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A Data Guy’s Take on Starbuck’s Eggnog Latte Fiasco

Posted by: liftpoint | On December 17, 2014

I love Starbucks! The value of a productTheir product selection, store design and customer service is structured to make people like me feel good. Their loyalty program is rich and I love paying with my mobile phone app.  I also enjoy the chitchat with baristas who willingly create drinks that meet the “high maintenance” needs of customers like me.

Given my love affair with Starbucks and all the data I know they have on their best customers, I was surprised to learn that Starbucks decided to not offer their 20-year, traditional eggnog latte for Holiday Season 2014. With the exception of Pacific Northwest stores (as I understand it), Starbucks chose to replace the eggnog latte with another seasonal coffee drink.

For what is probably a small-volume, seasonal drink with, I imagine, an equally small audience, Starbucks was surprised by the furor that this decision created. Websites were built. Starbuck’s “My Starbucks Idea” forum exploded. Twitter was flooded. Facebook filled with loyal consumers threatening boycotts and demanding “Bring Eggnog Latte Back”.

How could Starbucks have missed the mark so dramatically, especially during the critical holiday season?

I’m obviously not a Starbucks insider, but let me hypothesize from a data-driven perspective. Most likely, Starbucks fell prey to the same sort of analysis mistakes that retailers commonly make when they attempt to optimize their product assortment.

Product analysis without customer analysis doesn’t work!

Here’s the trick. If you examine a product like the eggnog latte, you may very well see declining sales volume year-over-year and increasing costs. The increased costs probably come from the rising price of eggnog as well as the waste of eggnog spoilage. If you examine the product only by sales and cost measures, then the conclusion is inevitable – you should replace the eggnog latte with some higher-growth, lower-cost, greater-profit alternative.

But here’s what this narrow analysis of exclusively product costs and sales volume misses: That frequent purchasers of eggnog lattes were likely Starbuck’s best customers.  They purchased the eggnog latte as a relatively small share of their total purchases during the year, but probably a pretty high share of their purchases during the holiday season.  It was also an emotional purchase steeped in holiday tradition.

Guess what happens if you cancel that beloved eggnog latte? Your best customers “blow up.”

You see, the value of any specific product is actually NOT the value of the product by itself.   It is the value of the customers who purchase that product. If you take away a desired product, your customers may go elsewhere to get it, and they may not come back.

Suddenly you find yourself facing the customer acquisition dictum: for every one best customer lost, you need 10 to 15 average customers to replace those sales. And that math never works. As retailers roll along during this holiday season, it will be interesting to see which retailers have “optimize their product assortment” and which retailers have “optimized the value of their best customers.”

When you can’t find your favorite product at your favorite store, you will know the answer.

In my next post, I will talk about how you can figure out which products are so critical to your best customers and what to do about it.

Misconceptions of Multi-Channel Attribution

Posted by: liftpoint | On December 5, 2014

Cross Channel AttributionMarketing measurement is becoming even more important as marketers are under increased pressure to justify the impact of their spending.  But you can’t evaluate marketing touch points as standalone if you want to get a comprehensive picture of what is working or not.  Effective marketing often requires multiple communications to move a customer to purchase.

To identify what works or not, marketers are now delving into the area of “multi-channel attribution.”  The goal is to determine which combinations of marketing touch points and offers are the most successful at moving high-value customers towards the incremental purchase.

This recent Forbes article gives some background on the field of cross-channel attribution and the common misconceptions that marketers hold about this valuable type of analysis.

BTW — we are a consulting firm and we have experience in this area (despite what the author of the article claims!) :)

The heat is on for marketing organizations to demonstrate the value of their campaigns and show what worked or didn’t. This helps explain why brands plan to increase their spending on marketing analytics a stunning 73% over the next three years, according to the September 2014 edition of The CMO Survey published by Duke University’s Fuqua School of Business. For companies with $1 billion to $10 billion in revenue, the expected increase is even bigger at 86% – and for companies in the B2C services sector it’s nearly 100%.

The CMO Survey paints a clear picture of marketing organizations feeling more pressure to prove the value of what they do (65% say the pressure is increasing), but lacking the means to demonstrate impact in quantitative terms (about 65% say they can’t). For many brand marketers, attribution is the answer.

