Customer Experience -the Amazon,Uber, Google way!

I have always believed that words like Customer centricity, Customer experience,Customer obsession etc are all fluff unless there are changes in the company’s operating model. Unless customers are given a place in the boardroom, it isn’t likely that we as consumers would sense a difference, despite all the analytics & technology at play. There is this anecdotal story about Jeff Bezos at Amazon leaving a seat vacant at every important meeting & telling everyone to treat that vacant seat as the customer in the meeting.

Now, companies have petabytes of data & a plethora of technology choices with which they can analyze this big data & get big insights. But the rubber meets the road, when the customer gets a better experience because the “customer data ” enables it!

Today I addressed a webinar at the Super CX week organized by Oracle.

Customer experience is changing as a concept & is creating large opportunities for companies who truly believe in bringing the customer up front & centre. Remember, it is easy to talk about Customer obsession rather than embrace it.

India now has close to 450 million Internet users. In fact, we now have over 440 million Millennials & over 390 million Gen Z consumers(born after year 2000). These consumers think very differently & have very different expectations from brands & companies.

And these youth have a social megaphone that allows to wrest the bargaining power towards them!

This leads to a whole new way of Marketing & these are the trends that I see:

  • Marketing will move towards relevancy
    • “Marketing that is done so well that it feels like a service”-To service is to Sell
  • “Marketing as a relationship”
    • Customers would only respond to “profitable conversations”
    • No one wants a relationship, unless it is relevant
  • Mass customization: segmentation to increase dramatically
    • From 3-5 segments that most businesses maintain to lights-out, automatic modelling that is driven by the data
    • Segment of 1

Delighting customers doesn’t build loyalty; reducing their effort—the work they must do to get their problem solved—does. How do companies embark on such a journey.

A few points to consider:

  1. Support an institutional memory of the customer-different silos or “lines of business” creating campaigns & running them independently means that you do not have a centralised contact history or “intelligence” about customer response
  2. Enable dialogues not just campaigns. If campaigns are seen as just “list pulls”, then anyone who knows basis SQL should be able to do the job. But the consumer is no longer ready to listen to “push marketing” & the creation of a “dialogue factory” is one essential element of a strong Customer strategy
  3. Establish a strong Customer management council: group of top leaders in the company who are able to mediate to solve the issues that arise out of taking customer centric action. This council becomes a strong enabler for Campaign management playing a differentiated role.
  4. Being loyal to customers & not the other way around (customers needing to be loyal to the company). This needs companies to have a longer term view of customer lifetime value & not a short term view of immediate profit. It needs an internal senior level stakeholder who champions the customer cause (CMO?)

Two years back Gartner predicted that by 2017 CMO’s will spend more on IT than CIO’s. Is this happening? So how big is the market for marketing software today? IDC has an answer to that question, $20.2 billion in 2014. IDC expects that the market will have a compound annual growth rate (CAGR) of 12.4% for the next five years, resulting in a $32.4 billion market by 2018.

I would urge CMO’s & CEO’s to first articulate & get board level agreement on a differentiated Customer Strategy. Make Marketing technology & team structure investments after that.

Here is a copy of my presentation at the Super CX week organized by Oracle today. Hope you will evangelize some of these concepts at your company.

Customer Experience Oracle

IBM, Adobe,Oracle…watch out!

IBM, Adobe & Oracle have all decided to focus on the CMO. Don’t get me wrong, I love these companies & I think they are doing a great job of reaching the CMO’s.

But the job of the CMO continues to get harder! And the number of options the CMO has to wade through just keeps getting larger. According to Scott Brinker: “From 2016 to 2017, the marketing automation category of the marketing technology landscape grew yet again, by 36%, from 156 vendors to 212. If you predicted it was going to consolidate in the past six years, sorry, you were wrong”

In the past there was a difference in the business models of software & service companies. One was low-margin analysts and the other was high-margin code. But that difference is now disappearing. SaaS has also entered the business lexicon. But it isn’t so simple for SaaS players also.

When it works, SaaS has delivered phenomenal results.Giants like Salesforce, Atlassian, ServiceNow, LinkedIn, Workday and Zendesk have displaced on-premise software solutions and have a combined market value of $94 billion

Not all situations are appropriate for SaaS products. In fact for marketing, maybe service providers are better suited to deploy the SaaS solutions for clients. They bring expertise & can help improve speed to market & also maximise utilisation of SaaS product features. JEGI has nicely coined this term SaaSfraS. In their words: “Client service teams expertly operates the software on behalf of customers to deliver the desired results. Call it “SaaS as a Service”. Or maybe “Software as a Service as a Freakin’ Awesome Service”– SassafraS”.

Meanwhile, service companies are selling more software. For example, Deloitte Digital packages its own predictive models under the brand name nACT. Global holding company Publicis Groupe acquired mobile ad solution RUN, part of performance-marketing platform Matomy. Meanwhile, rival WPP claims to have invested more than $1 billion in technology, much of it gathered under its ad tech umbrella Xaxis.

CMO’s need to navigate this landscape & think before they commit to either a startup or to IBM,Oracle or Adobe? And the IBM’s of the world have to think harder about how they sell, how they implement & how they can bring more innovation into their products?

 

 

A Billion people customer behaviour experiment!

India’s population & the mirage of the huge middle class has existed for many years. It is only now that a few trends are coming together to make some of those projections into a reality.

In November, when the government Demonetised the currency, it set in motion what can possibly be called ,the world’s largest experiment, a billion people were forced to change their payment behaviour overnight. Banks were centre stage during this & would today have access to all the individual customer data that showed change in behaviour.Maybe companies can become a full-time laboratory? What if you could analyze every customer transaction, capture insights from every interaction, and have that data available real time? Actually technology now exists to make this a possibility for at least those businesses which have direct customer information-Banks &Telcos amongst others.Google has just launched a new feature to Google Calendars called Goals. This allows you to direct Google Calendar to fill in unscheduled hours with time devoted to work toward more personal goals, such as exercise more, meet your mother or read more. Google bought Dan Ariely’s company to launch this feature. Now with millions of customers using Google Calendar, they will have actually have transactional information that predicts how people prioritise between the short & long term goals. What a massive behaviour experiment that will be! And new age companies like Google have assembled the technology & people to constantly analyse the data that is generated by users consuming their products. New age companies, such as Amazon.com, eBay, and Google, have been early leaders, testing factors that drive performance—from features on a Web page to the sequence of content displayed.

