The Value of Analytics in Customer Value by Maria Petrescu * [17]

Source: digitalerra.com

Did you ever wonder what is the value that consumers are getting from your company’s products and services? Your customers are surely analyzing, consciously or not, the value they are receiving when interacting with a business. Organizations who do not try to find answers to these questions are not going to be able to differentiate themselves and offer superior value to customers. But if you are already working on constantly monitoring the value received and perceived by consumers then marketing analytics are a great source of help. 

Customer value analytics assumes the use of data science, technology, statistics and business processes to analyze customer response and perceptions and to understand the buying and consumption context. From this information, managers are able to draw conclusions about the customer experience and formulate strategies for improvement. 

For example, businesses can use marketing analytics to evaluate and monitor customer acquisition, customer needs, and customer profitability, to gain customer insights, and to build relationships. Analytics also help manage and improve customer lifetime value, as well as personalize the value offering for consumers in order to increase loyalty. Marketing analytics can be used in different stages of the customer value management process.

• Customer acquisition - prospective customer behavior, customer needs, lead management
• Customer profitability - sales, registrations, sales discounts use 
• Customer loyalty - loyalty offer use, loyalty card data, online account use 
• Customer engagement - complaint behavior, online interaction, word-of-mouth
  

In the customer acquisition phase, there are various software and analytics platforms that are being employed for lead management (such as Salesforce), to analyze prospective customer behavior offline and online (including Google Analytics), and to assess customer needs through market research. 

In the next stage, after the customer acquisition, analytics can be used to evaluate existing traditional data, including scanner data and the sales database, as well as more modern marketing promotions and analytics insights coming from the interaction with consumers online and through sales promotions. This can also contribute to an increase in customer loyalty and to further consumer insights from loyalty management analytics and digital behavior, including email management, web traffic, and pull marketing (e.g. various platforms such as Hubspot, Hootsuite, ConstantContact).  

Nevertheless, an important part often ignored by marketers in the evaluation and monitoring of customer value is related to customer engagement and especially the feedback offered by buyers on the digital platform. Because of the difficulty and the skills required in the analysis of qualitative data such as consumer complaints, reviews, recommendations, and shares, methods such as sentiment analysis, social network analysis, and quantitative analysis of qualitative data are often overlooked. In this case, simple software options such as Tableau, MAXQDA, MonkeyLearn, and Adobe Analytics can help. No matter which analytical tool is employed, the insights about consumers’ perception of value are essential. 

* Maria Petrescu, Ph.D., is an Associate Professor of Marketing at ICN Business School Artem, Nancy, France and Colorado State University, Global Campus. Her main research areas include marketing analytics and digital marketing. Dr. Petrescu has published articles in journals such as Psychology & Marketing, the Journal of Marketing Management, Public Management Review, Journal of Product and Brand Management, the Journal of Retailing and Consumer Services, and the Journal of Internet Commerce.  She may be reached at Maria.petrescu@csuglobal.edu     

Further Reading

Iacobucci, D., Petrescu, M., Krishen, A., and Bendixen, M. (2019). The state of marketing analytics in research and practice. Journal of Marketing Analytics, 7: 152. https://doi.org/10.1057/s41270-019-00059-2 

Petrescu, M. & Krishen, A.S. (2018). Novel retail technologies and marketing analytics. Journal of Marketing Analytics, 6: 69. https://doi.org/10.1057/s41270-018-0040-z

 

Experiential Retailing - Can It Help Offline Stores? by John Gironda * [16]

                         Image source: Tim Nichols (2014) – “Experiential Marketing on The High Street” (ExactDrive™).

 

The growth of online shopping has led many traditional brick-and-mortar retailers to create and emphasize unique in-store shopping activities and experiences as a way to compete with online retailers. This is known as experiential retailing, and the idea behind this trend is that the one thing online retailers can’t offer is the in-store experience. Therefore, if offline stores can develop truly interesting, entertaining, and/or one-of-a-kind shopping activities/experiences, that would be one way to effectively compete.

There are a number of examples of companies engaging in experiential retailing. For instance, Bass Pro Shops Outdoor World superstores feature a number of attractions that make each store a unique destination, such as indoor waterfalls, gigantic aquariums, archery ranges, and ponds with fish native to the store’s area. In addition, the stores hold a number of demonstrations and workshops that teach customers a variety of skills related to outdoor activities, including camping, hiking, fishing, and water safety. Another outdoor recreation company, REI offers climbing walls at some of its stores, for patrons to try out and practice their rock climbing skills. In addition, Dick’s Sporting Goods offers a golf simulator for shoppers to try out any of their golf clubs on a number of virtual holes before purchasing them. On the simulator, the customer hits an actual golf ball and then a large projection screen shows the flight of the ball through the air, as well as where it lands. In addition to displaying this, the simulator also provides a number of useful metrics, such as ball distance, speed, launch angle, and spin, to further help customers decide if the club they’re using is the right one for them. 

Sporting goods and outdoor oriented stores aren’t the only ones engaging in experiential retailing. Many other brick-and-mortar retailers are starting to use technology to create a personalized shopping experience for customers. For example, many companies such as Target offer mobile apps that allow shoppers to see if an item is available at a particular store, and if so tell them the exact location of that item within that store. In addition, other retailers including Timberland, are beginning to employ the use of augmented reality systems in their offline stores, to allow customers to virtually try on clothing and accessories, as well as instantly mix and match various combinations of shirts, pants, shoes, etc. www.youtube.com/watch?v=5TZmQPdhpak.  Neiman Marcus has also developed the “Memory Mirror” shopping assistant, which allows shoppers trying on various items to view them on a large video screen from any angle, as well as instantly change an items color, or see the way different outfits look in side-by-side comparisons: www.youtube.com/watch?v=B97k394jetk. 

Since many of these retailers’ items can be purchased online, companies are hoping that by offering these extra experiences, it will encourage consumers to go and shop at their physical stores. Obviously online shopping is here to stay and will most likely continue to keep growing well into the future. However, experiential retailing does show promise in helping offline retailers to still have a relevant place in consumers’ shopping habits.

What do you think of experiential retailing? Do you think it’s a viable technique for allowing offline stores to better compete with online shopping? Are there any other examples of experiential retailing that you’ve recently seen in action? Please share your thoughts in the comments section below.

John Gironda, Ph.D., is an Associate Professor of Marketing at Nova Southeastern University. His teaching and research interests include digital and social media marketing, consumer behavior, marketing strategy, advertising, personal selling, and sales management. He can be reached at: jgironda@nova.edu

Customer Ownership - Understanding the True Value of a Relationship by Ricky Fergurson * [15]

In the rapidly changing landscape of B2B sales, factors such as technology, competitive intensity, and rising sales support costs oblige greater attention to customer relationships. Many companies that have an enterprise focus struggle with the concept of “owning the customer” (Weeks 2016). Given that customers are buying in different ways, firms are driven to engage customers differently. According to Cooper (2016), “customer ownership is all about creating, delivering and communicating compelling value”. In nurturing and developing customers through the B2B life cycle, multiple departments and functional units in the firm are entwined in customer relationship management (CRM). The complexity of CRM and dynamism in customers’ relationship expectations require that sales, marketing, service, and support work together through the customer buying and fulfillment process. The diffusion of tasks and responsibilities exposes a fundamental CRM gap: who truly owns the customer? A recent American Marketing Association Marketing News article referred to customer ownership as “the age-old battle between marketing and sales” (Qaqish 2018). The idea of who ‘owns’ the customer relationship may become ambiguous.  So, what does it mean to own a customer relationship?

Customer ownership is defined as building a level of rapport, commitment, and trust with a customer that increases dependency. The question becomes “does this dependency by the customer reside with the salesperson who they deal with regularly or with the company they purchase from?” Anecdotally consider this situation, the salesperson who you normally deal with leaves to go to another company with similar and substitutable products. Do you continue buying the same product from a different salesperson or do you buy a different product from the same salesperson you have always dealt with? 

In B2B channels, most firms entrust front-line responsibilities to salespeople. Thus, the majority of customer interface occurs between salespeople and the customer which enhances the salesperson-customer bond. A convergence of personal and social forces emanates from the salesperson as well as the firm, so who owns the customer relationship, the firm or the salesperson? Gaining clarity on who owns the customer relationship is critical to maximizing customer satisfaction and the firms’ ability to develop and execute a growth strategy with the customer.

References

Cooper, D. (2016, November 22). Customer 'ownership? is about delivering 3 kinds of Value. - The Donald Cooper Corporation. Retrieved from https://www.donaldcooper.com/customer-ownership-delivering-3-kinds-value/
Qaqish, D. (2018, April 17). Who Owns the Customer Journey? AMA Marketing News. Medium. Retrieved from https://medium.com/ama-marketing-news/who-owns-the-customer-journey-53a2f271de25
Weeks, T. (2016, October 11). The Question of Customer Ownership. Retrieved from https://www.linkedin.com/pulse/question-customer-ownership-tom-weeks/

* Ricky Fergurson, Ph.D., is an Assistant Professor of Marketing at Indiana State University. He can be contacted at ricky.fergurson@indstate.edu

Customer Retention - 5 Guidelines [14]

[I behave as if every IBM customer were on the verge of leaving and that I’d do anything to keep them from bolting.  Buck Rodgers]

Given the opportunity, dissatisfied customers will tell 5 to 20 other people about the source of their service or product-related frustrations. However, if you make a prompt effort to resolve the issue, 85% of those customers are likely to remain customers (service recovery must be a key strategy).

Why, then, do most companies spend a majority of their time, energy and resources chasing new business? While it’s important to find new customers to replace lost business, to grow the enterprise and to expand into new markets, a smart company’s main objective should be to keep customers and enhance customer relationships. With the passage of time, it is getting easier, because newer and better CRM systems help you track, sort, and analyze meaningful customer data to make better marketing decisions.

What is your current retention rate? What is the cost of a lost customer to your business? What percentage of your marketing budget is spent on customer retention activities? Do you develop retention programs for key target markets? Is customer win-back a priority?  These are some of the major questions that must be addressed if you want to maximize customer retention and minimize the amount of money you have to spend on customer acquisition. Here's my 5-point customer retention plan.

1. Measure Customer Retention   It is surprising that many companies do not know the annual percentage of customers that leave (defection rate) or stay (retention rate). There are many ways to measure customer retention, including annual and targeted retention rates, weighted rates (accounts for usage differences); segmented indicators (sub-group analysis); share-of-customer; customer lifetime value (CLV); and recency, frequency, and monetary value (RFM analysis). Choosing appropriate measures provides a starting point for assessing a firm’s success in keeping customers. 

2. Keep Customers from Disappearing    You have to analyze the defection problem. Step two is a three-pronged attack. First, identify disloyal customers. Second, understand why they left. There are 6 types of defectors - customers seek: lower prices, higher quality products, better service, alternative technologies, market changes, or "political/social" considerations. An analysis of switching motives is insightful. Third, develop strategies to overcome non-loyal purchase behavior.

3. Establish New Customer Retention Objectives    Customer retention objectives should be based on organizational capabilities (strengths, weaknesses, resources, etc.); customer and competitive analyses; and benchmarking the industry/sector, comparable firms, and high-performing units in your company. Say that your company retains 75%  of its customers. A realistic stretch goal may be to increase client retention by 3%, bringing your company to 78% next year, and to aim to keep 85% of your clients over 4 years.

4. Invest in Targeted Customer Retention Initiatives   The cost (potential lifetime value) of a single lost customer can be substantial. This is magnified when we realize the overall cost of lost business. Consider the impact of a 25% defection rate for a health care center caring for 15,000 patients annually. A revenue loss of about $9.4 million [assuming $2,500 average patient revenue and a 5 percent profit margin] results in a dive of nearly $500,000 on the bottom line. A $100,000 investment in patient retention training and follow-up initiatives can dramatically improve profitability. Targeted retention means that organizations segment customers by relevant dimensions, such as geodemographics, psychographics/behavioral factors, and usage patterns.

5. Evaluate the Success of the Customer Retention Program   Lexus and Subaru have the highest loyalty rates in the automotive industry by consistently providing superior ownership experiences. The final phase in building a strong customer retention plan is to ensure that it is working. Careful scrutiny is required to assess the program’s impact on keeping existing customers and, where possible, upgrading current customer relationships. Gather information to determine if your customer retention rate improved. You may need to revisit benchmarks and probe isolated causes of defection. Strategies and tactics over a short to medium-term span should be closely monitored in order to assess which methods worked best and those with little or no impact on keeping customers.

This blog post is the 9th in a series extracted from Superior Customer Value – Finding and Keeping Customers in the Now Economy, 4^th Ed. (2019, Routledge Publishing/ Taylor & Francis). For further information contact Art Weinstein at artweinstein9@gmail.com, 954-309-0901, www.artweinstein.com 

Drive Your Business with Marketing Dashboards [13]

[You can drive your business or be driven out of business.  B.C. Forbes]

                               Reprinted with permission of InetSoft Technology, Piscataway, NJ, www.inetsoft.com

The late Ed Koch, a former New York City mayor, always asked, “How am I doing?” Marketers — as well as government leaders — need to know if their “customers” are happy.

Perhaps you head the marketing operations for your company and want to get a better handle on customer metrics. You heard about the idea of a marketing dashboard at a recent trade association meeting and think that may solve your problem. How should you proceed? What should be on your dashboard? 

Progressing beyond a single item to monitor the effectiveness of business performance, leading organizations often use a set of key metrics called marketing dashboards to understand their key performance indicators.

Just as an automobile dashboard captures critical driving information such as speed, distance, fuel levels, vehicle and engine temperature, navigation and so on, a marketing dashboard summarizes pertinent information on branding, channels, customer contact, promotion, sales performance, service profitability, the web, and customer value. 

Consider the Benefits

Some specific benefits of using dashboards include the following: business intelligence, trend tracking, measuring efficiencies or inefficiencies, real-time updates, visuals (charts, graphs, maps and tables), customized reporting of performance and aligning goals and strategies with results. Major downside considerations include the cost, time and the talent needed to administer marketing dashboards.

The main value of the dashboard framework is that it consists of a multitude of practical information that is current, accessible and easy-to-understand. Dashboards can be designed for top C-level executives as well as the managers working in the trenches.

The above graphic illustrates an example of an executive marketing dashboard. It features the following metrics: revenues and returns, monthly sales trends, 5-year order history, geographic sales (by cities and states), and employee sales performance. 

Decide What to Measure

What should you measure? The spectrum of opinion varies widely from a single metric such as the Net Promoter Score to 50 or more performance indicators. Just as we don’t want to be overwhelmed with our automotive dashboard, keeping the marketing dashboard simple helps measure what matters and aligns with business objectives. That said, here’s a good starting point to consider in choosing 5 to 10 key performance indicators that may include the following measures:

• Financial: revenues, contribution margins, turnover ratios, profitability
• Competitive: market share, share of advertising/promotional budget 
• Consumer behavior: market penetration, customer engagement, customer loyalty
• Consumer intermediate: brand recognition, customer satisfaction, purchase intention
• Channel: distribution level, intermediary profits, service quality
• Innovativeness: new products launched, the percentage of annual revenue from new products
• Customer value: process metrics, customer retention, customer lifetime value (CLV), RFM (Recency, Frequency, Monetary value) 

Realize that doing business today requires a new level of accountability for performance. Superior customer value means knowing customers’ behaviors and buying patterns.

Metrics are an important part of the strategic marketing process to understand: (1) How successful the organization is now; (2) What it needs to accomplish to become even more successful in the years ahead.

Smart marketing managers will embrace this challenge and use metrics as a planning tool to improve business strategies. How about you?

This blog post is the 8th in a series extracted from Superior Customer Value – Finding and Keeping Customers in the Now Economy, 4^th Ed. (2019, Routledge Publishing/ Taylor & Francis). For further information contact Art Weinstein at artweinstein9@gmail.com, 954-309-0901, www.artweinstein.com 

                                                                                                                                                                                                       

Pricing Revisited - Balancing Gains and Losses by Bill Johnson * [12]

People generally fear losses more than they covet gains; losses are weighted more heavily than an equivalent amount of gains, e.g., the absolute joy felt in finding $50 is a lot less than the absolute pain caused by losing $50, a phenomenon known as “loss-aversion”.  Kahneman and Tversky stumbled upon loss aversion after giving their students a simple survey, which asked whether or not they would accept a variety of different bets. The psychologists noticed that, when people were offered a gamble on the toss of a coin in which they might lose $20, they demanded an average payoff of at least $40 if they won. The pain of a loss was approximately twice as potent as the pleasure generated by a gain. As Kahneman and Tversky aptly put it, “In human decision making, losses loom larger than gains.”

If you ever kept a gym membership long after it has become clear that you are not now and will never be a gym rat, then you have felt the effects (i.e. “dead-loss” effect) of loss aversion. Think about how insurance is sold, not on what consumers will gain, but what they stand to lose—insurance (and warranties) is by definition designed to mitigate “loss”.

Consider the following example of how loss aversion works.  A grocery retailer has tried to decrease people’s use of plastic grocery bags. One approach was to offer a five-cent bonus to customers who brought reusable bags. That approach had essentially no effect. Later the retailer tried another approach, which was to impose a five-cent tax on those who ask for a grocery bag. Though five cents is not a lot of money, many people do not want to pay it. The new approach has had a major effect in reducing use of grocery bags.

Here is another example of where loss aversion comes into play.  Suppose two companies sell calling plans. Company A advertises their plan for $25.00 per month, with a $12 rebate for continuing the contract for at least one year.   Company B advertises their plan for $24 per month, with a $12 surcharge for dropping out of the program before a year is up. Which is the better deal after one year’s worth of calls?  Of course, the economic costs of these two plans are identical, except that the plan offered by Company B is framed differently, i.e. as a potential loss, and would more strongly appeal to loss-averse customers.

Loss aversion has many practical applications in marketing, in particular when it comes to pricing, i.e. when using price increases, reference prices, limited time offers and price bundling.

Price increases – Whenever a customer sees a price increase, they interpret this as a personal loss.  Hence, businesses often see extremely emotional reactions resulting in lost business (e.g. Netfix lost 800,000 subscribers in the 3rd quarter of 2011 after an announced price hike).  One strategy, if possible, is to change the packaging of the product, e.g., Kellogg’s reduced the size of its Frosted Flakes and Rice Krispies cereal boxes from 19 to 18 ounces. Frito-Lay reduced Doritos bags from 12 to 10 ounces. Dial Soap bars shrank from 4.5 to 4 ounces, and Procter and Gamble reduced the size of Bounty paper towel rolls from 60 to 52 sheets.

Reference prices – A reference price is what your customers expect to pay.  If they are forced to pay more than this they consider it a loss.  Less is a gain.  Existing customers often use the last price paid as their reference price (and smart phones now offer instant reference pricing data).  However, for new customers, firms have the ability to influence their reference price.  We often see retailers show MSRP and then a marked down price--this to influence the reference price.  Alternatively, some companies choose to compare their product to one that is much more expensive in hope of increasing the prospect’s reference price (a tactic frequently used by off-price retailers like Ross or T.J. Maxx).

Limited time offers – If Macy’s is willing to sell a jacket at 50% during a sale that ends Sunday, why wouldn’t they sell it at 50% off on Monday?  The answer is loss aversion.  If potential buyers are on the fence about buying the jacket, they are more likely to go purchase it while it’s on sale.  Once Monday comes they have lost the opportunity.  If Macy’s doesn’t stop the sale on Monday they don’t have the extra incentive to go buy on Sunday (Walgreens features “Senior Tuesday” sales).  Loss aversion is one factor that drives the success of “sales”.

Bundling – charging a single net price for the overall exchange hides gains and losses on the component transactions and allows consumers flexibility in mentally apportioning the net price across the components in a manner they construe favorably.

People and customers in particularly don’t like to lose. This is why good marketing and sales is often all about convincing prospects that what they are about to buy is worth more than what they must pay for it.  Something is seen as a good value when any perceived pain of loss will be more than offset by the joy of gain. 

So, what about you, are you more likely to avoid losses or pursue gains?

* William (Bill) Johnson, Ph.D., is a Professor of  Marketing (Retired) at Nova Southeastern University. He can be reached at billyboy@nova.edu 

Co-creation of Value - Collaborating with Customers [11]

[Co-creation is the purposeful action of partnering with strategic customers, partners or employees to ideate, problem solve, improve performance, or create a new product, service or business. Christine Crandell]

Customer focus no longer means just researching current and future needs to design expected or desire goods or service. A rising trend in business today is co-creating value with customers. Value is created when product and buyer come together within a particular use situation. Examples include retailers getting the customer involved in the shopping experience to save time (Home Depot’s self-checkout) or costs (IKEA’s assembly and delivery by customers), smart phone personalization through app selection, Dell’s online built-to-order computers, and management consultants collaborating with clients to add value in research projects. As the table below explains, co-creation of value has a dual emphasis on the customer and company as value creators. 

Value Creation and Marketing Opportunities

Marketing Strategy	Market Emphasis	Value-Creation Focus	Corporate Examples
Market driven	Established market	Customer	Coca-Cola, Procter & Gamble, Toyota
Market driving	Emerging or imagined markets	Company	Google, IKEA, Virgin Group
Co-creation of value	Established, emerging or imagined markets	Customer and company (simultaneous)	Amazon, Apple, LinkedIn

Co-creation of value can lower costs and improve the overall service experience. A great example of the new co-creation of value model is illustrated in the case of Crushpad, a Napa-Valley based winery. Crushpad’s value proposition is “Make Your Own Wine” and has transformed their business through technology. Consumers can participate on a limited to a full scale basis depending on their interest in the wine-making process. Some activities that customers engage in include creating a wine-making plan; monitoring the grapes; picking, crushing and fermenting the grapes; and even packaging the bottles. Support services include party planning, advice on wine creation and business guidance on how customers can sell their own wine. Websites, blogs and community events help spread the word about this unique type of co-creation of value.

Here are 6 questions to address as your company ponders the idea of co-creation of value:
1. Do you strive to continually exceed customer expectations?

2. Does your view of value creation go beyond the firm (to include the customer)?

3. Do you actively seek to create an extended community of users?

4. Is personalizing the customer experience a major part of your marketing strategy?

5. Is your marketing team truly obsessed with researching and improving customer experiences?

6. Do you nurture and forge enduring business relationships with customers and collaborators?

This blog post is the 7th in a series extracted from Superior Customer Value – Finding and Keeping Customers in the Now Economy, 4^th Ed. (2019, Routledge Publishing/ Taylor & Francis). For further information contact Art Weinstein at artweinstein9@gmail.com, 954-309-0901, www.artweinstein.com