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Making millions with pennies – BEHAVIORAL ECONOMICS
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
Business Design and Transformation process for growth
I have been privileged to be part of some major enterprise transformation processes over the past decade that have taught a lot about how do you actually enable and enforce change for customer centric, holistic, agile and innovative corporate culture. In the business world we are living in today, brands are created with customer experience and corporate culture. The capacity to serve customers in an omni-channel world the way they want to be served is becoming a competitive requirement instead of being an advantage.. This can not be done with silo organisation with responsibility barriers, split budgets, strict hierarchy, fixed roles and waterfall development processes. Those things are true status quo traps that will eventually kill any business sooner or later.
Just like Jeff Gothelf and Josh Seiden, the authors of Lean UX -book, I got fed up with cases that were perfectly planned but never implemented or the implementation was too far from the plan and naturally didn’t deliver as expected. I’ve also grown out of creating strategies and roadmaps and moved to actual change making. I really love Lean UX. Lean Start-up- and design thinking adjusted to established enterprise environment. Solving real problems, creating customer insights, direct applications and implementing them asap is much more rewarding for everyone involved than just designing the change. Getting results fast accelerate learning, inspire innovation and motivation beyond anything else. The gradual change is also much easier to manage than a complete turnover at once.
The key rules for success are:
- Outside-in > understand customers and markets first, then look at your offering, customer interfaces, brand, invoicing, agreement processes, up-sales, cc etc. Be honest and learn.
- Bottom-up > The need for a change should be recognized at the board level, however the change learning should start at the bottom – with people who are directly communicating with customers and know their frustrations and understand company’s challenges. Most often they can directly tell you what needs to be changed. Once you know these, you can take it to the board room and be honest again and learn more
- Do and learn fast, adjust and improve. Don’t try to get everything right before releasing something. There are no watertight facts before there are real life results. Most things can be tested small before scaling or making major investments before proof of concept. Stay curious and lean even in case of larger enterprise
Based on my experience, this approach works every time:
It is crucial to work you way bottom up in order to obtain actionable insights
1. Create customer insight. Use customer data, analytics, scoring model, online data, research and any available data sources in order to understand who the customers are how do they behave. If you don’t have enough data, get it, make 1-2-1 interviews or research and mash-up other datasources. Create a customer journey map based on these findings and engage with people who work in direct customer interfaces like sales, retail, call center, research, support, invoicing, credit negotiation, specialists, etc. By connecting these two realities you can see a couple of things:
- Who are the customers, what are they doing, how and why?
- How does this customer behavior show in your customer interfaces, what are the most important pain points and frustrations customers have and what can you do about it. Once you have the facts, you can see how you can extract painpoints by re-designing the customer journey experience across customer interfaces and how that will reduce costs to serve while also improving NPS. That has a direct bottomline impact. Also, you can recognize opportunities that will help you sell more effectively, improve conversion rates and thus drive marketshare and sales up.
When you have understanding about the customers and you can define Customer relationship-, Customer experience vision, set goals and recognize their impact to revenue and bottomline. The Customer interface and customer analysis becomes the roadmap for better and enables a shared language thru organisation. Everybody can agree with the facts and understand their own role in the customers’ process. The discussion is around customer behavior and going forward, it’s not about blaiming anybody for their decisions in the past. The mandate for change comes frome the customers and dictates what needs to be done. This is why everyone can agree with it and don’t lose face or feel the need to defend prior decisions. In every single case this first part has been capable of igniting inspiration, trust in own capabilities to do meaningful changes and realize them. Insights and understanding create momentum that makes it possible for a company to change fast in a meaningful way. This change is done because people love it and their hearts and minds are burning to make an improvement. It’s not done because management has told employees to change or because the management team has come up with new organisation chart… This route to transformation can be rapidly implemented and the results are quickly at hand. These results justify futher improvement.
It has been interesting to learn, how much silent knowledge, un-tapped knowledge and supressed passion can be found in any given organisation. This capacity can only be realized by deploying the change within the organisation. This is why outsourcing the planning is not a good idea in my opinion. Carrying light inside with a bag doesn’t help, you need to light up the people. Once you release that passion and knowledge in constructive way, it will change the organisation permanently. The way of working will change, it will improve job satisfaction and willingness to push the limits further. At best, it will create a positive cycle for competitive advantage and growth.
