Category: Marketing

Starting Turbulence

My travel to the US began on a wrong note. About 12 hours before departure, I was informed that my flight (Air India’s Mumbai-Newark nonstop) was delayed 15 hours. I figured the delay would probably only increase and by the time I could reach Hilton Head for the Email Insider Summit conference, I would have lost the better part of a day of a two-and-half-day conference.

Waiting to take the delayed flight was not an option. The likelihood of further delays were high. And just sitting at home for another day wondering would be extremely unproductive mentally. At moments like these, my stoic approach to life comes into play. I could have expressed my frustration at the Air India staff and rued my bad luck. That would not have changed the reality. Instead, I calmly went online and checked on the Air India site for seat availability on flights from Delhi. (Air India has multiple direct flights from its Delhi hub to the US – JFK, Washington, Chicago and San Francisco.) I then had my assistant speak to Air India and told them to get me to any destination in the US via Delhi. After a couple hours of anxious wait, I was rebooked via Delhi to JFK. The flight would arrive at the same time as the Newark flight. A couple things likely worked in my favour. I was travelling Business class and because of my 2019 travels, I was on the highest frequent flier status (Maharajah Club). So, I probably got priority in the rebooking process.

When I reached Newark airport around 10 am, I figured that the net cost had been that I had to leave home five hours earlier (to travel to Delhi) and $150 for an Uber ride from JFK to Newark. I was exactly at the place I would have been had I taken the nonstop. So, not a bad eventual outcome. It could have been far worse had I not been rebooked on the alternate flight.

In life, such events happen. They are beyond our control. Getting upset or angry is not the solution. My general approach is that there has to be some good which will come out of it even though I cannot immediately figure out what. So, a calm demeanour and presence of mind is needed, rather than taking one’s anger out at the airline ground staff – they were not the cause of the problem.

As it turned out, this was the only flight delay I experienced. All my domestic flights in the US were on time. My baggage was not lost. And to top it all, the return flight from Newark to Mumbai three weeks later landed 40 minutes ahead of schedule!

Conferences and Me

I have always looked forward to attending conferences, especially in the US. The content is exceptionally good. Also, the time difference with India is large enough that there are no interruptions with calls and messages which allows for total immersion in the conference which heightens concentration and learning.

Right from the time I began my journey as an entrepreneur in 1992, conferences have been an integral part of my learning. To understand a new field, the best way is to spend 2-3 days listening to a diverse set of speakers, one after another. There are no distractions as one sits there and lets the presenter’s (or the panelists) words and ideas interact with one’s own to create mental models of the space.

For most of my life, it has been about attending tech conferences – mostly in the US, but a few in Europe and South-East Asia. For a brief period during 2014-2018, I switched to attending economics and public choice conferences. Then in 2019, it was back to tech with 5 conferences: SaaStr in San Jose, Email Evolution in Savannah, Gartner’s flagship Marketing conference in San Diego, along with Dreamforce (by Salesforce) and TOPO’s parallel event in San Francisco. In Jan 2020, I attended a special event by the Mont Pelerin Society at the Hoover Institution in Stanford University, along with the Antigua Forum in Guatemala. That made it seven conferences in just under a year.

And then came the pandemic. Everything went virtual, and it was just not the same thing. Sitting at home and listening to speakers or watching recorded videos – it was a very different experience. What I missed was the extended time spent at the conferences – the total focus, visiting the booths, and the random conversations with the people sitting around me. The in-person conferences were what I missed most during the past couple years.

And so, it was with some excitement that I decided in April to visit the US for 3 conferences: Email Insider Summit (EIS) in Hilton Head, Internet Retailer Conference and Expo (IRCe) in Chicago and Permissionless in Palm Beach. Netcore was a sponsor at the first two, and so I had an opportunity to present on Email 2.0 at both events. Permissionless was themed around crypto and blockchain – a new space for me, and relevant in the context of my thinking around Loyalty 2.0.