India’s urban population grew from 290 million, in the 2001 census, to an estimated 340 million in 2008 (this is 30% of India’s population) & according to Mc Kinsey estimates this could go up to as high as 590 million by 2030. It took 40 years for India’s urban population to rise by 230 million (between 1971 & 2008) & India will add the next 250 million in half that time.

Aadhar is probably the world’s largest database. But with this kind of demographics, companies operating in India will manage to create significantly sized customer databases. So data about the individual & how she responds to marketing triggers will now be available at large scale for marketers. As India becomes increasingly digital, customer data will emerge on:

  • How customer’s shop?
  • How they save?
  • How they react to cash & digital currencies?
  • How they transact?

About 40% of India’s population will be living in urban areas by 2025, and these city dwellers will account for more than 60% of consumption. Much of this growth will take place in small towns. BCG estimates that by 2025, wealthy urbanites will be responsible for one-third of total consumption. Again BCG estimates that nationwide, internet penetration rose from 8% in 2010 to almost 25% in 2016. It is likely to grow to 55% or more by 2025, when the number of users will likely reach 850 million. The composition of the user base is also changing. It is expected that expect that more than half of all new internet users will be in rural communities and that rural users will constitute about half of all Indian internet users in 2020.

This also means that thanks to Digital, a lot of consumers will become addressable through their mobile phones. The more marketers spend money on digital, the more measurable it will become. In developed markets, this is leading companies to make large investments in data analytics

The rate of increase in the amount of data generated by today’s digital society is amazing. According to one estimate, by 2020 the global volume of digital data will increase more than 40-fold.Beyond its sheer volume, data is becoming a new type of raw material that’s on par with capital and labour.Massive Internet companies such as Google, Facebook and Twitter have shown the importance of collecting, aggregating, analysing and monetising personal data. These rapidly growing enterprises are built on the economics of personal data. I see many more companies beginning to take this very seriously in the years to come. Banking has understood this traditionally but I feel even the FMCG world will begin to grasp this in the years to come. Traditionally FMCG has been a data dark industry while service businesses like Banking, Retail, Travel etc have been customer data rich.

A lot of the growth in India would come with consumers moving up with affluence. And while consumers are becoming more affluent, companies now have the ability to reach & engage such customers through Mobile & other digital means.

Of the 650 million users expected to be using Internet in India by 2020, a whopping over 61 per cent will be accessing it in local language, forming majority of the online population, according to technology giant Google.

What kind of implications does this have for Marketers?

  1. FMCG brands should start to develop their own independent data to give them a picture of both consumer and shopper behaviour. Maybe the way to do it is through partnerships & creating coalition programs. Organized retail has low penetration in India. This impacts the largest “success criteria” for a coalition, the high frequency supermarket category. Consumers build points fastest with high frequency categories like supermarkets. But in India, organized Retail is less than 2-3 % of total retail spends. That makes it harder to effectively bring in a large number of smaller Retailers into a coalition program. Maybe the innovation required for India is that a consumer goods company leads such a Coalition & brings in its distribution muscle across small retail. Now that would be a game changer in India. Could such a venture be owned by a Unilever or an ITC? Or can the ultimate high frequency category, the newspaper pioneer this space in India. Imagine a Times of India led coalition!
  2. Loyalty: There are very large rural audiences in urban areas in India. This is due to the huge migration that is consistently occurring-moving people from rural to urban areas. I would look to experiment here. Build relevance amongst this segment with loyalty applications that are completely voice based. I would look at loyalty applications that allow this population to use voice based applications to share credits across: transportation, education, & money transfer!
  3. On boarding for new customers: Banks, Telecom companies & other service organizations will rapidly get new customers who are just not familiar with their services. There is likely to be a huge inflow of customers at the bottom of the pyramid who would with increased affluence be buying products & services for the first time. It would be critical to onboard such customers effectively. Also you would have a whole range of behaviours which would be getting triggered with the government’s move towards digitisation.  How do you get a customer to start using his debit card on POS without sufficient & relevant information?
  4. Growth of microsegments: need for analytics to study small consumer segments that may begin to display very different behaviour. As an example, youth in lower income household’s may take up Mobile banking in a much bigger way than what was traditionally thought-Marketers need to be watching this kind of behaviour change very carefully. Especially Banks, Telecom & retail companies have data at a customer transaction level which will help them watch this kind of behaviour change using advanced analytics.
  5. Impact on Retail: Many years ago during my Retail experience, I found that many stores were impacted by what we called the cluster effect-a store in Hyderabad got many shoppers from Vijaywada, a store in Pune got in customers from Solapur etc. And these customers came in for short visits to the city & ended up spending big time! So they were valuable high ticket customers! All this happens because these visitors had friends & family working in the bigger cities. It would be interesting to see Retailers develop focussed databases to identify such prospects in partnerships with Travel companies?
  6. Power of campaign management in local languages: Many brands will want to predict which language is their user or subscriber more comfortable in. Of the 650 million users expected to be using Internet in India by 2020, over 61 per cent will be accessing it in local language, forming majority of the online population, according to technology giant Google. So traditional campaigns in English would not be as relevant as content created in local languages. Google research shows that over 44% of local language internet users find it hard to comprehend product descriptions in English.
  7. Marketing technology can play a powerful role in all of this. Bring on a seasoned Technology guy into your marketing function to create a Martech vision.

Why Amazon may eat Future group, HDFC bank & other legacy businesses for lunch?

