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Choosing and Buying – Cross-channel influence

We first started the development of cross-channel customer behavior analytics methodology – One Experience in 2004. The original insight about channel development was about clear conflict between companies channel development practice and customers actual behaviour. Companies used to develop each channel individually. Very often each channel has still own channel responsible management that is developing that individual channel to the max. Also the benchmarking was done against competitors channel and the goal was to be better than the competitor. There’s nothing wrong with anything described above unless it generate blind spots and steer companies to invest in development that doesn’t actually support customers and create value for them. The rule of thump is that you should constantly consider effort vs. gain from customer perspective whenever you are developing or changing something.  When doing Cross-channel customer behaviour studies we learned that in some cases companies channel strategy and customer’s needs and expectations were not aligned and the channel strategy actually hindered sales.

Many brands have a long and successful history of servicing their customers thoroughly in a single channel.  Kirsti Lehmusto (former CMO of Finnish retail company Stockmann and colleague from Taivas, now CMO for Helsinki University) recognize the retail store management, contact centre services and distant sales services with catalogues as methodologies that have created great financial success by concentrating in excelling in the customer experience in a single channel from beginning to the end.

Channel management 1_single channel optimizationIn the current 24/7 economy and world of digital influence it is even more important to understand that in current world customer’s move accross channels and create service strings that fluently move customers from one channel to another according to their preferences, drivers and motives. It is important to look at these service moments in each channel and optimize them to help the customer further to his preferred next step.

Channel management 2_cross-channel behaviour

Service and product ranges don’t have the same meaning for customers and people are not quite as interested in everything. In the article ”Customer Decision Making FLOW” there’s more about how the decision-making about a certain FMCG goods and brands like Coca Cola differ from buying a magazine subscription, taking a mortgage or buying a motorcycle. The following gives an outlook on general learning’s about stages in various businesses.

Let’s dig deeper in to stages: Browsing, Configuring, Deciding, Buying and Post-Purchase.

The two stages before these are: Brand-as-a-platform that you can read from here and Initiation, you can read here.  (I would recommend reading them, before going further to choosing and buying journey below). Also check out how to run customer driven business design development here.

Browsing

Browsing is most often about learning, simultaneous process of exploring your own intentions and interests, and actively considering what kind of solution would be perfect for the customer. Customer has mental goals while doing this. He’s interested in certain facts, has drivers guiding him further while exploring. Not all factors are created equal. These things define customer’s mindset & motivation. (We must not forget, that people are emotional by nature and we need to understand what people are feeling while they are browsing and learning and help them feel good about the brand we are promoting). While doing this, customers use information sources that are both interactive & instructional. On-line services, product reviews, friends, catalogues, retail stores, contact centres, agents & brokers. Some of these touch points can be led by the brand, some can’t. Some of the touch points have more meaning than others. The important thing is to understand what the customer is trying to do, which touch points the customers use and how did the touch point fulfil customer’s expectations.

Customers who have no prior experience about buying products and services in certain service or product category are more likely to browse more thoroughly and consciously. Also, people who are more price sensitive tend to do more work in browsing and all other stages in general. There are two underlying reasons for the Journey driven emphasis and strong browsing

  1. Customers are curious and actually want to know what options are most interesting and
  2. Customers are worried about making bad decision and try to learn more in order to avoid mistakes.

In many cases both reasons are meaningful.

Some businesses are naturally interesting for customers, like travelling and cars. In these businesses learning about products, services and prices can be considered as entertainment. Coffee table discussions and other people’s experiences are also an important part of the decision making process. In this kind of categories visits to the stores and actually seeing the products are also considered entertaining and fun. If people are busy and don’t just go out and see products for fun they are more likely to actually go and see what they are considering in configuring or even in purchase stage after making the mental decision to buy. The trend though is that companies have less and less face time with customers enabling persuasion. Cross channel marketing is more about steering customer forward and selling by supporting their choices than actual selling. Pulling instead of pushing.