I planned a 3-week trip split equally between the conferences and meetings with customers, prospects and partners, and catching up with friends on the weekends. It was a hectic itinerary: Hilton Head, New York, Puerto Rico for a day, back to New York, Chicago, San Francisco and the South San Francisco Bay, Palm Beach and New York once again. Nine domestic flights in the US and international flights made for a lot of travel. After my 2-month stay in Sep-Oct 1994 when I envisioned IndiaWorld, this was my longest visit to the US in nearly three decades. I packed each day with meetings; I used the flights to reflect on my learnings and imagine the future course for Netcore.

I recently spoke with Chris Marriott and Paul Shriner on the Email Geeks at Home Drinking Coffee. We discussed Email 2.0, profit-centric marketing and Netcore’s Unbxd investment, among a wide variety of topics.

Also available on Spotify and Apple Podcasts.

A New Mu World

Imagining something is the first step to making it real. Over the past few months, through a series of essays, I have tried to put forth a set of ideas that can solve a big problem that businesses face: how to grow their businesses profitably. With marketing sucking away an ever increasing chunk of the spending, brands need to think differently. This is where the Web3 disruption comes in.

Trying to change the status quo is not easy. Google and Facebook have established their dominance in the Web2 world. There is no single company which can take them on, though a few like Amazon and Tiktok will nibble away. Their valuations reflect the belief that investors have in their strong future cashflows – which are increasingly coming at the cost of brand profits. For now, VCs and PEs are willing to pour money into brands knowing full well that half or more of that investment will be spent on the adtech platforms. But at some point in the future, this ‘free money’ will stop. And then brands will be faced with the question of how they are going to get on the path to profitability. CMOs will need to become Chief Profitability Officers. That will mean looking at alternatives to an endless spending on new customer acquisition.

This will require a different approach. The ad spending problem cannot be optimised at the Web2 level. That game is over; Google and Facebook have won big. This is where the disruptive innovation of Web3 comes in. It is a fundamentally new way to imagine the future by asking the question: what is centralised today that can be decentralised tomorrow? Smart people backed by big funding are building the underlying infrastructure for Web3. Cryptocurrencies, their ups and downs, and government regulations have distracted many from the true potential of Web3. New constructs like the blockchain, NFTs (beyond art and collectibles) and DAOs are laying the foundation for a new world – just like the http protocol, HTML, web browsers and servers did more than a quarter century ago.

In my writings, I have tried to imagine what new worlds we can build on top of the Web3 infrastructure. We need to solve real problems and fix real inefficiencies. And as I see it, there is no bigger one than in the world of marketing – the 50% adwaste that is impacting company profits. The core theme I want to champion is sustainable profitable growth, which needs profit-centric and customer-centric marketing. This is where the idea of Loyalty 2.0 comes in.

Mu Tokens

There are many ways to earn and encash Mu tokens. Here are some starting ideas.

Earning

1. Users providing zero-data about themselves upon registration
2. Opening and reading emails and other incoming push messages
3. There could be higher incentives for steaks (acting on successive messages) and speed (less latency between receiving the message and taking action)
4. In-message actions eg. clicks, playing a game, giving feedback (NPS, ratings)
5. Providing preferences (zero-party data)
6. Participating in surveys
7. Agreeing to participate in trials and sampling
8. Watching a product video
9. Sharing on social media
10. Referrals
11. Actions on website or app eg. connecting email ID to mobile number, which provides the brand an additional channel of communications
12. Greater rewards for Best customers
13. Using Micronbox as the app for brand messages
14. Using WhatsApp or an in-mail chatbot as an alternative to calling a support helpline (helps reduce costs for the brand)

Note that all of these are not linked to transactions. The key point to note is that the Mu tokens become an instrument for marketers to nudge customer behaviour. As has been explained earlier, the prerequisite for success is creating the hotline with customers. None of these ideas are easily doable today because marketers don’t have the conversation pipe to their customers.

