Published July 8-21, 2022
On a recent US vacation in June, two seemingly unrelated things came together – shopping and a book on strategy. Shopping – a voluntary exchange of money from consumers to buy something of greater value – is everywhere around us. Brands invite us with their products and innovations to transact in a win-win transaction. Shopping is something I see much more closely in the US because we (my wife Bhavana, son Abhishek and I) spend a lot of time in stores looking at all the new things to be bought. A vacation affords plenty of time for this. Shopping by consumers is what drives the global economy. We have needs and wants that companies aim to fulfil in a competitive marketplace.
Most of our time was spent in New York City. It is a city we have grown to like a lot – we are back for our annual vacations there every 2-3 years. The pandemic ensured there was a 4 year gap this time. We typically stay in the same place for 10-12 days – no packing and unpacking for multiple destinations. At best, there are day trips which bring us back to the city by night. My love for New York stems from the year I spent living there when studying at Columbia in my early 20s (1988-89). Even when I was working at White Plains, the city was just an hour away by train. Rarely does a US visit happen without a stopover in New York. (The Air India non-stop from Mumbai to Newark, NJ has made it even easier.)
New York’s grid layout, the subway system, the pace of life, the big city similarity with Mumbai, the diversity of people, the ability to get to places by just walking – there is something magical about the city. There are so many opportunities for everyone to spend money on! For a long time, it has been books for me – Strand and Barnes & Noble, both around Union Square. I still remember my first purchase I did with my first salary after I began working at NYNEX – a Sony shortwave radio to listen to BBC World Service for $230 from a 42nd street store.
New York also solves the Jain food constraint we have. A hotel room with a kitchenette combined with vegetarian Indian restaurants that serve food without onion and garlic are but a few minutes walk away from the midtown hotels we stay at – we rotate between Pongal, Kailash Parbat and Saravana Bhavan. This time, we discovered Ahimsa in Murray Hill. Vatan is usually for business dinners when I am visiting on my own. In the past, we have stayed at the Affinia properties (Dumont and Shelburne). This time, we were at Marriott Residence Inn (39th Street and 6th Avenue), near Bryant Park and close to Times Square. The 34th floor room afforded a wonderful view of the Empire State Building.
And so back to shopping and brands. Our usual places in New York are the stores in midtown (34th Street to 42nd Street), 5th Avenue, Broadway, Union Square and Soho. There is typically a day trip to the outlets in Woodbury Commons, and a visit to the superstores in New Jersey (Walmart, Target and the likes). Most of the world’s biggest brands have a physical presence in New York. Even as some shopping has moved online, the joy of walking around and discovering items cannot be replaced with a distant click.
So it was that I was once again in New York, with family, walking through stores, and wondering about brand-customer relationships.
We were in New York on vacation after a gap of four years. In 2018, my mind was still on the political situation in India, and what could be done to transform the nation. (It was in early 2019 that I ended my Nayi Disha efforts.) In the past couple years, I had spent a lot of time thinking and writing about marketing and brand-customer relationships. There were several ideas that I had expounded on: Velvet Rope Marketing, the Best-Rest-Test-Next customer framework, CLV (customer lifetime value) and BCG (Best Customer Genome), Email 2.0 and Loyalty 2.0, profit-centric marketing and most recently, extreme retention. A 12-day vacation with a significant time spent interacting with brands as a customer let me think more about the real-world applicability of these ideas.
The vacation also came against a backdrop of stock market turmoil – we were in a bear market. Inflation was rising to 40-year highs fueled by trillions of dollars in pandemic stimulus, leading to the Fed taking action belatedly by increasing interest rates after more than a decade of easy money. Another angle was the crypto market meltdown. The aggregate value of the currencies had fallen almost 70% from the $3 trillion high reached some months ago, leading to talk of a crypto winter.
There was talk of a slowdown and perhaps a recession in the air in the next 12-24 months. Companies had already started freezing hiring and some even resorting to layoffs. Prices were on the rise. Gas was at $5 a gallon. As I compared food prices at Indian restaurants, the $8-9 items were now at $13-16, a 50% jump in four years. Of course, none of the slowdown was visible in the actions of the tourists lining the streets of New York – shopping and spending!
I spent a day attending CommerceNext – a conference and expo which brought together retailers and technology vendors. (A colleague who was supposed to attend had taken ill, and so there was a free pass available. It was the last day of my vacation, and so I decided to spend it listening and learning.) The sessions were on how brands could adopt tech for acquisition and retention. A common theme many speakers mentioned was the rising cost of acquisition, and the disruption in customer data collection with the coming focus on privacy and elimination of third-party cookies. Another variable that brands had to contend with was supply chain disruptions. The glass was half-full or half-empty depending on whom you spoke to.
