Good Marketing Leads to Profit. Skip it and You Are Stuck with Loss.

Filed Under , Effective Marketing, Product Management, Product Marketing | Leave a Comment

Marketing, as a business activity or profession, has a bad reputation. Most people think that anyone can do marketing and there is no need for professional training. From my personal experience in large and small companies, there are dozens of people who think they are good marketers. But, alas, they are not. Like in any industry, there is a certain percentage of people whose work is effective and worthwhile emulating. The rest are poor examples or attempts to mock something like it (”marketing”) in haste.

If we think of the best practices, successful product launches would illustrate the idea behind the quality of good marketing. It goes without saying that a product should be of value to the customers too, but its benefits must be communicated and marketed aggressively to succeed. The best products will not sell themselves, but a strong marketing effort, a well-targeted approach and efficient after-sales service will do the magic. This is where marketing planning comes into play: well-integrated, properly-targeted, proficiently-resourced and well-executed.

So, what is good quality marketing?

The top four qualities include:
1. Good marketing starts with a development of a marketing plan as an integral part of the new project or product process.

2. Good marketing means planning early and properly, identifying all the potential risks and opportunities before the execution of a campaign or a start of product development. Design cannot be started before its requirements are established, the target market is identified and positioning strategy is finalized.

3. Good marketing is only possible if you define its objectives clearly and early before execution. What do you want to achieve with your efforts? How does success look like? How are you going to track it? Measure, measure and measure your marketing to bring profitable results.

4. Good marketing is only as good as the market intelligence you have access to. You need that crucial information to build your game plan. Skipping on it - is going to cost you.

According to the studies by Robert Cooper, as listed in his book “Winning at New Products”, one of the persistent themes when it comes to problems and pitfalls of products that fail - is “that many marketing activities are seriously deficient….Many key activities are simply left out altogether”, especially the commonly critical ones like market research studies, trial sells, detailed business and financial analysis. Lack of market information remains the number one cause of product failures! Another trend showcases that marketing spend is only justified at the end (launch stage), when the product is designed. But this is where you are wasting the dollars if your assumptions are subjective and not supported by good marketing. This is where pieces of bad reputation are assigned to marketing as a discipline.

Learn on the mistakes other people made, do your homework first! Do your marketing planning first and you will reap profits from every dollar you spend.

Creative Brand Awareness Campaign for a Good Product

Filed Under Advertising and Entertainment, B2C Marketing, Creative Marketing, Effective Marketing, Product Marketing | Leave a Comment

When an existing product is revived by a new use case - miracles happen! Tide-To-Go exemplifies a stellar product already - it cleans the spots when you need it - right at the moment when they happen.  The product has been in the market for approximately two years if not more (according to my own discovery of it in 2006). However, it is only now that its powerful benefit will be known to the masses!

The new campaign - “Silence the Stain” illustrates good quality, creative marketing. It surely brings the product benefits to life in a humorous yet persuasive manner: a dirty spot becomes so distractive as it almost comes to life.  Brilliant theme and consistent messaging of this campaign are the standards to adopt while practicing the power of marketing! Check the ads for yourself and see which one speaks to you. My favorite - is the job interview clip.

Silence the Stain - Job Interview

Or the the marriage proposal:

or the date:

next one is a stop by police:

Measure Your Marketing with These Handy Metrics

Filed Under , B2B Marketing, B2C Marketing, Effective Marketing, Metrics | Leave a Comment

Measuring your marketing expenditures and re-evaluating what you have accomplished can be rather daunting and rewarding at the same time. But the most crucial benefit is how your actions are to be affected based on your findings. It is not the news that measuring your actions is followed by better decisions, however it is so common that most of us (marketers) are mostly 99% focused on just launching our campaigns, accomplishing the laundry lists of the pre-planned roadmap and creating new one before we can catch a breath and take a minute to look back. Metrics can help us maximize our effectiveness and identify our strengths and weaknesses on both strategy and execution. And of course, there are no perfect models to assess our actions. However, when I was reviewing my recent readings on marketing metrics by Paul W. Farris et al, I chose the following top eighteen (because ten is not enough) to adopt into the arsenal.

