Invert the Pyramid and Supercharge Your Profits

Mark Price

All customers are not created equal.  Rather than investing your marketing budget equally across your customer base, consider focusing funds on customers with the highest current value, the strongest relationships and the greatest ability to return value to the company.

Different customers have different needs, and different willingness to spend their money on your business.  In addition, customers differ on the amount or type of relationship they want to have with your company, either due to their psychographics, or their relationship with other companies in your space.  Net of everything, most customer bases end up being distributed like this:

Across our clients, consistently, the top 10% of customers represent between 50-60% of revenue, and the next 30% represent 30-35% of revenue.  The bottom 60% of customers are extremely low value, and usually contribute less than 15% of total revenue (this trend of value concentrated in top customers is even more so when you analyze profitability).  Now, the “right” way to do this analysis is based on Customer Lifetime Value, but as you can see in this post, that approach has its challenges.

When researched, most customers do not spend all their money with a single company, even when those customers are in the top 10% of the base.  In some of our research, we have found that even those best customers spend only 50-60% of their category spending with our client. So even the best customers have upside – additional category spending they could do with your company, but do not.

If you ask marketers whether they target those best customers (and the mid-value, high potential customers) or not, and they will tell you “yes.”  Sometimes they do.  Some marketers limit their direct mail to high value customers; some do not.  Way too many marketers mail too deeply into their customer file, choosing to waste marketing dollars to squeak out a little bit more revenue, even if that revenue costs more than the profit it yields.

While some marketers do tighten their targeting to focus on higher value customers, they consistently fail to change their spending per customer in their database marketing efforts to reflect the differences in current and future value.  The best marketers vary their spending per customer in three different ways: 

1.     Frequency of communications – Rather than contact each customer one time, contact higher customers two or three times to break through the clutter and successfully reach your customer.

2.     Type of communications – Instead of just sending low-cost emails and blanketing your customer base with communications that they may not want, create a multi-channel communication plan, where you reach your best customers through a blend of low-cost and higher-cost communications (such as email, direct mail, phone calls, etc.).

3.     Value of the material delivered – if you are creating a database marketing program, consider increasing the value of the communications that you send to your higher value customers.  For example, send a postcard to your lower value customers, a trifold piece to your medium value customers and a beautiful brochure to your highest value customers.  Take a lesson from the airline reward programs, where the costs of the intro pieces escalate according to the value of the customer.

 When you add all of this up, you end up with a marketing investment plan that looks like this:

  

Ultimately, the goal is spend most of your resources where they can do the most good, where they will yield the highest return.  Focus your spending (and your effort) on the smaller group of customers who buy the most from you.  Measure your marketing strategies carefully and you will reap the rewards.

Check out a video blog post on this subject at: http://www.cultivatingyourcustomers.com. 

Mark Price is Managing Partner of M Squared Group, a consulting firm focused on understanding and building customer relationships, and the author of the blog “Cultivating Your Customers,” where he writes about practical approaches to improve customer retention and overall customer value.

The future arrived half an hour ago. Where were you?

Marc Sokol

If you are reading this post on the MNAMA blog, odds are you also attended the recent MNAMA conference.  Perhaps you were fortunate enough to hear the keynote address by Cecily Sommers, ‘Think like a futurist”.  Dave Buchanan, wrote a nice summary of that session, which you can read if you scroll back a few posts.   

Let’s build on the ideas surrounding her session.   Why a futurist at a conference on conquering chaos in today’s marketing world?  Don’t you have enough to do without being distracted by someone going on about what’s going to happen someday somewhere?  And if you’ve seen some of this before, why give it another thought?  After all, it’s at least one week since the conference has come and gone.

As a psychologist (yep, I’m one of those), I can tell you that if you resonated to the conference theme of Conquering Chaos, then you need a conscious strategy beyond just showing up for the day.

We’ve already acknowledged that the marketing space (and wherever you locate yourself within it) is expanding, evolving and accelerating.  Great, just what you need: more chaos! 

All of which creates a stress reaction.  A little stress is a good thing as it activates your brain.  More stress continues to energize some people and begins to paralyze others.  Too much stress and we all get overwhelmed.

There are, however, well known tactics, which we can call the 3 A’s of stress management for marketers:

1.      Avoid the source of stress.  Hmm, you could hide under the covers, cross the street when you see future trends at your doorstep, or get into another field, but I’m guessing this tactic really isn’t you.

2.      Adapt to increased stress levels.  This is where you learn to adapt and adjust your body to more ambiguity, more multi-tasking, more rapid change imposed by changing events.  Exercises, healthy eating, sleep, biofeedback, mediation, keeping a sense of humor – they are all part of the prescription.  These work, but you may still feel like a victim to events coming at you faster than level 15 of that video game on your Smartphone.

3.      Alter the situation that is causing stress.  Take action! Kick back at the source of stress; change your course of actions so you impact the situations that create stress.  See the future, create your own future, and eliminate some of the stress of an externally imposed future. 

What does that look like?  Well it could look like a traditional brand strategy firm (or independent consultant) diving deeper into the social media space, learning how to moderate online communities, and from there discovering new ways to deploy brand strategy that go far beyond traditional advertising for CPG companies. And it could look like someone who does that in sync with their awareness of increased societal/business/government focus on a particular macro trend, such as getting yourself known as THE expert for design of branded, engaging online healthcare communities.  (If it sounds like I’m talking about you, it’s because I am!)

So how does a futurist fit into the stress management prescription?

In our culture, people often are optimistic that anything is possible in the future, but focus all of their energy on today and what is immediately required.   For many, aligning today’s actions with the future is more hope than strategy.  But that doesn’t have to be you.

What Cecily and other futurists offer is perspective; today’s events are just one point in a stream of events.  When you have a sense of the trends, you are better able to place a bet on the future and see how your choices today line up with where you plan to go.  The world will begin to seem less chaotic; misaligned, yes, but not nearly as random or chaotic.

One last thought:

Assume the future arrived half an hour ago, but is distributed in many different pieces and locations.  All you have to do is connect the dots!

So what are you waiting for?

Marc Sokol is an organizational psychologist with an eye for how people and teams can be more effective, even in a dysfunctional company. He is part of M Squared Group, a data-driven marketing consultancy. 

 

Don't Miss the 11/16 Digital Series #2 with Rick Mathieson

Join MN AMA and nationally acclaimed author, speaker and frequent media commentator, Rick Mathieson—author of The On-Demand Brand: 10 Rules for Digital Marketing Success in an Anytime, Everywhere World for an exclusive event exploring the major digital trends that will affect your marketing efforts in 2011. Learn how to identify and capitalize on the right mix of channels and interactions to build awareness and demand—before your audience hits the snooze button.

Produced by Make it Real McCoy.

More info here: http://bit.ly/9iF30v

The Graying of Social Media

Jennifer Broman

As marketers, we all know that the social media landscape has changed drastically in the last five years.  But most of us don’t realize that these changes are spurring on a whole new audience to enter the social media scene.

Supported by research from Pew Internet, a sub-project of the Pew Research Center focusing on Internet and American Life, this far-reaching growth is due to a large number of older adults participating in social media networks, including Facebook, LinekdIn, etc.   The reports states, “social networking use among internet users ages 50 and older has nearly doubled – from 22% to 42% over the past year (April 2009-May 2010) (Pew Internet, 2).”

And these new social network users aren’t just interested in standing on the sidelines when it comes to this new fad.  “Among the pool of adults ages 50 and older who use social networking sites, 44% used them on the day prior to their being contacted for our survey," according to the Pew Internet research (4).  As you can see, older adults are showing they truly are plugged into social media.

So what is driving older adults to join the social network movement?  Looking back to the Pew Internet study, there are a few strong reasons for increased social network use.

1.     Social networking sites provide opportunities to reconnect with people from their past, which serves to provide “a powerful support network when people near retirement or embark on a new career (Pew Internet, 6).”

2.    Older adults living with these diseases are more likely to reach out for support online (Pew Internet, 6).

3.    Social media bridges generational gaps and social spaces connect users from very different parts of people’s lives and provide the opportunity to share skills across generational divides (Pew Internet, 7).

