measuring customer loyalty

3 Attributes to Extend Your CMO Longevity

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As 2013 winds down and we prepare to enter 2014, there are bound to be a few changes in the CMO line up.  You say, that’s not news, CMO tenure is always a bit tenuous. But actually, that is less true today than ever. In SpencerStuart’s 8th Annual CMO Tenure Study, it was reported that CMO tenure is now nearly 4 years, compared to just 2 years back in 2006.  While CMO tenure varies across industries, there are several attributes long- tenured CMOs share. First and foremost, these CMOs can demonstrate positive impact on the company and have impact beyond the “marketing agenda.” They also tend think more like business-people who are able to provide strategic direction and use data and analytics to make fact-based decisions.  

In addition to being an exceptional, technically proficient marketer, there are three attributes we see among successful long-term CMOs. 

1.   Customer-centric. These tenured CMOs connect regularly with customers. They do more than conduct voice of customer research, review customer data, or meet with a customer advisory board. They are actively and regularly engaged in customer conversations. Do you describe your customers for example as engineers with X years of experience in Y industries, Y accreditations, who attends B events, reads Y publications, and uses Z social media? If this example seems familiar you may be missing the mark. These long-tenured CMOs have a deeper understanding of their customers’ needs, wants, emotional state and motivations, what it takes to engage them, and the kind of experience that needs to be delivered. These CMOs serve as the window into the customer for their companies. They are relentless in their pursuit to know and understand the customer.   

2.  Outcome-oriented. It is clear to the leadership team that these CMOs have marketing well aligned to the business with metrics and performance targets focused on producing business outcomes rather than marketing outputs. These CMOs understand that outputs such as visitors, fans, followers, etc. create more contacts, connections and engagements that are important. They also understand that their job is to translate these outputs into something relevant and meaningful to the leadership team, such as how marketing’s contribution is reducing the sales cycle/accelerating customer acquisition, reducing the cost of acquisition or retention, and improving product adoption and win rates. These CMOs have an excellent handle on what touch points and channels are most effective and efficient depending on the needle that needs to be moved. 

3.  Alliance-savvy. There’s been a great deal of coverage on how important it is for the CMO to have solid relationships with their Sales, IT, and Finance colleagues, and our research shows that Best-in-Class CMOs do more than that. These CMOs have forged formal explicit partnerships with these counterparts. They invest in these alliances because they believe that the partnership will enable the organization to be more customer-centric and more competitive. As a result, these companies are able to enter new markets and bring new products and services to market faster. What is different about the alliances formed by these CMOs? They work with their colleagues to plan, form, design, and manage a formal working agreement that focuses on developing the right working relationship, taking into the account that each function most likely operates differently. They create and execute an agreement that emphasizes how the organization’s committed resources will achieve a common set of objectives, how to leverage the differences to the company’s advantage, and how these differences are designed to facilitate collaborative rather than competitive behaviors among all the members of each team. Performance metrics are established to support the alliance with a focus on both the outcome of the alliance as well as the process.   

Whether it be the stream of green lights you hit on the way to work or the person that holds the door for you as you juggle groceries, at the end of the day, we are most appreciative of the people and things that make our lives easier. Although technological innovation and automation have given us the ability to soothe many of our woes, we cannot forget that the human element is at the center of all things marketing. In light of this, we must ask ourselves, “Would I be satisfied as a customer or colleague in this process, and if not, how could I change it?” By exemplifying these traits of a successful CMO, the outlook of your operations will shift from being self-serving to philanthropic in nature.  

 

 

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Measuring Relevancy: A Three Step Approach for Linking Content and Behavior

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Various studies over the years have examined the relationship between content relevancy and behavior. Almost everyone would agree that content must be relevant. But what is relevance? According to Wikipedia: “Relevance describes how pertinent, connected, or applicable something is to a given matter.” A thing is relevant if it serves as a means to a given purpose.Image

In the context of this discussion, the purpose of content is to positively influence customer or employee behavior, such as increasing purchase frequency, purchase velocity (time to purchase), likelihood to recommend, productivity, etc.

When we ask marketers and others how they measure content relevancy, we often hear, “We base it on response rate.” If the response rate meets the target, then we assume the content is relevant; if response doesn’t meet the target, we assume it’s not relevant.

Clearly there is a relationship between relevance and response. Intuitively we believe that the more relevant the content, the higher the response will be. But measuring response rate is not the best measure of relevancy. Many factors can affect response rate, such as time of year, personalization, and incentives. Also, in today’s multi-channel environment, we want to account for responses or interactions beyond what we might typically measure, such as click-throughs or downloads.

So, what is the best way to measure relevancy?

The best-practice approaches for measuring relevancy are many, and many of them are complex and require modeling. For example, information diagrams are an excellent tool. But marketers, who are usually spread thin, need a simpler approach.

The following three steps provide a way to tie interaction (behavior) with content. It’s critical
that you have a good inventory of all your content and a way to define and count interactions, because once you do, you’ll be able to create a measure of relevancy.

The process and equation include the following:

1. Count every single piece of content you created this week (new Web content, emails,
articles, tweets, etc.). We’ll call this C.

2. Count the collective number of interactions (opens, click-throughs, downloads, likes,
mentions, etc.) for all of your content this week from the intended target (you’ll need to
have clear definitions for interactions and a way to only include intended targets in your
count). We’ll call this I.

3. Divide total interactions by total content created to determine Relevancy: R = I/C
To illustrate the concept, let’s say you are interested in increasing conversations with a particular set of buyers. As a result, this week you undertook the following content activities:

• Posted a new whitepaper on a key issue in your industry to your website and your
Facebook page
• Tweeted three times about the new whitepapers
• Distributed an email with a link to the new whitepaper to the appropriate audience
• Published a summary of the whitepaper to three LinkedIn Groups
• Held a webinar on the same key issue in your industry
• Posted a recording of the webinar on your website, SlideShare, and Facebook page
• Held a tweet chat during the webinar
• Tweeted the webinar recording three times
• Posted a blog on the topic to your blog

We’ll count those as 17 content activities.

For that very same content, during the same week, you had the following interactions:

• 15 downloads of the whitepaper from your site
• 15 retweets of the whitepaper
• 15 Likes from your LinkedIn Groups and blog page
• 25 people who attended the webinar and participated in the tweet chat
• 15 retweets of the webinar
• 15 views of the recording on SlideShare

That’s a total of 100 interactions. It’s likely that some of these interactions are from the same people engaging multiple times, and you may eventually want to account for that likelihood in your equation. But, for starters, we can now create a content relevancy measure:

R= 100/17 = 5.88.

Using the same information, had we measured only the response rate, we might have counted only the downloads and attendees—40 responses—so we might have had the following calculation:

R = 40/17 = 2.353

As you can see, the difference is significant.

By collecting the interaction data over time, we will be able to understand the relationship between the relevancy and the intended behavior, which in this example is increased “conversations.”

I strongly encourage you to consider relevancy as a key measure for your content marketing. By tracking relevancy, you will be able to not only set benchmarks and performance targets for your content but also model content relevancy for intended behavior.

Cracking the Code on Marketing and Sales Alignment

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The dynamics of the 21st Century are forcing businesses of all sizes and types to be able to react quickly and decisively to rapidly changing business and competitive conditions and Imagechanging customer demands. The more agile a company, the faster it can respond to market dynamics and develop new products and processes, recognize new opportunities, and redeploy resources accordingly. The degree of agility may be the difference between being a market leader instead of an also-ran. Agility requires proactive planning, business intelligence, alignment and collaboration among all the key functions to make the right decisions and turn opportunities into a competitive advantage. One of the key alignment issues facing many companies is the alignment between Marketing and Sales.

Marketing and Sales Alignment Remains Elusive

The issue of marketing and sales alignment isn’t new. Most marketing and sales people have been in organizations where marketing has been known to accuse sales of not following up on leads and refusing to track leads through the sales cycle and sales has been known to accuse marketing of not providing viable qualified leads. This misalignment is often attributed to a variety of factors, such as different goals, different timelines, and different psychologies. Market dynamics such as commoditization, the Internet, mobility and virtualization and changing business models only compound the problem. Companies attempting to resolve the issue often approach the problem by trying to tighten the alignment of marketing activities within the sales cycle, improving coordination around lead generation, and increasing sales force participation in the marketing process. Sadly these attempts often fail. Regardless of various approaches taken by companies to address this issue, the lack of alignment and collaboration between marketing and sales persists. Both organizations need to change for the organization to succeed.

 From Transactional to Customer Centricity

To achieve greater alignment, both organizations need to decide together which market segments offer the best opportunities and deserve the highest priority. Today’s buyers are more sophisticated and today’s buying processes are more complex. The transactional approach of marketing generating qualified leads that sales then brings to a close is an outdated view. The transactional approach is what permits marketing and sales to operate as independent silos. This results in Sales immersing itself in the latest training, engaging in calling on customers and focusing on post-sale efforts and Marketing focusing on implementing various campaigns and 2 coordinating a variety of tactics.

A Customer-Centric Approach Offers Hope

Customer Centricity requires a company to look at the world through the eyes of the customer, what they want from you, what they expect from you, what they can count on from you. One way to become more customer-centric is to move from looking at the world from a selling perspective to taking a customer relationship lifecycle perspective. Taking a customer relationship lifecycle approach provides an avenue for alignment by focusing both organizations on the same set of outcomes – creating, keeping and growing the value of customers. The customer relationship lifecycle begins the moment a customer appears on the radar screen, moves into the lead-sales funnel, emerges as a customer and engages in a variety of experiences that result in them becoming an advocate. The customer relationship lifecycle provides insight into which customers provide the greatest values to your company. As result, the company can create a set of common metrics for both organizations which will help ensure alignment. Customer relationship management metrics include buying related metrics such as recency frequency and quantity; cost related metrics such as gross amount of money spent on acquiring and retaining the customer through marketing dollars, resources spent generating each sale, and post sales service and support; and customer value related metrics such as the duration or longevity of that customer’s relationship with your business, the referral rate, and share of wallet. Establishing a common set of customer-centric metrics facilitates alignment and collaboration and provides both organization with customer-oriented vocabulary and set of priorities.

Does Alignment Matter?
While no one can offer any guarantees, aligning Marketing and Sales makes good business sense and ultimately impacts the bottom line. A study conducted by Aberdeen on sales effectiveness with more than 200 executives from the executive, sales, marketing and IT management functions study found that companies that had strong collaboration between these two functions achieve a higher sales effectiveness. For many companies, this additional boom in sales more than justifies making the effort.

How Vulnerable Are You to Customer Defection?

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In this article, you’ll learn…

  • Five factors for maintaining successful customer relationships
  • How to identify your most vulnerable customersImage
  • How to calculate your company’s vulnerability index

In the early ’90s, the term “customer relationship management” (CRM) joined the marketing lexicon. Though the idea is often thought to refer to the implementation of some kind of technology, the real idea behind CRM is that the management of customer relationships is a business imperative.

CRM is about deciding which customers or segments to target, and then developing customer acquisition, retention, and growth plans that will attract and keep your best customers. CRM is really about making your customers the heart of your business.Our job as marketers is to acquire, grow, and retain profitable customer relationships to create a sustainable competitive advantage.

How do you measure customer relationships?

We’ve all come to accept that creating customer loyalty is an integral part of any organization’s strategy and focus. Various factors influence the success of any customer relationship initiative.

Here are five critical success factors:

1. Clearly defined business outcomes related to customer acquisition, retention, and growth

2. Agreement about who the customer is and what they want and need from your category (and you)

3. Well-defined customer segments (and their desired behaviors) and customer-experience objectives

4. A documented, integrated customer strategy

5. Explicit measures of success, and the data and processes needed to support the metrics

Customer satisfaction and loyalty are two of the most common measures of success. A variety of models are used to measure and quantify customer loyalty, ranging from simple recency and 2 referral models to RFM and customer lifetime value models. Recent research is examining those models to ascertain which, if any, truly measure customer loyalty.

Many organizations would agree that a loyal customer…

  • Stays with the brand despite competitive offers, changes in price, negative word-of-mouth, and product failures
  • Increases business/engagement in some way
  • Actively promotes the brand to others

Though there are many approaches to measuring customer loyalty, one metric that many
organizations should consider is the Vulnerability Index.Add the vulnerability index to your marketing KPI’s. A vulnerability index serves as a way to measure loyalty in the face of competitive pull. Its purpose is to help you identify your most loyal customers—those who are going to stick with you through thick and thin.

To calculate your vulnerability index, you will need excellent market intelligence about your
competitors’ campaign’s channel, offers, and markets. Once you have this information, follow these seven steps to construct your vulnerability index:

1. Map the competitive activity. Include the competitor’s name, offer, duration of offer, and the offer’s focus area and market.

2. Generate a list of loyal customers in the market where the campaign ran.

3. Map their repurchase and engagement cycle based on frequency and last purchase date.

4. Isolate all the customers whose repurchase or renewal dates fall within the competitor’s campaign period. This is your observation set (OS) and the set of customers who will experience the greatest competitive pull and are, therefore, the most vulnerable.

5. Define your observation period, which is generally the campaign launch date and one purchase cycle after the last date of the competitor’s campaign.

6. Monitor the purchases by vulnerable customers. Track all the customers whose purchases drop during the observation period. These customers constitute your vulnerable set (VS).

7. Calculate the vulnerability index. Divide your VS by your OS and multiply that number by 100:

Vulnerability Index = (VS/OS) x 100.

The index will give you a good idea of the proportion of customers who are succumbing to
competitive pressure and some idea about the level of loyalty in those customers. If the index is high, you know that there is something to worry about. If the index is low, you can assume, with some degree of certainty, that your customers are exhibiting robust loyalty to the brand.

Because Marketing is charged with finding, keeping, and growing the value of customers,
customer retention falls within the domain of marketing. Therefore, marketing organizations
should have at least one objective aimed at retaining customers. In addition to monitoring customer loyalty and advocacy and customer churn, Marketing should also keep tabs on customer vulnerability. If your vulnerability index begins to climb and exceed that of your competitors, you can anticipate that your defection rate is going to increase. By monitoring your vulnerability index, you will know who your most loyal customers are, and you will be able to develop and implement strategies to withstand competitive pressure.

Big Data Promises Marketers Big Insights

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By: Laura Patterson, President

The amount of data being generated is expanding at rapid logarithmic rates. Every day, customers and consumers are creating quintillions of bytes of data due to the growing number of customer contact channels. Some sources suggest that 90% of the world’s customer data has been created and stored since 2010. The vast majority of this data is unstructured data.

vem big data 2It is not surprising, then, that study after study shows that the majority of marketers struggle with mining and analyzing this data in order to derive valuable insights and actionable intelligence. A recent report by EMC found that only 38% of business intelligence analysts and data scientists strongly agree that their company uses data to learn more about customers. As marketers we need to learn how to leverage and optimize this flood of data and incorporate it into customer models we can use to predict what customers want.

Big Data

Many marketing questions require being able to perform robust analytics on this data. For example, understanding what mix of channels are driving sales for a particular product or in a particular customer set or what sequence of channels is most effective. These types of questions often require large sets of data, or what is being referred to as Big Data.

Big Data isn’t new; it’s just gone mainstream. A recent study found that almost half (49%) of US data aggregation leaders defined Big Data as an aggregate of all external and internal web-based data, others defined it as the mass amounts of internal information stored and managed by an enterprise (16%) or web-based data and content businesses used for their own operations (7%).

 But 21% of respondents were unsure how to best define Big Data. IDC defines big data as: ‘a new generation of technologies and architectures, designed to economically extract value from very large volumes of a wide variety of data, by enabling high-velocity capture, discovery, and/or analysis.’

Holistic Approach

Big Data incorporates multiple data sets—customer data, competitive data, online data, offline data, and so forth—enabling a more holistic approach to business intelligence. Big data can include transactional data, warehoused data, metadata, and other data residing in extremely massive files. Mobile devices and social media solutions such as Facebook, Foursquare, and Twitter are the newest data sources. Most companies use Big Data to monitor their own brand and that of their competitors. The use of “Big Data” has become increasingly important, especially for data-conscious marketers. Big Data is a valuable tool for marketing when it comes to strategy, product, and pricing decisions.

Big Data offers big insights and it also poses big challenges. A recent study by Connotate found the top challenge with Big Data was the time and manpower required to collect and analyze it. In addition, 44% found the sheer amount of data too overwhelming for businesses to properly leverage. As a result, many companies aren’t maximizing their use of Big Data.

The effort however associated with managing Big Data is more than worth it. The promise of Big Data is more precise information and insights, improved fidelity of information and the ability to respond more accurately and quickly to dynamic situations.

How to Handle Big Data

So while Big Data might seem a bit daunting, these steps will help you navigate using Big Data:

  1. Clarify the question. Before you start undertaking any data collection, have a clear understanding of the question(s) you are trying to answer. Using Big Data starts with knowing what you want to analyze. By knowing what you want to focus on, you will be better able to better determine what data you need. Some common questions asked are ’which customers are the most loyal’ and/or ‘which customers are most likely to buy X‘? Big Data is about looking beyond transactional information, such as a click-through data or website activity.
  2. Clarify how you want to use the data. Will you be using the data for your dashboard, to define a customer target set for a specific offer or to make program element decisions (creative, channel, frequency, etc.)?
  3. Think beyond the initial question. Invariably the answer to one question leads to more questions. If you’re not sure, hold a brainstorming session to explore all the ways the data could be used and potential questions the answers might prompt. Structure your data in a dynamic way to allow for quick manipulation or sharing. Aggregate data structures and data cubes aid with this step. Construct your data cubes so that
    they contain elements and dimensions relevant to your questions.
  4. Identify data sources that need to be linked. Once you identify the question and how you want to use that data you will have insight into what data you need. To run analysis 3 against data you will need to consolidate and link it. More than likely you will need to collect the data from disparate data sources in order to create a clear, concise, and actionable format. It may be necessary to invest in some new tools so you can pull and analyze data from disparate locations, centers, and channels. These tools include massively parallel processing databases, data mining grids, distributed file systems, distributed databases, and scalable storage systems.
  5. Organize your data. Create a data inventory so you have a good understanding of all your data points.
  6. Create a mock version of your data output. This is a key step to helping you determine the data sets. It will also help you with thinking about how you will convert the results into a business story.

Smart marketers use the data to tell a story that will illuminate trends and issues, forecast potential outcomes, and identify opportunities for improvement or course adjustments. They use the data to gain big insights into customer wants and needs, market and competitive trends. Tackle Big Data and tap into big insights that enable you to take advantage of market opportunities, deliver an exceptional customer experience, and give your customers the right products when, where, and at the price they want.

Measuring the Pay-Off for Customer Loyalty

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Let me take a minute to inundate you some commonly accepted facts about the impact of customer loyalty or the lack of it on an organization. Do you know that

  • 98% of the dissatisfied customers never complain, they just leave and 75% of the reasons these customer’s leave has nothing to with the product? Sixty seven percent of customers switch from one company to another because they didn’t feel appreciated?
  • 85% of dissatisfied customers tell nine people about their poor experience and 13% tell 20 people; while a satisfied customer tells just five people?
  • 80% of typical American company’s customers are lost over a five-year period?
  • Operating income will improve 20% for every 1% improvement in customer rate sustained over five years?
  • The top 5 businesses in any industry have 93% – 95% customer retention, although most businesses average 78-82%?
  • Customers who come to you from a referral will have a 92% retention rate versus a 67% retention rate for customers obtained from advertising?
  • A 5% reduction in customer defections can lead to an 85% boost in profits. Companies that lead their markets in customer loyalty generate operating margins of 13%, while laggards had margins of just 2%?

All of these facts are about the business value of creating customer loyalty, that is the bottom line impact of customer loyalty – reduce cost to serve, lower cost to acquire, increase in rate of customer acquisition, increase in the value of existing customers. Many of the organizations we work with deploy some type of customer measures, such as customer satisfaction, customer advocacy, and/or use the net promoter score or something similar. These are good metrics but what they don’t do is tell us what business outcome they expect their investment in customer loyalty to impact.

For example, is the focus of customer loyalty to increase repurchase? Is it to drive referrals for similarly minded prospects (grow market share)? Is it to help expand your footprint within the customer base (expand share of wallet)? Facilitate faster adoption of new products (reduce time to revenue)?

Clarity around the needle you expect customer loyalty to move is essential. Movement of the business needle or outcome will affect whether the investment is paying off. Therefore, investing and implementing any customer loyalty initiative should be made in the context of what business needle or outcome you want to impact. (Yes, it is possible that you may want a customer loyalty initiative to drive more than one outcome.)

Ensure your customer loyalty efforts pay-off with these five steps:

1. Specify the business outcome. Before you implement a customer loyalty strategy and develop a customer loyalty program, understand the business outcome it is intended to impact. Possible outcomes might include some number of net new customers, reduce customer churn by some amount or of a specific customer segment or tier, some amount of repurchase for existing products, some additional business from other lines of business or regions within existing customers, some amount of purchase of new products. This step lays the foundation for how you will measure the success of any customer loyalty efforts.

2. Take stock. Can you implement a loyalty strategy? A successful loyalty effort requires that you are at a minimum doing two things well: providing quality products and services that meet your customers’ expectations and being ultra-responsive to your customers in terms of problem resolution, meeting service requests, and so on. Some homework may be in order so you have a baseline for the state of customer loyalty today. Dig into customer comment cards and emails, service tickets, and leverage surveys and Voice of Customer (VoC). Create a culture that encourages customers to let their voice be heard. Actively solicit information from your customers to identify problems and opportunities and consider implementing an ongoing VoC initiative.

3. Select a strategy. Define the strategy and program within the context of the business outcome. Repurchase of existing products vs. acquisition of net new customers are two different outcomes and as such will mostly likely entail different strategies and programs.

4. Measure. Research suggests that changes in customer loyalty generally precede changes in business outcomes typically by a quarter. Create metrics to measure and improve loyalty and the desired business outcome. Track the results over time so you will be able to employ statistical techniques to discover what aspects of your loyalty efforts are having the greatest impact. Technology can also help you centralize the information, create reports, and structure drill- downs.

5. Optimize. Use the results of your research and measurement efforts to make course adjustments that will move the needle not just improve loyalty. You may need to make strategy and program adjustments in order to realize your specific business outcome. You may also need to invest in systems, processes and tools to improve service quality, address gaps, and enhance your loyalty efforts.

Researchers have clearly documented the impact of customer loyalty on a variety of business outcomes, such as higher and faster conversion of referrals, faster time to revenue for new products, etc. The job of marketing is to measure customer loyalty and to communicate the value of this loyalty in terms that matter to your organization.