Too Big to Fail – But Not Too Big to Suck

On a recent “Real Time With Bill Maher” show, Maher responded to the announcement that Time Warner Cable would merge with Comcast Corp. in a $45 billion purchase. He noted that, combined, the two cable systems represent 19 of the 20 largest U.S. markets; and, apart from suppliers like Dish and DirecTV, they have no competitors in these metros. Further, Maher said, the two companies have the lowest customer satisfaction ratings of any cable system. So, as he asked his panelists, where is the value for customers in this merger if both companies are known to have questionable service performance?

On a recent “Real Time With Bill Maher” show, Maher responded to the announcement that Time Warner Cable would merge with Comcast Corp. in a $45 billion purchase. He noted that, combined, the two cable systems represent 19 of the 20 largest U.S. markets; and, apart from suppliers like Dish and DirecTV, they have no competitors in these metros. Further, Maher said, the two companies have the lowest customer satisfaction ratings of any cable system. So, as he asked his panelists, where is the value for customers in this merger if both companies are known to have questionable service performance?

The Federal Communications Commission (FCC) will, of course, have a great deal to say about whether this merger goes through or not. During the past couple of decades, we’ve seen a steady decline in the number of cable companies, from 53 at one point to only six now. Addressing some of the early negative reaction to its planned purchase of TWC-which would increase Comcast’s cable base to 30 million subscribers from the 22 million it currently has (a bit less than 30 percent of the overall market)-Comcast has already stated that it will make some concessions to have the merger approved. But, that said, according to company executives, the proposed cost savings and efficiencies that will “ultimately benefit customers” are not likely to either reduce monthly subscription prices or even cause them to rise less rapidly.

Comcast executives have stated that the value to consumers will come via “quality of service, by quality of offerings and by technological innovations.” David Cohen, their Executive VP, said: “Putting these two companies together will not deprive a single customer in America of a choice he or she will have today.” (Opens as a PDF) He also said, “I don’t believe there’s any way to argue that consumers are going to be hurt from a price perspective as a result of this transaction.” But, that said, he also admitted, “Frankly, most of the factors that go into customer bills are beyond our control.” Not very encouraging.

As anyone remotely familiar with Comcast’s history will understand, this is not the first time the company has navigated the river of communications company consolidation: 1995, Scripps, 800,000 subscribers, 1998, Jones Intercable, 1.1 million subscribers; 2000, Lenfest Communications, 1.3 million subscribers.

In 2002, Comcast completed acquisition of AT&T Broadband, in a deal worth $72 billion. This increased the company’s base to its current level of 22 million subscribers, and gave it major presence in markets like Atlanta, Boston, Chicago, Dallas-Ft. Worth, Denver, Detroit, Miami, Philadelphia and San Francisco-Oakland. In a statement issued by Comcast at the time the purchase was announced, again there was a claim that the merger with AT&T would benefit all stakeholders: “Combining Comcast with AT&T Broadband is a once in a lifetime opportunity that creates immediate value and positions the company for additional growth in the future. Shareholders, employees, and customers alike are poised to reap considerable benefits from this remarkable union.”

There have been technological advances, additional content, and enhanced service, during the ensuing 13 years. But “immediate value” and “considerable benefits”? Having been professionally involved with customer research conducted at the time of this merger, there was genuine question regarding the value perceived by the newly acquired AT&T customers. In a study among customers who discontinued with Comcast post-merger, and also among customers who had been Comcast customers or AT&T customers prior to the merger, poor picture quality (remember, these were the days well before HD), service disruption and high/continually rising prices were the key reasons given for defection to a competitor.

Conversely, when asked to rate their current suppliers on both key attribute importance (a surrogate measure of performance expectation) and performance itself, the highest priorities were all service-related:

  • Reliability of cable service
  • Availability of customer service when needed
  • Speed of service problem resolution
  • Responsiveness of customer service staff

On all principal service attributes except “speed of service problem resolution,” the new supplier was given higher ratings than either Comcast or AT&T. And there were major gaps in all of the above areas. Overall, close to 90 percent of these defected customers said they would be highly likely to continue the relationship with their new supplier. When correlation analysis was performed, pricing and service performance were the key driving factors. In addition, even if Comcast were now able to offer services that overcame their reasons for defection, very few (only about 10 percent) said they would be willing to become Comcast customers again.

Finally, we’ve often focused on unexpressed and unresolved complaints as leading barometers, or indicators, of possible defection. Few of the customers interviewed indicated problems with their current suppliers; however, as in other studies, problem and complaint issues were frequently surfaced for both Comcast and AT&T.

It should be noted that having lost a significant number of customers to Verizon’s FiOS, Comcast has a winback program under way, leveraging quotes from subscribers who have returned to the Xfinity fold. In the usual Macy’s/Gimbel’s customer acquisition and capture theater of war, this marks a marketing change for Comcast. As often observed (and even covered in an entire book, with my co-author, consultant Jill Griffin), winback marketing strategies are rather rarely applied, but can be very successful.

One of the key consumer concerns, especially as it may impact monthly bills, is the cost and control of content. For example, Netflix has agreed to pay Comcast for an exclusive direct connection into its network. As one media analyst noted, “The largest cable company in the nation, on the verge of improving its power to influence broadband policy, is nurturing a class system by capitalizing on its reach as a consumer Internet service provider (ISP).” This could, John C. Abell further stated, be a “game-changer.” Media management and control such as this has echoes of Big Brother for customers, and it is all the more reason Comcast should be paying greater attention to the evolving needs, as well as the squeeze on wallets, of its customers.

Perhaps the principal lesson here, assuming that the FCC allows this merger to proceed and ultimately consummate, will be for Comcast to be proactive in building relationships and service delivery. There’s very little that will increase consumer trust more than “walking the talk,” delivering against the claims of what benefits customers will stand to receive. Conversely, there’s little that will undermine trust and loyalty faster, and more thoroughly, than underdelivery on promises.

Get Ready for 2013: Customer Acquisition Emails

Acquiring long-term platinum customers is much harder today than it was even a decade ago. The globalization of the marketplace created an environment where people have access to multiple choices for every product or service they want to buy. This availability has created an environment where long-term customer loyalty has been replaced by hit-and-run shoppers. The only way to offset this to create a relationship with your customers that makes them want to stay with your company even when the competition offers lower prices and faster service.

Acquiring long-term platinum customers is much harder today than it was even a decade ago. The globalization of the marketplace created an environment where people have access to multiple choices for every product or service they want to buy; a simple search on Google for any item or service will reveal a multitude of choices at a variety of prices.

This availability has created an environment where long-term customer loyalty has been replaced by hit-and-run shoppers. The only way to offset this to create a relationship with your customers that makes them want to stay with your company even when the competition offers lower prices and faster service.

Relationships begin at the first contact point. Prospects who sign up for your email list have different expectations than your customers. Sending them the same promotional emails may convert a few, but it will not create the foundation for a long-term lasting relationship. People need to know they’re valued. The best way to communicate that is by creating customized emails designed to woo prospects into becoming customers. The same technological advances that increased your competition also make it easier and more economical to connect with people.

Every email marketing strategy needs a triggered systematic campaign designed to convert prospects into customers. Most companies have a welcome email automatically triggers when someone subscribes to their email list but very few businesses follow-up with additional emails that communicate information about the company products and services. It’s as if they presume that everyone knows everything there is to know about their company.

People subscribe to email lists for a variety of reasons. Some are simply looking for discount offers, others want to learn more about the products and services. Failure to take advantage of the opportunity to share information with people who have indicated they want to know more is a waste. The cost is minimal. The potential return is huge. If you do not have a customized prospect conversion strategy, you are squandering an opportunity to build a foundation for long-term customer loyalty.

It’s almost impossible to identify the prospects with long-term customer potential. The only information you have available is the original source and what people choose to share. Requiring additional information to better qualify subscribers is counterproductive—long sign-up forms yield fewer subscribers. The objective of your sign-up form is to gain permission to email prospects. The trigger emails following subscription can be used together additional information as well as convert the subscribers.

Start with a welcome email that thanks people for subscribing. Ask if they will share their preferences so you only send relevant emails. Be very careful with this. Do not ask what the subscribers want if you are not going to honor their wishes, it will alienate your prospects. If you choose to ask the questions, limit them to five. Keep them on one page above the fold with the save button in clear view. People’s eyes start to glazing over when they see a long list of questions.

The emails following the welcome letter need to build trust, provide relevant information and match the preferences indicated earlier. Don’t presume your prospects know about your top-notch service, liberal return policy or special promotions. If they do, the emails will serve as a reminder. If they don’t, providing the information is a service. Including customer testimonials and product reviews provide social proof and help establish trust.

