Archive for the ‘Marketing’ Tag

Using behavioural economics to trigger action

Behavioural economics posits that all human behaviour, including in business, is shaped by irrational and unconscious influences, such as bias, social pressure and cognitive inertia. The notion of psychology as a driver of economic action is not new: As an academic discipline behavioural economics dates back to the 1970s, and the foundational principle back at least to Adam Smith’s The Theory of Moral Sentiments (1759). Behavioural economics has, however, only in recent years found widespread currency within the business world, spurred by a plethora of bestsellers, including Thinking Fast and Slow (2011) by Daniel Kahneman and Predictably Irrational (2oo8) by Dan Ariely.

Increased interest from the business community is due to the insights gleaned from the discipline, which have been used to successfully “nudge” customer behaviour in a variety of sectors, such as wealth management, insurance, customer products and retail. Specifically, behavioural economics has been used by product managers to guide consumers toward certain product choices (i.e., “choice design”), by marketers to develop brochures and Web sites that more persuasively communicate marketing messages and by service managers to design better support experiences.

The field can provide hundreds of potential “triggers” to augment behaviour, depending on the business objective, situation and context. Psychologists Robert Cialdini, Noah Goldstein and Steve Martin identify 50 different possible applications in The Small Big: Small Changes That Spark Big Influence (2014). Three among the list include:

  1. Leverage social proof: People will make the same decisions as a group with which they identify. Nudge people to adopt a new behavior by showing them a training video featuring their peers doing the same thing.
  2. Invoke first names: Get and keep people’s attention by frequently using their first name. A sales representative’s repeated use of a prospect’s name will cue their attention through the clutter of other sensory inputs and focus attention on the key message.
  3. The power of loss avoidance: Individuals strongly prefer avoiding losses to acquiring gains. Marketing studies have shown that consumers would rather avoid a $5 surcharge then get a $5 discount even though the net effect is the same.
    Case study: behavioural economics in action

Communications Case Study

A technology company was struggling with customer support issues, resulting in unsustainable levels of customer churn, high support costs and wasteful discounting. We were tasked with identifying the root cause of the problem and recommending fixes.

We reviewed the support scripts and escalation processes and listened to call records. Using the lens of behavioural economics to look for unconscious biases, explicit and implicit incentives and insidious social pressures, we discovered both that the existing scripts were ineffective and that the prescribed escalation process was not being followed by most service reps.

While management believed more resources and training were the answer, we convinced them to first experiment with a pilot program that featured rewritten scripts and process redesign. These changes included a variety of nudges to trigger the desired service experience, including:

  • Establishing a rapport from the get-go: People are more easily persuaded by those that they like and have some connection with.
  • Starting with the bad news but ending on a high note: Getting bad news out of the way shows empathy, acknowledges responsibility and allows for a good finish.
  • Following the script: Because a good process is only effective if it is consistently applied, we recommended having service reps formally and publically commit to following the revised protocol.

By implementing insights gleaned from behavioural economics, customer satisfaction scores increased, service escalations fell and cross-selling rates improved.

Behavioural economics for your business

As mentioned earlier, how you should apply behavioural economics insights to your business depends on your circumstances and your goals. However, here are five general tips to guide your strategy:

1.  Understand the business context:  What business problem are you trying to solve?
2.  Audit key customer decision points:Look for hidden bias, social and incentive pressures and opportunities to catalyze desired actions.
3.  Prioritize your opportunities: The economic, operational and brand impact of each decision should be considered.
4.  Identify suitable nudges:This should involve an optimized choice design that guides actions and decisions toward your desired result.
5.  Experiment, measure and scale: Only then will you discover the optimal strategy for your business.

For more information on our services and work, please visit our web site at Quanta Consulting Inc. 

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3 ways to maximize sponsorship ROI

If you followed the World Cup, you would have noticed the many corporate sponsors of the event, the teams and players (i.e. the properties). Sponsoring the right property can give a brand a major boost in awareness and appeal. However, having the wrong approach or property could waste the investment and compromise the firm’s brand image. Fortunately, there are some best practices to follow to maximize a sponsorship’s potential.

Corporate sponsorship is big business. Annual global investment exceeds $25-billion, growing at almost 10% each year. Sports — teams, events and athletes — make up the majority of spend. Growth is being driven by an increase in the number of new properties like rock bands, festivals and charities, the rising value of some properties as well as the growing practice of tiering sponsorship support (think platinum, gold, silver levels).

Sponsorships are an important way for many companies to get their brands in front of elusive, skeptical and mobile consumers who are regularly bombarded by numerous marketing messages. Opportunities can range from naming rights on a stadium and client relationship events to limited edition products and custom advertising programs. Sponsorships can significantly build a business (think Michael Jordan and Nike) or hurt a brand image, as was the case when Kate Moss’ personal issues led to major problems for Chanel and H&M. How do you ensure you get the most value from this powerful but risky marketing tool?