Done right, attribution can provide clear and accurate insights into how, when and where marketing influences customers across devices and channels. Marketers can then use those insights to spend smarter and define the optimal mix of customer interactions. In short, with cross-channel attribution, marketers can do more with less because they understand their customers better.

Read more from the source: Forbes

 

Weather or Not – Improve Customer Engagement with Weather Data

Posted by: liftpoint | On November 19, 2014

Big Data WeatherMany companies want to begin using Big Data, but very few know how to drive ROI from such efforts.  Red Roof Inn is using publicly available weather data to personalize communications to existing customers who may suddenly need a room due to weather-related flight cancellations. Weather data is one of the most easily accessible third-party Big Data sources, and often one that correlates well with purchase patterns. A good one to start with…

“Much of the conversation among marketers today focuses on Big Data. More specifically, how marketers can pare it down to make it useful. Leveraging open data–or free information such as government stats or weather information–is one way marketers are using Big Data to inform their campaigns in real time. In fact, marketers for hotel chain Red Roof Inn saw an opportunity to use this past winter’s weather data to turn travelers’ woes into valuable offers and increased sales.”

Read more from the source: Direct Marketing News

 

Can You Grow Short-term Revenue with a CLV Focus?

Posted by: liftpoint | On November 12, 2014

Customer Lifetime ValueChandni Vyas, in a post in Forbes, recently highlighted a study that Forbes has conducted with Sitecore, on the use of analytics to improve customer value.  This post focused on customer lifetime value (CLV) as a key metric used to “identify the value of a customer.”

“Using data and analytics has become a popular way to retain customers. This type of technology enables companies to collect data on an individual level. The customer lifetime value (CLV) metric is often used to identify the value of a customer.  It allows companies to balance the costs of acquisition and retention against future spending, and helps identify those customers that represent the highest future value.”

I have found that many companies struggle with how to focus on CLV in a way that helps grow the business in both the short and long-term.  CLV is by definition a long-term strategy (i.e. “lifetime”).  While these companies understand the strategic value of CLV, they need to concentrate on customer value in the current year to make their goals.

Their goal for marketing analysis is to improve the effectiveness and efficiency of their marketing budget; i.e. spend more money on customers with the greatest potential to increase value this year. While such an analysis can ignore long-term potential, our research has suggested that customers with improving 1-year value often tend to be customers who increase their long-term value as well.

Read more from the source: Forbes

Improving Customer Engagement with Big Data

Posted by: liftpoint | On November 12, 2014

Big Data Customer Engagement

In a CMSWire blog post titled How Big Data Can Make You a Better Marketer, Svetla Yankova uses the opportunity of Big Data to focus the conversation on how to improve customer acquisition by focusing on the right metrics, such as conversion of the right customers.

“Big data is everywhere these days. Among other things, it’s created some big expectations for marketing — especially when it comes to mining information. And while it may have the potential to change the game when it comes to data driven marketing, the reality is that it has yet to fully deliver due to a myriad of marketing methodologies clogging the funnel. What does this mean? Let’s back up for a minute. Before we can tap the results of big data, we need to examine the perspectives that are used to fill the funnel — growth and sales — and think about some of the fundamental shifts that are taking place. Then we’ll more clearly understand how big data fits in.”

While I agree with her discussion with regard to new customer acquisition, she fails to address one of the real opportunities of Big Data though.   Big data provides an important opportunity to increase engagement with current customers.  As much research has shown, retaining and growing current customers is easier and more profitable than large-scale acquisition efforts.

By leveraging Big Data (e.g. weather forecasts or construction) marketers can provide valuable services to their customers (particularly their Best Customers) in a way that will increase stickiness and long-term value.

Read more from the source: CMSWire.com

5 Reasons to be a Minnesota Cup Mentor

Posted by: liftpoint | On October 28, 2014

If you spend any time with me, you will know these three things:

  • I get excited when our team at LiftPoint Consulting (formerly M Squared Group) figures out how to use a new approach to help our clients solve a tough problem.
  • I get pumped about new technology.
  • I enjoy helping young people get started in their careersMinnesota Cup

This summer, I was able to combine all three of the things I value by serving once again as a mentor for startup or early-stage companies entered in the prestigious Minnesota Cup competition, the largest new venture competition in the country.

