If you think about it, intention, action and reaction is only about 1/4 of a brand’s value. The customer controls the remaining 3/4 of the brand’s value based on their perceptions of how the company delivers, whether it be product quality, service and fit with the customer’s needs, values and expectations.

Company’s influence their brand value through interactions. Customer’s control brand value.

If you got up this morning believing your company is in control of its brand, your year is already off to a rocky start.

The good news is it’s only January 3. You still have a few days to make changes.

Will you make them?

You cannot control your brand | Dave Harkins

It occurred to me today that I may already have a way to measure WOM influence and the impact of social media.

Years ago, I came up with a simple equation to measure what I called, the “Residual Value of a Customer.”  In other words, this is a calculation to determine value of an average customers’ impact on your business relative to their individual influence on other customers.  Keep in mind that this was before the internet and social media tools, so the sphere of influence of an individual customer was generally much less—maybe 7-10 people total.  However, I think the logic still applies today.

The Residual Value of a Customer takes into account the annual sales to a customer, the expected tenure as a customer, and the estimated number of people influenced.  For example, if “Customer A” spends $150 a year with a company and the average tenure is three years, then “Customer A’s” value to the organization is $450.  However, if “Customer A” recommends the product/service to just one other customer who follows the same spending/tenure patterns (as the average), “Customer A” now has a residual value of $1,350.

Let’s take this thinking a step further.  Recent research has suggested that the average Facebook user, for example, has 120 friends.  The average user may interact meaningfully with between 10 and 20 Facebook Friends within a 30-day period.  Using the calculations above, let’s say “Customer A” influences 20 friends within a 30-day period.  “Customer A” now has a residual value of $27,000, as do each of those 20 friends who adhere to the average customer measures.  In this first circle or ripple of influence the residual value of these 21 customers is now more than one-half million dollars over the next three years, assuming the averages spending and purchasing life remains consistent.

These are significant numbers, and all brought about by one customer sharing experiences with a circle of friends.

I have used this model a number of times to demonstrate the power of WOM marketing programs to senior management.  It is simple to understand, and proven using average customer sales and tenure numbers.  In the majority of the cases, I’ve been successful in gaining support from senior management for at least testing WOM or now, social media, programs.  I have also used the Residual Value of a Customer to demonstrate the opportunity cost for not engaging in WOM.

In the spirit of sharing, I’ve created an online version of the model for you to use here: Residual Value of a Customer Calculator.  Feel free to use this model and share with others.

I’d appreciate your feedback.

How to measure social media | Dave Harkins

Customer loyalty, like friendship, is built on a mutual understanding and acceptance of one another. At minimum, the relationship between the customer and the organization requires:

> Honesty

> Integrity

> Consideration

> Empathy

> Respect

> Humor (maybe not required, but certainly helpful)

While the customer easily gives these qualities, organizations with which they purport to have a relationship often do not reciprocate. From an organization’s perspective, a customer relationship is all too often built only on revenue generated. Specifically, the value of that relationship is measured on the number of purchases made and the size of those purchases. When a customer recognizes that their loyalty is measured only by these factors, such as with supermarket loyalty programs, they become fickle about the relationship. Laziness creeps in and whoever has the best sale prices or is closest to home gains the customer’s favor. When this happens, the relationship becomes a commodity for the customer, as it is already for the organization.

To prevent customer laziness, organizations need to think of customers more as friends, than as dollar signs. Put yourself in your customers’ shoes and ask yourself the same questions you might ask about your friendships, for example:

Do my customers…

1. Feel like they’re “my only customer” whenever we get together?

2. Talk about our relationship in a positive light with their other friends?

3. Tell me when I’ve done something wrong and give me an opportunity to make it right?

4. Share their lives and stories with me because they know I care about them and the relationship?

5. Count on me to deliver whenever they’re in need?

6. Desire to spend more time with me and take every opportunity to do so—wherever I may be?

7. Show passion about our relationship (brand)?

8. Believe that every action I take is in their best interests?

9. Feel that they’re desired?

10. See tangible and long-term value our relationship?

If you can truthfully answer yes to most of these questions, your customer relationships—and long-term customer loyalty—are in good shape. If not, you have some work to do.

Do keep in mind social media tools make it very easy to build and cultivate customer loyalty today. You can connect anywhere at any time and have a meaningful conversation with customers. There’s really no excuse for not putting time and effort into building these relationships. Not doing so will make it easy for the customer to decide if he’s really loyal, or just lazy.

Can you afford lazy customers? No, I didn’t think so.

Are your customers loyal or lazy? | Dave Harkins

I read today that more than 200,000 job cuts have been announced this month. Most announcements have been by big companies; we never hear about the smaller firms. In fact, many businesses have likely closed all together. We will not hear about those for a while.

