Multichannel Magic

“Marketing is an investment. Service is an expense.” While those words may never be spoken aloud in corporate board rooms, it is a common misconception reinforced by resource allocation. All of the talk about the importance of customer service fades into the background when budgets are created. Shortfalls in revenue trigger reductions in service.

The gap between the mission of an excellent customer experience and execution is unimaginable because improving service strengthens relationships, creates loyalty, and increases profitability. Perhaps we should hire a public relations agent to change customer service’s image. Decades of being a line item in operational expenses have to be overcome. Service is not a cost of doing business. Service is an investment in a company’s future.

Part of the problem is with the operational team. Somewhere along the line they bought into the service is an expense idea. I cringe every time I hear a departmental manager say, “We need more money because expenses are up and customers keep contacting us” as if customers connecting with the company is a bad thing. A conversation with a prospect or customer is an opportunity to create or solidify a good relationship.

The marketing team isn’t much better. The purpose of marketing is to create customers. When done well, marketing is service but it can never create the solid relationships built in the service department. Marketing is the promise and service is the delivery. One without the other is ineffective. Success becomes reality when marketing and service departments work together for a common goal – making and keeping promises to people who become customers.

Making the shift to integrated marketing and service departments starts with updating customer service’s image. The best way to update an image is to change the reputation by delivering something different from expectations. Instead of looking at how much service costs, look at how much it improves satisfaction and saves money. It’s much easier and less expensive to market to happy customers. Here are some specific customer service tactics that reduce costs and improve satisfaction:

• Provide self-serve options for everything from completing transactions to processing returns. People want to control their interaction with companies. Use some of the money saved by making it self-service easy to provide better and faster personal service. When people need help, they don’t want to wait.
• Improve communication with customers. Email provides an economical way to keep people apprised of changes in orders, policies, and events. Using trigger emails to keep customers informed about order statuses reduces “where is my order” calls and opens the door for additional marketing messages.
• Analyze behavior and seek feedback to match service to individual preferences. Over the top service isn’t expected and may not be wanted. It is expensive and rarely delivers a good return on investment. Targeted service is much more effective and personal.
• Educate people about how to best use your products and services. A marketing message with a limited time offer delivers a bump in sales. Educational messages deliver a lifetime of sales. Find the right mix of marketing and educational messages to keep people happily coming back for more.
• Make it easy for people to contact you. Finding a telephone number or email address is impossible for some companies. They try to make their operations more efficient by controlling customer contact. Doing this reduces trust and increases frustration. Making it easy for people to get in touch with the right department increases sales, improves satisfaction, and has little or no effect on costs. (The exception to this is companies that have major service issues. They should still be accessible but it will have an effect on costs.)

If you want to discuss how this applies to your business, please email me at dellis@wilsonellisconsulting.com.

How many marketing dollars were wasted last year contacting customers who didn’t buy from you?

It’s easy to look back and see where your investment was ineffective. On the tangible side, there are the catalogs and direct mail pieces sent to people who didn’t buy and resources invested in social networking. Less quantifiable are the effects of lost goodwill and increased spam reports because you are persistently contacting people who have completed their lifespan.

There’s an ongoing branding debate about the value of impressions to build awareness and goodwill. What’s the cost of bad impressions from over marketing? It has to be exponentially higher than the value of good ones.

How many marketing dollars will be wasted this year?

Now, that number is harder to obtain. How do you know which individuals have completed their shopping life cycle with your company? If they are grouped in a high performance segment, they may receive promotions for up to two years after they stopped buying.

The problem is that all new customers are treated equally in most marketing models. The first purchase is the entry fee into the promotional funnel. Individuals are bagged, tagged, and sorted by identifiers like recency, order size, and demographics.

All customers, new or old, are not equal.

Some enter the marketing funnel excited about your products or services and stay a lifetime. Your marketing dollars purchased the privilege of a long term relationship. Others enter out of short term need or curiosity and leave after the first or second purchase. Your investment borrowed a brief promotional opportunity with hit-&-run shoppers.

Traditional marketing analytics won’t distinguish between the two. You have to dig deep into buying behavior to find the early warning signals. Or, you can continue sending promotions until you receive cease and desist notifications or the money runs out.

Acquisition and retention costs are equal.

It costs the same to acquire and market to customers who buy for a full life cycle, hit-&-runners, and the ones who fill the gap between. The first is an asset, the second an expense, and the third can go either way. Your goal is to identify the expensive customers as quickly as possible and minimize your marketing investment.

Before you start digging deep in your customer database for behavioral identifiers, determine the extent of your problem by measuring your retention and attrition by year. If you find that your active database is growing but attrition exceeds acquisition rate, you may be replacing high lifetime value customers with hit-&-runners.

Depreciating customer value is an insidious company killer.

