Thinks 327

McKinsey on food delivery: “Even as the food-delivery ecosystem continues to expand, its economic structure is still evolving. Considerations such as brand, real estate, operating efficiency, breadth of offerings, and changing consumer habits will determine which stakeholders win or lose as the industry develops. Potential regulatory constraints, including possible changes to how drivers are compensated, will figure into the reshuffling. And while the industry has experienced explosive growth during the global pandemic, delivery platforms, with few exceptions, have remained unprofitable. As DoorDash chief operating officer Christopher Payne told the Wall Street Journal recently, “This is a cost-intensive business that is low-margin and scale driven.”

Ruchir Sharma: “Merkel has defied the normal evolution of power, which is that leaders grow stale with years in office and leave on a low. Those who endure tend to grow arrogant or complacent over time, and get caught in scandal or are overtaken by events. Most lose momentum and support, usually well before their first decade is up…The consistent knock against Merkel is that she was a bore from the start, a timid reformer who left a long to-do list, from energy supply to digital competitiveness. But sins of policy omission should not overshadow the human tendencies she rose above: pride, greed, sloth. Power corrupts and time erodes but neither had much effect on Merkel. Go back more than a century and it’s rare to find any major leader who ruled so long but went out on such a high.”

Paul Milgrom (2020 Nobel Prize Winner in Economics): “We think water rights are going to be important. I don’t have a design in mind for that yet, because the legal rights are a big part of the problem, determining exactly what rights farmers have to their water, to the groundwater, to the surface water, how surface water recharges the ground. If you extract too much groundwater and cause the structure to collapse, then you can destroy it permanently, and then it’ll never recharge. How do you create markets that are viable, and so that we have sustainable water use? Just like we had to change rights in radio spectrum to make it work, we’ll probably have to make some adaptation of rights in the water markets, too. Just like in radio spectrum, when we come up with the design, it’s going to need to have good bones because it will be changed, because there’ll be political interests that will force us to make changes.”

Martech’s Magicians: Microns, Micronbox and µniverse (Part 6)

The theory of “Jobs To Be Done” comes from Clay Christensen. He wrote in Harvard Business Review:

After decades of watching great companies fail, we’ve come to the conclusion that the focus on correlation—and on knowing more and more about customers—is taking firms in the wrong direction. What they really need to home in on is the progress that the customer is trying to make in a given circumstance—what the customer hopes to accomplish. This is what we’ve come to call the job to be done.

We all have many jobs to be done in our lives. Some are little (pass the time while waiting in line); some are big (find a more fulfilling career). Some surface unpredictably (dress for an out-of-town business meeting after the airline lost my suitcase); some regularly (pack a healthful lunch for my daughter to take to school). When we buy a product, we essentially “hire” it to help us do a job. If it does the job well, the next time we’re confronted with the same job, we tend to hire that product again. And if it does a crummy job, we “fire” it and look for an alternative. (We’re using the word “product” here as shorthand for any solution that companies can sell; of course, the full set of “candidates” we consider hiring can often go well beyond just offerings from companies.)

… [D]isruption theory doesn’t tell you how to create products and services that customers want to buy. Jobs-to-be-done theory does. It transforms our understanding of customer choice in a way that no amount of data ever could, because it gets at the causal driver behind a purchase.

Alan Klement defines it thus: “A Job to be Done is the process a consumer goes through whenever she aims to change her existing life-situation into a preferred one, but cannot because there are constraints that stop her.” He writes about the thinking behind JTBD:

Ten thousand years ago, we were hunter gatherers and used our feet to roam the earth. Today, we have fast food restaurants and autonomous cars. Why did we change? Because we have an intrinsic desire to evolve ourselves. We do this by remaking and adapting to the world around us.

The desire to evolve is in our DNA. It’s what makes us human. Moreover, we do this evolution with purpose. We purposefully use the arts to evolve ourselves emotionally; the sciences to evolve ourselves intellectually; and engineering to evolve how we interact with the world. Purposeful evolution is why we are different from animals:

  • A bear trying to catch food by the river may think, I wish fishing could be made better, faster, or easier.
  • But only a human will think, Fishing is no good. If I could transform that lagoon over there into a place where I can breed fish, then I’d never have to go fishing again.

The bear thinks only about what is. Today, it may come up with a better, faster, or easier way to fish. But tomorrow, it is still a bear that fishes. The human, on the other hand, thinks about what ought to be. Today, she fishes, but tomorrow that can change. If she could figure out a way to no longer fish, then she can focus on improving herself in other ways — like building a hut so she could move out of that dank cave.