Is analytics yet another fad? Is there much more talk about it than real solid action. It does seem so when you look around you as a consumer. Marketers still don’t care, as much, about being relevant to you. You get that umpteenth credit card solicitation from the bank which has already sold you a card. And nothing about a physical retailer shopping experience makes it personal for you! And yet your online persona seems to be treated differently & when you go to Amazon & other sites you do get a feeling of getting offers being recommended for you. And as a consumer you flit between your online & offline avatars, this becomes more obvious. What have these “new age” companies done differently than has disrupted the legacy competitors?

One of the key strengths that new age companies bring is their “data literacy”. While legacy companies are still at some level paying lip service to the whole concept of data based marketing. So is Analytics just a fad & have we been oversold on it? Technology players have packaged analytics into each of their solutions at different levels of complexity. And they have created a lot of marketing noise around it. It almost seems like buying analytics software or some piece of digital platform will suddenly make the organisation an Analytics champion. Maybe the issue is much more fundamental.Organisations have to rethink how they leverage analytics & actually change their company structures, incentives & processes to create meaningful & large business impact. The volume of data available to companies continues to double every year & new streams of data from the Internet of things is adding to the party. Clearly most legacy companies still have a long way to go to truly extract value from analytics. Apart from a few digital natives such as Amazon, Facebook, Google, Netflix, and Uber most companies have struggled to realize anything more than average returns from their investments in big data, advanced analytics, and machine learning.

But it is still early days. According to McKinsey, “About 90 percent of the digital data ever created in the world has been generated in just the past two years, only 1 percent of that data has been analyzed”.
I think where many companies go wrong is that they do not have a clearly articulated strategy around analytics. How much extra revenue can I generate if I had access to insights that Analytics can produce? What if Shoppers Stop said that we will target a Rs 1000 crore revenue by crafting an Analytics led strategy. How do we bake this in the company’s Annual operating plan along with the micro level changes required in company structure & business processes. How do we ensure that the business use cases associated with this are sufficiently detailed to ensure that we put together the data required to actually do the analytics. The next thing companies need to do honestly, is assess where we are on this journey. One of the most critical pieces in the journey is to embed analytics folk on the business side to become translators who help the traditional business manager understand what is being done with the analytics. This is a very significant step & companies need to invest fully in this to allow for such translation to happen on the ground.

What’s the difference? Is there a category of organization which is able to leverage “data” far more effectively? Who values Analytics more? Some industries seem to believe in the power of analytics & actually base decisions on this. A bank decides whether to give a loan or not basis an Application score card or a credit card company spots a fraudulent activity basis analytics & stops the card usage. A lot of other industries use Analytics for insight generation but are they as good as the Banking & Financial services industry (BFSI) in linking the analytics to action.

Clearly an important element that accounts for how data led the organisation can become, is the “Culture”. A way of working in the business where everybody assembles data to take key decisions. When Warby Parker selected its first office location outside New York, it considered a large set of variables — Gallup’s Well-being index, talent pool, cost of living, number and cost of flights to New York, etc. — and ranked and weighted them as part of the final decision. So what is critical is that, a data-driven organization will use the data as critical evidence to help inform and influence strategy.

Data led organisations also “test” a lot. They allow the data from the tests to do the talking & they make key decisions by testing. I think the “new age” companies who are born out of the internet revolution do this very well. Could the enterprise become a full-time laboratory? Digital native companies were built for data and analytics–based disruption from their inception.

While new age companies are structured to do this very well, there are a few traditional or legacy companies who have also created a differentiator using Testing methods. Nigel Morris, one of Capital One’s cofounders says that the company’s multifunctional teams of financial analysts, IT specialists, and marketers conduct more than 65,000 tests each year, experimenting with combinations of market segments and new products.

Google-executive-turned-Yahoo-CEO-thought-leader Marissa Mayer declares that “data is apolitical” and that her old company succeeds because it is so data-driven: “It all comes down to data. Run a 1% test [on 1% of the audience] and whichever design does best against the user-happiness metrics over a two-week period is the one we launch. We have a very academic environment where we’re looking at data all the time. We probably have somewhere between 50 and 100 experiments running on live traffic, everything from the default number of results to underlined links to how big an arrow should be. We’re trying all those different things.”

Here is an excerpt from Carl Anderson’s book:
“It was 1998, and Greg Linden, one of Amazon’s early engineers, had an idea. Why not create recommendations on checkout? Supermarkets put candy at the checkout aisle to stimulate impulse buys. That works. Why not peek into the Amazon.com cart and make personalized, relevant recommendations that the customer might appreciate? He hacked up a prototype, got it working, and showed it around. The rest of the story is best told in his own words:
While the reaction was positive, there was some concern. In particular, a marketing senior vice-president was dead set against it. His main objection was that it might distract people away from checking out — it is true that it is much easier and more common to see customers abandon their cart at the register in online retail — and he rallied others to his cause.
At this point, I was told I was forbidden to work on this any further. I was told Amazon was not ready to launch this feature. It should have stopped there.
Instead, I prepared the feature for an online test. I believed in shopping cart recommendations. I wanted to measure the sales impact.”
And what a success this experiment was! 35 percent of what consumers purchase on Amazon comes from product recommendations based on such algorithms. Amazon calls this the “item-to-item collaborative filtering” algorithm and it’s used this algorithm to heavily customize the browsing experience for returning customers.

I guess the “new age” companies are architected to capture data far better than the legacy companies. But a lot of it also comes from mindset. A lot of the new age companies do not hesitate to ask customers for their data, secure in their knowledge that they will provide value back to the customer in this barter. One simple example is Google’s Screenwise Trends panel, which gives a US$5 cash voucher to anyone willing to simply share their Internet browsing behaviour with Google and its partners, with a further US$5 gift every three months thereafter. Or take Raptr, an app that tracks users’ video gaming habits in exchange for regular rewards, such as in-game content or free games. Online fashion retailer Zafu allows customers to buy high end jeans by asking a series of simple questions about the customers’ body type, how well their other jeans fit, and their fashion preferences.The data collection and recommendation steps are not an add-on; they are Zafu’s entire business model

But these are just the starting point. Other businesses will start to develop more creative incentives, from loyalty points through to enhanced services, to encourage consumers to share their data. And the trick lies in making that data central to your business model!

