Panel: Structuring Marketing Strategies in the Age of the Customer
Thought leaders from IDC, Boxed.com, Fortuna and Adorama discuss marketing strategies in customer-centric brands.
– [Moderator] This is where, in the conference, we start touching upon the actual problems and the actual nerves. This panel today will be talking about Structuring Marketing Strategies in the Age of the Customer and I think that, you know, customer centricity has been a thing for probably 50 years. Before that, people would, you know, be product-centric.
But other than a buzzword, it means a lot of things. It means significant shifts in customer strategy. According to [inaudible] I think that 75% of the brands believe they are customer-centric. The problem is the dissonance between what the customers think, only 30% of the consumers agree. So, on that note, I’d like to invite the panel to stage, which is comprised of three leading CMOs from leading brands from across the globe and one distinguished professor.
I’d like to call to stage Jackson Jeyanayagam, CMO of Boxed.com. Your applause, please. Darren Lovern, Chief Marketing Officer, Fortuna. Lev Peker, Chief Marketing Officer, Adorama.
And Professor Barak Libai from the IDC Business School. So, I only presented you guys by name so let’s give you each one a few moments to present themselves.
Let’s start with you, Professor Libai. You have a microphone right there on the table. – [Professor Libai] As he said, I am a professor of marketing at the Arison School of Business, IDC. IDC is Israel’s first private university. We have the…probably the leading group of researchers in marketing in Israel.
Prior to IDC, I have been in the Technion Israel Institute of Technology, Tel Aviv University, visiting professor the MIT Sloan School of Management where I introduced the customer profitability issue into the MBA curriculum. My research deals a lot with the issues that we deal with here, with customer profitability retention.
In particular, with social influence, how social influence, word-of-mouth, imitation, trends affect the profitability of customers, how much customers are worth because they talk. – [Lev] My name is Lev Peker and I’m the Chief Marketing Officer at Adorama. I’ve been there a little over three years. Adorama is a specialty retail store in New York with the most of our sales online.
We sell electronics. And prior to that, I ran home appliances and tools divisions at Sears, which is now going bankrupt, but yeah. So, I’m very interested in the relationship marketing aspect because I saw this problem a lot at Sears, where we spoke about being customer-centric but there was always constant battle over the customers, you know, was it an online customer or a store customer?
So, we didn’t really have a central view of the customer so it’s an interesting problem to solve. – [Darren] Hi, my name is Darren Lovern, I’m the Chief Marketing Officer for Fortuna Group. Fortuna Group would be the largest online and retail sports betting and casino business in Central and Eastern Europe. So, we target countries like Czech Republic, Poland, Slovakia, Croatia, and Romania.
And I’ve been Chief Marketing Officer there for the last three and a half years. And similar to the guys here, we’re on a similar journey to try and reorient ourselves as a much more customer-centric company. – [Jackson] I’m Jackson Jeyanayagam, I’m CMO of Boxed. If you’re not familiar with Boxed, imagine if Costco and Amazon got drunk, hooked up, had a kid, and that kid moved to SoHo, New York.
We’re that kid. So, it’s bulk wholesale delivered to your door in two days. I’ve been there for two years, overseeing everything from growth to retention to creative. But before that, I was actually at Chipotle, which was a whole other story. I was there for two years running digital marketing, including CRM. If you’re familiar with the store. I was there before the food crisis so engaging with our customers and building a relationship with them after a food crisis like that took on a whole different meaning which I’ll talk about later on in the presentation.
And I spent my first 15 years at agency side working with Nike, T-Mobile, P&G, and other consumer brands.
– Thanks, guys, and thanks again for joining us today. So, the first question I want to present to the panel is about, you know, as I mentioned, to begin with, for ages, marketing strategies have been built around product centricity. And then, at a certain point, four Ps became four Cs, you know, products in the four Ps became consumer.
Obviously, this is a result of customer centricity. And on that, I want to ask you about the decisioning. When does a brand come to that point where it decides to do that shift from product centricity to customer centricity? And Lev, I’d like you to, if you’re happy to answer that, take on the first.
– Yeah. So I think, for us it came pretty early on because what we realized is that we’re selling a commoditized product that’s been sold everywhere and it’s at MAP pricing. So, if we’re not customer-centric, we’re essentially competing with Amazon and Best Buy on their terms, and we can’t match their scale so we have to build a relationship with our customer and we have to understand what our customer is looking for besides just the product that we’re selling because there is a commoditized product.
– Okay. Very interesting to hear. Darren, from your side, how things might be different or the same in, you know, in the gaming space.
– Yeah. Well, in one sense, it’s very similar. I think our industry is incredibly difficult, it’s a differentiation. I mean, if you look at any brand in any market, there’s very very little when you ask customers what’s different about each brand. So, it’s really really difficult. I think, historically, product is where people have tried to differentiate. But even within that, you know, people catch up and copy very very quickly.
So, you might gain a six-month advantage. So, where we’ve tried to focus is move our brand more towards customer-centric and more emotional kind of links to customers and really try and reposition the brand that way so, you know, to get above, if you like, the commoditization around product, around pricing, etc.
– And then, that would probably focus, like, the goal on making sure that, you know, the KPIs become longer-term relationships with the players.
– Okay. Jackson, how about you? Probably, correct me if I’m wrong, but Boxed was born customer-centric so perhaps, from other experiences you’ve had with other brands?
– Yeah. I mean, I think, similar what Lev was saying, we’re a commodity. I mean, you can get Doritos and coffee from anywhere. But that said, I do believe it’s a balance. I don’t think the focus on product has changed, I think there’s just…it’s a better balance. So, meaning, if our product isn’t insanely awesome, if that experience isn’t great, there are many other places to go to get it, and then you add the layer of consumer-centric focus on marketing and messaging and customization, and that’s where AI fits in.
So I do think it’s a balance, but our project experience is actually still a core of what we do. If we can’t figure that out, then being relevant to a customer actually doesn’t really matter. But after that, it’s about the brand values and then what the brand stands for, and that’s how we think we’re relevant to our customer beyond just the CPG products we sell.
– Makes sense. Every time I’m asked about this question. So, I would say that, you know, product centricity is that, but the product isn’t that. The first thing with customer-centricity is having a good product and I think that, you know, we all agree on that. Professor Libai, I’m more than happy to hear the academic approach to this question. What point in time is the right time to make that shift?
– Let me say, before that, that if you want to look at when did the world become more customer-centric, it’s about 25 years ago. So, over the end, actually, when I see here the topics and the talks, people began to talk this language in the 1990s. And they were…
– Are you hinting that we’re old-fashioned?
– The buzz names changed, the ideas. But the main issue, following what these gentlemen said, is that people began to realize that they cannot differentiate based on the brand. And products are becoming more and more commodities and if they have the information, they could do something else. And actually, they began to have the information.
So, the story, also, of customer centricity, is in stores for information. People have it and can analyze it. And what we see is that they have it more and more and their brands become more and more commoditized. So, it’s sort of a process that is going on. I think that, to many companies, if they could, would have stayed product-centric. It’s much easier. You put a product in the market and you don’t have to do anything about it, it’s just that they can’t.
They can’t. As they said, we are commodities. So, they’d have to do something else.
– I think it’s also important to distinguish, you know, product because, like, when we’re e-commerce, pure-play D2C, selling CBG products, right? So, you know, the way we look at it’s like there’s merch and digital products. So, I would say, like, definitely on the CBG side, it’s all the same shit, right? I mean, you’re hoping to save 50 cents here and there, but at the end of the day, it’s the same stuff.
But the product from the digital experience side, I think that actually is important and I think, in this day and age, the last 5 years, 10 years, when people talk about product and the old, the Four Ps, it was very much about the placement of that coffee, that car, that diamond ring, whatever it is. Now, it’s the digital experience, the app, the dot-com experience, and everything goes along with that. And I think that is very consumer-centric. So, there is this proliferation of that, but I think the idea product has changed and how we define product has changed because of all the D2C companies that evolved, obviously beginning with Amazon into now where we are.
– It’s so interesting you say that because, in the Four Ps, when they did that shift or, you know, to the Four Cs, so placement became convenience, right, convenience of the consumer. So, definitely, we need to, you know, dance around the consumer and make sure that they have a good experience to create that type of long-distance relationship or long-term relationship, which is a great segue to my next question because customer centricity means different things for different brands.
Happy to hear how, you know, each one of you created that specific marketing strategy around customer centricity and how it’s unique for your specific strategy. I mean, how did you address customer…how do you even interpret customer centricity and how do you go about that when building your strategies?
– I mean, for us, there’s two key questions, what the customers need and what do they want? And I suppose the second want is generally what they’ll tell you they want but then you also have to try and go behind that and actually understand what they really need behind that, and that’s the real challenge. So, yes, we do lots of things like customer research and focus groups and quant surveys and things, and that tells you a certain amount, but particularly in our industry, you know, they’ll all tell you I’m extremely price sensitive and then you’ll see the evidence behind it, actually they’re not, and that’s a classic one for us.
So, it’s really trying to work out what they want and, you know, and move from a, “Oh, this competitor’s developed this product, we better develop it too,” towards actually understanding, you know, which product-type features, what type of prices they need, etc., what the customer actually needs.
– Yeah, we created a three-year strategy, and we called it, FOCUS, which means for our customers and us. And we’re, kind of, the first step in being customer-centric was really understanding who our customers were. We thought we had an idea of who they were, but then, when we started looking at the data and we started asking questions of our customers, like, we found that, you know, for example, they weren’t buying televisions from us, they were going to Best Buy for that even though they were trusting us with very large purchases of video and photo equipment.
So, understanding who the customers were and then, kind of, launching a voice of customer survey and really digging into what mattered to them and why they were making the decision to buy from us versus somewhere else, that’s kind of how we took it down the path of being more customer-centric. And then, we had to change and create programs, you know, we had to change our user experience on the site, we had to change our fulfillment processes to make sure the customers are getting their packages faster, rolled out loyalty programs.
So, a lot of things had to change, and it all came out of talking and understanding what our customer’s needs and wants were.
– Yeah. I mean, the same thing, you know. For us, e-commerce is a very soulless category sometimes. It’s about…it’s a race to the bottom, essentially, right? Who’s got the cheapest price and the most convenient, but we’ll never beat Walmart on price and we’ll probably never beat Amazon in convenience, it’s that same-day delivery and the way they can scale, that’s going to be tough for us, so it has to be something else. And you can live in a spreadsheet and you can do a lot of testing of everything, and we do that, I mean, trust me, we’re so quad-driven, but sometimes, you have to have a heart and you have to be just instinctual about what a customer wants.
So, I wasn’t a founder, but the founders started the company, and one thing they wanted to do was just make it more of a personal touch. And they had no data to support this but they included handwritten notes in every single box, and that was from the first box all the way down to the millions of boxes we send now. And the people always asked us, “How do you scale that?” And the answer is, ‘We just do.” We make it a priority for everyone in the warehouse, when they’re shipping things, just like you have to tape up the box, you don’t tape up the box, there’s going to be, you know, a lot of problems, same thing.
They handwrite a note in every single box, and that was a personal touch that you, for sure, will not get from Walmart or Amazon or Target for many reasons. So, those are little things that we’ve done that, you know, we feel like makes us more customer-centric while also hitting on the basics that we need to.
– So, it’s more of the smaller micro-gestures, if you will, that make it feel, you know, more personal.
– Yeah. And then, that’s when you can use AI. And we have an awesome data science team that predicts things, we can customize messages, we customize flows, we customize what we serve up to you based on everything that you’ve done in the past and people who look like you so we can scale that feeling like it’s one-to-one but it’s really, you know, one-to-many, but many who look like you.
– Yeah. Professor Libai, I want to give you the same question, only with a small pivot. So, Darren mentioned needs and wants, whether the customers know what they need or know what they want. From an academic standpoint, where is the threshold between, you know, where customers understand what they need and actually know what they want?
– You know, Steve Jobs talked about the fact, why he doesn’t like market research because he tells customers what they really need and what they want, and it worked for him. I don’t think it works the same for other marketers. I think, in general, one of the things that we need to do in order to be customer-centric is indeed to understand the value to the customer.
But I think that we don’t have to stop there. We must not stop there. The story is about customer lifetime value. So, ideally, what we want to do is to manage the profitability of our customers. And I know it’s a bit not politically correct because I see the language, again, here and other places, everybody talks about delighting customers and so on.
In the end of the day, you need to understand the chain to customer lifetime value. And the aim of firms is to understand how value to the customer brings to us a customer lifetime value. For example, when I look at organizations, if the organization is divided to marketing sales and service that don’t talk to each other, this is not I know this is not customer-centric even if they talk about it because nobody sees the full story, how service affects retention which affects lifetime value, how sales affects acquisition, which means we want to acquire the right customer, not every customer, how marketing affects the pricing which might affect customer development that affects lifetime value.
Our aim, at the end of the day, is to understand the full chain, not to stop with the customer, but to end at customer profitability.
– So, discover more and more elements that affect lifetime value and then see how we can, you know, change them and impact them.
– And see, everything that we do, we should ask ourselves, “How does it affect lifetime value?” In fact, the ultimate measure is not even lifetime value but what we call customer equity, the sum of the lifetime value of the current and future customers. All of the people here are customer equity managers, whether they know it or not. And the customer-centric companies are the ones that know or try to understand, everything that they do, how does it affect this customer equity.
That’s the story that we’ll see also going into the coming decades, imagine.
– Interesting. So, parking that for a second and talking about, you know, sounds very simple. Product-centric to customer-centric, instead of focusing on the product, let’s focus on, you know, on the product itself. And my question here would be that, you know, we know that that shift from our experience at Optimove is one of the biggest and most challenging shifts out there.
It affects almost every and any part of the business. And I would like to ask you all, which were the specific parts of the business, which aspects the business did this or does this customer-centric strategy touch upon most? Or what are the focal aspects of the business that, you know, that make or break a good customer-centric strategy?
– I think marketing and, you know, as much as I hate to say it, it really touches marketing the most because, to Professor’s point before, we have to balance the lifetime value of a customer over the cost per customer acquired.
And so, when you start thinking about that equation and you want to grow your lifetime value and the cost per customer acquired continues growing as you’re going out on the fringes, it becomes harder and harder for you to acquire loyal customers. So, you know, it really affects marketing a lot. But marketing doesn’t has to drive change through the organization because it also impacts your user experience, and your merchandising strategy, and your fulfillment processes, and your customer service.
So, marketing has to become the voice inside the organization to drive that change because a lot of companies say, “Well, we’re customer-centric,” and then they’ll just change their customer service policies and they’ll say, “Well, we’ll make returns easier. That’s customer-centric.” Well, okay, like, that’s great, but did you really solve a problem that needed to be solved? And it doesn’t really mean that you became customer-centric.
So, I think marketing gets impacted the most and then it’s up to marketing to then drive that all the way through the organization.
– So, this change is led by marketing, it touches upon almost any aspect of the business? And another point, I think is, that you mentioned, is that don’t scratch the surface, go deep. Otherwise, you know, customers are smart. They’ll smell it from a mile.
– Yeah. So, I think, previously, you mentioned that you have to walk the walk, right? You can’t just say, “Hey, we’re customer-centric,” and then not do anything. So, you have to walk the walk and you have to really understand how the different aspects of your business are impacting the customer.
– Yeah. I mean, I’d agree with that. I mean, it definitely starts at the marketing team and, you know, essentially, we can try to think of ourselves as being almost the internal advocate for the customer, and that’s one of the reasons, for example, customer service is part of the marketing function in our company and a lot of companies these days, and that’s a key part of it. For our industry, though, I think where it manifests itself, where it has to end up, is in the product, for our industry, because that’s the touchpoint for the customers.
So, you know, if we’re not translating it there, you know, we’re, you know, 99.9% of interactions that our customers are faceless, they’re on online on the product, so it excludes the retail obviously. But, you know, perfect example, you know, we identified customer needs to improve people’s ability to withdraw money and so we’re pushing for better functionality, faster withdrawals.
And you know, one of the geniuses in the product team says, “But why would we make it easier for people to withdraw money?” And you know, it’s a very different mindset. It’s I think, you know, bookmaking teams say some of the product teams, historically, might have a…or subversives the customer because they’re trying to tackle the, you know, the shrewd punters, etc. So, you have to really change that mindset in those guys to really think, you know, from a customer perspective in that sense.
– It’s funny you mentioned this because a lot of our content today will be touching upon subscription-based businesses. And then, back in the day, it used to be, you know, how to trick your customers not to cancel their subscription, right? And today, that doesn’t work anymore. So, you know, giving a better experience sometimes might, for the short-run, look like, you’re losing. But then, for the long run, it creates that type of impact.
Another follow-up question to you, Darren, is are there aspects of the business that you think that, you know, be customer-centric doesn’t touch upon?
– No, I don’t think so. I can’t think, off the top of my head, I can’t think of any example. I mean, you know, in terms of what we do, obviously, we have a lot of regulatory requirements which often aren’t, let’s say, customer-driven, they might be, you know, tax-driven by our regulator etc. But even those, you know, one of the key things we have to do is try and turn those around to, you know, minimize the impact on the customer.
So, you know, in each of our markets, we’ve a lot of very tricky, kind of, KYC requirements. In some countries, you actually have to go and visit a shop and show your ID so, you know, you can’t continue betting with us unless you get up off your ass, walk down to the shop and show it. But trying to make those processes easier and easier is a challenge. So, I can’t think of any area apart from maybe some of the things, you know, obviously, we wouldn’t want to do that, from a customer point of view, we have to do it.
So, I think that’s probably the trickiest one, where there’s things you have to do for regulation reasons that you don’t want to do.
– Jackson, how about you? Do you recognize any parts of the business that customer centricity doesn’t touch upon?