Redeeming

1. Paying for unique and differentiated experiences on the three axes of access, ease and exclusivity. These are “priceless” in that brands (or influencers) are not “selling them”. For example, a bookstore can provide me early access to a book for some of my Mu tokens. So could the OTT platforms. A new electric car company could offer me a priority test drive. Artistes (creators) could offer priority access to their works in exchange for Mu tokens.
2. There would be a brand marketplace where brands could list all their premium offerings to enable easier discovery
3. Selling to brands or other customers via the exchange.
4. Transferring to friends or family members
5. Buying brand NFTs
6. Holding on to the tokens with the belief that they will increase in value over time (because there is an upper cap on the total Mu tokens that will be in circulation)
7. Converting to cash (this may have some tax implications in some countries, so perhaps could be avoided)

These are just a few initial thoughts. The MuDAO needs to create the trading platform (exchange). After that, brands and customers will take over and create a virtuous cycle which benefits both sides. What’s needed is for the tokens to have utility and be “alive” (have circulation), leading to mutually-beneficial brand-customer relationships, bringing them closer.

MuDAO Tokenomics

MuDAO creates the Mu tokens.  The number of tokens could be limited or fixed, or supply may be left flexible, in order to accommodate future demand or respond to exogenous shocks. For the purpose of this article, we will assume the supply is limited. Let us take the number of total tokens to be 300 billion. How do these tokens come into circulation?

The first 100 billion can be given to entities who help with enabling Loyalty 2.0 for brands. These could be ESPs (email service providers) or martech platforms. An ESP could embed the tokens it receives (or buys) in brand messages sent through its platform. A martech platform could do the same for push notifications. To take some real numbers: an ESP sending 10 billion messages a month could offer Mu tokens as rewards for opens and clicks on behalf of the brands. Assuming 2 billion such actions in a month, the ESP would enable the circulation of 25 billion Mu tokens in a year spread over hundreds of millions of individuals.

Another 100 billion Mu tokens could be auctioned over a 3-year period: 100 million a day for 1000 days. Brands could then buy them via the exchange, thus setting an initial price for the token. Brands could now reward their customers for additional actions: in-mail engagement, zero-party data, and so on.

The final 100 billion Mu tokens could be split two ways: 50 billion for the developers and miners who will underpin the Mu tech, and another 50 billion for treasury operations to ensure market liquidity.

The entire 300 billion should be in circulation in the next few years. Individuals would have a Mu wallet which could also serve as identity for their brand engagements. The wallet could also house NFTs that brands could periodically offer for free or sell. In the steady state, brands would buy Mu from the exchange (sellers could be individuals or even other brands) and then use them as incentives for strengthening their customer relationships.

The big question: where will brands find the money for this? Would this not lead to an additional outflow leading to a further hit on profitability? My answer is: No. It would be the opposite. Today, brands spend 90% of their marketing budgets on new customer acquisition, and half of that money is wasted. If they can use some of that “adwaste” money for their existing customers, it will lead to more attention, higher retention and, hopefully, increased transactions. As I keep saying: To get customers to pay attention, pay them for their attention (else you will pay Google and Facebook 100X more for them). The twin combo of higher revenues and lower marketing spends will improve profitability.

By disintermediating the adtech platforms, brands will find rich rewards themselves – delighted customers. The added dimension of gamification that the Mu tokens bring can make it attractive and exciting for customers. Metrics like Hooked Score and Earned Growth Rate can be good complements to Net Promoter Score in measuring customer loyalty – redefined to go beyond transactions but also include attention, sharing of customer data, referrals and many other actions that marketers decide.

Past Writings on MuDAO

µniverse and Bharatverse: Web3 Explorations:

Brands are faced with three challenges: the rising cost of new customer acquisition driving a “doom loop” of spending on Google and Facebook, attention recession among existing customers which leads to retention recession and continuous churn, and retaining existing customers since competitors are persistently targeting them for acquisition. Brands selling through marketplaces have another challenge: how to build direct relationships with their customers since marketplaces do not share customer information.

