Published November 4, 2022
CEO Persuasion, Email
I had just finished a presentation on Email 2.0 and Loyalty 2.0 to a group of marketers. I spoke about the changing paradigm of marketing from an excessive focus on new customer acquisition to a bigger emphasis on deepening existing relationships. I encouraged the marketers to think about profit by ensuring that existing customers come back for more and bring their family and friends, rather than relying on a steady stream of expensive and wasteful spending on the Big Tech platforms. I then discussed how new innovations like interactivity and micro-incentives can help marketers build a hotline to their customers with a focus beyond the transaction on the upstream of attention and data. I ended with a 90-day action plan for the marketers: take 10% of your customer base, split into test and control groups, use the ideas of AMP and Atomic Rewards to recraft the email program, and measure the uplift through the customer journey from opens to in-mail actions to transactions.
I then opened the floor for Q&A. I knew many of the ideas I had proposed were contrarian, but I also knew that the challenges brands faced (attention recession, data poverty, rising CAC, AdWaste) could not be solved by conventional thinking. So, I expected a lot of pushback. I was not disappointed.
The first question came from my left. A marketer asked, “Within my company, the CEO wants to see new growth. Everyone else is spending money acquiring new customers. How can I persuade my boss to reduce acquisition budgets when every competitor of ours is bidding furiously to keep the new customer pipeline moving aggressively?”
I replied, “Start by showing the AdWaste. My guess is that half of your spending on new acquisition is being wasted because of reacquisition and wrong acquisition. Both are easy to demonstrate by digging deeper into your customer database and seeing which acquired customers were already in the database (reacquisition) and which ones exited website without purchasing or uninstalled the app in days (wrong acquisition). Next, show the CAC has been increasing over the past year or so. My guess is that CAC would be up 40-50% as compared to a year ago. Then, you could tell your CEO that you are not asking for additional budgets. In fact, you will spend less and deliver better outcomes! What you need to show is not just growth but profitable growth – in both cases, there is no compromise on growth. What you need to persuade your CEO is that the plan that you have will create happier customers, drive more revenues from them, and get more referrals from them. Finally, ask for a quarter’s time to run a pilot and show the results. Take 10-20% of your customer base and run the new marketing program with them.”
The next question came from a marketer at the back of the room. “What you are proposing is impractical. No one cares about email. WhatsApp is what’s working for us. Why do you want us to go back to yesterday’s channel?”
I decided the best answer would be to actually show what Email 2.0 could do. I opened by Gmail inbox and showed what Email 2.0 looks like through multiple examples covering two broad themes – how actions could be completed within the email itself without clicking through to a landing page thus removing friction (via AMP) and providing micro-incentives (Atomic Rewards) in the form of Mu for data and allowing the redemption in the same email. I had the audience in awe with the possibilities opened up by email apps: filling forms, gathering feedback, asking for zero-party data, getting additional product information, adding to cart, scheduling appointments, getting real-time news and stock updates, searching, chatting, even making payments. All without ever clicking out of the email.
I then added, “Some of what I have shown can be done in WhatsApp, but at a price which is 25-50 times higher. $15 billion has been spent on email acquisitions in the past 18 months – definitely not the signs of a dying channel! Email still delivers the best RoI compared to every other channel.”
AMP, Rewards, Mu
The marketer responded, “This is email like we have never seen before! If it is so good, then why haven’t others done it? You said AMP has been around for three years. What about the US marketers – why have they not gone overboard with Email 2.0 in their email-first market?”
I answered, “That’s a very pertinent question. There have been two challenges with AMP. The first is that AMP email creation requires some software development. Most agencies have creative talent, but not software skills. So, AMP emails take longer to create. This is becoming easier now with the launch of AMP Editors with drag-and-drop capabilities. Just for your information, Netcore has an AMP Editor. Over time, customisable AMPlets accessible via an AMP Store will make it trivially easy for most use cases. Second, AMP is only supported on Gmail and Yahoo, and that too only in their apps. In the US, about half of the consumers use Apple’s iOS mail client to view their emails and AMP is not supported by Apple. This is the reason why adoption in the US has been slow because only a third or so of the recipients will be able to view the AMP email. Of course, for those who cannot view the AMP email, they will see the regular email so there is no downside to using AMP. In India, the situation is very different. 90% of consumers use Gmail and almost all of them do so on Android devices using the Gmail app. So, India could actually be the global leader in AMP adoption.”
The next question followed immediately. “What about security in AMP? How is data safeguarded?”
I replied, “AMP is a secure channel. When AMP emails are forwarded, they show up as ordinary emails – so the AMP elements are only available to the recipient who is directly emailed to. Interaction between the mail client and the enterprise servers use the best encryption protocols. So, AMP can in fact be used without hesitation of fear for payments and every use case that needs security.”
A marketer to my right stood up and asked, “You are asking us to pay our customers for their actions. Would that not create perverse incentives? They will do the actions just for the rewards rather than out of genuine interest. And you really believe a few rupees a month will get them to change their behaviour?”