From the category of shares (hearts, minds and markets)
- Loyalty - measures future revenue streams. Usually, includes a combination of share of requirements (a.k.a share of wallet, a given brand’s share of purchases in its category), willingness to pay premium, willingness to search.
- Top of Mind - I love this one = The 1st brand that comes into a customer’s mind when he or she is asked about a category. The percentage of the customers who the given brand came out on top can be measured.
- Willingness to Search - implies the likelihood that customers will settle for a second-choice product if their first choice is not available. ( I know I do that for my dining experiences).
- Willingness to Recommend - includes a percentage of customers surveyed, who indicated that they will recommend a brand to their friends.
- Sole Usage Percentage - measures the proportion of a brand’s customers who use only the given brand’s products and do not buy from the competitors in relation to total brand customers.

From the category of margins and profits
- Marketing Spending – includes total expenditure on marketing activities (advertising and non-price related promotions, can include sales spending). Very useful metric. It is advised to have 2 formulas for it: fixed and variable marketing spending. Fixed marketing spending includes sales force salaries and support, major advertising campaigns, marketing staff (our salaries!), sales promotion materials and cooperative advertising allowances. Variable marketing costs comprise of sales commissions, sales bonuses, bill -backs for local campaigns, rebates, early payment terms expenses. To calculate the latter, you should use your revenue number multiplied by the percentage of variable selling cost. Total marketing costs is a basic sum of both.

From the category of product and portfolio management
- Brand Equity Metrics - helps to monitor health of the brand. This is the hardest metric and has a number of models, true moneymaker for the agencies and consultants. Interbrand and Young & Rubicam are the leaders in evaluating brand monetary values. The Y&R evaluates a given brand based on the perceived differentiation on the market, relevance to consumer lifestyles, the esteem the consumers hold due to the brand and the perceived knowledge about the brand those consumers possess. Strong brands show higher degrees across all four values. Growing brands illustrate high levels of differentiation and relevance. Declining brands show relatively higher degrees of esteem and knowledge. Personally, I like the Brand Equity Methodology (a.k.a Moran), that calculates brand equity based on the multiplication of effective market share, relative price and loyalty index. Loyalty index can be calculated by a percentage of brand customers that will repurchase the brand in the next year.

From the category of customer profitability
- Customer Lifetime Value considers the present value of the future cash flows attributed to the customer relationship, allows to budget acquisition and retention initiatives. Very useful metric for contractual customer relationships, where you have a projected timeline, average usage/purchase number, price, retention and frequency values. If margins and retention rates are constant, you can calculate the CLV as follows: multiply margin into the retention rate divided by a difference of (1+ discount rate) and retention rate. Valuable metric to identify the limit on acquisition spending.
- Acquisition vs. Retention Spending -the former represents the average cost to acquire a customer and is the total acquisition spending divided by the number of new customers. The latter illustrates the cost of retaining a customer (your retention spending and number of the “saved” customers).

From the category of sales force and channel management
- Direct Product Profitability includes the adjusted gross margin of products, less direct product costs.

From the category of the pricing strategy
- Price Premium implies the percentage by which the price of a brand exceeds a benchmark price.
- Reservation Price means the maximum amount an individual is willing to pay for a product. It is a key metric to predict the demand for your product.

From the category of promotion
- Average Deal Depth - comprises of sales via coupons divided by total sales. Quick and easy metric to see brand dependence on promotional efforts.

From the category of advertising media and web metrics
- Cost per Thousand Impressions (CPM) Rates is our standard advertising basics- is calculated as cost of advertising divided by impressions generated. My only concern and eternal question - how much is the noise or extra in the total impressions number and how much is the actual working range?
- Share of Voice quantifies the advertising presence of a brand, in relation to total advertising in a given market. Helps to evaluate the strength of the advertising program.
- Visitors - implies the number of unique web site viewers in a given period. I still trust only this web metric, love it for its ability to measure the reach of the website, identify its loyal visitors and content effectiveness during the time you were testing your messaging.

