Future CMO Movement

Home » Uncategorized » Making millions with pennies – BEHAVIORAL ECONOMICS

Making millions with pennies – BEHAVIORAL ECONOMICS

Growth and productivity

When I think about board member’s day to day life and board meeting’s average content, I know it’s full of big decisions. What is our growth strategy? Are we willing to invest millions of euros/dollars in technology in order to enable customer relationship strategy and automation? How can we reduce our churn? How can we lower over all costs and increase productivity? Thinking big is important, but I’ve come to conclusion that thinking big also makes board members blind to potential that is at their reach with minimal investments.

I’ve been working on direct marketing, sales development, customer journey analytics and customer experience-  and customer interface design since 2004 and learned that the potential is amazing. Realizing the potential often only cost pennies, but requires new point of view and strong experience. So what is this really? It’s BEHAVIOURAL ECONOMICS. Using BE in order to rapidly create major changes has to do with Choice Architecture and Nudges, leveraging behavioural patterns. It’s very much like Service Designing, but doesn’t necessarily require total make over, just adjustments. I decided that I collect and publish some of the actual outcomes that I’ve discovered with my clients so that there is tangible proof of what I am talking about. These cases are anonymous and from multiple market areas including both B2B and B2C cases:

Conversion: Sales increased by 240% by only re-designing the way the product was introduced and how customers actually were steered to made the purchase. Investment level 5000€ – sales value in millions
Sales: Changing messaging order and starting marketing by allowing own members to buy first, before others. Creation of momentums inside the campaign. Sales index was 200% in a first year and 260% in second year compared to the original target budget. Investment level – no change. Double profitability impact:  higher margins and stronger sales. The sales impact was + 20 millions.
Churn reduction: By changing the way how the company did invoicing, the company’s churn reduction was almost 1/3. Investment level in thousands – savings/improved loyalty > 1 million
Customer service cost reduction: Changing the way invoicing was done, we were able to cut contact center calls to half and allocate that free capacity to proactive contacting of customers who had given critical net promoter scores. Multiple impacts: NPS increase, higher loyalty, higher ARPU, lower cost to serve. Customer feedback also gave insights to overall service and product development. Investment level in thousands – impact in hundreds of thousands
SEO/SEM improvement: Cost of acquisition is often a critical profitability factor. In one case I analysed company’s current reach of SEO and SEM and came to conclusion that 1) Their all key words were targeting the last moments of decision making = most expensive 2) They completely missed the contexts that made their service interesting and valuable = high reach, low cost. Also, they renewed their website, which cut their lead generation to half. The solution: conversion fixes on website with minimal cost, new approach to SEO/SEM. Investment – re-allocated current marketing budget, projected impact more than 200% sales increase
Proactive service messaging: Sending customers service messaging with automation multiply their frequency to use service, increase spending and reduce churn. Investment apr. 100K, sales increase impact in millions.
What board members should consider:

We already have technologies and on-going spending – can we improve their impact
We already have thousands/hundreds of thousands/millions visiting our customer interfaces. Can we improve conversion to sales?
What is our level of contact center costs? How many contacts is there? What is causing those contacts? Can we do something about it?
What is our churn level (leaving customers)? What does that mean in euros/dollars? Can we do something about it?
We have tons of data. Have we really understood the value buried in it? How can we transform data into money (operational improvement with current offering – potential for new businesses and offerings)
One case I am currently working which is special for one major reason, its public, is Kela (Finnish pension insurance company). KELA is government managed and doesn’t have competitors, which means that I can talk about the case without breaking any NDA’s. Due to a legislation change, Kela is going to take over a new service area in the beginning of 2017 that currently employs 600 working years in employee resources. I have a privilege to analyze how customers are currently using Kela services, how and why they use office- and call center services. Based on this data I am looking for ways to increase self service level and decrease cost of servicing. The goal is, that by changing the customer interfaces and service processes we can decrease the service need so much, that Kela DON’T need to hire 600 more people to fulfill the new responsibilities. Since I started analyzing data, interviewing customers and customer service people, we have already found improvement points that allow Kela to cut hundreds of thousands and eventually millions of calls or manual applications. Very little user interface element changes alone can reduce costs by 1,5 million euros in one single service segment. These findings are now in process to be realized with lean UX workshopping.

There’s one specific finding that I just have to point out. In every application context Kela gives an average decision making time. The idea to give an average time is natural and intuitively right way to approach the customer need. However, there is a problem. Giving an average time for decision will create expectations. Giving an average time actually means that HALF of the applicants feel they get below average service, get worried and call. The number of such calls is +200K in total. What can we do? We can change expectations by changing ONE LINE across all services.

“The decision making typically takes AT LEAST xx time”

The change of this one line has very meaningful benefits:

half of the customers feel that their service EXCEEDED expectations
The other half is more patient
The projected saving for this very simple change is at the level of +1 million euros. The cost to make that change is 0€. When scaling all improvements together the savings will be calculated in multiple millions.

What is that KELA case really about? It’s about recognizing why people get worried, feel anxiety, what they don’t understand and how can we improve their feeling of confidence that things are going well. In practice we improve customer experience. In a commercial context this means higher NPS, stronger customer relationships, higher demand, higher conversion rates, lower cost of acquisition… the list is endless and it’s full of direct profit impacting factors.

What I suggest for your next board meeting is, that you take the board consideration list above and put it on  your agenda.  Then honestly consider if there is room for improvement. My experience is, that there always is. Then contact a person who has real experience about recognizing improvement points, analyzing the data for potential and capacity to create insights and design changes that make millions in ROI.

This is what I do.

Here is a short introduction to my offering and how does it impact company’s customer centric transformation, management, culture, infrastructure and processes: Behavioural Economics offering


Let me know if you want your company to take a leap to a whole new level of productivity. Let’s have a chat and see if we both get excited 🙂

Toni Keskinen
+358 50 55 222 76
toni.keskinen@futurecmo.org
http://www.linkedin.com/in/tonikeskinen/
@Toni_Keskinen


2 Comments

  1. […] How to take advantage of Brand’s position very fast with Behavioral Economics Making millions with pennies – Behavioral Economics approach […]

  2. Heikki Lehmusto says:

    Taas selkeää pässinlihaa Tonilta.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: