Avoiding the One-Night Stand

Stating that all customers are not created equal is hardly an oversimplification. But, just like the pigs in Orwell’s “Animal Farm,” some customers are more equal than others. No company has unlimited resources to equally service or support all its customers. Repeat buying power, the essence of customer loyalty, is everything. Some customers are worth a great deal, some may become more valuable over time, some may be valuable for a brief period but may be easily lured away, and some are never likely to become valuable.

Stating that all customers are not created equal is hardly an oversimplification. But, just like the pigs in Orwell’s “Animal Farm,” some customers are more equal than others. No company has unlimited resources to equally service or support all its customers. Repeat buying power, the essence of customer loyalty, is everything. Some customers are worth a great deal, some may become more valuable over time, some may be valuable for a brief period but may be easily lured away, and some are never likely to become valuable.

At minimum, companies need to segment their customers so they can determine how much longer that customer will remain with them, how much revenue each customer will contribute, how much and what kind of services the customer should receive, and what efforts will be needed to keep them whether they are new, at risk, or even already lost. Also, if a company is changing product or service focus—such as beginning a new customer experience management or frequency marketing program—decisions will have to be made about which customers it wants to retain.

Just as companies are becoming smarter about keeping the customers they want or “firing” less attractive customers through stepped-down services, they have to invest more upfront, at the beginning of the customer life cycle, in learning which potential customers will be the most valuable over time. This goes beyond segmentation. It is almost pre-segmentation.

Here’s a prime example. The business of gaming in Las Vegas, Atlantic City, numerous riverboats, Indian reservations and offshore is built not on a house of cards, but a house of numbers. At Las Vegas casinos like the Rio, those players who gamble $1,000 a day with the Rio, whether they win or not, receive the designation “hosted guests.” These are the kinds of customers the Rio works hard to acquire. Their level of play accords them VIP status, with more “comps” (free dinners, show passes and other gifts). Each hosted guest has an individual staff host assigned to check on them and provide any needed services.

The host is actually a highly paid, personal customer service representative. It’s an important position, which casino operations like the Rio consider pivotal to their success. The hosts cultivate relationships with the players; and VIP players are encouraged to call their hosts before arriving at the casino, so the host can have show tickets, restaurant reservations and suites set up, per the player’s profile.

There’s even a higher echelon of gaming customers—those players who have a $1 million line of credit. They get the best suites and virtually everything the casino has to offer. They’re nicknamed “whales,” and with good reason. At the Rio, this means a suite with 7,000 square feet of space and bathroom sinks with gold-plated faucets. These players are relied upon to bet in the Rio’s secluded back room, called the Salon, where they may play baccarat and roulette with $100,000 chips.

In an industry like gaming, where the level of customer migration is very high, it is imperative that casinos not only keep the players they want but target the right customers in the first place. They do this in a number of ways, including geodemographic profiling for their acquisition. For the high rollers they’ve lost, many of the casinos make an extra effort to get them back, as well.

Advanced companies have begun applying “conversion” models, seeking customers who:

  • Need less direct motivation (incentive) or indirect motivation (promise of support and committed resources) to purchase;
  • Have demonstrated more resistance to claims and attempts to lure them away;
  • Are less price-sensitive;
  • Are more accepting of occasional value delivery lapses and are less likely to accept alternatives if the brand/service is unavailable; and
  • Demonstrate more positive attitudes about “their” brand.

In the retail automotive industry, as another example, potentially loyal new customers take less time making their purchase decisions, consider fewer dealerships, are less price-driven, and rely less on magazine articles and other media and more on previous experience and personal recommendation.

Some years ago, South African researchers Jan Hofmeyr and Butch Rice created an effective conversion model, which helped marketers develop and sustain effective customer loyalty initiatives programs for customers, both new and established. They found that, beyond customer needs and value delivery requirements, companies must understand the potential depth of a customer’s commitment to the supplier. Part of this means identifying the degree of customers’ tangible and intangible involvement with the company. Tangible involvement can include such factors as the actual dollar cost of switching to a competitor. Intangible issues include the emotional strength of the connection or the upset and insecurity created by switching suppliers. The model also measures the degree of attractiveness of competitive brands, based on what these customers want as prioritized elements of value.

Hofmeyr and Rice’s model also enabled them to view their clients’ marketplace in terms of users and non-users. Users can be divided into those who are truly committed and loyal and those who are “convertible”; that is, declining or wavering in their loyalty. Non-users—prospects and previous customers—are divided into potentially convertible and non-available (because they are committed to their current supplier).

Detailed analysis could then be developed for current customers and prospects. The percentage of current customers who are entrenched, or completely loyal, can be identified, as well as those who have moderate loyalty, shallow loyalty, or convertibility (true vulnerability). Non-users, or prospects, could also be identified in a similar manner: those who are available, or highly receptive to a competitive offer; and those who are ambivalent, but who would switch with the right value-based incentive. Other prospects, who have average or strong loyalty to their brand or supplier, are considered unavailable by the model.