From the category of marketing and finance
- Return on Marketing Investment is different from the common return on investment due to the fact that we take a risk and expense our initiatives in the current period. The formula suggested: (incremental revenue attributed to marketing multiplied by contribution % minus marketing spending) divided by marketing spending. In other words, you have to attempt to identify the revenue piece you brought divided by total invested marketing resources.
- Project Metrics: Payback, NPV, IRR are our favorites from the finance departments. I mostly prefer the payback and NPV as applicable models to justify your spending.

To sum it up, various measuring models might evolve over time: some will be rejected, some will be re-established, and some will be invented. However, the more you are aware of various metrics, the better you are in your decision-making process, the more accuracy and tangible benefit you will receive for your marketing programs. It is just a challenge at times not to forget to apply them. However, imagine the benefits of testing various metrics and seeing through practice what makes sense and what does not?

P.S. Forrester Research folks have recently posted a video on marketing metrics. There are more metrics discussed outside the above list, like customer advocacy related to customer-centric marketing. Check it out for your listening pleasure yourself!

What’s in the Name? Naming New Products and Re-branding

Filed Under , Branding, Creative Marketing, Effective Communications, Effective Marketing, Product Management, Product Marketing | Leave a Comment

Coming up with a new product name, creating new packaging and staying loyal to the master brand could be quite a challenge, especially when multiple stakeholders are involved. So, what helps us go through this creative process? What can we already apply for our benefit that was tested and lived through? - Provided that we look at every product launch as a truly unique experience (which it is), here are some nuggets from my research to share on the subject:

I. The branding signals beyond the name
II. The necessity to change names and logos when strategies change
III. The beauty of the unique names

Firstly, Allen Adamson in his book “BrandSimple: How the Best Brands Keep it Simple and Succeed” points out the concept of bringing brand signals beyond the name. In other words, there should be some sort of a unique customer experience that reinforces your product name and transfers its meaning even further: instant perceptions of a product experience. This information can be of great value when you are to change the name of the service, product or even a corporate name. He calls these experiences - “power signals”. Examples of those signals could be:

1. People behind the brand – like FedEx employees delivering “reliability”. Before its expansion into the global markets, the brand had a name of “Federal Express”. It served well for a while till the company moved into a broader service scope both functionally and geographically. Federal Express became too limiting and not succinct in expressing the brand power and did not allow “capitalizing on what became a positive fact of life. “FedEx became a ubiquitous term everyone used for an overnight delivery. In 1996, FedEx was formally adopted as a brand name which followed the logo change as well. Moreover, FedEx is a fast, confident and super-efficient brand, so its employees! You have to deliver on the promise you have in your brand name –already!

2. Exclusive product placement –like Gatorade, can be another power signal. Its placement into the football game –“dunking of the winning coach” – almost became a very recognizable association. The trick though not just in the right placement at the right media and the right place – it truly evolves around the authenticity of the product benefit – it is created for the athletes and it does improve performance. So, it just makes sense to be endorsed in the football game placements.

3. The speed at which the brand is recognized – the power of the icon, can be very effective to communicate your meaning. KFC managed to get the attention of folks speeding at the interstate by using its recognizable icons. Originally, it used to be fully spelled out as Kentucky Fried Chicken with a pretty sizable image of Colonel Sanders. When the brand team had a re-design challenge, they first shortened the name to KFC AND increased the speed of service. Then, they reduced the size of the image to the postage stamp. What happened later is very interesting: customers perceived the change in the name (shortened version) as sensible, but interpreted the loss of sizable image as the indicator that the meal is no longer home-cooked quality. They wanted the image back. Colonel’s face was equal to Micky Mouse ears – highly recognizable.

4. The power of the first impression or a first mover – Genworth – (a spin off of the GE) – can be effective. The company utilized the parent cache of the GE brand and solved the challenge of getting to the market fast by differentiating itself through the parent company heritage (excellent management and credibility), leaving the GE in the name and by coming up with the “generation- worth-assets” meaning – Genworth.

5. Advertising – could rule? Couldn’t it? Yes, it could. The U.S. Department of Transportation had a success campaign “Friends Don’t Tell Friends Drive Drunk” utilizing the four fundamental principles of effective advertising: grab a viewer’s attention, communicate to the right audience, persuade and stimulate the action and be effective overtime to build the recognition. This was a vivid example of that.

6. WOM – Word of Mouth – was utilized by Blackberry to develop a community and a cult movement of Type A personalities: people who make things happen in the professional world. The functionality this communication tool provided directly appealed to the emotional need of those professionals to stay in touch –always! If your product integrates well into your customers’ lifestyle – you might use this power signal very effectively. Just launch a community campaign, make it interactive and integrative of the customer experience with the product.

7. PR – used by Dove – capitalizing on the simple benefit and an authentic statement (providing soap which consists of ¼ of a cleansing cream). Testimonials became the strongest part of the branding campaign: there was evidence to its claim to make women beautiful every day. However, the most effective research fact the company used is expanding the definition of beauty for its customers – that made more women feel beautiful! It showed variations of beauty in its ads further on, thus increasing the 2 % of confidence to potential 10%! Brilliant!

8. Experience, as was implied before in the previous items, can be quite differentiating: Ann Taylor maximized the retail space to provide a unique experience to the professional busy women: it always provided high quality, high coordination items – thus appealing to a broader demographic. It is like a friend who will always give you a sound advice on clothing! If you go there next time, pay attention to the fact how well the retail space is designed to make it a fast and efficient shopping experience when a busy woman can run there at lunch and have a perfect outfit in 15 mins due to its consistent layout.
Sephora did the same by redefining the experience of make up shopping by brining it to customers for play!

Secondly, Joan Schneider in her book “New Product Launch: 10 Proven Strategies” shares her extensive expertise and experience with the new product launch strategies. This is a great guide to the topic with solid cases. The ones, I particularly liked referred to Compaq and British Petroleum. The former used to be a 1000-dollar mini computer brand that expanded into other markets. It had a perfect name for its initial products, but failed to see the need for image change when it brought other products through acquisition. The old brand (name, logo, etc) did not coexist well with the new strategies, thus bringing confusion. Eventually, Compaq was bought by HP.

British Petroleum on the other hand, had a success story when the need for re-branding occurred. It already moved strategically into global markets and it did expand on the energy offerings beyond oil. Leveraging the brand cache of BP (initial letters) and integrating the “beyond petroleum” strategy, BP had an effective repositioning. Perhaps, it is a synergy between the senior management support and true marketers.

To the third point, Seth Godin proposes to use the strategy of making the names up as opposing to turn to the benefit-description techniques. He points out that the unique name not only moves you forward in the differentiation game, but also develop its secondary meaning in a short period of time –initially internally and later externally. “The entire point of “secondary meaning” is that the first meaning doesn’t matter at all (especially since you picked a name with no meaning to begin with). Over time, a surprisingly short time, your unique word, especially if it sounds right, will soon be the one and only word.”

And this is just a tiny glimpse into the magic of brand perceptions world! A combination of art, psychology and common business sense!

Summing it up:

1) It is imperative for you to understand that bold moves pay off if you set them right with solid strategic planning.

2) It is important to look at the entire initiative as a “gestalt” or a “whole” integrative movement (like in a chess game): where all your communication pieces are in play: logo, product name, brand cache, and power signals embedded in the product experience. This allows you to choose a wining strategy based on the wealth of available product launch and re-branding knowledge that is still highly focused on your unique brand case.

Three Useful Models for Web Copywriting

Filed Under , B2C Marketing, Effective Communications, Effective Marketing, Phychology, User Experience Design | Leave a Comment

Three Useful Models for Web Copywriting

Writing a web copy? It has been a while since you did any highly visible writing? Or do you simply wish to refresh your copywriting skills and use those for quality check review of your contracted writers? Maria Veloso, a 27-year expert in copywriting and direct marketing, shares her experience in the book “Web Copy That Sells”- a highly recommended reference that is worth taking a place in your marketing library. Here are three useful models to shape up and sharpen the web writing skills:

I. Conceptual Web Copy Blueprint
II. Five Guidelines to Make Your Copy Sell
III. Priceless Techniques to Use While Constructing Web Copy