These challenges can be reconsidered thus. In the world of martech, the focus needs to be building deep relationships with existing customers so that the need to constantly offer transaction-linked incentives can be obviated. This needs brands to shift the focus to the upstream of attention, engagement and habits to create “hooked customers”. In the world of adtech, the power of the intermediaries (Google, Facebook in digital advertising, Amazon in marketplaces, and Instagram and Tiktok in influencer marketing) drives up spending and creates barriers to profitable growth.

Solutions need to be thought about against the backdrop of three colliding worlds: customer loyalty, gamification and crypto. In other words, how can brand-customer relationships be reimagined in a Web3 world? This is where the idea of the µniverse comes in, with attention tokens as one key building block.

… Consider an entity (MuCo) which creates a pan-brand attention and engagement loyalty program. Brands can buy Mu from MuCo and reward their customers for specific actions linked to attention, engagement and zero-party data. Customers collect Mu from across their favourite brands and then can redeem them at the Mu Shop.

… As Mu tokens acquire value beyond what is set by MuCo, it can become an “attention crypto-currency”. Transactions are stored on the blockchain to ensure transparency. Every customer now has a “Mu Wallet” where they can hold their tokens. And as marketers and customers see value, the usage of the tokens can also diversify. A MuBox (or micronbox, as I have termed it previously) can aggregate all messages with rewards into a single inbox. A MuBrowser can address privacy and generate rewards. These would be the baby steps to creating the µniverse, a virtual world where brands and customers can engage with each other.

Constructing the µniverse (envisioning the near future):

MuDAO had to solve the cold start problem and get both brands and customers to trust that a decentralised system could work. Luckily, the popularity of cryptocurrencies helped address the initial scepticism. Besides, the initial success of MuCo had enough brands and customers on board to get traction for the second avatar. The µ collected by customers now could be traded on an exchange so brands could buy it. The combination of abundance and scarcity of µ created value for both sides and helped drive µ not just as a means of earning some goodies but also as a long-term investment. For the first time, attention was being monetised – not by BigTech, but the people themselves.

Step by step, MuDAO solved the three biggest problems that brands faced: attention recession, repeat customers, and new customer acquisition. Attention recession was solved by using atomic rewards in the form of µ in push messages, starting with email and then expanding to the other channels. By calibrating µ to customer lifetime value, brands also started driving repeat purchases and loyalty – for the first time, they had a hotline via the Micronbox to their existing customers. With end customers valuing µ, it became easier to ask existing customers to help spread the word among their friends and family about the brand. Both the referring customer and the referred customer benefited from the rewards, and the brand could save on spending via the BigTech platforms.

MuDAO thus created a new ecosystem – the µniverse – between brands and customers. The relationship had meaning for both – attention was not taken for granted by brands, and incentives helped customers along their engagement journey.

Recap

Before we get to discussing how to make Loyalty 2.0 a reality, let us summarise the key ideas we have discussed so far because they will point us to the implementation.

• The quest for sustainable profitable growth must begin with profit-centric marketing. In recent years, the extreme attraction towards new customer acquisition has shifted focus from customer relationship and experience management. Marketing budgets now skew heavily toward adtech rather than martech.
• Adtech has become a black hole for spending. Marketers are ignoring the “adwaste” that is happening because of reacquisition and wrong acquisition. The result is an unsustainable arms race in spending on Big Tech platforms to prop up what is being lost because of inadequate focus.
• With easy money from investors, brands are also spending heavily on discounting, offers and cashbacks – all of which are profit killers. With new age brands chasing only valuation and the next round of funding, the goal is to show topline growth whatever be the cost. Traditional businesses are left with no choice to compete. The only “profipolies” being created in this customer chase are Google and Facebook (Meta).
• To break away from this madness, brands will need to start focusing on the upstream of transactions: attention, engagement and habits. To enrich the lives of their customers, brands also need more volunteered data. The focus thus needs to shift from money to time. Win the battle for time, and only then will there be victory in the war for revenues.
• Brands need to therefore reward attention and data. This is the foundation for Loyalty 2.0.
• Attention begins with the push messages brands send out; they are the mechanism for bringing back customers to their properties. Thus, Loyalty 2.0 need to start with push messages. Zero-party data collection can also be done via push messages.
• Push messages are being largely ignored by customers today because they are filled with generic promotional content. This is where the innovations being championed by Email 2.0 come in.
• Loyalty 2.0 will not work if it is at the level of a single brand since the rewards will not be large enough to make it attractive for customers. These are “atomic rewards” – micro-incentives for micro-actions. They thus need to work pan-brand.
• The next question is: who runs such a pan-brand attention and data loyalty program? The right answer: no one! Loyalty 2.0 is run by rules, not rulers. This is where the intersection with Web3 comes in. A DAO (decentralised autonomous organisation) is the right home for a pan-brand Loyalty 2.0 program.
• The economic opportunity is huge: $200 billion is being wasted annually in spending on the adtech platforms on reacquisition and wrong acquisition. This is money which should be split between customers and brands. To disintermediate Big Tech’s centralised monopolies needs the disruptive innovations of Web3: a decentralised blockchain-based DAO-managed Loyalty 2.0 platform.

