Left/Right brain Jugalbandi!!

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In  AdAge Al Ries writes about the conflict between marketing and other functions at the executive table. Marketers think right brain, non-marketers think left brain. Management deals in reality, marketing deals in perception. "Marketing is visual, intuitive and holistic," writes Ries. "Management is verbal, logical and analytic".

 I feel however that Marketing is becoming much more left brained given the data that it now has at it's command! However the irony is that to be effective, the marketer needs to be able to integrate right & left brain thinking. Even Analytics produces far more "actionable output" when the analytics team is structured cross functionally and with a mix of left & right brain analysts.

In an interesting article in the Harvard Business review, the authors have argued about how innovation can be effectively driven by integrating left & right brain thinking. Here is an excerpt from the article:

At the top of virtually every fashion brand is a distinctive kind of partnership. One partner, usually called the creative director, is an imaginative, right-brain individual who spins out new ideas every day and seems able to channel the future wants and needs of the company's target customers. The other partner, the brand manager or brand CEO, is invariably left-brain and adept at business, someone comfortable with decisions based on hard-nosed analysis. In keeping with this right-brain-left-brain shorthand, we refer to such companies as "both-brain." They successfully generate and commercialize creative new concepts year in and year out.When nonfashion executives pause and reflect, they often realize that similar partnerships were behind many innovations in their own companies or industries.

Have a look at this interesting article:

http://hbr.org/2009/06/innovation-in-turbulent-times/ar/1

Here are a few things to think about:

1. Would you bring a creative person as a part of your analytics team? Imagine the kind of lateral thinking that can help bring perspective to the "hard number" based analysts?

2. Would you allow an analyst to lead an "innovation" function within your organization and then build a team under him or her staffed with more creative type people to make the Left/right brain jugalbandi happen!!

 

 

Airlines say Baggage fees are revenue drivers!

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During the second quarter of 2009, the largest airlines in the US collected $669.5 million worth of baggage fees from the nation's hapless passengers. That's a huge 275 percent increase from the second quarter of 2008.

 Ancillary income or revenue from sources other than the ticket price is categorized by the industry as a la carte features, commission based products and frequent flyer activities and today account for a substantial portion of revenue for airlines. Today, these features comprise as much as 10-15% of most airlines’ revenues. United Airlines, for example, has estimated that baggage fees and other add-on charges for meals and seat selection will generate $700 million in additional revenue in 2009.  Asia is a bit different and possibly only Air Asia shows this kind of ancillary income percentages!

In an article by Joe Brancatelli, he states “But here's an indisputable truth: The more baggage fees that the big airlines pile on their customers, the faster their overall revenue is collapsing. In fact, the only carriers that escaped a double-digit revenue decline in the second quarter were the two that still allow all passengers to check at least one bag for free”

To me this conclusion is “so wrong” …airlines lost revenue for a whole bunch of reasons and you cannot attribute “cause & effect” here. In fact look at the facts, in many businesses like Airlines, Banking, Credit cards & Hotels, you actually do not mind paying small amounts of money for a variety of services.

This “small amount of money” contributes substantially to the other income line for these marketers. In the case of credit cards when you use your card internationally, you pay a “not so small” markup and that is very profitable for the card issuer. Credit card loyalty programs are among the best examples of programs that allow Ancillary revenue (e.g. membership fees, point sales, partner payments). Even banks have developed sophisticated ways of charging you for all sorts of services which slip under your radar! At an individual level it may not hurt so much-as an example debit card fees may be just Rs 100-150($ 2 to 3) per customer but the Debit card portfolio makes a healthy pile of profit because of this innocuous line item!

Interestingly Analytics can play an important role to gauge pricing power amongst customers and finding segments that may find more “value” in a specific service offering and therefore not mind paying for it. I wonder how many companies actually have a specific executive or function tasked with uncovering “ancillary income” opportunities. A strong analytics based program to uncover these opportunities will more than pay for itself.

Read more about the Airline baggage charges here:

http://www.portfolio.com/views/columns/seat-2B/2009/09/29/baggage-fees-hurting-airlines-bottom-line/

Loyalty programs can drain profits!

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Whenever companies run short of ideas for engaging with their customers, they launch Loyalty programmes. In fact ,my belief is that companies end up spending millions of dollars supporting loyalty programs many of which do “zilch” to their bottom line.