You have to aggressively look for it because it hides deep in your database. Sales reports are misleading because revenue can increase while customer value decreases. A review of a $20 million company provided the following sales history:

The chart is picture perfect with a steady annual increase that moved sales revenue from $9.9 million to $20.5 million over a five year period. The company appears to be on a strong growth track with increasing sales, orders, and average order size.

Average order size has increased by $12.67. The number of active customers in the house file has doubled:

Additional analytics tell a different story.

While the active customer count was increasing, orders per customer were declining. In 2008, customers ordered an average of 3.2 times. By 2012, this had dropped to 2.6 orders per customer. More customers were ordering less often. This translates into increased marketing costs and reduced average lifetime value.

The acquisition rate was strong, peaking at 41% before dropping to 32% in 2012. By itself, the decline is a normal business fluctuation easily explained by external events. But when the attrition rate is factored in, it indicates that the company is in serious trouble:

Between 2008 and 2012, the attrition rate grew from 7.9% to 14.1%. If they had waited for the symptoms to appear on the sales report, it would have been too late to save the business.

Poor quality products were sabotaging their marketing.

The second stage of the review was to identify any trends that contributed to the core customer shift. The marketing plan had been consistent over the five years and there was still room to grow in the market. There were no indications that there was an issue with marketing.

Further analysis revealed a high percentage of one time buyers. A deeper dig into the data linked product quality with the hit-&-runners and growing attrition rate. In an effort to reduce costs, quality had been sacrificed, alienating customers. Fortunately, the story has a happy footnote because the quality issues were resolved and customers have responded well. The same analytics that tell you what you’re doing wrong also show what’s right.

It is impossible to drill deep into customer analytics without revealing challenges and opportunities. Your marketing dollars will always buy some lifetime customers and borrow some hit-&-runners. When you know the difference, and alter your plan to fit, your return on investment increases.

Are you ready to start digging?

If you want to discuss how this applies to your business, please email me at dellis@wilsonellisconsulting.com.

Mobile devices are forecasted to account for 16% of the total US retail ecommerce sales this holiday season. The research and analysis from eMarketer, Inc. suggests that smartphones and tablets will contribute to sales growth through direct purchases and as a shopping tool that drive consumers to stores or desktops to complete their purchases.

The chart below shows US retail mcommerce sales by device for 2011 through 2017:

Source: eMarketer Inc.

Sales using tablets are predicted to hit $26.05 Billion, or 62.5% of the overall retail mcommerce sales. The smartphone share is decreasing but actual sales dollars for purchases made via smartphones is increasing. Retail sales made on smartphones are expected to reach $14.59 billion.

Mobile devices are increasingly being used to open emails too. According to research at Return Path, 48% of overall commerce emails are opened on mobile devices. Emails from retailers have a higher mobile open rate of 55%. A similar study at Experian Marketing Services found that 50% of unique opens were mobile only:

Source: Experian Marketing Services

Global statistics are interesting metrics but they don’t mean much without actionable information for individual companies. The takeaway for retailers and small businesses is that mcommerce has to be part of every company’s marketing strategy. Creating mobile friendly access to websites and emails makes it easy for consumers to complete their holiday shopping. Simplifying the buying decision streamlines the transaction process. Easier shopping and service experiences improve loyalty and sales.

Optimizing webpages and emails for mcommerce provides a competitive edge because companies have been slow to adapt their websites and emails for mobile access. While there isn’t enough time to plan and implement a full scale mobile makeover, there are some things that you can do now:

• Know the difference between tablet and smartphone mcommerce. These devices are often grouped together when people talk about being mobile ready. This is a mistake because smartphone and tablet shopping is very different. Creating shopping experiences on each type of device that match user behavior optimizes revenue generation.
• Shop your business using different devices and browsers. The shopping experience varies by device and browser. Take a walk in your customers’ shoes to see where improvements can be made. Create a list of every issue and frustration you encounter as you navigate your website. The education is priceless.
• Open your company’s emails using smartphones and tablets. Is the content easy to read? Can the links be easily clicked? Or, do you have to scroll from left to right to read and enlarge the email to click the right link? Most email marketing services offer the ability to create mobile versions. If yours doesn’t, start thinking about making a change. (It is a good idea to wait until after your peak season in case there are problems.)
• Create a prioritized “get mobile ready” list. A prioritized list that includes tasks, resources, level of difficulty, risks, and expected return on invest simplifies the implementation process. Low risk, high return items need to be completed as soon as possible. High risk items need to wait until after the holiday season.
• Test and measure. Measure and test. However you do it, gather as much as possible during the holiday season so you can use the information to make next year even better. Every marketing piece and service change needs a control and results to create a continuous improvement environment.

Need help getting optimized for mcommerce? Email Debra at dellis@wilsonellisconsulting.com.

“A sale is a sale is a sale.” The toy department manager at Best Products repeated this saying as if it were a spell that would miraculously change him from mediocre employee to super-manager. Periodically, he would change it to “A customer is a customer is a customer.” If asked to explain, he would respond that any sale was better than no sale and any customer was better than no customer. Anyone who dared question his view of the retail world was delegated to the warehouse. It was a good thing that I liked warehouses because I spent a lot of time there.

