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Segmentation 3.0 – disrupting marketing, media and management

Designing advertising, services, products or doing media planning requires us to understand customers and target markets. The more we understand about behavioral preferences, attitudes, lifestyles and multiple other variables, the better we can do our jobs. Combining all sources of data: research, analytics, buyer segments in real time bidding (RTB) targeting engines, qualitative research.. its such a wealth of data that it has become too big to manage. Right now we need to be able to simplify and turn such wealth of data in to understanding and actionable priorities. This is exactly what segmenting should be all about.

Segmentation 1.0 is about creating customer understanding inside organization. The segments are actually stand alone pictures and stories about customers. These segments can’t be connected to data, which means that they steer creativity but don’t offer KPI’s, real business management tools or monitor market share changes.

Segmentation 2.0 is about more data driven and actionable segmentation. Dynamic interest grouping with online targeting tools allows you to calculate probability of click or purchase and adjust your investment/segment accordingly. Same method applies to existing customer analytics, which offers steering such as next best offer, likelihood of negative churn or the level of monetary value of different segments. It’s already about making data actionable. However, these technology specific, not market level segments.

There are two cases of Segmentation 2.0 that are now leading the way to 3.0 available in Finland. Finland is interesting because of advanced population register allowing you to do interesting solutions easier than elsewhere. However, these learnings will soon become internationalised.

The story about Finnish church is quite eye opening. Since 2000 the Finnish national church membership level has dropped from 85% to 72%. The Church is in crisis.

Church churn

Church has been responsible for registering population since the beginning of organized society in Finland. Everyone who gets baptized start paying church tax as part of their national taxation. My personal church tax was more than 1000€ last year. Losing members means losses in church taxation and losing young people means losing their life time taxes calculated in billions.

Church needed tools to understand their members and ways of preventing churn. Actually the church needed to re-invent them selves. They needed segmentation. Jarmo Lipiäinen, head of Kotimaa’s sales and marketing recognized this challenge and took action. Member 360 was born. This segmentation divides people in to segments by their religious tendencies and multiple other lifestyle variables. This segment tag is attached to everyone in Finland, member or not.

Screenshot 2016-03-16 10.17.58

Picture: Main and sub-segments

Screenshot 2016-03-16 10.18.12

Picture: Example profile – Disconnected experience seekers

Making the segmentation applicable required tools. Jarmo Lipiäinen led the project and they created data visualization tools for parishes. You can now look at areas and understand what kind of segments are there and buy addresses to people from different segments. This allows church to speak to their members and prospects in language and perception they can agree with. Church is not just about religion, it’s a second layer of safety net for under privileged people and has multiple other roles in society . People don’t leave church only for religious reasons, they expect church to act for greater good and help people. Church stands for a lot more than God.

Since the Member 360 was introduced, now +100 parishes are using the tools and changing the way church works and is relevant to their members. Church is now rewriting their story, hiring service designers to design engagements and services for members. One experiment, internet priest with chat, was very popular among young people who were in distress but would never have reached out to church advice or someone to talk face to face. The role of church, the message and ways of being part of peoples’ lives is now changing fast. Church is learning member centricity.

Commercial 2.0 segmentation

Another initiative took place simultaneously on commercial side, Fonecta Buyer Classification. This toolkit looked at people’s lifestyles and buying preferences and was also connected to the entire population. On top of that, it is also connected to   media buying tools and TNS research data. I have personally implemented multiple cases with buyer classification in travel, restaurants, hotels, telco and retail. Buyer classification has 8 main segments and sub-segments.

  1. Budget-Concious young adults
  2. Bargain hunters preferring finnish purhases
  3. Parsimonious Pensioners
  4. Brand-Focused thrill seekers
  5. Ordinary citizens
  6. Service-seeking couples
  7. Family-focused quality seekers
  8. Solid and prosperous elite consumers

The segments can be attached to your own customer database which allows you to see how many people there are in each segment, how they behave, how valuable they are, what do they buy. You can use this understanding to reach out potential new customers out there based on insights from your own data. Buyer classification allows you to connect internal and external realities with same segments and also monitor market development in numbers: who’s winning and losing what kind of customers. Business is not just simple numbers – won and lost, its very much about value too. The whole point of segmenting is about understanding where to concentrate your resources and optimize your profitability. You have to make choices, segmenting allows you to do make better decisions for those that matter most. This kind of generic segmenting attached to media buying and external data is a whole new game for business KPI’s and corporate management. It’s a possibility to connect creativity, resource allocation and business goals together

Human 360 – Next generation – segmentation 3.0

The next level is currently entering the market. Same segments are now connected to online behaviour too. You can now do online media planning by segments and use same segments in real-time-bidding. That’s a minimum standard in this day and age, but there’s more.

Member 360 and Buyer Classification were single purpose segments that could be adapted to other purposes but weren’t optimized for them. The next generation is about connecting multiple segmentation tools together:

  • 1st You have your own core segmentation or generic segmentation that has been made for your business sector’s specific needs. This segmentation is used for business management and company wide KPI’s
  • 2nd You have supplementary contextual segments for further insights: eg. Food, travel, technology, sports, politics, religion, fashion, housing,… you name it

To say it simply, the new generation approaches individuals holistically. People have different kind of passions and interests, capabilities and life situations. These contexts can be translated as passions and orientation. You can now approach people based on their orientation and you can analyze what kind of passions and orientations your current and potential customers have. You can also calculate scores for each segment allowing you to evaluate which approaches to your customers have strongest likelyhood of meaningful impact. Creation of business scenarios and relevant communications has never been easier.