Also maybe, new age companies have younger employees who are not afraid to use data to change the mind of more senior folk. The shared economy of data lets owners capitalize on the First party data they are already collecting. First-party data can be gathered from a marketers’ site traffic, CRM database, or customer purchase history. With their Android and iOS mobile operating systems, respectively, Google and Apple know the location of every customer’s Wi-Fi-enabled phone — far more location data than any other company could access. The Silicon Valley giants aren’t allowing access to such data by outsiders as yet. The new age companies, from Uber to Facebook, hold growing stores of data about user behaviors, and that is a “customer data moat” that they are creating.

Data and analytics are in fact changing the basis of competition. Changes in the business environment affect all sorts of companies. India’s move to demonetise it’s currency was one such trigger. Paytm hit a record 5 million transactions a day starting 10th of November, 2016! In less than 24 hours, Paytm’s platform saw an overwhelming 435% increase in overall traffic — as millions of consumers across India moved to use their Paytm wallets to transact. Instamojo, the online payments service provider for SMEs, also saw a huge surge in merchant signups by 1,500 percent on its platform. And in most businesses now new age companies are fighting for market share with legacy companies. So your investment in analytics capability can pay rich dividends. Earlier Industry leaders invested mammoth amounts into factories and equipment, the new emerging companies invest heavily in digital platforms, data, and analytical talent. But in legacy companies, often Analytics is seen to be too theoretical. Not enough integration with systems has happened to push decisions to the point at which consumers interact with the business. This is far easier to do in new Online businesses which have built their systems around this capability. CIOs & technology teams in large existing legacy businesses are taking time to act on this. New age companies are doing it very well though. Recommender systems are very well integrated with the consumer buying process. As the new age companies compete more with legacy companies, the need to integrate analytics into the business fabric will become even more palpable. So a Meru cabs should be able to pivot & compete with an Ola by embedding some fundamental data & Digital thinking!

And yet,Gartner says that only 20% of enterprise will use more than 50% of the total data they collect to gain competitive advantage. So most companies are capturing only a fraction of the potential value from data and analytics. Companies are now looking at new sources of data that can bring enormous competitive advantage. In Vehicle insurance, where new companies have entered the marketplace with telematics data that provides insight into driving behaviors. Also in personal loans, a while new segment is created basis data trails that didn’t exist earlier. Similarly in Retail businesses, huge amount of Video data exists that can further bring insight that positively impact operations.
So unless companies learn to creatively marshal their data resources, they will leave a lot of opportunities on the table! This is what software architect Grady Booch had in mind when he uttered that famous phrase: “A fool with a tool is still a fool.”

In most legacy businesses, analytics as a function is often seen as a support function. The vision is limited to provide data based support to other business folk. This is a mistake as what is required is a complete disruption. Do you want your analytics team to participate in deeper strategic & longer term decisions in the company?Do Analytics folk with their deep specialist background have the skills to participate in such initiatives? Can they own a P&L & run the complete digital avatar of the legacy business.
So more debate is required before an organisation is able to clearly articulate its Analytics strategy. In fact the triumvirate of Analytics, Digital & Alternate channels go well together. Analytics can disrupt the business model & for companies who really want to compete in this data rich world, a clear articulation of Analytics strategy is very important. And then companies can debate about which analytics team structure is most appropriate. Should the team be centralised or decentralised. Or you could create an internal consulting organisation with resources embedded in user departments. Another way of thinking about this is to create a “hub & spoke” capability with a Centre of Excellence model underpinning it. But more fundamentally, how can a legacy company compete with new age companies & actually use analytics in a more holistic way.

My experience of working in the trenches has been that someone has to lift Analytics out of the mindset of a function & help seed it as a part of Business strategy itself. To do this, you have to articulate the Analytics strategy & expand on how it would impact the company Structure, Incentives, Channels& Processes. Companies need to realise that this needs a lot of involvement at the CXO level & just having an Analytics department would not enable that. An internal or external evangelist needs to push the envelope to create & sustain the strategy. New age companies do it more naturally, legacy companies need to make a solid effort!
Then again companies must realise that Analytics doesn’t need you to solve a technical problem but a “business & social” problem. And most Business analysts have not spent much time in business roles. They are super specialised number crunchers without a sufficient exposure to business reality. Even if the managers have some exposure to business through experience across a variety of analytics projects, is it enough? Analytics and data are transforming companies around the world. Yet one of the great difficulties with analytics is that it can be difficult to explain and understand; it is widely held that analytics specialists don’t communicate well with decision makers, and vice-versa. As a result, analytics adoption is still not easy within legacy companies. Analysts, at one end, are busy learning more specialised & deeply technical methods of analysing data & at the same time they are finding it difficult to get themselves “heard” within organisations. Influencing ultimate decision makers is similar to selling products or services to external customers. Analysts need to understand that when they present ideas to decision makers, it is their responsibility to sell — not the decision maker’s responsibility to buy. Does this bring the analytics career into some jeopardy? No but what it does is ask for the creation of an entirely new role often referred to as the Business Translators. Ideally for this you should take a few of your solid analysts with good communication skills & embed them in the business. Thereby asking them to play a translator role to embed analytics into the fabric of the company. Analysts need to “Story tell” to bring analytics into the fabric of the company. But analysts are too one-dimensional & not embracing the intersection of “technology, statistics & business”. So analysts struggle to tell stories. Often I see journalists do a far better job with infographics in media. But information journalists are not wanting a career in analytics & so there is a gap in “story telling”.

And finally, the Average age in the “new age” companies is far lower. Younger people are adopting analytics far faster. They are getting exposed to it in their education & they are consuming it through their “digital avatars”. They see this often as a “no brainer”. Older executives are harder to convert to this line of thinking.

Unless legacy companies completely relook at how they see analytics, they may lose to New age companies!
So will Amazon eat the legacy businesses for lunch? Time will tell but clearly the legacy companies need to take notice of how data is now a core product & leveraging it can hugely boost company performance. In general, markets now value companies more than the sum of their tangible assets. And so intangible customer data & how it is used by companies will be the key differentiator in the days to come.

 

Test or get Fired! Harrah’s casino’s amazing philosophy

Analytics needs a evangelist! Without such a person, you just don’t get the impact that Analytics actually is capable of providing! Mostly this evangelist needs to be right at the top, the CEO! I have worked with a range of industries & everywhere the degree of impact shoots up once you have a CXO who is evangelising this change.

Of course, some CMOs have led their organizations into embracing the practice, including John Costello, former exec VP-CMO of Home Depot; John Elkins, head of global brand and marketing at Visa International; and Cathy Lyons, CMO-exec VP at Hewlett-Packard.

One organization which has become a huge case study in the application of a “fact” based approach to business is Harrah’s Entertainment! Recently though it had a messy bankruptcy of its casino operating unit and reportedly faced fines of up to $20 million over money laundering allegations. The most valuable of the assets being fought over by creditors is the data collected over the last 17 years through the company’s Total Rewards loyalty program.

Back in 1998, as Harrah’s was about to embark on a wave of expansion, their CEO Philip Satre asked Gary Loveman to take a break from Harvard to become chief operating officer of Harrah’s Entertainment. The important thing was the he was not brought in as a CMO but as the COO-he had the line authority to make changes that would impact the business!!

“In terms of income, it was actually a pay cut,” Loveman says, since he had to forego the consulting that supplemented his income as a professor.

He went on to develop the gaming industry’s most successful loyalty and analytics program—Total Rewards—which boasts more than 40 million members.

In an interesting article, Karl Taro Greenfeld says this about Gary Loveman, who has since then also become the CEO: the chief executive officer of Harrah’s Entertainment Inc., the largest gaming corporation in the world, sees his customers as a set of probabilities wrapped in human flesh.

Since taking over as CEO in 2003, Loveman, 50, has relied on the numbers to build Harrah’s from a regional operator of 15 casinos to one with 39 in the U.S. and 13 more overseas.

His first big move as COO was to start a loyalty program called Total Rewards, which became such a success — growing to over 40 million members by 2010, the largest database of probabilities in the industry — that by the time Satre stepped down in 2003, Loveman had become the logical choice to succeed him.

Loveman earned a Ph.D. in economics at MIT and went on to become CEO, president, and chairman of Caesars Entertainment, owner of Harrah’s casinos and other resorts worldwide.

Loveman says there are three ways to get fired from the hotel and casino company: theft, sexual harassment, and running an experiment without a control group.

But this seems like common sense, run experiments , see what works & scale up! And yet very few companies do it.

Dan Ariely, a behavioral economics professor at Duke University and the author of Predictably Irrational, outlined some of the resistance to experimentation that he’s come up against.

“I’ve often tried to help companies do experiments, and usually I fail spectacularly,” Ariely writes. For a company struggling with getting a good bonus system in place, he suggested experiments or even just a survey. Management, he says, “didn’t want to add to the trouble by messing with people’s bonuses merely for the sake of learning. But the employees are already unhappy, I thought, and the experiments would have provided evidence for how to make them less so in the years to come.”

But Gary Loveman managed to stay incredibly committed to Testing. These tests run from the use of coupons to offers of free meals or hotel stays, all designed to get customers to spend more money during their playtime.

This is what he said when asked about the Testing culture: “We need to overcome hunch and intuition with empirical evidence. . . . We can start with a hunch or strong belief, but we act on it through experiment. We want evidence. We’ve gone from the introduction of experimentation as a technique to a culture of experimentation as a business discipline. We hire people predisposed to do this by temperament and by background. Organizationally, we’re committed—and I’m committed—to making sure we have the discipline to have the decisions we make informed by this evidence”.

So what is the future for analytics in Gambling? Over time with data being leveraged by everyone, it was only natural for analytics to also start helping the players. Big data services quickly appeared that were designed to empower gamblers, giving them more information and helping them strategize more effectively. One such site that made full use of big data is SharkScope, which collects data from millions of online poker games every day. Players can track all their statistics on the site as a way to improve and increase their chances of winning.

And lastly we must also ask ourselves, is this kind of Analytics good for society! It’s estimated that 3 to 5 percent of people who gamble develop an addiction to the activity, which can lead to an array of problems for gamblers, their families, and society at large. Keeping gamblers coming back may hurt them & cause a lot of turmoil in many lives! Does analytics not have a social responsibility!

Your Bank can be Amazon & Google!

Roughly one in three banking and insurance customers globally would consider switching their accounts to Google, Amazon, or Facebook ,if the tech giants offered financial services, according to a new survey.

Google , Amazon & Facebook have been setting standards for degree of personalisation & powerful customer experience.

Newspapers are getting disrupted by online resources. These same web destinations are becoming less relevant as people simply lift and filter the information they want using RSS feeds. The music CD is being unbundled as customers buy individual tracks online Power has shifted to customers: it’s no longer about the products that marketers want to sell but about the content components that users want to consume & mash up together.

The new battlefield lies in the control of the user interface and the customer intelligence system that supports it. Companies that build highly equipped Customer intelligence units will win in the coming days.

The internet is disrupting retail & I am sure Retail banking is also waiting to be disrupted. According to Capgemini’s 2014 World Retail Banking Report (WRBR), less than 40% of customers globally reported positive customer experiences with their financial institution. But banks still push products on their own terms. Take a term deposit for 3 or 6 months? Well, why can’t I have it due on April 28th, which happens to be my birthday?

Google has launched its own mortgage calculator, and imagine what an Amazon Bank could look like, but who are the startups disrupting banking today? Mostly these are the Fintech companies! New age companies are very good at embedding design & personalisation into the fabric of their business.

The other thing, which the new-age companies do very well, is the notion of ‘profitable data sharing’. They do not hesitate to share data across partners to ensure their customers get a kickass solution. They share data through APIs. There are over 14,441 APIs offered by firms today, according to programmableweb.com.

Amit the Co-Founder & Chief Curator of Let’s Talk Payments had this interesting statement:  “As FinTech startups continue to disrupt traditional financial services, banks are also waking up to the fact that offering an open API—where developers can latch on and create very specific customized app solutions—is the way to engage and retain their customers in the future”.

Adaptive Path, a design and user experience consultancy has been acquired by Capitol One. And just before that Daniel Makoski, founder of Google’s modular Project Ara phone project joined Capital One.

In the new digital world, banking & creativity may not be oxymorons!

New banks in India have a unique opportunity to embed “digital” in the fabric of how they do business. But banks are complex with structures that don’t allow for speed. In many cases, eBusiness teams own the mobile banking strategy, but few eBusiness teams have an exclusive mandate over their firm’s mobile banking initiatives. This division of responsibility creates silos and adds significant complexity to the coordination and optimization of Digital efforts.

What does design have to do with finance, money and banking?

Brands that use design very effectively are far easier to spot nowadays because we interact so much with fast growing digital businesses, Ola, Amazon etc. Consumers, especially Millennials, are learning to expect more from the companies they choose to do business with. And they are not limiting their benchmarks within one industry-I want my Netbanking to be as easy as the Uber interface!

‘Project Pokhran’, as Paytm calls its payments bank project is due for launch the summer of 2017 & they may begin to look at banking very differently.

New banks in India ,IDFC & Bandhan, better be listening.

A few years ago Adaptive Path, a design and user experience consultancy was acquired by Capitol One. And just before that Daniel Makoski, founder of Google’s modular Project Ara phone project joined Capital One.

Then Capital one acquired Money management App, Level Money. The app is focused on the Millenials & helps users set savings goals & offers suggestions for what they can do with their extra cash.

Capital One recently launched what is called as Capital one Labs. This is what they call the “rogue innovation arm” of the bank. Lab members have opened a series of “Capital One 360 Cafes”, a hybrid of a coffee shop & a bank branch. Here employees interview café customers to get real time feedback on new prototypes.

In the new digital world, banking & creativity may not be oxymorons!

Some time back I came across this Job requiremnet at Capital one:

Design Strategist

As a strategic thinker with a focus on innovation for our banking business, you will have the opportunity to define, design, and develop new products and services that defy industry expectations and meet real human needs.

At Capital One, we’re building a leading information-based technology company. Still founder-­led by Chairman and Chief Executive Officer Richard Fairbank, Capital One is on a mission to help our customers succeed by bringing ingenuity, simplicity, and humanity to banking. We measure our efforts by the success our customers enjoy and the advocacy they exhibit. We are succeeding because they are
 succeeding.

New banks in India have a unique opportunity to embed “digital” in the fabric of how they do business. Maybe some of them will come up with teams that include a “Design strategist”.

But banks are complex with structures that don’t allow for speed. In many cases, eBusiness teams own the mobile banking strategy, but few eBusiness teams have an exclusive mandate over their firm’s mobile banking initiatives. This division of responsibility creates silos and adds significant complexity to the coordination and optimization of Digital efforts.

And yet, the user experience is the key for more consumers to adopt the bank’s digital channels.

As the infrastructure of digital technology — the chips, network connections, computing — becomes ever cheaper, they’re becoming commodities, and the value of tech products is shifting to the design and the user experience. But the real value starts to flow when companies orchestrate the User experience with Personalisation.

Personalization, it seems, is really about gathering exactly the data that’s needed in order to perform a particular task. Think about how Amazon asks users whether purchases were for themselves or as gifts, or how streaming services like Netflix and Pandora ask users to rate content. But personalization is a complex process involving multiple components:

Some areas to ponder about:

  • What do you think about the internet & mobile disrupting banks? Which areas can the banks defend and which are vulnerable to disruption?
  • What do banks need to do to modernise their architectures to compete against the new wave of startups? Will they offer API’s to other brands?
  • What is the new age Customer intelligence unit that can be the nerve centre for competing in this landscape? How do they capture unique customer data & create a competitive differentiator by mapping the Customer DNA ?
  • How will banks completely transform their digital experience? Or would the new Fintech innovators show the banks the way?

It would be interesting to see how the new Indian banks & the existing players shape up to this new reality.

The CMO’s guide to Technology & why Marketing Tech is different?

The chief marketing officer and the chief information officer have become the corporate board room’s odd couple.

According to Wall street Journal: “As marketing budgets shift to relatively newer channels like social media marketing and mobile advertising via complex advertising technology vendors, marketing executives have in recent years been tasked more and more with understanding technology — while technology executives have been pushed to understand marketing”.

But are Marketers really investing a lot in Technology. Two years back Gartner predicted that by 2017 CMO’s will spend more on IT than CIO’s. Is this happening? So how big is the market for marketing software today?

IDC has an answer to that question, $20.2 billion in 2014. IDC expects that the market will have a compound annual growth rate (CAGR) of 12.4% for the next five years, resulting in a $32.4 billion market by 2018.

 

IDC breaks that market down into four broad categories:

  • Interaction Systems — the majority of customer-facing marketing software advertising, digital commerce, marketing automation, web experience management, mobile apps, social media tools, etc.
  • Content Production and Management — internal authoring and publishing tools, CMS platforms, DAM platforms, etc.
  • Data and Analytics — storing data and producing insights from it, such as business intelligence, predictive analytics, financial analysis, and broader marketing analytics.
  • Management and Administration — internal communications tools, workflows, budgeting, expense tracking, MRM, project management, collaboration tools, etc.

And yet Marketers are finding it difficult to adopt technology. Success rates are not so high. Vendor hype is far higher than on the ground reality. Research shows that CMO’s need to be better prepared to overcome some of the challenges & one key impact item can be a stronger Technology organisation supporting the Marketing technology implementations.

 

Forrester polled 308 marketing and tech leaders, finding that 44% of marketers believe the CIO hires staff with marketing experience, an improvement compared with the 19% figure from last year’s survey. But on the other side, 58% of tech leaders think that marketers actually understand marketing technology, compared with 71% of marketers who believe so, a gap indicating how marketers’ “self-confidence is inflated,” according to Forrester.