So, you have a vision for your site and you think that you have the content necessary to deploy for the copy. Well, the truth is that your content is not your web copy. All the information that you compiled while talking to various groups within your company is just information. You still have a job to translate it into a “sellable” web copy – a copy that delivers – empathizes with your customers, persuades them and generates sales. Thus, the initial step for you as a writer would be to step into the shoes of your audience and get their perspective on the user experience that they would have while visiting your site. What would they do and what path would you lead them to? The five key questions to answer while going through this exercise is:

1. What is the Problem?
(Diagnose the problem or pain point for your audience. Sometimes, they do not even know that they have a problem – educate them.)
2. Why Hasn’t the Problem Been Solved?
(Check the history of the solutions that failed or succeeded).
3. What is Possible?
(Use “possibility thinking” and paint a picture for your audience of what is possible for them to do and enjoy while the problem is solved (by your service/product.))
4. What is Different Now?
(Explain how your product can help them and what is different about it.)
5. What Should I Do Now?
(State clearly what you want your prospects to do.)

This is your conceptual blueprint!
What do you do to make your copy live and actionable? Sprinkle your blueprint with the basic design and psychology guidelines:

1. Inject Emotion
2. Add Bullet Points, Bonuses, Guarantee and Close
3. Add Credibility-Building Elements
4. Add Psychological Devices
5. Replace Rational Words with Emotional

This is your five guidelines to follow while writing the copy!

What are the priceless techniques to keep for reference in the process of writing the copy?

• Use AIDA Principle (Capture audience’s attention, get its interest, build desire and induce action).
• State The Unique Selling Proposition (competitive advantage of your product).
• Make the Impression in the First Paragraph
• Write the Offer You Cannot Refuse
• Use Testimonials: “It Can Happen to You”
• Use Your Headline to Sell
• Introduce the Price Through (Daily-Cost Technique and Minor-Purchase Technique)
• Keep On Selling: Craft The Order Form Thoroughly
• Infuse Your Copy with a Money-Back Guarantee: Make a Deal
• Plan the Close For Potential Sale
– Provide a Free Gift
– Use a Time Limit Offer Technique
– Use a Limited Supply Technique
• Spell Out Your Call To Action
• Use an Opt-In Mechanism
• Use Attention-Grabbing Words
• Avoid Jargon and Corporate Speak
• Use Multiple Pricing/Benefits Offers

This is a good checklist to have while crafting the copy.

Another good source of short articles on effective web copy is available at excess voice site.
The third source for web copy intelligence that I would recommend to subscribe to for weekly updates - is Brian Clark’ blog – Copyblogger.

What are your best sources, tips and examples of effective copywriting?

Relevancy Marketing, Takeaways from the Marketing Profs B2B MKTG Virtual Conference

Filed Under , B2B Marketing, Effective Marketing, Professional Development | 1 Comment

It was quite a convenient experience to attend a virtual conference set up by Marketing Profs on B2B Marketing Wednesday this week. At the same time, the most valuable parts of the arrangement is the ability to download presentations right away and the ability to listen the recorded sessions afterwards! Great value! Saves time, provides flexibility and shares content freely at no charge. More about a similar positive “user experience”, check Jeremiah’s post.

The session on B2B Marketing by Google’s folks: Benjamin Chung and Mark Martel was of most interest. The term of Relevancy Marketing peaked my attention. The idea is simple of putting your ads and products in the right context -where your users are and where their behavior illustrated obvious interest in those products. Sometimes, Relevancy Marketing is called Contextual Marketing that has a power of effective influence over one billion people online today. Its key benefits are: being transparent and flexible for adjustments in real-time. Also, online sources of information become very influential today for B2B segments. Niche content grows significantly attracting the involved end-users. Hence, B2B advertisers move online as well. The top three tips to remember are:

1) To focus on the customer
2) To profit from fragmentation
3) To measure, learn and optimize.

(See the link below to access the details and narration for the session.)