The one constant was the inexorable march of new technology. From full-stack martech solutions to innovations in messaging (SMS, conversational commerce) to better targeting for improved ROAS (return on ad spend), companies offered brands solutions to make their business better and more efficient. The omnichannel world is at hand. Just like a hybrid workplace, customer habits are also merging the offline and online.
As I absorbed our own shopping experiences with what I was listening to in the sessions, the flight back to Mumbai saw me immersed in reading a book on strategy that I had picked up in Mumbai just before I left for the vacation. And as it happens so often, the contiguous hours on the nonstop Air India flight from Newark to Mumbai helped connect some of the dots for a better insight into brand-customer relationships.
Brands and Customers
I am not much of a shopper – except for books. On this New York vacation, I decided to join Bhavana and Abhishek with the occasional purchase to upgrade the wardrobe. A Haggar pant at Target, a Perry Ellis belt at Macy’s, a T-shirt (with a pocket) at Gap, ASIC shoes at Kohl’s. I also bought a few books (Strand, Barnes & Noble and Kinokuniya), and Kashi Simply Raisin cereals at Whole Foods. The cereals need an explanation – not many would import breakfast cereal from the US!
I fell in love with cereals when I came to New York as a student in the late 80s. I tried various offerings from Kellogg’s (who cannot love Frosted Flakes) and the one I liked the most was Raisin Wheats. So, whenever I went to the US after my permanent return to India, I would buy a few packets. Many years later, my friend, Atanu, introduced me to Trader Joe’s, and their cereals – especially, the Vanilla Almond Clusters. My breakfast now had choices, including Raisin Bran and Mini-Wheats (but without the raisins). Then came two disruptions: Kellogg’s discontinued the Raising Wheats and my sister (a doc) seeing my voracious cereal consumption limited it to just once a week. This rationing meant I had to carefully choose my cereals! I standardised on Trader Joe’s offerings.
On this trip, walking the aisles of Whole Foods, I came across Simply Raisin from Kashi. It had the right imagery on the box and I was delighted. I immediately bought a box to see if it was the real thing. Almost. I missed a bit of the sweetness that Kellogg’s lavished on their Raisin Wheats, but then this is the world for the health-conscious. I brought back three packets with me to mix-and-match with the other cereals I already have in stock.
I also saw Bhavana and Abhishek shop. Woodbury Commons had great deals – Calvin Klein, Aeropostale, Gap, ASIC and more. In New York City, Macy’s, Uniqlo, Nike, and some other stores around 34th Street. And beyond the shopping was the entertainment: Hamilton on Broadway, and two movies at AMC Theatres (Top Gun: Maverick and Lightyear). Target and Kohl’s in New Jersey were also a hit, as were DSW and Burlington’s at Union Square.
In some of the places, when asked for an email address, they conveniently put in mine, and so now I get wonderful offers from many brands that I will probably not be buying from for many years!
A couple of years ago, I would have immediately deleted and unsubscribed from all these emails. Now, given my interest in new marketing ideas, I actually scan these emails. (Netcore sends out 18 billion emails a month for brands globally.) The question that I have been thinking for some time has been on how to get open rates in marketing emails to increase from 8-10%. The low open rates mean that 90% emails are being ignored, and this is the opportunity for product innovation. This was the genesis for the Email 2.0 ideas.
The trip’s memories, the shopping experiences, Netcore’s future innovations – all were mixing in my subconscious as I started reading Richard Rumelt’s “The Crux: How Leaders Become Strategists.”
Richard Rumelt – 1
Richard Rumelt in his own words: “I studied electrical engineering in college, then worked as a spacecraft designer at the Jet Propulsion Labs. I studied Bayesian statistical decision theory at the Harvard Business School, switching to study strategy after two years. Then spent three years in Iran, teaching at a new Harvard-sponsored business school. Then back to HBS, then to UCLA to teach strategy for forty years, with three years off to teach at INSEAD (France).”
The Crux is his second book on strategy. The first book, “Good Strategy/Bad Strategy: The difference and why it matters” was published in 2011. He has spent a lifetime thinking, writing, and advising on strategy. As he writes: “What fascinates about strategy is its centrality to the success or failure of individuals, enterprises, and even nations. Make the right move at the right time and a cascade of positive outcomes may be unleashed. Fail to grasp the nettle of solving the crux problem and recovery may be long delayed or even impossible.