According to a recent report by loyalty program watchdogs, Colloquy, the average U.S. household is enrolled in 14.1 loyalty programs, which marketers spend as much as $2 billion annually to operate.

Here is an interesting article by Tim Keiningham, Global Chief Strategy Officer at Ipsos Loyalty and author of the newly published book Why Loyalty Matters. The premise of the article is that many companies incorrectly associate so-called “loyal” customers with profitable ones

Here’s is what Tim has to say:

Looking at customer actions and attitudes, our research showed a very large percentage of loyal customers—often more than 50%—are not profitable for most companies, because their loyalty is driven largely by expectations of great deals.

http://online.wsj.com/article/SB10001424052970203353904574149041326829628.html

Bill Hanifin has this very interesting comment

Take it a step farther and I’ll assert that while every company doesn’t need a “loyalty” program, EVERY company needs a well planned and executed Customer Strategy. Imagine if our industry ditched the “L” word and adopted a more inclusive term. The semantics debate might be de-fused and we could get down to business.

Read more of what Bill has to say at:

http://blog.hanifinloyalty.com/2009/06/25/ipsos-theres-no-p-in-loyalty.html

Here is what I believe are key questions to think about:

1.    Is your loyalty program only ending up rewarding new customers?

2.    Do you measure the profits that you get from loyalty or do you just see Loyalty sales as a percentage of total sales?

3.    Are you under investing in your loyalty program by not impacting any core aspect of your service or product delivery? As a retailer do you say that your loyalty program is doing well but hesitate to give an exclusive checkout counter for loyalty program members because it is operationally difficult.

Is Customer experience too much fluff for the CFO?

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Often marketers are rapidly putting together rollout plans and aggressively chasing market share and customer centricity takes a back seat. But does customer centric action impact the bottomline!Do the CEO & CFO care?

Forrester’s previous research has shown a high correlation between customer experience and three key elements of loyal behavior: willingness to buy more, reluctance to switch, and likelihood to recommend.

Here is an extract from an interesting study from Forrester:

But how does Customer experience affect a company’s bottom line? To answer that question, we looked at the percentage of loyal customers within the customer bases of more than 100 companies. It turns out that customer experience leaders have an advantage of more than 14% over customer experience laggards across all three areas of loyalty. The annual revenue gains from a modest difference in customer experience can total $311 million for a large hotel. Banks and hotels garner the largest gains from their current customers, while airlines get the most from an increase in positive word of mouth. Customer experience professionals should use this information to build customized business plans.

I believe that in growth markets such as India the opportunity to embed "customer centric" processes into the fabric of the organization is very strong. This is because entire industries are being created right from "scratch"-Retail, telecom and many others.

It needs a strong CEO who drives the customer centricity agenda himself and makes it practical for the market to absorb. The CEO then must drive a technology agenda, with the CTO, which puts together the "plumbing" for crafting a great customer experience.

Credit cards can provide Retailers superior Consumer insight!!

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Credit card retail spend data is also so valuable for Retail merchants but I do not see any concentrated initiative from any bank in India to use this data as a strategic differentiator.

Already credit card as a % of total sales would be 50% or more, for at least the department store category of Retailers. If I were a Retailer, I could use this information to profile my regular customer base far better-they may not be loyalty program members, it’s just that their credit card number tells us that they are repeat customers for the retailer.

So clearly there is an opportunity for Indian banks to provide retailers more insight and on the back of that build larger spends and revolves on their cards with that merchant establishment. American Express has traditionally been good at this. Only a few months after American Express announced its Business Insights solution for consumer data analytics and consulting, MasterCard Advisors has now launched “Merchants Solutions”, their response to the growing number of payment services companies that offer data on their customer’s purchases to marketers.

Read more about this at

http://www.dmnews.com/amexs-new-division-displays-value-of-data/article/159487/

Banks can Bundle data!

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I have always believed that banks can do much more with the consumer data that they have without sacrificing any consumer privacy guidelines. Imagine the power of Debit & Credit card retail spends information.

Here is an interesting initiative from Citibank called Bundle. It showcases proprietary data, sourced from Citibank's massive card-spending warehouse.

The site is based completely on spend data, showing household spending personalized to your specific location. There's also professional personal finance advice mixed with stories and comment from the community. Even the articles use the database to illustrate points.

Imagine the power of Analytics in driving this business model forward. In India it would be interesting to see a bank use its large Debit card base to build an application like this.

Have a look at this application at:
http://www.bundle.com/

Jim Bruene at Netbanker has some very good analysis on this(in his words):
If they want to attract data junkies like myself, the data needs to be more transparent and they need more robust tools to play with it. I enjoyed being able to compare the spending of my Seattle neighbors against that of my home town in Iowa (it's surprisingly similar). But I was left with a number of questions:
    * Where does the spending data come from? The FAQs are vague on saying that it comes from Citibank card data, government sources and "other third parties."
    * If its primarily Citibank card data, is it really representative of the entire town or just the people that hold Citibank cards? For example, Bundle tells me (screenshot #3),  that the average dining out expense in Seattle is $115 and the most common spot is Starbucks followed by McDonalds. Something seems wrong with that.  
    * And furthermore, are these estimates of all spending or just that on Citibank cards? And which Citi portfolios are included? What about business cards?
    Check out Jim’s comments at
http://www.netbanker.com/topics.htm

Comcast uses Twitter for Customer service!

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Ten months ago, Frank Eliason , whose official title is director of digital care, Comcast  came up with the idea of using Twitter to interact with customers of Comcast (CMCSA), the mammoth provider of cable TV, Internet, and phone services for whom he has worked for a year and a half.
Eliason discovered that by doing a search for the word "Comcast" (and occasionally "Comcrap"), he could find tweeters who just happened to mention service complaints he could address. In December 2008, he celebrated the handling of his 22,000th tweet.

Read more about this fascinating use of Twitter for Customer service!

While I would not recommend the use of this strategy for everyone, simply because it invites genuine and “not so genuine” customers and may in fact create a backlash for the brand if not managed correctly. In fact the controversies that Shashi Tharoor generates out of his tweeting may just be a new ploy for driving PR!
However, I do believe that this may be a great way for companies to build a personal relationship with their consumers. If done correctly it has the power of enlisting communities to participate in the creation of a customer service.

Customers look for genuine help even when they interact with companies and remember the best customer service representatives are those who bring that sense of “she is doing this for me” into their professional work!

Here is an interesting comment from Frank on his blog:
What else have we learned?  Customers, just like most Customer Service agents, are craving real time, unedited information.  If something is wrong they really want to know what it is, what is being done and when it will be back.  We are working to create that environment at Comcast.

Read more at Frank’s blog

Closed Loop Marketing multiplies ROI

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The term closed-loop marketing has been around for decades. The huge increase in marketing channels adds complexity to the challenge of delivering relevant messages to customers and prospects. Put very simply Closed-loop Marketing (CLM) is interactive marketing where customer responses and behaviour are employed to direct and refine marketing strategy and tactics.

There is a "closed loop" where collected customer data and behaviour is used to build a profile of customers - profiles that provide the basis for further marketing initiatives. Typically, the recipient profile is adjusted by responses to the campaign and the campaign is adjusted to the recipient profile - there is a feedback loop.

Companies are constantly creating interactions with their customers. A lot of these interactions are outbound interactions initiated by Marketing. A Retailer may advertise an end of the year sale in media and also use some other channels like email and direct mail to invite specific segments of customers to their stores. Marketers do not need sophisticated technology to start measuring the results of each marketing action. Yes there would be no perfect answers. But the important thing is to start creating this “accountable marketing” philosophy.

Increasingly, organizations are using customer data and behavior to direct and refine marketing strategy and tactics, creating a closed-loop system between their marketing message and their customers that continuously evolves.

According to a recent report from Aberdeen, "The CMO Strategic Agenda: Automating Closed-Loop Marketing," 88 percent of best-in-class companies have adopted this full-circle or "closed-loop" marketing approach, and they have procured technology to help automate the process.

You can read about this here:Automating Closed Loop Marketing

 However we believe that Closed loop marketing is wrongly sold as a technology problem. Many IT companies almost seem to be sayings that automate marketing and you will accomplish Closed loop marketing-almost magically. Closed loop marketing is also wrongly perceived to be purely an Online kind of approach where you integrate all aspects of your internet marketing into a closed loop.

The real problem is that Marketers need to examine if they are process and ROI focussed. Do they measure how each leg of their marketing campaign is delivering value ? How does the sms,internet, DM and Advertising medium work together? Are you attracting a different profile of customers from these different channels? Are consumers primarily multi channel? Are you using Analytics to figure out the ROI on your Marketing investments.

Our perspective at Cequity is that companies must build appropriate marketing processes ahead of automation-only then can Marketing automation give you results.

What’s on your CIO’s mind?

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IBM did a study across CIO’s of over 2500 CIOs in 78 countries and across  19 industries. The objective was to understand how can today’s CIO make the biggest impact on behalf of the entire organisation? Largely CIO’s spoke about what they are doing to achieve three primary goals: to make innovation real, raise the ROI of IT and expand business impact.

The findings really struck me, as the key message pointed to exactly the type of problems we at Cequity, help organizations tackle every day.

A few important points from the survey(as quoted from the findings):

1. When asked to identify their visionary plans for enhancing their enterprises’ competitiveness, business intelligence and analytics was the top answer, selected by 83 percent of our sample. A Media and Entertainment CIO in Belgium told us better business intelligence will “bring marketing analysis to a higher level, to improve buying behaviour and increase advertising ROI. Many others agreed that they seek information-led innovation based on information as an asset. “Facts drive decisions,” said an Insurance CIO. “Plans for imbedded analytics need to enable data capture at the customer touch point.”
2. CIOs have typically made data collection a top priority. Yet even when data exists, no CIO can take its availability for granted. Just 67 percent of High-growth CIOs said data is readily available for relevant users, versus 51 percent of Low-growth CIOs. “The benefits of making information available are beyond comprehension,” an Education CIO in Saudi Arabia told us. Many CIOs admitted that their users can’t always access the information they need in a timely manner. A Government CIO in the United States noted:“Data is readily available to users, but it’s tough to find if you’re a novice”.
3. Some of the key findings of the India PoV of the CIO study 2009 are: 70 per cent of Indian CIOs are integrating business and technology to promote innovation for the entire organisation as compared to 47 per cent of global CIOs; and 64 per cent Indian CIOs proactively push IT as an innovation element compared to 55 per cent of global CIOs.
4. One key area where global CIOs rank ahead of Indian CIOs is around proactively crafting data into actionable information. However, this is also an area which both global and Indian CIOs have ranked as number one for their visionary plans for future.

 Some thoughts basis this:

1.    Analytics is often spoken about as a strategic area. But what are the elements required to really embed analytics into the corporate strategy. I think you need the following:

a)    huge mindset towards data based decisioning from top-typically CEO

b)    Aggressive CFO questioning marketing spends

c)     Strategic CTO/CIO who creates the enabling environment

d)   Most importantly you need a passionate evangelizer-in either marketing, finance or customer operations. Typically a senior person in these functions who passionately believes in data led decision making

e) Data is there but is awfully difficult to put together for analytics. Smart companies are able to create “Data capability” by bringing disparate data streams together –first manually and eventually into a datawarehouse

"Customer intelligence" needs internal marketing!

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Retail, Telecom, Banks and many other businesses are interacting with their customers almost on a 24x7 basis! That is producing a huge amount of data from which “insight” is often hard to extract. But the more significant challenge is actually communicating the very “actionable insight” that a Customer Intelligence function produces to key stakeholders across the company! Emails tend to be often ignored and with the barrage of meetings that most executives are subjected to, analysts must look for creative solutions to the communication problem!

Why is this critical? The adoption of analytics in an enterprise is directly proportional to the ability of an Analyst to communicate in a concise fashion to key decision makers across the company in a way that improves" evidence based decision making" in the company!

Jaulie Katz from Forrester has this this interesting comment- "only about half of the Customer Intelligence professionals at the firms we surveyed use a dashboard or scorecard to communicate their successes across the enterprise. We also find that those firms that have implemented a dashboard are included in more elements of strategic planning than those who don't."

At Cequity we believe that the change management across the enterprise as a result of Analytics is fundamental to delivering the holy grail of "ROI due to analytics". And for this to happen it is absolutely imperative for the Customer Intelligence team to communicate effectively across the company.