The best programs get three things right:

1.  Align the opportunity to business objectives

Given the range of properties, you need to use a thorough process to filter and analyze the sponsorships to find strategic congruence between the property, brand and target audience. When affinities are lacking, the opportunity and investment could be wasted. In a high-profile program we studied, a mismatch between the firm’s customer base (women, 18-49) and the properties’ core audience (men 18-24) led to a lower than expected ROI.

2.  Promote the sponsorship

Companies often spend a lot of money acquiring sponsorship rights but very little on the promotional support that would magnify its impact. Various studies suggest that underperforming programs spend less than $1 on promotion for every $1 spent on sponsorship rights. The lack of marketing support may trace back to management neglect or the need to limit spending after paying for the rights. In one case, a client of ours believed that becoming a concert sponsor alone would drive their business. Though the sponsorship was deemed a success, management acknowledged that a lack of promotional support resulted in the firm missing out on millions of dollars in merchandise sales. Conversely, higher performing companies spend more than $1.50 in promotion for every $1 in sponsorship. Not only do these firms magnify their sponsorship investment but they also integrate their properties within their marketing mix.

3.  Evaluate performance

Despite the importance of sponsorships, many firms do not effectively quantify the impact of their expenditures. This is not surprising given the difficulty of linking sales directly to sponsorships. Successful companies use a variety of approaches. The simplest way is to survey customers, partners and employees on program impact and lessons learned. Firms can also tie total program spending to key metrics such as unaided awareness or purchase intent, and then link them to sales using regression analysis. The most sophisticated approach uses econometrics to ascertain links between programs, awareness and sales, and then isolate the impact of sponsorships from other marketing and sales activities.

Maximizing sponsorship value can be a challenge, especially when firms have multiple properties, customer segments and marketing tactics. BMO Financial Group is a major sponsor that has figured this out. The bank successfully operates a North American-wide program with dozens of properties and partners including: NBA Basketball (Toronto, Chicago), NHL Hockey (St. Louis, Chicago) Major League Soccer (Toronto, Montreal), amateur sports and the Calgary Stampede.

The Bank looks at sponsorships strategically, with a proven approach to identifying, evaluating and managing sponsorship deals. Each property — whether it is in sports, arts or regional events — aims to reach diverse customer segments within local communities as well as appeal to broader national audiences. The bank magnifies the impact of its sponsorships by integrating its elements with other marketing activities. For example, BMO was able to quickly maximize its sponsorship of the Toronto Raptors during their 2014 playoff run by increasing media advertising and launching a new Twitter campaign.

Finally, BMO sees a deal signing as the beginning of an iterative win-win relationship between the parties and not an end in itself. Justine Fedak, senior vice-president and head of brand, advertising and sponsorships for BMO, emphasizes the importance of long-term partnership. “Similar to marriage, a sponsorship begins with a mutual understanding of shared values and then evolves over time. Gone are the days when you slap a logo on something and walk away.”

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Organizing for global growth

Management guru Alfred Chandler asserted that business excellence comes about when “structure follows strategy.” Unfortunately, many Canadian firms with global ambitions fail to heed this axiom. In their drive to tackle international markets, they often pay insufficient attention to how certain groups, like marketing, end up being organized and perform their functions. This neglect can kibosh even the boldest plans. Fortunately, managers can fall back on a rich trove of best practices.

Companies go global as part of an organic growth strategy or because of an acquisition. The potential returns are great but so are the risks. Given the high stakes, leaders should tread carefully but not too hesitantly.

Managers need to address three key questions up front:

1. Which organizational model — centralized at the home base or decentralized at the local office — can best deliver the growth plan?

2. What are the tradeoffs between a single, global message/program and more tailored, local campaigns?

3. How do you foster integration, collaboration and sharing of best practices between the different offices and teams?

Addressing these questions will expose latent tensions and implementation issues (and new synergies) between various approaches and groups. The story of how two firms addressed the challenge of going global differently illuminates some best practices and key pitfalls. Lets start with a company that has done it right — Manulife Asset Management, the investment arm of insurance giant, Manulife Financial.

Though a global business, it was not leveraging its international marketing and distribution capabilities to market as a local one. The leadership was looking to drive more cross-pollination of best practices and tools, better servicing of local client needs and more efficient processes and practices. A senior Manulife executive, Anthony Ostler, was brought in to reorganize the entire marketing structure. Some of the major changes included: establishing a centralized CMO office; retuning roles and responsibilities, as well as workflows; and promoting richer communication. After 12 months of transformation, the results were impressive. Lead generation and RFP success rates soared and margins widened while overall marketing spend fell.