I was happy that there was a question about Atomic Rewards. I replied, “Incentives work. We can see that with loyalty programs. Airlines, hotels and credit cards have demonstrated how loyalty can be fostered with their rewards programs. What I am suggesting is to extend the same logic to the upstream for attention and data. Because the cost of NOT doing it is perhaps 10-50X higher – a lost customer reacquired via Google or Meta. The point here is not the quantum of the reward but the gamification and fun element. Actions in emails earn Mu which can be redeemed right away. In fact, my suggestion is to not take my word but try it out. Run an A/B test and see for yourself. Atomic Rewards will indeed change behaviour through its twin benefits of gamification in the short-term and asset appreciation via Web3 tokens in the long-term.”
I added: “With respect to the provision of incremental data about oneself in return for micro-incentives, doing so isn’t just beneficial because of the micro-rewards received. It is beneficial because both the brand AND the customer have an interest in an unimpeded, direct hotline between them. We wish to receive marketing messages about shoes that are our size. We wish to be identified correctly based on our gender. We would like messages addressed to us that match our hobbies, interests, passions. I believe that we as consumers are willing to reveal more of ourselves in return for effective communication that serves us. What we have now isn’t working as well as it can, because that two-way bridge between brands and consumers is absent.”
Switching, Mu, Atomic Rewards
A marketer in the front row stood up and commented: “We know acquisition works. Yes, it is getting more expensive. Our own CAC is up 45% from a year ago. But we really don’t have a choice. If we don’t acquire these customers, someone else will. And then switching a customer later from a competitor will be even more expensive.”
I replied, “I agree with you that switching customers is expensive. The question to ask is: which customers should you be switching? What is the best way to reach them? And also remember that just as you are targeting customers of other brands, they too are targeting your customers to switch! So, what is the best way you can retain customers? And which customers should you retain? Here, you should segment your customers based on CLV (customer lifetime value) and focus on the Best Customers which will be 20% of your base and will account for 60% of revenue and probably more than 100% of profits if you factor in acquisition and servicing costs. These are customers you absolutely don’t want to lose. The problem today is that you have a tenuous relationship with many of them because they are probably ignoring a majority of the messages you send.
“This is what the ideas I have proposed can change. Email 2.0 and Loyalty 2.0 with AMP and Atomic Rewards can help you build the hotline which will reduce the likelihood of churn. And then you can ask your customers for referrals – Best Customers will likely get you more Best Customers like them. Also, their data can help you better target the acquisition you do – more like using a rifle than spraying wide. So short answer: think of the 5 Rs – Retention, Repetition, Reactivation, Referrals and Replenishment, and you will spend less and get more.”
The conversation continued. “You spoke earlier about Mu for rewarding actions. Where do we get the Mu from?”
I was glad that people had started thinking deeper about the ideas. I replied, “There will be two ways to get Mu. First, customers of Netcore will get Mu free as part of Netcore’s B2B loyalty program. This will be linked to your spend with Netcore. Over time, other partners will be able to offer Mu by buying the points and tokens from MuCo, the entity that issues them and manages their operations. Think of the big advertising companies. They will be able to partner with MuCo, buy Mu from it, and work with MuCo and their clients to craft marketing programs that serve both the client brands and consumers. Second, Mu can also be bought directly from MuCo. MuCo is independent of Netcore, and has a special partnership with Netcore, among others. And if you don’t want to use Mu, you could consider offering rewards linked with your own loyalty program, in case you have one. The key point: offer incentives for attention and data to your existing customers.”
Another hand went up. “The idea you spoke about – Atomic Rewards – will work across brands. Why should I share my customer data with other brands? Also, won’t the same problem of rising payouts to customers happen here too after some time? All we are doing is training our customers to do for money what they are currently doing for free.”
So, back to Atomic Rewards. I replied, “The Loyalty 2.0 ideas I spoke about are built around MuCo and Mu envisions a pan-brand program. This is because the incentives a single brand can give out for the actions are small. They need to be aggregated across multiple brands to create something substantial for the consumer. Also, managing multiple small loyalty programs will be too much – we all know this. How many points do we let go unredeemed across various brands?! With this context, let’s first address the question of customer data. Consumers will need to explicitly opt-in to the Mu program with MuCo. Only then does MuCo start interacting with them. There is no data sharing across brands. The value of rewards will be linked with how you and consumers themselves value their attention and data; in fact, you may want to reward your Best Customers with substantially higher Mu than say the Rest or Test Customers. You have the choice – whom to reward and how much. On the question of rising payouts, it all depends on the value being seen by both sides. Also, MuCo will have a Marketplace where you as a brand can also sell products and services to earn Mu. And to your last point: you are not getting much for free now. A 10% open rate of emails means a 90% ignore rate. Imagine the benefits of taking that to 30-40%. That is where you start building hotlines. Also, as I explained earlier, you should measure RoI at every step and only then move forward. Start small and expand the program based on the success you see.”
Email Design, Other Channels, Reactivation
The next question followed. “Your ideas make sense, but who will do it? How do we get Email 2.0 emails designed? Our current agency knows how to do the creative but from what you are saying these emails also need software elements. This will just increase the complexity and time needed.”