After 5 years of serving in this role, and a little reflection, here’s why I enjoy serving as a mentor and what I’ve learned along the way.

The 5 benefits I’ve gained from being a Minnesota Cup mentor include:

1.  LEARN SOMETHING NEW

Every time a new entrant selects me as a mentor, I’m guaranteed to learn something new. Last year I learned about the need for modest clothing among women of certain religions. This year took me to Southeast Asia (not literally) to learn about business card printing on palm leaves and water security/drip irrigation for rural farmers in India. These entrepreneurs show me a world outside of my normal life and open up my thinking for new possibilities. Often the most successful innovations in one industry come from another, and the techniques I see internationally have potential to help my clients here in the United States.

2.  RENEW MY EXCITEMENT

I have been running my company for over 13 years. We focus on the same industries, although with different strategies and technology.  But when these entrepreneurs tell me their stories, their businesses are both similar and REALY different!  They are so smart, so passionate about their mission and opportunity. It’s impossible not to have that excitement rub off. I leave my mentoring session excited for them and for with renewed excitement for my life and business.

3.  RE-IMAGINE POSSIBILITIES

When I spend time with entrepreneurs who are planning for explosive growth of their businesses, ideas come to mind for LiftPoint – ideas to serve our current and future clients in new and evolutionary ways. When I work with these startups, anything is possible.  Exponential growth is expected. How will they scale marketing, sales, production to accommodate dramatic growth in a short time period?  If growth is possible for them, why not also for me, our company, and our clients?  As a mentor I get a new set of glasses to look at my situation and re-imagine what might be.

4. SEE MY OWN BLIND SPOTS

As a mentor, it’s easy for me to see the shortcomings of these young business plans. Is the market big enough?  Is the expertise deep enough? Is the personality the right kind to attract investors?   My role as a mentor is to infuse additional confidence and point out spots that need more polish.

The examination of their business leads me to examine ours. What are our blind spots?  What is holding back our explosive growth?  How are my blind spots like those of these entrepreneurs?  If it weren’t for this mentor experience, I might not be asking myself these questions.

5. APPRECIATE MY COMMUNITY

The Minnesota Cup rallies successful entrepreneurs from the Minnesota area. These professionals serve selflessly as judges, hosts for networking events, and, like me, as mentors.  During the six months of this competition, the entrepreneurial community is alive with excitement about the many new business ideas, and anticipation about which team will win the $300,000 prize.

What other business community in this country or the world rallies around young business dreamers the way Minnesota does? Sometimes I just have to take a deep breath of appreciation for where I am planted and the caring and selfless professionals around me. My Minnesota Cup mentor role fills me with such appreciation.

The next time you have an opportunity to “pay it forward” by mentoring a young person in their career, I urge you to do it.  The person you help will benefit from your wisdom, and in more ways than you can imagine, you will benefit too.

Bringing Marketing Analytics to a “Gut-Feel” Culture – 4 Approaches

Posted by: liftpoint | On October 28, 2014

Marketing analytics is today’s business oxygen. It’s ever-present, virtually invisible and the force underlying economic activities.  It’s so valuable that you’d think everyone would use it. But they don’t.  Only 32% of marketers use marketing analytics in any formal, routine way. *

For the other 68% of data-deprived marketers, a different thinking is prevalent.Data In Gut Feel Culture

“I trust my gut.”   “I know what works.”  “I’ve been at this a long time. I know what to do.”  “Data will only confirm what we already know.”  

Hmmmm. Really?

If that sounds like your organization, here are 4 ways to start breaking down that “gut feel” tendency.

1.  Use visualization to bring data to life

You may hear that data is too hard to understand or that rows of numbers are boring and confusing to everyone but quantitative marketers (and accountants).   Create charts and graphs that make those numbers easy to understand.  Trends and other patterns become readily apparent in a chart when they can be difficult to see in a table.   And popular Infographics are particularly effective at telling a data story.

2.  Preview results with key stakeholders

When you’re a data-driven marketer, you make decisions based on insight. But your approach can appear complicated and confusing to non-technical managers. Don’t surprise them in a meeting with data insights or results they have never seen.  To succeed, find time to share your data strategy and results in informal meetings with key stakeholders before big meetings. In these 1:1 interactions, it is easier for your stakeholders to ask questions and “kick the proverbial data tires,” without appearing confused in public. This approach makes data approachable (and you too!). And you might even create a data advocate in the process!

3.  Use test-and-control to show statistically significant lift

Marketing leaders are looking for measureable results.  MarketingSherpa’s 2014 E-COMMERCE BENCHMARK STUDY shows that marketers who test are more likely to have business success. Let me say that again: when you test, you improve your results.  So start testing!

Use control group to prove incremental behavior for your data-driven programs. Keep the timeline short. Analyze results for statistical significance. Base your next test on what you learn.

Test the position of different elements on your website. Test times of day, day of the week for sending emails.  Test colors, calls to action, headlines – every component of your marketing materials you think might impact results.  You’d be surprised how something like the position of pricing information on a web page can change results generated by that site.

4.  Create stories to bring the data to life

Many marketers are creative types who are experienced in storytelling.  Instead of showing trends, identify specific, personal examples and make them into stories supported by data. For example:

  • James is middle-aged father of 4 from St. Louis, MO who likes to do his own car and home repairs, but doesn’t have a lot of time or money. He is a one-stop, big-box shopper.
  • Jill is a 20-something professional who shops online for her office attire and furnishings for her Lincoln Park, IL studio apartment. She wants an online reservation system to schedule her car repairs.
  • Steve and his wife are empty nesters who drive around the Midwest to see their grandkids. Personalized, rapid car service is more important than cost to him.

Tell the story of “Mrs. Simpson in Biloxi, MS” who has been buying your product faithfully from her favorite drugstore for 15 years. Another consumer could be just-out-of-college, suburban-Chicago resident named Amanda who shops only online and is trying your product for the first time.  This approach puts a “face on the data” and helps managers visualize real customers in real-life situations.  Make data fun by using stories and watch the walls of resistance fall.

Now is the time for you to take a deep breath, try some new strategies and see those anti-data biases fade away. When you do, your whole organization will breathe easier, enjoying the success that a data-driven approach brings.

* marketingsherpa, E-commerce Benchmark Study, 2014

5 Reasons Why Marketing Segmentation Projects Fail

Posted by: Mark Price | On July 18, 2014

It’s an uber-personalized world out there.  Which means customer segmentation is the name Customer Segmentationof today’s marketing game. But if segmentation is so essential, why does it fail over 50% of the time?

First a quick review.  Segmenting your customers means dividing them into smaller groups that are more alike than the rest of your customers.  This process yields critical insights about your best customers and helps you identify other segments that can become best customers over time. With this information, you can customize messaging and provide offers that appeal to smaller, more valuable groups, increasing engagement, retention and ultimately customer value. While customer segmentation has been accepted as a critical marketing tool for over 20 years, more than 50% of these efforts end up in failure – wasting hundreds of thousands of dollars and much of your sponsor’s goodwill.  Make sure your customer segmentation initiative is a success by avoiding these five common roadblocks and landmines:

  1. No strategic goal
    Good journeys begin with a clear focus on the destinations.  If you do not know the overall business driver behind segmenting your customers, you will not succeed. Many companies start a segmentation project because someone else did it. But what is the strategic need in your company — is it more efficient lead acquisition or reduced attrition of best customers?  Do you know who your best customers are (not your highest revenue, but your best)?
  2. Lack of buy-in from the teams responsible for sales
    Ultimately, the “peddle hits the metal” when someone has to sell something to someone else.  If the teams that sell to your customers — whether web site development, Sales or telemarketing — will not support a segmentation pilot, then you will not succeed.  Segmentation must reach customers to matter, and marketing cannot win this battle alone.
  3. Lack of an executive sponsor
    Eventually, all segmentation efforts face pushback from other departments whose goals and metrics are not the same as those of marketing.  The only way to ensure buy-in is to have an executive sponsor who can intercede with Finance, with the Creative team, with e-commerce, to make sure the pilot program can see the light of day.  An executive sponsor, in our experience, is critical to your success.
  4. No ROI/success parameters
    Another key factor contributing to segmentation failure is a lack of quantification of potential value.  What are your success metrics?  Without a forecast of potential upside, supporting groups (and potentially Marketing as well) can get sidetracked meeting their own metrics or senior management special requests.  Identifying the potential upside, based on company performance and best practices from similar companies, gets you through the hard times, when everyone else would like to abandon your initiative.
  5. Inability to link data to individual customers
    The most common mistake of all is a focus on an “attitudinal” analysis rather than a behavioral one.  This approach is useful to provide insight into customer beliefs and needs, but you can’t use it to target specific customers for database marketing efforts. It simply doesn’t work.  Build your segmentation on parameters that you want to change — behaviors, and you will be quickly on the road to success.

Yes, segmentation can be transformative to an entire organization.  Viewing your customers as groups, rather than a single “she” or “he”, allows the company to better tailor products, services and communications to your critical customer classifications. Since any customer segmentation effort can easily be derailed, keep these five factors in mind, and success will be on the way.

 

10 Reasons to Personalize Email Marketing and 1 Way To Get Started

Posted by: liftpoint | On June 20, 2014

It still surprises me today when I run into retail marketers who are sending the same email to all their customers.  They are the ones who are surprised at the low levels of their open and click rates.Top 10 Reasons to Personalize Email Marketing

While there are probably a 100 reasons to begin to personalize email marketing today, here are the top 10 reasons to start now. Remember, in digital marketing, time is not your friend!

  1. Your customers are receiving personalized emails from your competition.  As personalized emails become more common, consumers will begin to shift their spending to brands that seem to know them the best.  That better be you!
  2. Your customers don’t know many of the products that you carry. Often, even best customers do not know your entire product assortment.  By highlighting products that analysis suggests they might be interested in, you both intrigue and reward your better customers with more information.
  3. Your retail experience is largely unpersonalized. No matter how much training you give your store associates, regular customers are seldom recognized, and their service experience is often generic.  Email campaigns give you the opportunity to add a personal touch not available in-store.
  4. Your customers may be running out of your products right now.  You do not know what the consumption/usage patterns of your products are and cannot easily anticipate when customers may need a refill.  Every time they run out of a product, they have to make the choice to repeat or seek out other alternatives.  Help them make the choice to come back by letting them know that you know who they are and care about them.
  5. Email personalization does not require programming knowledge any more. “Back in the day,” you often needed a combination of HTML and SQL skills to execute personalized email marketing.  Today, the new generation of email marketing tools allow you to “point and click” your way to basic email customization (images, offers, text).  Don’t let software installation stop you, either.  Most of these new tools operate in the cloud.   You can get up and running quickly.  You can load your email list, host your images and copy and build your campaigns as you need.  In addition, you can download open/click files for further analysis as you wish.
  6. Your customers think you don’t really know who they are.  Why should they?  Do you?  If you knew that the patterns of a mere 10% of your customers would determine not only your bonus but whether you stay in business, how different would you act?  You can identify those customers with some basic analysis and then focus on them for your targeted marketing.  Begin to convince those customers that you know them by referring to their prior purchases and other things you know about them, and follow-up with other programs, both online and in-person.
  7. Your customers are angry that they don’t receive the discounts “the other guy gets”.  Why is it that companies give the largest discounts to prospects, who they don’t even know, and the lowest to their prize customers, the ones who “keep the lights on”?  By the way, if you think your best customers do not know what other customers and prospects receive in offers, you are wrong.  The Internet takes care of that.  Preempt those concerns with special offers for Best Customers, based on their unique needs.  That approach will help with retention.
  8. Bored customers try the competition.  “Hey, the other guy has some shiny new bells and whistles!  I think I will go try them out!” And there goes your Best Customers, trying the competition’s new offers or products while you send the same mass boring emails to them over and over again.  Use your customer knowledge to customize the offers in ways a competitor can’t.
  9. Personalized emails make you more money.  Over and over again, we see in our clients that personalized email subject lines and offers drive up to a 50% higher lift in open rates, click through rates and conversions.  Yes it takes more work.  Yes it will make you more money.
  10. Personalized emails contribute to customer retention.  Customers, simply put, want to return to places that know them, speak to them as individuals and would miss them if they were gone.  That is the goal of all marketing.  Personalized emails are one small step in that direction, but they are a clear step, one you can’t afford to miss.