What they did right:

  • Collaboratively redefined success and the marketing and change strategy that would deliver it, aligning all teams and offices to that single vision
  • Looked at the business holistically but did not shy away from getting the details right, like refining employee career paths, adjusting metrics and optimizing workflows
  • Adopted a “hub and spoke” model that centralized key activities like strategy and RFP creation and decentralized others like product development and local marketing support.

Ostler believes “Focusing on the client experience helped to guide all the decisions and was critical to success. At the same time, efficiencies could be recognized by globalizing certain aspects and we moved aggressively to do this. This client focus coupled with efficiencies helps the business to grow.”

At the other end of the spectrum is a professional services firm that acquired a successful overseas competitor in order to get a foothold in a market it deemed vital for growth, and to ensure retention of its multinational clients. This was not a hostile takeover and the clients viewed it favourably. However, after 18 months the forecasted revenues were not materializing despite significant marketing investment and considerable head office attention.

What they did wrong:

The new firm was managed in a controlling, overly formal fashion that was at odds with the professional services firm’s more entrepreneurial culture and practices. For example, local marketing programs were abruptly cancelled in order to capture early cost savings. Since both offices shared many of the same clients (often on the same project), the acquiring firm assumed the habits and needs of these clients were similar across geographies. In reality, each client subsidiary acted very differently leading to problems and gaps in service and delivery. Finally, the acquiring firm lacked the stamina to fully integrate many of the systems between the two companies. As a result, they were never able to leverage their important knowledge and human capital management systems and achieve the desired productivity and innovation gains.

Going forward:

Since every situation differs, a “one size fits all” approach in areas like organizational design and sales & marketing planning rarely works. Organizational, channel and program integration is not easy but must be relentlessly pursued in order to maximize program efficiency & effectiveness, minimize internal strife and drive collaboration. Using proven change management tools is critical. At its core, excelling as a global company is about dissimilar people working together. Ignoring the needs and aspirations of your teams will compromise organizational performance and business results.

For more information on our services and work, please visit the Quanta Consulting Inc., web site.

Bridging the new-old marketing divide

In many organizations, two factions within marketing are grappling over a core question:  should their role and plans fundamentally change given the emergence of digital technologies and the multi-channel universe? One team considers social networking merely as another tactic within a larger marketing mix.  The other group sees these same technologies as game changers that will redefine the marketer’s role and programs. At issue is the direction of the marketing plan and the funding & resources that enable it — and ultimately the performance of the business.  Truth be told, both viewpoints are critical for success and need to be inculcated into daily thinking, practices and planning.

For simplicity sake, we can reduce this battle for marketing’s soul down to two competing stereotypes:  Mike is an old-school marketer whose mindset emphasizes control of message and channels, and focuses on traditional research techniques and conventional metrics like customer awareness, acquisition and retention. Managers like Mike are comfortable with a “ready, aim, fire”  broadcast model that relies on studio-based agencies to develop creative and push it out through media buys. He recognizes the potential of new technologies but needs to see tangible ROI, proven success stories and strategic fit before committing a substantial amount of his tight budget and time.

At the other end of the spectrum is Lynn, a new-school” marketer in her early thirties. She fully embraces the ubiquity and power of mobile computing, social networking and rich media, because she lives it. Her Millennial-focused strategy looks to engage web-powered, trendy audiences on a 1:1 level wherever they are.  Lynn’s digitally-focused tactics look to leverage user-defined content, community-building and sharing.  A consummate experimenter, Lynn is challenged determining the ROI of new technologies and getting her programs funded in mature companies.

According to best practice research and our experience, marketing performance will be maximized when both Lynn and Mike’s thinking are part of the whole team’s DNA and practices. The key is to find the right balance between their approaches and get them to work collaboratively.

Advice for Old Schoolers

Open up the creative process: Great ideas and content can come from anywhere.  Marketers need to open up their broadcast-content model and consider more of an editorial approach to developing and managing their message in conjunction with customers and influencers.  This requires them to adopt new skills like brand story-telling, facilitating and integrating multi-channel conversations and fostering shareability, tailored to each digital platform.

Engage the customer: Millennials and other customer segments can quickly change their buying behaviour (think mobile commerce), habits and beliefs as a result of technological developments.  For example, many of these people are using new technology to skip advertisements.  Instead, many consumers look to be part of an entertaining, meaningful and authentic conversation where the brand is part of the context and not necessarily the focal point.

Embrace speed: The traditional slow and plodding approach to developing and implementing marketing programs is becoming anachronistic.  Old schoolers need to figure out ways to get their creative and programs out quicker (even it is not polished), more broadly and tightly integrated across all channels.

