A recent McKinsey article entitled “Getting More From Prepaid Mobile Services” (subscription required) highlights some lessons from a consumer offering that has applicability to many other offerings – microsegment promotions and experimentation. In this article, the authors talk about how mobile operators are creating microsegments of users to test promotions with the objective of creating renewals and increased (profitable) usage.

Segmentation is a well-known discipline. What is different about microsegmentation is the ability to continually experiment with promotions that are likely to be highly relevant to the microsegment, without jeopardizing revenues. If you experiment with promotions in a segment that is too large, you carry two risks:

1. People will ignore the promotion, and begin the cycle of ignoring your future communications because they lack relevance,
2. People who would have done what you offered anyway, take advantage of the promotion and cut into your margins. (For example, you might be a heavy text-message user and receive a promotion for free text-messaging.)

However, if you experiment in microsegments, you are much more likely to provide a promotion that will be relevant to that microsegment, that will be adopted by them and that will result in increased revenue (and profit). The article acknowledges that running microsegment promotional experiments is not simple, but it is effective. The team will need to be cross-functional, to include marketing, IT specialists and financial analysts. And naturally, it assumes excellence in data mining. However, when designed and executed well, this approach will create more value from existing customers and may help you get more customers as well.

Have you experimented with microsegmentation? How do you think it could impact your revenue and profits?

A recent Harvard Business Review article entitled “In E-Commerce, More is More”, provides valuable insight into what customers are looking for from vendors. Two professors, one from London’s Imperial College Business School and the other from Munich’s School of Management, conducted research into two critical items:

• What increases the likelihood of customers revisiting a site and,
• What causes customers to feel engaged with that company’s products

Engagement in this context means things like that customers are more “involved” and “connected” with, and feel a stronger “overall attraction” to the company’s core offerings.

At Crimson, we have spoken before about Engagement (see #2, Rethink the Basics) as a critical component in marketing. The HBR article talks about what causes customers to be engaged with a vendor. While research was conducted on e-commerce sites, I believe the lessons are applicable to all sites, for all types of customers.

The professors looked at five major factors that impact the likelihood of revisiting the site and the sense of engagement they had with the company’s offerings. These factors are ranked from low to high:

1. Order tracking
2. Clear categorization
3. Personalized shopping
4. In-depth information on product or service

… and the winner, by a substantial margin is …

5. Information on related products and services.

What does “information on related products and services” mean? Some examples:

• Ralph Lauren provides content on fashion, art, sports, healthy diets and business.
• Online auto shoppers show great interest in travel, sports, apparel and finance and an exceptional auto shopping site would provide that content.
• Another example is what Cisco does for its SMB customers via BizWize TV. This broadcast medium provides a variety of valuable information for small businesses (not just Cisco information), giving them a lot of reasons to continue revisiting the site and creating a stronger “overall attraction” to the Cisco’s core offerings. (Full disclosure, Cisco is a Crimson client.)

My takeaway: Companies of all kinds can maximize the likelihood of people revisiting their site, and of feeling engaged with that vendor if the company will invest in content that’s of interest to customers – content that extends beyond discussions of products and services. One great way to do that is to establish a community on the site that enables visitors to vote and comment on the things they want to see on the site. The community approach (not covered in the HBR study) will strengthen the tie a company is attempting to make with its customers even further.

What best practices have you encountered in getting customers more engaged with your company?

We work with a lot of clients that focus on verticals, many that consider focusing on verticals and several that go back and forth in terms of their commitment to verticals. I asked myself — why aren’t companies better at this? Here’s the answer:

1. World-class vertical marketing takes executive level commitment. No commitment, no success. As we mention in CMOs: Step It Up, this is the responsibility of the CMO.
2. Companies must recognize that this is a significant cultural shift, not a casual “marketing” shift. Products may change. New solutions may be developed. New positioning is required. New alliances are almost certainly required, along with new channel partners. Companies may require a retooling of their sales organization as well. This is a big deal.
3. The vertical “shift” will take time. A long time. Many years will pass before the organization can determine success, and as we know, ROI is hard to measure on this particular topic.

So, what’s a world-class marketer to do? Here’s a greatly simplified list to get you started thinking about the key issues to address.

1. Determine the right verticals. This is based on size and your ability to differentiate a solution within a vertical.
2. Identify the hot spots within the vertical. What and where is it that people really want to buy?
3. Determine who the buyers are. You will find they are different from who you sold to via a horizontal approach.
4. Determine what the “whole product” needs to look like. It is different from what you have today.
5. Determine what partners you need to deliver that whole product. You will almost certainly need a new set of alliance and channel partners.
6. Determine your go-to-market strategy (with which partners, with what solutions, into which markets?)
7. Build the teams you need, with the right domain expertise (people who understand that vertical), both internally and externally.
8. Develop your positioning and messaging around your new solutions. See Marketing Gets the Message for more info.
9. Pilot your approach into your highest priority vertical.
10. Rinse and repeat for each vertical.

Too simple? Too complex? What do you think?

Why do you think companies aren’t better at vertical marketing?

Venture capitalist Stu Phillips of Ridgelift Ventures writes about companies needing to “eat their own dog food” when it comes to using their products. He makes the point that they’ll understand product issues and fix them faster if they do.

While I agree, I think it’s especially important that companies eat the competitors’ dog food too! Most of our clients are involved in crowded markets where customers have a multitude of choice. And yet, I see technology companies using ONLY their own products internally.

Does HP use Sun servers with Solaris? Does Apple use Nokia phones? Does Cisco use Juniper switches? Does Oracle use SAP? Does Microsoft use web-based office productivity software?

Imagine if they did. Imagine what the marketing and engineering people would learn. They would learn the good, the bad and the ugly, not just about their competitors’ products, but more importantly, they’d learn the good, the bad and the ugly about their own products when they contrast them to competitive offerings.

Too many companies “drink their own kool-aid” and/or eat their own dog food so much that they actually believe they understand their products from a customer’s perspective inside an incredibly competitive world.

Worst case, if you can’t make it happen inside your company, hire a firm (could be Crimson, could be other companies) to help you get that real experience, insight and knowledge you crave about how your competitors’ products are really doing.

Are we in a recession? Maybe, maybe not. However, let’s assume that at least the U.S. economy will be in a recession and that as marketers, we need to work within that reality. Here are some tips for what you should do.

1. Spend smarter
   
   You may spend less on marketing. Not because marketing should be cut first or most (it most certainly should not), but rather because your company may cut budgets across the board. In fact, by showing how you intend to spend smarter you will make it easier to fight for your resources (see below). By “spend smarter”, I mean create a clear-cut justification for the investment. While you won’t always be able to measure the ROI (this is marketing after all), you can have your people create a compelling business case for each investment. Then, when it comes time to justify the investment, you will have established sound business reasoning behind it. And that’s what the CEO and CFO need to see in a recession.
2. Double-down on your current customers
   
   Sure it’s more fun to get new customers, but it’s more practical in a downturn to provide more value (and get more in return) from your current customers. When customers make decisions in a downturn, they’re more likely to go with a more trusted source. If they’re more likely to go with you, then you want to make it easier and more obvious to them to go with you. Market to them. Enable your sales teams to be more effective with them. Ask current customers what they need from you. Care for them and they will be even more likely to stick with you if the going gets tough.
3. Outsmart your competitors
   
   You have an opportunity to win market share from your competitors in a downturn. If you pay close attention to what’s happening in your target markets and how customers are reacting to a recession, you can act early and often with changes in product (if you can change it quickly), price, and positioning (especially as perceived needs change). For example, in the last technology downturn, software companies became very creative in their pricing schema, creating many variations of software as a service (SaaS) that enabled them to sell when their competitors were stuck in an old paradigm.
4. Invest in Growing Market Segments
   
   In every downturn there are market segments that grow faster than others. It’s your job as a marketer to help your company see and understand these market segments, and determine if you can quickly win business in these fast-growing market segments. These may be segments you’re already selling to, but not particularly focused on, or they may represent new segments – and new opportunities for your company. At the same time, you want to reduce your investments in the segments that will get hit the most in the downturn.
5. Fight for Your Resources
   
   As I’ve argued before (see CMOs as True Leaders) it’s marketing’s responsibility to drive strategic issues. In a recession, this becomes even more important. Knee-jerk reactions of companies where the CMO is not deeply involved in strategy, are often to cut budgets and people in marketing disproportionately. This results in marketing playing a less important role, and an extremely inefficient pendulum-swing of dollars and people that result in being caught flat-footed and losing out to competitors very shortly after the cuts are made. It’s marketing’s responsibility to fight for it’s resources, and doing the four items above will help you win that battle.

What other ideas do you have for thriving in a recession?

We recently completed a project for a client with the objective of creating a community of advisors. Our client wanted frequent, highly qualified input to gain an understanding of market requirements as they developed a series of product plans. This leading edge community would help us recommend to our client the best way to put in place the services, training, support, future program feature sets and market programs to best serve the market.

We conduct research of all types for our clients, and we sometimes develop communities (some call them panels, see my post on “What’s Your Market IQ?”, and Karen O’Brien’s post on social community success). When developing this community of advisors we learned that:

• online recruitment didn’t work,
• third-party “panel vendors” didn’t work,
• banner ads didn’t work.

What did work was a personal approach. We eventually had to get on the phone and talk with the potential community members. This is a more expensive, time-consuming approach, but an approach that works. Why?

• Potential community members can ask questions about the benefits, structure, and goals of the community; and realize that they could personally profit from their participation,
• Phone recruitment is much more personal and real (online solicitation has a much more “spam” feel),
• Potential community members feel much more comfortable divulging their personal contact information to someone on the telephone, as opposed to via an online form.

We learned to start with human contact to most effectively create the community. What ways have you seen community building work?

(Marek Ranis of Crimson Consulting Group, contributed to this post).

A recent article in the MITSloan Management Review discusses how to raise your “market IQ”. I will summarize this article for you.

The authors argue that many market research efforts are misguided and create poor results because:

1. They focus largely on current customers. The flaw in this approach is that you miss all your potential customers.
2. They have a tendency to base strategy on what is publicly known, such as industry reports. The flaw in this approach is that decisions are made without executives understanding whether or not the data are truly applicable to their unique situation.
3. They rely too heavily on qualitative research. Readers of this blog will know that I am a big fan of qualitative research. Nonetheless, these authors argue that the flaw in this approach is that you can’t get the insights you really need.
4. They enable a pattern of taking a piecemeal approach. By this they mean too many uncoordinated market research efforts. The flaw in this approach is that the company doesn’t operate from a true database of knowledge.

I agree with their proposed solution – creating full-market panels – because we have successfully implemented these for our clients. A full-market panel means a set of online respondents that cover the full spectrum of customers and potential prospects within the markets you intend to serve. The advantages of these panels include:

1. You can recognize needs and identify your most valuable customers more easily. By designing the panel to include non-customers, you can identify why you are losing, or not reaching key customers.
2. You can examine where you stand against competitors – overall and in detail. You can begin to examine sources of erosion in your customer base vs. your competitors.
3. You can better see where the market is headed. By examining trend data, you can begin to see – much earlier than otherwise, where the market is heading. This can give you a huge advantage over your competitors and first-mover advantage with new products and new market segments.
4. You can more precisely track your performance. The first panel provides a baseline of information and over time, you can watch the change in your performance within specific target segments and/or with specific products.

Have you run full-market panels? What advantages and disadvantages do you see in this approach?

According to a Booz Allen Hamilton study, companies that elevate marketing to a strategic level have stronger growth in revenue and profitability. Why is that? Since the study requires a login to review, I’ll summarize some of the study’s findings below.

The key themes for why this happen include:

1. Put the customer at the heart of marketing
   In an idea I wholeheartedly support, the study talks about how at Yahoo, the marketing team exposes senior management to their consumer labs to give them an appreciation for the value of talking to consumers and to build empathy for them. The more of this the better, I say.
2. Make marketing accountable
   Interestingly enough, the study did not have very many examples of successes in this area. It made it more of an objective without substance. I argue that you should Stop Measuring Marketing.
3. Embrace the challenges of new media
   A little too obvious perhaps. The best quote from this is from NBC Universal that “consumers are telling us they want to be in control of the storytelling”. I point out that Marketers Aren’t Using Web 2.0!
4. Recognize the new organizational imperative
   One key part of this is that “marketing can no longer live on an island”. Marketing now has organization-wide responsibility. See CMOs: Step It Up for more elaboration.
5. Live a new agency paradigm
   As Keith Pardy, SVP of strategic marketing at Nokia states “we are moving from technology push to consumer pull, from push marketing to co-creation, from idea manufacturers to consumer experiences. Agencies (and all other marketing services firms) need to adapt or die.
6. Remain adaptable
   Particularly for marketers involved in technology, the world is changing ever more rapidly, and we need to change with it.

So marketers, how can you elevate yourselves to more strategic levels in your companies?

Earth to Mark Zuckerberg, Earth to Mark Zuckerberg. Have you forgotten about your users?

OK, you’ve reversed course on portions of your advertising scheme, and done so in response to user complaints. I give you credit for that. However, I think you’ve forgotten that you are a two-sided platform. One side is your advertisers and the other is your users. You are serving your advertisers to the detriment of your users. To win a platform war (and believe me you are in a war that will last for a very long time), you need to serve both sides. If you lose one side of the platform, you lose the other side as well.

Your current advertising scheme (even with changes) is all about your advertisers. I can see no benefit to your users, only headaches. (See Facebook’s Social Ad Experiment)

If you continue down this path of making life more difficult for your users, they will go somewhere else (do you remember Friendster? Do you know what Ning is?)

Do other readers feel the same way I do?

John Quelch, a Professor at Harvard Business School, and director of WPP Group plc has written about How to Build a B2B Brand. Dr. Quelch provides three reasons brand-building should be important to B2B CEOs. I will quote from his post those three reasons, and add four of my own:

• “First, most B2B marketers have to address thousands of small businesses as well as enterprise customers. They cannot do so economically using the traditional direct sales force.
• Second, if left unattended, individual managers will each do their own adhoc marketing. The result will be a hodgepodge of corporate logos, taglines and packaging. Customers will be confused and the company will look disorganized.
• Third, B2B marketers are realizing that developing brand awareness among their customers’ customers can capture a larger share of channel margins and build loyalty that can protect them against lower-priced competitors.”

Now for my additional points:

• Fourth, selling through the channel requires a strong brand. Channel partners need a brand to promote as they (almost never) have a brand that businesses want to buy from. Business buyers are comfortable buying from a channel partner if they represent a brand with which the buyer is familiar.
• Fifth, the brand is the tip of the arrow of marketing. A strong brand enables the rest of the marketing (and sales) to get through to the buyer. The business buyer needs to know who the company is before they’ll pay attention to what they have to say.
• Sixth, a strong B2B brand enables a higher margin because the “brand promise” provides a lower risk to the decision maker, and enables that decision maker to justify their decision to others – because the brand is familiar to them as well. “Nobody every got fired for buying from IBM” is the ultimate brand promise.
• Seventh, a poor branding effort creates a poor brand promise. For example, Phil Mickelson (sponsored by BearingPoint) is probably the second best golfer in the world. BearingPoint, therefore, is associated as being the second best. Accenture is associated as being the best. Which would you want to buy from?

Can you think of other points as well?