Screenshot 2016-03-16 10.22.30

Such insight can be used for creative planning, media planning, new service development, partner selection,.. well, designing the future of the company.

Segmentation 3.0 enable us to connect 4C’s together and create a corporate GPS for success:

Screenshot 2016-03-16 10.22.42

Sofar Google has given a price for words with Google Adwords. This kind of segmentation will give similar price variation for people, it becomes the unifying currency in media buying. Some people have a much higher profitability potential than others. The future of media profitability will be dependent of reaching those audiences and people, advertisers are willing to pay most for. We are truly entering a new era in data driven analytics, planning, marketing, creativity and management. This development will have major impact on general management, mediabuying practices and entire creative industry. This kind of methods and tools will allow us to work miracles in unseen scale.

Aller Refinery

This development will further enhance marketing’s strategic role in management and strategy. Data will enable us to manage end-to-end processes better than ever

Screenshot 2016-03-16 10.22.54

Author Toni Keskinen and Jarmo Lipiäinen have published “Journey with customer – from product centricity to symbiosis strategy” –book in Finnish 2013.

 

Loyalty in an interactive digital market


The concept of loyalty is a very profound human emotion like love and trust. Loyalty is an outcome of shared values and experiences, forged with time. It’s not a fling, its about integrity, trust and dedication. Loyalty truly is the holy grail of brand relationship even in the interactive digital marketplace. When we think about loyalty between people, we know that it takes a long time to develop such deep feeling of trust. The same aspect of time certainly applies to brands too. Brands are concepts you can see, feel and experience, even have a dialogue with via customer interfaces and people representing the brand in question.

Well, think hard and consider which brands, products or services are you loyal to? I would imagine there are some. Then think, which brands show genuine interest in you, making your life easier, helping you, respecting your wishes, sharing your values, trusting you completely. Can you think of any?

Companies are quite good at “doing things right”, professionally and operationally delivering what is expected from them. The superb quality of certain product does create trust and loyalty as such due to rational and emotional consideration. This is especially true when your life could depend on that product. On the other hand companies are not that good at “doing the right thing”. Doing the right thing has to do with a context of engagement, feeling of fairness and trust. If your phone breaks a day after the guarantee closes, what does the company do? In case you have bad luck and you fall behind you payments for some period of time, what does the company do then? If the company has a choice between 10% higher profit margin and environmental or societal benefit, which will they choose? There is a lot of data that shows, how profitable “doing the right thing” actually is in case of reclamation. When you do the right thing, listen to your customer, pay attention and do your very best to make things right, the customers reward such deed with their wallets and hearts.
So, my advice for brands is coming straight out of the Bible, Matthew 7:12, The Golden rule: “Do to others whatever you would like them to do to you.” This truth is eternal and applies to Brands on- and offline just as it does to people. Loyalty truly is a concept that takes time to evolve and it can only be earned over time.
Well, the concept of loyalty, in case of commercial operation, means that brands are measuring their brand loyalty with KPI’s like RFP analysis (recency, frequency and monetary), length of customer relationships, life-time-value, share of wallet and Net Promoter Score. All of these measures have to do with loyalty, but they could also be about something else. Not all behavior that appears to be loyal has to do with the concept above. Let’s take a look at commercial loyalty strategies:
1. Rational Loyalty
2. Emotional Loyalty
3. Habit based loyalty
4. Imprinted customers
5. Legal loyalty
6. Structural bonds
Rational loyalty
Most loyalty programs don’t deliver brand loyalty, really. That is due to the fact that people have all loyalty cards and they pick cherries from where ever they happen to find best offer at that point in time. Points based loyalty programs are often buying loyalty from customer. You get more discount when you buy more and you get offers only available for members. Loyalty can be completely rationally driven model that create a behavioral pattern for customers to buy when it’s cheap. Naturally, they don’t if you don’t have an offer for them. In the open online market its very easy make comparisons.
Most often, members also get bulk messaging in which there is nothing personal. A membership equals the license to sell. Selling is often positive. Customers consider selling as active relationship in which the company is offering new services and value for them (servicing by selling). Buying several products or services from a single company generate stronger relationship and lower attrition probability. Everything above is basically positive, better than no program. However, when customer relationship is based on rational decision, another company with more aggressive approach can do considerable damage.

Emotional loyalty
Emotional loyalty has to do with the true concept of Loyalty. Brand as a whole has its foundation in customer experience, quality, integrity, service, ethics, trust, corporate responsibility and values. If the brand feels right for the customer he’s less likely to consider competitors. Also, the loved brands become part of customer’s own identity and they don’t lose customers without warning. If customers truly love your brand, they let you know if your pricing or position is having a strong challenger and they actively ask your approach to the situation. Emotional loyalty is not price driven. You can have healthy margins and customers accept it. In such a position customers also offer their helping hand and are much more open to participate in open innovation or co-creation dialogue or giving you advice how to improve your service even further.
In current business environment there’s too much of everything all the time. It’s very difficult to differentiate yourself by offering or pricing. The truly emotionally driven approach to loyalty is to consider how the company can show it’s loyalty towards customers. How do you take care of your customers? How do you make certain that the value you are delivering to your customer becomes even higher? How do you solve problems that your customers have?