These stories remind me of economic climate around the time of the dot-com bust. There was a lot of disruption then, too, but it led to great thinking and innovation in technology and in other sectors.

For those of us in the technology sector then, it was difficult time. Yet, those experiences changed technology. That disruption forced us out of our comfort zone and to the edges of our businesses where we discovered new opportunities to serve untapped markets. In some cases, we created markets where none had previously existed. We found things we never dreamt about or thought possible before someone “dropped the bomb,” forced us out, and made us look back on what had happened.

Without the dot-com disruption, we likely would not know about MP3 players, iPhones, social networks, blogs, or Twitter. Thanks to that disruption, technology makes it easier for us to keep in-touch, check our bank accounts from our mobile phones, and carry thousands of songs in our pocket.

I believe we need disruption in our lives, our businesses, and our worlds. We need to be forced outside of our comfort zone. We need to get to the edges, pull out the binoculars, and look at things a little differently. Like it or not, we need disruption to facilitate change and force us to the next level–whatever that may hold for us.

The good news is, we don’t have to wait for disruption from an external source.  Scary as it may be we can create it ourselves; and, we probably should in this economy. Finding and getting to the edges may well be the only way our businesses will survive.

Finding the edges | Dave Harkins

- Mahatma Gandhi

America didn’t change today.

There is a new person in The White House, but most everything else is the same. The economy still struggles. The stock market continues to decline. Most people out of work today will still be out of work tomorrow. Some people lost their homes today while others struggled to put food on their tables.

Today’s problems will still be here tomorrow. The hard reality for each of us is that change doesn’t begin in Washington. Change begins with us.

Sometimes in our businesses and our lives we’re afraid to make important decisions that are necessary to take us to the next level of success. We say we’re “risk adverse,” when in reality we’re probably just afraid we’ll make the wrong decision and fail.

So what. Failure is nothing more than change–not good or bad in most cases, just a different outcome than we might have wanted.

It is our fear of change, not failure, which stands in the way of our successes.

Accept change. Gather your courage and embrace it in your life and in your business. Because when you are ready to embrace change, you will be ready to make change. And that will make all the difference in your business and your life.

No, America didn’t change today. The expectations of many Americans changed.

Did yours?

Change begins with you | Dave Harkins

There are more than 40 million users in the United States alone. The Blackout folks didn’t even register a hiccup. In fact, Alexa.com did not show a sudden drop in pages views on December 15, or a sudden increase in page views on December 16.

The core generation using  Facebook understands that the masses can move the direction of a company.  They understand that the customer (in this case a Facebook user) can control and guide the brand.  The problem here seems to be that the users think they “own” the brand that Facebook has developed. It’s a subtle, but important difference for both Facebook management and its users to consider.

We understand that Facebook management wants to build a website that attracts the masses, build user stickiness, and tastefully monetize the website through advertising.  Management’s goal is likely to make money for investors (0r at least cover the cost of operating the service.)  We also understand that users just want to interact with each others using the website and tolerate the advertising in exchange for free user of the tools.

Facebook management does seem to listen to requests and input from users, but I doubt the Blackout garnered much of their attention. Although, if the Blackout participants had numbered 10 or 20 million it might have raised an eyebrow or two. Facebook, like many Web 2.0 services, is designed for “the many” and not “the few.”  It’s a very small number who are complaining about the changes Facebook management is making.

I suspect “the few” just don’t like any change in their lives.

Yet, in our online and offline worlds, change in our lives is the only thing on which we can depend. So, you (Facebook user or not) really have just three choices:

1.  Drive change
2.  Accept change
3.  Freeze from fear of change

What will you chose in 2009? I hope you don’t choose the third option.

Happy New Year!

The “Great” Facebook Blackout | Dave Harkins

Most told us they just punched the last prompt they heard, but 99% of those misdirected callers should have chosen the first prompt they heard. I suppose one way of looking at this is that they customer was interested enough to listen to all the prompts before deciding. I think what truly happens is customers are waiting for a better “fit” with their needs and are responding to the last thing that they hear because they can’t remember what came before.

You do this, don’t you? I certainly do. We are always looking for something that better meets our needs, so we filter information that we don’t believe is relevant at this moment. We say to ourselves, “I don’t need that now. I’ll look for it again, when I do need it.” Things you don’t need never make your radar; the last thing you hear always does–even if it’s not what you need at the time.

For marketers, this is a huge problem. What it means is that we cannot just strive to be first name that comes to mind, we must also be the last name heard.

This is a task more difficult that it sounds.

Accomplishing both means your brand has to be everywhere, or at least seem like you are everywhere your customer. To be sure, it means you have to look for alternative ways of reaching customers. It definitely means you have to go to the customer and stop waiting on them to come to you. You also have to engage in the conversation and make sure your voice is heard. You have to understand your customer better and anticipate their needs to the best of our ability. However, more than anything, this means you have to be where you’re not expected, as well as where you are expected.