Much of what I have learned about strategy has come from working with executives. Whether at the DoD, a small start-up, or a giant enterprise like Shell, the best have a knack for teasing out the key elements of a situation and then focusing energy and resources on resolving those problems or grasping those opportunities. I have also seen too many who mistake vague generalities about ambitions and purposes for strategy or who treat strategy as an exercise in setting financial goals.”
Here are some quotes from Rumelt in a 2007 interview with McKinsey Quarterly:
Most corporate strategic plans have little to do with strategy. They are simply three-year or five-year rolling resource budgets and some sort of market share projection. Calling this strategic planning creates false expectations that the exercise will somehow produce a coherent strategy.
Look, plans are essential management tools. Take, for example, a rapidly growing retail chain, which needs a plan to guide property acquisition, construction, training, et cetera. This plan coordinates the deployment of resources—but it’s not strategy. These resource budgets simply cannot deliver what senior managers want: a pathway to substantially higher performance.
There are only two ways to get that. One, you can invent your way to success. Unfortunately, you can’t count on that. The second path is to exploit some change in your environment—in technology, consumer tastes, laws, resource prices, or competitive behavior—and ride that change with quickness and skill. This second path is how most successful companies make it. Changes, however, don’t come along in nice annual packages, so the need for strategy work is episodic, not necessarily annual.
… Strategic thinking helps us take positions in a world that is confusing and uncertain. You can’t get rid of ambiguity and uncertainty—they are the flip side of opportunity. If you want certainty and clarity, wait for others to take a position and see how they do. Then you’ll know what works, but it will be too late to profit from the knowledge.
… A strategic insight is essentially the solution to a puzzle. Puzzles are solved by individuals or very tight-knit teams… If you ask a group to put aside the bullet points and just write three coherent paragraphs about what is changing in an industry and why, the difference is incredible. Having to link your thoughts, giving reasons and qualifications, makes you a more careful thinker—and a better communicator.
Richard Rumelt – 2
This is from a column by Rumelt in McKinsey Quarterly in 2011:
A strategy is a way through a difficulty, an approach to overcoming an obstacle, a response to a challenge. If the challenge is not defined, it is difficult or impossible to assess the quality of the strategy. And, if you cannot assess that, you cannot reject a bad strategy or improve a good one.
…[I]f you fail to identify and analyze the obstacles, you don’t have a strategy. Instead, you have a stretch goal or a budget or a list of things you wish would happen.
… Good strategy, in contrast, works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes. It also builds a bridge between the critical challenge at the heart of the strategy and action—between desire and immediate objectives that lie within grasp. Thus, the objectives that a good strategy sets stand a good chance of being accomplished, given existing resources and competencies.
… The four key hallmarks [of bad strategy are]: the failure to face the challenge, mistaking goals for strategy, bad strategic objectives, and fluff … If you fail to identify and analyze the obstacles, you don’t have a strategy. Instead, you have a stretch goal or a budget or a list of things you wish would happen … The job of the leader—the strategist—is also to create the conditions that will make the push effective, to have a strategy worthy of the effort called upon … A long list of things to do, often mislabeled as strategies or objectives, is not a strategy. It is just a list of things to do … Fluff is a restatement of the obvious, combined with a generous sprinkling of buzzwords that masquerade as expertise.
… Despite the roar of voices equating strategy with ambition, leadership, vision, or planning, strategy is none of these. Rather, it is coherent action backed by an argument. And the core of the strategist’s work is always the same: discover the crucial factors in a situation and design a way to coordinate and focus actions to deal with them.
He then explains the basic underlying structure of good strategy:
A diagnosis: an explanation of the nature of the challenge. A good diagnosis simplifies the often overwhelming complexity of reality by identifying certain aspects of the situation as being the critical ones.
A guiding policy: an overall approach chosen to cope with or overcome the obstacles identified in the diagnosis.
Coherent actions: steps that are coordinated with one another to support the accomplishment of the guiding policy.
Just as Jim Collins has imparted wisdom about building enduring great companies, Richard Rumelt has done the same for strategy in his two books.
The Crux – 1
Richard Rumelt’s “The Crux” has a core idea that he builds on: the leader’s most important responsibility is to fund the crux of the challenge and solve it. In that sense, strategy is not about wish lists or numerical targets, but about problem-solving – pinpointing the most important issue and then crafting a solution, much as a mountaineer finds and gets past the “crux” to climb higher. (The book’s introduction has a fascinating explanation about the “crux”.)