Experiment regularly: New technologies and methodologies give marketers an unparalleled ability to quickly and inexpensively test new ads, creative and promotions as well as refine existing programs and websites.  Marketers should prioritize continuous improvement initiatives as well as explore breakthrough innovations.

Advice for New Schoolers

Be analytically rigorous: You don’t jettison proper financial and consumer analysis because Facebook offers new functionality or Instagram suddenly takes off. As digital marketing moves beyond the novelty stage, its programs should be expected to demonstrate hurdle-rate ROI and be aligned to the consumer and marketing strategies.

Use the right metrics: Many of the popular digital metrics like re-tweets and Likes cannot be linked to real business results. New schoolers should measure the impact of social sharing by using innovative metrics like ‘positive-neutral-negative’ ratings.  These can provide a more accurate picture of program success and word-of-mouth impact and better link to strategic goals.

Consider context: Without a doubt, content is important.  Increasingly, brands will also need to take into account the digital context of where they will live and propagate. Marketers need to leverage the right context for consumer conversations and content sharing. Companies like Virgin Mobile and Coca-Cola do a great job of producing interesting content and brand stories tailored for the characteristics of the platform.

Heed the Old Schoolers: Remember that marketing was around long before the Internet. New Schoolers would be wise to study the lessons of pacesetters like Michelin Guides (original content marketers), Harley-Davidson (community cultivators) and Disney theme parks (pioneering experiential marketers).

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Boost marketing performance

The marketing landscape of 2013 is a menagerie of media vehicles, digital tools & platforms, Big Data initiatives, sales channels and influencer programs — all requiring coordination, integration and funding.  Making sense of this complex world is a challenge; it’s hard to know what’s working and what’s not.  Conventional evaluation tools like ROI have their place but they are not strategic and don’t go deep enough in analyzing plan effectiveness.  To really evaluate marketing’s worth, it pays to go back to basic principles. We have found that asking five questions can help determine whether the marketing function is “doing the right things, right.”

Do we really understand our customer and what influences them?

For many companies, the answer is an unfortunate no.  This knowledge gap goes beyond understanding basic needs; it touches on how consumers interact with companies, who or what influences their actions, and what sub-conscious triggers drive purchase behaviour. Even data-intensive companies often know little about how specific tactics — like social media or TV advertising — drive purchase, as well as how various programs interact with each other.

To maximize performance, managers need a new, 360-degree view of today’s consumer.   “Connecting with clients is much tougher now than it used to be,” says Lynne Coles, a senior B2B and B2C marketer.  “They are one click away from becoming as well or even better informed than the firms trying to sell to them. They’re also just one click away from sharing their opinions and experiences with an ever-expanding activist community. Marketers need a holistic approach to understanding the entire customer experience across all channels.”

Is our value proposition relevant and differentiated? 

Whenever I give a speech on branding, I ask the audience members what their value proposition is, and can it be supported.  Typically,  80% or more list the same benefits, like great service or lowest cost.  Furthermore, less than 20% of the audience will link a meaningful outcome and explanation to the benefit (e.g., thanks to newer technology, XYZ brand delivers an 80% savings versus the leading brand). These ad hoc surveys usually point to serious flaws in a company’s core positioning, that no amount of spending or technology can fix.

Most firms can differentiate.  Many already do, they just don’t realize it.  The marketing challenge is around finding meaningful strategic differentiation and then driving the message through all marketing tactics as well as the customer experience.

Do we have enough information and wisdom to make decisions?

Exploiting Big Data — using advanced methodologies and tools to mine data for insights — is all the rage these days.  Making it work is another story.  Companies may collect a lot of data but it is not always accessible and usable. Furthermore, much of the data may not be germane to marketing goals.  Finally, data mining skills does not necessarily translate into wisdom that would help in areas like fostering innovation or creative development.

Modern marketing remains as much an art as a science.  Companies require proven analytical and IT capabilities plus common sense to ask better questions and to make better strategic and tactical decisions.

Are we using the right metrics?

Einstein said, “not everything that counts can be counted, and not everything that can be counted counts.” Many firms use metrics that cannot be effectively measured, are unrelated to strategic goals and lack organizational buy-in. The choice of metrics is important.  They play a major role in driving management focus & behavior, allocating resources and in framing the evaluation of marketing plans and vehicles.

Leaders should regularly confirm that each tactic is properly measured, evaluated and then linked to the long-term, strategic goals of the company.  Managers should also be mindful that a slavish focus on metrics is not a replacement for solid business and creative judgment.

Is the organization enabling marketing?