Here are some do’s and don’ts for creating a triggered welcome email campaign:

  • Do include an added bonus in every email. This can be as simple as providing tips. For example, a B-to-C business selling cookware could offer recipes and cooking tips. A B-to-B company selling office supplies could offer productivity tips.
  • Don’t overwhelm new subscribers by bombarding them with emails. Test different delivery times and spacing to find the best strategy.
  • Do provide links to your website and additional information in every email. Always gives people a place to go and easy way to get there if they want more.
  • Don’t include icons for social media sites without providing a call to action. Give people a reason to connect with you on the other channels.
  • Do test everything. What works for your competitor may fail for you and vice versa.
  • Don’t think of your welcome email campaign as “set it and forget it” marketing. Strive for continuous improvement to maximize your return.

An ABC Introduction to Data Mining for Dollars: Slicing and Dicing Your In-House List for Profit (Part 1 of 2)

One of the best ways to build your online business is to build your list; that is, your “database” of potential subscribers, customers or prospects. This may not be as sexy as social marketing, as robust as mobile marketing or as challenging as search engine marketing … but it is a viable way to harness the power within your own “house file” to maximize your marketing ROI.

One of the best ways to build your online business is to build your list; that is, your “database” of potential subscribers, customers or prospects. This may not be as sexy as social marketing, as robust as mobile marketing or as challenging as search engine marketing … but it is a viable way to harness the power within your own “house file” to maximize your marketing ROI.

Today, I’ll show you how you can segment your database of names to boost sales, increase bonding and shorten conversion time. Data mining, list segmentation or strategic database marketing is basically the art of slicing and dicing your own in-house list of names for optimal performance. You do this to help increase the response of your promotional and conversion efforts.

You see, once you divide your list of names into smaller groups (known as segmentation), you can target your product offers and promotional messages to each of those groups. By customizing your marketing messages based on specific customer needs, you’ll be promoting products to people who are more likely to buy them. You increase your customers’ satisfaction rate as well as your potential conversion rates. And higher conversion rates mean more money for your company.

One data-mining model is the RFM method. It’s practiced by direct response marketers all over the world. “R” stands for Recency—how recently a customer has made a purchase. “F” stands for Frequency—how often the customer makes a purchase. And “M” stands for Monetary—how much the customer spends. Here’s how you can use the RFM method to help lift your sales.

Recency
Whether your house list is made up of people who signed up to receive your free e-zine or people who paid for a subscription, you can segment your database according to how long your subscribers have been with you. For instance, you can create categories such as: 0-6 months, 6-12 months, and 12-plus months. You would look at these groups as your hot subs (newest subscribers 0-3 months), warm subs (mid-point subscribers) and cool subs (those who have been subscribing to your e-zine the longest, 12-plus months).

Here’s one way you can put that data to use …

Let’s say some of your “cool subs” have lost their initial enthusiasm for your e-zine. You could cross-reference those names with their open rates. If most of these subscribers haven’t been opening your e-zine in six, nine or 12 months, you may consider sending them a special message asking to reengage them. These “inactive” subscribers are a great group on which to test new marketing approaches, new prices and new subject lines. Since this group is not responding to your current emails, why not use this as a platform to reengage AND test? Your “hot subs” are your newest, most enthusiastic subscribers. They are ripe to learn more about you, your products and your services. If you handle this group properly, you can cultivate them into cross-sell and up-sell customers.

For example, send your “hot subs” a special introductory series of emails (also known as auto responder series). This special series would encourage bonding and introduce readers to your e-zine’s contributors and overall philosophy. It could also tempt readers with specially priced offers. Sending an introductory series like this can not only increase the number of subscribers who convert to paying customers, it also increases their lifetime value (LTV)—the amount they spend with you over their lifetime as your customer. Hot Tip! Make sure to suppress the recipients of your auto responders from any promotional efforts until the series is complete to ensure more effective bonding.

If, instead of subscribers to a free e-zine, your house list is made up of people who paid for their subscription, the same segmentation process applies. You break your active subscribers into hot subs, warm subs and cool subs. You also break out “expires” (those who allowed their subscription to run out) and “cancels” (those who cancelled their subscription).

Cross-marketing to these lists is usually effective. The expires oftentimes simply forget to renew and need a reminder. And just because someone cancelled one subscription doesn’t mean they may not be ideal for another service or product that you provide. If they’re still willing to receive email messages from you, add these folks to your promotional lists. Once you’ve gotten these cancelled subscribes to open your messages, turning them into paying customers is just a matter of time. Most Internet marketers would have written these people off. So any revenue you get from them is ancillary.

Next time, I’ll go into Frequency and Monetary, the two other components of the RFM model. So stay tuned!