With this background, we are now ready to discuss how to bring Loyalty 2.0 to life. We need to think Mu, MuDAO, Micronbox and Muniverse.

1.0 vs 2.0

We can now do a comparison between existing Loyalty 1.0 proposed and the proposed Loyalty 2.0 ideas.

Attribute	Loyalty 1.0	Loyalty 2.0
Rewards for	Transactions (Money)	Attention and Data (Time)
Where	PoS: Offline, Website, App	App; Push Messages (to begin with)
Owner	Single Brand; Centralised	Multi-brand; governance via a DAO
Earnings	Points	Web3 Tokens
Storage	Brand Database	Blockchain
Redemption	Brand Catalog / Store	Exchange / Marketplace
Redemption Ease	Hard (in most cases)	Easy
Value Decision	Brand	Market
Can be debased	Yes	No
Can be traded	No	Yes
Can be transferred	No (in most cases)	Yes
Value over time	Stays flat or decreases	Will increase with utility
Expiry	Yes (in most cases)	No
Rules	Determined by brand	Encoded in “smart contract”
Anonymity	Not possible	Possible
Security	Low	High

As can be seen, there are many differences between Loyalty 1.0 and 2.0. Loyalty 1.0 programs are all around us; Loyalty 2.0 platform has yet to be created. To begin with, there is almost no overlap between the two types of programs. While the sole focus of Loyalty 1.0 is to drive and reward transactions, Loyalty 2.0 focuses on the upstream: attention, whether it is in push messages or later on the brand’s digital or physical properties.

Loyalty 1.0 aims for retention and repeat purchases in commoditised markets. It aims to influence behaviour with the prospect of a future reward. Loyalty 2.0 solves the problems of attention recession and customer data poverty, both of which are the priors in the customer journey. If a customer is not listening to a brand, it is hard to get them to the brand’s property for a transaction. In the pre-digital world, when it was not easy to know each individual customer, the only possibility of a loyalty program was based on transactions. The digital world has opened by the prospect of nurturing customer relationships via targeted messages, nudges and personalised recommendations.

Cristina Ziliani and Marco Ieva write in their book, “Loyalty Management: From Loyalty Programs to Omnichannel Customer Experiences”:

In today’s world, marketing is largely based on the goal of earning long-term loyal customers, and long-standing loyalty tools – transformed by the information revolution into datarich, interactive touchpoints – have become the enablers of loyalty-oriented and customer-centred omnichannel strategies that are shaping the consumer world…The rise of digital has added a new online dynamic and along with it, inevitable challenges and opportunities. Over more than a century, a variety of loyalty tools and practices have arisen and diffused across industries and countries. The paraphernalia of loyalty management has taken manifold forms from tickets, tokens and stamps to plastic cards, vouchers and coupons to digital wallets, wish lists and personalized journeys.

