January 06, 2006

Practical Segmentation Continued - More Paul Wang Thoughts

Paul Wang really is amazing. Another approach he outlines takes his simple segmentation a step further. In How to Manage Customers he first outlines a segmentation approach based on lifetime value and then marries this with a stunningly simple and powerful ROI based approach to segment your marketing efforts:

• The top quintile, our Gold customers, are where the bulk of our revenue and profits are generated. We must treat these customers with respect. Don’t, necessarily, market to them. Provide them with super services – service so good that you could not possibly afford to provide it to every one of your customers. The marketing dollars should be aimed at the second, third, and fourth quintiles. To the second quintile, you tell them how close they are to qualifying for Gold. You tell them how wonderful it is to be Gold, and how easy it would be for them to move up.
• The bottom quintile may actually be losers – with a negative lifetime value. Why try to retain these people? Why reactivate them? Why spend expensive service dollars on them? On the other hand, we need to manage them properly. Maybe some of these bottom quintile people may be young college graduates just starting out in life. They may have very low incomes and no children now, but they have a great life ahead of them with hundreds of dollars of spending during the next forty years. Why alienate them too early? Find out why they are in the bottom quintile. If they have a legitimate excuse and a reasonable future potential, keep them in.
• Come up with a ROI for [each} segment. The formula looks like this: ROI = (Lifetime Value of Customers in the Segment) / (Investment in the Customer Segment). In doing this, it is useful to look at three activities [as investments in the sectment]: acquisition, retention and reactivation of customers. Each may have different costs and success rates. Using this information, we can determine where to put our marketing dollars.
• What can typically result? That it's better to retain customers first than acquire new ones. That the sweet spot for marketing spend in not in the top or bottom but in those that can be influenced by spend to go up to higher quartiles.

Very useful way to think about these issues.

Professor Wang also had a bunch of great maxims (from a speach in New Zealand):

• When making promises, we have to be true to ourselves and to what we represent.
• Desperation advertising over promises what the brand can deliver
• Marketing courage is over delivering - making promises we keep
• Effective marketing is hard work - it's about doing ordinary things extraordinarily well at all times.
• Achieving long-term competitiveness requires capitalizing on investment opportunities, not in ability to reduce cost.
• Marketing approaches begin with either "Who," "What" or "How." Traditional marketing starts with "What," the product. "Who" is the customer; "How" is the process.
• Companies need to concentrate on core competencies. If they are expert at process, their marketing approach should start with "How" and then move to "What" and "Who."
• If you want to cultivate customers, you must start with "Who."
• Differentiation is key. The first level is imitation; the second, improvement; and the highest, innovation.
• In "Me Too" marketing, 80% of offerings bring in 60% of revenues and 40% of profits. In "Unique" marketing, 20% of offerings generate 40% of revenues and 60% of profits.
• When facing large competitors, always mislead the enemy, fight on your own ground at your own time, and strike when the moral effect is greatest.
• With small competitors, never refuse battle or show a sign of hesitation. When you get the enemy on the run, keep him there.
• Volume is not necessarily driven by price. If value is eroded as prices are decreased, volume will drop. Similarly, providing value innovation will help increase volume even if prices are increased.
• Value propositions can be emotional, economic or functional. No proposition can fully cover all three. More relevant and unique appeals go all the way on the emotional and functional axes, but only half way on the economic axis.
• Emotional connections make it most difficult for customers to switch brands.

Finally, check out his book: Strategic Database Marketing an excellent guide.

Posted by johnza at 10:42 AM | Comments (1) | TrackBack

January 04, 2006

Paul Wang - a God of Customer Segmentation

Several years ago I went to a lecture at the excellent Northwestern School of Integrated Marketing Communications. It was by this young guy, Paul Wang, and the down to earth, insightful and practical things he had to say about customer segmentation have never left me.

What was great about what he said was that it really guided you to stay focused. Not just on the easy wins but on the ones that will pay. Great sales people cut folks out of their pipeline that are going to waste time and energy to sell. Professor Wang directs strategic (and database marketers) to do the same thing, not just in the short but in the long term.