Be everywhere. Be relevant. Be unexpected. Any one is good, but achieving all three will help keep your brand both first and last in your customer’s mind. That’s where you want your brand to rest. Nothing between really matters.

The last thing you hear | Dave Harkins

Growing up, I learned quickly how to determine when my dad wanted my attention. He could add a certain tonal quality, let’s say, to the delivery of a sentence that let me know I needed to focus on what he was saying. He never raised his voice, but I often heard him “yelling” when he used “the tone.” On the other hand, my mom’s voice often had a constant level of exasperation that allowed me to lose every word she shared to the white noise that surrounded us.

I thought about “the tone” as I watched President-elect Barack Obama’s acceptance speech last evening. His entire campaign was delivered with a different tone. It was a tone crafted for and deftly delivered to a generation–the Millennial Generation. CNN’s exit polls last evening noted that 68% of voters 18-24 and 69% of those 25-29 voted for Mr. Obama–a solid victory for the Millennial Generation. Conversely, the same exit polls placed the majority of McCain’s supporters over age 45 and a great number over the age of 65.

If you have been unable to see these change markers in your every-day life and work, it should be clear from this election that the Millennial Generation, more than other generations, responds as much to the tone of your voice, as they do to your message. This realization presents an interesting dilemma for marketers, I think. Most of us understand “the tone” concept in our gut, but do not put it into practice in our marketing or advertising campaigns. A good many of us are using a tone in our voice that is heard well by Baby Boomers, but is generating white noise to pretty much everyone else.

The November 4, 2008 election should be a wake-up call for marketers. It is time to adjust the tone of our voice if we hope to be heard by a new generation.

It’s all in the tone of your voice | Dave Harkins

Recently I had the privilege of proposing a couple of new product ideas to a small group of folks. Both ideas involved new media, never before used by the organization in this fashion.  Early in the conversation one member in the group said something like, “…in the 80′s we made a decision not to move away from our printed materials because we want to take a stand on literacy. We believe encouraging people to read the materials we provide is the best way to engage them and support our plan to support literacy.”

Wow.

Although I countered with the need to address alternative learning styles of the target audience and noted the cultural changes. What I left unsaid, but probably should not have, was in1985 the technology that we use today (especially today’s youth) did not exist. There were no iPod’s, and music was just beginning to be delivered on CDs. Cell phones were not prevalent except in the wealthiest households, and the Blackberry™ was not yet invented.  The Internet, as we know it today, was not available. VCRs were the norm. Text messaging—not even a glimmer in someone’s eye. So, how could anyone possibly believe that our 1980′s thinking about these things is still relevant today?

This outdated thinking makes these brands seem less relevant to today’s world.  Many of these organizations have become so rooted in their past that they have put their entire future at risk to preserve their own traditions and corporate cultures.  They persist in developing marketing and product plans based on what is now an outdated idea of what was prevailing thinking at some tiny point in their history. There is no faster way to kill a brand than to think about future opportunities looking through the wrong end of the telescope. Sadly, this is what many of America’s oldest companies and non-profit organizations do every day.

If you are still making product, program, or marketing decisions based on 80′s, 90′s or even 2007′s cultural norms or content delivery systems, you need to consider how you can reconnect to the world around you. Start by asking yourself how relevant your company or non-profit organization brands are in today’s world. You may simply find that your message is still sound, it is the messenger that needs refreshing.

Looking through the wrong end of the telescope. | Dave Harkins

When I was the CMO of a software engineering firm at the end of the dot com era, my boss would find a way to work, “If it’s a good idea, it’s worth doing poorly,” into every conversation.  When I got over the annoyance of it, I realized he was on to something.

“We can’t drive innovation through planning. It only comes in the doing.”

- Dave Harkins

This is the time of the year that most of us work on our budgets for the coming year.  Many of us are cutting back on marketing expenditures. Why?  We didn’t deliver, because we used history as our guide. Basically, we didn’t keep up with the change around us and planned our marketing programs by looking through a historical lens.

Successful marketers today understand that we must keep our eyes open and our ears tuned-in to all that happens around us today. Yesterday is irrelevant in today’s culture.  We must be bold enough to take action on what little we know, or think we know, and connect the seemingly-unconnected patterns in daily living to find opportunity for innovation.

As you think about next year’s marketing budget, open your eyes and ears to what’s really happening in our world. You will undoubtedly see opportunities that you could never have planned in your wildest dreams. You can’t plan innovation. You can only live it.

Take risks. Big risks. If it seems like a good idea, do it…poorly. Do whatever you do poorly, if it means you’ll get it done sooner rather than later. You can always improve upon it daily hourly.

What are you waiting for?

If it’s a good idea, it’s worth doing poorly. | Dave Harkins