos: The acquisition process is not streamlined because there is no exchange of data between the acquisition and engagement teams
  • Cannot measure RoI: Finally, it is hard to get the green light for VRM because the CMO is unable to show the actual uplift in revenue

In my presentation, I address each of these challenges and show the solution to every identified problem. These series of essays discuss the VRM roadmap in depth:

And as it happens so often, one idea leads to another. While VRM does well in addressing the needs of the best customers, a question that came up repeatedly in my meetings was about how to optimise new customer acquisition.

Tomorrow: Rethinking Referral Marketing (Part 2)

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.