You probably realize by now how critical personalized email marketing is to the growth of your business.  Now, how to start?

In our experience, the one place to begin with personalized offers is to offer customers exactly the same product category they purchased before.  That approach may be counter-intuitive, but in client after client, the last product category purchased shows up as one of the products categories the customer is most likely to purchase again, even for categories with longer purchase cycles.  So take the shortcut, and offer your Best Customers a product from the same product category as before, with personalized communications and subject lines.  Sometimes the easiest approach is the best.

Personalized email marketing is a critical link to retaining and growing relationships and business with your Best Customers.  Don’t wait to start.  Your competitors already have.

Data-driven Lead Scoring: What Makes a Best Customer?

Posted by: liftpoint | On May 28, 2014

Lead ScoringB2B Sales and Marketing  always seem to be disagreeing about lead quality.   Marketing claims that the leads are “highly targeted” and Sales claims that the leads aren’t accounts that can help them meet their revenue and growth goals.  Either they are too low in value, or not well qualified.  Lead Scoring can help resolve those issues, but carries some unforeseen risks.

Given that leads are the lifeblood for growth of B2B companies, what is the solution to this dilemma?  How do you get targeted leads that actually close?

One approach is to use lead scoring software.  These software companies provide a solution that allows you to “score” leads based on factors such as their stage in the buying cycle, SIC code and the prospect’s level in their company.  Those scores will help you find prospects that resemble your highest revenue customers.

But what if your highest revenue customers aren’t really your best today, or the best customers for the future of your business?

To identify the best prospects for the company’s future, you need to start with your past.  

  1. First, identify current customers who are “right” for the company as it grows.
  2. Then you use data about those companies to determine what they have most in common.
  3. Once you have found those common elements, it is not difficult to identify and rank prospects on those same factors.   

The hardest step is the first one — actually determining what customers you would consider to be “your best.”

To identify best customers, I recommend incorporating the following data:

  1. Depth of Product Purchases
    How many of your product lines does a given customer buy? Your BEST customer buys across your product offerings.  Customers, who buy a lot of the same product, don’t share that distinction.  By ranking customers according to range of their purchases, you begin to build a customer profile with an insight that a simple “who bought how much” analysis doesn’t give you.
  2. Retention
    How long has a given customer been your customer?  Chances are, the longer the relationship the better the customer.  By measuring the time between the first and last purchase, you gain valuable data in building your best customer profile.
  3. Loyalty
    How many channels does a given customer use to access your company?  Has this customer written positive reviews on social media?  By taking a cross-channel look at your customer database, best customers will rise to the top – providing another insight in fine-tuning your best customer profile.
  4. Strategic Fit
    How does a given customer fit with your company’s strategic direction?  Does a given customer’s demographic profile match your corporate “voice of the customer”?  What psychographic data can you append to your customer database?  If you’re selling tractor equipment, your best customers probably aren’t lawyers.

Combine all of this data and you’ll have a pretty clear profile of your best customer.  Analyze those customers to determine common elements — that is the key to the most effective type of prospect targeting.

Once you have determined the commonalities between those best customers, you can apply a lead scoring algorithm to rank your prospects based on those factors.

You see, the hard part of this process is not the lead scoring itself; rather, it is the thinking and analysis that helps you lock down who are your real best customers.  That insight can be company changing, both in how you treat your current customer base and how you target.

Companies who have used this approach have seen double digit improvements in revenue from new leads.  The insights from understanding what really makes a best customer also helps the company better target new products and services to that base.

So before you score your prospects, make sure you are scoring them on the right factors — your “true” best customers — those that meet the needs of your company now and for the future.  Otherwise, as they say, “be careful what you pray for, you just might get it!”

Read some of my previous posts about Sales and Marketing alignment:

Sales Alignment – An Essential Link to Build Marketing Credibility

Grow Your Marketing Credibility Before It’s Too Late