In business-to-business customer journeys browsing is about looking for potential service providers for further negotiations. Managers and entrepreneurs looking for service providers ask other people’s opinions, look online for potential companies and potentially even use a professional consultant to find best possible potential service providers.

When defining sub channels for Browsing stage our experience is that it’s better to use broad descriptions of the touch points and ask about customers experience and what kind of information had most meaning for them. In browsing it is impossible not to talk about search engines in the current digital environment. Customers often have pre-decided brands and options they are mostly looking at. However, they also look for other people’s experiences and use search engines while looking for information. Even if the brand or product would not be known and on customer’s shortlist, search engine advertising enable capturing some of the customers. The more entertaining and positive context the buying is about, the more likely people are to click and learn about options they didn’t know existed. Travel is a great example of such business. In travel people are happy to give their email and contacts to travel agencies, cruising companies and airliners just to get more entertaining ideas and travelling inspiration from them. In less entertaining businesses too, it’s possible to capture customer’s contacts and call back later. When I built a house and was looking for materials, contractors etc, it was obvious that the browsing was often done in the middle of the night and an opportunity to leave contacts and get a call next day was considered as good service.

In less interesting businesses people often skip browsing or do it in-store at a shelf. FMCG businesses represent such business in which people don’t search information or find out about options outside store. Browsing is likely to be done at the shelf comparing contents and prices. If customer does this once, he’s not likely to stop and think next time. Once decided, customers easily create habit and non-considered re-purchases. This doesn’t mean that you couldn’t do anything though. Some companies have created wildly popular recipe clubs and services that offer inspiration in a format of recipes instead of individual products. One of the best examples is Valio’s Cream Club which cost 18€ as annual subscription price. This program is nothing but marketing and branded content. Still, people consider these recipes so inspiring that they are prepared to pay for a membership which makes this marketing program practically free for Valio even without product sales. If your product is not interesting as such, people could still be interested in the context your products are used in enabling branded engagement.

Configuring

Configuring can be exactly that, e.g. using a car configuration online in order to learn which kind of combination would be most suitable for me. The name of the stage comes from mass-customisation vocabulary (Jarmo Suominen, professor for Masscustomization (MIT/UIAH) had strong impact on the original theory development). In configuring stage customer has most often chosen the brands he wants to learn more about. Often it is about negotiating with potential suppliers about the price or contents and terms of the offer. The difference compared to browsing is that in browsing customer often is learning and more open to possibilities. In browsing, he’s also often anonymous visitor online or in store. At configuring customer is engaging actively and has more defined decision making criteria. He’s looking for the best deal. Configuring is also about letting some options go in order to concentrate on the best potential choices. It’s equally important to know how people define which brands they want to continue with and understand what kind of tools and information sources people use in order to rule out some brands. The car configuration tools are a great example of that.

Case: We studied 500 professionals who had chosen a leasing car as their car benefit provided by their employer spring 2010. The study proved that 18% of all buyers used car configuration tools to decline brands before going to test-drive or asking an offer for the car. It’s actually rather logical. When customers start building their dream car they easily come up with a solution that is too expensive for them. Also, the car configuration tools give a price before any discounts. As a result customers start dropping out options they had chosen in the first place and suddenly the whole experience is about giving up on things the customer would have liked. Eventually the brand loses the appeal it had originally. It is absolutely certain that every car brand’s research prove that customers require openness in pricing and giving as much information as possible online. However, optimisation of sales and driving people further in their journey is sometimes different from what customers demand. Direct marketing has proved this decades ago. Customer should not get a figure online that he could consider as an offer unless you are selling cars online and actually give a real offer for the customer. In majority of car selling the customer should only get an offer from car seller and enable the car seller to show the qualities of the car in person. Emotional and rational influences are often a mixture creating desire to own the car. This desire requires certain level of engagement, which improves the probability of closing a deal. Car configuration tools’s role is to enable dreaming and bring the customers to the store.