2. The next stage is about turning insights and understanding in to systematic Way of Working. This is actually very practical consideration about recognizing responsibilities, ownerships over larger entities, creation of KPI’s and information flows or designing the approach to commercial management in general. Often there are factors like scorecards and conflicting interest in the organisation that need to be fixed, rewarding mechanisms or silo cultures that just need new perspective and solving. Very often dysfunctional organisation has everything in order on the surface, but multiple little things that paralyze the operational engine, innovation, productivity and motivation. Sometimes management isn’t even aware of such issues that could be historical relics that should have been solved ages ago.
What ever there is in the way of working, the new perspective gained in the first stage will help in finding solutions to them. The work is done gradually case by case and the excitement and positivity for change gradually take over the entire personnel. At this point, the company should reach a positive cycle that feeds winning mentality, job satisfaction and capacity to innovate.
3. The first two stages have already revealed the challenges that can be found from systems architechtures and platforms. While the first stage already enables major improvements with UX design and coding, the platforms enable strategic development and automation. This naturally takes more time and is different kind of project, but by this time the needs, benefits and requirements should be selfevident. As the learning has already started at frontend level, the understanding about available business benefits should also be clear for decision making and investment planning.
This kind of change can improve efficiency and productivity very fast without showing anything outside yet. However, when the company is really changing it should also show outside. In my experience advertising is actually very effective mean for internal change communication. The promises that the company gives outloud enforces the internal resolve to follow thru and deliver as planned. Advertising is about communicating the core values and that goes to own personnel, customers and the market. There’s just the question of timing that must be carefully considered. If the advertising starts too early and the personnel hasn’t really got on board, it might have double negative impact:
- internal feeling of disconnect between promises and capability to deliver and
- customers feeling that there isn’t enough substance behind those promises which could damage the brand and destroy the momentum that would have been available.
Like anything that has to do with people and emotions, these are delicate matters and require consideration. In order to do things successfully you need to have a clear plan but it has to be flexible enough so that it can be deployed in right order.
These transformation stories are truly interesting and educating processes. I’d love to hear your stories and experiences about them. Please comment and share 🙂
SEE ALSO:
- Marketing’s new and re-designed 7P’s
Managing Brand – The most profound KPI’s and measures / - From marketing automation to service automation
- Managing customer interfaces
About Author
- Toni Keskinen , CEO, Future CMO – Catalyst for Growth (http://futurecmo.org)
- Toni.keskinen(at)futurecmo.org
- http://www.linkedin.com/in/tonikeskinen
Megaphone model – An approach to influence an entire market
I’ve been involved in some cases that had to do with introducing something new to the market place and/or required changes to legislation, public opinion and awareness. Such cases are about energy legislation, taxation, medical legislation, healthcare, vaccination programs, trade legislation, nuclear power plant permits, etc. In such a case I and Minna Ritoluoma (Marketing Architect at Toinen PHD) came up with an approach to communications and influence design that can act as a foundation for influence planning. I named the approach “The Megaphone model”. (Click to enlarge the picture)
The idea is to recognize and plan the shared vision and goal that other parties would share and be willing to support. Once you have the vision you can start designing the comms flow – what messages are relevant for the cause and who are the persons, parties or institutions that would be most capable of getting them thru to the over all public opinion and legal entities. These cases have to do with very long term market condition creation that often enable huge business potential. Let’s say that your goal would be to increase the natural gas demand in the market – it would be better for the cause that a car company offering cars that run with natural gas would start marketing their offering for the market than the gas provider to try to increase the natural gas demand on their own. The message makes more sense for consumers when the fuel and its practical use benefits along with pure energy claims are communicated simultaneously. On the B2B side, for example food production lines are major natural gas clients that act as enablers for gas line extensions or building a LNG terminal, which requires building permits and long-term investments that then again can be used for consumer distribution network creation. The energy as such isn’t interesting – the cars are, the lower cost warm water and heating is and the more efficient manufacturing is.
