Attention Messaging: Bridging Adtech, CPaaS and Martech (Part 7)

The Economics

Let’s do some simple analysis to understand the financial gains from Attention Messaging. The specific numbers will likely differ from brand to brand, so treat these as directional and indicative.

Let’s say a brand has 100 customers. The cost of a new customer acquisition is Rs 100. A new customer has a 20% probability of becoming a loyal customer. Non-loyal customers stay for 24 months. Thus churn is about 40% a year, or just over 3% a month. Assume the brand spends to re-acquire a third of the churned customers. The cost of messaging to an existing customer can be taken as 50 paise per month – across emails, SMS and investments in martech software which enables analytics, engagement and push notifications. What I have not factored in is the cost of labour (in-house and at agencies).

Based on this model, we can come to the following conclusions:

  • At the start, the brand has 100 customers
  • At the end of the year, churn will bring down this base to 60 customers
  • Assume it acquires 50 new customers each year and re-acquires 13 churned customers
  • This the brand spends Rs 100 x 63 = Rs 6300 to grow its customer base by 23
  • The 50 paise spend per customer per month can be split this: 10 emails x 1 paise and 3 SMSes x 13 paise
  • Thus, the brand spends Rs 6 x 100 = Rs 600 on retention annually
  • To summarise: the brand spends 10X more on new acquisition then it does on retention

Now, let’s bring in Attention Messaging.

  • The brand sends 10 new Ems for branding at a cost of 10 paise additional per month
  • Let’s assume the brand offers 10 paise as rewards per open and assume 50% such messages are opened
  • Thus the total cost comes to 60 paise per customer per month
  • The brand converts 5 emails and SMSes (of the 13) into microns and offers rewards of Re 1 in each of them for specific actions (opens, clicks, preference info) which doubles open rates from 10% to 20%
  • Thus, the additional spend will be 5 x 20% x Re 1 = Re 1 per customer per month
  • Taken together, Ems and Microns will cost Rs 1.60 additional per customer per month
  • In a year, the brand thus spends an additional Rs 19 per existing customer
  • Combined with the Rs 6 being spent earlier, the total retention cost is Rs 25 per year
  • Of this Rs 25, about Rs 18 is being ‘returned’ to the customer as a reward for attention

So now, we can compare the costs of retention and reacquisition. Retention costs Rs 25 per customer per year, while reacquisition costs Rs 100. Combined with the fact that an existing customer is 3-10X more likely to make a purchase, the RoI on retention for a brand is 12-40X by focusing.

The budget to fund retention is hiding in plain sight. Instead of a 90:10 acquisition:retention split, marketers need to make it 75:25. This will make for happier customers (they are being rewarded for their attention), drive greater engagement (more attention = more opens/clicks and thus more transactions), and reduce churn (attentive customers are less likely to become dormant and inactive).

Attention Messaging is an absolute no-brainer! It’s the best RoI secret for attentive marketers!!

Attention Messaging: Bridging Adtech, CPaaS and Martech (Part 6)

Four Innovations

Attention Messaging can be revitalised via four innovations: Ems (short, informational, sequenced emails), Microns (messages with rewards), Mu (the attention currency), and Micronbox (a new inbox for push messages).

None of these are being used today. Emails tend to long and poster-like, messages have no incentives for recipients to open or act on them, there is no pan-brand attention-currency to drive actions at the top and middle of the funnel, and brand messages have to vie with personal emails, transactional messages and spam in our various inboxes.

Ems: Emails are the best RoI channel to engage with existing customers. Over the years, brand emails have become longer and require more of our time to consume. They have also become purely promotional. This is where Ems can make a difference. I have written about this idea earlier. (I had called them “Microns” when I first wrote about the idea of short, informational emails so it may confuse with the next idea.)

Microns: To get customers to pay attention, brands must consider paying for attention. Who doesn’t like some rewards for actions done?! Microns are push messages with rewards. They nudge the recipient to stop ignoring messages and start opening them. I wrote about this in my series: Microns and Loyalty: Gamifying and Rewarding Attention.

Mu: While brands can try and create their own loyalty programs for attention, what will work best is a rewards program that works across brands and thus is focused on the inbox actions. Mu is one such idea that I have written about: Imagining Mus: An Attention-Action Currency. By combining financial incentives and gamification, Mu can become a magnet for attention.

