Disruption

Messaging Balance: Two Traps to Avoid

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Developing messaging for your company at any stage can be fraught with difficulty. Even when it seems straightforward, marketers tend to fall into one of two traps. These are well-illustrated by how companies in my industry, technology, have approached talking about themselves and their offerings.

Trap One: You Say You Want a Revolution …

This is the most common messaging mistake technology companies make, and I’ve seen this across many other industries. You want your offerings to be not only different, but also new and exciting. So you start making claims about how you will transform your customers’ lives or businesses, or about how your offering is the newest, most exciting thing anyone has ever seen. In tech, this sometimes takes the shape of claiming “you don’t even know you need this yet.” While there are some companies that can pull this off (Apple, historically), most can’t.

My friend and colleague, Martina Lauchengco, writes, “The Revolutionary Messaging Fallacy happens when those creating messaging make leaps into benefits or transformational language as if what their product did and why someone should care is already accomplished and understood” in her article cautioning against claiming to be too revolutionary.

The problem with trying to be revolutionary is that it’s limiting — often very limiting. Yes, some markets are ripe for disruption (and not necessarily technology-based), the vast majority of customers in most markets are looking for something to solve a particular problem (see Christensen’s book Competing Against Luck about how products are hired to do a job), and to solve it in a way they know and understand.

Side note: If you want to understand how much of your market is looking for proved vs. revolutionary solutions, consider a research project based on those suggested in Moore’s Crossing the Chasm.

Unless your intent is to address the small part of your market that can accept something revolutionary, stop trying to say you’re revolutionary. You’ll just scare off everyone else in your market.

Trap Two: Walk the Line

I’ve been around the technology industry long enough to see not just the disruption that can be created, but also the bandwagons on which everyone else tries to jump to get a piece of that disruption — whether in market share or in reputation by associating with the lead disruptor.

One of the trends most interesting to me as a marketer is the way companies try to become part of a particular trend or movement. The first one I was a part of was the “dot-com” trend of the late 1990s. For most companies, it wasn’t just a web address, it was how they told their own story. Even the largest companies wanted to jump on this bandwagon (do you remember when Sun Microsystems was “the dot in dot-com”?).

Then there was a bust, the dot-com market died, and in its place was the cringe-worthy “Web 2.0,” reflective logos and all. Even I am guilty of jumping in this bandwagon with “Learning 2.0” and “Sales 2.0.” Then Zuora showed up and wowed everyone by being the platform for the “Subscription Economy.” Every company wanted its own economy, and some jumped on the bandwagons of the “gig economy” and the “sharing economy”’ and even, in environmental circles, the “circular economy” referring to the market for reused and recycled products. Now, “economy” is running its course, and I’m starting to see companies calling themselves “the <blank> transformation,” as popularized by the book The Fourth Transformation (by Israel and Scoble).

If you haven’t guessed where I’m going here, the trap marketers can easily fall into is sounding like everyone else in the market. If a prospective customer who knows nothing about you can’t tell the difference between you and your competitors, and you can’t explain it in a sentence or two, you’re not going to win them over.

Balancing Act

If you can’t be revolutionary and you can’t be like everyone else, where should you be? To me, the answer is simple: What difference do you make in the lives of your customers?

I don’t mean that you save them $x or y minutes in some task. That’s not life-changing.

Here’s an example of what I mean by “life-changing”: When I sold a solution for sales leaders to better predict results, I would address a fear every single sales leader has: walking into their CEO’s office and telling her they were going to miss this quarter’s number (maybe, again). When we took away that fear and that conversation, we made a difference in their lives.

Ask yourself what difference you make in your customers’ lives. Explain how you do that better or differently than everyone else. Distill it into a story everyone can understand. Make that the crux of your message.

And let everyone else fall by the wayside as they fall into one of the traps.

Decision Making

Artificial Intelligence – The Next Marketing Frontier (and Danger)

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Artificial Intelligence seems to be everywhere all of a sudden, and it’s making its way into the technology marketers use every day.  We’ve been talking to (with?) our smartphones for a while now, and there’s pretty much no mobile device that isn’t just begging to hear your voice.  With Apple adding Siri to the Mac, that now applies to pretty much any device. Amazon even has an eerily lighted cylindrical device that can play Jeopardy! with you―and presumably understand your stuttering, uncertain responses in the form of a question.

