During my Lotus years, I’ve been given the opportunity to meet Mike Zisman our CEO at the time. One of his statement stayed with me since then: “The purpose of any enterprise is to acquire new customers and retain existing ones. Product an services are only a means to that end.” It sounded a bit simplistic initially, but my experience in several companies since then reinforced my conviction of the importance and truthfulness of this statement.
During my marketing journey, I discovered the notion of customer lifetime value (CLV), more complex to comprehend and so effective to coin what your marketing focus should be and furthermore how to present it to your team. It also allows to present to CEOs and shareholders the real value ($) of customer loyalty.
Here comes customer equity that definitely coins the term that best represent all of this. You now can think of CLV as an an additional equity to the shareholders or the brand ones.What if you could revise Marketing ROI and fine tune your marketing course of actions based on this equation coming from Roland T. Rust in Advertising Age : “The ROI is simply calculated as the projected increase in customer equity minus the discounted [marketing] investment divided by the investment.”
But how do you calculate customer equity with real numbers? Now we’re talking 😉
Well, a number of tangible and intangible enters into this and I do not necessary agree with Roland Trust in his article. I’d refer you to Customer Equity Calculations dedicated site, and will come back on this later on. To approach it, just think of customer equity as the total of the discounted lifetime value of all of its customers. I know, not that intuitive.
To be continued …
I mentioned behavioral targeting recently on Marketing 2.0 as a way to increase marketing effectiveness. I wanted to come back on this topic in light of a datasheet that you can download from Omniture, to share with you a tip about successful segmentation as described in Wikipedia.
“The requirements for successful segmentation are: homogeneity within the segment, heterogeneity between segments, segments are measurable and identifiable, segments are accessible and actionable, segment is large enough to be profitable.
These criteria can be summarized by the word ADAMS:
- A Actionable: you must have a product for this segment
- D Differential: it must respond differently to a different marketing mix
- A Accessible: it must be possible to reach it efficiently
- M Measurable: size and purchasing power can be measured
- S Substantial: the segment has to be large and profitable enough” — Wikipedia
I won’t come back on all segmentation variables (Geographic, Demographic, Psychographic and Behavioral), you can follow the links for more, but I wanted to highlight the behavioral ones: benefit sought, product usage rate, brand loyalty, product end use, readiness-to-buy stage, decision making unit as Wikipedia refers to it in the Marketing 1.0 world. This is still valid of course, but new dimensions do appear with Marketing 2.0 especially around behavioral analysis. Thanks to web techniques you can easily track, using cookies for instance, what a prospect did before landing on your web site and what retained their attention.
More interesting, in our web 2.0 world, is the way a prospect, or for that matter, a customer expresses his relationship to your brand. This has changed significantly with the web 2.0 advent. As a matter of fact, behavioral targeting and market segmentation offers a powerful way to dialog differently with each segment. Defining your segments along the lines of attitudinal loyalty — more on customer loyalty on wikipedia — and remembering ADAMS rules will guide you to the appropriate solution to improve it.
I’ve been commenting and highlighting for some time what was appearing to happen at Dell — you can read all Dell related posts on Marketing 2.0. Dell customers should be glad to see Michael Dell return as the CEO of the company he created and by the way investors as well. Why? Mainly because Michael Dell has always been focused on customers satisfaction.
Let’s take a close look in the coming weeks to the concrete changes Michael Dell will initiate to turn things around. To begin with his recent e-mail to Dell employees already indicates that he will attack bureaucracy and develop its global services business.
I would repeat my recommendation, in a pure Marketing 2.0 inspiration:
“Appoint a Marketing 2.0 executive that you’d call Chief Voice of Customers Officer, with Web 2.0 as the only authorized marketing media. Engage the customer community in a genuine, transparent and honest 2 way conversation with your brand.”
Of course this is not to be considered as the only thing to be done, but one that could not be forgotten. Customer loyalty is key to any business growth and trust is key to customer loyalty. Trust nowadays demands transparency and genuine customer centric business state of mind. Good luck Michael.