To say that we didn’t see eye to eye is an understatement. I understood the need to make sales and treat all customers well regardless of the purchase amount. I didn’t understand the “all customers are equal” mentality. The value of a customer is directly related to the contribution made to the bottom line over a lifetime. Our different views about customer relations led to the Star Wars incident. Years later, it is still one of my most vivid customer care memories.

A little background information may be helpful before I continue the story of the Star Wars incident. Technically I worked in the jewelry department but anyone who knows me knows that I don’t idle well. Repeatedly polishing a clean jewelry counter while waiting for customers is enough to push me over the edge. When things were slow in jewelry and the toy department needed help, I always volunteered. I suspect that the manager there saw my assistance as a combination blessing and curse.

Remember the “why” stage that children go through? I never outgrew it. “Why?” and “How?” are my favorite questions. Sometimes they keep me awake at night. The jewelry department manager always answered my questions and listened to my thoughts. The same questions annoyed the toy department manager. When he declared that all customers were equal, I couldn’t get my mind around it. His “because they are” responses to my questions were less than satisfying and set the stage for the Star Wars incident.

Star Wars action figures were in high demand. Someone in manufacturing had the bright idea that people would buy an army of stormtroopers to go with the main characters. The figures arrived in packs of 24 pieces consisting of Luke Skywalker, Hans Solo, Princess Leia, Chewbacca, C-3PO, R2-D2, Ben “Obi-Wan” Kenobi, Darth Vader and sixteen stormtroopers. People didn’t buy as expected. They wanted one of each of the main characters and a couple of stormtroopers. This left a lot of stormtroopers on the shelf and unhappy customers at the counter.

Some customers would show up when a truck was scheduled to arrive in hopes of snagging an elusive main character. One customer was particularly diligent. He came every day to check on the inventory. This particular customer was a regular in the jewelry department spending hundreds of dollars during a down economy. Time was running out for him to get a Princess Leia for his daughter for Christmas. While making a jewelry purchase, he asked me if I could help him get the action figure. I made no promises but agreed to try.

The next truck had the toys. I placed a Princess Leia in the jewelry department, told my manager, and called the gentleman. He was so excited. Later that day, he told my manager how appreciative he was for the special service. My manager told the toy manager and then it was on. The toy manager wanted me fired immediately for providing special service to a loyal customer. His reasoning was that all customers were equal. Preferential care upset the balance of things. No one corrected him. The firing didn’t happen but I became disillusioned with the company and resigned after a few months.

All customers are not equal. Some contribute to the company’s success. Others are an expense that needs to be eliminated. Yes, this is harsh and very different from the “customer is always right” mentality. Sometimes, customer and company are not a good fit. When this happens, the relationship needs to be severed. Knowing how to choose which customers to keep and which to let go is key to a solid company foundation.

Letting customers go is scary, especially in a tough economy and digital world. What if they tell everyone? What if sales drop and you need the cash flow? What if you make a mistake? The “what if’s” will drive you crazy. Instead of going there, think about this – the customers who cost more to keep than they contribute are pulling your company down. Do you really want it to sink because you’re afraid that you might alienate a few people? Choosing to invest your marketing and service dollars in the people who contribute to corporate success is better. And, just to calm your nerves a bit, most of the customers you let go will never know it.

How do you decide which customers to let go? Direct marketers used to do it by recency. People who hadn’t ordered in twelve months would start to be phased out of the mailing cycle. Technically, these customers were being fired but they didn’t know it. Today, more analysis is needed. Seasonal customers can get caught in the purge trap if recency is the only consideration. We have access to more data than ever before. Identifying people who cost more than they contribute is much easier. There are three reasons to let people go:

1. Marketing cost is greater than contribution. These customers rarely order and/or have a low average order. Marketing costs are higher than the revenue generated. Before removing them from the marketing cycle, try using less expensive marketing tools. Email is relatively inexpensive and can be targeted well.
2. Service cost is greater than contribution. Some people order so they can return the items to order again. This may not be their real motivation but it seems that way. When service calls and events exceed the norm, review the customers to determine the wisdom in continuing the relationships. In most cases, you can simply phase them out of the marketing cycle. Occasionally, you will have to fire them.
3. Customers abuse policies and employees. No one should have to work in a hostile environment. There are always a few people who feel entitled and will demand over the top service. If they don’t receive it, the bearer of bad news (aka your employees) will be subjected to a temper tantrum that would put any two year old to shame. This is cause for immediate termination. People that repeatedly abuse policies need to go too.

Letting customers go is part of a sound management strategy. It is never easy and shouldn’t be done frivolously. When done well, resources are freed to use for building better relationships with the people who matter most. Everyone wins.

To learn more about how you can better manage customer relationships, email Debra at dellis@wilsonellisconsulting.com.