In business-to-business and major consumer purchase decisions the configuring stage is often about a meeting with the salesman or other representative in order to define request for an offer. Online e-commerce and opportunity to buy abroad is just another way of servicing the same need. The buyer wants to know and learn about the service providers or products capabilities, background, cases and discuss about the qualities of potential solution. Very often the first engagement with the service provider also allow buyer to evaluate what kind of feeling the service provider left in the first engagement. Word of advice from previous cases is, that it’s more important to ask than present at this stage. In people businesses customers want the company to concentrate on their needs and solve them. It is important to show interest in customers needs and show how much you care about their problem. Human behaviour is about trust. The seller’s first priority as a contact person and representative of his company is to understand the brief and create trusting and caring connection to the buyer.

Decision

Was there a specific event or incentive that led to decision? If yes, what was that? Whether or not there is an offer, the people still evaluate offer or stimulus against their perception of the brand, the company and the product. Customer has certain motivation, drivers and resources that guide him. From which retailers did the customer ask for an offer. What prompted the decision?

In some cases customer know that they should buy a new product in order to replace the old one but they just don’t recall doing so or lack motivation or ability to do it. In these cases we talk about ”pending purchase decisions”.  Offer in store or discount advertisement could act as a trigger. In smaller purchases just seeing the product is the trigger. In other cases there could have been long-lasting interest and consideration but no action. In cases like this the customers have been interested and wanted to buy for a long time but were not able to do so or lacked justification. Discount advertising is very effective trigger in these cases. People could wait for a long time for the products price to come to the acceptable level. The discount has two-fold triggering effect

  1. The price can be considerably lower than normal
  2. The offer is there for a limited time or there is only limited number of products at that specific store resulting feeling of hurry and justification. It’s now or never!  Limited number of products is a message that increases sales never mind how many products the store would actually have in storage.

In TV-shop commercials sales increased when customers were told: ”If you call, Prepare for holding online or use SMS for ordering”. Just saying some other people would also buy the product was justification enough for more people to act.

In technology businesses like wrist-top-computers measuring pulse and other training factors, mobile phones and entertainment gadgets the prices come down after some time due to rapid product circulation. If the products become ”most wanted” like iPod and iPhone did, declining pricing eventually reach tippin’ point driving products to move from most wanted to market dominating products. Following the own brand’s and competing brand’s customer journeys and preference, enable recognising and preparing for such events.

Another very important thing is to track competing brand’s actions in this space. Competing brands could send offers by mail; use out-bound telemarketing to help (read: push) customers make decisions right away. Proactive decision supporting and triggering could result a lot of lost business unless it’s detected and acted on.

In business-to-business cases and major consumer purchase decisions the decision stage has to do with comparing offers. It is smart to take the time and present the offer face to face. Face time often increase trust and represent dedication. At best the presenting of the offer means evaluating and considering it aloud. Customer has a change to ask questions and make certain that they understand what exactly the offer means. The first meeting with a salesman was about first impression and the next about how well does the contact person meet expectations and is he trust worthy? How well has the contact person taken customers wishes in account and what kind of pro-active propositions there are in order to better meet customer’s goals. It all comes down to trust eventually. Price is a subjective issue in most cases, not an absolute measure. Higher price just require more trust and better justification than lower price.

Purchase

Where did the customer purchase? Purchase channel and location give new information for analysis when looking back at the customer journey. Customers could have purchased from certain store brand, specialist store, online retailer, catalogue sales company, by phone, by calling to contact centre. It’s important to track which player was the active contacting party a) customer b) competitor.

Purchase channel send a message about customers decision-making dynamics too. In several cases the customers behaviour has been very online centric in every other stage but purchasing. Online channels are very effective in offering information about the products and services but often customer rather purchase from store, individual contact person or contact centre rather than online. Why is that?

Our learning has been that it’s most likely an expression of insecurity and pure need for human contact confirming the decision. People want to call, possibly bargain a little, but most importantly they want to feel secure that they are doing a good deal and they will not feel sorry for it after. In retail products customers could go to buy in retail store in order to confirm their decision by touching the product and experiencing it live or they want to get it with them right away. Visit in the store could be inevitable in many cases but there are risks.

When we were developing One Experience methodology we did some multi-client researches in order to develop the methodology. We found out that while Fujitsu-Siemens had 22% preference rate, they sold 35%. Their sale was roughly 50% higher than their brand preference would let expect. In the further analysis we found out that majority of sales people working in stores preferred Fujitsu-Siemens laptops and often owned one too. Of course the same apply in case of trade promotion offering sales people extra for selling more Fujitsu-Siemens. However, in this case there was no promotion but it was natural for sales people to recommend Fujitsu-Siemens.

The reality is that when people have been looking for a solution, product or service they would like to buy, they are actually still rather open for influence at the very last stage. When people get to know offering they often come to conclusion that certain product is both possible for them and they feel comfortable about choosing it. Once the customer comes to a store and the premium product is in discount, the customer is likely to change his mind in that instant and buy the premium product even if it was still slightly more expensive than the one the customer came to pick-up. The same phenomena apply when customer engage with store personnel. The professionals in store can raise insecurity in customer’s mind or recommend something other than the customer was going to buy. Often the customer’s goal for the discussion in store is meant to confirm customer’s own thinking. Still, often it results alternative outcome depending on the advisors training, experience, opinions and incentives. Brands have very different variation in the level of determination in their buying. Strong brands, which have a “love” relationship with buyers, are much harder to persuade to some other way.

In the same Laptop study we found another interesting phenomenon. There were dramatic differences between store brands in which customers went to see the products and where they actually purchased them. The conversion rate from visitor to buyer was at best 66% and at worst less than 30%. The two biggest retail brand conversions were a) 29% visiting and 9% of sales and b) 23% visiting and 6% of sales. These two brands dominated people’s visits but they didn’t dominate sales. Retail conversion rate optimisation would have dramatically increased these retailers market share and it shouldn’t be too hard when they already have people coming to them.  41% of customers told that the sales person influenced their decision and in 23% of cases they reported sales persons opinion had important role. 39% of customers only went to visit in one store. Still, many of those people purchased online.  Currently many customers consider stores as showrooms and look for the best deal online.

RECENT DEVELOPMENT AND TRENDS

The rise of online channels and social media’s role in customer journey has increased information available for customers. Social media has enabled and encouraged communities and discussion forums in which people share experiences of different products and services. This change has diminished the role for sales people in many businesses and created disruption in former Customer Journeys. In the world of 3i, that is high interest, high involvement and high investment product and services, people’s know-how about the products and services often exceed the level that sales people have in store. The customers are increasingly becoming specialist in what they are buying. They are also actively using this knowledge as social capital. People enjoy their position in their own community and sharing increase their role as a valuable member. Peer-group’s respect is often very effective motivator that activates discussion and participation.

The customers are also increasingly interested in companies’ practices and values. Several brands have suffered major image setbacks due to child labour in their production, environmentally indifferent attitude and any ethically questionable actions. People become more and more conscious about their consuming,  effects of their choices and the products and services are no longer enough. People also need to feel good about their choices.

The trend that is shaking the corporate mindset is transparency. Brand, products and services, pricing, quality and experiences are all available online. Customers trust each other more than the brands specialists even if they don’t know each other. Transparency means that companies need to be just as good as they say they are or better than they have promised. Search engines are the best enablers of transparency democracy.

