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Tuesday, April 7, 2015

Convert More Leads To Sales
Only 3.6% of leads from customer and employee-referrals convert to sales.  (1,000 leads produce a paltry 36 closed sales!)  However, 3.6% looks good compared to conversion rates from other lead-sources.  Consider:
  • 1.6% for website leads
  • 1.5% for Facebook/Twitter/Social Media leads
  •   .8% for advertising and marketing leads
  •   .6% for trade show leads
  •   .5% for webinar leads 

While discouraging, these closure rates probably aren’t a complete surprise. If you consider it further, the superiority of personal recommendations should be no surprise as well.  We’ve previously cited research from Nielsen and other organizations to reinforce our belief in the power of personal communications versus institutional sources.  People simply trust other people!


There's No Hiding From the Numbers

 

Yes Implisit, the sponsor of the research that generated this information did gather the

numbers in a B-to-B environment. No doubt many consumer products enjoy higher close

rates.  But even so if generating new sales weren’t so critical we might be tempted to ‘throw in

the towel’ on the lot. After all, the highest conversion rate is a measly 3.6%! 

 

Or, the Reality

The answer might just have to be one of generating a lot more leads - the most productive type of leads - those generated by customer and employee word of mouth.  Unfortunately, no matter how great your product or service, even the most loyal of customers usually don’t generate the level of word of mouth you deserve.  And strange as it seems, even those people whose paychecks are dependent on your company’s success (your employees) may not be of the mindset or have the total corporate picture needed to speak to their friends, neighbors, relatives or strangers about your brand.

Turning Customers (and Employees) Into Active AdvocatesPositive word of mouth can be an incredibly powerful force in encouraging potential customer to consider and buy a brand, but it doesn’t easily happen without some facilitation.  Both customers and employees need a well-orchestrated word of mouth management program; one that provides them:
  • Motivation
  • Opportunity
  • Content
so they can effectively lobby for your brand.
 
Until such individuals are reminded of their connection to your brand they won’t be motivated to promote it.  This holds unless and until an incident or event occurs that provides them with an opportunity to express their opinion.
 
Further, until they are provided with content and a 'story' to tell, most won’t be helping you build awareness/consideration and they aren’t likely to be heard recommending your brand.
8:28 pm edt          Comments

Saturday, February 21, 2015

A Simple Story of Customer Lifetime Value

We don’t read much today about Customer Lifetime Value.  Maybe it’s not exotic enough to command much attention, but we all know it’s critical to business success.  Our friend, Tommy the barber, understands the concept completely though he won't use the term.  Follow with us through an example of lifetime value using Tommy's barbering business.  We’ll not only consider the value of a single customer over time, but also the added (and often overlooked) value of a customer's ‘multiplier effects’ that add far greater significance to a customer's value.

Our friend Art is a long-time customer of Tommy, an aging barber in his little old-fashioned barber shop.  Including tip a haircut at Tommy’s costs $20.  At this price, an individual hardly seems worthy of too much attention.  But Tommy would be the first to point out the error in that observation.  Tommy knows that Art’s worth far more than the $20 he pays on any given visit.  That’s why Tommy will stay open a half an hour later if Art’s running late, and never hurries his attention to Art’s cut – even when the waiting area is full.

Those $20 Bills Can Add Up!

Tommy’s figured things out.  He understands that Art gets his hair cut every three or four weeks – like clockwork.  So, since he’s been a customer, Art’s value each year to Tommy has been about $300.  And, because Art has been a loyal customer of Tommy’s for the last 10 years, he’s put no less than $3,000 into Tommy’s old cash register.  This could be Art's “lifetime value”; an amount considerably more meaningful than the $20 transaction for a single visit.
 
But There's More....
 
But Tommy would point out that Art’s lifetime value is actually a lot larger.  Not only is Art still a relatively young man with years of haircuts ahead of him but his word of mouth is extremely valuable to Tommy's business.  Art was responsible for recommending Tommy to us.  We subsequently recommended him to three others, who each became his customers.  We know at least one of those customers has recommended Tommy to two additional folks who also became customers. So the ‘snowball’ of positive word of mouth accumulates adding an exponential amount to Art's own, personal contribution.  The fact is, Art and the additional customers he's sent to Tommy have been worth almost $6,000 - to date - and that amount grows each month!

In past articles and talks we’ve employed similar examples from local pizza parlors, gas stations, life insurance agents, etc..  These examples taken from businesses with seemingly small transaction revenues dramatically make the point that a customer is worth so much more than his or her typical purchase.

No doubt you were ahead of us as soon as you began reading this column.  But, we hope Tommy’s appreciation for Art's value gives you some ideas about how to compellingly communicate customer lifetime value to your colleagues and subordinates (sometimes even higher-level managers).  It’s a lesson that can’t be underestimated in its importance.

 
8:46 pm est          Comments

Thursday, January 29, 2015

Do Your Employees Know Too Much to Think Like Your Customers?

Mark Zuckerberg and a coalition of technology companies (including Ericsson, Qualcomm, Nokia and Samsung) and nonprofits have teamed-up with the aim of bringing the Internet to the two-thirds of the world’s population that currently doesn’t have it.  A lofty, admirable goal.

Beyond our respect for the societal benefits of this project, we discovered within reports of the project an intriguing challenge they faced: getting ‘Silicon Valley types’ (who live with high, hi-tech items) - to comprehend life in, say, a farming village in India!
 
While building a permanent lab to simulate in-market technology conditions, Facebook became aware of the ‘disconnect’ between their view of their category – as ‘insiders’ – and the perspective of their target customers.  To Silicon Valley insiders a 2010 Android phone is “ancient” but to many of their target customers it’s “high technology”.   When forced to interact with such hardware, staffers were heard referring to “low-end” phones and networks.   Of course for the majority of the world’s population a first generation Android phone is not “low-end” or ancient but rather is current reality.  And before the engineers could begin to conceive of how to tackle the adoption problem, their mindsets had to be drastically altered. Rather than thinking and talking about “low-end equipment and service” they needed to start referring to it as “typical hardware”.

 


Great, But What's This Got To Do with Your Business?


You aren’t tasked with bringing the Internet to the world’s population, but we see an important lesson here.  Just like those Facebook technologists, most business executives and marketers are simply so close to and so knowledgeable about their products and category that they fail to relate to and experience their category from their customers’ perspective.  They’re privileged to use the latest and greatest versions of their products and by doing so can be out of touch with their customers’ current perceptions and problems.  Like Facebook’s technologists they are industry insiders and very different from most of their customers and prospects.

Consider a few examples we’ve encountered in past assignments:


  • Insurance company executives observing focus groups conducted among their policy holders refused to believe they were bona fide customers.  Why?  Because the participants hadn’t carefully read their insurance policies and didn’t really understand the coverage they were paying for.  (The executives, on the other hand, lived and breathed the details, understood the terminology and legalese, and would never have bought a policy without reading and digesting every word.) The executives weren’t bad people, they simply couldn’t comprehend any customer not having the same information as they had.
  • Auto executives found owners' descriptions of the Owner Experience as inconsistent with their reality.  In lengthy discussions it was learned that the executives had never purchased a car in a dealership but rather selected their next year’s model from a company website and the car was subsequently delivered to their corporate office.  They hadn’t visited a dealership for service because their Administrative Assistants scheduled their cars for servicing.  The car was picked up at their office and dropped off later the same day, washed and detailed to perfection.  They knew all the design features and specs and how their cars compared with the competition, but their corporate positions actually limited their opportunity to experience their product in the same way as their customers.

Challenge Your Perspective, Step Outside Your Office and 'Look In'

We all want our executives and staff members to know everything there is about our products and our category.  Ideally we would like customers to share much of the same knowledge.  But pragmatics interfere; consumers interact with too many types of products and services and lack the time or the inclination to listen, read, or digest the information available.  The two realities are very different.  Taking steps to help management understand the experience of a “typical” customer, and even encouraging your internal partners to modify the language they use to talk about it, as Facebook’s coalition did, can lead to progress in delivering higher quality products and services.


 


5:39 pm est          Comments

Sunday, December 21, 2014

What Are Customers Saying About You? How Do You Know?

Wired magazine’s September, 2014 cover was a photo of Eric Snowden, period.  No photo caption, no headline, no copy whatsoever.

 

We won’t take a position on Snowden or the cover.  But as marketers we were intrigued by a follow-up story in Wired that reported on reader reaction.  But rather than the reactions themselves, what really caught our attention was how the tonality of the received comments varied so much by medium.  Wired was clever enough to track responses by each platform.  They reported on the seven most-used sources of feedback/word of mouth.  These high-volume channels ranged from Instagram to Twitter, to their own website and even traditional postal mail.

The strategically relevant story, from a marketer’s point of view, is how much difference there was in the tonality of communications by channel:

 

https://gallery.mailchimp.com/cce6f552e5e9cb3cffca079b3/images/371bc168-d00e-4a0c-b4ee-4b1c74887053.jpg

Wired’s analysis shows that relying on a ‘content analysis’ from any one source could lead one to drawing conclusions that were completely unrepresentative of the overall sentiment.  The diversity exhibited here clearly suggests the need to monitor multiple social media channels to accurately determine what your customers may be saying about you.

It's What Many Brands Are Doing

But even if you include multiple channels (as Wired did) you're still likely hearing only a fraction of what's being said.  That's because customer comments aren't restricted to only the public social media (Instagram, blogs, Facebook, Twitter, Reddit, YouTube, etc.).  Instead, research from multiple sources tells us that 80% + of all word of mouth takes place through private social media (emails, test messages, phone calls, and plain old face-to-face conversations).

The Lesson from Wired's Analysis

Most astute marketers today understand that consumers control the brand message.  As a result most now make an effort to monitor social media and to respond when and where appropriate.  But the most important lessons the Wired story should teach us are:

  1. Monitoring one or two public social media platforms is not enough. 
  2. Be sure to give your customers multiple channels to reach your brand.  And, be sure you are listening to all of them. 

One Final Reminder

Wired did not consider it in their summary, but you probably should.  The 80%+ of word of mouth that circulates out of the public eye doesn’t all take place through email and hard mail.  The majority likely occurs in private text messages, phone calls, and face-to-face conversations.  If you truly want to understand the forces that are impacting your brand today, and those that will shape the future of your brand, you need a broader, more objective, more representative measurement tool like our Buzz Barometer®.  You need to know how much word of mouth is circulating, through which channels, with what frequency, with what tone, and the exact content that's being communicated

 


10:17 pm est          Comments

Monday, November 24, 2014

A Final Word About 'Firing' Customers

It should be simple; some customers are costing you money, so fire them!  Activity-based cost accounting has dramatically shown that for most businesses 20% of customers generate all the profits, while 60% of customers help to cover fixed costs but are basically breakeven, and 20% of customers actually are a drain on profits.  With this ‘client topography’, it would seem logical that all any business needs to do is jettison its unprofitable customers and watch the remaining dollars flow to the bottom-line.

But, of course, the devil is in the details.  In particular, identifying costly customers and, for that matter, identifying currently profitable and potentially profitable customers has been challenging.  Some businesses naively believe they know their best customers because they must be the ones spending the most, or those in the highest tiers of a loyalty/points program.  In most cases these indicators are overly simplistic and may not be accurate indicators of truly profitable customers.

 

Then, How Do You Identify Costly Customers?

To properly identify those customers that you might want to lose, and for that matter to identify those customers who deserve extra effort to be retained (because they are most profitable) we have promoted a scoring system we call SLP2 (as in Satisfaction, Loyalty, Profitability and Potential).  Each component has its own source.  Satisfaction is scores generated through survey feedback capture.  Loyalty is a measure of historical buying behavior.  Profitability is modeled from servicing costs including: discounts required to close sales and demands for after-sales servicing.  Potential is based upon the share of category spending currently allocated to the brand by each customer.

 

We've Come a Long Way

When we first introduced SLP2 to the world some fifteen years ago, it was, to be kind, ahead of its time.  We were frequently told (either correctly or incorrectly), “We can’t access that information!”  And in fact, most marketers lacked the systems to precisely track individual customer’s buying behavior or to model profitability.  But that was before CRM software and the popularity of ‘big data’.  With today’s information capture systems, most services and many goods manufacturers can now access an entire history for every one of their customers!  Further, most corporations regularly track customer satisfaction, and many no longer shirk from asking share of wallet spending questions (to determine potential).

 

SLP2 has the potential for really making efficient and effective use of all that information.   Identifying the most valuable and the least valuable customers for the future of your business can take marketing and customer service strategy to a smarter and more profitable level. 

 

A Final Word About 'Firing' Customers

By the way, for all those who read to the end of this column, we at Customer Experience Partners, strongly recommend against ever “firing” any customer.  If possible, we recommend directing them to a product and service mix that turns them into at least a breakeven customer for the company. Should that fail we recommend finding a way to introduce and escort them to a competitor. It will save a lot of pain for everyone and avoid a lot of potential negative word of mouth. 




 

 

2:28 pm est          Comments

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Customer Experience Partners, LLC
Measurement, Management, Optimization
Contact us at: 203-655-0090 or
pruden@customerexperiencepartners.com

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