Our electronic footprints!

I wrote earlier about data privacy issues and how customers are willing sometimes to share data with marketers in return for specific benefits. What about data which gets picked up without you even knowing about it? Scary right!!

Nick Gonzalez has this interesting comment about this fascinating company:

Path Intelligence is a U.K. based company that monitors foot traffic in a rather ingenious way, through customers’ cell phones. Periodically our cell phones ping the nearby cell towers basically saying “Here I am”. Path Intelligence has built receivers that detect these signals and triangulate the owner’s location with accuracy of up to a meter.

Path Intelligence can then map these signals and track anonymous customers as they move around and answer questions about the store’s layout through online reports. Where are the bottle necks? Where do customer’s spend the most time. How many customers browse and go?

Here is my take:

1. This would be a fascinating way to analyse footfall within a store. It might lead to a better way of staffing different departments within a store. Or even locating another cashier till!
2. Imagine how this can be used effectively to understand which part of an exhibition or conference was visited more. Check this out: http://www.slideshare.net/brady/where-20-path-intelligence
3. Look at the rich analytics that you can do by marrying the footfall data with conversions within the store(cash memos per footfall)

Credit cards help you save!!

Credit cards helping you save-that sounds like a oxymoron! Are banks trying to become more customer centric! 

Debit & credit cards are different silos within banks-Credit cards operates as a separate P&L and often the Debit card reports into the Liability business head. And of course it is rare for the silos to talk to each other in any business! So how on earth can these businesses become more Customer centric!

Credit card companies in the US that once were a vehicle for out-of-control spending are now helping consumers stay out of debt. Citi and MasterCard Worldwide announced that Citi will implement the consumer application in the U.S. of MasterCard inControl – a service that gives cardholders the ability to set spending controls and receive real-time information about their accounts. By itself this is nothing new, Quicken & others have been pushing this service for a while now.

Interestingly, MasterCard’s announcement comes days before the final provisions of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, the most comprehensive overhaul of the credit card industry in history, goes into effect today, August 22.

Dan Ariely the Behavioural economist has spoken about a “self control” credit card.

But is it practical to expect a financial institution to gustily embrace such a concept especially when they earn billion in “interest charges”. Is there an opportunity out there for a bank to be truly “customer centric” without “breaking the bank”!!

Here, from Dan Ariely’s Predictably Irrational is the idea of a” self-control” credit card:

A FEW YEARS ago I was so convinced that a “self-control” credit card was a good idea that I asked for a meeting with one of the major banks. To my delight, this venerable bank responded, and suggested that I come to its corporate headquarters in New York.

I arrived in New York a few weeks later, and after a brief delay at the reception desk, was led into a modern conference room. I began by describing how procrastination causes everyone problems. In the realm of personal finance, I said, it causes us to neglect our savings-while the temptation of easy credit fills our closets with goods that we really don’t need. It didn’t take long before I saw that I was striking a very personal chord with each of them.

Then I began to describe how Americans have fallen into a terrible dependence on credit cards, how the debt is eating them alive, and how they are struggling to find their way out of this predicament. America’s seniors are one of the hardest-hit groups. In fact, from 1992 to 2004 the rate of debt of Americans age 55 and over rose faster than that of any other group. Some of them were even using credit cards to fill the gaps in their Medicare. Others were at risk of losing their homes.

Now the ground was ready and I started describing the self-control credit card idea as a way to help consumers spend less and save more. At first I think the bankers were a bit stunned. I was suggesting that they help consumers control of their spending. Did I realize that the bankers and credit card companies made $17 billion a year in interest from these cards? Hello? They should give that up?

Well, I wasn’t that naive. I explained to the bankers that there was a great business proposition behind the idea of a self-control card. “Look,” I said, “the credit card business is cutthroat. You send out six billion direct-mail pieces a year, and all the card offers are about the same.” Reluctantly, they agreed. “But suppose one credit card company stepped out of the pack,” I continued, “and identified itself as a good guy--as an advocate for the credit-crunched consumer? Suppose one company had the guts to offer a card that would actually help consumers control their credit, and better still, divert some of their money into long-term savings?” I glanced around the room. “My bet is that thousands of consumers would cut up their other credit cards-and sign up with you!”

A wave of excitement crossed the room. The bankers nodded their heads and chatted to one another. It was revolutionary! Soon thereafter we all departed. They shook my hand warmly and assured me that we would be talking again, soon.