What does this mean?  This shifting demographic is changing the tide on how social media is both used and implemented by marketers. Not only must we broaden our understanding of the media used to target older adults, but we must also think differently about the messages we send.  For instance, maybe the marketing messages created for use in social media for younger generations is similarly accepted by older generations utilzing those same sites.  Therefore, marketers may need to reconsider their social media (or lack of social media strategy) when it comes to older adults and take into consideration what is driving them to visit these sites.  

What are your thoughts? Has your company's social media strategy changed recently to include older adults into the audience? Have you seen the gap narrow in your marketing messages as it relates to your various audiences?  If not, what would need to change for this to happen?

Jennifer Broman is a recent college graduate from Gustavus Adolphus College with a strong passion for the marketing industry.  She has gained marketing experience at Clarity Coverdale Fury, full-service advertising agency in Minneapolis, and a division of Lifetouch Photography, a Minnesota-based company who operates the portrait studios in Target and JCPenney.  Currently, she is serving as the MN AMA Blog Content Manager.

 

Jumping through “Hiring Process Hoops”

Barrie Berquist

Hiring managers have a tough job.  They are tasked with sorting through hundreds of applications and resumes to find the best person for an open position.  They want to do it in the most efficient, least expensive way possible.  Making the wrong hiring decision is more inefficient and expensive than doing it right the first time.  With an unemployment rate still near 10%, hiring managers are bombarded with applications from those who want the job.  Therefore, hiring managers are in the driver’s seat and can afford to be very choosy during the hiring process.  As jobseekers, this means that we are often asked to jump through many hoops in the hopes of receiving an offer.

I recently applied for a director-level position at a medium-sized, Minnesota-based company.  After a phone interview and face-to-face interview with a woman from Human Resources, I was asked to complete an online assessment.  The assessment took an hour and I was able to do it from home.  I must have passed because I was asked to come in for two more rounds of interviews.  Finally, I was asked to complete 3 more hours of on-line assessments, then an 8 ½ hour series of assessments with a consulting company downtown.  During this process, I completed online personality tests, problem solving tasks, and logic problems.  I completed a 2 hour “inbox” prioritization drill, a role play meeting with a “direct report”, and an intense interview with a psychometrist.  I didn’t get the job.

During the interview process for various positions that I have applied to, I have completed pen and paper tests, online assessments, case studies, and behavioral interviews.  I have been assessed on my math, analytical, problem-solving, reasoning, management, decision-making, and other various skills.  My personality has been classified and compared to the company culture and the desired traits for the open position.  The results from all these activities supposedly provide information to the hiring manager regarding how I would perform if I were hired for the position, but do they?

What do you think?

·     What have you had to go through to try to get a job?  Did you get it?

·    Do you think that these steps are necessary to sift through the candidates or do some companies take the process too far?

·    Do you think assessments, role plays, and other interview tasks accurately demonstrate your capabilities to do the job?  Why or why not?

Barrie Berquist is a Retail Analyst on the ConAgra Foods Team at Acosta Sales and Marketing.  She has been a member of the MN AMA since 2007 and is a member of the MarCom Committee where she serves as the Career Insider Blog Project Manager.  She can be reached at barrieberquist@yahoo.com.  You can follow Barrie on Twitter @BEBERQUIST. 

Meet Jennifer, Becky, Melissa and Josh

Dan Hammer, Senior Vice President of Marketing at Schwan’s Consumer Brands, gave early afternoon keynote participants an insight into what it’s like inside the marketing department of Schwan’s. Apparently, the place is populated by Jennifer, Becky, Melissa and Josh. These are the proper names given to Schwan’s brand heroes that embody three tried and true fundamentals of marketing that hold true for anyone, no matter their level of expertise.

Dan distills all of the market noise that is out there today down to three key concepts that make an effective marketer and brand builder:

• Know your brand

• Know your consumer or customers

• Focus on value creation

Knowing your brand means having a clear vision of why your brand exists. Making your message simple and easy will contribute to the clarity.

Know your consumers and customers by understanding their values and motivations. Be certain to speak on their terms and to build a personal relationship with them.

Then create value by making the message ownable and compelling so that it drives people to change their behavior and buy your product or service.