Many leaders believe their firms are market(ing) driven, with a mission to fully satisfy in a differentiated way the needs of consumers in attractive markets.  The organizational reality, however, is often different.  Other internal groups frequently have different agendas, a disproportionate share of internal resources and dissimilar perspectives on what drives long-term performance.  These dynamics are natural but could result in strife, lack of focus and poor resourcing.

Marketing performance — and ultimately competitiveness — will suffer without adequate alignment, investment and capability-building. Making the marketing mission real will be part cultural change, part priority-setting and part talent management.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

 

Gamification for Retailers

Gamfication — the use of gaming principles and technologies to drive customer engagement — is the most unique business development to emerge in the past couple of years.  Gamification is a triple-threat strategy.  Properly executed it can drive higher customer loyalty, increase marketing efficiencies and boost brand differentiation.   Of the many industries it is being implemented, retailing has produced some of the most interesting case studies. Below are two of the most noteworthy examples, as overviewed in Retail TouchPoints magazine:

Duane Reade

Duane Reade is a leading pharmacy chain with over 250 stores in the New York City metropolitan area.  Duane Reade has used Gamification in conjunction with a variety of social media platforms over the past 18 months to build sales, brand awareness, and customer engagement.  Its Gamification initiative features a location-based game using smartphones and a variety of social media sites like Facebook and Foursquare.   Users first have to download an app that contains a storyline.  This story features two factions, each battling to control a recently discovered resource called Exotic Matter. Players choose a faction to join and compete against one another in teams to “control” territory.  A sprinkling of logos found in 250 Duane Reade stores marks this territory.  Customers would go to one of the stores, scan the logos and download promotional offers, collect virtual resources or collaboratively solve puzzles.

The marketing results have been impressive. Duane Reade has seen a sharp increase in web and in-store presence as well as higher brand awareness and deeper customer engagement. As of March 2013, Duane Reade has been mentioned and/or shared more than 1,500 times.  The Company recognizes that getting their customers to play fun games is an effective and efficient way to drive business results and collect user data. According to Duane Reade spokesperson Calvin Peters: “Strategically engaging gamification experiences that utilize location-based gaming platforms, are becoming increasingly relevant as mobile concentration within the retail space continues to expand. It is important for us to be where our consumers are, including the virtual world.”

Whole Foods

This upscale grocery chain uses Gamification in a different way.  Instead of a stand-alone marketing program like Duane Reade, Whole Foods leverages game mechanics to enhance the social media and mobile components of existing marketing campaigns. In a recent promotion, Whole Foods rolled out the “14-Day Blast Off” campaign, which challenged consumers with a set of tasks that focus on making healthy life choices such as getting daily exercise or eating better. Throughout the course of two weeks, badges were given after participants completed one mission of healthy living per day. The missions were designed to ease the players into healthy living with small but important gains. Whole Foods understands that its consumers want to eat well and live a healthy lifestyle.  Instead of pushing out information, this campaign used fun and engaging missions (i.e. games) that promoted the desired behavioral change.  Interestingly, Whole Foods also uses Gamification to promote positive behavioral change among employees.  If the employee can achieve company goals like losing weight, they can get a discount on products.

Three elements made these programs successful.  Each integrates Gamification as part of its existing online and offline marketing campaigns and business strategies; the retailers linked game mechanics to their deep understanding of a user’s habits and practices; and; their executions were fun and engaging, tapping into a consumer’s intrinsic desires like competition and achievement.  As well, there are now enough successful Gamification examples across multiple sectors to generate best practices around program design and implementation.

For more information on our services and work, please visit us at Quanta Consulting Inc.

Big Data boosts advertising

Much has been written about the transformational role of Big Data in improving business performance, but the usefulness of data analysis has spread to almost all aspects of business. Most recently, ad-development managers have been able to make use of Big Data to measure and improve the performance of their traditional and digital advertising programs and tie them more closely to corporate goals. A thought leadership piece by Wes Nichols published in the March 2013 issue of the Harvard Business Review highlights a new framework for designing and implementing cutting-edge advertising analytics.

In the dynamic world of digital and traditional advertising, channel proliferation and social media, any improvement in measuring and refining performance will have an immediate impact on the bottom line and the brand. Traditionally, advertisers have been challenged to realistically measure the performance of their creative and media plans. They have been forced to link sales data with a small number of variables such as media reach and frequency, using a limited number of rudimentary analytical tools like media-mix modeling, surveys, measuring clicks and focus groups.

This popular approach has some significant drawbacks.  It evaluates each medium (e.g., TV, print, digital) independently, and not collectively as consumers in the real world experience them.  Secondly, it is very difficult to measure the impact of one advertising variable, (increased banner ads, for example), on another variable like awareness. Finally, these tools do not easily connect advertising activity back to changes in consumer behaviour like purchase.