Micronbox: The all-in-one inboxes we use today need to give away to a specialised inbox for brand messages. I covered this idea in my series: Micronbox: A New Inbox.

All these ideas came together in Micron-verse: Making It Happen. Short emails and messages with goodies, combined with a new currency and new inbox can bring the world of Attention Messaging to life, and enable smart marketers to reduce their dependence on acquisition spending. They will also change the customer mindset from ‘delete’ to ‘delight’. They are big gains awaiting the pioneering marketers: loyal, attentive customers.

Attention Messaging: Bridging Adtech, CPaaS and Martech (Part 5)

India Numbers

In India, Nutgraf estimates that the total number of users who buy stuff online is 70 million – 5% of the total population. More from Nutgraf on the Indian online consumer pyramid:

Level C: India’s entry shoppers. At the lowest level, with the broadest base, comprising roughly 40 million users. These users are the ones who have bought something online, but have done it very sparingly. Maybe once or twice last year, and they have done it because they heard that one gets a good deal online for a really important purchase, which is usually a mobile phone.

Level B: India’s occasional shoppers. At the middle level, comprising roughly 20 million users. These users may buy something online, but will venture outside online shopping very, very sparingly. Think of users like our moms and dads, who spend money online to get food from Zomato as a treat, or maybe take an Ola once a month if they are feeling particularly generous. It’s a base that’s somewhat comfortable online, but can’t be relied on to spend regularly.

Level A: India’s California users. At the highest level, comprising 10 million users. If you are reading this, you are likely in this category. You are a digital native. You buy nearly everything online—from products, to groceries, to food. You may even have a Netflix subscription. You are the elite user—the one with a lot of spending power. They may be just 15% of the active transacting customer base, but …they account for nearly 40% of the money spent by this pyramid.

In comparison, Nutgraf says that China, with a per capita income of 5X of India, has a transacting base of 800 million, more than 10X of India.

Indian businesses are spending Rs 25,000 crore annually for these 7 crore customers, with 80% of the spends going to Google and Facebook. That comes to Rs 3,500 per online customer annually. If we narrow it down, about Rs 10,000 is being spent annually on each of the 1 crore Level A customers. Since everyone wants them, their attention recession can become very expensive for brands.

The only way to break this cycle of ever-increasing acquisition spending is for brands to focus on the idea they have missed – Attention Messaging. Push messages hold the key to getting attention from existing customers. Other than the availability of new channels for pushing messages (push notifications, WhatsApp), there has been little or no innovation in this forgotten category. And yet, Attention Messaging is what will make the difference between continuous burn and persistent profits.

Attention Messaging: Bridging Adtech, CPaaS and Martech (Part 4)

Retention vs Reacquisition

Here’s a marketing paradox: It is 6 times more expensive to acquire a new customer than retain an existing one; yet, just 10% of marketing budgets are spent on retention. If marketers were to wake up to this fact, they would become the single biggest profit boosters for their organisation instead of the tech trio of Google-Facebook-Amazon.

SignalMind offers some additional nuggets show the importance of existing customers even as marketers chase “shiny” new customers:

  • The average conversion rate from promotions sent to new customers is less than 1%
  • The probability of a sale from a new customer is 5-20%; the probability of converting an existing customer is 60-70%
  • Loyal customers are worth up to 10 times more than their first purchase
  • 80% of future profits will come from 20% of existing customers
  • A 5% increase in customer retention can increase profits by 25%

In fact, quoting from “Marketing Metrics”, Tricia Morris writes that “the probability of selling to an existing customer is up to 14 times higher than the probability of selling to a new customer.”

From conversations I have been having from marketers, my assessment is that a third of acquisition budgets are being spent, knowingly or unknowingly, on reacquisition. This is because the pool of available customers is limited. Outside of the loyal cohort, the lifetime of other customers with brands is perhaps no more than a couple years – which means half of them churn each year. And since they were valuable at one point of time, they are more likely to get retargeted for acquisition.

So, despite all the evidence to the contrary, marketers prioritise acquisition over reacquisition. This is the marketing’s big mystery. Why? I can think of 3 reasons:

  • New acquisition is what the top management wants to see, because that is what investors want to see. In a land grab market, marketers are measured by customer growth, not customer retention. Hence, the focus is on new acquisitions, irrespective of their profitability. Everyone else is doing it, and therefore how can a brand miss out?
  • Spending on new acquisitions is easy. Google-Facebook-Amazon have made it child’s play with their awesome analytics and targeting tools. External agencies are there to help if the in-house team cannot do it.
  • Retention success takes time. Customers have to be nurtured, relationships have to be cultivated, preferences have to be understood for personalisation to work. Not every brand has instant recall in the customer’s mind; hence the only way to bring them back to the website or app is via push messaging. And as we saw earlier, attention recession means fewer brand messages are being opened, leading to a break in the hotline between the customer and the brand.

Put it all together, and it becomes clear why acquisition is preferred over retention. Easy vs Hard. Flashy vs lowkey. Today vs tomorrow. Unless marketers look at the evidence and change their mindset, they are in a race where they all collectively lose to the tech giants. In a gold rush, it is the shovel sellers who make the profits.

Attention Messaging: Bridging Adtech, CPaaS and Martech (Part 3)

AM + PM

Attention Messaging combines two ideas: attention marketing (AM) and push messages (PM). Attention marketing is about capturing a user’s attention. Attention is upstream of actions and transactions. Push messages are the way to get attention. In the pre-digital world, attention was grabbed via arresting ads and amazing copywriting. They were all about generating mass interest and desire – be it a car, shampoo, cereal or vacation. Fulfilment was done in the physical world when we went out and purchased the advertised product. In the digital world, a new factor came into play – each of us had identifiers and thus could be tracked and targeted individually. Mass advertising was still possible, but the attractiveness of targeting by age, gender, location, interest and time created the world of adtech. What’s more, every action of ours could be recorded and stored forever creating a composite persona, thus leading to “data is the new oil” and “if you’re not paying for it, you become the product” memes.

Among our identifiers were addresses that allowed us to be digitally communicated. The physical mailbox was replicated in the digital world with inboxes tied to our email addresses and mobile numbers, or proxies based on them. This led to the rise of Gmail, SMS, push notifications and the social media streams. Most have a mix of personal and commercial messages. We favour the former over the latter. As the ease of pushing messages to us rose, spam and unsolicited messages skyrocketed. What did not change was our time. Our attention thus got fragmented, and we entered a new era of attention recession.

Brands push messages, but we choose to ignore, so brands push even more. Since the cost of sending messages is low, the RoI economics justify sending more and more. Email as a channel has an RoI of almost 40:1, so why should a brand not flood our inboxes! Of course, we can unsubscribe, but how many of us actually do?

It is in this context that we need “Attention Messaging”. I define it as push messages that reward attention. The word “reward” is a positive word – we all like to be rewarded when we have done something. Rewards create a feel-good and leave us wanting more. This is in contrast to “grabbing” our attention which can be done with click-bait headlines, but that doesn’t lead to a relationship. Fool me a couple of times and I respond by ignoring the messages forever. So, instead of thinking of a one-off click which can be self-defeating over time, Attention Messaging offers marketers a way to build long-term relationships – changing the recipient’s mindset from ‘delete’ to ‘delight.’

Attention Messaging is about pushing messages – thus letting the brand control when attention is sought. Brands can do messaging on their site and in the app also – personalised recommendation, nudges, pop-ups, and so on. I don’t see these as part of Attention Messaging – they are the sequel. Only after attention comes the action – which could entail a click to a website or app. But without the attention, there is no action.

Attention Messaging is thus about using push messages to get and reward attention, thus laying the foundation for a win-win relationship. It is about creating a habit of always opening and never ignoring brand messages. It is about creating a friendship, a relationship, a two-way engagement. It is a theme most marketers have not explored deeply – because it has been all too easy to ‘push’ money to Big Tech. Smart marketers need to make the shift by making attention as the new acquisition.

Attention Messaging: Bridging Adtech, CPaaS and Martech (Part 2)

Attention Recession

Let’s look at our lifecycle as a typical customer. We see an ad, or find a link in a search, or get a reference from our network about a new brand. We go to the website or app. It is not always that we will do a transaction in the first instance. In the event that we don’t, the brand will get some info for retargeting us via a cookie. This is the first place brands miss a trick by not persuading us to provide an email address to ensure they have a direct relationship to bring us back to their property in future.