Rumelt writes in the book’s introduction:
… [T]he term crux … denote[s] the outcome of a three-part strategic skill. The first part is judgment about which issues are truly important and which are secondary. The second part is judgment about the difficulties of dealing with these issues. And the third part is the ability to focus, to avoid spreading resources too thinly, not trying to do everything at once. The combination of these three parts lead to a focus on the crux—the most important part of a set of challenges that is addressable, having a good chance of being solved by coherent action.
As with climbers, every person, every company, every agency faces both opportunities and obstacles to their progress. Yes, we all need motivation, ambition, and strength. But, by themselves, they are not enough. To deal with a set of challenges, there is power in locating your crux—where you can gain the most by designing, discovering, or finding a way to move through and past it.
Rumelt adds: “A strategy is a mixture of policy and action designed to surmount a high-stakes challenge. It is not a goal or wished-for end state. It is a form of problem solving, and you cannot solve a problem you do not understand or comprehend. Thus, challenge-based strategy begins with a broad description of the challenges—problems and opportunities—facing the organization. They may be competitive, legal, due to changing social norms, or issues with the organization itself. As understanding deepens, the strategist seeks the crux—the one challenge that both is critical and appears to be solvable. This narrowing down is the source of much of the strategist’s power, as focus remains the cornerstone of strategy … [The] process of diagnosing the challenge and then creating a response is the best theory we have for strategy creation. You analyze the challenge and your resources, and you try to think of ways to surmount the challenge and realize some of your ambitions. A myriad of tools exist to help you analyze the challenge. And there are ways of stimulating and helping you think of a response—analogies to other situations, altering the point of view, doing again what worked last time, and so on. But these are only stimuli. You don’t “pick” a strategy; you create it. Then you do your very best to choose among the alternatives you have created. Finally, you need to translate the idea into specific and coherent actions.”
The Crux – 2
Here are more quotes from Rumelt about the book and strategy, along with reviews about the book:
Rumelt in an interview with Martin Reeves: “The crux is an idea that comes from climbing, as you know. It means the hardest pitch or the hardest move on a climb. And the central message of the book is about focusing your strategic thinking on the hardest problem you face that you can actually do something about. And so that’s where the crux concept intersects the climbing idea … Good strategy, in the end, is a design created by judgment. How do you create a good song, or how do you create a great building or great painting? Not easy to explain. Strategy is a bit easier than that. But it’s in the same area of design-type problems. My intuition and my understanding of what works in strategy and what doesn’t work is that it’s better to start by looking at challenges … [T]here may be several addressable strategic challenges. The crux is narrowing it down to something special. I believe, although some may disagree with me, that the most fundamental concept in strategy is concentration and focus. The oldest strategic teachings are: you focus your strength on where your opponent is weakest, or where the market opportunity is the greatest. And that focus, that concentration, is the crux in some sense. This has to be part of a good strategy. You can’t try to do everything at once. You’ll fail.”
LeadingBlog: “Getting to the crux of the issue is harder than one might think. We are too often stuck in our assumptions. Often it requires a reframing, a new analogy, or a reanalysis of data in ways that we have not previously considered … Rumelt walks us through a crux defining, strategy creating process, which he calls the Strategy Foundry. It is an intense challenge-based discussion to get to the crux that will form the basis of the strategy. It is not goal setting or budgeting. [Quoting Rumelt] “By starting with the challenge, the group becomes responsible for designing a response rather than choosing among plans already advanced by members or others, or just filling in the blanks for a longer-term budget.””
Roger Trapp in Forbes: “[U]sing a variety of examples, ranging from Elon Musk’s SpaceX, through Google and Salesforce to Marvel and Netflix, [Rumelt] suggests that the key to setting an effective strategy is to identify a problem and come up with a way of solving it. Saying things like “we are always increasing sales and cutting costs” or “our company is going to beat all the other paint companies because we are customer focused” do not wash with him. “To have someone believe you and trust in your strategy, there has to be a logic and argument, and some evidence, as to how you are dealing with the challenges you face,” he writes.” … It is a wide-ranging book that takes in failings of military strategy in various conflicts as well as a host of corporate successes and setbacks. Although there are practical elements, including a section at the end designed to show how a group of employees might come together to help create a strategy, Rumelt really seems set on challenging assumptions about strategy.”