Recently, a new set of specialized Big Data methodologies have emerged that allow managers to improve both the effectiveness and efficiency of the advertising plans.  Powerful techniques and technologies can now mine terabytes of data in real time across hundreds of different marketing and business variables in search of key correlations.  The insights gleaned can then be used to dynamically adjust media spend and creative execution for optimal performance.

In his Harvard Business Review article, Mr. Nichols, outline a three-step approach to leveraging next-generation advertising analytics:

Attribution: Gathering and attributing the revenue and strategic contribution of each tactic.  In many companies, this exercise could involve hundreds of variables, ranging from marketing initiatives to economic factors and competitive actions.

Optimization: Using predictive analytics to measure the potential outcomes of different business scenarios based on the interrelationship between tactics and changing market variables. For example, what will happen to sales revenue if you boost online advertising in Ontario, cut it in Quebec and increase prices in the Maritimes?

Allocation: Re-allocating marketing and advertising spend based on the learnings gleaned from the Optimization phase. Ideally, the most successful programs would gain additional funding while others would see less support.

We have witnessed a number of companies use an approach similar to Mr. Nichols’ to generate a 20-40% improvement in marketing effectiveness and efficiency.

Case in point is Electronic Arts, one of world’s leading software gaming companies.  They were looking to boost marketing performance by going beyond simple measurement tools and managerial judgment.  The company decided to use the attribution, optimization and allocation process on the marketing plan of a new game, Battlefield 3.  Hundreds of variables were analyzed including sales results, online chatter, pricing data, advertising reviews and distribution information.  The predictive analytics uncovered some important insights.  For example, a favoured tactic (in-theatre advertising) was under-performing.  Second, digital marketing performed better than previously thought.  And finally, the media launch plan was sub-optimal.  These learnings helped the firm revamp the introductory marketing plan of Battlefield 3, making this launch the most successful in the company’s history.

Despite Analytics 2.0’s potential, firms need to approach it systematically and with common sense as implementation could be a challenge. We have seen analytics projects flounder due to poor data quality and reporting, weak compliance (e.g., data hugging), insignificant management support and insufficient IT capabilities.  Moreover, good judgment and creativity is still vital in the creative and media planning process.  Glen Hunt, creator of many memorable ads including Molson Canadian’s “I am Canadian”, says:  “Big Data represents a big opportunity, but it does not negate the importance of ‘blink’ test intuition and experience.  After all, ‘not everything that counts can be counted, not everything that can be counted counts.’   Or so says, Einstein.”

Big Data has the potential to revolutionize advertising measurement and evaluation, truly delivering higher marketing performance at less cost.  Companies looking to build and leverage these new capabilities would be wise to make them strategic priorities, choose the right business or product beachhead to kick-off and earmark the necessary mandate, resources and investment.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Influence and social media marketing

Social media marketing is a large and growing part of every company’s marketing budget and plan. Conventional wisdom says leveraging “influential” people like friends or celebrities can trigger many others to do new things like purchase a product or join a community.  However, new research published in the Harvard Business Review challenges this view and suggests a significant amount of social media investment and focus is being improperly allocated.

Over the years, millions of dollars of social media investment has been directed at finding and leveraging influential consumers who will virally persuade others to try a new product or service.  On the surface, this notion makes a lot of sense.  Marketers can improve effectiveness and efficiency by targeting only those customers that will use their product and trigger others to do the same.  Much of the rationale behind this premise dates back to Malcolm Gladwell’s book, The Tipping Point, which explored why some ideas take off and others don’t. Does this “cause and effect” hold up to statistical scrutiny?

No, or at least not yet.  In a social media universe, it still is very difficult to separate influence from other factors in a purchase decision.  “Real influence depends on personalized and engaged relationships,” says communications pundit John Barker of Truenote. “However social media often dilutes digital relationships to the point where ‘influencer’ impact becomes increasingly abstract.”

To get closer to a definitive answer, NYU management professor Sinan Aral conducted a number of experiments to understand who and what is most influential, and who is most predisposed to their influence.

Results

We know from psychology that human behaviour clusters among friends over time.  What we don’t know is whether or not this is due to peer influence or another factor, such as similar interests. In one experiment, Aral studied the adoption of a mobile service product within the 27 million-member Yahoo! instant messenger network.  The research used the latest analytical models to separate social influence (i.e. how does a friend’s usage or recommendation impact another’s decision to use the product) from another factor, homophliy.  A sociological phenomena, homophily is the preference of individuals to associate with, have the same habits as, and like the same things as other people (the proverbial ‘birds of a feather, flock together’ concept), even if these people have no direct connection to each other.