…Over the past three decades loyalty management has undergone three phases. From 1980 to the end of the twentieth century, it meant running a loyalty programme. Since 2000, companies have shifted their focus towards harnessing the ‘invisible’ advantages of such programmes: the insight they offer into the world of their customers, the opportunity this gives them to develop and manage positive relationships with those customers, and the value created by being able to use scheme data to inform decision-making and shape targeted marketing efforts to retain, upsell, cross-sell or reactivate their customer base. Today, in 2019, we are entering a new phase. Loyalty management is increasingly now being identified with the design and management of a quality customer experience across the various touchpoints that connect the customer and the brand and through which the customer journey evolves.

Loyalty 1.0 was built for the offline world; Loyalty 2.0 is made for the digital-first world. Loyalty 2.0 builds on the work done through the decades in loyalty. It moves loyalty higher in the funnel and earlier in the journey; attention retention is the first step in the customer relationship. Without attention, there is no retention; brands face churn and continuous high spending on acquisition and reacquisition which erodes profitability.

The Missing Link

There has been a lot of discussion about the use of blockchain for loyalty programs over the past few years. And yet, there has been very limited progress and no breakout success. Why is that the case? I think that the missing link is attention and data.

The assumption being made in the writings and early implementations is that the tokenisation should begin with the existing rewards programs. As we have seen, all rewards programs are linked with transactions – with customers spending money and being given some sort of cashback in the form of points. This does not substantially change the game for brands and customers. Whether they get points, stars, credits, gold, miles or some cryptocurrency does not move the needle significantly.

The starting point needs to be at the top of the funnel in the brand-customer relationship: with a customer’s attention and data. Attention is critical for everything else that follows. In a world of too much information, individuals can be lost; messages find it hard to get through; connections cannot be easily established. To instil loyalty, brands must solve the attention problem. This means building a pipe, a hotline to their customers. This is where the loyalty app comes in – an app which, crucially, rewards them for their time and data. As I have written earlier: to get customers to pay for their attention, pay them for their attention – else the brand will end up paying Google and Facebook (Meta) 100 times more for the same customer’s attention. There is no loyalty program anywhere in the world for attention.

After attention comes data. Brands need to understand their customers better. While they can decode actions of individual customers on the website and app, the better approach is to simply ask customers and incentivise their actions (in this case, the data being provided voluntarily). How many brands ask us? How many brands offer us incentives for giving information about ourselves? In this case, the additional benefit is that we will also benefit from the personalisation in the offers that we receive. We want to be shown opportunities that interest us, that speak to us. Revealing ourselves is both an opportunity to earn points and to ensure future communications are targeted for our particular tastes.

User self-revelation enables the loyalty program operator to approach more potential clients for participation in the program and points issuance and sales. Imagine a user who, when they sign up for a Loyalty 2.0 app, goes through a series of screens regarding their possible interests. The more screens the user goes through, the more reward points earned.  One screen mentions an interest in culture. The next breaks it down into music, performances, art.  Potential partners are streaming platforms, museums, galleries.  Similarly, a screen on sports interests can be followed by a more detailed menu of items – cricket, football/soccer, F1, e-sports.  Each box checked is an opportunity for the loyalty program to grow and better serve the user.

Attention and zero-party data should become the two starting points for a next-gen loyalty program. Because the quantum of rewards that can be offered by a single brand is small, the program must necessarily be pan-brand. For such a program to be trusted by both the participating brands and their customers, it must not be under the control of a centralised entity, and definitely not Big Tech or any of the data brokers. This is where the construct of a DAO comes in. With the DAO comes the Web3 token, where value is set not by a single omniscient entity but by the market (voluntary transactions, mediated via an exchange). The token can be listed on an exchange and over time; as its utility grows, its value should also increase.

This is the opportunity for Loyalty 2.0. The financial benefits for brands and customers are huge. As I have explained earlier, 50% of the adtech spending is being wasted on reacquisition and wrong acquisition. Some of this $200 billion adwaste can go towards incentivising customers via Web3 tokens which would drive higher revenues and some of it can help brands reduce marketing spends. Together, brands can increase profits – rather than go around in Big Tech’s doom loop of spending. Loyalty 2.0 is thus an imperative for brands, a cornerstone for profitability.