Habit based loyalty
In most businesses there comes a time when customers re-consider whether to buy the same brand again or to buy something else. If the customer is involved in continuous relationship it requires active sign-off from the current relationship. If you can turn single purchases in to continuous relationships in any way, you are likely to drive much higher loyalty. That’s the best part. Once the customer is engaged in continuous relationship it requires time and effort to close it. The bigger the required effort is, the less like people are to go thru with it. Some of the best psychological themes for loyalty are laziness and minimizing points of discontinuity creating experiences like billing. One of the great ways of improving loyalty is allowing customers to have automatic payment methods directly from account or via credit card (eg. Netflix and Spotify). As a result customer does not get direct invoice for the service delivered but it’s included in credit card invoice or directly paid from account. Attrition probability drop is quite significant with such a method and the relationships could continue for as long as the credit card is valid.
When people establish behavioral patterns like reading a newspaper every morning, their likelihood of attrition is much lower. Habit based loyalty is really about keeping the status quo. Low profile and making certain that there is no need for active consideration for the customer enable very profitable type of loyalty.
I have have been completely loyal to LensOn contact lens selling online store for the past four years. This is because they send me an email enabling me to repeat purchase with only two clicks. I didn’t even remember the brand, but in case I didn’t order instantly I would go back to my email and search: “contact lenses”. This search will bring me the email I am looking for and with only two clicks I’ll order new package of contact lenses. Because my credit card information is already stored in the service, this habit is extremely easy for LensOn to maintain.
Another fantastic case of habitual loyalty is online banking. The first online bank was issued in Finland and since then the whole retail banking has changed completely. People no longer have a reason to go to the bank. They can take care of all their finances online. As an outcome people have become user interface loyal. Only in case of major need for relationship driver service, like mortgage, people would consider changing their bank relationship. Online banking is like electricity, as long as you get it when you need it, there’s no problem. If you don’t, you have a major problem. If the service keeps on going there’s nothing to question the current relationship. Online banking enabled huge cost cuts and automated service processes. Cost to serve is now marginal. Once online banking was introduced and became a habit for customers, the vast majority of customers became profitable. Banking margins and profits have grown and the profitability has increased without attrition.

Imprinted loyalty
Customers are not necessarily loyal to the company, but person they are in a relationship with. If customers get imprinted to their counterpart and the person stays with the company, relationships could be very strong emotionally, rationally and habitually. Trusted person can be an enormous asset for a company. The online revolution has diminished the role of person-to-person relationships in consumer businesses. The role of brands and trust in service processes has substituted the void to some extent. It’s not quite the same but works too.
The company’s customer interfaces and people servicing customers should still be trained to reach for such relationships. The brand is as good as the person representing it. Some major hairdresser chains evaluate their employees based on the fact, how many of the hairdresser’s customers book their next visit from the same hairdresser. This measure is beautifully simple and revealing. Being a great hairdresser is not just about the quality of your work, it’s very much about the whole experience. Especially women open up and discuss at the hairdresser. They could easily spend two hours with the hairdresser and spend a lot of money on the experience. It’s about being heard, appreciated and pampered along with getting your hair cut and dyed.

Legal (Contractual) Loyalty
Mobile operators in Finland suffered from very high attrition rates after number portability was enabled. Churn rates reached +30% level even though customers were very happy with their operators. This is a great case proving that customer satisfaction DOES NOT EQUAL loyalty. Customers want to have a new mobile phone every two to three years. The need to get a new handset created natural discontinuity to relationships. Mobile operators have an orientation to offer good deals for new customers and winning higher share of dynamic market. This orientation led to higher advantage for changing a company than staying with the current one. These operators had same level of perceived value and customers had rarely real preference. Most customers had only options that were equally good in general. Only differentiating factors were the brand communications and current offers.
The operators started selling customers 12 month agreements, which offered lower cost calls in the evenings or weekends. These agreements sold quite well and led to lower attrition rates. Once 3G bundles were introduced they included 24 month agreement and were sold with handset subsidies. Against your 24 months agreement you got the mobile phone at about half price. These agreements dropped attrition rates below 10%. In other words agreements offered steady relationships and predictability. As a result mobile operators profits increased and people purchased more expensive mobile phones, which enabled major increase in the use of data creating completely new mass market. Everybody won. After the 24 month agreements ended, the attrition rates increased back to 15-20%. Although the attrition rate increased, they didn’t reach previously familiar 30% rates.
Human nature is lazy and towards many product and service ranges, indifferent. In order to gain market share in a business like this brand has to actively sell and create discontinuity with sales. Electricity agreements are a great example of this. Very few people compare electricity pricing and actively change a power company unless it’s actively sold. When you get a call offering you -5-10% and the offered power is produced with water and greener than your current option, it’s easy to agree. Even better, the new company also close the previous deal so that the only thing you need to do is say ”yes” on phone. It is possible to surprise a competitor with heavy attack in a case like this. Unless the competitor has closed agreements for certain period of time, they are likely to lose a lot of customers almost over night. Who would start comparing for 5%? Very few would. Who would accept such offer when it doesn’t require any effort? Quite many will. Only thing hindering people to accept such an offer would be to tie them in the relationship with an agreement for certain period of time.
Loyalty by structural Bond
What could you sell your customer to make him dependent on you? Structural bond is an interesting approach to loyalty and how to create value in which the customer becomes dependent on.
When Polar Electro introduced their wrist top computers with heart rate monitoring they soon created online Personal Trainer in the end of 1990’s to supplement additional training advice for users beyond possibilities of the cadget in it self. Personal Trainer recorded all your training to a database and created record. It helped analyzing your training requirements and results very effectively. In the early 2000 this was a ground-breaking innovation. When all your training history was online, Polar Electro had a structural bond on you. If you wanted to change to more advance training tools, you had to buy another Polar wrist-top-computer in case you wanted to keep your training record ongoing. Currently mobile phones have same functions and you can use variety of platforms for storing your data eg. Samsung back-up, Apple iCloud or Android saving to Google account. These platforms effectively still create structural bond although some of them are now cadget independent and available to iPhone, Nokia and android. Still, Polar Electro’s Training Tool is an effective loyalty driver for everyone who has been using it for the past decade. The current rush to “internet of things” will produce massive offering of services just like Polar Electro’s training tool. As this market is only just opening, every brand should consider right now, how can they lock their customers in.