The bear does not think about evolving itself and its world. It never has a Job to be Done. The human, on the other hand, does think about evolving herself. And every time she begins the process of evolving herself, she has a Job to be Done.

JTBD is an idea that is central to the brand-customer relationship and the coming martech era. Marketers have focused too much on either acquiring new customers or pushing them to completing the transaction. They need to look beyond this world of adtech and Martech 1.0.

Thinks 326

WSJ on the metaverse: “[We will soon have] a virtual world where our digital avatars and those of people in our communities and around the globe come together to work, shop, attend classes, pursue hobbies, enjoy social gatherings and more. Immersive videogames and virtual concerts have given us a taste of this world. But visionaries say the metaverse, as this world has been dubbed, will be far more engaging and robust, not only mirroring the real world in all its three-dimensional complexity but also extending it to allow us to be and do what previously could only be imagined. Walk on the moon in your pajamas? Watch a baseball game from the pitcher’s mound? Frolic in a field of unicorns—or be a unicorn yourself? In the metaverse, tech visionaries say, just about anything will be possible.”

Ninan: “The government’s programmes should be expected to generate some momentum, but the macro-economic numbers are not encouraging. Total investment in the economy in 2021 is estimated at 29.7 per cent, down from 39.6 per cent a decade back. The fiscal deficit for Union and state governments combined is 11.3 per cent, up from 8.3 per cent in 2011. The debt-GDP ratio is now 90.6 per cent, up from only 68.6 per cent. The much better indicators of a decade back did not last, and growth slowed. One must hope the opposite happens now, with today’s energy and optimism being sustained.” More from Rathin Roy: “Unlike China, Bangladesh and Vietnam, India’s savings rate is forecasted to decline reflecting the permanent scarring caused by the pandemic. The investment to GDP ratio is not forecasted to rise appreciably till 2024. India’s ability to walk its big talk as an investment destination, though always fragile, has therefore taken a further credibility hit after the pandemic. Finally, India had the worst fiscal deficits before the pandemic and despite an insipid fiscal response to the pandemic, will have higher levels of debt and fiscal deficits in 2024 than it did in 2019. The silent fiscal crisis prior to the pandemic is urgently driving a programme of asset sales, but these will only plug the fiscal hole; there will not be resources left to increase the investment to GDP ratio above the IMF forecast and bring India back to its pre-2019 growth potential if we continue with business as usual. This is a grim outlook.”

David Brooks: “A nation is a community of people that, at best, is held together by a common story. When I was a kid, I was told a certain triumphalist story about America, which was loaded with words like “superpower” and “greatest.” That triumphalist story sounds tinny in 2021, and it seems to have been rejected by many in the younger generations. As that story has faded, our country has fractured, without a cohering national narrative.” What is India’s story?

Martech’s Magicians: Microns, Micronbox and µniverse (Part 5)

Strategic Inflection Point

In a world of digital customers and relationships, martech, not adtech, is the secret to customer delight and business success. The second generation of martech solutions will create their own ecology: full stack rather than point solutions to provide a unified customer view, CDP to create a single vast repository from the data hose, AI engines to predict behaviour from the actions of the many, APIs to glue different components, and new avatars of the digital agency which are built on proprietary martech products and deliver results for retention, reactivation and referrals. These new martech platforms, along with the upheavals in the adtech world, are creating a strategic inflection point for businesses.

An inflection point, according to Investopedia, is “an event that results in a significant change in the progress of a company, industry, sector, economy, or geopolitical situation and can be considered a turning point after which a dramatic change, with either positive or negative results, is expected to result. Companies, industries, sectors, and economies are dynamic and constantly evolving. Inflection points are more significant than the small day-to-day progress typically made, and the effects of the change are often well known and widespread.”

Rita McGrath wrote in Fortune: “Strategic inflection points—changes that alter the taken-for-granted assumptions underlying a business model—can feel sudden. In reality, however, they tend to build up slowly, gathering momentum until a transformative shift becomes clear. Andy Grove, who coined the term, said it referred to change that was 10 times more significant than a typical change encountered by a business.” She adds that companies tend to fall in three categories when these shifts occur: “The first are those that have missed the inflection point entirely. These firms often shrink or disappear … The second group comprises those that realize an inflection point is underway and place a huge, last-minute bet on catching the wave … The third set of companies are ones that have placed a number of small bets over time to position themselves to take advantage of shifts when they happen.”