Specifically, he has broken down the type of business buyer into three groups - program buyers, transaction buyers and relationship buyers:

• "A program buyer is one who follows some sort of internal procedure to make their business purchases. This is typical of governments or mature industries which have developed manuals which govern their buying process. Typically, such buyers try to spread their purchases of any one category among several suppliers according to a fixed schedule. Such program buyers are almost immune to external marketing stimulus. They are highly unlikely to be early adopters. One of the first steps in finding early adopters, therefore, is to identify the program buyers, and eliminate them from consideration. Your sales force and your common sense can help in this task."
• "The transaction buyer... are primarily motivated by price. They are willing to shop around for every purchase... and actively compare prices. Loyalty is almost unknown to these buyers. You can keep your warehouse open on a Saturday afternoon to meet an urgent need for such a buyer. The following Tuesday when they have a big additional purchase, they will bid it out, rather than giving it to you in return for your exceptional service only three days before. These buyers are also unlikely to be early adopters... If you are on sale, they will flock to buy from you. When your competitor is on sale, they will desert you. By keeping track of the ebb and flow of buyers as your prices change, you can often identify these transaction buyers, and eliminate them from your product launch portfolio."
• "The relationship buyer... are customers who like your products and services. They have built a relationship with your employees. They think of your company as their primary supplier of your category. They do not want to be bothered to have to shop around every time they make a new purchase. They look for quality, good service, helpfulness, friendship and information. If you can supply these things, they will stick with you when your competition is on sale. If you have a new product, they will be the first to want to hear about it. It is to these good people that we look for our product launch."

I love this segmentation. It had a strong influence on our own "regular, seeker, doubter, sleeper" segementation. It's great because it give you direction. Focus on the folks who can be loyal, who will generate the highest life-time value. Do the minimum for those who won't be influenced by your marketing anyway and avoid the temptation of dragracing for customers who will desert you on price later anyway. Clearly not just for business-to-business customers either. For more on this segmentation read here.

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March 31, 2005

Jobster Launched

Here's a company that really did their customer ABCs/gap analysis. They found a big hole for corporate recruiters between Monster.com and expensive head hunters.

Well now they launched the offering to fill that gap. Check out the news from their launch. And also check out how they think of themselves as a company. Been talking a lot about mission/vision stuff lately, well here's a company that put a lot of thought into that and into the operating values that implies.

(Note, this is an Ignition company, so we cannot claim to be objective)

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January 17, 2005

CRMish segmentation of CRM users

Dave of B2Blog wrote an interesting entry on different types of users of CRM software:

• Power-user: One who wants to make the most of the tool they've been given and is willing to explore its capabilities.
• Power-ignorant: Those who use the software, but aren't aware how the software is there to benefit them and make their lives easier.
• Power-less: Those who simply don't understand what to do. Most likely these are field salespeople somehow.
• Power-trip: One who understands the software and its capability but takes short-cuts or does it the old way.

Nice segmentation, seems to apply to just about any category of software. Dave observed this using Goldmine CRM. So here's my opportunity to openly plug an Ignition portfolio company, Entellium, maybe with it more of the power-less and power-ignorant will become power-users or power-trippers.

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January 01, 2005

Campaign for Real Beauty

Cosmetics and fashion, I have to admit are categories that have always baffled me, especially from the standpoint of true product and competitive differentiation. I know I have no fashion sense at all so I never felt up to commenting or judging most campaigns in these categories. But over the holidays my wife pointed out a new campaign that I plain old admire.

Amidst all the talk of even presidential candidates using Botox to look youthful, in one of many striking and beautifully photographed ads "Wrinkled vs. Wonderful", Dove does not specifically promote Dove soap, but challenges us to think differently about our definition of what is beautiful in Women. The "Campaign for Real Beauty" plays prominently on their website and states its mission clearly: to make women feel beautiful everyday by widening today's stereotypical view of beauty and inspiring women to take great care of themselves.