Facebook also has a strong structural bond, your friends that are already there. When everyone is already there, it becomes very difficult to leave and completely stop using it. It is also very challenging for other services to get really active users, because Facebook is a strong habit and it holds your entire social life and has become big part of yourself – part of who you are and how you represent yourself to the world.

Attrition
No matter what you do, some customers will leave eventually. Still, applying effective win back strategies could diminish negative churn. One telecom company actually managed to win back 80% of already lost customers. Win back operation was probably the most profitable function the company had ever created.

Just one more advice, when you are trying to develop your company’s customer relationship excellence, you can’t just look at the customers who are happy and satisfied. Their responses will only strengthen the status quo and hinder innovation and adaptation to changing business environment. Lost customers on the other hand are a great source of insight and improvement advice. Any information that help you predict discontinuity, increase the probability of re-purchase, or shield customers from competitors influence and decrease retention clearly increase profitability.

Loyalty certainly is something worth thriving for. Just remember the Golden rule when you are making choices – even though you work in the interactive digital market place.

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About Author

Marketing technology and Branding – free book

Originally published at http://chiefmartec.com/2014/03/new-brand-marketing-technology/

A NEW BRAND OF MARKETING – free book by Scott Brinker

A NEW BRAND OF MARKETING: The 7 Meta-Trends of Modern Marketing as a Technology-Powered Discipline

Click to Download PDF: A New Brand of Marketing: The 7 Meta-Trends of Modern Marketing as a Technology-Powered Discipline

“The modern CMO and marketer can no longer be just a brand ambassador, they must also have a deep understanding of marketing technology. Scott Brinker helps the reader to understand how technology can be used for both successful marketing strategy and execution.”
Jonathan Becher, CMO, SAP

I’ve written a very short book, A NEW BRAND OF MARKETING, that’s free to download and share.

It frames the epic collaboration underway between marketers and technologists, set against the backdrop of two seismic shifts in marketing today:

First, how marketing is taking over the business. We can debate functions and org charts. But in a hyper-connected digital world, everything that a business does — the entire customer experience that it delivers, from the very first touchpoint onward — is now the scope of marketing.

Second, how technology is taking over marketing. Marketing has more software entwined in its mission today than any other profession in the history of computing. Leveraging these capabilities requires new approaches to marketing strategy and management — as well as new kinds of talents within the marketing team, such as marketing technologists.

These two massive shifts are the result of 7 “meta-trends” — each of which has dramatically changed the nature of marketing. And collectively, they have created a whole new brand of marketing:

  1. From traditional to digital
  2. From media silos to converged media
  3. From outbound to inbound
  4. From communications to experiences
  5. From art and copy to code and data
  6. From rigid plans to agile iterations
  7. From agencies to in-house marketing

At only 40-pages, this is probably the shortest marketing book you will ever read. But if you want to understand the context in which marketing has become a technology-powered discipline, I hope it may be one of the most helpful.

Download your free copy now.

Reviews of A NEW BRAND OF MARKETING

As modern marketers, we have to embrace technology in order to stay relevant. But how? In A New Brand of Marketing, Brinker dives into the shifting digital landscape and illustrates how businesses can transform their marketing to be more inbound, and ultimately more effective, with tech-driven strategies.”
Mike Volpe, CMO, HubSpot

“Scott Brinker nails it with his articulation of the 7 meta-trends that have fundamentally altered — as well as empowered — marketing. Technology now fuels the marketing discipline, where science and art come together to build a brand based upon customer experiences, where the interactions are more inbound than outbound and truly global in nature.
Amy D. Love, CMO, Appirio

“Scott has penned a veritable treatise on the subject of marketing in the digital age of digital. In this pithy work, Scott captures the key meta-trends that will define how all marketing is done in a world of technology enablement and customer empowerment. The punch line: read it.
Terence Kawaja, CEO, LUMA Partners

“The leading meta-trends transforming and growing business at the convergence of marketing and technology by Scott Brinker. This short story is a simplified illustration of modern marketing, disrupted and transformed by the growing evolution and impact of technology, the modern the face of marketing.”
Mayur Gupta, Global Head, Marketing Technology, Kimberly-Clark

A New Brand of Marketing articulates the why of marketing’s fundamental changes over the past 20 years better than any book or blog post I’ve ever read. Scott, in his succinct and thoughtful voice, showcases the how necessary to navigate to a healthy and successful marketing organization as only a thought leader and expert marketing leader such as himself can. A must read for every marketer.”
Jascha Kaykas-Wolff, CMO, Mindjet

With A New Brand of Marketing, Scott has put traditional agencies on notice. Clients are evolving faster than agencies and their organizational models. A New Breed of Agency is needed, with an operating system that has Scott’s meta trends at its kernel. Every marketer and marketing technologist should memorize this short read. Gold!
Sheldon Monteiro, CTO, SapientNitro

