Learn from the babies

Recently while reading a health magazine, one particular article caught my attention. This article was different from the rest. It discussed on the exercises that one must perform and spoke something about the cartilages covering our muscle. What was really interesting in the article is the author's attempt to draw our attention to babies.

He stated that babies come with a natural instinct to develop their bodies. The actions and movements actually help them stretch, maintain flexibility and strengthen body parts. As they grow older and the need to develop body parts are desired but not critical, these actions move from the subconscious to the conscious. And the new adult now needs external stimulus (read health resolutions, gym adverts) to perform the same actions.



Consider the baby in the picture. We have seen all babies do this activity. Raise their legs in the air and often hold their toes in their hands. My physiotherapist prescribed me a similar exercise to stretch my lower spine and strengthen my abdomen and thigh. Its really surprising how simple this idea seems. All we need to do is watch and learn from the babies.

So where is the CRM connection?

Every marketing person I interacted with (and i mean "every") discussed about identifying profitable customers, about cross selling to existing customers, about predicting relationship demise, etc. But it always was about a customer who has been in the environment for a significant period.

Never have we focussed on the new customers -- the babies. We have not spend effort to observe and understand the behaviours and interactions of new customers. Just as a baby grows into an adult and is shaped by its cultures, surroundings, elders, etc. Similarly, a new customer grows into a vintage customers shaped by her experience in the early days. The customer settles into a state of acceptance and gets into a predictable behaviour. As analyst we try to map this behaviour and identify opportunities to benefit from any behavioural event.

It is useful to note here that the behaviour of the customer is partly due to the "state of acceptance" that was defined in the infant days. For example, a customer facing bad customer service in the initial days often settles for the state that the provider will always provide bad service. As such the service criteria is never considered in the sphere of influence. So many times we hear the phrase "...they have bad service..." from customers of the service providers.

It is important that we track the new users, the babies, and observe their behaviour so that the processes can be optimized for the desired customer profile. If the first thing a customer does after buying the product is call the call-center, then we should ensure that the call center is equipped to handle the infant appropriately. This will create a positive impact on the customer which she will carry in her vintage stage.

If this idea appeals to you, drop me a mail at michaeldsilva@gmail.com. We can jointly work out an initiative to observe and study the infant customers.

Oh...for a rainy day

Have you ever liked an item in a store only to be disappointed because they did not have the right size or colour or model in stock? I bet everyone of us has had this experience. Many a times I have walked into a clothing store, selected a handsome shirt and found that size 42 is no longer available. There is 40 and there is 44... But no 42. The store clerk with a very disinterested or disappointed look (probably depends on how his day went by) tells you that there is no size 42... not even in the stock in the back of the store.

The interaction often ends there. Never have I had any store clerk or manager show eagerness to get my contact details and commit on delivering the size 42 (or colour blue or whatever) to me as soon as it arrives in store.

I remember way back in 1999 when I was in Cincinnati, Ohio. The local Walmart store had a special deal going on for a "DIY shelf". As a bachelor, it attracted me as something that might get some order in one corner of my bedroom. So I get into my car and drive over to the Walmart store. They are out of stock. Apparently there were many more who thought same ways on the deal and were much quicker than me. The store clerk immediately took me to the customer service desk and handed me a "rain check" which entitled me to the "DIY Shelf" at the same price as it was available in the special deal. After 3 days, I get a call from the store saying that the shelf has arrived in stock. So I go down there on the way back from my office and pick it up.

My friend had a similar experience with Best Buy. There were giving a desktop PC for 300 dollars as part of the thanksgiving promotion. My friend stood in queue waiting for the store to open. However, he was probably 2 persons too late. The stock was picked up before he could reach the PC aisle. The Best Buy attendant gives him a rain check for the deal. He gets a call on the second day to pick up the PC at 300 dollars. Apparently, there was one store in an adjacent town that could not sell its stock and had some leftover. They got the PC shipped to the local Best Buy store and my friend ended up owning the PC.

I wish the Shoppers Stop, Big Bazaar, Lifestyles in India learn this lesson. When a customer decides on a product and starts looking for a special fit... whether size or colour... thats point of sale. Knowing that his size or colour is not available after spending time going through the various options to narrow on the design he likes is a big disappointment. But NO retailer in India has ever tried to leverage this situation. They always say the required SKU is out of stock and move on.

It would create such a delight to the customer if the retailer could just provide a rain check on the item and make sure the customer is either alerted or delivered the said item.

Aim for captivity... Not loyalty

Every marketer worth his salt wants to implement a loyalty program. What the word "loyalty" in a loyalty program means is still debateable. Also, whether the loyalty programs actually result in loyal customers is also something that need to be proved. Many times a pissed off customer will first consume all the loyalty points and then terminate the relationship. A much worse scenario is when the "terms and conditions" make it very cumbersome and irritable for a customer to enjoy his loyalty earnings. How many marketers have actually walked in the customer's shoes thru the loyalty reimbursement process? I don't think very many have done so. Especially not the airlines .. which are the most avid adopters of loyalty programs aka frequent flyer programs. Ever tried to reimburse the frequent flyer points at the last moment... there will never be any "seats" available on the program.

Creating a loyal customer is not sufficient. Lets learn some lessons from the masters who have designed process to never lose their customers (if I may term them as customers). Which is the jail houses. The customers are prisoners. The program is captivity.

A marketer should design process that makes the customer a captive inmate. The cost of exit should be exceptionally high. Thats how a jailhouse is successful. The cost of escape is often the danger of being shot at or worse being nabbed and getting a longer session.

A telco can use convergence to its benefit to captivate its subscribers. For example, a telco in europe provided its subscribers to create a phone book of sorts on the web site. The phone bill created, instead of showing the phone numbers of the call records, replaced the number with the name of the person as defined in the phone book. The bill also grouped interactions person wise. Now a subscriber who goes through the toil of creating a phone book on the web site will not want to go through the same grind with another service provider.

Mobile manufacturers have an excellent opportunity to lock in their users. The concept of "customized tunes for callers" is a very very strong feature. Imagine someone having a 100 entries in the contact list and have defined customized tunes for a large number of them. This will definitely form a barrier to switching mobiles on the fly. I must make a note here.. that this is not the only thing that will hold a user. Unfortunately, none of the Nokia, Sony Ericsson, LG, HTC, Blackberry (and others) leverage this feature strongly. It should be simple to do... when a user gets a call from the caller without a custom caller tune attached, the phone should prompt the user to select one after the call is over. Over time the number of people with custom caller tune will exceed the point where the user would not want to do it all over again. At this stage, another feature which allows a Nokia user (say) to transfer the setup from one Nokia phone to another Nokia phone will be very useful and helpful in creating a stickiness to the Nokia brand.

Grocery purchases are often a chore rather than fun activity. A grocery retailer could allow a customer to define her basket of regular purchase. Then have an SMS facility wherein the customer sends in her request for a particular basket and have it delivered to her home. What a convenience that would be? Would this customer want to go over the pain of defining her baskets with another retailer... highly unlikely.

I have found in my interactions with people performing retention models for banks that the "bill pay" facility is very high on the captivity factor. Yet, so many banks charge the customer for this facility. They should make bill pay a impulse activity. Whenever a customer drops a cheque for payment of any utility the bank should proactively offer to enable "bill payment" for that utility. But, alas, how many banks do so? None that I know.

Back to our prison case, if the life in prison is better than the life outside prison then the "customer" may love to be in for life. During my recent trip to South Africa, I came across a news item wherein an arrested suspect was found innocent but he refused to leave the prison compound since it was the first time in his life that he had a proper bed to sleep in and a personal space in his cell. Now, if only we had customers who felt life with their service provider is better than life without the same, we would not need any more marketing budget.

So aim for captivity... think like a jailer. Lets talk on how to achieve this in your business... mail me at michaeldsilva@gmail.com

ROI on IPL 3?

A lovely final match of the IPL 3rd version. A month long extravaganza is finally over. And apparently a lot of money has flown through - either officially or unofficially.

I wonder if any of the advertisers actually have an ROI put in place for any of the investment. I heard a CMO discuss on advertising options in one of the IPL matches. He was easy to spend over a crore rupees on this one match. After he hung up, he had only one comment ... good investment to have the CEO present the man of match award.

That got a lot of alarm bells ringing. Are marketing departments supposed to work on the brand image and acceptance or Are they PR agencies of the CEO?

I decided to question all the companies who advertised in the IPL and whose shares are owned by me. Fortunately, only Idea Cellular Limited was such a company in my portfolio. That also shows, that my portfolio is comprised of companies which focus on customer and market rather than on any fad such as the IPL.

I have sent a query, as a shareholder, to Idea Cellular Limited's invester relations asking them on the amount spent on IPL and the ROI model on which this amount was sanctioned. Am hoping to get some reply from them.

Do let me know if you own shares in any other advertisers to the IPL? If so, I urge you to send similar queries to the companies asking for ROI. Do let me know if you get a reply. Especially, if you get one where the ROI has been justified and realized. We should celebrate such a company.

Waiting for your feedback....

The TIME Factor in Modeling

Last week I read a question on one of my linkedin community on whether "marketing is science or art". There was a lot of debate on it being a bit of both or more of one and less of other. I had my two bit answer to it also. I was pondering on the question. That seems a bit odd since I remember having the same question for my marketing management question during semester exams of my MBA program... the answer was by rote. Today I ponder. Does that mean I am wiser? Before you answer, that was a rhetoric. My response was that marketing was both an art and a science. The science part of marketing lies in all the theory and algorithm that is available to be applied. The art part of the marketing depends on what theory or algorithm to use.

I recall an incident at a general insurance company a few months back. The team had built a cross sell model. They had first segmented the customer base and done a product association analysis. Two particular products were found to be closely associated. For sake of confidentiality lets call them ... well... Product 1 and Product 2 (not very innovative... are we?).

The next step was to find customers who had only Product 1 and not Product 2 and treat them as the target for scoring the propensity for purchasing Product 2. The data set of the customers demography, transactions, etc., was formed and the model building and scoring process executed. The customers were ranked to give the potential base for cross sell.

While the process used was appropriate there was a major flaw in the way the scoring exercise was used. The data created for model building was derived from a cut of the customer database as of a particular time... say January 31, 2010. This is where the process went .. drastically .. wrong. A cardinal mistake committed by statistical standards.

For sake of explanation, consider three customers who have bought both Products 1 and 2. The following gives the timeline of purchase of the two products.




As can be observed, by taking last 12 months data from a cut of Jan 2010, the actual purchase of the two products were not taken into consideration. For Customer 1, the purchase of Product 2, which is the target event in this analysis, actually happened outside the period of analysis.

The correct approach would be to identify the event of purchase of Product 2. Term this period as Base period. For each customer, basis the purchase of Product 2, the base period will be different. Then take the data for 12 months past from this base period.

The reason this needs to be done is we are studying the pattern of behaviour a customer exhibits before he purchases the product. Thus, the period of analysis is relative to the purchase of the product.

The following figure shows the period for which data needs to be extracted for each customer. This is dependent on the purchase of Product 2. Notice that this period is different for each customer. In fact for customer 1, this period is way in the past and goes beyond the period that was displayed. It probably needs to be decided whether Customer 1 is a "vintage" customer and should be excluded from the analysis.



This is classic case of the wrong science applied to correct art. No doubt this cross sell campaign had a high chances of failure. And the blame to be put on the statistical model which failed to predict the correct potential base.

If you want to avoid this and similar pitfalls, I will be glad to discuss ... contact me at michaeldsilva@gmail.com.