The Direction of Artificial Intelligence Operational Systems

It’s only in the past year or two that we’ve seen so-called artificial intelligence technologies make their way into operational systems and software used in business.  And now we’re seeing some form of intelligent capability make its way into marketing.  Here are a few examples:

  • Ad Targeting: Machine learning is working for companies such as Baidu to determine when any given user is most likely to click on what kind of ad, then automatically serving the right kind of ads for that user at that time.  This attempts to maximize click-throughs.
  • Recommendation Engines: We’re all familiar with the jokes about Amazon’s (and other vendors’) “people who bought this item also bought” feature which often make less-than-ideal recommendations.  Applying machine learning to large amounts of data on consumer behavior, however, can improve this dramatically.  Under Armour is using IBM’s Watson to analyze its own customer purchase data with third-party data on fitness and nutrition to serve up far more relevant product recommendations.
  • Preventing Credit Fraud: Banks have been using massive amounts of data to try to determine when a particular credit card transaction has a good chance of being fraudulent.  Now companies such as USAA are using natural language processing algorithms to look at the text within transactions to determine potential fraud even without a previous pattern having developed.

These examples are taken from a pretty interesting list of applications of artificial intelligence in marketing.

The key question for me is:  How will this change marketing?  I’ll offer some thoughts on where this is going, but first indulge me a short background explanation.

There are two main lines of thought in the computer science world about how intelligent systems (from software to robots and beyond) should act and interact with humans.  One says we should be developing systems that are independently intelligent.  Those systems would learn from the initial set of experiences humans provide but then would function on their own, without human guidance and making their own decisions.  If this scares you a bit ―and it should―you can read an incredibly insightful speculation on this in Asimov’s classic, I, Robot.

The other line of thought says intelligent systems should be built to extend and enhance human intelligence.  Sometimes this is called the “Star Trek” school of thought since that is how the computer systems on that show generally operated (and the independent androids were almost always evil―apologies to Mr. Data). The goal here is to help humans advance their own thinking.

A good example of the latter in the marketing world (and a function I really hope to see one day soon!) is the ability to ask your marketing automation systems questions such as “What are the top three paths people who buy our products take through our website?” and have your system know it needs to crunch the behavioral data to develop paths and determine outcomes.  Even better, the system would know why.  In this case, the system is not making decisions on website structure or how to present what information to whom, but it is telling you, the human decision maker, what you need to know to make those decisions.

Most of the examples of intelligence, including machine learning and natural language processing, that are in place today fall into the latter category:  they exist to provide some form of information plus analysis to a human decision maker.  There are a few examples of systems that are given jobs they do themselves (such as the ad server example above), but even those are assigned a specific job and decision-making framework by the humans who control them.

What Comes Next?

I think the next few years will bring a dramatic increase in the intelligent capabilities of all kinds that will be brought into business systems, including marketing systems.  Nearly all these will fall into the data or language analysis category at first.  They will do things such as answer customer-service requests or help marketers make sense of large sets of unrelated data.

But some will start to make some of the decisions marketers make every day.  For example, IBM’s Watson technology analyzed millions of recipes and now can develop a (presumably tasty) recipe given a set of ingredients.  That’s why they let it compete on Jeopardy! but not on Chopped!  Imagine if Watson’s artificial intelligence analyzed the marketing mix of every company in your segment and added in the consumer behavior data.  I’m willing to bet it would make marketing mix and timing decisions as well as any of us could―maybe better.

In the retail business, it’s not hard to envision the day when Apple’s intelligent ear pieces (version one comes out later this month in the form of AirPods) can remember that three days ago you mentioned you needed to buy new socks, and then remind you (literally putting a “bug” in your ear) as you walk by a sock-selling retailer that is doing location-based advertising with Apple.  Today this feels intrusive, but as our artificial intelligence assistants become more intelligent, it will seem less so. It’s more like having your friend notice the socks in the window and asking, “Didn’t you mention you need socks?”

Will Marketing Change?

No.  Marketing, as we sometimes need to remind ourselves, is a discipline, not a set of actions.  We’ll still be doing it.  But our jobs will change dramatically.

The predictions for future jobs are dire.  This article predicts Robots (or some form of artificial intelligence systems) will take over 50% of all jobs within 30 years (the career span of someone 10 years out of school!).  And if you Google “Jobs AI is Taking Over,” there is no end of similarly dire predictions.  Many of those jobs are white-collar jobs.

Some of those will be marketing jobs.  As systems get better at analyzing data and behavior, the jobs devoted to that will disappear.  As systems get better at processing and responding to natural-language requests, customer-service jobs will start to go.  And yes, as systems get better at inductive reasoning, jobs that focus on messaging and positioning (inducing target customer desires) will also go.

The flip side of all these dire predictions is that more intelligent systems will help the marketing decision makers make better, more informed, less biased and faster decisions. Those of us who focus on creative roles and on decision-making roles will get much, much better at our jobs, as our systems help us do better, faster.

Now, if Siri could only tell me where I saw that really cool gadget I wanted to buy.  Or even reliably get me directions home.  Then I’d be convinced we’re on our way to more intelligent systems.

Are you using intelligent systems in your marketing?  Are they helping?  I’d love to hear your stories.

Customer Success

Building an Exceptional Customer Success Culture: How Buffer Does It

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If you’re like most recurring-revenue companies, you’re not just looking for skills when you hire customer success people, you’re looking for cultural fit and that intangible-but-oh-so-important natural customer-happiness focus. If that’s the case, the person you’d want to hire is Carolyn Kopprasch (@carokopp). Sorry, she’s not available.

Carolyn is chief happiness officer at Buffer (full disclosure: I am a user of their service), a social media posting service that schedules or meters your posts (for me, it keeps me from inundating my followers). I quoted her in my previous post on customer success culture as a great example of how to get customer success right.

I had the pleasure recently of interviewing Carolyn to find out why she is so good at customer success and how she hires and trains Buffer’s people to make sure they are, as well.

If you are leading or part of a customer success team, or you want to be, there’s a lot you can learn from her.

Making empathy a part of the culture

“One aspect of Buffer’s mission is to set the bar for customer service,” Carolyn says. She adds that the definition of customer success is evolving as the company grows — and as the Happiness team doubles in size from three to six people.

I’ve had a number of interactions with Buffer, most with Carolyn herself. Her direct honesty and ability to make me feel cared for impressed me. Why is she so good at this? She points to two things:

First, she was a user of Buffer before joining the company. Having “been in [customers’] shoes and experienced their frustrations” gives her the ability not only to understand the situation, but also to know what will help this particular user get what they need.

Second, she cites empathy as critical to great customer service. “We have to be able to understand not just what the customer means, but their frustration, obstacles and needs.”

To even be considered for a job at Buffer, you have to be an established customer and be familiar with the product. When hiring, Buffer is looking for “someone who has used [Buffer], run into the little frustrations, been confused by this or that, who generally has experience using technology for a purpose and knows how joyous it can be when it’s successful and how frustrating it can be when it’s not.”

Carolyn says this ensures there is some basis for empathy in everyone they hire. This is true not only in the Happiness team, but throughout the company. The people on her team feel “privileged to be doing what we are doing and to have customers who give us the opportunity to do what we are doing.”

Buffer also puts prospective hires through what sounds like a practical exam. Candidates are given a series of actual requests from customers and asked to respond. How they approach the response is a key factor in the hiring decision.

But the culture of empathy extends beyond the walls of the company. “If you are not practicing [these values] in your everyday life, then it’s really challenging to put away your habits and just start it when you show up for work. So we do it in every area of our lives,” she says.

[Note: If this sounds like you, Carolyn is hiring. Just remember they only hire Buffer users.]

Creating a new kind of customer success culture

Buffer handles customer success differently from most organizations. “We don’t assign cases,” Carolyn explains. The team is still small enough that everyone can see all the open cases, and everyone is tasked with taking whatever action they can to help. With a team that now spans the globe, cases are often resolved overnight while the U.S.-based team is sleeping.

This makes communication important. “We have weekly meetings and an ongoing exchange of ideas” to keep that going, she says. The email threads among the Happiness team at Buffer include everything from making sure a response actually meets a customer’s need to discussing the most understandable tone and words to use in email.

Buffer does not try to scale its customer support with technology. They have made the decision not to try to push customers toward helping themselves, but rather to focus on hiring more people to respond to and support their growing customer base. They will add online help (“some people just like to figure things out for themselves” Carolyn says), but they will continue to make email support the primary way customers get the help they need.

Buffer also publishes — yes, publicly — a monthly happiness report on their blog and on Facebook. Here’s the October report (note the summary graphic at the bottom of the post). They let the entire world know just how well (or not) they are doing. It’s a manifestation of their transparency value, and it lets all their customers know they are a part of Buffer’s ongoing improvement.