“Scott has provided a great overview of the trends that are driving the long-term changes in how marketers do their job and the role that technology plays. This book provides much-needed context to help marketers and marketing technologists build long-term strategies that will let them thrive regardless of what comes next. Better still, he does it in a clear, enjoyable writing style.”
David Raab, Principal, Raab Associates

“Scott has brilliantly framed the dimensions along which marketing has transformed — and where it is headed in the future. This should be required reading for everyone in the industry.”
Dharmesh Shah, CTO, HubSpot; Author, Inbound Marketing

“Anything is possible when marketing and technology collide. Brinker’s A New Brand of Marketing concisely captures the fundamental shifts driving the most transformative time in marketing history. Read it, share it, and use it to accelerate change within your organization.”
Paul Roetzer, CEO, PR 20/20; Author, The Marketing Agency Blueprint

One of the most important marketing books I’ve read in some time — short and concise, but intensely relevant for today’s marketers. This is a manifesto for math marketers out there, and perhaps a final warning and blueprint to those who haven’t yet are the transition (but will soon be extinct unless they do).”
Matt Heinz, President, Heinz Marketing

“When asked, ‘What’s your biggest challenge?’ — most marketing executives reply that it is staying on top of the constant and rapid change that shapes the current environment of marketing. While I don’t know of any book that can solve that problem, Scott Brinker’s new book superbly sets the conversation in which that challenge can be met head-on and managed.”
Ric Dragon, CEO, DragonSearch; Author, Social Marketology

“Scott has put together 7 extraordinarily insightful trends that every CMO and CIO need to understand. He calls marketing a ‘technology-powered discipline.’ And while I might rather call today’s technology a ‘marketing-powered discipline’ — Scott would forgive me for fighting for top billing. It’s just a wonderful, insightful, and just plain entertaining read. This is one that every marketer and the technology teams they work with should read together.”
Robert Rose, Chief Strategist, CMI; Author, Managing Content Marketing

“Scott Brinker does a great job articulating a compelling and exciting opportunity for today’s marketers. The 7 meta-trends that Scott breaks out are accurate, digestible, and actionable. I suggest all marketers move this onto their must read list!”
Sam Melnick, Research Analyst, CMO Advisory Practice, IDC

“I love this book. It brilliantly and simply explains some of the most important drivers underlying marketing today. Scott lays out the facts, using data to explain what’s happening in the world of business as it touches marketing and technology.”
Michael Krigsman, Strategy Advisor & Analyst, Host of CxOTalk

Admap Best Practice: Mapping the Customer Journey

This is the original non-edited version of the article I wrote for Admap January 2014 issue:

Best Practice in How to Map Customer Journey

by Toni Keskinen

Customer Purchase Journey by definition is the customer’s journey from existing life experiences to initiation, cross-channel consideration and purchase. Customer Journey then continues to using the product or experiencing the service, re-purchases and loyalty or attrition. This article concentrate on Customer decision-making journey to purchase.

Marketing research often looks into the future perspective and ask about awareness, top-of-mind, preference and shortlist of potential brands. The challenge about researching future is that people are quite bad at acting according to their own intentions. Habits, convenience and instincts drive behaviour to unexpected directions that are difficult to predict by research. These studies also often miss a major point. They ask customers which brand they prefer and make them choose one, and consequently fail to recognize the fact that people might have only brand options, not a specific preferred brand.

Example: In a Telco case we learned that 76% of the customers had a pool of options but they didn’t have a specific preferred brand. This result means that most of the market is floating. People only have options and consider brands as equally good. When the time comes the best/ first/nearest/most conveniently available deal will win regardless the brand as long as the brand is within the pool of options.

How to prepare for Customer Journey mapping:

Before you start designing the research or make any assumptions, establish the foundation. You can establish the foundation with two key factors:

a)    Is the category or brand in high intensity position: high involvement, -investment or –interest product or service? Heinz ketchup would be in the low-end, buying a car would be in the high-end. The purchase intensity stands for the depth of consideration and willingness to make an effort to make a considered choice. If the product or service has low intensity, there will be no actual journey but rather spontaneous and habit driven behaviour. High intensity decision-making on the other hand could last a long time and have a lot of touch points in variety of surroundings.

b)    What is the brand’s status in customer’s mind compared to competitors? In case the brand is well-known and preferred brand, the customer journey will have completely different dynamics compared to less known challenger. The key question is; “is the brand being sold or bought”? In case the brand is bought, you can approach the mapping in order to find ways of optimizing conversion rate. For such case tactical marketing will also generate much stronger impact than in case of a brand with less demand. In case the brand is sold, you should find ways how to break into customer’s consideration and prove your brand better than competitors. In case the brand is sold, the burden of proof is on the brand’s shoulders and you need to find ways how to guide customers away from the path leading to market leader purchase.

You can find data for creation of foundation from the company’s brand tracking research, market share report, online analytics and Google Adwords tool or Google Trends tool. When looking for foundation intelligence, consider how the category behaviour reflect the two foundation factors, how the brand in question and it’s competitors position against each others. Draw a map with all competing brands on it (X-axis: Activity share seller vs. buyer, Y-axis: Intensity level. Eg. Heinz = bottom right corner = no or very little advertising, strong sales & market share, low intensity) Do the preparation phase well and you will have a rather good idea about what is happening in the customer behaviour dynamics. Analytics can give very good answers to “what” –questions. However, you need to make in-depth-interviews in order to find answers to “why” –questions.