In some cases it’s also better that some neutral scientist to make the environmental claims instead of a brand with vested interests. On the other hand the legislation preparing entities and public opinion can and often should be influenced simultaneously for the positive outcomes, sometimes over a very long period of time. Such cases are about strategic Must Win Communications Battles that can be very expensive or impossible to win solo.. As some wise man once said something like this: “If you want to move fast, go alone. If you want to go far, take a team with you”. A company can act as a kind of orchestrator designing the market place and mastering communications via different public or behind the scenes players like lobbyists, but the company needs the shared vision and goals to fuel the megaphone model. Such synergy can also be approached with Symbiosis Strategy that I published about earlier
Let’s move to details that make or break the case: Influencer mapping (Click to enlarge the picture)
The keys to success can be found with influencer mapping. The map is three dimensional tool that has two axis a) legislation decision power b) public opinion influencing power and c) color coding for each actor > positive, undecided/neutral and negative towards the shared vision and goals. This map is a fantastic tool for creation of the plan further and design influence patterns > who’s listening who, what goals do they have, who’s influenced by public opinion, who’s in alliance with who etc. Each actor should be thoroughly researched in order to master the communications scheduling, actors and routing for the messaging. Like most things, the whole model is about doing the hard work and being smart. Advertising can be a very powerful tool but it’s rarely the only solution – these cases are about market creation and foundations for a completely new ecosystems. When the opportunities present themselves, make sure you are ready to make most of them.. or contact me 🙂 Nothing is as fun and rewarding, as challenging the existing status quo and re-writing the rules in a certain market place!
Every now and then new major opportunities become possible. I hope these tools help you to make most of them. I would love to get your feedback for this approach and possible experiences you have had about this kind of cases!
Check out these articles too:
The SYMBIOSIS STRATEGY – Creating an ultimate value propositionMarketing’s new and re-designed 7P’s
Managing Brand – The most profound KPI’s and measures /
About Author
Toni Keskinen ,Chief Editor for Future CMO Movement (http://futurecmo.org)
Toni.keskinen(at)futurecmo.org
Fjord’s and Accenture’s “Trends impacting Service Design in 2014”
This is a great report about the changes and developments in the digital arena. Enjoy 🙂
Service Designing Marketing
Service Design is a ground breaking methodological shift towards customer centered business development. I can’t underline enough how important this new dicipline is in creating completely new and very influential business models. Service Design should also be used in marketing just as effectively.
In my opinion, marketing should evolve in to such direction where we are designing the entire customer relationship from consideration to purhcase and continuously improving relationship with earned trust. Custom communications according to customer behavior is one key issue, because the company should be capable of adapting to customer’s needs and motives, not the other way round. Customer centricity and customer centric innovation accross all touchpoints is the very core of the game.
This presentation is very thorough and insightful approach to Service Design. Check it out and think how you could use these ideas and methodologies in your approach to service designing marketing
Author: Toni Keskinen, Marketing Architect & Customer Journey Designer
http://www.linkedin.com/in/tonikeskinen
Join FutureCMO Movement LinkedIn Group here
Business Design.. with customer centricity
Here is my presentation that is about Business Design and how you lay the foundation of business development and value generation on customer journey and diminish the complexity to understandable and measurable insights and practices to marketing, operations and R&D. Recognition and simplification is the way to go and insights come from that. I’ve just landed back to my roots and start Business Development consulting which is really about customer and total marketing driven corporate transformation. That’s why it was relevant to take a look back and make a fusion from past to current.
I came to conclusion that past was already right – but required a lot to learn in order to develop the understanding and methods further.. Even if your theory and concept were perfect – making it a practice and a reality takes a lot of sweat, consideration, trial and error, right context, position and organization. However, enjoy. This material was better than I remembered (I was a founding member at Taivas Business Design and OneExperience planning director before my assignment as marketing architect at Toinen PHD and starated Future CMO transformation consulting and coaching in Jan 2014).
Author: Toni Keskinen, Marketing Architect & Customer Journey Designer
http://www.linkedin.com/in/tonikeskinen
Join FutureCMO Movement LinkedIn Group here