The Crux – 3
Gartner book review: “Rumelt defines true strategy as the mix of policy and action designed to overcome a significant challenge. Rumelt calls these significant challenges “Cruxes”. A crux is further defined as a challenge that is both critical and appears to be solvable. It is a very simple, but immensely powerful way of thinking – particularly compared to the current goals first. Using this view Rumelt effectively advocates that strategy is a special form of problem solving with the ability to deal with Gnarly problems. Gnarly problems or situations … may have no clear definition of the problem itself, it tough because the issue is not self-evident nor self-defined. This means that gnarly problems are either overlooked or avoided in favor of simplistic goals, because you have to work at them and face the truth … [They] do not have a single or simple goal, rather they often require addressing a number of potentially competing ambitions. Again, they are hard to solve and cannot be wished away with a goal of mission statement.”
Rumelt in McKinsey Quarterly: “A gnarly challenge is not solved with analysis or the application of preset frameworks. A coherent response arises only through a process of diagnosing the nature of the challenges, framing, reframing, chunking down the scope of attention, referring to analogies, and developing insight. The result is a design, or creation, embodying purpose. I call it a creation because it is often not obvious at the start, the product of insight and judgment rather than an algorithm. Implicit in the concept of insightful design is that knowledge, though required, is not, by itself, sufficient. The way through a gnarly challenge may not seem clear at first but working to grasp the structure of the challenge is often the best way of seeing a path through. As a number of problem-solving researchers have found, “at the least, problems must be deeply analyzed before an insight solution can be achieved … The skilled strategist recognizes the heart of a challenge as the thing blocking an easy solution. Attention is drawn to it because it hints at leverage—that if we could only just move the keystone, the whole wall can be breached.”
Rumelt added about how Elon Musk identified and solved for the crux in the early days of SpaceX:
As an example, the entrepreneur Elon Musk is passionate about populating Mars. He imagined promoting this idea by sending a small payload there. In 2001, Musk had tried to buy an old rocket but was unhappy with the style of bargaining and how the price tripled during the negotiations. He began to look at the challenge of cost—why did it cost so much to put payloads into orbit? He was quick to see that the high cost was because rockets were not reusable. There was no cheap way to return to Earth through the furnace-heat of blasting back through the atmosphere at 18,000 miles per hour. Was there a way around this problem, the Achilles heel of the old space shuttle? Then Musk had an insight: fuel was a lot cheaper than vehicles. It might make sense to avoid the huge complexity of super-high-heat reentry by carrying more fuel and using it to slow the rocket’s return to Earth. Like many old science fiction stories, Musk imagined a rocket that would turn around and slow down by firing its engine, leading to a soft landing. No violent reentry furnace would char the outside of the vehicle. The process could be automated, as well—no need for a human pilot. The key would be engineering a rocket engine that could reliably start and stop and accurately throttle and direct its power. With this insight, soft reentry became the crux challenge for SpaceX.
As I read the initial chapters of the book on the flight from Newark to Mumbai at the end of my vacation, the question that came to me was: What is the crux of the brand-customer relationship? In other words, what is the hardest (“gnarly”) problem that marketers need to solve to help them in their journey of maximising customer loyalty, revenues and eventually, profitability?
Here is a gist of what I heard in the various sessions on the first day at the CommerceNext event in New York on June 21. (I could not attend the second day since I had my flight back to Mumbai.)
- Retail is overstored; ecommerce is growing
- Same day delivery is expensive
- Customer acquisition is difficult and expensive, and getting harder
- It is hard to be a retailer; more bankruptcies are coming
- Delivery companies are being hit with wage inflation
- Many sectors are over-inventoried
- US retail environment is very competitive
- Fashion accounts for 4% of global carbon emissions
- Brands go out of business for three reasons: lack of product-market fit, cannot operationally scale, and run out of growth capital
- Customer touchpoints keep increasing
- Inventory management is a big challenge; and supply chain disruptions are hurting
- Brands need future hunters who can look a few years ahead
- Brands need to think servicing, not transacting; think experiences, not transactions
- UGC and Community creation are becoming very important
- New investment areas: omnichannel, search, personalisation, loyalty
- Need to think full-funnel marketing, not distinctive brand and performance marketing
- Story-telling is important to differentiate
- Tiktok is the hot new thing; that’s where the attention is; but it offers limited measurement
- Measurement (attribution) needs to be done right
- Need to focus on profits – now! Also need to optimise cashflows.
- Make marketing spend as a profit generator
- Brands must ask “how did you hear about us” for new customers on the order confirmation page
- Think of media and creative as investments for the future
- Identify new pockets of traffic beyond Google and Facebook
- Conversational commerce via 2-way SMS
- Think “in-the-moment” interactions
- Customers willing to share personal data in return for some value exchange
- Offer multiple ways to earn loyalty points beyond transactions
- Personalisation needs customer data and product data; need for a unified data model
- It costs 5-25X more to get a new customer than to keep an existing customer
- Consider doing testing on the copy (words/images) used on the website/app; small visual cues can have a big impact in the customer journey
- Online chat can be very helpful
- New trends to consider: metaverse, NFTs
- Use AI and data for decisions because humans don’t scale
- The future is about mobile experiences
In the presentations I heard, there is a mix of what modern marketers think: the challenges they face, the opportunities that they are, managing the short-term and the long-term, thinking new acquisition and retention marketing, piloting new technologies, and worrying about the changing macro environment. At the heart of everything: the evolving brand-customer relationship.
I have been thinking and writing about brand-customer relationships for the past couple of years. My key theses have been along two tracks. First, that a small percentage of customers deliver a large percentage of revenues and an even greater quantum of profits, and brands need to create a separate internal business unit to deliver exceptional experiences to these customers. This is an idea I have termed as “Velvet Rope Marketing” and more recently “Extreme Retention”. Second, brands are guilty of “Adwaste” – half of their marketing spends are being wasted because of reacquisition and wrong acquisition. A more balanced approach is needed between adtech spending for new acquisition and martech spending to build deeper engagement with existing customers – what I have termed as “profit-centric marketing”. Martech 2.0 is about focusing on the 4 Ps (pipe, partitioning, properties, prospecting) and 5 Rs (retention, repetition, referrals, reactivation, replenishment). This is also where the ideas of Email 2.0 (Hooked Score, AMP, Ems, Atomic Rewards, Progency) and Loyalty 2.0 (tokens for attention and data) come into play.
This is a long list of ToDos for a modern marketer who is caught between the demand for continuing growth in revenue at all costs (which can be brought in easily via spending on Google, Meta, Amazon and increasingly Tiktok) and the need to deepen relationships with existing customers (which needs CDPs, marketing automation, personalisation, analytics, omnichannel engagement, and more). The latter is more effective but takes time, while the former delivers results instantly. The conundrum is that the cost of new acquisition (CAC) has been rising rapidly – in many cases, at 40-50% year-on-year. This is sucking away marketing dollars into adtech when the right thing would be to grow the engagement with existing customers. With a slowdown and possible recession likely in the next 12-24 months, belt tightening has begun. There are only two paths to profitability in such a scenario – cut employee costs or cut marketing costs. This is the difficult choice for CEOs and CMOs.
It was against this backdrop that Rumelt’s new book made me ask the question: What is the crux of the brand-customer relationship? Among all the challenges faced by a modern marketer, what is the gnarly problem to tackle which can unlock profitable growth? The candidates were many: optimise return on ad spending (ROAS) on Big Tech platforms for new customer acquisition, offer bigger discounts to drive more revenues from existing customers, to invest in more martech solutions for omnichannel engagement and personalisation, and so on. In fact, there are many profit killers [Parts 3 and 4 in my Extreme Retention = Profit-centric Marketing essay] in a business which can be addressed and converted into profit creators. But there had to be that one thing which could be the gamechanger – the crux faced by marketers, a challenge that was critical and solvable. This is what I was thinking about while immersed in Rumelt’s book on the flight back from Newark to Mumbai.
I realised that the challenge had to be linked to the retention and engagement side of the relationship, rather than the acquisition side. Marketers had little or no control on the spends for new acquisition – there was a bidding process for attracting digital customers via the Big Tech platforms. While they could search for more esoteric keywords or sites, other brands could also do the same. It was almost as if a driver discovered a new road to get to a destination faster in traffic, and before one realises it, even that road gets congested as Google Maps re-routes others on that path.
The next possible approach could be to make it attractive for first-time app users or website visitors to transact. Brands already offered discounts for this. When Bhavana ordered shoes from ASIC’s website, they offered her a 10% discount on her first order if she signed up with her email address to receive regular updates. Brands now even offer small incentives to collect email addresses and mobile numbers in-store for new buyers. The challenge remains in converting the one-time buyer into a repeat customer. A friend I spoke to said that 80% of first-time buyers do not return for a transaction – meaning only one in five make a second purchase. Driving a second transaction could be a good candidate for a gnarly challenge marketers needed to address.