Well, they never called me back. (It might have been that they were worried about losing the $17 billion in interest charges, or maybe it was just good old procrastination.) But the idea is still there-a self-control credit card-and maybe one day someone will take the next step.

Whose data is it anyway?

Big organizations have a lot of fear concerning peoples' privacy, but book publisher, event organizer and industry luminary Tim O'Reilly thinks it's time to throw our old models out of the window and re look at privacy afresh. "The old model of privacy isn't taking into account any of the trade offs, and clearly people are willing to make those trade offs," he says. "Google maps on your phone sends your location to someone else's server every time you look something up, for example." O'Reilly's position on privacy is a very important one, at this point  when the future of privacy is being debated.

O'Reilly says.

"Technology is taking us a direction where more and more is known about us. It’s hard to be completely anonymized. I think we need a complete fresh look at what trade offs we're making and why. A good example is health care privacy. It's true that there are some diseases that still have stigmas around them, but our need for privacy is mostly about adverse selection from insurance companies. The problem we need to solve is adverse selection due to pre-existing conditions, not to treat the info like it's toxic waste. If we look at the benefits of using the information - they are incredible.

"One thing we can do is look at places where people have given up a fair amount of privacy and feel ok about it. The financial arena is one of those places - it's ok to do data mining for fraud prevention.

What do you think?

1. Should we as a society be sacrificing privacy for the sake of innovation and more relevant services?
2. What is the role of Marketers, especially in India, where data privacy regulations are nascent or not there at all?
3. Can  Analytics play a role in uncovering more insight in the data and making the marketing more relevant thereby crowding out the irrelevant messages ?
4. Should some industries lead the thinking on data privacy? After all Telecom services, Banks & Retail probably have the largest customer databases. Should Marketers in these businesses think ahead and establish “high ground” in how they treat their customer information?
5. What about data sharing across industry- Co branded credit cards have used data across Retail , airline and other sectors  to launch customized offerings? I Mint has done the same as a coalition loyalty program that has multiple participants-Banks , retailers, Airlines etc.
6. How should the CTO/CIO think about this? What kind of customer privacy safeguards can be built into the technology roadmap?

 

Wave & shop!!

I saw this interesting story about Citibank launching a pilot in Bangalore to test out what it claims to be the world's largest Near Field Communication (NFC) contactless payment pilot. Mobile Proximity or “contactless” Payments are made at the point-of-sale (POS) by physically touching or tapping the phone on a contactless reader device.

 NFC was one of Gartner's 8 Mobile Technologies to Watch in 2010. Mobile payments offer the possibility of entirely new ways of making payments and moving money to and from individuals, businesses, and other entities. Look at this interesting Coke vending machine-just wave your mobile and take your Coke!

I found this interesting because I have been observing customer payment behaviour change for over a decade now. Not very long ago, share of credit card spends in department stores was not more than 35 %(that is 35% of total store sales came from credit cards)! Today it is more like 50%!

I wonder how migration to newer payment technology will progress. This is why I found the Citi Tap and Pay pilot to be a very interesting experiment run with commitment & with strong investment. The pilot enabled Citibank MasterCard credit cardholders to use NFC phones to make payments at the point-of-sale and to receive promotional offers and discounts at a wide range of department stores, food courts, restaurants and fast food outlets, book stores and multiplexes.

The catch with contactless payment is that any device to be able to carry out such payments has to be embedded with near-field communications NFC chips; in most cases in India, for example with the Delhi Metro card, consumers are being issued separate cards. The problem with NFC deployments is that no handset manufacturer, except in Japan has taken on the additional cost and effort of embedding NFC chips in their phones.

To take part in the trial, Citi customers first needed to purchase a Nokia 6212 Classic phone, pre-loaded with the Citi Tap and Pay application and enabled with MasterCard's PayPass contactless payments technology. The Nokia phones were made available for sale from a number of Nokia stores in the city and, as an incentive, Citi offered cardholders a rebate if they purchased a phone and then used it to make purchases

Contactless payment allows issuers to compete with the cash payment market. Retailers realize benefits due to faster transaction times, increased revenue, improved operational efficiency, and lower operating costs. Consumers enjoy the convenience of hands-free payment, the ability to pay for multiple services using one device, and the security of not having to display a card for payment.

