What Do We Need Marketing For?

In my (very glamorous, high-profile) job as an industry analyst, I’m supposed to be on top of industry trends and happenings. For other analysts, that means talking to a lot of people.

Ugh. Mr. Cranky doesn’t like talking to people. 

So I’ve planted listening devices in the offices of leading financial services execs to hear what’s really going on.

The following is (as best as I can make it out, the audio quality wasn’t that good) a conversation between the CEO and CMO of JYAFCU (Just Your Average Federal Credit Union), on Monday, November 7th, the first working day after Bank Transfer Day. 

CEO: How did we do on Saturday?

CMO: (mumbling) You would know if you had bothered to show up.

CEO: What’s that? Can’t hear you. 

CMO: I said, “wouldn’t you know, we did very well.”

CEO: I read that overall, credit unions pulled in 40,000 new accounts and $80 million dollars in deposits. What did we bring in?

CMO: Well, considering we’re JUST YOUR AVERAGE credit union, we opened 6 new accounts, and added $12,000 in deposits. 

CEO: So that’s like, what? One account per hour that we were open on Saturday?

CMO: Uh, yep.

CEO: And were all branches open?

CMO: Uh, yep. 

CEO: So then, not every branch even averaged one new account per hour. 

CMO: Uh, nope.

CEO: How did we do in the month leading up to Bank Transfer Day? CUNA says credit unions opened 650,000 new accounts and brought in $4.5 billion in new deposits. 

CMO: Well, boss, seeing that we’re JUST YOUR AVERAGE credit union, we opened 91 accounts and took in $630,000 in deposits. 

CEO: Well, I’m no CFO, but something doesn’t seem right to me with those numbers.

CMO: I’m the marketing person. Maybe you better explain it to me. 

CEO: Well, on BTD we averaged $2000 in deposits per new account. As did the industry overall, for that matter. Yet, in the month leading up to BTD, we averaged nearly $7000 in deposits per new account. Why the discrepancy?

CMO: I don’t know. My people are working on it. 

CEO: OK, so let’s recap. Since the end of September, we’ve added 97 new members, did I get that right?

CMO: Sure did. 

CEO: So we currently have how many members?

CMO: That would be 12,783. We ended September with 12, 686, which, interestingly enough, is the credit union industry average. 

CEO: Well, I’m no CFO, but my trusty calculator says that’s about 0.8% growth in the month. 

CMO: That’s correct. 

CEO: Remind me again what our membership growth was from September 2010 through September 2011. 

CMO: We grew by the industry average of 1.7%.

CEO: And remind me again what our marketing budget is. 

CMO: Our marketing budget is 1% of assets, which is about the industry average, which comes out to $1.3 million. 

CEO: And remind me again what we spent to create Bank Transfer Day.

CMO: We didn’t spend anything to create Bank Transfer Day.

CEO: OK. Now remind me of one last thing: What do I need you for?

CMO: Huh? What do you mean?

CEO: Between September 2010 and September 2011, we spent $1.3 million on marketing which produced 216 new members. That means we spent about $6000 per new member. According to that Net Promoter guy from Bain, it costs 6 to 7 times more to acquire a customer than retain one, isn’t that right?

CMO: Ron Shevlin says that’s quantipulation.

CEO: When Ron Shevlin writes a bestselling management book, I’ll listen to what Ron Shevlin has to say. In the meantime,  I have to assume that the vast majority of our marketing budget is focused on member acquisition and not retention. So, even if the part of the marketing budget that went to acquisition was just $1 million, we still spent more than $4600 in the past year to acquire each new member. And what you’re telling me is that in the past month we acquired 45% of the total number of members we acquired in the previous 12 months — at absolutely no cost to us. I ask you again:

What do I need marketing for?

The 2011 Marketing Tea Party Awards

Last year we issued the first of our eponymous awards to some very worthy winners.

The word Like took honors for Most Annoying Word in the Marketing Lexicon, while Twitter walked away with the Most Overhyped Yet Ineffective Marketing Tool award. And, to nobody’s surprise, Groupon won Bonehead Decision of the Year (for passing on a $6 billion offer from Google).

Although 2011 is only 10/12ths of the way done, we’ve pretty much seen enough (in fact, we’ve seen all we can take), and can confidently call this year’s winners in some newly ordained categories.

The New Coke Award

This year’s winner of the New Coke Award, for the company that commits the worst strategic blunder, is — hands down — Netflix. The firm’s pricing decision and  flip flop on the Qwikster thing resulted in the loss of nearly a million customers and somewhere in the order of $12 billion in market valuation. If you’re Google, that’s no big deal. But to the rest of us in the 99%, that’s a lot of money.

In the age of social media, where gathering feedback from the market and testing marketing (read: pricing) decisions can be done relatively fast and cheap, there’s simply no reason for major strategic blunders like this one.

Now, I know what you’re thinking: Based on the criteria, wouldn’t Bank of America be a close contender? No. They captured a different award:

Credit Union Marketer of the Year

Bank of America, with a single move — that they didn’t even implement — has done more for the credit union industry in one month than credit unions have done for themselves in 100 years. The Great Debit Fee Fiasco of 2011 will be a case study in business schools for years to come.

The circus surrounding an announcement — wait, did they ever really announce it? — is perhaps unprecedented. The number of parties taking credit for the reversal has only just begun. Claiming that they “listened to their customers” as the reason for the reversal only begs the question: Why didn’t they ask their customers BEFORE they made the decision?

Congrats, credit unions. This is your Rocky moment.

Most Overused Word in the Marketing Lexicon

I’m going to go out on a limb and make a prediction: 2011’s most overused word might just repeat the honor in 2012. Whether I’m right or wrong about that, there’s no doubt in my mind that Analytics takes the crown for most overused word in the marketing vocabulary for 2011.

Did you know that when you create a spreadsheet, and populate some cells with formulas that do addition and subtraction, that that’s called Analytics? If you use an Excel function, you might get away with calling it Predictive Analytics. 

Have you ever taken a list of customers and identified those that meet a certain criteria, like under a certain age, or over a certain income level? Congratulations, you’re an Analyst performing Analytics!

Do you create reports for the management team showing them traffic on your firm’s web site? That’s called web analytics.

And there’s certainly no shortage of experts telling us that analytics is the key to competitive success. If you’re not performing predictive analytics on the social media data you’re monitoring and capturing, then you might not still be in business in 5 years.

If analytics was overhyped and overused in 2011, just wait until next year. 2012 will be the year of Big Data. We here at The Marketing Tea Party will be doing our best to make it the year of Right Data. Because what’s one more bruise on the side of our heads from beating it against a brick wall?

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Don’t forget to check out Snarketing 2.0:

For the print copy:      For the eBook:

   

I Regret To Inform You That My Blog Fees Will Be Going Up

Many of you have been reading this blog for the 2+ years of its existence for no charge. Well, my little freeloading friends, this is the end of that party.  Beginning December 1, I will be instituting the following fees for reading this blog:

1. Blog reading fee. Lifetime free readership will no longer be available. Per the terms of our agreement — that the end of anybody’s lifetime allows us to revoke the offer — free readership of this blog will no longer be offered. Starting December 1, you will be charged a $.25 fee for each blog post you read, whether you link directly to the site, view it in a reader, or are simply subscribed to it at the time it was posted.
2. Subscription reversal fee. Requests to unsubscribe from this blog will be assessed with a $25 premature disconnect service charge. At this time, subscription reversal requests cannot be taken online, as my eCommerce site is currently down for scheduled maintenance. Please mail your requests to the home office address, which can be found on my eCommerce site.
3. Inactive reader fee. For every week that goes by in which you do NOT read a blog post, you will be assessed a $.50 fee. For any month in which you do not read a single post, a $5 charge will be levied.

In an effort to be transparent, however, I think it’s important that I explain why I’m forced to institute these fees:

1. Higher debit card fees. Starting October 1, new debit card interchange fee regulations took effect. Even though these changes only impact banks with assets greater than $10 billion in assets, I figure that if this excuse works for Redbox, then it should work for me.

2. The Barbara Lee effect. Ms. Lee, a member of the House of Representatives, recently commented that she doesn’t use the self-checkout lanes at supermarkets because  “that’s a job or two or three that’s gone.” If there are more people like her out there — who stop using self-checkout lanes, ATMs (because they take away bank teller jobs), self-service gas stations (because they take away gas pumper jobs), or E-Z pass on the highway (because you know we can’t afford to lose any more toll taker jobs) — then the result will be higher prices for lots of things. In anticipation of this mass lunacy, I’m afraid I have to raise my prices.

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In a little more seriousness, there is a message here for marketers.

While I fully support the right of any business in this country to raise its prices, and shoot itself in its foot (or head) by doing so, firms that feel the need to raise prices WITHOUT committing PR suicide must do so with caution, transparency, honesty, and proactive communication.

Redbox’s announcement is shameful. They might have well as blamed foreign currency fluctuations in Uganda. There’s a large financial institution (who shall remain nameless lest they find out I’m blogging about them) that should’ve been a bit more sensitive about how it announced its recent price hikes. I would mention Netflix, but I have a professor/ad agency friend in the LA area who would jump all over any comment I might make about them.

Price changes are lightening rods. You might be able to mute the thunder, but people still see the sky light up. And then like to point at it and talk about it.

Are You A Snarketer?

By my calculations, if I can sell 23.7 million copies of my new book, Snarketing 2.0, within the next two to three years, then I can retire.

That would require everyone who qualifies as a Snarketer to purchase 2,370 copies of the book, however. So it doesn’t looks like I’ll be quitting my day job any time soon.

This is the problem with trying to get rich writing business books: There’s a limited audience. There are only so many people who are even potentially interested in the topic.

I’ve got an even bigger problem: My audience is more narrow than the typical business audience. The target audience for my book is a group of business people known as Snarketers. Are you a Snarketer?

You are if you meet three qualifications: 1) You have an interest in marketing; 2) You have an unusually high degree of intelligence; and 3) You have a warped sense of humor.

For your friends who can’t process that intellectually, show them this picture to explain to them why they don’t qualify.

I’ve done the research, so I know that there are only 10,000 Snarketers in existence. If you’re in the club, you’re part of a dying breed. Our increasingly politically correct culture is stifling warped senses of humor. And thanks to our “everyone gets a gold star” educational system, there are fewer and fewer people who meet the intelligence hurdle. On the other hand, everyone and their mother thinks they’re good at marketing.

The challenge in trying to identify Snarketers is that it’s not visually obvious — it’s not like being tall, or having blond hair. So how do you, dear Snarketer, let the world know that you’re part of this elite and prestigious club?

You buy the book, moron.

And then read it on the train on your way to work, or when you’re on a plane, sitting in first class showing off how many frequent flyer miles you’ve run up because you don’t have a real life.

If you do buy it — and post a review online (I don’t care if it’s a positive or negative review) — then I will give you the next book for free (yes, there will be another book, the subject of which will be Quantipulation).

Here’s my game plan: Real Snarketers who post reviews might convince some Snarketer-wannabes to purchase the book. If you don’t think the “find a sucker” strategy works, just look at how many banks now charge customers a fee to use a debit card. 

Where do you get the book?

If you want the print copy (you show off), go here:

For an eBook version, you can get it from one of two sources: At Lulu.com, or click on the icon below for the Kindle version.

If you buy the book, thank you. If you buy and review the book, double thank you.

UPDATE: If you order from Lulu by October 20, you can get free shipping:

Update #2: Apparently, there’s a formatting problem with the Kindle version. I’ve pulled that “off the shelf” for now (and disabled the link above).

Improving Bank Customer Retention

Market research firm Yoosless Phuqing Research released the results of a study today, revealing important insights into improving bank customer retention.

According to the study, bank customers who turn right into parking spots in a bank’s parking lot have a 7% higher retention rate than left-turning customers. According to the firm’s founder and CEO, Aimso Yoosless:

“Just 18% of right-turning customers switched banks last year. In contrast, 23% of left-turning customers switched. Clearly, a quality parking experience creates greater customer retention than quality online banking or direct deposit services.”

First National Bank of Boar Tush (Alabama) has already acted on these findings by closing off left-side parking spots:

According to the banks’s SVP of Revenue, William Dumass: “By closing off half the parking lot, we expect to increase our overall retention rate by 2.5%, which translates to roughly $500,000 in annual profits. The ROI on this effort is huge.”

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If you’re wondering what motivated this blog post, it was an article titled Banks Ignore Customers, Waver on Mobile Engagement that reported the following:

“While only 13% of banking customers currently use mobile engagement, a recent survey of revealed that a quality mobile banking experience creates greater customer retention than quality online banking or direct deposit services. A financial services strategy consulting and research firm conducted a recent study showing that only 5% of [consumers] using mobile banking and payment services switched bands in the previous year. With no true standout bank in the mobile banking arena, the bank that drives innovation in the mobile field stands to gain a large advantage.”

[Note: The above is a cut and paste with some rearranging going on. I’ll assume the author meant “bank” and not “band.”]

It would be easy to chalk this up to a misunderstanding of causation versus correlation. But that doesn’t capture it in every case.

On the contrary, in a number of–if not many–cases, it’s a factor of the author’s desire to make a statement about innovation, technology, or maybe to be seen as a thought leader. The research simply gives the author the opportunity to reiterate something that they already believed.

Ironically, I’m  a big believer that the mobile channel will be a strong differentiator. But the business case won’t be justified by some simplistic impact on customer retention.

The retention argument has been used with every online technology that’s been introduced over the past 15 years: online banking, online bill pay, eStatements, PFM, etc.

At this point in the development of online banking technology, banks’ retention rate should be approaching 800%.

Toilet Paper And Online Banking

Bank Innovation Monitor released a study recently which proclaimed that “consumers show deep ‘love’ for online banking.” The study found that:

“Only 3.8% of Americans over the age of 18 are not aware of online banking. However, it is not just that the vast majority of consumers are aware of online banking or using many online banking functions; consumers “love” online banking. Which online banking service is most “loved” by consumers? That would be online bill pay, the stickiest and most-killer of all banking features.”

My take: Americans “love” online banking no more than they do toilet paper.

Let’s compare the data:

• 96% of Americans are aware of online banking (source: Bank Innovation Monitor). 96% of Americans are aware of toilet paper (source: my unscientific estimate, based neither on surveys nor personal observations).
• 100% of Americans who bank online can’t live without it (source: OK, I made it up). 100% of Americans who use toilet paper can’t live without it (source: yep, made that up, too).

Now, let me ask you this: Although you might be fiercely loyal to a particular brand of toilet paper (the reasons for which I will not now, nor ever, ask you about), do you “love” your toilet paper?

If the answer to that question is YES, click here.

If the answer to that question is NO, keep reading. 

Bank marketers need to be careful to not confuse usage/dependency with an emotional attachment.

If consumers “loved” online banking so much, then wouldn’t it hold that they would “love” the providers of that service, i.e., the banks?

But, as we all know, consumers don’t love their banks. Nor do they love online banking. It’s simply a convenience that many of us have grown to rely on, and would be unwilling to give up. But that attachment is far from something we would call “love.”

Consumers don’t love online banking. In fact, most don’t really care about financial services or financial services providers very much at all. I would venture to guess that average Americans spend more time figuring out what restaurant to eat out at on a Saturday night than they do figuring out which bank to do business with.

If consumers truly loved online banking, than providing a measurably better online banking experience should get many of them to switch banks, right?

Good luck pursuing that path.

Toilet paper advertising is probably a good role model for bank advertising.

What does toilet paper advertising try to do? It tries to get people to care about their decision. It tries to get people to see that the choice in toilet paper is important. And if it’s successful in doing that, then the advertising can persuade consumers that one brand is superior to another.

Final point: I hope the people who clicked on the link above came back to read the rest of the post.

Quantipulation

A guy named John Wanamaker is famous for something he said 100 years ago. He said:

“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

Unfortunately, he’s wrong. I mean, if he didn’t know which half was wasted, how did he know it was half and not three-quarters or one-quarter of it?

He’s also wrong because it’s conceivable that 100% of his advertising dollars were wasted.

A century ago there were no ad ratings or measurement services. So how he could possibly know if ANY of his advertising spend was effective? It’s quite possible that any increase he saw in sales was due to exogenous factors like the weather, the economy, the competition raising prices or going out of business, or word of mouth among customers.

Ah, but hold on here a second. I guess it’s possible that 100% of his advertising spend was effective – or at least, not wasted – depending on what measure of success you use. If you don’t believe me, ask DeBeers.

Is it likely that the advertising he did had absolutely NO effect at all? Probably not. Just because someone didn’t make a bee line for the department store after seeing an ad, doesn’t mean the ad had no effect and should be considered wasted dollars. Some might have seen the ad and learned about the store, or the ad might have left others with a positive impression of the store.

Wanamaker thought half his advertising spend was wasted because he had no way to measure its effectiveness and didn’t even know what to measure.

Today’s advertisers have some measurement tools and services available to them, but none can claim to be totally accurate. And marketers are dreaming up new metrics every day, so you can be sure that no one measure is perfect, nor can we safely assume that even a group of commonly used metrics can truly give us a reliable picture of the effectiveness of advertising.

Bottom line: Any claim on what percentage of your advertising is wasted and what isn’t is just a random guess. We simply don’t know – and can’t know.

Here’s another claim to consider: Have you heard that its costs five times more to acquire a customer than to keep or retain one? How did they figure that? You could double the number of insurance, credit card, or mortgage customers you have by simply tweaking your underwriting guidelines, risk guidelines, or interest rates. No big cost associated with that.

But to retain those customers, you have to incur some big costs to keep branches open, provide call center support, and deliver service in an ever-growing number of channels. Many of the costs you incur to keep the business running are costs that help keep your customers  satisfied – and, hence, keeping them as customers. There’s simply no way the cost of acquisition is five times greater than the cost of retention.

But, wait, that’s not right either. Because all those costs you incur to retain your customers help to make your company the great company that it is. It’s what you’ve built your reputation upon. And without that reputation you couldn’t retain OR attract customers.

Bottom line: There’s simply no way to accurately calculate the cost of acquisition or retention. It involves making too many judgments and decisions on which activities contribute to acquisition and retention. It can’t be done.

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These claims – that half of advertising is wasted, or that acquisition costs are five times greater than retention costs – are examples of what I call Quantipulation:

The art and act of using unverifiable math and statistics to convince people of what you believe to be true.

The examples I just gave are just two examples of this widespread practice. In fact, the incidence of quantipulation has grown by 1273% compounded annually since 2003. And I have the math to prove it:

What’s driving this growth in quantipulative activity?

The false legitimacy that quantipulation provides gives quantipulators confirmation that the things they WANT to believe are really true.

In addition, there are many people who want to lay claim to having the secret sauce for marketing success, and sadly, many people who want that special sauce. Quantipulation provides the “scientific” proof that their sauce tastes best.

There are at a lot different flavors of this special sauce that people quantipulate about, especially about customer loyalty, influence, performance metrics and ROI.

I’ll be discussing those things in more detail during the conference. Hope you’ll be there.

Oh, and in the mean time, if I catch you doing anything quantipulative, I’ll be sure to call you out on it. 

In Defense Of Netflix

Netflix recently announced that it was jacking up its prices 60% to its existing customers, which — surprise! surprise! — caused nearly every Netflix customer with a Twitter or Facebook to bitch, moan, and complain about it on their social network of choice.

I have a message for Netflix customers: Quit your effing whining.

Netflix was well justified in doing what it did. Here’s why:

1. The CEO took a pay cut in 2010 and has to make it back. In 2009, Reed Hastings made $1 million in salary. In 2010, his salary was cut to a little more than $500k, which is where it stands for 2011. How the hell can he be a titan of industry if he isn’t making a mill per year? He can’t. You have to pay for that, Netflix customers. Sorry.

2. It’s the right thing to do for the country. Netflix’ provision for income taxes in 2010 was 5% of revenue, which came in about $2.1 billion. In other words, it paid out more than $100 million in taxes. If Netflix’s revenue jumps 60% as a result of its price increase — to more than $3.5 billion — than it will pay out roughly $173 million in taxes this year. And that’s good for America, folks.

3. You deserve to pay. If your lazy ass is sitting around watching all those DVDs every day, then you should have to pay for that privilege.

Netflix should have raised its prices by 70%. Enduring a little criticism on Facebook is a small price to pay for making this country a better place.

How To Reduce The U.S. Deficit

It’s a shame that my background couldn’t pass the media scrutiny I’d get if I ran for president (I got disciplinary probation in college for not leaving the dorm on a timely enough basis during a fire alarm). A shame, because I have an idea that could help reduce the U.S. deficit by billions, if not trillions, of dollars.

How? Through something I call the Decimal Tax.

It’s come to my attention that some of you are quite profligate in your use of decimal places in graphs and charts.

Take, for example, this chart from eMarketer:

Really, now. Is it important to know that fifty-eight POINT SEVEN percent of marketers measure clickthrough rates? If they had rounded it off to 59% would we have lost any critical information? I think not.

Then there’s this chart I pulled off the Internet:

Forget for a second that two slices of the pie appear to have the same color. Is it really important to know that James or Perez accounted for thirty POINT OH ONE percent of sales? No.

One more example: Toolbox.com reports that “IT professionals consumed social media at a rate of 6.77 hours per week, versus 4.29 for editorial content, and 4.16 for vendor content.” In case you’re not too good at math, IT pros spend 8 minutes more per week on editorial content than they do vendor content. If the Tools at Toolbox had rounded to one decimal place we might have underestimated this difference by 2 minutes.

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We have a problem in this country, my fellow citizens. We’re experiencing decimal inflation. And the only way to control this runaway inflation is by taxing the people responsible for this wasteful use of our precious decimal resources.

So I’m proposing the Decimal Tax. Every time you make inappropriate use of a decimal place in a graph or chart, you will have to pay a tax on that decimal place.

eMarketer, for example, would be charged $52 for the chart above. The guy who did the sales chart would need to pony up $100.

My inability to withstand the rigors of running for president preclude me from being able to implement this tax, however. Please help me make this a reality by electing a candidate who supports this tax.

Social Media Experts: Be A SNITCH