According to eMarketers’ article on “The Behaviorally Targeted Ad Audience” :

In a May 2007 consumer study by JupiterResearch and AOL, revealed:

1. 74% of frequent ad viewers stated they would pay more attention to a contextual ad vs. 89% who would pay more attention to behavioral ads

2. 63% of online consumers say they pay more attention to ads that fit their specific interests vs. 49% who pay more attention to ads that are directly related to their current online activity; that data could be interpreted as more attention for contextual (specific interests) than behavioral (current online activity)

3. 67% of online shoppers — defined as those who research and/or purchase online — notice behaviorally targeted ads vs. 53% who notice contextual targeted ads

Personalize the content, do you “research” or use your research and I will spare a minute to pay attention. Relevancy marketing translates into more effective marketing communications and eventually a greater awareness about the product offerings by the target audience.

Other sessions at the virtual conference included:

- Keynote: B2B Marketers Need An Interactive Makeover by Laura Ramos
- Customer Reference Programs and the Social Media Revolution by Bill Lee and Jeremiah Owyang
- Email Marketer Seeks Customer for Long-Term Relationship by Brian Ellefritz and Scott Barnett
- Is Thing On? Social Media for B2B Marketers by Greg Verdino
- Using Sustainable Word-of-Mouth Marketing in Growing B2B Business by Greg Spangler

P.S. Here is the link to the recorded sessions - check them out - time well spent.

Interactivity and Engagement Grab Attention, Build Connection and Make Us Buy

Filed Under , Community, Creative Marketing, Effective Marketing, Interactive Marketing, Phychology | Leave a Comment

People do not like to be sold, but we like to buy. Thus, it just makes sense that conventional commercials bombarding, be it a TV ad or a sales speech, does not work very well. Interactivity aspect became the key ingredient for making a connection to customers’ hearts and wallets. Touching customers at the moments of their experience while enjoying their passion, hobby or interest works wonders. It creates a connection that is weaved into already positive experience. That is why ad placements work best: be it traditional movies or games or mobile communications. According to the e-marketers recent article, “Advergames like the 3.2 million units sold at Burger King over the holidays have been a success, and in-game placements have music labels competing for exposure in the latest sports games. But it is online gaming that holds the best promise for targeting during specific time slots, as is possible through XBox Live and other game ad networks.”

Another way to look at it is through the lenses of experience design field, where cognitive psychology and consumer behavior are taken into the account. David Armano shares a very compact foil set, illustrating this concept on his blog. Experience design requires more “thinking” energy and planning though. With product placements, you are simply rewarded by doing your homework and using the info on where your customers “hang out, lounge and mingle”. With experience design applications, be it an event or a product, it has to do more with a new creation where prior knowledge is practiced. It could be more challenging and time-consuming as production and testing takes time. At the same time, what can be more rewarding than creating a new experience that your audience will definitely engage into and be able to enjoy the connections it builds with your product? The greatest part here is not about the product, but a user, consumer, as he/she is thought of, cared for and catered to!

What I Love About Marketing: My Definition of Marketing

Filed Under , Effective Marketing, Product Marketing, Professional Development | 2 Comments

One of my favorite questions to ask is “What is your passion?” The answer allows me to learn about a person so much more…It allows to learn about the object of passion (a professional occupation or interest), so much more. At the same time, I was numerously asked as well: Why Marketing? Why not Finance or something else? So, it would be only fair to share my own definition of it.

Marketing for me is not a matter of pure message crafting and information repackaging. It is not about creative eye-pleasing presentation…It is not about selling and convincing people into a purchasing decision. I say that without discounting the monetary value this function brings to the bottom line. There is no question that marketing initiatives have to be accountable and measurable, add value and contribute to ROI. But, the true motivation is not of dollar value.

Mainly, for me, marketing is connecting with people and understanding what makes their hearts and minds resonate. It has to do with the emotional aspect of social interaction that brings change or moves forward even the most logical planning and strategy. You need emotion to bring change to life. You need emotion to instigate progress.

As an occupation, marketing is:

- Flexible: it allows adjustments in the flow of events; it is applicable across industries, geographies and cultures! You practice and transfer it anywhere in the world! People will consume and trade as long as we exist!
- Dynamic: it is never boring! Constant change what can be better?!
- Broad: the scope of jobs to do, projects to accomplish and specialties to immerse into is as large as the ocean, enough for a life time!
- Deep: one can find 3-5 specialties and become very knowledgeable about them and still enjoy the challenge of change.

On the other hand, being a marketer allows playing so many roles! When I was little, I was dreaming to be an actress (so typical). Being a marketer provides so many opportunities to act and I love it every time I learn something new (play a new role)!

My favorites are:

- When I do market research, I become a detective, a CIA agent, “sometimes under cover”, trying to understand what makes those foreign species (new target market or user) tick…what makes them happy? What connects them? What drives them? What makes them laugh? What makes them “them”?

- When I do competitive assessment and strategy, I become a warrior, General with an army to lead and ability to predict the next steps of the contender.

- When I engage in writing and planning ads or event management, I become a producer, an entertainer and even a magician depending on the mystery level the audience craves for. Mystery does not necessarily exclude clarity and simplicity.

- When I engage in business development, I become a connector, a merchant that fuels the trade of information, opportunities and people.

- When I develop promotions, I exercise my creative mind and imagine myself being a painter that aims to draw a well-balanced masterpiece that brings harmony and evokes a following. Or, I could be an alchemist that works hard on the new recipe of the multiplying substance that has the ability to grow exponentially…

Thirdly, the challenge to curb this trade (marketing) and make it more intelligent, accountable and measurable provides lots of room for thought, experimentation and testing. Marketing can be and should be intelligent. Marketing should be supported not only by emotion, but logic (data, information).

Marketing is the driving force for change in consumer behavior. It is not a self-serving influence and persuasion; it is effective communication that drives our actions through emotion, connectedness or affiliation with the other humans and places our market choices based on common sense.

My Lifetime Value (LTV) as a Customer for Amazon

Filed Under B2C Marketing, CRM, Creative Marketing, Effective Marketing, Metrics | 2 Comments


 

Last three weeks of the MBA…cannot wait till I am done and ready to pursue my next adventures! However, I promised to share my recent learning on calculation of lifetime value in the database marketing class. My individual project required the calculation of my LTV to a service I have an extended relationship with. Amazon was my choice.

Relationship and Frequency Data:
- Length of active relationship = 9 months
- Average purchase over 6 months is $ 36.57
- Average frequency: 1.5 per month
- Average order: 3 books
- 99% of orders are books

Assumptions:
- Acquisition costs = $ 25
- Variable costs = 18 %
- Retention rates: 95.9% for first 6 months, 97% for the next 6 months, 98% for the next 24

There are 4 levels of customer engagement:

Level 1: Beginner (Free Super Saver)
Level 2: Purchase Patterns Captured (Buy 4, Get 1 Free)
Level 3: Heavy User, Hooked (Amazon Prime)
Level 4: Heavy User is Rewarded by Savings (Amazon Visa Card)

Each level of marketing programs reinforces continuous purchasing behavior, increases frequency and average purchase value that are paramount for increasing overall LTV.

Presently, I am a consumer on Level 3, as Amazon Prime Buyer. With the assumption of 3 years as my projected life experience with Amazon, the LTV amounts to $634. My switching costs are quite significant at this point and comprise of $79 of annual fee, ease of use, loss of automated purchase process, brand equity, security and trust that the service of the competitor might or might not be delivered.

As far as the effectiveness of this program, it did increase my frequency by eliminating time and quantity restrictions. I purchase twice as much on demand, increasing my total spending by 50 %. Simultaneously, it ensures committed 11-12 orders per year based on the annual fee that is a pre-paid shipping expense, thus increasing overall probability of purchase.

Retrospectively, I made a smooth transition from the prior 2 levels:

- Level 1 (Free Super Savor) made me buy in triplets manner which drove consistent purchase order to be roughly $28. At this stage, my LTV amounted to $348 over 3 year period.
- Level 2 (Buy 3 Get 1 Free) made me buy more books, increasing the level of frequency and ensuring that average order always amounts to $ 49. At that stage, my LTV was $ 507.
- Level 3 (Amazon Prime) increased my LTV to $ 634.
- Level 4 implies getting Amazon credit card. This could be a significant step transferring a heavy user, like me into a lifelong customer, however, the one time savings of $30 and the hassle of having another credit card is not enticing enough.