And further research showed the CMO involvement in Technology still lags

 

So what should CMO’s do differently in 2017 that will prepare them for this Tech invasion of Marketing.

Action Items for CMOs

  • Meet the CIO & set a common Marketing Tech budget for 2017:
    Does your company have a Tech budget for Marketing. Forrester research shows that only 47% of marketers believe that the CMO and CIO at their company work together to develop a tech strategy prior to allocating a budget.
  • Marketing strategy should drive Tech purchase:
    think through what elements of your marketing strategy you are trying to impact: Are you trying  to scale up 1:1 marketing based on analytics ?Or is it critical to create a solid data infrastructure for all the disparate data that Marketing has access to? First crystallise the strategy.
  • Carefully consider what technology you want to buy:
    Remember there are 947 companies at last count selling Marketing tech to you. Don’t allow a bundled sale where someone selling an Enterprise stack just bundles in some marketing software for a very low cost. Think about the implications about a wrong choice.
  • Look at building your Marketing tech operation with one primary Marketing technology provider as a hub & a few secondary best of breed point solutions as a spoke.
    This will allow you to get a maximum level of baseline capability from one vendor & so reduce the complexity of managing multiple technology partners.
  • Think about what changes in the structure of your marketing team are you & your company ready to make:
    Are you ready to hire a Chief marketing technology officer & will he report to the CIO or the CMO? Think collaboration rather than team expansion. The IT team can be your best friend if you get the structure right. Marketers who can truly understand the intersection of marketing and technology are rare. Most marketing organizations still struggle to find qualified people to support the evaluation, purchase, implementation and use of these new marketing technologies
  • Be more Process centric:
    CMO’s are buying a lot of technology. The intent is that it will help make us better, smarter and more efficient marketers, but with every license comes a new login and new processes that must be implemented to encompass it in our day-to-day workflows. Technology loses its value if you don’t adapt your processes to take advantage of what the software brings to the table
  • Think ROI & partner the CFO from the start:
    manage expectations about how quickly magic will happen, because it won’t. Process change & skill adoption takes time. Account for it. Don’t get surprised.
  • The Growth Hacker:
    The growth hacker is someone or a small team of people who understands technology and probably even have some coding skills. They understand their organization’s digital landscape to discover potential opportunities or loopholes. So this unit creates a Big data plan & has the all round skills to quickly create pilots & show impact. Sometimes external partners with such strengths can become your Growth hacker partners

Customer centricity-bringing customers in the boardroom!

Amazon aspires to be “Earth’s most customer-centric company.” Numerous mission statements are sprinkled with customer focus. But in reality it is hard to actually be customer centric. Many companies talk about it but only a few achieve the holy grail!

I loved the concept that Prof Ranajoy Gulati speaks about:  “In fact the big leap that companies need to make is to “not sell what they produce” but to “solve customer problems” & then suddenly “who produces the product is no longer important “because you start “owning the problem space”.

customer obsessed resized 600

Customer-centric companies tracked by Gulati between 2001 and 2007 delivered shareholder returns of 150 percent while the S&P 500 delivered 14 percent. While research like this looks great, one wonders why there are not too many companies who “really put the customer at the centre”. Only companies who are great at “disruption” seem to truly belong to the category of obsessively customer focused. A customer-centric organization’s business is built completely around the customer. This kind of company has a strong understanding of the customer’s value and what the customer represents to the business’s profitability. With this knowledge, a customer-centric company adapts everything it does – from R&D to Customer service – to deliver the best value at the right cost to their customer.

The old adage that customers are always correct may not always be right. Current breed of customers are spoilt for choice & empowered. E commerce industry in India is a classic example where consumers are getting pampered with discounts. But there is a difference between “customer friendliness” & “customer centricity”. Companies create value for customers but also have to capture value in their business to be sustainable.  So are companies like Amazon & Zappos the outliers? Zappos actually says that If a customer calls for a product and Zappos does not have the product in stock, they recommend a competitor who has it. While Zappos will lose the sale, in the long run it’s best for Zappos because the customer appreciates the help and tells their friends the story. It creates word of mouth.

Peter Fader, of HBS, has this interesting take: “Customer centricity is a strategy to fundamentally align a company’s products and services with the wants and needs of its most valuable customers. That strategy has a specific aim: more profits for the long term. This is a goal that every business would like to achieve… But you’ll only be able to get there and put customer centricity to use if you are willing to start thinking in new—and in some cases, truly radical—ways.”

So how should companies become more Customer centric:

  1. Sort customers into –who gives value & who does not?
  2. Operations-develop the ability to deliver different products & services to different customers-not easy! At first the operations folk will always say no!
  3. Creating a customer-centric culture where you don’t script every interaction. Therefore, employees need to be able to make the right judgment calls on their own when dealing with customers.
  4. Focus on customer satisfaction & retention over customer acquisition. In a 2013 Forrester survey of global CMOs, 63% listed acquiring new customers as their top priority, while just 22% said retaining current customers was their top goal. In India this is particularly hard because of low penetration of products & services.
  5. Customer-obsessed enterprises must migrate investment budgets from areas that traditionally created dominance — brand advertising, distribution, mergers for scale, and supplier relationships — and invest in Retention & customer experiences

Prof Niraj Dewar, Professor in marketing at the Ivey Business School has this interesting comment:  “Companies’ upstream activities, such as sourcing, production, and logistics are being commoditized or outsourced, while downstream activities aimed at shaping customers’ perception and reducing their costs and risks are emerging as the main sources of competitive advantage. To compete effectively, companies must shift their focus from upstream to downstream activities, emphasizing how they define their competitive set, influence customers’ purchase criteria, innovate to solve customer problems, and build advantage by accumulating customer data and harnessing network effect”.