If we do a transaction, then the brand gets some information about us. For digital products, we are asked to create a login and a first-party relationship is established. For physical products, we will be asked to provide much more personal info. All this assumes the transaction is happening at a brand’s own property. In the event that a transaction takes place via a marketplace, very little direct information is accessible to the brand – the intermediary has the info and the power over the relationship and future purchases. Even social media platforms like Facebook, Instagram and WhatsApp which allow for content subscriptions control what we see via their algorithms, further reducing the power brands have to make their voice heard.

The situation gets compounded by the huge array of choices customers have. As such, attention is short and temporary. Brands who have the digital identity of customers can start pushing messages to attract customers back. But in our inbox, every message looks just the same. We decide in a second or two whether to ignore or open. With many brands vying for attention, and spammers too having access to our inbox, the flood of incoming messages keeps increasing.

While the mailbox platforms like Gmail or Yahoo do track our opens and clicks (engagement), the inflow of messages keeps increasing. Gmail has created multiple folders to sort our incoming messages. For brands, this isn’t the ideal situation: Gmail’s algorithms are determining what sort of attention relationship the brand can have with the customer. Inbox communism (every brand message treated alike) leads to attention recession (almost every brand message ignored).

Across the three inboxes that dominate our digital lives, we as recipients have already made our choices. We open just 10% of emails (meaning we ignore 9 of every 10 incoming messages). We do almost the same with SMS – in fact, now that person-to-person messages have moved to WhatsApp and OTPs are auto-read by apps, we barely bother with SMSes. We block about half the push notifications from apps. Taken together, we probably ignore 80-90% of brand messages sent to us. And as we ignore brand messages, the primacy of that brand in our lives diminishes and the line of communications breaks. What is the brand’s response to this attention recession? Pay money to Google, Facebook and Amazon to win us back! And with every brand doing the same, marketing departments become collection agents for Big Tech.

What actions can marketers take to stop getting caught in this spend spiral? Brand messages today are focused on delivery rather than delight – which leads to our mindset of delete. Marketers need to think incentives and gamification to invert the open-ignore ratio. Attention Messaging is the way to make this happen.

Attention Messaging: Bridging Adtech, CPaaS and Martech (Part 1)

Marketing’s Missing Centre

In the previous series, I wrote about how marketing is getting disrupted and what it will take to simplify it. I ended with the recommendation: “Make attention the new acquisition, and rewards the new experience.” In this series, I will delve deeper into what I think of as marketing’s missing centre.

Digital marketers find themselves trapped between new customer acquisition and re-acquisition of those whom they lose. The supply of new customers is not infinite – after a time, there are diminishing returns in acquiring new customers whose spending potential is low. And yet, for the business to show growth, they need to keep new customers coming in. Where do they find such customers? From their own pool of lost or dormant customers! This leads to what I call the “doom loop” of spending: customers get acquired, some of them become inactive, they are then re-acquired, some among them become inactive again, and they are re-re-acquired.

Google, Facebook, and increasingly Amazon, have created huge advertising platforms for driving customer acquisition. In a world flush with investor capital, digital first businesses are channelling huge monies to this troika for customer acquisition. My anecdotal conversations suggest that more than half of the capital raised from VCs, PE and IPOs gets spent on revenue generation with 80-90% being spent on Google, Facebook and Amazon. Traditional businesses seeking to build digital extensions are also compelled to join this spending frenzy with their profits in the search for customers.

The marketing triangle’s three vertices are new customer acquisition and re-acquisition (adtech, where 90% of the budget is consumed), the transactional messages sent via communications platforms (CPaaS, or communications platform as a service), and martech platforms focused on improving customer engagement on their owned properties (websites and apps). The missing centre is the world of “Attention Messaging” – a cross between attention marketing and push messaging. This is the world marketers pay least attention to leading to businesses sacrificing a big chunk of revenues and profits.

There are only two ways that existing customers will come back to a brand property (website or app) for transactions: either the brand pull is very strong, or push messages have to have compelling content for customers to click through. Without mental availability of the brand and missing attention to incoming messages, customers are not coming back. These lost customers then have to get reacquired via ads on platforms where they are present – via Google, Facebook and Amazon.