Discovery phase:

Once you have a high level view on the market place and a lot of “what” ideas to guide you, prepare to make in-depth-interviews with customers and get “why”-answers from them. Choose customers who have made their choice recently. In case of high intensity purchases, people can remember their experiences for a couple of months, in case of low intensity purchases – interview them instantly at the point of purchase or walk them thru the store with the customer again using the customer as a guid for a tour and let the customer tell you what he experienced, noticed or thought along the way (the same approach can be used in online buying by recording customer’s actual journey thru website). This is different from mystery shopping, because the emphasis is on the customer, not on the store personnel.

The point of in-depth-interview is to analyse the customer’s lived experiences with out others’ interference. This information is only available from customers, because you need the full view across all brands, information and shopping touch points in the category – not just the brand you are doing the mapping for. Ask your customer to tell the whole story from what ever got him interested in buying to purchase. Here’s the process:

  • Who is the customer? Get to know his lifestyle and connection to category/brands
  • What made the customer interested (initiation)?
  • What and where did something happened that gave the impulse to initiate consideration: commercial act by the brand or it’s competitors or an event that made customer interest (eg. Moved to new apartment, new need etc.)?
  • Did the customer have a preferred brand in the beginning or not? Were there other options the customer considered?
  • How long was customer’s consideration and learning time before purchase?
  • Go thru all phases: initiation, browsing, configuration, decision, purchase
  • In which channels the customer interacted with your and competing brands in each phase?
  • Did the customer do all phases and what was the main driver and meaning of each of them? Did the customer skip stages? (In case you want to quantify results later, always define stage and ask if the customer did it before asking about it’s content and channels. Skipping stages is quite common)
  • What was the customer’s experience in each engagement like? Which brands performed well? Why?
  • Something led to decision, what was it and in which touch point did it occur?
  • What did the customer eventually buy?
  • What was the reason for choosing the specific brand over others?
  • What was the second best option or was there one? Why did it lose?
  • In case the customer chose competing brand, why did he not buy the one in focus?
  • Would customers buy again if they had a choice? What is different brands’ Net Promoter Score Index? What were they satisfied for? Was there dissatisfaction?

I would recommend making at least ten in-depth-interviews/category in order to learn about customers’ behaviour and motives. You should interview both won and lost customers and totally concentrate on their experience and point of view. In case you can study customers who left the brand you are making the customer journey mapping for, you will also find out where the brand failed and how the competitors caught the brand’s customers’ attention. In some markets for example outbound sales is an important influencer which has major impact on behavioral dynamics. While interviewing, keep your mind open. Don’t narrow your consideration, but consider all experiences and thoughts the customers have had. From customer’s point of view marketing, pricing, product design, convenience etc. are all relevant issues. As an outcome you will come across things you can influence and those you can’t. However, you need to understand customer’s behaviour and consideration holistically.

Analysis

This approach to interviews, discovery and analysis goes by the name “interpretative phenomenological analysis” (IPA) in psychology. Once you have the interviews, you can create an analysis about their journey and visualize it. The best way to do this is by visualizing each journey separately. Concentrate especially on chain of events, customer’s journey from one touch point to next, motives and contents steering the customer. Conscious cross-channel purchase journey is most likely in case of high intensity purchase. The behaviour dynamics differ between products, service ranges and between same brands in same category. In your analysis you can divide customer behavior in three major types:

Journey Driven people: These people take pleasure in getting to know their options, their qualities and comparing. They are also more likely to share their experiences in social media as they consider themselves as experts. People who are prepared to make detours and a longer journey require a different approach than destination driven ones and they don’t react on offers as easily, unless they have already got to know their options well in advance.

Journey Driven People are often early adopters. They are especially important in case you are launching new product. They are interested in the products and their qualities. You need to support their needs and change or influence their attitude in order to break in to their awareness. As they search and compare, you need to be able to justify to them why your solution would suit them and guide them to decide and purchase your product/service. These people really consider their user experience and share recommendations in case your performance is beyond expectations. Supporting their needs helps you perform better with other people representing different behaviour type.

Destination driven people: These people don’t really care to learn about products by themselves. They make rapid decisions based on their priorities (e.g. always the best, always the cheapest) or rely on 3rd party recommendations such as test results. An offer for test winner product is an effective proposition for them and generate rapid sales.

Destination driven people also need to be influenced at “need and attitude” -level in order to create better awareness of your offering and it’s qualities. However, this is more about leveraging past reviews and feedback from journey driven people. Destination driven people are more likely to be influenced by e.g. Magazine or social media reviews on your product or other independent sources of information. With such support you can just concentrate on tactical advertising in order to encourage decision and purchase making. Destination driven people are interested in the user experience and reviewing their own experience to others.

Slow movers, public opinion driven people: (also habitual or insignificant purchases). These people don’t take risks. Only after most of the others have already accepted and favoured a certain product or service will they follow. Same behaviour also describes the purchase process of less significant products, like toilet paper or other habitually purchased products. People don’t really pay attention to what they buy; they just buy it like they’ve done before.

Public opinion driven people accept your offering when it’s widely used and they are completely certain that choosing your offering has no risk what so ever. It’s all about tactical advertising, retail promotions and encouraging purchase. They are not likely to share their opinion to others or recommend your products or services actively.

In different product and service categories differences are dramatic. It’s easy to think in terms of travelling. A motorcyclist takes longer and slower routes because the journey is the major part of the travelling experience in itself. On a family holiday the same person takes a direct flight to an all-inclusive hotel. Although this is the same person, different context and different motives lead into completely different behaviour. The point of this analysis is to really understand how people behave in your category towards different brands and find out what is required from you in order to perform better.