 


The 4 level approach works well while acquiring new users and transferring them into heavy users and ultimately into loyal customers.

Frequency of purchase, volume and average purchase value play a major role while affecting LTV, thus the following initiatives are advisable to expand into:

- Cross-selling is optimal to generate higher frequencies of purchase. Bundle packaging and offerings could be considered as alternative offerings based on the search data.
- Branding initiatives could help to seed awareness and repeat the message that online you can find it at Amazon: all the goods, ranked, recommended, traded – already pursuing community engagement
- Utilizing referral campaigns to potentially eliminate acquisition costs and carry the branding message (though the latter are quite low)
- Developing an alternative to the level 4 program (Amazon credit card), perhaps just a points card for customers that are not responsive to getting another credit card. It can still provide the same data, but alleviate the commitment factor implied in the financial decision of signing up for a credit card.
- Not sure how I missed it, but Amazon does a good job utilizing social media and web widgets to generate more interaction and customer involvement. Brian Oberkirsh has a great post on it here. I wish the design and usability of Amazon could be better and user friendly..too busy and too much going on for me when I sign up.

P.S. Just ran into a good chart on Bnet brought by iProspect on the Purchasing Power of Web Sites. Clearly, Amazon tops the score. (Added on May 15, 2007)
Purchasing Power of Web Sites (IProspect)

Why We Marketers Should Adopt Another Segmentation Tool - Personas from User Experience Design

Filed Under , Conference, Creative Marketing, Effective Marketing, Professional Development, Segmentation, User Experience Design | Leave a Comment

The best discovery from last week was stumbling upon Steve Mudler’s session at Webvisions on personas . It almost feels like the more I learn, the more is out there still awaiting for discovery. Two weeks ago, I was rambling on the database marketing and its behavioristic approach to segmenting. I was thrilled and motivated to learn as much as I can about it. Last week, my attention radar caught the concept from the user design (scenario design) field - creating “personas” to segment potential customers and be able to communicate better with them, while resonating with their specific challenges. “Personas”, as a market segmentation tool does bring: focus, empathy, consensus, better designs and communications.

If I narrow down to the two major benefits of this technique, I would mention its flexibility and applicability to real life situations we marketers face and its fundamental psychological truth about discrepancies of people’s words and actions.

The greatest part about creating “personas” is that it allows segmenting your market while you engage into the limited market research initiatives. Let’s face it - most of the time, we (marketers) have limited budget and resources (people and time) and there is so much that we could do but we cannot afford….How do you find out what your potential customers will want and to what they would respond to if you only have 4 weeks, 4 people and no budget? You can only interview a small number of people, you can do so much as opposing to engaging in the ideal long and steady market research process that we learnt from the books or that is feasible if a specialized agency does it for us for a good sum.

Well, we have “personas”! Steve Mudler actually shares his expertise on it in his book ” The User is Always Right”, As an example, creating personas becomes a good segmentation alternative in the real life situation where you are developing a channel for a newly developed product or a “newly-is-still-in-development- product-that-is-has-to-sell-in-6-months”. There are three primary approaches, based on the type of research, scope and analysis performed:

• Qualitative personas (based on interviews, as an example)
• Qualitative personas with quantitative validation (interviews and surveys)
• Quantitative personas (surveys, data from the CRM systems, etc.)

Thus, it allows you to apply this technique to any scope of research that you are doing. Flexibility makes it a good model.

Another useful disclaimer that all of us - marketers performing research should always keep in mind is that what people say is not what they necessarily do. What they say is important as it reflects their goals and attitudes as well as perceptions and aspirations of being seen in a certain light. What people do is just as important, since actual behavior can reveal more about people than what they say. Behavior reveals patterns around which you can design your product or communication strategy. Again, the perfect combination of promise and action, if those are consistent – you got your answer and you are on the right track, if those are conflicting, you have to test your hypothesis again or change it completely.

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      Everything posted on this blog is a product of my own thoughts, ideas, reflections based on the professional interests. It is based on the public information, works of the colleagues and fellow researchers that are cited respectfully and my opinions as an industry professional.