Gerardo A Dada, Author at The Adaptive Marketer

February 20, 2011

How can CMOs Build an Effective Social Media Strategy

This post was first published in the American Marketing Association blog.

Bazaarvoice and the CMO club recently published a report about how CMOs think about social media and how they are finding ROI (or not). You will find a number of stats and details in the report itself. I want to share my own perspective on what I think are the implications made evident by the research.

Social is Important. Every marketer knows it. Customers have shifted the way they buy. Social is here to stay, there is no question about it. Every CMO knows they need to have a social marketing plan. This should not be a surprise to anyone, the report simply confirms it.

Measuring results is harder than expected. The report shows social media is harder to measure than what CMOs expected. By looking at last year’s report, it is clear most of them thought by now their social marketing efforts would have matured enough to have a good measurement framework. Today, most marketers are measuring engagement, not actual business impact. Many are still chasing shiny objects. Consider how many companies are trying to grow their Facebook fan pages without a clear reason why they are doing it or a strategy to convert fans into business value.

Social Marketing is too tactical. Without an indication of results, CMOs can’t make investment decisions on social media. As a result, most companies are still in experimentation mode. Only two years ago, social marketing meant blogs and wikis. Last year it has been about Facebook and Twitter. Now GroupOn (which is not even social, IMHO) and Foursquare join the category of shiny objects. Small and large businesses are jumping on the GroupOn mania, getting 25 cents on the dollar, often without thinking through a strategy.

Sadly, without a framework for results, CMOs have a hard time deciding how much to invest in social. According to research by Altimeter, the average large company is investing only $830K per year in social marketing. This budget can cover salaries for a team of three people, maybe a community platform to run support forums and a listening platform. The amount of resources, budget and results in social marketing is insignificant relative to overall marketing efforts. The danger is that a CMO hires a social strategist, two people to “man their Facebook and Twitter pages”, start a blog and ‘check’ – they have a social strategy, they can move on to more important stuff.

CMOs know they need to shift their investments from traditional advertising to social and digital efforts, but they can’t do it blindly. Even if a CMO wanted to shift $20 million dollars to social, they would have a very hard time finding where to spend it.

Reading the results from the research can be heartbreaking. The obvious question is: How to build an effective social strategy? There is no easy answer, however, I want to offer four ideas to help you build social into your marketing strategy:

Social is not a Strategy. Eventually, the word social will go away. Humans are inherently social, most human activity is social. We don’t talk about digital computers or electronic calculators, it is assumed. Companies are in business to make money. According to management guru Peter Drucker, the only valid business purpose is to create a customer. That is a paying customer. Social is not a goal, it is a means to an end. Should you experiment with social? Sure. What I am suggesting is to always think about how each social marketing activity will support your business goals.
Social as a marketing tool. Social tools can help marketing, innovation, customer support and other functions. But this is a blog for marketers. Yesterday I was having lunch with a friend who asked me if he should hire a social media strategist. To his surprise, I said ‘No’. I suggested he should hire a marketer that understands how social media can support the organization’s marketing goals. A marketer that understands how social marketing efforts can work together with ‘traditional’ marketing efforts to create more customers. To make money.
Smart social metrics. In any business functions leading indicators are important. For years, online marketers have measured page views as a leading indicator for customer engagement that then can be converted into paying customers. In the same way that email newsletter subscribers are an engagement metric that companies can leverage to do permission marketing to drive sales, the number of Facebook fans are also an interesting metric that enables permission marketing to drive sales. But you have to think through the experience: from leading indicator to business impact. Build a model that uses social media tools, to drive engagement and activity that then impacts business goals. Take a look at the model in this slideshare from two years ago, and at a more evolved model in Jeremiah Owyang’s Social Media ROI Pyramid
Social drives Advocacy. Social Marketing can be used by marketers in many ways: to build confidence in customers, to learn from customers and monitor your brand to make your organization more customer centric, etc. If you are looking for a quick win, I suggest consider using social media to drive advocacy: tap into Facebook , customer reviews and other forms of social media to empower your customers to sell for you. Word of Mouth is nothing new, it has been around forever. Social Media online makes it easy for happy to customers to drive advocacy and makes it scalable – and often measurable – for marketers.

Good luck with your social marketing efforts. Have fun. Be authentic. Experiment. And learn.

February 16, 2011

Social Listening, Customer Service and Social Blackmail

Social Listening has empowered organizations to listen to customers and respond in real time, primarily on Twitter. Here is an example where Southwest Airlines (from back in 2008) responded to a customer who had a bad experience. The mere act of listening to customers and showing some empathy can turn a very unhappy customer around.

A few weeks ago an industry expert shared his experience with a bank. He was having some trouble, called customer service and after becoming frustrated with the nonsense policies for the bank, suggested to tell his thousands of followers on Twitter about the experience with the bank. This story, and further discussion via twitter, led to a couple of thoughts:

Maybe, the people who demand better service via extortion, threatening to tell their followers about the bad experience, are using a form of blackmail. I know it is the new world of social. Just think about this before you do it.

In most cases, this influence is overstated. As I stated in a previous post, popularity is not influence. Further, If a user with 5,000 followers tweets a bad experience with a brand, only a fraction of those 5,000 people will read the tweet. Even if 50 people read the tweet it is bad, I am only stating that not all 5,000 will be exposed to the tweet.

In any case, it would be unfair if people with more followers received better customer service. If this is the inevitable future, we should all create dummy Twitter accounts and use unorthodox (but common) methods to get a large number of followers so that we can get decent service.

Brands should realize twitter is simply a form of customer service. The teams monitoring twitter (or Facebook) for customer service issues and responding to those issues are not that different to the teams with a headset responding to the same type of problems for the same customers via phone or email.

Brands should therefore have consistent customer service policies that apply equally to situations independently of what channels you choose to connect with the company or how popular you are. Imagine if I called an 800 number to complain and told them I have 2,000 people in my Rolodex threatening to call all of them if they don’t help me.

Brands should be smart enough so that it does not take a social media crisis (á la United Breaks Guitars or a Comcast Technician Sleeping on My Couch) to fix basic customer service policies and pay attention to what their customers want. Delivering great products and great service is the way to become a great company. Solving customer issues won’t get you there.

Brands should encourage customers to address their concerns, problems and feedback via a private support channels such as email, online chat or phone. Using your Facebook wall as your customer service center does not help anyone but your competition. Other channels are much more efficient at providing customer service, for example, with clear connection to your customer transaction record, no 140 character limit. Just today Fortune published an excellent piece titled “Can I help you? On Twitter, the answer is no” that compares actual experiences on twitter vs. phone vs web for top retailers.

If you think about it, your team that is helping customers via twitter should not be part of the social media team in marketing, maybe this function lives in customer service, in the cal center, where customers can get a consistent experience across interaction points.

If you are a social media marketer, I am not suggesting you move to the customer service department. Instead I am suggesting you consider your career path. As Jeremiah points out, Social Media Strategists are at a critical point where they can either become the ‘social media help desk’ or customer engagement marketers.

February 13, 2011

Adaptive Marketing

Welcome to The Adaptive Marketer.

As I reflect on my career I have been thinking about how the marketing profession has changed over the last few years: the internet, mobile devices, social media and now tablets are just examples of drastic changes in the world we live that are changing the marketing profession.

In a way, the challenges marketers face today with social media (“I guess I need a Facebook page but I don’t know what to do with it”) are very similar with the challenges marketers had 10 years ago with the internet (“I guess I need a web page but I don’t know what to do with it”). The way people interact, research information and buy products has changed.

Consumers are evolving faster than corporations. The gap is a threat for existing businesses and an opportunity for entrepreneurs.

A great case study is Blockbuster. The company recently went into bankruptcy and was de-listed from NASDAQ. What I find really interesting is that the rise and fall off Blockbuster happened over a span of only a few years. The chart below shows the stock price for the last 10 years. It is reasonable to assume the business failed because of an inability to adapt to the new world, a new world that created an opportunity that was captured by Redbox and Netflix.

It is easier to be a historian than to be a prophet, of course. I imagine there were conversations in the Blockbuster conference rooms talking about market dynamics and threats – but it is hard to change the status quo. It is really hard to fundamentally change a business when it is generating billions in revenue

Today marketers at large face a similar dilemma. The marketing tools that worked 50 years ago don’t work anymore. Marketing no longer can be only about creating messages and buying media to broadcast those messages. Today’s marketer must think about how to empower and amplify customers to be advocates. CMOs know they need to balance their investments by shifting dollars and focus to digital and social, but the path is unclear. Marketers know mobile is another disruptive change – few know what to do with it.

As Christopher Stutzman from Forrester puts it, “To Avoid Extinction, Marketers Must Replace The Bad Habits Of Traditional Marketing With The Habits Of Adaptive Marketing”. In short, marketers must become adaptive.

I considered choosing a name for the blog that was centered on Social Media, but then I realized that social media is only one of the discontinuities that is impacting marketers. I already had a blog on Mobility. I have blogged about the web too. If I call my blog something about social media, I would have to change the blog in a few years. Or months.

Peter Drucker published The Age of Discontinuity back in 1968 (before I was born!). he wrote “Businessmen will have to learn to build and manage an innovative organization. They will have to learn to build and manage a human group that is capable of anticipating the new, capable of converting its vision into technology, products and process, and willing and able to accept the new.”

December 30, 2010

Redskins Score with Fourquare – Or did they?

Today’s edition of SmartBrief on Social Media points to a Social Media Examiner blog post with the title “Redskins Score with Foursquare“. The article summary geos on to ascertain “The Washington Redskins have scored a big win with a Foursquare campaign….“

I think this story exemplifies what is wrong with social media marketers today. No discredit to the Redskins (they are a good team), SmartBrief (I read it every day) or the Social Media Examiner, which usually has really good posts. Not a criticism of the marketers who had good intentions and are experimenting with new social tools. My problem is with qualifying this as a “big win”.

The success of the campaign is measured in over 20,000 check-ins at the stadium. Great – 20,000 is a good number, right? Let’s see: We just finished week 16 of the regular NFL season, which means the Redskins had about 1,250 check-ins per game. According to the NFL, the Redskins FedEx stadium holds 86,484 fans. Which means 1.45% of fans could have checked at the stadium.

Where is the big win? knowing that 1.45% of the fans that purchased a ticked made it to the stadium does not seem like a big win to me. There is value in giving your fans a badge, for sure. There could be value in knowing that 30,000 fans checked in at participating restaurants (I assume all 86,484 fans are hungry and eventually eat somewhere during the 16 week period, in other words there is no indication of causality).

Growing the number of followers on Twitter and Foursquare (or Facebook fans) can be a good thing, if used properly. The value of a follower or a fan is zero until you do something with them. As I have said before, a fan or a follower is not really different from an email subscriber: a customer giving you permission to connect with them. The value comes from communicating with the customer with a relevant message that helps them or helps you.

In order to be a big win, the campaign would need to have helped with specific business objectives, such as increasing ticket or merchandise sales, accelerating season pass renewal, increasing viewership of games on TV or driving patrons to restaurants. Until then, this was a cool campaign with good engagement.

Congrats to the Redskin marketing team for embracing social media and my respects for experimenting with new tools like foursquare. I look forward to hearing about real wins.

November 2, 2010

eCommerce is dead

eCommerce is dead, long live eCommerce.

It’s not that eCommerce is going away any time soon, in fact Comscore reported today eCommerce sales in the US went up 9% YoY, but that number still represents about 6% of total retail sales. If you are a retailer, it could be a grave mistake to allocate 6% of your attention and resources to online commerce.

In the last few months the distinction between online commerce and the rest of commerce has been blurring. Today it does not exist anymore. This is why, at last week’s Forrester Consumer Forum, Brian Walker suggested it is time to drop the “e” from eCommerce.

Consider the following facts:

In the US online influenced retail sales are projected to top $1 trillion in 2010.
51% of all retail sales will be made online or influenced online by 2013.
While eCommerce represents 8-9% of retails sales, over 50% of all retail sales are influenced online.
Multi-channel is dead. Customers expect a consistent experience across all-channels : online, in the store, mobile, etc.

There is no separation between online commerce and offline commerce. Clicks and Mortar is gone. Customers today increasingly research online and buy offline. Online in a fundamental part of every purchase experience. There is no eCommerce anymore, online is a core part of commerce in general.

“The future of eCommerce is not as a standalone channel, but as one of the many channels working together “
– Brian Walker, What Every Exec needs to know about the future of eCommerce Technology

We don’t talk about electronic calculators or digital phones anymore. There is only commerce and it spans online, retail and mobile. In the same way, social will be dead soon. Soon there won’t be social commerce, social collaboration or social CRM. Soon the world will acknowledge everything is social and social will be dead too.

October 7, 2010

Building an Effective Influencer Strategy

Influencer strategy seems to be one of the pillars of social media marketing. There are many questions about how to identify, reward and empower influencers. So let’s say you have identified the top 1000 influencers in tour space. And then what? It reminds me of the U2 song that goes “We thought we had the answers….it was the questions we had wrong”.

What is an influencer? Often an influencer is measured in terms of the number of friends of twitter followers. Fans and followers are a measure of reach or popularity, not influence, but it is related. An influencer is someone who can convince other people to buy from you. That’s all that matters. From all the options for social media marketing activities the only ones that matter are those who result in someone buying from you.

“influencer” is not a label for people in general. It’s not a species. There is no influencer gene that I know of. People have different levels of influence in different topics, it is contextual. For example, I am an influencer when it comes to photography, but a normal guy when it comes to sports and very much not an influencer in terms of cosmetics.

How do I know I am an influencer in the context of photography? Because many of my friends and colleagues have purchased digital cameras based on my recommendations. Many people I don’t even know have done the same – people I have never met, never exchanged emails with, people that don’t follow me. How? I have influenced them because they have read my opinions online and relied on my knowledge to make a buying decision. They trust me because I am a a normal consumer, like them, and I have lots of passion and experience about photography.

All consumers, myself included, avoid or ignore advertising. When exposed to advertising most people don’t believe what it says. Grab a photography magazine and look at the ads: all of them say their cameras are awesome. People don’t trust marketers. But they trust people like them. They will be influenced by other customers who have experience with the products they are considered. People who like talking about their experiences, share their knowledge and opinions are advocates.

The most common influencer strategy is to find the top influencers and reward them for their advocacy. Depending on the nature of your business, this could be a good strategy – or not. Often these customers, identified as influencers, are already predisposed to buy. Surely they deserve some recognition and special treatment, and you must empower them to be advocates. However, you cannot influence the influencers easily. They are experts; they know their stuff and probably know more about your products than most people in your company.

Here is an interesting idea: instead of finding influencers why don’t you create influencers. Or better said, you can turn a customer who is very satisfied into an advocate by empowering him or her to influence others.

Imagine you are in the banking business. Now imagine you have a customer that is really happy with your checking account, the service from your credit card and your credit services. This customer is willing to tell other people about how great your bank is.

Imagine how powerful it would be to put this customer in a center of a room full of customers who are interested in checking accounts. Imagine if he had the ability to share his experience with your bank, in his own words, to all these potential customers. That would be really powerful, right? This room full of prospects is your website, they are visiting the “checking accounts” page, or the “credit cards” page. They are interested in your services, why else would they be there?

That’s the power of empowering customers to share opinions and experiences (what we at Bazaarvoice call reviews and stories). They allow customers to become influencers, enabling “normal” people to become advocates for your brand, in a very authentic and very convincing way. By enabling this conversation on your site, on your product or service pages, you are creating an influencer strategy that results in more sales. It’s a proven system.

A great thing about a customer influencer strategy is that you don’t even have to find these influencers. You don’t have to identify them or know their name or pamper them with special treatment. However, you can still recognize them. You can give the more influential customers a badge that recognizes their contributions or their expertise.

And this recognition can be helpful for customers. It helps them find among dozens of other customer opinions and give content to these opinions. In fact, customers can vote on the helpfulness of other customers contribution and sort them based on their helpfulness. The helpfulness votes help identify the most influential customers, those that write reviews that help customers make decisions, which earn them badges in turn.

All these pieces work together to promote advocacy, identify and recognize influencers in a way that helps customers buy. This system of advocacy and influence is customer centric, customer-driven and helps customers. Except for the sales, which benefit you and your business.

10 ideas for developing an influencer strategy:

An influencer is someone who helps other people buy from you
Influence is contextual
Popularity is not influence
Passion, knowledge advocacy and popularity are factors of influence
Everyone can be an influencer about the topics they are passionate about
You don’t have to know your influencers (but it can help). Instread of finding them allow influencers to sel-identify
Influencers are “turned-on” by empowering them to be advocates
Most influencers are hard to influence. You can’t buy influence – stay authentic
Your most influential customers are already predisposed to buy from you
Influencers are often driven by status: recognition is more important than rewards
(bonus) If your products suck it will be really hard to find influencers. The opposite is true, of course.

August 23, 2010

Are CFL light bulbs practical and safe?

A few days ago I wrote an off-topic post complaining “green” builders are not using CFL lights. I got a number of responses, including one from a homebuilder association that defines the TX Green certification explaining CFLs have mercury in them which creates a number of concerns: environmental, breakage and disposal, in addition to additional cost. When I got these responses I felt like and idiot for writing about the issue if there is a good reason why CFLs are not used. But then, I spent some time doing research and arrived at a different conclusion. There are easy ways to deal with every one of the potential issues.

First, the good news. Incandescent bulbs are being banned in the EU.

Why is this important? For our a small subdivision like the one where we live with 200 Homes, replacing 70 light bulbs per home (the number I replaced) would mean 14,000 CFL light bulbs replace the same number of incandescent bulbs, resulting in over half a million dollar in electricity cost savings, preventing over 1.5 million pounds of coal from burning and a reduction in 6.3 million pounds of greenhouse gases PER YEAR.

Now let’s look at the key concerns from the builder:

1. Mercury in CFLs

Manufacturer investments in technology over the last two decades have reduced the amount of mercury used in lamps by nearly 95%. The National Electrical Manufacturers Association (nema.org) has established a maximum of 5 mgs of Mercury per light bulb, but many of the latest modern have as little as 1.23 milligrams. According to the EPA, a 13 watt CFL over 8,000 hours of use could result in 1.8 mg of Mercury emissions versus 5.8 mgs for an incandescent. The CFL results in almost three times less mercury emitted to the environment. “CFLs result in less mercury in the environment compared to traditional light bulbs“ (5) EPA adds: “Because CFLs also help to reduce greenhouse gasses, other pollutants associated with electricity production, and landfill waste (because the bulbs last longer), they are clearly the environmental winner when compared to traditional incandescent light bulbs.”

2. Dealing with broken CFLs.

If a CFL containing the maximum allowable, 5 mg of mercury, breaks in the average bedroom with a volume of about 25 cubic meters, assuming all the mercury vaporizes immediately (an unlikely occurrence), would result in an airborne mercury concentration of 0.2 mg/m3. This concentration will decrease with time, as air in the room leaves and is replaced by air from outside or from a different room, likely approaching zero after about an hour or so. This level and duration of mercury exposure is not likely to be dangerous, as it is lower than the US Occupational Safety and Health Administration (OSHA) standard of 0.05 mg/m3 of metallic mercury vapor averaged over eight hours. (3)

3. Disposal of broken CFLs

CFLs can be disposed of on any CFL Disposal station. IKEA, Home Depot, Ace Hardware and other stores offer CFL drop-off stations. In Austin, businesses can drop off CFLs at the City of Austin HHW Collection Facility, . Additional locations throughout Texas found at http://www.tceq.state.tx.us/assistance/hhw/contacts.html Individuals can bring up to 5 gallons of waste for free. Commercial recycling for CFL light bulbs is quite inexpensive. Here in Texas, Waste Management will recycle 125 light bulbs for under $0.72 each. (10). There are a number of commercial recycling businesses.

The law in Texas allows businesses to collect their CFLs for up to a year prior to disposal or recycling. (11). So if a CFL breaks during construction, it can simply be stored in a closed leak-free bag inside a properly labeled container like a trash can in a central location. The builder could store all broken light bulbs for up to a year then send them to the HHW collection facility (an 8 minute drive from our subdivision). Alternatively, if two light bulbs are broken per house, every 75 homes built the builder would spend $120 (shipping included) sending all these light bulbs to a commercial recycling location.

4. Cost

Come on, $100 cost per home is more important than saving a million dollars, 6.4 tons of green house emissions and half a million pounds of coal burned? If that’s the case then it would prove that builders are only saying they are “green” as an advertising scheme to sell homes not because they really care about the world. Here is how you could deal with the cost:

a) You could apply part (3% to be exact) of the $3,000 “Green” rebate from the City of Austin to pay for the CFLs

b) You could give your customers the option to pay for them – I would gladly have paid $100 plus, let’s say $10 for disposal of any broken CFLs, and I would have volunteered to take any broken bulbs from my house to the disposal center.

c) You could increase the price of the homes by $100. As a customer, adding $100 would not have made any difference for the average cost new home. If the salesperson would have quoted a price $100 higher at the beginning no one would notice.

d) You could increase the price of the house by $200. The only reason the builder had an “EcoGreen” sign outside of the home, the only reason they were promoting their certification and the only reason they had EcoGreen brochures along with the home builder brochures is because thy feel it would be a differentiator that will help them sell more homes. They didn’t do it to brag about how much they love the environment. Builders could increase the price of their homes by $200 or $500 and promote “The only builder with all CFL lighting in Texas”. For a LOT of people , this would be a very good incentive to do business with this particular homebuilder. I know because I asked many of my neighbors. Builder would be doing the right thing and making more money.

e) Builders could eat the $100, if they really care about the planet we live in and the plane you are leaving for your children.

f) Builders could do a combination of all the above. Part of the money comes from the rebate, a part from the customer, a part from the rebate, a part from their profits, and still enjoy the marketing benefits of being really green.

In conclusion: there is no good reason why builder should not stop using incandescent bulbs right away and start using more CFLs. Now if you want to go green all the way and have some extra coin, another option is LED lights which are mercury-free and even more efficient than CFLs, but cost about $50 a piece.

Have you replaced your light bubls yet?

CFL Benefits
Each CFL can $30 in electric costs, Prevent 110 pounds of coal from being burned and Reduce greenhouse gas emissions by 450 pounds (1) Lighting accounts for 38 % of residential energy consumption (2) CFLs produce about 70% less heat than standard incandescent bulbs, so they’re safer to operate and can help cut energy costs associated with home cooling.
(4) EPA’s statement “Switching from traditional light bulbs (called incandescent) to CFLs is an effective, simple change everyone in America can make right now. If every home in America replaced just one incandescent light bulb with an ENERGY STAR qualified CFL, in one year it would save enough energy to light more than 3 million homes. That would prevent the release of greenhouse gas
emissions equal to that of about 800,000 cars. “ Sources and resources:

(1)    MSNBC http://www.msnbc.msn.com/id/17831334/
(2)    Energy Information Administration, 2003 Commercial Buildings Energy Consumption Survey
(3)    http://www.treehugger.com/files/2007/05/ask_treehugger_14.php
(4)    GE Lighting http://www.gelighting.com/na/home_lighting/ask_us/faq_compact.htm#epa_recommend
(5)    EPA’s CFL FAQs http://www.gelighting.com/na/home_lighting/ask_us/downloads/FAQsAboutCFLs.pdf
(6)    TCEQ http://www.tceq.state.tx.us/comm_exec/forms_pubs/pubs/rg/rg-377.html
(7)    www.Earth911.com
(8)    Recycling guidance to businesses http://www.epa.gov/epawaste/hazard/wastetypes/universal/lamps/recycle.htm
(9)    NEMA www.lamprecycle.org
(10) Waste Management Lamp Tracker https://www.wmlamptracker.com/v2/lamptracker_compact.cfm
(11) Texas Regulatory Guidance RG-377 January 2007
(12) GE Lamp recycling information page http://www.geconsumerandindustrial.com/environmentalinfo/regulations_resources/recycling_information.htm
(13) Incandescent Bulbs are banned in the EU http://earth911.com/news/2009/09/03/incandescent-bans-initated-in-europe-set-for-u-s/

August 18, 2010

The 10 Rules of Customer Centricity

I was reading Bruce Temkin’s report, The 6 laws of customer experience, which has a number of similarities with an article I wrote for 1 to 1 Magazine published in January, so I decided to post the full article here:

The 10 Rules of Customer Centricity

Build long-term relationships and business success by acting in the customer’s best interest.

Many companies claim customer centricity in their list of company values, in their organizational tenets, or in their mission statement. Being customer centric is not easy. Use these 10 rules to assess your organization’s customer centricity:

1. Co-create with customers. Involve customers in the design, test, and ongoing improvement of your products with tools like advisory boards, customer design meetings, and beta programs. Don’t focus on features and specs; instead focus on how you are helping customers get a specific job done. At Threadless, for example, customers design, vote on, and order shirts before they are produced. Starbucks captures customer ideas and feedback via StarbucksIdeas.com.

2. Incent your sales team to be customer centric. Most sales teams get bonuses based on quarterly or monthly sales and profitability, yet satisfaction and loyalty are the leading indicators for future profitability and long-term success. At leading companies, customer satisfaction is measured twice a year and the results directly impact executive compensation.

3. Empower front-line employees. Ritz-Carlton hotel employees at all levels are empowered to spend up to $2,000 per guest to do whatever needs to be done to make customers happy.

4. Happy employees = happy customers. Simple, but true. A company that values employees is a company where people enjoy working and, therefore, they do a good job.

5. Your customers are not assets, they are your reason to be. Peter Drucker said the purpose of the organization is to create a customer. The relationship you build with customers is, therefore, the foundation for success. Are you trying to extract as much money from customers or are you building relationships? Are you charging “convenience fees” that generate what Fred Reicheld calls bad profits like car rental companies that charge outrageous prices for gas? Kimpton Hotels’ loyalty program members are delightfully surprised by getting $10 worth of mini-bar items for free.

6. Contact Us. Really. Go to your website and measure how long it takes you to find your organization’s contact information: a real email and phone number. Pretend to be a customer to learn your response times via email and your toll-free number. At customer-centric companies people answer the phone within seconds, executives answer customer calls directly, and they publish names, phone numbers, and email addresses on their site.

7. Listen to customers proactively. You can do this the old-fashion way via customer service reports that feed product development, customer surveys, and other tools. Today companies are also required to listen – and respond – to the social web: Twitter, blogs, Facebook, etc. Beyond listening, you must empower people to respond and to fix problems. Do you have the processes to capture, organize, prioritize, and act on what you are hearing?

8. Focus on the customer experience. Get in your customer’s shoes. Pretend to be a customer to understand their end-to-end experience and what goes on in their mind at each step. Executives at a courier company went through the experience of actually shipping a product and tracking it to delivery. Software product managers go to customer’s homes to witness their experience from installing to using to troubleshooting the product.

9. Customer orientation. This means putting the customers’ needs first. The customer is not always right, but you really need to focus on making them happy. I owned a computer store in the 1980s. A customer walked in ready to buy a new computer because the old one was very slow. I suggested buying more memory, which solved the problem. The customer was blown away that I offered an inexpensive product when he was ready to buy a new computer. Not only was he my customer for life, buying multiple computers and accessories, he also referred lots of business to me and we became great friends.

10. Make money from your customers. Making money from customers is OK. They will gladly give their money to a company they value. Ritz Carlton estimates customer lifetime value at over $1 million – what is yours? An unhappy customer will probably tell a dozen people about their bad experience. Acquiring a new customer usually costs $300 or more. It is a better business proposition to keep your customers happy and make money from them over time by building a long-term relationship, not a transactional one that ends at the cash register.

Truly embracing customer centricity requires transforming the organization. The book The Discipline of Market Leaders suggests that organizations align behind one of three core disciplines: operational excellence (think McDonald’s), product leadership (think Apple) or customer intimacy (think Nordstrom). The “chosen” discipline defines the company strategy and culture and therefore the chances for success. Embracing customer centricity presents an incredible opportunity for differentiation, becoming a source for competitive advantage.

August 17, 2010

Green builders don’t act so green

This is a transcript from an email tip I sent to the Consumerist

We built a new home in Texas about two years ago. The builder told us it was an “Eco smart” house and that it was “Green Built TX” certified. They had yard signs and brochures to explain how green the builder is. We were shocked to find out most of the light bulbs in out house were incandescent. Isn’t replacing bulbs with CFLs the simplest, most basic way to save energy?

Our bathrooms, for example, have a lighting fixture with six lights, which means every minute the light is on, those six lights are consuming 360 watts. I replaced all six lights with 9w CFLs, now consuming 54 watts total – almost 7 times less energy. The CFL light bulbs are only about $1.50 at Home Depot or WalMart, I am sure the builder can get a better deal. I had to replace over 70 light bulbs in our house (picture of old light bulbs attached). I probably spent $150 total, a number that is absolutely insignificant relative the price we paid for the house.

The kitchen area, for example has 4 light bulbs, all controlled by a single switch, consuming 240 watts instead of 52 watts now with 13w CFLs. Every home in the neighborhood has an outdoor light outside of the garage with an average of three 60-watt light bulbs that are usually left on overnight. That’s 18,000 watts consumed for every 100 homes. All night long. Just for outdoor lights.

What is worse, is that we threw away over 70 perfectly good incandescent light bulbs that I paid for (when I bought the house), which are by now in some landfill. In addition, I had to go through the inconvenience of buying and replacing 70 light bulbs, not including some I have not been able to change because they are too high and I cannot reach them with a normal sized ladder.

I called the builder, who told me the “certification” does not require all light bulbs to be CFL, just a certain percentage. The builder probably installs enough CFLs to meet the minimum requirement to be certified.

Selling “green” homes with incandescent light bulbs is deceptive and misleading. Building new homes that consume so much additional electricity to save $100 is absolutely irresponsible in this age. At the very least I would have liked to have the option to pay $100 for the upgrade, which would save thousands of dollars over a few years in energy cost and is the right thing to do.

I suggest selling new homes with incandescent light bulbs should be illegal.

My other idea is to offer homes with solar-powered A/C units. After all, most of the time you need the A/C running in Texas there is plenty of sun shining. It would be much more affordable than full solar systems which require many more panels plus a battery…but that’s a subject for another post. Maybe.

July 20, 2010

Sprint’s Turnaround Strategy: Customer Centricity

This is a cross post from the Bazaarblog.

Traditionally, companies have focused on these key areas: sales, finance and operations. This is natural because they provide real, solid, measurable numbers: you can quantify cost savings from operations and you can measure sales in very specific ways (by region, by product, by sales rep). These are the metrics that count, right?

Sales and operations are not the only important measurables. They’re like the engine room of a ship. It’s important to make sure the engine runs smoothly, but how important is this if you are headed in the wrong direction, or toward an iceberg? I think Peter Drucker summarized perfectly “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

Marketing can be the internal champion for a new customer-centric focus. Dan Hesse, CEO of Sprint, took the stage at the Forrester Customer Experience Forum in New York this week to talk about Sprint’s customer-centric approach. Imagine his outlook and options on his first day as CEO: In 2007 the company lost almost $30 billion dollars. In Q1 2008 alone the company lost over a million customers.

If Hesse was like most CEOs, he would have spent all his time in the engine room, believing this was the heart of the problem—the heart of any possible positive change. He would have been under enormous pressure to engage in broad cost-cutting and to focus almost exclusively on improving internal efficiencies and operations. And he probably did a fair amount of this type of work. But Dan’s number 1 priority was improving customer experience. He knew that making customers happy is a good strategy for long-term success. He refocused the entire company around three key initiatives:

Customer Experience
Build the Brand
Conserve Cash

Every single Sprint resource was realigned around these three objectives. During his talk, Hesse outlined his “magnificent seven” change-drivers:

Align compensation and rewards
Knowing the agenda and knowing what the boss checks on
Root-cause analysis/data
Accountability
Project leadership
Simplify
Living the brand

Instead of going on a cost-cutting spree and inflating prices, Dan chose to simplify Sprint’s product offerings, making them easier to understand, less expensive to customers, and ensuring a better overall customer experience.

“Our core problem is cost cutting that led to customer satisfaction problems”

The result? $2 billion in savings just from customer service operations. Simplicity and better customer experiences result in fewer, shorter calls to customer service. Sprint was recognized by Forrester by having the highest improvement in customer experience across all industries by earning a 15-point jump. They were recognized as #1 in customer satisfaction for mobile, and J.D. Power recognized Sprint with a 17-point improvement.

The effect on earnings? In Q1 2010 the company reported their first profit (EBITDA) in a long time, the best improvement in net post-paid customers in five years and the first sequential increase in net revenues in three years. Sprint is not at the finish line, but is clearly getting there.

Hesse understands the value of satisfied customers and the power of word of mouth:

“In terms of how much will it influence customer purchase behavior, a TV ad would probably be a 1. A really good TV ad is probably a 2. Someone you know telling you about a product they like is a 9 or 10.”