Along with behaviour type, analyse:

  • What kind of commonalities and shared phenomena, motives, contexts, choice criteria and channels can be found from customer’s behaviour and what was there that you need to quantify or find more information about. Pay attention to the chain of events.
  • Which of the touch points the brand can control, which you just need to influence
  • What was the customer experience like in competitors different touch points along own ones. Can you learn something from them?
  • Pull all your findings together and have a workshop to discuss about these findings and find out how the internal organization experience these findings and what knowledge do they have about them. Get people who work in direct customer interfaces involved.
  • Also discuss, which ERP, CRM, online analytics or other systems are currently capturing data about the customers? This information can help you further and let you make a decision whether you continue by doing data analysis and workshop or do you need to quantify the results with larger research. I would recommend research every one or every two years in order to map out how the market place works from customer’s point of view and what you can learn from competitors’ practices or whether you can find opportunities for growing market share

Why this approach to mapping and analysing customer journey is imperative

In many cases your own campaign could actually sell competitors’ products. Also, in many cases the customer journey is full of conflicting interests. In case you only analyse the one brand’s journey you will completely lose sight on category dynamics. Here’s an example about my Garmin buying:

There was a home electronics store advertisement promoting TomTom navigator for 75€ with European maps.  I went to buy it, but the store salesman told me there was an error in the ad and that price only included Western European maps. He showed me the product with Full European maps with 105€ price. Next to it was Garmin Nüvi, which had exactly same price. I asked if there was any differences between the two and the salesman told Garmin had better battery life. I bought Garmin. Let’s look at the interests of different players:

Me, the customer:

I was very happy, although I paid 40% more than intended but 105€ wasn’t a problem eventually. I was highly price-oriented customer who was looking for ”good enough” solution and was not interested in more advanced solution or bigger screen. Because of the basic functionality needs I had I was also not interested enough to look in to product specifications online, product reviews or discussion forums. This product will get the job done anyway. I was a perfect example of destination driven buyer. At home, the product exceeded expectations. It had much more functionalities than I was expecting. They had minor meaning compared to the basic functionality, none of them was more important than the battery life, but it was a positive surprise.

Gigantti store:

Closed 40% more sales than I had intended to spend. The experience about the store was positive and the sales person’s advice was good, which means that the store will get more money from me later on. Was their error in the ad intentional? Probably not but they should still analyse how the error influenced their GPS navigator sales in general. What did customers come to buy and what did they actually walk out with?

TomTom:

Complete failure. The brand might have made a special deal for the campaign resulting change in price image. After reading that leaflet customers think, that you can get TomTom with European maps at the price of 75€. It easily becomes the market standard because of nationwide advertising campaign. You are making a bad deal if you pay more for it. Price/value ratio sounds perfect but actually it wasn’t real because of the error in the ad. That’s ok if you go to Gigantti and they tell you about the error. If you don’t you just expect that TomTom’s are now cheap. It’s most likely that TomTom does some kind of post campaign analysis and comes to completely wrong conclusions unless they understand how the purchase dynamics in the low price category GPS really works and how their campaign influenced customer behaviour in general.

Garmin:

Great success. Garmin did nothing but made a deal anyway.  Well, I had positive image about Garmin in advance and the sales person just gave me the last defining fact that led to decision to buy Garmin. Now that Garmin closed a deal with me and got me registered, I am quite likely to buy other stuff on top later on.  Was Garmin’s success intentional? In reality the sales person’s advice could have been founded on her own perception or Garmin had analysed the differences between brands and intentionally launched training for retail sellers which states that their battery life is better than TomTom’s. How much longer? No idea.  It never came up.

Conflicting interests are very important to understand. In another case a laptop brand sold 50% more than their preference rate would suggest. That also was because the sales people preferred that specific brand.

Here’s how Audi did in case of B2B car leasing deals:

  • Preference 14%
  • Alternative to 26 %. Altogether Audi was considered by 40% of all buyers
  • Audi sold 11,2% that is 2,8% below preference which means 80% conversion

Audi was the most sold brand but was also most often the 2nd best and had lowest conversion rate  in the market. Wolkswagen sold 119%, Volvo 117% and Ford 196% compared to preference. Even if you would be number one in sales, you could still be the one losing most.

There is one more thing to consider: Specialist & aggregator influence. In B2B especially customers are using professional consults and agents to compare and make recommendations. The customer journey behaviour and needs of an agent are very different from individual buyer’s needs. In B2C businesses comparison services and aggregators like Hotels.com and eBookers have similar significant influence. In case there are such actors in your category, analyse their journey separately.

Business Dynamics Score (BDS)

In case you quantify your results with larger sample you can calculate Business Dynamics Score.

Those who preferred you originally > How many did you keep?
Those who preferred your competitor > How many did you win?
Those who had no preference > How many did you win?

When you compare won-kept-lost results between brands you can really see how different brands are performing. I would recommend calculating BDS from all market players in order to learn about differences in channel efficiency. This figure will give you very good understanding on how behaviour from one brand to another differs and what you need to do in order to perform better. Such insight has great impact on media- and communications strategy.

Constructing Market Flow

In case you have the larger sample, you can construct entire market flow across stages, channels, motives and behaviour types from spontaneous purchases to considered ones on one page view. This single page view will help tremendously in understanding what kind of factors influence market success most and how for example strong retail strategy performs against strong online emphasis. In one case we found that spontaneous buying was quite strong and outbound calls represented 15% of total market sales. However, we were surprised to learn that more than half of customers buying in the category initiated because of outbound call, didn’t do one stop shopping, but instead started cross-channel consideration journey ending up in a purchase from some other channel.