The campaign has even generated a lot of attention on the blogsphere:

• Wonderbranding points the campaign out as one reflects "the needs and values of real women" and that other companies in the category can learn from.
• Big Fat Blog's entry generated a string of "Right On" commentary.
• A romance novelist (think plunging necklines), even endorsed the campaign passionately, saying "It has been years since I bought Dove products, but as a result of this, I'm doing all I can to help support them. I know that their campaign is a marketing tool, but I believe it is also going to help a lot of women learn to accept themselves as who they are. For that reason, I applaud the genius who came up with this idea!"
• Conversely, Greedy Girl, although intrigued thinks these kind of campaigns backfire, "In my experience, women tend to respond best to pictures of attractive, natural looking women - not overweight or unattractive women. Female consumers may claim otherwise, but their money doesn’t follow those claims...Effective advertising is about making people envision a positive future for themselve, not about making them look in a mirror under fluorescent lights." Also noting that even Dove may bea bit skeptical of the effectiveness of using older less "perfect models". In an ad for Dove shampoo the models may not be blonde but they thin and gorgeous.

Regardless of how sincere their intentions (of course this is a marketing campaign), it seems to me to be breaking through. My wife found it refreshing and so did many other women over 20 I know. She made the observation that perhaps Dove really understands where their target has moved. Dove has been around as a brand for a long time, young people may not think it's cool anyway so turning to the getting older audience may make a lot of sense.

Anyway I like it. I think it is provokotive and breakthrough (just be careful Dove, if your target gets devoted to this campaign and more loyal to the brand because of it, don't turn around and revert to worshiping the standard stereotype or you will be branded traitors instead).

[note: after this post on July 19, 2005, NPR did a great radio show about this campaign, for more click here]

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October 09, 2004

More Phone Targeting: Kids/Grandparents

textually.org: China: Mobiles For Children Released During National Day Holiday Interesting trend continues toward more and more targeted functionality for mobile phones. We hear about Senior Phones. We hear about phones that only call mom and dad.

And now a phone "designed specifically for children that no numeric keys, and the settings are all very simple so that children can easily use it., and that has an inbuilt positioning function that enables parents to find out where their children are at any time."

Via Textually.org, similarly, in South Korea, over 110,000 kids under 5 years subscribe to mobile service.

Also look here for even more on phones for the elderly.

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September 26, 2004

Anti-full featured mobile

With 3G coming, so much of the talk in the mobile market is about more, new features. Well, sometimes more features are not better. Sometimes a gap analysis will show you the solution to some customer problems is less not more.

Emily Turrettini of textually.org points out the problems arising from kids with cell phones in schools and highlights a suggestion by Xeni Jardin to offer phones that can only call mom and dad (and I think 911 too). Less gossip, less minutes, more safety. I like it.

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September 25, 2004

An iPod stealth play?

iPod for Tweens: Mattel's Juicebox Interesting article on how toy companies are filling a customer gap in the "iPod market" by focusing on price and content for tweens.

Posted by johnza at 06:24 AM | Comments (0) | TrackBack

September 11, 2004

Customers first, brand second?

What's Your Brand Mantra?: Customer-Centered Brand Management
Nice post from Brand Mantra. I realy like this idea: focus on your value proposition to customers first. Be a great customer manager and then become a great brand manager. That way when you make claims in building your brand they're actually credible and don't backfire.

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August 21, 2004

More "know your market"

Dairy Queen is paying attention here in China. They have stands with "Blizzards" and other stuff in malls but this is the only place I think you can find a DQ with soft-serve green tea ice creme.

It was yummy.

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August 20, 2004

Think globally, act locally, and know the difference

We were honored to be able to meet with Wang Jianzhou, Chairman and President of China Unicom, China's second largest wireless carrier. He shared a lot of wisdom with us but a few things really stood out.

The first was that he very explicitly chose to follow NTT DoCoMo's platform play in launching their wireless data service. Rather than trying to build the "killer apps" on wireless data themselves they opened it up to tons of ICPs (independant content providers) - over 600 major ones at last count. And made it easy for them to make money, providing billing and other infrastructure and charging only 10-15% of the revenue in return. Result, wireless data has taken off (a very, very good thing with over 300MM cell phones in China). By not being too greedy, China Unicom established an awesome ecosystem and reaps ongoing rewards.

Another of the many insights that left a huge impression. When searching for the plan of how import DoCoMo's success Mr. Jianzhou went to Japan and took the subway to watch how the Japanese used their cell phones. As he watched, he noticed that at least 50% was staring at thier handset screens and clicking away quietly. He took the same subways in Korea and the number was around 25% and others were talking on their cells. In Hong Kong, no one.

Why? Culture. In Japan it is considered impolite to talk loudly in subways. So data phones are the perfect outlet. In Korea less so. In Hong Kong everyone is loud anyway(look at the US where Cingular has to run ads about the annoying cell phone man - to get people to stop talking in movie theaters).

How did he figure this out and adapt? The smart, practical way - on the ground with his real target customers. What a wise man. Assume nothing. Check it out for yourself!

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August 05, 2004

A huge but often overlooked market

At our office, we sometimes like to tease our over 50 collegues about them becoming senior citizens. But it is no laughing matter. It is in fact a giant and growing market and one that (hopefully, as my wife says "from your lips to God's ears") we will all be entering eventually.

Strange, and disappointing that more companies, products, and services aren't adapted to the senior market's unique needs. But here is a nice example courtesy of Peter Davidson.
It's a phone with bigger keys and screen (note that already 15% of cell phone users are seniors). Makes sense. Also he provides a link to Textually, which has a nice set of links to info on seniors and wireless. They mention a number of phones that have only three buttons and are perfect for emergencies. Very smart. I tried to get my mom a cell phone for just this reason for her car, but I called her on it and the ring scarred the heck out of her. So she threw it out. Maybe Glen Miller ringtones would help.

Posted by johnza at 09:14 PM | Comments (1) | TrackBack

August 01, 2004

Are “Boys” lost to advertisers...

Perception Analyser highlights a recent Wired Article "The Lost Boys." Read the whole thing but there is a great little summary called “Gone in 30 Seconds.” Basically:
• "Young men (18 to 34) are tuning out broadcast TV …
• as they turn to games and the Internet …
• where porn, music, and auctions are top draws.
• As audiences shift away from network TV …
• the networks still raise their rates …
• and advertisers turn to cable and the Net.
• Five companies haved 'changed channels' " (Anheuser Busch, Coca-Cola, Ford, GM, and McDonalds)

Interesting ABCs according to David Raines, the Coke VP in charge of divvying up ad money:
A: Yes, 18-34 year old males are a critical target
B: But, although they haven't stopped watching TV, they're doing a lot of other stuff, too, going online, watching DVDs, playing videogames.
C: So, ad dollars have to follow them where they go.

"Of course, some media are more immersive than others. As young males drift away from the tube, advertisers are trying to focus on entertainment that grabs their attention and holds it. Tops on that list is videogames." Example, last year Coke followed them into The Matrix Reloaded and Atari's Enter the Matrix videogame. So much so that Jeff Brown a VP at Entertainment Arts said, "We're eating the networks' lunch!" Maybe a bit early to claim this but interesting.

Also, look at Atom films. The cult political online clip they distribute, This Land by JibJab, starts with a Toyata spot that looks like a video game.

Posted by johnza at 11:21 AM | Comments (0) | TrackBack

July 26, 2004

TripHub: Investing and Testing

While large companies spend millions on market research, smart entrepreneurs like Josh Herst are using the Internet to test new ideas and offerings for very little money.

Josh has some ideas about group travel and is implementing it over at Trip Hub. Buying ad words at google and having fulfillment via a travel agency, he's learning quite a lot from a small experiemnt.

Posted by rich at 09:36 PM | Comments (2) | TrackBack