Marketers obsessed with new customers will miss the seismic shift that is taking place. In a post-pandemic world where digital consumption has risen sharply, compressing many years of growth into one, it is easy to go after the next new customer. But if that is not accompanied with an equally strong focus on customer retention, what marketers will end up with is a leaky bucket of constant churn. It is easy to spend money on Google and Facebook and get “Gooked”. What marketers need to think of is “Hooked” – how to create hooked customers who have a net retention rate of greater than 100% and who work as micro-influencers to drive referrals from their family and friends to create the exponential growth that is so central to creating a profits monopoly in the category. A central idea that marketers need to understand is “jobs to be done” – that customers hire products to get something done in their life.

Thinks 325

Merkle CEO Michael Komasinski: “The best thing about today’s advertising is the strong focus on the customer experience. Building marketing strategies that place the customer at the center of every interaction makes advertising less superficial. We can now tangibly and positively change how customers experience a brand across the entire customer journey…Hands down, the largest issue in online advertising is the lack of data transparency and control standards. We need a common set of policy rules and technical standards that enforce transparency on behalf of consumers. It would be ideal from a performance perspective to have a unified “source of truth” attribution number that Google, Facebook, Adobe, etc. could align to and optimize from.”

NYT on why Thoreau lives on: “Thoreau suggested that the busyness of life — the frenetic pace of our jobs, the demands of our bank accounts, the status that we seek and never find — should never be the exclusive focus of living. Can we, as Lightman puts it in his essay, free ourselves from the “rush and the heave of the external world”? This is the lesson of Walden Pond: that our immediate concerns usually obscure the important ones, and almost always distract us from what is ultimate, the chance to live and die with the knowledge that we have tried to “truly live.””

Renée DiResta on Amplified Propaganda: “You don’t need fake accounts to spread ampliganda online. Real people will happily do it…Today there is simply a rhetorical war of all against all: a maelstrom of viral hashtags competing for attention, hopping from community to community, amplified by crowds of true believers for whom sharing and retweeting is akin to a religious calling—even if the narrative they’re propagating is a ludicrous conspiracy theory about stolen ballots or Wayfair-trafficked children. Ampliganda engenders a constellation of mutually reinforcing arguments targeted at, and internalized by, niche communities, rather than a single, monolithic narrative fed to the full citizenry. It has facilitated a fragmentation of reality with profound implications. Each individual act of clicking or resharing may not feel like a propagandistic act, but in the aggregate, those acts shape conversations, beliefs, realities.”

Martech’s Magicians: Microns, Micronbox and µniverse (Part 4)

Generation Shift – 2

Continuing with the transformations from Martech 1.0 to Martech 2.0:

All Customers to Best Customers: Martech 1.0 has been about targeting all customers with little regard to their lifetime value. Martech 2.0 will be about identifying the Best customers and creating differentiated experiences for them (think Velvet Rope Marketing). It will be about creating a separate business unit and shift from trying to foster loyalty in everyone to ensuring Best customers are treated like royalty and never churn.

1-way Broadcast Messages to 2-way Conversations: Martech 1.0 is about sending a huge number of broadcast messages via email, SMS and push notifications. Martech 2.0 will be about conversations. Email with AMP, SMS with SoIP (SMS over IP) and RCS, and WhatsApp are making these messaging channels interactive. Think of this shift as going from Messaging to Messaging+.

Loyalty Points to Atomic Rewards: Martech 1.0, with its transaction-centric view of the customer, incentivises the purchase. Martech 2.0, with its attention and time-centric focus, offers micro-incentives for micro-moments (“atomic rewards”) not necessarily linked to the transaction.

Point Solutions to Full Stack: Martech 1.0 is about stitching together various martech solutions as the need arises. Martech 2.0 will be about thinking full stack – from the CDP to analytics to engagement to personalisation to product experience to omnichannel communications. This is what will power the unified customer view that marketers need.

Data Silos to CDP: Martech 1.0’s point solutions ended up creating data silos which were broken down by the deployment of a Customer Data Platform (CDP) embedded in the Martech 2.0 full stack. The CDP will combine all customer data into a single repository.

Marketer Actions to Machine Predictions: Martech 1.0 is about the marketer making decisions on campaigns and journeys. Martech 2.0 will be about AI-ML using the customer data to drive the next best action for each customer, and continuously learn to improve the experience and outcomes.

Internal Teams to Progency: Martech 1.0 has been about staffing cross-functional talent within the marketing teams. Martech 2.0 will be about making use of a progency (product-led agency) which combines right- and left-brain skills to deliver the outcomes for retention, reactivation and referrals that marketers want.