Check out these articles too:
Marketing’s new and re-designed 7P’s
Managing Brand – The most profound KPI’s and measures /
From marketing automation to service automation

About Author

Toni Keskinen ,Chief Editor for Future CMO Movement (http://futurecmo.org)

Toni.keskinen(at)futurecmo.org

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

Insight IQ

I read a very interesting article from HBR, April 2012 issue. Shvetank Shah, Andrew Horne and Jaime Capella wrote an article about how good data won’t guarantee good decisions and most companies have too few analytics-savvy worker. If you are not able read that excellent article from HBR, here is a couple of points from it.

We have already discussed in this group about the new era of decision-making and importance of customer insight. Ability to collect, store and analyze the big data has grown explosively and companies spend a lot of money analyzing customer data. BUT. And this is a big but although you have the best BI tools ever but if your organization cannot capitalize it the investments are useless. Like Shah, Horne and Capella stated in the article: ”For all the breathless promises about the return on investment in Big Data, however, companies face a challenge. Investments in analytics can be useless, even harmful, unless employees can incorporate that data into complex decision-making. At this very moment, there’s an odds-on chance that someone in your organization is making a poor decision on the basis of the information that was enormously expensive to collect”

Shah, Horne and Canella created Insight IQ, method that asses the ability to find and analyze relevant information. They evaluate 5000 companies from 22 countries. The founding’s were interesting. Three groups were found: ”unquestioning empiricists”, visceral decision makers” and ”informed skeptics”

Companies are seeking for ”informed skeptics”. They are data-savvy workers who are able to make good decisions. They have strong analytic skills, ability to balance judgment and analysis. However, the study found that only 38% of employees and 50 % of senior managers fall into this group.

Shah, Horne and Canella identified four problems that prevent organizations from realizing better ROI in Big Data:

  1. Analytic skills are concentrated in too few employees
  2. IT needs to spend more time on the “I” and less on the “T”
  3. Reliable information exist, but it’s hard to find
  4. Business executives don’t manage information as well as they manage talent, capital and brand

Well, how to develop more informed skeptics? It demands constant competence development to increase data literacy and join information into decision-making. And of course, organizations have to give the right tools for analyzing the data.  Ongoing coaching is essential and formalizing the decision-making process based on data and information. Shah, Horne and Capella stated that “many of the best data-driven cultures have formalized the decision-making process, setting up standard rules so that employees can get and correctly use the most appropriate data. Companies should make performance metrics transparent and embed the in job goals. They should also make sure that compensation systems reward dialogue and dissent. Great decisions often need diverse contributions, challenges, and second-guessing”.

Tiffany and BCBSNC are the great example of companies who have shown growing awareness of the pay-offs from Big Data and data literacy.

Is your organization underinvested in understanding the information and maximize Big Data ROI?

Source: Harvard Business Review April 2012,

Article: Good Data Won’t Guarantee Good Decisions

Writers: Shvetank Shah who leads the information technology practice at Corporate Executive Board, Andrew Horne and Jaime Capella, who anre managing directors at Corporate Executive Board

Future CMO & Strategic Marketing

Customers are on a journey with your brand. In today’s business environment, the greatest purpose of organizational functions is to give the roadmap to that journey. Well then, what is a customer journey? It is the art and science of customer-centric methods, skills and tools to synchronize customer’s needs and company’s offering optimally by handling and managing offline and online touch points profitably. The Customer journey covers all stages along customer’s transition from never-a-customer to always –a- customer. Customer journey is the customer life-cycle from brand as a platform to initiation, choosing and buying, using the product or service to re-consideration and re-purchase or attrition. Handling and managing customer journey is the first priority for CMO’s in the future. But, are CMO’s ready for this? Are they specialist of customer insight and knowledge management? Can they turn data into information, information into deep and rich knowledge and knowledge into feasible results? And not only the CMO, can organizations as a whole meet the challenge. 

It is almost impossible to differentiate with the quality of products and services. Target marketing with intense positioning are very similar among competitive products and services. It is difficult to get your message through in infinite number of push marketing media. To achieve success, organizations need to focus on customers and differentiate brand by developing exclusive customer experience and build unbeaten trust.  Organizations need to get closer to customer, to understand the real drivers of customers behaviour and attitudes. It is all about driving insight. In the future CMO’s will be a specialist of driving customer insight. 

Strategic marketing is the sweet spot of operational and tactical activities, corporate strategy and customer insight. In practice this means need to synchronize organization, resources, supplies and customer touch points to customer behaviour. Leading with knowledge is the core of strategic marketing. Leading marketing is leading the organization. Future CMO’s is facing new, inspiring and challenging job description in the centre of corporate management. 

Strategic marketing will be in the corner room, on the table of top executives. But why it is not there?  Because marketing is as expense item and too far from concrete added value, which called the money. The most important thing is to bring central facts alive coherently that marketing and especially strategic marketing would be the interest for CEO and CFO. Future CMO has to simplify strategic marketing to executive group, packet and crystallize business benefits and glue them to corporate strategy. 

Bring the outside world into your organization. Lead with knowledge and explode the corporate silos. Lead the customer journey and optimize the touch points in multidimensional world. It is time for a real strategic marketing, customer driven organizations and constant development and innovations on customer interface. The fastest companies are on their way. Like one of the most famous hockey player has said: “I don’t go where the puck is, I go where the puck will be”. The best organizations know where the next pass is going to. Do you?

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