Author: Rajesh Jain

Help for Marketers

Adtech solutions have been simplified through the years, as Google and Facebook have become the dominant duopoly. Their platforms make it very easy for marketers to spend money and track the effectiveness of that spend. The result is that ad spending has become part of “cost of goods sold” – thus enabling brands to scale up spending for new customer acquisition. Acquisition budgets have had limits slashed as each new customer’s cost and RoI can be tracked. It is possible to pay not just based on a click but for a form fill, transaction or an app install. Digital agencies have facilitated this shift to performance marketing. The efficient supply chain for new customer acquisition gobbles up 80-90% of marketing spends.

Martech is a different world. Customer retention and growth is much harder. Converting the lead to first transaction, persuading the new customer to a second purchase, and then working to create loyalty to maximise lifetime spending – all of this is very hard work. It is also messier – with many point solutions solving lots of different problems. Data gets siloed and integration costs rise. The dream of a single customer view remains distant. And by the time someone in the marketing department gets it, attrition strikes and a new replacement begins the learning journey afresh. As a result, the martech side budgets have stayed small – a fraction of the adtech spends. It is so much easier to hand over money to an agency for a new acquisition than to get into the guts of retention and cross-selling.

And yet, the future success of brands will be determined not by new customer acquisition but by scaling retention and growth. In a world gone by, all one needed was branding and distribution. But the digital world is very different and demands granular actions. Few CMOs are ready for this – because the skill sets skew more digital than creative. Luckily, help is coming.

The first generation of martech solutions were point solutions – solving very specific problems. Marketers adopted these and got some help. But this created the baggage of fragmentation of customer data and spiraling spends on connectors to glue disparate systems together for the elusive unified customer view. The next generation of martech solutions are solving these problems by creating a full stack digital experience platform – transforming the trees into a forest.

The second level of assistance for marketers will come from the emergence of a new type of agency – the “progency” (product-led agency). The progency will build on proprietary martech platforms to provide the same performance-level outcomes that marketers are familiar and comfortable with. Such an agency will have deep knowledge of the martech platforms with skillsets encompassing analytics, software, machine learning, visualisation, and story-telling. The playground for such an agency is the vast pool of data that is generated by every customer action. The progency will drive specific business objectives along the customer journey: move the customer from the first to second transaction in 30 days, cross-sell a new category, reactivate a dormant customer, drive referrals from a best customer, and so on. Each will be measurable and thus can be compensated as a percentage of the benefit accruing to the brand. This will shift spending based on messaging units (emails or SMSes sent) and platform fees (based on monthly active users) to performance – just like the world of adtech. The compact with the progency: deliver tangible upside and get rewarded.

The full stack solution and progency will be the twin foundations marketers and CEOs need for their brand – leaving them with time and money to focus on other aspects of the business to create the “profipoly”.

Customer Life – 2

As customers, we want more personalisation, greater relevance, less spam and the occasional surprises. We also want to engage with brands across channels. We are willing to share information with brands provided we get a better experience. We also want our loyalty to be rewarded. All this is not too much to ask for given the data that brands can now collect from us – every click and swipe is getting stored away somewhere in a database.

Yet, most brands fail in creating the “wow” experience. While they do have martech platforms, the point solutions most brands use end up creating data silos, raising integration costs, preventing the single customer view, and impeding the working of AI-ML. This creates the disconnect with their customers, and instead of “delight”, they end up making customers “delete.”

Some changes in the customer interaction journey can give customers what they want.

• Brands should reward customers for their attention and engagement with micro-incentives (“atomic rewards”). These work as nudges and add a touch of gamification and excitement to the buying process. The first place where these rewards need to get used are for push messages because that is the only way for brands to get customers back to their properties (website or app).
• Brands should offer a short daily content offering via email in the form of “Ems”. This helps with brand recall – increase mental availability of the brand.
• A digital twin can help customers along the journey by showcasing the most relevant product recommendations at each stage. This makes discovery better by suggesting what is the next product they should consider.
• Brands should offer their top customers differentiated experiences – think of this as “Velvet Rope Marketing”. For this, they need to be able to identify them online and in stores. This makes the best customers feel special and wanted.
• Brands should ask customers for more information which can help improve their recommendations. While algorithms can work well, customer interests change. In most cases, the search box on Google or Amazon is the starting point for our buying journey. Brands need to change that by improving the search experience on their own properties.
• Finally, brands should recognise the influence each customer has. Influencer marketing and social commerce are new ways of discovery and persuasion. A recognition of referrals done can result in rewards which will further encourage proactive word-of-mouth spread.

Many of these ideas have been covered in some of my earlier essays.

Taken together, these ideas – all doable today – can help improve the customer experience and ensure that brands protect their turf in a world where competition is always chasing their customers and churn is just a click away. Yet, in the obsession with new customer acquisition, brands and marketers are missing the most obvious profitable growth strategy – retention and cross-sell to the customers they already have. This is the mindset switch that’s needed. After all, a bird in hand is worth two in the bush! This brings us to the next three secrets: full stack, progency, and rebudgeting.