I had written about this earlier as well. What does Customer centricity mean to you? I would love to have your feedback. Here is what I feel:

  1. Being loyal to customers & not the other way around (customers needing to be loyal to the company). This needs companies to have a longer term view of customer lifetime value & not a short term view of immediate profit. It needs an internal senior level stakeholder who champions the customer cause (CMO?)
  2. Become more accessible to customers & respond faster to their needs. This needs companies to move from “insight to action”. To act faster, companies need to break silos within their organisation to be able to respond to customers.
  3. Use information to make every interaction relevant & use customer data to more powerfully personalise company’s interactions with the customer. The Big data world is only producing more such information for marketers to leverage. This amounts to a mass customisation strategy where the CIO & CMO need to work very closely together to make meaningful changes in the company’s operating environment. And most critically, to do this keeping the customers sensitivity to privacy as paramount!
  4. Strategically think through what culture changes the enterprise needs to become more customer centric. Today technology & Big data based insights can help you accelerate this process.

For those of you in Mumbai, we at Cequity are doing this wonderful conference called Customer centricity world 2015 which has a keynote by Dr Bala Balachandran. Do join us for this conference & you can learn more here: http://www.customercentricityworld.com/#about

Unloved, undifferentiated & intrusive-is that a Bank?

Unloved, undifferentiated, and incapable of innovation — that’s what today’s  digitally savvy users, primarily including high-school students, entry-level  workers, and thirty-something professionals, believe about the banking industry says a recent survey of Millenials.

But often a bank’s marketing only reinforces this image. Pushing hundreds of irrelevant communications to customers despite having data about them frustrates customers.

And now consumers are begining to have choices.Nonbank solutions for financial services are not just imminent — they’re already here. Today’s digitally savvy retail banking customers are rapidly turning to Geezeo, Personal Capital, LearnVest, and others for personal financial management solutions. And they’re looking forward to other technology giants entering the market such as PayPal, Apple, Amazon, Facebook, and Google. Most of these new entrants are far more marketing savvy & have disrupted other industries by bringing the customer into the boardroom.

And yet, Banks often think of Customer centricity as a “fluffy” topic. Most bankers are hard wired left brain types & the retail banking business is such that customers are often prisoners & cannot leave very easily. According to Capgemini’s 2014 World Retail Banking Report (WRBR), less than 40% of customers globally reported positive customer experiences with their financial institution.

And yet there are contradictions: banks are probably amongst the few businesses that have an “extreme level of data” about customers. Banks know when you move your house, when you get that bonus & they even know when you are eating out at a restaurant or travelling internationally for the first time. Banking also was amongst the early adopters of analytics & so has the institutional capacity to understand customers better. And Banks have invested in huge amount of technology that can enable customer centricity. And yet Technology is transforming the way digitally savvy customers think about and manage their finances. And this is where banks may not be moving fast enough.

Banking tops the list of industries at risk of disintermediation by digitally savvy customers including millennials. And banks seem secure in the belief that this business is very hard to dislodge & too regulated to disrupt. Key findings from the Millennial Disruption Index (MDI), a three-year study of industry disruption at the hands of teens to thirty somethings (Millennials) found that 71% of Millenials would welcome a new bank from Amazon, Google, Square, Apple or Paypal.

I had written about the unbundling of banks earlier.

digital banks

In India, there seems to be a mad race by private sector banks to show Digital superiority. A lot of Apps are being launched. But at its core, the issue of being Customer centric still eludes many banks. Banks need to be committed to having an innate knowledge of their customer and using that knowledge for the customer’s benefit. Today most analytics teams in banks spend most of their effort in doing analytics that will benefit the bank: reduce risk, increase cross sell & reduce cost.

Chris Skinner, Chairman of the Financial Services Club and author of the book, Digital Bank, said, “A digital bank is a bank built with a vision to reach out to customers through digital augmentation. It is built specifically to offer the customer the service of their choice through the access of their choice.”

And yet banks do an extraordinary amount of push based marketing-pushing messages to customers which may not be relevant through emails, sms & calls. Banks set up campaign management teams that mine data & use marketing technology to automate campaigns for customers. But sometimes we need to be cautious about technology & automation. Our campaigns are not customer centric; they intrude & do not provide relevant information. In such a case, automating & increasing the volume of this campaign is pointless. You are only automating a more intrusive form of marketing, that doesnt work.

Often there is this belief that complex analytics is required to become more Customer centric by providing appropriate offers.But you don’t need too much fancy analytics to become more customer centric. There is so much data that exists with a bank that you can create hundreds of examples of campaigns that connect to customers.

I saw this wonderful example from Jim Bruene at Finovate:

“Card reissues after a data breach, or lost/stolen situation, are annoying for cardholders. But it’s even worse for the issuer who has to pay for a new card, hound the customer to activate it, handle customer service calls, and then risk losing recurring revenues from now-broken automated pre-authorized charges.

So kudos to Capital One for taking an important step in solving this problem.

Earlier this week I received a new card and number from Capital One, presumably because my card had been involved in a breach. I am not aware of any unauthorized attempts to use it.

In a followup email this morning, the giant issuer reminded me to activate the new card. That’s a fairly typical technique these days. But the help didn’t end there. The bank provided a list of likely merchants where I may need to update card info to avoid the charge being denied (see screenshot below)”.

http://bit.ly/1eOZroI

Simple communication like this can diffrentiate a bank & make it more relevant to consumers.

Here is what I believe banks need to think about:

  1. Treat customer communication with the same intensity that FMCG companies treat their advertising.
  2. Look at their data to “help customers”. Banks have rich information & everyone should be thinking about simple ways to connect with customers. Most times banks engage with customers only to cross or upsell. Bankers may want to think of a paradigm where sales begins to happen because you connect with customers at relevant moments with personalised communication like the example above.
  3. Set up a Customer Intelligence unit-use them to derive insight “about customers for customers”.
  4. Use that insight to create engagement programs with customers which help them lead their daily life.
  5. Cross sell will happen as an outcome.
  6. We believe that Marketing will move towards relevancy:
    • “Marketing that is done so well that it feels like a service”
    • “Marketing as a relationship”
  7. At Cequity we call this philosophy-“To service is to Sell”.