Contactless payment applications are particularly attractive to retail segments where speed and convenience of payment are essential (for example, quick service restaurants, gas stations, convenience stores, parking facilities, transit services, entertainment venues and unstaffed vending locations).

Here are some thoughts that came to my mind:

1. Convergence is about changing customer behavior-can be done through "trickle marketing" (one to one communication with relevance!)not "mass marketing"!Customers do not suddenly move towards Internet banking or Mobile banking or NFC (contactless payments) !
2. This change does not happen without a structured marketing effort to reduce consumer barriers. These barriers are at 3 levels: a)information barrier-I did not know you could do this? b) payoff barrier-What do i get if i change my behavior-and this need not be only price led & c) transactional barrier-how do i make this new behaviour a habit!
3. Making this kind of change requires marketers to think "one to one" and not "mass". It all starts with understanding & analyzing customer adoption. Analytics can uncover a lot of valuable information about customer paths as they adopt new payment methods.

 Meanwhile read about this interesting Citibank pilot here

http://www.edgardunn.com/uploads/100012_english/100366.pdf

 

 

 

 

Banking is going mobile!

There is this huge debate in India about who should own and drive the Mobile banking journey! Should it be the telecom operators or the banks! Recently, Duvvuri Subbarao, governor of the Reserve Bank of India (RBI), said at the Banking Technology Excellence Awards, “World over, there are two distinct models in mobile banking - the bank led model and the mobile operator led model. The Reserve Bank has a clear preference for the bank led model.”

 Indian mobile banking has two major segments: the urban segment and the rural segment. Celent, a consulting company, estimates that urban mobile banking subscribers will reach 65 million by 2012. The rural mobile segment represents a huge opportunity to bank the unbanked population, thereby adding a revenue stream. But I wonder how much are banks dipping into their vast treasure trove of transactional data to actually analyze the behavior changes that are driving adoption! Are consumers following a path through more advanced usage of ATM's and on to Internet banking and then they become Mobile banking users? Or are Mobile banking users distinct consumers with different needs?

 Whoever leads this journey, banks or telecom companies,the important thing is who is more likely to drive customer adoption and be more “customer centric” in their focus? Both industries, Telecom & Banking have a huge “new customer acquisition focus” and both have over the last 5 years been penetrating the market and bringing in a huge set of customers who are now beginning to expect far better customers service and more products configured to their needs.  In my view the critical area to think about is how are banks profiling and developing a better understanding of their customers who are “early adopters” of tech led services such as Net banking, Mobile banking, Direct pay etc.

Banks have so much information about what is leading to this kind of channel migration. How much of this information is being looked at analytically to deliver a better “one view” of this “new age” customer?

Who needs "New Customers"?

I worked in 2 organizations’, which had a “sense of urgency” about existing customers. I was the head of Marketing for Shoppers’ Stop and later for HDFC Bank.

 

The CEO himself led the “sense of urgency” in both companies! At Shoppers’ Stop we built a base of Loyalty program customers (over a million customers) contributing to over 60% of store revenue and at HDFC bank we reduced cost of acquisition by cross selling to existing customers using analytics.

 

But generally I do not see the same urgency across companies and industry and so I was quite amazed to see this bold statement from the Macy’s CMO Peter Sachse in his keynote speech at the Retail Innovation & Marketing Conference talking about a shift in company focus. For Macy’s, “What we don’t need to do is get new customers,” Sachse said. Instead, “we realized that all we need to do is take care of those who already love us.”

 

Here’s how it all started: Last year, Macy’s embarked on an intense research project to better understand their current customers. They conducted dozens of focus groups. Talked with nearly a thousand people walking out of their stores. Combed through all of their transactional data to find themes in buying patterns and shopping habits.

 

The company has set out on a goal to encourage each existing customers to visit the store one more time each year. “Half the battle is won if we can get them to walk into our store,” Sachse said. “And if we convert them during that visit, our comp store sales will explode.” To accomplish that goal, he said, “We had to get a lot closer to the customer,” which has led to the company’s new strategy of customer-centricity.

 

Here are some tips from Peter Sachse on how Macy’s is making decisions with the customer in mind:

 

• Make merchandising decisions with the customer in mind. Macy’s used to let buyers make merchandising decisions strictly with P&L statements. Today, the company layers customer insight over the sales metrics, which helps buyers make more holistic decisions over how pulling a product might impact customer behavior and overall sales. The product is no longer king anymore, said Sachse. Instead, the customer is queen. (Or king, of course.)