Attention Messaging is the glue that connects adtech, CPaaS and martech together to build – it is the missing centre in marketing. Without doing Attention Marketing right, businesses have little hope of building persistent profitability. Just as customers ignore most marketing messages, marketers too have not focused on getting attention of customers. Whether the problem is attention deficit, attention recession or information overload, the solution is the same – Attention Messaging needs to be done right.

India Consumer Tech Numbers (Part 8)

Looking Ahead

India’s moment in the Internet world has finally arrived. Zomato’s IPO and its heady valuation is going to be the start of a flurry of listings in the coming months. Investment banks are racing to use estimates many years hence (one even went up to 2031) to justify the current stock prices. What the right valuation and price should be for Internet companies will be hotly debated topics. What’s clear is that the new-age companies, powered by tech, have plenty of headroom for growth. The key to sustaining investor expectations will be crafting a path to profitability. Spends on new customer acquisition can drive growth but only customer retention and maximising revenue from each of them will ensure sustained profits.

A word of caution about India’s Internet numbers was sounded recently by The Ken’s Nutgraf. It estimated India’s annual active Internet customers to be at 70 million, split thus: 10 million at the highest level (digital natives), 20 million occasional shoppers, and 40 million entry shoppers.

Of course, the companies getting listed and the VCs and PEs investing hundreds of millions weekly into India’s digital ecosystem have a different view. With hundreds of millions of future customers, young and eager to spend, a new world beckons. The disposable income of Indians is increasing with economic growth, the number of digital users is increasing, and the options and ease of digital spending is growing. Everything not digital is getting disrupted – from payments to banks, from education to health, from shopping to entertainment. A new future beckons, and investors bet on big winners. And there will be many. Along with B2B SaaS, India’s digital ecosystem offers the next trillion dollar opportunity.

The golden age of Indian entrepreneurs has begun. This is now irreversible. Investor funds by the hundreds of millions are creating unicorns aplenty. With acquisitions and IPOs, this nominal wealth is getting converted into real money. This will find its way to new entrepreneurs as startup capital. Many will fail, but that’s the nature of the game. The winners will be big and that drives dreams for everyone else. These entrepreneurs will help make a better India – solving problems created through the decades by India’s government with its licence-permit-quota-raj. Risk capital was always a challenge in India and that is now getting solved. As long as India’s government doesn’t mess it up (and they cannot make things better) and let the markets work, India’s slow steps to prosperity will start. The initial beneficiaries will be those at the top of the pyramid, but it will percolate down to all in the decade to come. As the startup and digital boom is showing, what Indians need is economic freedom. The only risk to this new future is someone in government wanting to help!

India Consumer Tech Numbers (Part 7)

Retail India

The big picture from Fino Payments Bank: “the private final consumption expenditure (PFCE) was 58% of GDP in financial year 2021 at ₹ 116 trillion and India’s retail spending on goods was at ~50% of its private consumption.”

Fino adds: India retail spending is projected to touch ₹ 91 trillion by financial year 2025, with smaller stores and organised retail to co-exist.

Nykaa offers a deep dive into the growth:

Organised retail in India, which accounted for 15% of the retail market in 2019 (4% up from the share in 2016), as per Nykaa.

The changing Indian is showcased in this chart from CarTrade:

The pandemic-fuelled growth in ecommerce is highlighted by MobiKwik:

The digital commerce opportunity in India, as highlighted by Patym:

Nykaa offers some interesting insights into India’s beauty and fashion markets:

Nazara highlights the gaming opportunity in India:

India Consumer Tech Numbers (Part 6)

Stock Market, Mobile Wallets, BNPL

An overview of stock market and mutual fund participation, as per Paytm:

In 2020, the mutual fund investor penetration in India was approximately 2% in Fiscal 2021 with the AUM to GDP ratio at approximately 16% as compared to approximately 145% for the United States, as per MobiKwik.

Mobile wallets data is offered by MobiKwik:

The rise of BNPL (buy now pay later), as suggested by MobiKwik:

The BNPL opportunity arises in part because of the low credit card penetration in India as MobiKwik’s data shows: