This might take a while

Certainly the world is moving at an increasingly faster pace.

Clearly we have seen transformative new business models seemingly come out of nowhere to supplant industry incumbents.

Without a doubt, traditional sources of customer loyalty are being challenged in a rapid onslaught of ever-expanding options and innovative marketing techniques.

Yet, for many brands, it is still very much the case that relationships and trust matter.  And those precious assets are rarely earned quickly.

Despite the publication of Permission Marketing well over a decade ago, too many brands fail to follow the basics of Seth’s admonitions.

Too many brands want to get married on the first date.  Too many brands fail to take the time to treat different customers differently.

Too many brands think quantity trumps relevance (I’m looking at you Groupon).  Too many brands think they can shift their customer base quickly (I’m looking at you JC Penney).

As the pace of change accelerates, you may be tempted to do everything faster. But if you have a business model that is anchored in trust, rooted in deep relationships and in building a growing permission-based asset, the right answer may well be to go more slowly and deliberately.

Yes, it might take a while. But it’s likely to be worth it.

 

 

The people who want to hear from you asset

Go to your customer database. Right now. I’ll wait.

Now ask yourself the following questions:

How many of those people really want to hear from you?

How many actually pay attention to what you are saying?

Better still, how many eagerly anticipate getting your communication–Sunday circular, direct mail, e-mail, phone call, whatever–because they know it will contain something meaningful and relevant?

While it’s not on the balance sheet, one of the most important assets for just about any company is “the people who want to hear from you asset.” And many brands manage it poorly. As Seth pointed out in the classic Permission Marketing, permission is a privilege that needs to be carefully cultivated.

Just because e-mail is cheap, doesn’t mean you should spam me with largely irrelevant offers. But enough about Groupon.

Just because you are organized by channel, doesn’t mean your marketing shouldn’t speak to me with one integrated voice.

Just because I have shown a propensity to respond to prior offers, doesn’t mean you should up the quantity of communication to test my tolerance for pain.

At Neiman Marcus–because no one was paying attention to it–our highest opt-out rates were among our most valuable customers. We were squandering our people who wanted to hear from us asset.

Typically, it is expensive to earn marketing permission from customers with high lifetime value. Once lost, it is even more expensive to win it back.

My guess is you might want to start paying more attention to the people you want to keep paying attention.

 

 

 

Profitless prosperity

Ah, the era of “profitless prosperity” is back. I still have my Pets.com sock puppet to remind me of those once glorious times.

Barely a day goes by now that we don’t hear about a stratospheric valuation (actual or rumored) for some digital darling. From Facebook to Twitter to Groupon, it seems that unless your EBITDA multiple is either quadruple digits or infinite, you’re barely worth paying attention to.

To be fair, plenty of highly valued, enduring brands have gone through periods of losses ultimately to emerge with a dominant position and boatloads of cash generation. And there are perfectly good reasons a company might decide to pursue low or no profit sales for a period of time, in targeted circumstances or with certain consumer segments, including:

  • Generating trial among prospects with high potential lifetime value
  • Driving traffic to a store or website for consumers with a high propensity to cross shop or be up-sold
  • Creating positive word of mouth among highly influential persons (“You get a sock puppet! And you get a sock puppet!”)
  • Securing valuable customer relationships in a maturing market.

The companies that do this well have a clear understanding of customer economics by segment, a clear vision for how profits will develop over time and a disciplined process for measuring progress.

The brands that do this poorly are typically focused on revenue for revenue’s sake or obsessed with new customer acquisition with no way to tell whether those new customers can be profitable.

More dangerous still is falling in love with the “promiscuous consumer”–that customer that only goes for the best deal. They are often expensive to activate, they have little propensity for loyalty and you rarely break-even with them.

If your customer portfolio is comprised (littered?) with too many of these types, expect it to end badly. It always does.

Plunge

There are two basic ways to enter a swimming pool.

The first involves testing the water, cautiously inching your body into the pool as you slowly descend the steps or the ladder. It’s all about deliberateness and the hope that this “safe” approach will allow you to avoid any unpleasantness.

The second, of course, is to simply jump in–to plunge.

The avoiders come from a place of fear. The plungers embrace the risk, accept the trade-offs and commit. Once you are in the air, there is no turning back.

I wonder where Osama bin Laden would be if the Obama administration were afraid to plunge?

I wonder where the entrepreneurs behind Groupon, Netflix, Gilt Groupe and so many other share grabbing innovative businesses would be if they were afraid to plunge? And where the competition would be if they hadn’t been afraid?

I wonder what would be different if you took the plunge?

Say my name, say my name

Recently I’ve been wondering how much Groupon would be worth if they could consistently send me deals for products that actually interest me and aren’t an hour from my home or office.

The potential for daily deals sites, mobile commerce applications and, heck, just about anything in your marketing plan is enormous.

But when your marketing is unfocused, undifferentiated and underscores that you don’t know me, it quickly becomes irrelevant. And that’s when I stop paying attention. And that’s when you run the risk that I start running away from your brand.

It’s better when you know me and show me you know me. That’s when I lean towards your brand and become more willing to collaborate to build something relevant, differentiated and even remarkable.

So, say my name. Ask how you can make your product and service better for me. And then make it happen. Rinse and repeat.

 

Gee, I thought you were in the local advertising business?

Much has been made of the continuing, and seemingly inexorable, decline of the daily newspaper business. Most of these companies have been trying to figure out how to make money through delivery of their product over the internet. Turns out it’s hard to get folks to pay for something they can readily get for free.

So despite many years–and likely lots of money spent on consultants–your typical newspaper has lost consumer relevance and destroyed considerable shareholder value.

Part of the problem here is one of perspective. Sure, your newspaper is in the business of delivering news. But they are also in the business of delivering (primarily) local, promotional advertising to consumers.

With all the doom and gloom surrounding the newspaper business, and its advertising model, you might assume there was nothing of interest for consumers and no way to make money.

Tell that to Groupon or LivingSocial.

The rapidly growing daily deals segment is dominated by companies that started with zero existing customer data and no relationships with local merchants. Yet, they’ve totally trumped the newspapers who already possessed those critical assets–not to mention a burning need to develop new sources of profits.

Time and time again, industry incumbents miss the next big idea because they focus on squeezing value out of their old business model, rather than understanding how customer value is being created in new and remarkable ways.

So where’s your blind side?

 

Twitter’s birthday: Blow out the candles, step on the gas.

You probably heard that Twitter celebrated its 5th birthday yesterday.

The flash-sales model pioneered in the US by GiltGroupe is about 3 1/2 years old.

Groupon was founded in November of 2008, not even 2 1/2 years ago.

While it remains unclear whether Twitter will go the way of a MySpace or a Facebook, it’s hard to question that they have forever changed the way people communicate and engage.

The collective valuation of the flash-sale sites launched in the US is likely already greater than that of Saks Fifth Avenue, a pretty powerful brand that is more than 100 years old.

Groupon turned down an offer from Google to be bought for $6 billion and is rumored to be seeking a $25 billion valuation in an IPO later this year.

These innovative new business models are rapidly gaining share from industry incumbents who are slow to go through the cycle of awareness, acceptance and action.

If it hasn’t happened to your industry yet, rest assured it will.

So let’s all wish Twitter a Happy Birthday.

And then, go figure out whether you are driving the right car or not.

Either way, get ready to step on the gas.