 

• Start all meetings by asking “what will our customer get out of this discussion?” At Macy’s, Sachse says, “If there’s no answer, the meeting is over.”

 

• Create a customer-champion team. Macy’s Chairman and CEO Terry Lundgren calls himself the chief customer officer. Who’s the customer champion in your company?

 

 

Why “Less is More” in Retail?

Retailers find they sell a lot more of nearly everything by reducing the number of brands on offer, but figuring out what should stay and what should go is not easy. In economics they call it the "paradox of choice," the idea that a shopper, when faced with multiple options tends to focus too much on which item to choose, and is therefore less satisfied with the item she finally picks.

Reducing the number of products can help companies increase sales by as much as 40% while cutting costs by between 10 and 35%, according to a 2007 study by consultant Bain & Co.

Here is an extract from an interesting article in The Globe & Mail:

Several months ago Wal-Mart Canada Corp. decided to overhaul one of the staples of its grocery business – the peanut butter aisle. It dropped two of its five lines of peanut butter to free up scarce shelf space for cinnamon spreads. But the decision didn’t cost the retailer a single jar in sales. With fewer selections to browse, customers wound up purchasing more than before.“Folks can get overwhelmed with too much variety,” said Duncan Mac Naughton, chief merchandising officer at Wal-Mart in Mississauga. “With too many choices, they actually don’t buy.”

In a reversal, retailers are now reducing the amount of choice on their shelves. After years of tempting customers with ever expanding arrays of brands, hues, sizes and flavours, they’re racing to simplify their offerings. The recession has encouraged them to focus on top sellers and private labels while throwing marginal products overboard.

But look at the India situation:

Here are some facts from a recent article by  Meenakshi Radhakrishnan-Swami

FMCG companies in India have had a fairly smooth run until now - given that the average kirana is 150-200 sq ft and has space for less than 1,000 SKUs, they didn't need to create endless product variations and extensions of the same brands.

Compare this with Barry Schwartz's list in his 2004 bestseller The Paradox of Choice: Why Less is More, based on a visit to his local supermarket in the US:  285 types of cookies (21 options in chocolate chip alone), 95 different snacks, 360 shampoo types, 40 options for toothpaste, 275 varieties of breakfast cereal, 175 types of teabags.

Schwartz's supermarket was a "not particularly large store", but Indian consumer goods companies would struggle (and fail) to stock even that level of products (and remember, this book is three years old): Cadbury India has over 100 SKUs in two categories, Procter & Gamble sells over 320 SKUs across five categories, while Hindustan Lever has more than 700 SKUs in over 20 categories.

If hypermarket visitors are not to be confronted by acres of empty shelves, then, consumer goods companies will have to expand their portfolios substantially. "

Here is my view:

1.   I wonder if Retailers would like to explore using their Loyalty data to understand purchase behaviour at an SKU level. Companies like Big Bazaar & Spencers would have humongous amount of data which can be used effectively.  Analytics on this data would throw up actionable insights.
2. Also I am sure that a Retailer could partner very effectively with a credit card company to further overlay information on his loyalty card behaviour and analyse his assortment better. Partnered analytics is still a new concept in India and I wonder how it could explode action-ability.

 

Making Hospitality Marketing Customer-centric

Most often hospitality industry talk a lot about customer service at the property as a key differentiator to customer experience & satisfaction.

I believe this is not the case and most often, it starts with even before the customer visits the hotel or the restaurant of choice. Also, there are many a times, the post usage experience is forgotten and very rarely have I ever seen any credible data-led customer marketing intiatives in this phase. 

It was interesting to see Intercontinental Hotels do very interesting customer marketing work in this area. Here are some interesting facts: 

• Intercontinental Hotel Group’s (IHG’s) uses of data-driven marketing to improve communications with existing customers and prospects is an interesting case study for many hotel groups across the world.
  

• Lincoln Barrett, vice president for guest marketing and alliances, shared that, for IHG, building a customer-centric marketing strategy is based on 3 Key pillars:
  

          - Invest in technology
          - Expand into new frontiers
          - Build a centralized customer organization

She was talking at the UNICA Marketing Innovation Summit in Orlando.