The model has been used to plan the amount of advertising and promotional activity required for new customers and prospects, according to their commitment level and potential value. It has been applied in more than 50 countries and for scores of products and services.

On an everyday, or tactical, basis, companies should also always be on the lookout for customers who could represent more of a problem than the revenue they might contribute. Through our own research, we’ve identified seven such types of customers:

  • Non-Complainers—Customers who never express any negative feelings about performance or identify potential areas of improvement may just be hiding their disaffection. Marketing scientist Theodore Levitt has said: “One of the surest signs of a bad or declining relationship with a customer is the absence of complaints. Nobody is ever that satisfied, especially not over an extended period of time.”
  • Over-Complainers—Customers who tend to complain frequently, sometimes irrespective of whether their issues are really consequently or not, can beat down a company’s morale and overtax its support infrastructure.
  • Price Grinders—New customers who pressure their suppliers to lower prices on initial sales in return—they often promise—for future business that may or may not exist.
  • Chronic Defectors—When customers have a history of pulling their business without explanation or warning, this may be a sign that they’ll never be happy with any supplier’s performance. Their volatility and refusal to communicate issues makes them undesirable.
  • Friends in Need—These “quick-jump” customers who want to find new suppliers with great haste often don’t make purchase decisions very well, or they may have economic challenges.
  • Discourteous Slobs—Any customers who are chronically rude and verbally abusive, even though they may not contact their suppliers frequently, can undermine a company’s morale and operations. If they have reason to be upset or annoyed, that’s one thing. Their concerns should, obviously, be addressed and dealt with as quickly as possible. If the negative behavior continues, they’re probably not worth the effort.
  • Misfits—The needs of some new customers may simply not align well with the supplier’s ability to perform. If, for example, 99.9 percent of the deliveries to customers are made during normal business hours and the new customer wants delivery in the middle of the night, unless this customer truly represents a great deal of business, they are probably not serviceable.

If most people are like me—a statement always open to interpretation—virtually every day they will see content or promotional material from long distance telephone companies offering their latest and greatest low cost plans. Typically, they don’t try to find out about my business and personal long distance needs. They just try to push the plan. One of the enduring reasons for the high rates of customer turnover in this industry is the lack of scientific prospect targeting, and attempts to understand potential customers’ tangible and intangible switching issues, done at the outset. Perhaps it’s time for their conversion.

Waiting for Justin

While watching The Grammy’s on January 26, I became totally engaged with a new series of TV spots from MasterCard. In them, they suggest that a viewer may get a surprise visit from Justin Timberlake—a priceless surprise to be sure. Feeling optimistic, I quickly ran out to my front porch and made sure the light was on, the doorbell was working, and then I freshened up my lipstick ’cause hey, you never know.

While watching The Grammy’s on January 26, I became totally engaged with a new series of TV spots from MasterCard. In them, they suggest that a viewer may get a surprise visit from Justin Timberlake—a priceless surprise to be sure.

Feeling optimistic, I quickly ran out to my front porch and made sure the light was on, the doorbell was working, and then I freshened up my lipstick ’cause hey, you never know.

I frantically added a post to Facebook, just to alert my friends and neighbors (in case Justin went to the wrong house) that they should redirect him to Chez Goodman.

It seems I wasn’t alone in my efforts, because most of my Facebook gal pals had the same reaction: “Getting out of my sweatpants now,” one friend added, “I’ll be ready!” “He can surprise me anytime,” another one commented.

But the classic post came from my adult son who is, I would surmise, right in MasterCard’s target wheelhouse. Even though I knew he was glued to the Grammy’s, his pithy addition to my post was one word: “Huh?”

Aside from MasterCard missing the mark with the youth audience (ok, I admit that if he was a girl, the reaction might have been different, but that’s 50 percent of your target, MasterCard!), my son didn’t have a clue what I was talking about. He may have been distracted by the antics of fellow Canadian Justin Bieber, but that’s a story for another day.

The spots, it seems, and the accompanying promotional message didn’t even register with him or his roommates.

As I continued to dream about the potential visit from Justin, I started wondering how this promotion might work, because I knew it would be complicated to manage, and a visit to the site with the rules and regulations reaffirmed it: 10,596 words later, I was totally confused.

Of course there was the standard “no purchase necessary” rule (right up front), yet in order to be eligible, you have to be a MasterCard cardholder—wait… isn’t that a “purchase”?

The rules go on to talk about how to enter via Instagram or Twitter using a hashtag #pricelesssurprise. Then folks from teamDigital (who?!) will select 150 potential winners in a random drawing. They’ll then notify those potential winners who will then enter Phase 2 of the contest, which involves creating a 90-second video. A panel of judges (which may include Justin!), will select the Grand Prize Winner based on “Relevance, Creativity and Overall Appeal/Entertainment Value” (translation: it will bode well for MasterCard when aired publicly and will not embarrass Justin) AND (and this is the fun part), the finalists may have to submit to a background or criminal check, answer additional questions and sign releases. I guess they want to make sure that Justin isn’t surprised by some lunatic answering on the first ring!