Interestingly, Aral found that traditional measurement models overestimated the impact of a friend’s social influence on purchase decisions by a factor of seven times.  Furthermore, these models overstated the role of social influence early in a product’s life cycle (or when a trend should begin).  In fact, his research shows half of the perceived influence could be attributed to homophily effects alone. Early adopters tend to be so much alike that social influence plays a lesser role.  To see this phenomenon in action, check out the people standing in line at an Apple Store before a new product launch.

Another experiment looked at the role of social influence versus a common digital marketing program on the downloading of a Facebook app. Aral found that while personal invitations from a friend had a higher response rate (6%) versus an automated announcement (2%), the automated messages still generated much better results.  Their adoption rates were significantly higher (246%) versus a personal invitation (98%), due to the higher number of automated messages that went out.

To sum up, it appears that using outdated analytics and shaky strategic assumptions is leading marketers to rely too much on social influence-based tactics at the expense of more traditional yet successful homophily (i.e. segment) driven programs.

Implications

This research has significant implications for a firm’s marketing strategy and planning, especially around new product launches.

  • Peer-to-peer tactics (e.g., referral incentives) designed to leverage social influence will be less effective and more costly than previously thought.  This is not to say that P2P programs should be abandoned; rather they would be more effective introduced later in a product’s roll out.
  • Well designed digital and traditional advertising and promotion tactics that target discrete segments (based on homophily characteristics) will be more effective and efficient, at least initially.
  • Marketers will benefit from using the latest Big Data models so they can design plans with the optimal mix of influence and traditional-based tactics.

Exploiting Big Data may hold the key to super charging the role of social influence.  According to Mr. Barker, “Big Data can now provide customized social influence at scale.  Building a virtuous circle of “mass personalization” that is both deep and broad could be the “tipping point” for digital marketing.  Think influence on steroids.”

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Big Data 1-2-3

Taking advantage of the insights buried in Big Data is all the rage in many companies. An omnibus term, Big Data is the accumulation and synthesis of all kinds of customer data collected but lying dormant within an organization. However, exploiting its potential could be a daunting task for many managers. Here are three foundational steps to help kick off a high return, low risk analytics program:

Begin with a hypothesis

Big Data presents so many opportunities it’s often difficult to know where to start.  The journey can finish at many end-states, some providing real business value but others offering nothing actionable.  Moreover, data analytics competencies are not easy to assemble. Analytics experts are expensive and often difficult to find. You need to know where you are going if you want to extract value and not waste time and money.

One way to ensure you are on the right track is to create a hypothesis about your customers that is directly linked to corporate strategies and metrics. For example, an explicit hypothesis could be that the existing digital marketing plan is not effectively targeting the needs of the highest potential customer segments.   This hypothesis would then be tested against the insights produced from an analysis of the pertinent customer and operational data.

According to Casey Futterer, vice-president of  strategic new business at Nielsen Canada,  “Coping with large amounts of data with few analytical resources creates an imperative for laser focus — what issue to solve, what action to take.  Important issues will relate to questions of: who? (consumer/shopper); what? (proposition); and/or, how? (plan).”

Balance left and right brain thinking

Many assume Big Data is a mathematical and IT exercise based on customer relationship management data.  While these three drivers are critical to producing meaningful insights, they cannot tell the entire picture about the customer, particularly if the data is internally siloed or incomplete.  For example, firms can find in Big Data a link between nice weather and increased purchase behaviour but they often can’t tell you why these correlations occur.  Do people buy more because it’s sunny outside, springtime or because of a recent price promotion? Without knowing the ‘why’, marketers will have a difficult time turning the insight into something actionable that generates solid financial returns.

To get to root causes of behaviour and a critical 360-degree view of the customer, managers need to look elsewhere at non-quantitative factors — the right brain or emotional side of behaviour — through tools such as ethnography, neuroscience and qualitative consumer research.  In addition, managers should round out their quantitative analysis with a holistic examination of the customer experience including service, channel interactions and their actions with competitive offerings.

“There is no magic box that spits out the answer,” says Futterer. “Managers need to combine analytics with emerging tools and your team’s collective experience and brain power to extract insight and drive action.”

Test and scale

Once you know where you are going and have the right approach to get there, its time to put your strategy into action.  When it comes to high-impact initiatives like Big Data, prudent firms walk before they run.  This is often done for practical reasons.  For one thing, few senior managers have direct experience with complex analytical tools or methodologies. Secondly, Big Data programs can be costly to implement. Finally, organizational and IT challenges may initially limit data accessibility and quality.

Using pilots is a common sense approach when experience and investment are low, and uncertainty is high. By running a number of small tests, managers can identify resource requirements, learn by doing and build internal momentum behind quick wins.  Pilots could be structured around important questions such as which purchased products trigger the cross-sell of other items.  Or, they could be run in specific geographies, lines of business or with single products.

Finally, collecting and analyzing more data does not always lead to better results.  According to the former CIO of CIBC and McGraw-Hill Companies, Peter Watkins, “There is a common fallacy that more data is better. Best practice research shows that it is not the volume, rather it is the variety of data, and the better quality of that data, particularly on customer behaviour and characteristics, that enables smart analytics to produce rapid insight and speedy action.”

Properly executed, analytics has the potential to transform an organization. Tapping this opportunity need not be intimidating or unmanageable. Following an analytics strategy that aligns to marketing goals up front, adopting a holistic analytical approach and focusing on generating quick wins and learning will increase your firm’s chances of success.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Social media best practices

Most firms are expected to significantly increase their spending on social media over the next 18 months.   However, managers need to ask themselves if they have the capabilities to exploit its potential?  Our experience and industry research suggests that many companies are ill-prepared to leverage social media.  They will first need to optimize their organizations and then get three best practices right.

Social media is clearly near the top of the corporate agenda.  According to a 2011 Booz & Co. and Buddy Media survey of 117 companies, 40% of CEOs reported that they will be increasing social media’s priority within their firm. About 95% of the respondents indicated that they will invest more in social media.  To efficiently and effectively scale up this investment, firms must make certain they have the right organizational design and the requisite capabilities, including the ideal combination of people, skills and technology.

Given its relative newness, social media’s place in many companies’ structure, workflow and culture is unclear.  As a result, the first step for any CEO is to communicate down through the organization why social media is a strategic priority and how it supports key corporate priorities like new business acquisition, customer satisfaction and project execution.  Secondly, the CEO must ensure that all functional groups and business units are aligned to this mandate and provide the necessary input and support.  To guarantee brand consistency and integration, CEOs should make certain that the marketing function has clear responsibility and accountability for all social media efforts and budgets.

Once their organizations are optimized, firms must build and excel at three foundational competencies:  1) content creation 2) community management and 3) audience analytics.

Content Creation

The unique format and culture of each social media platform – think Twitter’s 140 character limit – requires a completely new kind of creative execution and campaign development. Compelling content is social by nature, unique and relevant to the community.  It incites engagement (i.e. having conversations, sharing stories) and is always focused against the brand strategy and key marketing metrics.

To deliver this, firms need to cultivate and attract ‘social creators’ with strong writing, editorial and listening skills.  Prudent firms are already bulking up.   According to the survey, 49% already have internal creative talent while 35% are building their bench.  Of those planning to hire, 72% are prioritizing creative talent (producers and editors) above other requirements.  To ensure that their content is fresh and innovative, companies should regularly engage with creative outsiders.  Given content’s vital role, it would not be surprising to see flourishing social media practitioners evolve as mini-publishers of different types of content and innovative tools.

Community management

Developing great content for your brand followers is just the beginning.  Companies need to cultivate these fans by effectively managing them ‘24/7’ within a community across multiple social media and offline platforms. To do this, firms need to excel at listening to their followers, overseeing their actions, rewarding their brand-reinforcing behaviors, and bringing new content and tools quickly to their attention.  However, this can be a challenge, requiring the skills of unique individuals and teams who wear many hats – part social media connoisseur, part brand champion and part analytics expert.

Some firms, like Microsoft, already get this.  “Our strategy,” says Grad Conn, chief marketing officer at Microsoft U.S., “is to evolve from ‘social marketing’ which simply pushes a message through social networks to a ‘social business’ approach where we use social networks to build relationships and foster conversations with our audience through listening engagement.”  Managers recognize this internal gap.  Approximately 50% of the survey respondents indicated that insufficient community management capabilities represent a barrier to social media success.  Importantly, 55% of respondents worry that they will lose control of their brand messages in a dynamic social media environment.

Audience analytics

There is no point in bolstering your content and community capabilities if you can not evaluate the results and course correct quickly.  At the most basic level, marketers must be able to measure the reach of their initiatives, for example, how many visitors, likes, comments and shares are they getting. Moving forward, managers need to understand the ‘why?’ behind the numbers.  For example, why does some content get shared over others?  Or, why do some communities participate more than others?

The real interesting insights come when firms can understand which fans or magnifiers (i.e. those that share content outside of the community) are strong brand advocates, and why they do that and influence others. Getting to these nuggets will require good qualitative and quantitative research competencies as well as social monitoring tools. Thats a focus area of Microsoft.  According to Conn, “Good content still rules, but now we know what’s good much faster as a result of social monitoring.”  Ideally, this analytical approach will lead to marketing’s Holy Grail – the determination of social media program ROI.

Social media has the potential to transform a company’s marketing effectiveness and its relationship with its customers, if management has the foresight, ability and fortitude to build out their capabilities.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

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