Post-Purchase

Once a customers have made a purchase and started using the product or service they are often likely to talk about their experiences. Word-of-mouth is a major influencer in many businesses and sharing experiences spontaneously online has multiplied the word-of-mouth influence. Another important thing to consider is that web does not forget easily. When customers start looking for information about the product or service online, they use search engines. The highest scoring links are the ones that have been clicked most often, have external links directed to that specific content and so on. This means that the highest scoring content could be several years old. It is very important for brands to stay in touch with customer’s satisfaction and recommendations.

Analysing the outcome

As customer journey designer I was very interested in learning about the customers decision-making dynamics from beginning to the end. In order to optimize that you first need to understand what is happening. We came to conclusion that the best way to effectively show what happened was to break the conversion analysis in three: Won, Kept and Lost business. To make it more meaningful we broke further to three dimensions: before buying, what happened in the original groups and what was the outcome. Here is an illustration of one case. This measure is called Business Dynamics Score (BDS)

 Business Dynamics Score

Of those 42% who originally preferred the brand 95% were kept and only 5% lost. Of those 28% who originally preferred competitor 70% were converted and only 30% were lost to competitor. Of those who had no preference 88% were converted and won. Only 14% were lost. The outcome is that from this company’s target group they won 46% of sales from competitors, 40% of their sales came from those who originally preferred them and they lost 14% of their reference group’s sales to competitors. In this case the sample the data was collected from customer buying this service at certain frequency and in this case some of the customers had purchased competing brand after the most recent purchase from the brand that was studied. This finding helped further in recognizing how much business is leaking from the brand to the competitors and why.

This way of looking at the customer data also reveal where the brand is making it’s sales. Of people who originally prefer the brand, how many actually buy it in the end. Of customers who prefer competitors, how many the brand is capable of winning. From customers who have no preference but only rather equal options, how many of them actually buy the brand in question. While capturing data, this same comparison also work very efficiently in analysing how competitors win from the brand in question and what can be done about it.

In order to finalize the big picture, it’s also very educating to see which brand the customers consider was second best after the purchased brand if any. Being second best means that the brands success was good but something still turned the customers head and led to lost business. If your brand is very often the second best, it means that it is not too hard to make major improvement in sales.

Of the full Customer Journey – this article was about the third slot – Choose and buy, Check out the first two stages:

Customer Journey stage 1: Brand as a platform

Customer Journey stage 2: Initiation

Also see Business design with customer centricity

Managing customer interfaces – marketing do-or-die

and How to Map and Study Customer Journey

Customer Journey

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). 

WHY THIS ONE EXPERIENCE FAILED TO SCALE INTERNATIONALLY?
One Experience was a cross-channel behavior analytics tool and methodology we at Taivas Group started developing already back in 2004. Professor for Masscustomization Jarmo Suominen (MIT/UIAH) contributed to the theory and framework tremendously in the beginning and I led the project turning the ideology in to OneExperience online platform. This tool was extremely advanced back then but also represented a Utopia as practice. It turned out the tool was not viable back then due to siloed ecosystem which made it totally impossible to distribute and scale globally as a SaaS planning platform. Combination of qualitative and quantitative studying methods and total planning approach delivering insights about customer interfaces, brand status, distribution channels and product/service qualities it was impossible to integrate in WPP organisation and scale with Ogilvy Group, JWT, RMG, G2, GroupM, MillwardBrown… Why? We talked to everybody and they all loved it. Well, you would have needed to involve crm, online, advertising, promotion, creatives and media planning from separate organizations and align all their efforts for unified practice and goals. The same applied to client organizations. CMO’s at that point were more brand and advertising directors than true business drivers with full marketing spectrum and integration to operations.
That.. well.. was utopia in 2007 when we launched the tools.  We did good in Finland where we were a single team working for clients in Finnish culture with low organization hierarchy enabling collaboration directly with CMO, board of directors and business managers responsible for operations. We did great results but could not turn OneExperience in to international business as such.
The world has changed over the past five years.. This change is now reaching the tippin’ point. Perhaps we are closer to that Utopia now.. or are we? This change involves every one in the ecosystem and everyone inside corporate management. This is what we are now trying to do at ToinenPHD in Finnish scale. Is the world ready for scaling this kind of Total marketing approach and Customer Journey driven ideology in to practical daily work. Are CMO’s and the ecosystem ready for it now? Is it possible to make Utopia a reality?
SEE ALSO:

Author: Toni Keskinen, Marketing Architect & Customer Journey Designer

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

Join FutureCMO Movement LinkedIn Group here

Forecast for marketing planning and ecosystem evolution

The high frequency trading (HFT) stands for machine based stock exchange trading. HFT model leverages price differences in variety of stock exchanges, buy and sell in a fraction of a second. If there is 0,01% price difference in two stock exchanges,  you can make 100 profit with a 1M investment in a millisecond. HFT is based on algorithms and data and it’s increasing it’s share of trading steadily against traditional trading. HFT is very much like trained limbic system in human decision making: rapid, based on heuristics and rules from learned experiences and blind to events that have not been pre-coded in to the system. Traditional trading is based on rational thinking, analysis, luck, intuition.. well human intelligence and conscious decision making, even creativity. Traditional trading is much slower and more vulnerable to human emotional flaws but also allow long-term consideration. There is a lot of money involved in stock trading with instantly measureable success. It is also the most developed trading environment in the world.

Well, let’s look at marketing then. If you consider the fact that the CMO has liquid cash worth several percentages of corporate annual turnover, in case of P&G 9-11%, it is quite a considerable liquid asset too. Actually, in many cases it is the largest liquid asset the companies have and spend. The others are for long-term strategic Merger & Acquisition purposes, infrastructure investments and salaries.  Marketing is also the only investment that has difficulties in defining ROI, instant and long-term. Well, this will change quite soon and create tectonic changes in the foundations of marketing industry. The data explosion due to multi device Internet and inter-connectivity of mediums and customers combined with regulatory changes in privacy will result complete make over of the marketing industry.

Let’s consider Facebook for a moment. Facebook is a vehicle designed to enable personal communications and community. It is a yielding platform in which the user is the product for sale. The basic idea is that the advertisers will fund the business model and the consumers will allow data capturing in return for using the Facebook as their communications platform and vehicle representing their identity and social relationships.  Effectively Facebook knows more about us than we even realize. The question is, how does Facebook capitalize this knowledge? Facebook could become the world’s most effective advertising targeting and RTB business operator outside Facebook’s own touchpoints in case they decide to pursue this goal. We should expect black swans like that to appear and change the way the marketing ecosystem operates and challenging the balance of power. Big players will enter new areas and small players will emerge and grow big faster than ever (like Pinterest) and we will surely see new symbiotic business models created from combinations of existing players creating new value propositions and services.

If we consider the development of media buying and spending then, it is starting to look more and more like HFT due to the increasing level of Real Time Bidding (RTB) inventory and media business model. RTB is about getting the best price available for advertising inventory. The ecosystem is feeding advertisers willingness to pay for contacts and is trying to increase the willingness to bid higher. RTB is the new “share of voice”. The drivers of this business model have been Google Ads and Facebook but the model has been adopted by other media companies widely and will be adopted by majority of mediums over the next couple of years. The advertisers willingness to pay for each contact is based on data and the decision to bid is made based on the rules defined in the Demand Side Platforms (DSP’s) within milliseconds, exactly like in the case of HFT. As the business model is based on engagement or acquisition, also the rewards can be easily tracked which drives transparency and corporate management acceptable investment model in marketing.

The key here is the corporate management acceptable investment model. Marketing has been a rogue spending area in corporations without direct accountability for financial results. This will change. Every single business investment area has been made liable for profitability and accountability apart from advertising. It is not going to be acceptable anymore. Because it is becoming possible, it will be demanded. Period. Just like in case of the HFT also the liquid resources will become almost infinite and marketing budget will become flexible when the accountability is made possible. There is no limit in spending if every single cent invested result 10 cents in return. Well, in future markets such disproportional returns will be balanced but the main rule will still be valid. Groupon is a thriving example of corporate willingness to pay disproportional costs for easiness and accountability. The change is inevitable but will happen gradually. The wheel of change is already turning and it will spin wilder and wilder before we reach the new normal.

Investment sector has been in great turbulence and HFT has changed trading volume based market shares rapidly. In Helsinki Stock Exchange March 2010 the top three traders were SEB, Nordea, Handelsbanken and FIM. They were all local or Fennoscandic players. In January 2012 the top three were Morgan Stanley, Nordea and Credit Suisse. Along with those three there were newcomers like Citadel, Getco and Spire. The newcomers are all specialized in robot managed HFT. Credit Suisse and Morgan Stanley represent the same phenomena by selling others the rights to use their HFT technology. Local players are losing ground.

The change is happening at increasingly rapid speed and will eventually escalate. At that point within apr. 5 years media agencies don’t call to mediums and ask quotes for their mediums, media buyers and sellers in current meaning will vanish. Media planning is no longer about choosing media and negotiating price for it. Media agency will be impossible to distinguish from stock exchange trading company by sight. The tools, technology, algorithms and productivity goals will be very similar. The competition will be about measureable ROI of marketing portfolio management. Like in the stock trading it will be driven by analysts who are specializing in short term instant ROI and long-term profit expectations. 

What about creative agencies then?

IBM did a major study in 2010 and interviewed over 1500 CEO’s around the world. Mr. Samuel J. Palmisano, Chairman, President and CEO of IBM Corporation captured the findings in three major issues in his pre-words of the study report:

  1. The World’s private and public sector leaders believe that a rapid escalation of “complexity” is the biggest challenge confronting them. They expect it to continue – indeed, to accelerate – in the coming years
  2. They are equally clear that their enterprises today are not equipped to cope effectively with this complexity in the global environment
  3. Finally, they identify “creativity” as the single most important leadership competency for enterprises seeking a path through this complexity.

Well, creativity is a human trait and a profession. Creative agencies will have major role in the change and they are trusted partners for CMO. Creative agencies will remain true to their creativity but the demand for creativity will be far more diverse than just advertising message creativity now. Customer experience design, advertising, product- and service design all serve the same common goals; creation of competitive advantage, brand and relationship value. CMO’s responsibility is going to be about exactly that, creation of competitive advantage. CMO should be already responsible for insights on customer behavior change and delivering them to other members of the board influencing strategy and operations. CMO’s key role is to practice strategic sensitivity of the market and customers. The best CMO’s will earn a new role closer to COO’s current role as they start carrying more accountable and strategic responsibility. The CMO position will also become number one route to CEO position. Sir Terry Leahy, former CMO and later CEO of Tesco Plc has already shown the way. Tesco is also one of the premier examples world wide in customer data driven strategic and operational management, behavioral economics research and service design. Tesco’s growth and profitability also prove the point rather well. Creativity in the Tesco way will become mainstream now that we are reaching tippin’ point.

There is another reason why Tesco is such a great example of future marketing planning. Tesco is one of the first companies using customer behavior data to personalization and individual customization of offering and messaging in massive scale. Today we recognize this as marketing automatization and customer experience management. Each individual customer has offering scoring attached to their data and this scoring model define what and how should be offered in order to turn push marketing and sales in to inspirational service experience. People are looking for advice, inspiration and great deals. Giving all three in one package with great customer experience in any given customer interface create trust and relationship.

Customers are becoming another portfolio for CMO to manage; who, what, when and how are the questions that need an answer. The answer is another case of trading mechanism. The company has an inventory of products and services. This inventory is the other subject to yield management and the customer base is another portfolio. The perfect combination of both enhances loyalty and lifetime value with optimal profitability.

Well, let’s go back to Facebook and consider that the product they have, are their customers, the users. The product and service portfolio they are managing is not actually their own but their clients, the advertisers. The two way yield management means optimizing the profits from the customer base they have. Facebook must consider overall profitability of their users against the price different product & service vendors are prepared to pay for them. Yield management will differentiate products and services in to categories:

  1. Easy to activate mass categories which deliver small but high volume transactions
  2. More difficult to activate categories which deliver less but bigger transactions

Well, that’s not the end of it. There are known brands with stronger demand creating also high volume and less known brands that are more difficult to yield but deliver higher revenue/transaction. In this game brands, creativity and quality of creative work are subject to instant and continuous pricing. If the creative work is highly appealing and works very well, it will result transactions at lower costs and higher margins for advertisers. If the creative work is not working the price you need to pay for each transaction will cost much more. When we reach this point, you don’t need to question what is the value of your brand. You will know the difference… Painfully well. The same apply to advertising in any other mediums, which will still be impossible to directly measure. The measures will be based on direct increase in sales compared to the base line without marketing and it’s effect in real time bidding costs. Currently the same ideology works well in businesses requiring outbound selling. In case advertising works outbound sales conversion will increase and cost per transaction will be less expensive. Same mechanism will work much faster in the real time bidding environment.

The media companies’ capability to invoice consumers’ subscription fees will erode steadily and the requirement for advertising profitability will grow. The media trading could well learn from retail category management and yielding optimization of shelf space. The media inventory is made of certain media placements, which will develop but still exist in the near future. Every single placement will be subject to yielding methodology. Facebook, Google and most media companies will not really care where the money is coming from as long as their yield management drives strong profits. Statistical analytics, scoring models, algorithms, richer and richer data combinations and continuous optimization will be the name of the game. They have the data and they can re-create their business models. There are only so many people on this planet and in any given country. The media which have the best data and the best tools to create multi client lead nurturing methodologies delivering strongest rate of acquisition will win. Just like in case of HFT, the balance will shift and the global players will take larger share of the business. The smaller but local and trusted media companies are now in a do or die situation and by the end of this decade we will know how if and how they survived.

The role of mediums as the data owners will also change. The services they deliver could vary from x amount for introduction, y amount for acquisition to z amount or percentage for the profitability e.g. during the first three years. The data holders will become capable of working as headhunters for advertisers. They will just hunt customers, not employees. The stakeholders in this game can be anything from media companies to large loyalty programs, telecoms, Apple like manufacturers (e.g. Siri) and global social mediums and data capturing platforms like Facebook and Google. The most rapidly growing market sector is currently services that come between the producers of products and services and the customers. Travelzoo.com and Groupon are good examples of such. All players mentioned above have direct customer relationship to consumers and consumers are using their services to make their choices and living easier and better. In a very complex world these players offer advice, the solution to customer’s needs. They can inspire and serve and they can gain a trusted partner status with consumers. The key word is trust. Trust is also the key word in yield management.  The increasing transparency will become another management imperative. Bad companies stand for, bad customer experiences and effectively bad advice for consumers. It means lost trust and less effective yielding for mediums. If the company cannot deliver what they promised, they will face increasing costs again.

The world has become extremely interconnected and transparent. The market price for a customer engagement or customer acquisition will be determined by trading environment. The market value of data will deliver steady revenue and the big players will become bigger than ever but we will also witness unexpected newcomers. The competition will be about the game of trust and relationships in the consumer markets and extremely efficient trading tools and data based intelligence delivering accountability in the B2B markets and planning. The value of existing customers will become imperative and corporations will implement marketing automatization technologies in order to enable individual care models and increase in customer lifetime value. The tools will become smarter but creativity will flourish as human trait, profession and specialty.

Author: Toni Keskinen, Marketing Architect & Customer Journey Designer

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

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