On the retention side, the problem could be to improve the omnichannel customer experience. This begins with search on the brand’s properties. As we have seen, most search results suck. The item may be in the catalog but it doesn’t show up when a prospect is searching. This could be a gnarly problem to fix. Then come the actual recommendations – how personalised and relevant they are. Another gnarly challenge. For existing customers, what is the next best product to pitch could also be a problem worth addressing.
I started thinking about some of my own experiences as a buyer. When I wanted to book a hotel room for the vacation, I would have liked to see a floor plan rather than just a list of amenities and a few pictures. Most hotel sites are still stuck in the early 2000s when providing detailed info about the rooms – which becomes especially important for long stays. I had bought two pants from Target and realised that one of them was a bit too tight – there was a “classic fit” (which was good) and a “straight fit” (which was not). So, I decided to return the latter. When I went to the store (a different one from where I had bought), could the cashier engage me with my reason for the return and the possibility of sending me the right fitting pants rather than just refunding the cash with their no-questions-asked returns policy? Could Gap have asked me for my email address and then offered to send me more suggestions for T-shirts with pockets? Could every book that I inquired about and which wasn’t in the store at Strand and Barnes & Noble triggered an email with an offer to deliver it in two days from their warehouse? Could the Hamilton play company offer me some cross-sells after the play – the book by Ron Chernow, the sound-track with the songs, and perhaps other memorabilia? In fact, since I booked via Ticketmaster, do they even know me?
As I was thinking about all these experiences and imagined wish lists of what marketers could have done differently to get more from me, I got that insight – the Aha moment – about the one gnarly problem which if solved could help address many others and unlock a better customer relationship.
The One Problem
I realised that the real problem is that most marketers have no way to engage with me after I have shown interest or done the first purchase or even a few transactions. While the brand’s properties are there and the focus of their martech investments, what they lack is a definitive approach to getting me back to their site. The one problem, the gnarly challenge, the crux that had to be solved was that brands did not have a “hotline” to me as a customer.
Sure, they had my email address or phone number – so they could mail, SMS or WhatsApp me. In some cases, I also had the app installed, so technically they could send me notifications (as long as I did not block them). But the reality is that most of their messages do not get to me. Many emails end up in the Gmail promotions folder rather than the primary Inbox. SMSes – at least in India – are only OTPs and spam. More than half of the consumers block most push notifications. WhatsApp is growing as a business channel but is no longer free; in India it can cost 25-50 times more than an email and 4 times that of an SMS.
I started thinking more about the “hotline” idea. I remember in the early 1990s using the word a lot. We had two offices in South Mumbai. (This was in the pre-mobile era.) Rather than dial the number each time, we had set up a “hotline” – a direct communication link between the two offices. When I picked up the phone at one end, it would automatically ring at the other end. No dialling needed! It was a time-saver.
What brands lacked was a “hotline” to their customers. When a brand spoke, a customer would respond. And of course, it had to work the other way also. The hotline was the prerequisite to bringing customers to the brand’s properties. In my previous writings, I have used the word “pipe” to describe this. But the word “hotline” is much more appropriate. A push pipe is important for sending messages – like a regular phone line is for making calls. A hotline is special – because it is always answered.
The hotline was the crux that brands had to solve for. Get the hotline right, and you have a 2-way relationship going with the customer. They could begin with their Best customers. And Best customers could in turn respond by ensuring they did not ignore the brand’s communications. It would be a win-win for both.
More than a shiny, new feature of the website or app, what brands need to realise is that it is the hotline that is the crux for their customer relationships. If they can shift the mindset from “delete” to “delight” in their messaging, it would solve every other problem for them.
If there was a Hotline
If Target had a hotline to me, they could have engaged me and offered a replacement “Classic Fit” pant instead of simply refunding the money. They would have realised that of the two pants I bought, I had only returned one.
If Pongal (an Indian vegetarian restaurant in New York) had a hotline to me, they would have recognised me as a visitor who came every third day – and offered me an incentive to come every second day, and thus grow their wallet share from me by 50%.
If Gap had a hotline to me, they would have recognised me as having bought a shirt from them a few years ago and offered me more of the same when I entered their store.
If Barnes & Noble had a hotline to me, they would have realised that my email ID had been incorrectly entered and would have corrected it the next time I did a purchase. And then linked my in-store book requests to offering to send me the book within 24 hours if it wasn’t available in the store.
If Macy’s had a hotline to me, they would have offered me add-ons to the Perry Ellis belt I bought – rather than telling me that their rewards program was only open to New York residents (not realising that faking a NY address is so easy.)
If Aeropostale had a hotline to me, they would have wondered why I returned a couple of clothes within an hour of purchase. (Answer: Abhishek found better and cheaper in a store next door.)
If ASIC had a hotline to me, they could have asked me how many members are in my family and which shoes they would be interested in. In this case, ASIC doesn’t even know me since I bought the shoes from Kohl’s.
If book publishers had a hotline to me, they could cross-sell me other books in a similar genre. Again, they don’t even know I have bought a book. As an example, I have recommended “The Crux” to a dozen friends in the past week, and they have no clue.
If Air India had a hotline to me (rather than the contact info of my assistant), they would have asked me how my flight was and what could be done better in the future. (I would have told them maybe they need to do an upgrade to their interiors in the non-stop US flights which have been unchanged after 15 years!)
If Amazon had a hotline to me, they would have offered me free Amazon Prime while in the US – rather than blocking my account (which was using a different email address – the only way to get 30-day free Prime) and wasting an hour of my time in trying to get it unblocked.
If Nike had a hotline to Bhavana, she would have told them how silly it was for the sales executive to refuse to offer laces so Abhishek could try on the shoes and walk around to get a proper feel. (She eventually got the laces by escalating.)
And so it goes on. Billions of customer engagements daily. And so many missed opportunities for cross-sell, upsell or future-sell. It is little wonder that many brands lose out to faceless marketplaces – they not only lose margins, but also the customer relationship. It is the hotline which is indeed the crux – the one thing marketers should look at solving for, at least with their Best customers if not for everyone.
Making it Happen
Building the hotline with existing customers is the only way brands can get their attention and solve for data. It is one of two ways to bring customers back to the properties (app and website) – the second method being big spends on branding. The hotline is the trick marketers have missed in the two other obsessions – new customer acquisition and adding bells and whistles to the app and website. In hindsight, the idea of a hotline seems so obvious and yet it is ignored. Marketers seem to have resigned themselves to 80-90% of their emails and SMSes being ignored, and most of their push notifications being undelivered. This is where the opportunity for smart marketers. The coming downturn and push for self-sustainability and profitability offers an inflection point to change the foundation in the brand-customer relationship.
The good news is that there are many innovations which can support a push by marketers to build the hotline with their customers. Email 2.0 offers interactivity in emails via AMP, daily habit-forming content via Ems, micro-incentives in the form of Mu tokens as Atomic Rewards, a new metric to track engagement intensity via Hooked Score, and a new type of product-led agency (Progency) to do it all. Email 2.0 is the best way to build the hotline – better than 2-way SMS or even WhatsApp. Everything that can be done in other push channels can be done via Email 2.0 – and at a fraction of the price. The good news is that marketers are already sending out emails daily to their customers. What needs to change is the underlying tech and the mindset.
The combination of AMP and Atomic Rewards offers a very powerful combo to build the hotline. AMP offers an “All-in-Email” approach – Shop in Email, Search in Email, Play in Email, Browse in Email, Earn in Email, Chat in Email, and so on. There is no need to leave the email at all – no need for click-throughs and landing pages! Atomic Rewards offers the foundation for Loyalty 2.0 – incentives for marketers to nudge customer actions. Mu tokens can be used to get attention and zero-party data; they can also be used to drive referrals and reviews because every customer also has a network and voice. Think of Mu tokens as the non-monetary equivalent of loyalty points which are linked to money and transactions.
A hotline also means a greater frequency of communication. Ems powered by informational microcontent are a great way to keep the relationship alive. Every email doesn’t have to be just an offer to buy. Stories can drive the emotional connect and help build community. What brands are doing on the social channels can be replicated within Ems.
Over time, the same underlying themes of Email 2.0 (interactivity, in-place actions, incentives, insights) can be replicated on the other push channels – making for a true omnichannel hotline relationship with customers. Every interaction is an opportunity to collect volunteered data that enriches the customer profile – and helps increase personalisation on not just the push channels but also the brand properties. This will become even more important in a world where privacy has taken centre stage and the efficacy of using cookies is diminishing.
So, the message to marketers: make the Hotline via Email 2.0 as the crux for customer relationships. It will not only improve customer experience but also drive profitable growth. In an uncertain tomorrow, the Email 2.0 Hotline offers comfort and certainty for brands and their (Best) customers.