Using the brand heroes as personal representations of their customer helps Schwann’s focus their marketing and, as a result, focuses their customer’s feeling for the brands as well.

Dan closed his talk with the following principles for success in a Corporate structure:

Focus – be as declarative about what you don’t want as what you do want

Accountability – gain alignment on who does what/when and then hold people accountable

Simplify – Complexity causes confusion and chaos

Talk, talk, talk – you can’t over-communicate to your people and do it live, not via email, as much as possible

Execute with excellence – good ideas become great ideas when you do the last 10%

Results – celebrate the successes, big and small, to maintain a happy, motivated team

Dave Buchanan is an account manager at Capsule. He is involved in brand development, research planning, and naming for the firm's clients. Client experience includes: Rayovac, AMPI, Honeywell, Polaris, Carlson Companies, Spec Mix, Herman Miller, Vital Images, TIGI Linea and Target. http://www.capsule.us/

Market Whisperer

This morning's keynote Speaker, Cecily Sommers, founder and president of The Push Institute, begins by asking everyone to stand up and do three turns in one direction, three turns in the other direction and then a little yoga neck stretching. We all comply and sit down feeling a bit more relaxed. Dizzy but relaxed.

Cecily explains that what she did was to introduce a new thing into our routine. An important exercise when it comes to conquering the chaos that threatens to take over our everyday lives, whether at work or at home. She explains that chaos has patterns that never repeat themselves but do have a predictable path.

I liked her use of Cesar Millan, The Dog Whisperer, as an example of someone who enters a chaotic system, the home of the dog owner, and presents a method to deal with that chaos, the dog’s bad behavior. Or more accurately, as viewers of Cesar’s TV show know, the owner’s bad behavior.

Cecily points out that the brain, business and governments all resist change. She recommends that we combine the left hemispheres of our brains (most directly connected with language) with the right hemisphere (most directly connected with imagery) using associative thinking. Associative thinking is what we use when we “sleep on” a problem and allow our brains to work on it in the background. Combining these can create a zone of discovery.

Cecily recommends we study structural and systematic factors in the four forces of change; resources, technology, demographics and governments to determine your best questions. Then find what she calls the New by taking in new experiences – travel, joining different groups or trying anything new. This can lead to a path of inquiry that discovers a trend. From there you find the challenges that the trend brings up, look for the future market that the challenges point out and, finally, use your intuition, that associative thinking that can’t be forced, to innovate and create the product that addresses that market.

Now, stand up and turn around three times in one direction and three times in the other direction. And I mean that both in actuality and figuratively.

Dave Buchanan is an account manager at Capsule. He is involved in brand development, research planning, and naming for the firm's clients. Client experience includes: Rayovac, AMPI, Honeywell, Polaris, Carlson Companies, Spec Mix, Herman Miller, Vital Images, TIGI Linea and Target. www.capsule.us

The Eyes Have It

The Eyes Have It

The late afternoon Keynote featured panel moderator, Rick Kupchella, BringMeTheNews.com; panelists Susan Adams Loyd, Principal, Beavers Pond Press; Deborah Hopp, Publisher, Mpls. St. Paul magazine; and David Brauer, Journalist & Media Critic, MinnPost.com. All present to lend their perspective to Chaos in today’s current media.

The general consensus from this afternoon’s panel was that the local media has changed dramatically in the last ten years. In that timeframe, television ad revenue in the Twin Cities marketplace has dropped from $300 million to less than $200 million. Many magazine circulations have declined with corresponding revenues. We’ve all heard about the woes of dwindling newspaper subscriptions.

Yet each of the panelists found reason for optimism. Susan Adams Loyd mentioned that it was a time of changing opportunity for book publishing. As one of the oldest forms of publication, books now have a new opportunity to appear online in an additional digital format as well as in their age-old paper format. And with an increase in world literacy to 87% of the population, there’s more chance for readership than ever.

Deborah Hopp suggested that print media that can be held in a person’s hands, such as the Mpls./St. Paul Magazine, is more intimate for readers than reading online. And most readers prefer that a traditionally published magazine is finite, with a satisfying feeling of ending when you get to the last page, while an online version tends to keep linking on.