Customer Life – 1

Unopened messages. Undifferentiated experiences. Missed moments. Stalking ads. Sucked data. Interrupting calls. Such is the life of a modern day customer.

Our inboxes are full of messages that we ignored and yet keep receiving – messages that are identical to almost everyone else, even though the brand can track every click (and non-click). Even after we have been loyal with our shopping, the brand barely knows us – we get the same treatment as a first-time or one-time buyer. Brands miss so many moments where they can delight and surprise us – a little surprise in a large order, faster delivery, human assistance instead of a frustratingly dumb chatbot, less wait time when we call their toll-free number. Brands could perhaps learn that showing the same ad for the fifteenth time will not make us more likely to buy. Data – our precious identity, the oil of the 21^st century – is taken away without as much as an acknowledgment; in fact, if they had asked nicely, we would perhaps have told them so much more. And those pesky calls keep coming, DnD be damned. Being a customer means being at the receiving end.

Brands have the power within them to change their engagement with us. And yet few do. Why? One answer can be laziness – they just don’t care. Each of us is a statistic, one among millions. Who cares whether we stay or leave? There is a pipeline waiting to be acquired. A second answer can be they lack the tools to behave better with us. But we know this is not true – communications and martech platforms have advanced sufficiently. A third answer is that the various internal departments do not speak or share data with each other. So customer support doesn’t know that I am a valuable customer, or I haven’t opened the app for the past 30 days and am likely to churn. Whatever the reasons, it is inexcusable for a modern day brand to not provide wow experiences for their customers – every one of them. Because a few of them are doing it. Why cannot others copy from the best?

Imagine a different world. Messages that come to us carry incentives to get us to pay attention. Brands where we are Best customers treat us like royalty – the way an airline’s First and Business class crew does. Brands plan our journeys and surprise us with amazing recommendations – of books and movies we are delighted to watch, of gadgets and appliances we didn’t know existed but are needed, of clothes that we can “try now and pay later” because they know we have never reneged on a commitment. Ads shown to us can perhaps become smarter – just because there is investor money to burn does not necessarily mean a brand needs to always outbid others. A “Preferences” page can ask us questions directly rather than intuit from the semi-random exploratory clicks we do. A search box that works and the products we browse can also provide rich insights on what we are looking to buy next. And those calls – maybe a better understanding of which channel we like to interact on can drive a better response; every push message can now be made interactive and conversational.

The ideas and tech solutions are all there for brands to make our experiences better. Atomic rewards. Velvet Rope Marketing. CLV. BCG. RFM. Automation. Journey orchestration. CDP. Omnichannel personalisation. Unified customer view. Next Best Action. Nudges. Conversational AI. Permission marketing. Predictive segments. Preferred channel. QR codes. Send time optimisation. Frequency capping. Interactive messages. Identity resolution.

A new world of brand-customer engagement is possible. If only the individuals making decisions at brands saw themselves as customers at the receiving end. If only the marketing department felt the pain of poor engagement, churn and wasted money. If only the CEO or CMO started thinking like Chief Profitability Officers. If only the idea of exponential forever profitable growth starts taking root. Only when retention and growth become more important than acquisition and reacquisition. Only then will true “digital” transformation happen. Only then will our lives as customers will transition from “delete” to “delight”.

4 Rs

Marketers have grown up with the 4Ps of marketing: product, price, place, and promotion. In the martech world, unknown customers can now be uniquely identified, thus making it possible for brands to build relationships with them. This entails anticipating their next needs, at times even before they know it. Digital is now not an afterthought but the primary engagement option. For a brand, digital equals data. The hitherto anonymous buyer is now identified. Each customer is as unique as a snowflake. Branding and push messages help in driving this 1:1 engagement – a visit to the website, or opening the app. Every action (or non-action) needs to be tracked so AI engines can further improve the experience. The endgame is omnichannel personalisation, and the bar keeps rising for this. 1-way communication channels are becoming 2-way conversational platforms. Customers want seamless movement across channels for which brands need to ensure experience continuity.

It is these relationships which will drive revenues, but not all revenues are equal. Offer me a 50% discount for ordering a pizza via the delivery app, and I will do it. The question is: what happens after the discount is withdrawn? If I don’t use the app as often, then the revenue realised was actually a transfer of cash to me! Of course, the hope is that if I do the same ordering a few times, I will form a habit and then the discounts can be weaned away. Customers are much smarter as brands who have burnt through investor money offering discounts have realised. Revenues need repeatability – almost subscription-like. Only then will they become drivers for sustainable profits.

To build relationships, drive revenues, and grow profitable customers for life in the digital data-driven world, marketers need to bring a sharp focus on the 4 Rs: retention, rewards, reactivation, and referrals. Let’s discuss each one of them.