Net-net, this seems like way too much work for this Justin fan—and that’s probably a good thing because I don’t plan to switch from American Express anytime soon.

So the light may be on, but I may not be home. #SorryJustin.

How ‘Frienemy Marketing’ Can Save Your Online (and Offline) Business

With the economic climate as crazy as it’s been, now more than ever businesses large and small are looking for creative ways to increase visibility, sales and leads. One effective way is to leverage the relationships with your ‘friendly’ competition. By friendly, I mean synergistic and respected formidable adversaries with a like-minded community of followers to your own.

With the economic climate as crazy as it’s been, now more than ever businesses large and small are looking for creative ways to increase visibility, sales and leads.

One effective way is to leverage the relationships with your ‘friendly’ competition. By friendly, I mean synergistic and respected formidable adversaries with a like-minded community of followers to your own.

You can look to this niche for opportunities to help grow your list and add extra revenues to your bottom line. Even better, this can be done for virtually no out-of-pocket cost.

This is a great way to leverage your content and increase market share, enhance brand awareness, grow sales and leads, and establish credibility with a new, yet synergistic list.

As a consultant, and even back in the days when I was leading the marketing efforts at top publishers, it’s important for me to be “strategically creative” and deploy as many no-cost online marketing tactics as possible for greater return on investment (ROI).

I like to concentrate on the marketing and editorial relationships I have forged with fellow publishers and aggressively pursue ad swaps, guest editorials and joint ventures (JV). I’ll explain a little more about these three opportunities in a moment.

With “frienemy marketing,” the idea is to develop synergistic relationships that are mutually beneficial—to look for areas of deficiency in your competitors and think of ways your company can fill the void.

One potential partner may have a great front-end product (e.g., a low cost e-book) but no up-sell (e.g., a higher-priced related kit containing DVDs, CDs and workbooks). Another potential partner may have an innovative back-end product but no cost-effective front-end product to bring new customers in the door. Still others may have large, qualified lists but need editorial to bond with their lists.

Some tips to keep in mind when looking for partnerships with friendly competitors:

Do your homework. Find out, in advance, who will be at industry events that you’ll be attending. (Check the program for speakers, vendors and participants.) Sign up for their e-newsletters. Read their promotional emails. Maybe even purchase some of their products.

Look at EVERY opportunity as a way to maximize your company’s brand during presentation breaks, lunch time and cocktail parties. When you go to industry events, don’t eat dinner alone in your hotel room. Go to functions. Mingle. Network. Have a genuine conversation with a potential partner … then, if there’s a synergy between your two companies, exchange business cards.

Before you contact a potential partner, get familiar with his products and target audience and figure out how your company may be able to dovetail with his product line or marketing efforts.

So, once you’ve made the connection, now what? You need to look at potential marketing and editorial opportunities …

Ad swaps are a form of revenue sharing. Typically, this can be a text or graphic ad two publishers place in each other’s e-newsletters and each keep 100 percent of the sales they get from their respective ads, no strings attached. Other things to know: Both list sizes should be close in circulation size, hence the reciprocity. You both keep any sales or email addresses collected, and call it a day. Know your “opportunity cost”—the “cost” you will incur for running an outside ad to your list instead of your own ad. If you normally sell ad space in your e-newsletter, this cost could simply be the flat rate fee you typically charge. Or, if you know the average revenues an issue brings in, you could calculate the potential “missed opportunity” of letting another ad run to your list on a given day. You should also agree to share important information with your partner. Before his ad runs in your e-newsletter, point out any creative issues. Provide your partner with your e-newsletter’s sent and deliverability sizes, open rate and ad click rate. Exchanging performance data is critical to a long and mutually beneficial relationship. It has to be a win/win situation for the partnership to work.

Guest editorials are offering content (editorial) that is relevant and targeted for an external publication and reciprocate. This is a great way to get introduced to a new list with the “implied” endorsement of the publisher. His endorsement gives you credibility. And if you provide his readers with good, solid, useful information, they will bond with you quickly.

This is a soft-sell approach that may or may not yield results on its own. At the end or beginning of the article is an Editorial Note or Byline, which can have author attribution, back-link to your website and short sentence for cross-selling, which help with sales, traffic generation and link-building efforts.

Joint ventures are similar to affiliate relationships, with the difference that instead of an affiliate program that is openly marketed, this relationship is more personal—it’s usually a company that you’ve built and cultivated a relationship with and are looking forward to a variety of ongoing business ventures down the road. There’s more of a vested interest. This is a quick and cost-effective way to make money with your list even if you have not yet developed any products.

To determine the viability of a potential JV product, there are several strategic marketing variables to consider. I like to think of them as “PPPGS”:

P = Product quality
P = Price point
P = Performance (when promoted to your potential partner’s house list, as well as to outside lists)
G = General market demand
S = Subscriber interest (when promoted to your list, as determined by feedback, surveys, etc.)

Remember, with “frienemy marketing” you’re looking for long-term partners, not one-hit-wonders. So carefully select the people you approach, making sure their products, brand and message make sense to your business … and, together, you can reap the unlimited profit potential of this underutilized business builder.