David Brauer had mixed feelings about online publications rather that print. He felt that the shorter online format meant that writers produce articles of less depth and have less time to reflect on the stories they’d done. Yet he did acknowledge that, for him, the closer connection with an audience online meant he felt more in tune with them.

Everyone had concerns with some aspects of online publishing, particularly in association with news. Bias due to sponsorship was chief among these concerns. Rick Kupchella’s new venture, Bringmethenews.com, uses sponsored stories. Although, he sees them as close kin to the sponsored news programs of the fifties. Hopp’s concern over potentially less neutral journalistic standards by non-professional online journalists is a valid one. This was countered by Bauer’s contention that online we may often be fed information by an editor that knows us well and cares about us, our friends. Adams Loyd pointed out that essentially all content is sponsored content and always has been since ad revenues have always driven content and the pursuit of ratings.

For me, Bauer summed an essential aspect of print and online media today: people are still getting more than what they pay for and until they feel they get less than what they pay for and vote with their eyes, publishing will continue in the current online direction.

Dave Buchanan is an account manager at Capsule. He is involved in brand development, research planning, and naming for the firm's clients. Client experience includes: Rayovac, AMPI, Honeywell, Polaris, Carlson Companies, Spec Mix, Herman Miller, Vital Images, TIGI Linea and Target. www.capsule.us

MN AMA Annual Conference Spotlight: David Brier

David Brier

Having a unique blend of practical realism coupled with the ability to challenge the normal and average, award-winning designer and brand identity expert David Brier wanted to arm this year's attendees with some crisis-crunching brand strategies. Tools to ignite or reinvigorate any brand. The result is a never-before-seen presentation, "What’s Killing Your Brand (and how to kill it before it kills you)."

 Brier states, "So many brands are struggling and getting frantic with ‘What do I say, how do I say it and where do I say it to make an impact?’ that I wanted to make a presentation at this year’s conference that would give each attendee a few powerful tools they could walk away with and apply immediately."

 The presentation will be delivered with Brier's trademark wit and humor that professionals have come to love showcasing recent work (and the results from those strategies) for Botanical Bakery, Big Dot of Happiness, New York City celebrity skin care expert Joanna Vargas, Menomonie Chamber of Commerce, Legacy Chocolates and others.

 Brier’s presentation, focused on the B2C brand mix, will focus on:

• Minimizing waste while creating a killer brand

• Creating a brand that leads and doesn’t merely follow.

• Creating a brand that knows when to rock when others roll

• Using a little known exercise to elevate any brand’s perceived value

• A strategy for creating a brand that factually stands out (versus merely blending in)

• Saying goodbye to brand strategies that are a few fingers short of a high five (and loving your newfound freedom)

In addition, there will be a special section in the presentation on “what social media cannot achieve (unless you have one key element in place first).”

 Brier concludes, "If your brand is a few fingers short of a high five, this presentation will light your candle. It will also answer, 'Why is your brand is costing you a small fortune to achieve any success at all?' "

David Brier is a native New Yorker now living and working one hour east of Minneapolis. David is a brand identity expert, veteran designer, author, speaker and Fast Company expert blogger.  "Cookie cutters are for baking, not branding," states David Brier, chief gravity defyer at DBD International. David's worked with Revlon, Estee Lauder, Jim Henson Associates, Rolling Stone magazine, the New York Times Sunday magazine and the Trump Organization, as well as numerous local and regional companies and organizations earning David over 300 international and national industry awards.  Equally comfortable designing the look of words, David's skill with the use of words is equally respected. David released a remarkable book entitled DEFYING GRAVITY & RISING ABOVE THE NOISE, the book on brand elevation that has found its way into the hands of Donald Trump and Steve Jobs.  You can follow him on twitter @davidbrier.

Please register for the 2010 MN AMA Annual Conference taking place next Monday, November 8th in Minneapolis, MN.  This year, we will be hearing from a variety of innovative, strategic and on-trend marketing professionals, who have great insight on how to grow your business, as well as your professional skill set.  Registration concludes Wednesday, November 3rd at 12:00 a.m., so be sure to reserve your spot!