Posts tagged Customer
How to measure social media
Sep 7th
There is much talk in marketing circles about how to measure the impact of social media. Some measurements are hard, such as actual campaign response and conversion rate measures. Others are a bit softer, such as measuring campaign reaction frequency and tone (e.g., positive, neutral, negative). While both are valid measures, I do think we have been missing a broader, yet critical component of our measures—the overall financial impact of word-of-mouth (WOM) spread.
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.
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Digital is not a channel; it’s a life-connection tool.
Jun 8th
At the 2009 International Licensing Expo, I watched intently as people from all over the world walked up and down the aisles with their faces literally buried in their smart phones. There were hundreds of exhibitors, featuring some of the most exciting ideas and concepts in the Licensing Industry; yet, I’m sure many good opportunities were lost or simply overlooked because those exhibiting didn’t make an effort to connect with the lives of those attending. Most exhibitors simply were not in the “life stream” of the attendees.
I decided to try a little social media experiment at the Licensing Expo to see if we could get into the attendees life stream and create personal engagement. We advertised our presence on Twitter in print and on signs in the booth, we engaged followers of the Licensing Expo Twitter feed (#LX9) on the floor, and we brought a magician to the booth to create a different life experience on the show floor.
Were we successful?
Our Twitter follower numbers are up modestly since the advertisements began to appear, but the real success comes from the buzz we generated on the show floor. We tweeted multiple times a day, awarding prizes, sharing memorable visits and talking about our booth activities. The folks at the Licensing Expo and others took notice and retweeted. Many booth visitors said the tweets were the reason for stopping.
It seems that we were not only successful in getting into the life stream of attendees, but once we gained their attention we also did well to create a memorable experience (with our magician) when they engaged. This good memory we helped to create launched many deeper conversations about our brand and our opportunities. Although, had we not made good use of the moment when we captured their attention, attendees would have been off to the next thing.
Some have said this was a successful use of the digital channel, or perhaps savvy social media marketing. Maybe, although I no longer believe in marketing channel silos when it comes to building customer relationships (see my 2003 whitepaper, Customers are Channel Neutral for details). Customers effortlessly move between channels, so our old definitions are no longer truly relevant-except to say that the customer experience must be consistent regardless of when and where the customer connects. Today, marketers must subtly connect, be accepted in the life stream, and engage with passion so that it creates a memory for the customer. So, it was not the use of the social media that mattered in our experiment, rather it was the memory we helped to create. Social media and digital technologies are only tools to help spread the message. What is most important for marketers to remember is simply: great stories and memorable experiences spread quickly to build brands–the channel and the tools are irrelevant.
With people from all over the world attending, the Licensing Expo provided a microcosm of what is happening in our culture. Our personal and work lives are intertwined and we engage both regardless of our location. Life is no longer exclusively defined by what is happening in our physical presence. For many of us it resides in the palm of our hands and is illuminated by a tiny screen. As marketers, we must adapt to these changes without being intrusive or obnoxious if we are to keep our brands relevant.
As I see it, this ever-present digital and wireless connection to the world can no longer be called a “channel.” Digital technologies simply and effortlessly extend the connections in our lives; and life connections are not channel dependant.
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Are your customers loyal or lazy?
May 27th
“I don’t know whether I’m loyal, or lazy,” tweeted a friend of mine last week as his eye doctor ran more than 30 minutes behind. He seemed as frustrated with himself for not finding another provider, as he was with his doctor for wasting his time. Granted, there may have been a patient emergency or an unforeseen situation with that caused the delay; yet, others with appointments were expected to endure without being alerted to the problem and given the option to reschedule. While this particular situation is most prevalent with professional appointments, we all know of similar situations that occur in our own businesses and organizations.
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.
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The last thing you hear
Dec 6th
Dave
The automated phone system in the office has six option prompts. That’s not a big number, really. Yet, when we made a small change to the last prompt recently, we noticed a 100% increase in the number of misdirected callers who hit the last prompt–the one before, “If you need to hear these options again, press the number or pound sign.”
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.
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