10% of Budget to 50% of Budget: With adtech and new acquisition gobbling up most of the marketing budgets, Martech 1.0 spending has been at just about 10%. Martech 2.0 will drive a rebalancing as the importance of retention, growth and cross-sell becomes clear to CEOs. The “one rupee solution” will allocate a relationship and rewards spend for every customer every month.

Here is a table which summarises the transformations:

In short, Martech 2.0 will be the “real thing” – what marketing should always have been with its focus on maximising lifetime value by building deep, engaging and rewarding customer relationships. The transaction is an outcome, rather than the only goal. With the focus on retention, reactivation and referrals incentivised at the right times with rewards, revenues will rise and so will profits.

Thinks 324 on the importance of a subscription model: “Compounding growth of customer relationships is what makes subscription revenue models so powerful. Long-term subscribers become more valuable to your business. Revenue flows linearly from marketing to sales and finance in a traditional business model. However, subscription businesses have cyclical income. Subscription models allow businesses to lock customers in for an extended time. In a long-term relationship, companies can modify their products and services to meet customers’ needs and grow with them.”

The Limits of Democracy: “Democracy may be the best form of governance available to us, but it can easily yield suboptimal outcomes. That is especially true with a progressive ideology, a populism focused on restricting trade, good intentions captured by special interests, or idolatry toward the state. Democracy, to be socially viable, must be bounded by what F. A. Hayek (1960) called “a constitution of liberty.” Without limited government—with effective levels of federalism, an independent judiciary, and a constitution that promotes liberty—the mixed blessing of democracy can become a dog’s breakfast of inefficiency, corruption, incompetence, and injustice.”

The Economic Mentality of Nations: “In virtually every country there are people who passionately defend free markets, while others have very interventionist mentalities…To measure popular attitudes toward economic values, we have created the Global Index of Economic Mentality (GIEM).”

Martech’s Magicians: Microns, Micronbox and µniverse (Part 3)

Generation Shift – 1

We are seeing the emergence of Web3. As FreeCodeCamp explains:

Web 1.0 was the first iteration of the web. Most participants were consumers of content, and the creators were typically developers who build websites that contained information served up mainly in text or image format. Web 1.0 lasted approximately from 1991 to 2004.

Most of us have primarily experienced the web in its current form, commonly referred to as web2. You can think of web2 as the interactive and social web. In the web2 world, you don’t have to be a developer to participate in the creation process. Many apps are built in a way that easily allows anyone to be a creator.

Web3 has decentralization at its core. [It] enhances the internet as we know it today with a few other added characteristics. Web3 is verifiable, trustless, self-governing, permissionless, distributed and robust, stateful, [and has] native built-in payments. In web3, developers don’t usually build and deploy applications that run on a single server or that store their data in a single database (usually hosted on and managed by a single cloud provider).

Similarly, we are seeing the emergence of Martech 2.0. The first 20-25 years of the Internet were about Adtech – as consumers came online, they left a digital trail which businesses could use to target them via intermediaries like Google and Facebook. Then came the first generation of Martech, which helped companies build relationships with their existing customers to drive transactions. We will now see the second generation of Martech, where the focus will be on the upstream of transactions – attention, engagement and habits – to create hooked customers.

Here are some additional transformations between Martech 1.0 and Martech 2.0:

Purchase-centric to Complete Lifecycle: Martech 1.0 is about driving towards the transaction. All messages are in the “see this / buy this” mode. Martech 2.0 goes beyond that to consider pre-purchase, post-purchase and the journey beyond. It will be about creating mental availability for the brands – informative content which becomes a utility in the recipient’s life. Martech 1.0 messages felt like spam that one wanted to delete; Martech 2.0 will offer moments that will delight.

One-offs to Retention and Subscriptions: Martech 2.0 will shift the focus from discrete transactions to driving subscriptions, thus reducing the need to persuade each time a desire needs to be fulfilled. This is what creates the “forever transaction”, thus focusing not on the short-term but the long-term.

Reacquisition to Reactivation: In Martech 1.0, customers who became dormant or inactive ended up being reacquired via the ad platforms. In Martech 2.0, the focus will be on reactivation at a fraction of the cost.

Any New Acquisition to Referrals: In Martech 2.0, the focus will be targeted acquisition by driving referrals, especially from Best customers. This brings down the cost of new acquisition sharply.

Thinks 323

Adam Grant on the new work environment: “We need boundaries to protect individual focus time too. On remote teams, it’s not the frequency of interaction that fuels productivity and creativity—it’s the intensity of interaction. In a study of virtual software teams by collaboration experts Christoph Riedl and Anita Woolley, the most effective and innovative teams didn’t communicate every hour. They’d spend several hours or days concentrating on their own work and then start communicating in bursts. With messages and bits of code flying back and forth, their collaborations were literally bursting with energy and ideas. One effective strategy seems to be blocking quiet time in the mornings as a window for deep work, and then coming together after lunch. When virtual meetings are held in the afternoon, people are less likely to multitask—probably in part because they’ve been able to make progress on their own tasks.”

Ninan: “Election results and “wallet economics” seem less synchronous in India than elsewhere. Tamil Nadu with a superior performance threw out its ruling party, while Kerala with relatively bad performance re-elected the Left Front. On the other hand, look at nationwide elections. India wasn’t “shining” enough for the BJP to win in 2004. The subsequent years of rapid poverty reduction got the Congress re-elected in 2009. Five years later, the onset of a slowdown helped usher in Narendra Modi. And he remains popular though per capita consumption has been stagnant for four years. Perhaps his skill at alternative narratives (hard work, infrastructure, welfare measures, identity politics) makes the difference. So people don’t ask themselves whether they were in fact better off four or five years earlier. That’s how it often works out with charismatic leaders.”

Michael Munger: “Economic revolutions do not care what we think of them. For people who believe they are the centre of the universe, or for technocrats who want to pull strings and push levers to ‘run things’, that can be very disquieting. But failing to understand that economies are organic complex systems can cause problems that make things much worse. These systems have internal dynamics that operate independently of the will of the state, or of any individual for that matter.” [via CafeHayek]

Martech’s Magicians: Microns, Micronbox and µniverse (Part 2)

Coming Martech Era

The coming martech era will be different from the early days of martech. The first-generation martech tools were primarily point solutions solving specific needs. A few marketing clouds did emerge but they were built mainly out of components stitched together from acquisitions by the big players rather than natively built. The second generation will be about full stack solutions that solve the ABCDE problems of martech: attention (recession), branding (for retention), churn (of Best customers), data (silos), and engagement. These solutions will drive a rebalancing of the budget as marketers realise that a bird (customer) in hand is worth two in the bush! A new martech era is coming. Companies who can deploy its power appropriately will emerge winners and lay the foundation for exponential forever profitable growth and become “profipolies” of the future.

I wrote on the coming martech era in a recent series:

The Martech era will be characterised by a focus on 4Rs: retention, rewards, reactivation, and referrals. It will need marketers to think about segmentation based on customer lifetime value. Marketers will need to combine tech, data and analytical skills to make the most of all the demographic, behavioural and transactional data that will flow into a Customer Data Platform (CDP). They will need to integrate different tech solutions together to get a unified view of the customer. What will matter is not just a one-time acquisition but the customer journey, with the right nudges at the right time to ensure timely transactions. AI will assist the marketer at every stage but the questions and creativity will need to come from the marketer. Art and science is what will make martech work like magic.

This will need a new bag of tricks for marketers. It will be much more than just saying, “Oh – that’s what our CRM department does.” The Martech era is in fact the second coming of CRM. Only this time, marketers will be armed with much more data and have a wider arsenal of tools to create myriad magical moments for their customers, rather than just one-time offers. The way marketers have prioritised and perfected ad spending for new customer retention is what they will need to do with existing customers. As of today, most CMOs have a limited focus on this because adtech sucks away 80-90% of budgets and attention of marketers. In the years to come, in a world where the profitable pool of customers for a category is finite, marketers will need to switch time and money to martech to drive customer communications, engagement and experience and ensure they grow profitable customers who stay with them forever. Martech done right will help them optimise their adtech spends, create the space for profits, and lay the foundation for winning the customer moments that will drive exponential forever profitable growth.

…By using the secrets outlined here (smart segmentation, 4 Rs, full stack, progency and rebudgeting), brands can drive up the profitability in their business by ensuring the Best customers stay forever, the Rest customers are moved along the customer journey to become tomorrow’s Best, the Test customers are reactivated instead of being reacquired, and the Next customers come from referrals and a higher profitability pool of customers.

By working to maximise and then monopolise the profits in a category, brands create a profits flywheel to lead to a “profipoly”. This works as a double moat in the coming Martech era: the most profitable customers are retained to maximise lifetime revenues, and competitors are deprived oxygen of growth capital in the form of profits. The profipoly is thus the endgame. It also works as the beginning – because the profits can power the expansion into new categories – either organically or via acquisitions. Creating a profipoly is the real secret of creating a model that can power the “rinse and repeat” of exponential forever profitable growth.

Martech is at a strategic inflection point. The old will give way to the new, the first-generation to the second-generation, point solutions to the full stack.