I answered, “Three options: you can use the AMP editor from email service providers (ESPs) like Netcore. Second, very soon, various AMPlets will be available in the AMP Store that you can customise. Third, I see a new type of agency coming up – Progency (a product-led agency), which will do the design and management of Email 2.0 programs on a performance basis. Think of this as Performance Marketing – just like the Performance Advertising agencies that are there today. The two elements which bring in an element of complexity in AMP are the interfacing to your CRM system and storage of data that is being collected. Both of these will require some support from your internal product teams. Given the upside that can be delivered, I don’t think that should be a problem.”
A voice rose from the centre of the room. “Can we do what you are suggesting on SMS and WhatsApp? We don’t have as many email IDs as mobile numbers.”
I was glad that someone was thinking of new applications for Atomic Rewards. I said, “Of course. The principles of micro-incentives are format-agnostic. The idea of Atomic Rewards with Mu can be applied to any other push channel, and later perhaps even on your website and app. The interactivity of AMP is not possible on SMS but can be done on WhatsApp through a chatbot-like interface – think of it as conversational messaging.”
The next question was on a topic I had only briefly touched on. “You mentioned the same ideas of Email 2.0 and Loyalty 2.0 can be used for reactivation. Can you explain? We have 2.5 million email IDs but we do campaigns for about a third of that base because our ESP tells us to focus only on those who have interacted with our email in the past 120 days.”
Reactivation! I was waiting for this question. “The good news is that you have a right of way to the inactive customers via their email IDs; the bad news is that they are ignoring your emails. The first step would be to do a check on which of those email IDs are active – that is, they are opening emails from other senders. There are external service providers who can help with this. My guess is that you will get at least half of your inactive database that you should be able to send emails to without a bounce. The second step would be to use Email 2.0 with its Mu signal in the Subject and the AMPlets in the footer to generate interest. Start small – mix some of these email IDs with the good database you have and work to “wake” up the consumers. Perhaps, some past data that you have on what their interests are can also help. The third step would be to run a reactivation campaign using Email 2.0 Footer Ads – this is not yet launched, but I do expect this will be available in the coming months. Across these three initiatives, you should be able to start building hotlines with many of the dormant consumers.”
Loyalty Program, Web3 Tokens, North Star Metric
Another marketer stood up and said, “We have our own loyalty program. Can we integrate and reward them with our points rather than the Mu that you mentioned? This way we have better control on their earning and redemption.”
An easy one. I replied, “Of course, you can. The only challenge I have seen from past conversations with marketing teams is that internal engineering projects take much longer than integration with external APIs. So, if you can get the bandwidth and already have a loyalty program, go ahead. My hunch though is that your customers may find Mu much more rewarding and exciting because of the easy earning and redemption options. Again, the best way to decide would be to run A/B tests.”
This was followed by a question I had only said in passing. “You talked about the Mu points becoming Web3 crypto tokens. What are the tax implications of that? Will these be classified as cryptocurrency? We don’t want to get into trouble with the authorities.”
I was expecting this. I answered, “Good question. In India, the government has defined something called a ‘virtual digital asset’ which would be taxable. Our belief is that when Mu points become Mu tokens they would still be classified as “loyalty points”. They are not cryptocurrencies by any stretch of imagination. However, from what I know, MuCo plans to have both points and tokens coexisting. So, in countries where there are tax issues, brands and consumers could simply stick to the Web2 world of points rather than migrate to Web3 tokens.”
As the organisers called for time, a marketer stood up with the last question. “I like what you have suggested and am keen to start a pilot in my company. What according to you is the crux of the challenge? What is the one thing that will determine the success of such a program? And what should be the North Star Metric that we should be focused on?”
I was ready with my answer. “I like the ‘crux’ in your question. In this case, the crux is where Atomic Rewards can change user behaviour. I am betting that micro-incentives can. But these are new ideas, and we will only learn with experiments that we conduct. We know transaction-based rewards to foster loyalty, so I think time-based rewards should also work. This applies to the Loyalty 2.0 part of your question. On AMP, there are now plenty of case studies that it is working very well – brands are seeing big uplifts. Not 20-30%, but 3-5X. The last part of your question was about the North Star Metric. I think the best metric is what has been proposed by Fred Reichheld and his co-authors in “Winning on Purpose” – a metric called Earned Growth Rate. It measures the revenue growth because of existing customers who return, and the referrals they generate. Because the ideas of Email 2.0 and Loyalty 2.0 are exactly about that: how to bring back existing customers for more, and ensure they bring their family and friends.”
As the session ended, I wondered if I had done enough to persuade marketers to think differently and consider implementing the ideas I had proposed. I had a hint of the future when a marketer came up to me and said, “For the first time in many years, I have heard a genuinely new set of ideas. My colleagues have forgotten the basics of marketing and just become vassals of Google and Meta. CAC increases are hurting us. I am glad you have shown us an alternate roadmap. I am going to discuss these ideas with my CEO tomorrow and push for the 90-day action plan you suggested. Thank you.” I smiled. The process of changing the minds of marketers had begun.