Retention is the key, else what’s the point of acquisition. Relationships lead to retention. Existing customers need to be retained, but which ones? Does it make sense to keep giving offers to the long tail who do not become regular buyers at the right price points? This is where brands need to calculate the customer lifetime value, and then determine who are the customers that must be retained. Retention of the right customers means ensuring zero churn in the Best customer cohort.

Rewards is not a new idea. Many brands have loyalty programs. But all existing rewards programs are linked to transactions and the spending of money by the customer. What is being missed is that attention and engagement are upstream of transactions, and need an equal focus. There is no nudge, no incentive to push customers along the journey. This is where the idea of “atomic rewards” comes in – incentivise customers for their time, because their attention is upstream of every action. These rewards can help nurture good habits – opening a brand message, clicking on the link for more info, filling in a survey form, watching a product video, agreeing to a trial. Atomic rewards can help marketers get the desired customer behaviour and thus accelerate the eventual transaction. A rupee spent per customer per month on rewards can avoid the need to spend Rs 100 should the customer churn.

Reactivation is the missing link in the customer engagement chain. The reality is that customers do become inactive. They start ignoring brand messages and are as good as lost. But the brand still has a hotline to them in the form of an email address, a mobile number or a still installed app. How can this connection be used to reactivate the customer? Instead of a laundry list of offers, perhaps some interesting content can ignite interest. Instead of treating the customer as part of a big segment, a narrowcast message based on specific affinities could do the trick. Reactivation is hard, so allowing customers to become dormant should be avoided. But it is still cheaper than reacquisition which entails using Google-Facebook and spending many times more.

Referrals are near zero-cost acquisition, and so it is a big mystery why most brands don’t do it. All a brand has to do is to ask its existing customers. They speak to their family and friends, and are probably going to be very willing to spread the word. A simple question on a sign-up or first transaction form which asks “Who suggested us to you?” can help marketers quantify and accelerate the referrals process. Word-of-mouth remains the most powerful marketing weapon and its one which is missing from the arsenal of most marketers. An atomic reward for referrals can create a low-cost alternative to the Google-Facebook spending.

The 4 Rs form the bedrock of the coming Martech era and should become part of a marketer’s new vocabulary. Just as marketers learnt how to make the best use of Google and Facebook, they will need mastery over these new methods for winning in the Martech era.

Thus far we have discussed the Martech era from the lens of the marketers. To delve deeper into the next secrets, we need to switch sides and look at the view from the customer side. Marketers need to walk in the shoes of their customers.

Smart Segmentation

Most B2C bands already do customer segmentation but it is very rudimentary. Segmentation is generally done on customer activity – number of transactions in a specified time or activity on the website or app. What brands need to do is start using customer lifetime value (CLV) as a way to segment existing customers into three buckets: Best, Rest and Test. The fourth segment is Next – for future customers.

The Best customers are the top 20% or so customers who account for 60% of revenue and over 100% of the profits. They have a very strong brand affinity and will have very good top-of-mind recall for the brand. They need much more than loyalty – they need an experience which befits royalty. It is what I think of as “Velvet Rope Marketing”.

The Rest customers are the next 50% or so. They will account for about 30% of revenue and some incremental profits. The focus with them needs to be identifying the ones who can become tomorrow’s Best customers. For each customer in this bucket, a “twin” needs to be identified in the Best category: a customer with similar characteristics who is ahead in the customer journey. The building block for this is decoding the Best Customer Genome (BCG). This way, the “next best action” can be correctly defined for every customer, incentivised by “Atomic Rewards”.

The Test customers comprise the bottom 30%. They account for 10% of revenue but cause losses for the brand after the cost of acquisition and servicing is factored in. These customers have made a purchase or two but not become regular or even infrequent buyers. They are inactive and in the red zone of churn. They have little or no attraction towards the brand. They perhaps came for a specific purpose and then went away. Brands keep trying to engage with them via push messages which they ignore. A different strategy needs to be considered. CMOs should not waste their time on these customers, and instead outsource engagement to a new class of martech specialists. It is what I call the “Red Ventures Model”.

There is a fourth segment – the Next customers. These are the future customers the brand is acquiring via the adtech spends. There is room for significant optimisation here. By leveraging the data of the Best customers, brands can improve their acquisition process, and reduce the wastage that typically happens. As most CMOs have seen, only a fraction of the leads result in activations, and most app downloaders tend to uninstall fairly quickly. This is the huge leakage that needs to be plugged. This is what drains away the profits of the business and passes them on to Google and Facebook. An excessive focus on indiscriminate acquisition just ends up making CMOs as collection agents for Big Tech!

A smart strategy for CMOs is to consider four internal teams. The two most important are the ones focused on the Best and Rest customers. The other two oversee outsourced agencies: a martech agency for Test customers, and an adtech agency for Next customers. This will mean a big shift from the current structure where the Best, Rest and Test teams are all clubbed together under “Growth” and first-party data does not flow to the adtech team (and agency) to rationalise spending. The singular goal of the two internal teams will be on the 4 Rs of Martech: retention, rewards, reactivation, and referrals.