Measuring customer success can be challenging. Unlike many companies, Buffer does not count the number of replies or exchanges it takes to close an issue. “We disregard replies per conversation. Most customer success teams look at this as speed to resolution, but we know that happy customers reply back and forth a few times,” Carolyn says.

Carolyn has two measures of success for her team: “First we work on the hypothesis that a faster answer leads to a happier customer. So, we track how fast we respond to the first email and get the solution started. Second, we track self-declared happiness. Every email to a customer has emoticon ratings (provided by Hively). We track how many customers are happy with our solutions. Or not.

“Customers can also add comments to their rating, which only go to the support individual who responded, not for review or to management.” This, she explains, allows the “Happiness Heroes” to learn what they have done well and what they have not.

The best possible response to being hacked

Buffer was hacked recently. Their response was impressive, fast and very revealing, and customers responded with astonishing support. I asked Carolyn how they put together an effective customer communication plan so quickly.

“There was no plan. There was no one person defining the voice. It was a natural reflex for us to tell everyone,” Carolyn says. “That was the extent of the plan. We could not have imagined it going any differently.”

Buffer posted several times per day on their blog and social media on their progress and about the resolution. Instead of one “please change your password” email, customers knew every detail of the issue and resolution, and exactly what to do about it. Look at the overwhelmingly positive and supportive response. It’s the kind of response of which most companies dream.

Changing customers’ expectations

Carolyn sees Buffer’s approach of quick and direct responses as starting to overcome a culture in which customers expect to be angry and frustrated before they even get the help they need.

“We live in a culture that has trained customers to start on the offensive just to get good service, and it’s really easy for the customer service rep to react to that,” Carolyn says. “Often, you don’t get to talk to a manager or someone with authority to solve your problem unless you say a curse word.”

Carolyn and her team are working to get better and better at providing help that takes away the customer’s frustration and, she hopes, changes the starting expectation of her customers.

It’s working

Buffer’s and Carolyn’s ideas on how to create a customer focus in the business are groundbreaking. Even for those of us who are working to disrupt the customer relationship models that have done so much damage to the tech industry over the years are moved by companies such as Buffer to rethink our assumptions. Buffer is an example of what can be done when you throw out your experience and start with a customer-focused set of assumptions.

Buffer is a young, growing company, but it’s experiencing very low churn rates (5-6% at last count). Only 2% of customers are paying for the service, but they see conversion rates increasing month-to-month (note that the Happiness team is not compensated for conversion).

I say it’s working.

What do you think?

Brand

Stop Enabling Your Customers! And Get Your Product “Hired” Now

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Have you ever heard product or service claims like these:

  • [Our service] enables executives to achieve their top priorities.
  • [Our product] enables you to make better use of your network to help the people you trust.
  • [Our product] enables you to create beautiful native mobile apps styled with CSS.

These are typical examples of statements that all too often appear as the headline of product data or sell sheets, web pages, and other promotional material.  Two of these examples come from small companies you probably don’t know, and one comes from a large company you probably do know.  And while this type of phrasing is all the rage in Silicon Valley, it pervades plenty of other industries as well.

But it says nothing.

Or at least nothing useful.  In these headlining statements, the companies producing the product have failed to communicate to the potential buyer why it is so important to the buyer to have the product or service being offered.

Of course, we want to enable our customers to do something that is of value, but all too often, when I see statements like the above, the value is either misplaced or misunderstood.  This is often indicative of a serious underlying issue with the positioning of the product or service.

Allow me to explain.

In his seminal work on innovation, The Innovator’s Dilemma, Clay Christensen points out that every product, in order to be successful, must have a job.  This means that in order for any person or organization to buy a product or service, they must have a job they want that product to do, and then they make a decision to “hire” the product or service to do that job.

Sometimes we know well the job we need done.  A simple, if dated, example of this is the personal computer.  When PCs were first brought to market in the 1970s, they were hobbyist toys.  Then along came Dan Bricklin with a program called VisiCalc, and suddenly companies could “hire” personal computers to do the arithmetic that had taken junior accountants much of their day to accomplish.  As the versatile computer became more of an office presence, it found more and more jobs to do but would never have been there in the first place had it not had a job in the first place.

Sometimes we don’t know the job we need done until it shows up in front of us.  A personal example goes back just two years to when I bought my first iPad.  As Silicon Valley marketing professional, I was a fairly mobile worker able to find ways to be reasonably productive from pretty much anywhere, whether traveling on business or working from home.  Once I learned how to connect my iPad to all the relevant services, however, I became a walking office.  Everywhere I went, all I had to do was open the iPad and suddenly there was no difference between being in an office and being anywhere else.  The iPad did the job of making me location-independent (or as one of my campaigns put it, “as productive from anywhere as I am at my desk”).  I wasn’t very aware I needed that job done, but once it was being done, there was no question that I had made a great “hire.”

So what’s the problem with statements like those above?  They don’t connect the value of the product or service to the value the potential buyer needs.  The marketers behind them found a really cool thing that their product enables, but they either failed to connect it to something their buyer needs or communicate that connection.  This is a serious positioning error that could cost you your ability to successfully enter a market or overtake competition.

Fortunately, the solution is simple, and it is nothing more than great positioning. Here’s how:

  1. Understand your intended customer’s needs:  What do they need done for them?  What needs does this create?  Which needs are being met and which are not?  Can you identify any needs they have — or soon will — of which they are not aware?
  2. Look carefully at your own capabilities:  not just your product or service but the whole range of capabilities your company, including its people and technologies, can bring to the market to serve those needs.
  3. Match your capabilities to the identified customer needs and figure out exactly how your capabilities meet those needs.
  4. Communicate as potential results your customers can achieve rather than things they could do, which will allow them to understand the compelling reasons to “hire” your product or service.

There is one more pitfall.  Many of the start-up companies with which I work fall into the trap of defining customer needs as what they want them to be (or, in the worst cases, wish they were).  It’s nice to think your customers should have a need to do whatever your product does for them, but (as we so often have to remind ourselves) we do not get to define what customers need and why.  Our task is to discover the actual needs and meet them.

When you define customer needs, make sure you do not believe your own mythology.  Make sure your findings are grounded in reality.

So stop enabling.  Start solving problems and creating results.  And your product will be the one that gets “hired” over and over.

Decision Making

Elephants and Data: The Missing Link to Making Sales & Marketing 2.0 Work

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This week I had the privilege of attending the Sales and Marketing 2.0 Conference in San Francisco (thank you to the conference team for the invitation!).

While this edition focused on social selling and marketing (as expected), it also focused heavily on what leaders need to manage a social selling or marketing team.

But this is not a summary of the conference. If you would like to see the very useful and interesting learnings from these two days, my friend Matt Heinz has an excellent post you should read.

This is my view of the most important lesson learned this week, and what I think is the missing link to making all of these new ideas in sales and marketing work. First the data.

Data

For the past five years or more, I have been hearing conference presenters, pundits and all sorts of others talk about the new way to market and sell in a social world. While some of it is just hype (isn’t it always?), when you sort through all of the information out there, you reach a few simple conclusions:

  • Technology has and will continue to disrupt how products and services are marketed and sold
  • Social technology has shifted the balance of power to the buyer, so that sellers now have to work not to sell, but to help buyers buy
  • Most corporate organizations and the systems by which they measure their people have not adapted to this new reality at all, meaning we are all essentially doing what we used to do, just with new technology (yep, I wrote that five years ago!)

The focus of the conference for the past two days offers some hope for addressing this last point. Much of the focus was on managing in what they call a “sales and marketing 2.0” or “social” world.

Speakers showed us how they are helping their people do certain things differently – or do entirely different things. They showed how they are figuring out what those things should be. And – since we know what gets measured gets managed – they showed how they are measuring success in the social selling and social marketing process, and how they are rewarding people for that success.

These management practices are all based in what we have come to call big data. For example, you have to merge and interpret data from your company’s traditional systems (e.g. CRM), your other internal data (e.g. email communications, chat and other interactions), customer data, social network data and other public data to gain a deeper understanding of how a Facebook campaign or a sales rep’s blog helped generate revenue and specific deals. And yes, this can be measured. But no, it’s not easy.

We saw examples of how every aspect of management from governance to measurement to evaluation, to hiring to leadership and coaching (yes, coaching) can be improved when driven by the effective use of data.

Elephants

Here’s what I think was the elephant in the room: In order for individuals to succeed at anything at all in a corporate organization, they have to know what success looks like.

Your sales leadership can be the best at understanding and directing a social selling organization. but does your newly hired rep know what to do when she is on the phone (excuse me, web conference) with a hot prospect? Do they know how to use the social tools at their disposal to make that a more successful call?

Your marketing leadership can put in place all of the social tools and programs, and even hire people to manage the various social channels. But when your demand gen manager executes a new campaign, do they know how and when to incorporate those channels?

Do your people know it when they see it?

What leadership needs is a way to institutionalize the knowledge, learning and assumptions needed to become a social sales and marketing organization. We need not only a way to not just communicate to our people what this is all about, but also a way to make sure that when our people do their work, they know – intuitively – how to do it in this new way.

Do you give your people the knowledge and skills to be able to do their jobs in whatever new way your organization is adopting? Does it work?

Add your story to the comments below. And I’ll see you at the next Sales and Marketing 2.0 Conference.

customers

Does great customer service matter?

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“Of course! If I didn’t give my customers great service, then my customers would leave for a competitor” (which we know is is not a good outcome)

True, but let me phrase the question differently: What does it take to keep your customers coming back?

Before you answer, did you ask? Yes, customers typically love great service, but here’s the most important thing to remember:

Customers became your customers for a reason (or several). If you do a great job at a bunch of things, but not that (or those) thing(s), you will lose your customer.

Yes, it’s that simple.

Let me give you an example: I used to have DSL Internet service in my home (which gives you an idea of how long ago this was), and was more than a bit suspicious of cable-Internet. When I signed up, the DSL was the fastest connection available. And, my DSL provider was fantastic (shockingly) at customer service. Every time I called, I got an actual person. I wasn’t transferred around, the person who answered my call did the research and talked to colleagues for me. He/she was nice, friendly and often offered credits for past poor service.

But….I needed a fast connection (when I signed up, they were the fastest available). And in the months preceding my change, my DSL provider’s speeds had slowed dramatically and a connection that hadn’t dropped in six years (you read that correctly!) was suddenly dropping several times every day.

The best efforts of several customer service reps, technicians, and even the people they sent to my home (for free!) could not resolve the issue.

They offered me credit; they offered me free add-on services; they made so many enticing offers that I was tempted to live with the unreliable, slow service. But in the end, I switched. I needed fast service.

My new provider has horrible customer service. An actual person never answers the phone, and when I get a person they are always rude and unhelpful, it usually takes five, six or seven people just to get a simple answer. But my connection is fast and almost never drops (three times in five years).

If you don’t believe me, take a look at two very well known examples of poor customer service. Whenever people bring up bad customer service stories, the examples they rely on are typically cable television companies and airlines. In my area, that means Comcast and United (I pick on them a lot). Think about it: Do you fly one airline all the time? If so, are you getting great customer service? If not, why do you keep going back? (If I had to guess, it’s schedule convenience, fares or frequent flier points — not customer service!)

This may not be how your business works, but if your business depends on repeat customers, you have no choice but to ask: “Why did my customers buy from me in the first place, and what will keep them coming back?”

Then invest your customer retention budget right there.

So, yes, if customer service matters to your customer, make it great. But always be sure you know — and are serving — your customer’s needs.

conversation

Making Better Investments in Your Customer Relationships

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(this is a repost of a post written by me for PAKRAgames. It is part four of a series of four.)

Business relationships are not this intuitive (though I contend they should be), but let me ask you this (if you’re in a long-term relationship, think back to when you were single).

When you started dating, you had opportunities to begin and pursue relationships. How did you make the choice of which woman/man to pursue? Was it the best looking? The smartest? Maybe the most accessible or one you thought would say yes? And if you were lucky enough to have several people from which to choose, into which relationships did you invest your effort? Was it with the cutest partner? The one who seemed most likely to succeed? The one most likely to commit to you?

I’d be willing to bet you made these decisions based on some form of intuition. You probably agonized, analyzed and got lots of advice from your friends and family, but some sense of the “right” choice probably made itself apparent, and off you went.

We don’t do the same with business relationships. We look at forecasts, financials and, if we’re smart about it, marketing and culture compatibility. Specifically, when we look at our customers, we have pretty much one measure of desirability: Customer Lifetime Value (CLV), which is essentially a net-present-value of expected future revenue from that customer.

But if you ask your sales people and customer service and support representatives, you might see a very different story. You’d hear endless anecdotes that go something like this: This customer may not produce much revenue for us, but they (pick one or more of these) helped us fix several critical bugs, showed us some new uses for our product, are really devoted to us, use only our products and never our competitors’, or have been our best reference customer and a big advocate in the market.

How much value do you place on any (or all!) of those things? My guess is that when it comes to making decisions on how much effort to put into the customer relationship or how hard to try to save them if they suggest they may not come back next year, you put not much value at all (or maybe a little, as an exception).

But you should. Companies that do have customers who keep coming back to them and not their less-successful competitors.

Here’s one example of why: Clayton Christensen’s (@ClayChristensen) “Innovator’s Dilemma” suggests (among other things) that as companies grow, they miss the customer doing something weird with their product. Smaller entrants see it, find the new market based on it and can disrupt the larger company’s market in doing so. But if you — I presume you are the larger, growing company — found the customer doing that weird thing and knew they were valuable, then worked to keep them, you would be able to see the new opportunity and capitalize on it.

There are similar examples for any number of the possible reasons noted above that customers can have value beyond CLV.

So what do you do about it? It’s a simple yet hard answer: Develop a model that can evaluate any given customer’s true value to you (building and helping you manage this model is one of my firm’s main services). That model must include revenue (CLV), but also must include the other dimensions that could make a customer useful and valuable to you. Not all possible dimensions will apply to all companies and, even among the subset that applies to you, not every customer will have much value in each one.

Once you have a model that can assign a quantitative value to each customer relationship, you not only know how valuable each customer is, but how to rank them and know who is genuinely more (or less) important to you. Then you can make well-conceived and well-informed investment decisions. You’ll also know why exactly you are making those decisions.

So when it comes time to allocate budget, time and people to ensure customers are happy, you’ll know who to make happiest. It’s not exactly intuition, and your friends may not have much to say about it, but it will ensure you are doing the best for your customers and for your company, and building relationships that last.

Conclusion:

Over the four parts of this series, I’ve suggested a new way to approach improving and deepening customer relationships, which can reduce churn and ensure customers who walk in the front door this year don’t walk out the back door next year.

I’ve covered:

– Rethinking our business model to ensure we’re making the most of recurring revenue

– Building an effective and measurable sales and marketing process for renewal revenue, and why that’s just as important as your acquisition process

– Learning to understand the value our customers place on our services

– Valuing customer relationships and making better investment decisions

I hope this has helped you think about your business model a little differently and more clearly, and that it has helped you focus your efforts on maximizing the power of your recurring revenue model.

We’d love to hear your story about how you are making the most of your recurring revenue model. Tell us in the comments. And thanks for reading!

customers

The Missed Marketing Opportunity: Your Customers

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(this is a repost of a post written by me for PAKRAgames. It is part one of a series of four.)

Why would you let as much as one-third of your revenue walk out the door every year? And knowing it will, why include it in your forecast, and consider it a “success” as long as it’s no more than one-third?

This is exactly what many companies with subscription-based business models are doing.

The move to subscription-based business models has accelerated in the past decade, led by technology-services companies moving to cloud-based offerings. Most companies that have made this shift have benefited from having a recurring revenue stream and the ability (generally) for more automated sign-up and service options for prospects and customers.

But we missed something.

Recurring revenue means it’s critical to ensure that customers who walk in the front door this year don’t walk out the back door next year. Put another way, it means the value of renewing your customer’s subscription is just as high as starting the subscription in the first place.

A few of you who are doing this right may take exception to this, but in most of the organizations with which I’ve worked, the effort devoted to renewing customer subscriptions is not even close to the effort put into acquiring the customer in the first place. Ask yourself this: In your organization, how much of your budget and staff are devoted to ensuring customers renew? I’ll bet you’ll be surprised at the answer.

Conventional wisdom says it is far less costly to keep a customer than to find a new one. But translating that into action is far more challenging than it sounds (isn’t it always easier said than done?). Some companies do a good (sometimes great) job of bringing a customer up to speed with their products or services (called on-boarding), but then don’t do much of anything else until it’s time to renew. At that point, many companies will alert their customers of upcoming renewals and even assign so-called renewal reps to solicit the renewal.

Which means those companies missed numerous opportunities in between to understand how the customer uses their product and gets value from doing so.

Is it any wonder that as many as one-third of customers walk away every year?

How do we do better?

I propose three areas on which we need to focus to do a better job:

  1. Treating renewals with the same respect we do new customer acquisitions: This will ensure we gain the expected financial and market benefit from our customer relationship.
  2. Gaining a better understanding of how customers value our products and services: This will help us understand why customers renew or don’t — and what do to about it.
  3. Understanding how valuable our customers are to us: This helps us understand how to prioritize investment in our customers and in our renewal efforts.

Parts 2, 3 and 4 of this series will discuss these and how to make them work for you.

Differentiation

Differentiation is in the eye of the beholder…your customer

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Be honest. If you’re a marketer, you love nothing more than shouting to anyone who will listen (and maybe some who won’t) about why your product or service is so cool, special, interesting….meaning different and unique.

Of course you do – it’s your job.

But while we’re all talking about why our thing is so cool, and what the latest features are, we must remember:

Differentiation is in the eye of our customer, not ourselves.

I want to thank my friend Yvette Cameron for reminding me (leading me to remind you) just how important this perspective shift is. And it’s good to see customers asking this question and defining how their vendors are unique and different, rather than marketers trying to come up with a useful description of the latest new feature.

So, please, when you start shouting about why your offerings are so cool and interesting, ask a few customers first why they think so. They’ll tell you how you benefit them more than your competition (I hope!).

And once you know, go ahead and tell the world.

Share how you discover your unique value in the comments:

 

Disruption

Apple’s plight: will disruptive innovation make it a winner?

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Earlier this week, Apple (once again) became the world’s most valuable company. For those of us who have been fans over the past 10 or 15 years, this may come as no surprise, especially given their loyal customer base and their ability to enter, and often define, entire new markets.

But the rise of Apple has, at many points over the past few years, led me to ask whether their leadership will remain intact for the long term. By long-term, I mean the next 20 or 30 years (I’m pretty confident about the next year or two). Then I came across this article from the Wall Street Journal blogs which asks at least part of the question I’ve been asking, and I thought it was worth explaining.

One of my favorite professors taught me an introduction to business strategy. He opened the course by making the point that business always changes – dramatically – and as the time horizon lengthens, the rate of change increases exponentially. So, to use his method of making the point I looked at the Fortune 500 lists from 1955, 1985 and 2005 (keeping the decades even), and found:

– 210: The number of companies on the list in 1955 which were still there in 1985
– 139: The number of companies on the list in 1985 which were still there in 2005

I think it’s a safe bet to say that in 2015 (just three years from now) the number of companies that were on the list in 2005 that are still there will be smaller still. And yes, I assume the rate of change in business, most importantly the rate of market disruption, will continue to accelerate.

Which leads me to ask: What can keep a company on the list decade after decade?

General Motors was on top of the list in the 1970s, and we know what has happened there. I won’t go into all the factors, but the saturation of the American car market, global competition and consumers holding on to cars longer were certainly factors in GM’s decline.

Exxon Mobil, which has topped the list a number of times over the years, doesn’t face these challenges. The demand for oil is still increasing and prices are (generally) still rising. One wonders what will happen when other unexpected energy alternatives become dominant.

Back to Apple.

One thing Apple has shown over the years that few other companies have shown (at least to the same degree of success) is the ability to create disruptive innovation (for an interesting discussion of Apple’s innovation strategy, take a look at Curt Carlson’s book, Innovation).

Apple has continued to re-invent itself (from computer company, to music company, to mobile device company and so forth) as the needs and desires of technology consumers have changed. And whether through it’s visionary founder or it’s innovation process – most likely a combination – it has often been the company that defined what was possible and showed us how to turn our technology aspirations into reality.

If Apple is to stay at the top of the list, it will – among other things – need to continue and accelerate this innovation capability. There will be challengers. Not just the kind of competition that comes out with “the better alternative to _______ device” but the companies that will define the future needs and aspirations of technology consumers. Apple will have to continue to disrupt our world in order to stay on top.

And if in 2025 we look back on today, and we are amazed at how Apple has been so successful for so long, then we will be able to point to the disruptions they defined. If we are wondering how such a mighty company fell down the list so quickly, we will likely collectively conclude that the passing of Steve Jobs must have been the cause. But in reality it will have been the loss of the ability to continue to define the market disruptions that will happen increasingly frequently.

And no, this is not exclusive to Apple. Any company that makes it to the top of its market faces the same issue. In part, it’s Christensen’s famous innovators dilemma and in part another idea Mr. Christensen introduced. If the job that people are hiring your product to do for them is no longer necessary, then your product is no longer necessary.

And the jobs we need products to do are evolving quickly.

Are you taking the steps you need to in your company to make sure your products will do the job your customers will need done in the future? Tell me how.