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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

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:

  1. 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.
  2. 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
  3. 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:

customer centric management transformationIt is crucial to work you way bottom up in order to obtain actionable insights

Bottom-up strategy creation and implementation

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:

  1. Who are the customers, what are they doing, how and why?
  2. 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:

  1. internal feeling of disconnect between promises and capability to deliver and
  2. 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 🙂

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CMO´s were hit by Tornado

Marketing departments in many companies are currently losing their importance and budgets. The world of commerce and marketing is truly in great turbulence right now.. Tornado really. The change is like force of nature and it is so fierce, because several megatrends are colliding simultaneously:

  1. Customer Experience design and metrics mania (NPS)
  2. Corporate Identity as a holistic concept, not just brandbook but experience
  3. Integration of service & marketing = Business Process Design & LEAN process requirement for efficiency
  4. Design thinking breakout for innovation and business model generation
  5. CRM and automation capabilities increase: Increase CIO’s, Sales director’s and business management’s involvement in marketing
  6. Social brand and open dialogue with customers (rating and feedback is ever present issue + the rise of Open Innovation as part of customer relationships)
  7. Revenue Performance Management requirement and Analytics
  8. Decline in traditional marketing & Own media’s tremendous influence increase
  9. Organisational changes – Torn Silo walls makes marketing everyone’s business > “We are all marketeers now” said McKinsey’s article
  10. Requirement to deliver better results with lower budgets

What I’ve heard and observed is, that business management has already got used to thinking in terms of processes due to ERP and CRM technology development and implementation. They are also very familiar with cost/performance analysis and practical implementation to processes. It is easier for them to think about Customer Journey and CX design pragmatically and apply the ideas in practice. Sadly, CMO’s in many companies are strangers to such consideration and thinking. Branding used to be about doing things according to the brand book and design guidelines. Now brand is both an idea about something great that stands for something and something that you can experience with all your senses. The Corporate brand identity is more about such holistic experience than images, jingle’s or tone of voice. They are still important, but the other factors are increasing their influence exponentially.

This community was created because we wanted CMO’s to take advantage of the turbulence that would enable major increase in their influence and improve productivity in organisations. Now it feels like marketing departments influence and capacity to deliver results is dividing in two and this change is escalating as two roadmaps: a) Marketing becomes the driving force for corporate business development (= CMO’s take the driver’s seat leading the change) or b) Marketing becomes second grade support organisation without power (= CMO’s continue their work as they have done before). I wish more companies and CMO’s would choose the roadmap A.

I participated in DMA event in 2004. There Nectar’s (Loyalty Management UK’s) CEO Robert Giergink presented his case about coalition loyalty management program and their results for the first couple of years. His co-speaker was a University Professor whose name I can’t recall anymore, but he said that loyalty programs might represent the future of Marketing in general. I was deeply impressed, enlightened really, about Nectar’s case and find it still very inspiring. In my opinion that professor hit the point exactly. Currently all marketing is about Customer Journey and Experience management, individualized dialogue and event based, triggered and service oriented communications. That is exactly what loyalty programs are supposed to do. However, until recently such approach was ridiculously expensive or impossible. Right now, the technology is very cost efficient and the ROI capacity is absolutely amazing. While this is true with all recognized customers it’s now becoming possible also for customer’s that have left no identification about them.

Naturally the online revolution and social media storm have made everything above even more important and possible and that is why these things have become management imperatives. I’m looking at the CMO’s position in the light of generic Must Win Battles shared by many companies:

TOPLINE GROWTH:

  • Best customer experience (Goals: loyalty, LTV, cross & upsell, high NPS)
  • Continuous and cost-efficient new business (Goals: new customers, demand generation and stronger conversion)

BOTTOM LINE STRENGHT:

  • Lean and effective operations and processesstrong bottom line (Goals: highly productive organisation capable of delivering superb customer experience at comparatively low expences by using new technologies, self service and help, Social customer service, online environments and automation)

ENERGIZING SUSTAINABILITY:

  • Creation of winning corporate culture: Inspirational and very satisfying workplace capable of understanding and driving development and change. Recognition as very prominent employer for hungry and innovative new talent, Topline growth energize the company’s employees and partners focusing their minds on opportunities, innovation and growth

Such MWB considerations should become the heart of marketing strategy development. I’m currently involved in such cases and I’m witnessing the great change and impact such consideration has on the organisations. Creation of new and exploration of unknown are naturally inspiring and when they also deliver financially measurable success it is certainly worthy of your undivided attention.

Word of encouragement: Very few people are truly experienced in this game. Go ahead and learn by doing. I can promise you it is great!

Also check out:

Managing brand – the most profound kpi’s and measures

Marketing has an identity crisis

Author: Toni Keskinen, Change Catalyst & Executive as a Service

http://www.linkedin.com/in/tonikeskinen

Join FutureCMO Movement LinkedIn Group here

Digital Trends for 2013 by Adobe

Technology meets marketing. Analytic mind meets creativity. It’s going to be a year of change which is just speeding up constantly

Digital Trends for 2013 by Adobe

Re-structuring and re-inventing the Ecosystem

The corporate management is facing complexity they are not equipped to handle at faster and faster speed. The CEO is challenged with innovation as a new management imperative. There is a strong need for change inside corporate management and outside in the siloed ecosystems serving companies. In media and marketing the world has changed dramatically over the past decade.. well we are only in the beginning and we need a completely new approach to handle it and become capable of meeting the new demands of CMO’s and management:
(SEE PRESENTATION)

Some signs of new demands, requirements and changes in the balance of power:

Gartner says, CMO’s will invest in IT more than CIO’s

Marketers fail to deliver real-time targeted-customer brand experiences

Ad Agencies narrow Gap. Digital may be at the tipping point of overtaking all other media

Brand website visits declining. Read more

 P&G said it would lay off 1,600 staffers, including marketers, as part of a cost-cutting exercise. More interestingly, CEO Robert McDonaldfinally seems to have woken up to the fact that he cannot keep increasing P&G’s ad budget forever, regardless of what happens to its sales. Read more
Next news 27th Feb 2012: P&G reduce advertising spending by 1 Billion. Read More
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