• She talked about the need for real-time data mart that would allow IHG to match the data it was gathering through proprietary and third-party sources to existing customer information. 
  
• According to her this step also made it possible to gain immediate access to data for analysis or campaign building purposes – a significant upgrade to IHG's previous functionality, which updated records in batches and only made data available some 30 days after a customer incident (like a hotel stay).
• She talked about some interesting trends in hospitality Marketing - Right Time marketing, Channel Synergy, Glocal Communication, Non-member marketing etc. 

Analytics is sexy ..what about making it work!!

Making Analytics sexy doesn’t make it easier to implement! And this is where the challenge lies in Analytics. Striking headlines make for easy copy but don’t do wonders for executing analytic intent within a corporation.

Unfortunately executing analytics is hard work and demands the coming together of business skills, advanced statistical knowledge and technology capabilities. For years there have been sexy headlines about a retailer who found that diapers and beer are purchased together by men on Fridays. Recently one can see this story about Why Visa Predicts Your Divorce?

Unfortunately the challenges faced at the implementation level are really about making your way through issues about  company's structure, process, incentives & the really big one about “silo mentality”.

Making a great Analytics scorecard is possibly only about 35-40% of what is required –much more needs to be done in terms of change management and all the nitty gritty of wading through the implementation. The greatest analytics would not solve the problem of the sales channel continuing to sell a higher margin product! Even if analytics predicts that the next product more likely to be purchased is a different one-the sales channel would continue to sell the higher margin product. In such situation what is needed is the ability to be able to articulate the business case for analytics which involves having a voice in the decision making process of the corporation. Often Analytics teams may be structured as independent support functions and then they would not have the authority to seek such changes.

Key requirements to make Analytics work in my view are as follows:

1. Allow analytics to be both centralized & de centralized-it should not be seen as a function but rather as a necessary process to achieve more profitable results. Some companies who have “got it” tend to have had a visionary leader at the CEO level who drove this vision through-Gary Loveman at Harrah’s Casino is an example.

2. For the Analytics process to mature in any company –leadership must build a “evidence seeking” culture towards decision making. Like the old saying-“In God we trust , all else must bring me data”

Meanwhile the sexy headlines are fun to read, so enjoy!! http://www.thedailybeast.com/blogs-and-stories/2010-04-06/how-mastercard-predicts-divorce/full/

Getting past lip service on Customers!

Everyone speaks of being Customer centric and I am sure you have been reading about it for years. Different names are used for it: Relationship marketing, One-on-One marketing or Customer marketing! The essence of it is often lost in the mad rush that exists in a growing market.

Increasingly India is becoming a Service economy, but our mindset is still manufacturing. We have over 600 million customers who are on some customer database either of a Telco, Bank, Retailer or Travel company. These customers are "addressable media"they hugely value a differentiated treatment at the retail point. because we know them by name and understand their behavior patterns. Retailers by the nature of their business have an even more "intimate connect" with their customers. Customers tend to become "store loyal" over a period of time and

It is far easier to market a "product" which a consumer can hold vs. a "service" which is by nature so fragmented. There is also an increasing trend towards "service-isation" of products. A washing machine is more than a product, its servicing needs are a "service offering". You could imagine a brand like "Coke" offering "dating" services.

 

As the Indian economy moves increasingly towards services, consumers move from Brands to Services to Experiences. Coffee costs are low at the wholesale market and we sell it as an "experience" at a higher end restaurant at over Rs. 50 per cup.

 

A silent revolution is on in the minds of urban consumers in India. And the revolution is about a change in expectation about how brands "build relationships" with customers. The question is, are marketers who have been used to "building brands" able to fathom the changes that "building relationships" demand.

 

More critically what do traditional Marketers need to do to effectively produce Return on their marketing expenditure?

To summarize, getting past purely doing lip service to ROI led Customer marketing needs the following pillars to be in place:

1. Marketing must have a significant voice in driving the "customer" agenda and setting the pace for CRM.

2. The organization must have a compelling "evidence" based culture which persuades marketing to look at customer behavior before and after every marketing campaign. This forces the marketer to look at "return on customer" along with other metrics like "return per square foot" or "Return on inventory".

3. Marketing must be sufficiently automated, using technology to do this at scale. But the automation can vary right from an excel sheet to expensive analytical and marketing automation technology. Companies should take the call of level of technology investment very carefully and it should match their appetite to do "intensive change management".