– Yeah. I mean, so, I hate panels where everyone agrees, but I do agree that that’s led by marketing. But I would say, historically, marketing has never been very connected to supply chain and operations, they’ve just been, kind of, church and state. And I would say, that area is where you can become quickly separate yourself from the customer because you’re in a warehouse, you’re somewhere where, you know, you might be a contract worker working hourly.
You don’t give a shit about the customer. At the end of day, you just want to make sure that you have a job for the next day. And I think, connecting the dots there, whether it’s turning them into full-time employees, increasing wages, being smarter about the vision and culture. Chobani, well, was famous for this. Hamdi, the founder of Chobani actually gave equity stake to all his warehouse employees, one of the first companies to do that. Chobani is a very successful private company. They will have an exit or an IPO at some point, that’s a life changer for anyone, in particular, the folks on the operations warehouse side.
So, I think, thinking about how to connect the dots of the vision of the company with operations changes the whole experience because you could argue if you don’t nail operations warehouse, nothing else matters. At least, I would say, with any business, but especially with D2C e-commerce or CPG. The other piece is customer service. I mean, customer service, the bar has been so low for what customer service is.
I mean, historically, customer service, the benchmarks would get off the phone as quickly as possible, right? And on one hand, yes, that’s good. You want to solve the need fast. But what happens when you think about those KPIs and time, then someone stops listening, they try to get off the phone quickly, they try to rush through an answer and say, “I can’t help you.” Everyone talks about United Airlines, you guys have seen the video, right? United Airlines? The guy famous for getting carried off the plane?
Why does that happen? Well, I could tell you the KPIs for the flight attendant, all the security was flights on time, get the crew from one city to another. So, your decisions start getting made as a result of that, not what’s best for the customer. So, you know, ultimately, that’s an extreme example. Hopefully, none of you have been carried off a plane before between now and then, but the idea was that the KPIs for her, that flight attendant, and that guy who came and forced that guy off the plane, the way I see it, was, this flight has to leave on time, you can’t have more than X flights depart late and on-time window, and that crew has to get from one city to another.
So, all of a sudden, people blame United Corporate, but I would argue it was because they weren’t customer-centric enough and thinking about what is the customer service experience? Don’t just focus on the superficial metrics like on-time departure, or get off the phone as quickly as possible, think about how do I engage the customer more. I’ve heard a lot of companies are actually now getting customer service reps to spend more time on the phone with them. Not only is it a great way to build a rapport, but it’s actually an upsell opportunity, opportunity to sell incremental products depending what you do.
Zappos, I think, famously, has done this well. I think they’re probably one of the best in class with customer service. But you’re seeing a whole shift in that mindset and the irony is it’s called freaking customer service but yet, the KPIs and benchmark are so low. If you guys have a good customer service experience, you’ll tell everyone. But that, a good service, a good experience, is so simple. It’s like, “Oh, they sent me a freebie. They were nice to me and said, “Thank you.”
They gave me $10 off,” and you’re telling everyone, like, that’s bullshit. Like, that is, like, such a low bar, but that’s what it’s been. So, I would argue, ops and customer service are the two areas that we need to focus on more.
– Which, you know, I’d assume that the most natural follow-up question is that, you know, as Lev said, that, you know, all of this customer centricity approach is driven by marketing, how do you affect those arms that you are directly in charge of?
– I mean, I’ll answer it. I think the CMO and that marketing needs to be the chief culture officer so I think there’s an HR impact. So, but it starts with the CEO. The CEO has to empower marketing, they have to say, “This is the value of marketing. This is what I need from you as a CMO, and this is how I expect you to go about it.” And then, the CMO needs to cross-collaborate. They can’t lead by title, they can’t lead by, “Hey, this is my purview. This is what I’m responsible for. This is my budget.”
They have to inspire, they have to get everyone excited, but they can’t be a cheerleader either, right? Because you can’t drink the Kool-Aid and not be honest with yourself about, well, what’s wrong with the business? Where can we improve? So, it’s a real balance of, you know, old-school marketer was a cheerleader, so I think it’s a balance of being realistic, optimistic, but realistic too with everyone. Because the moment you’re overly optimistic, people will shut you off, and I think that’s a traditional CMO, but the CEO has to give them the power and give them the room.
But the CMO has to go cross-collaborate and win those relationships with the key leads.
– Yeah. So, I agree. And I actually advocated to create a new role within Adorama. And so, we created a role of Chief Customer Officer, to address exactly that gap. And so the Chief Customer Officer is responsible for customer service as well as warehouse operation. And so, now, I’m collaborating with this person, making sure that we have weekly meetings and we’re talking about, you know, how that those two areas are impacting what I’m doing on the front end and how we can now talk to our customers more confidently about delivering packages on time and, you know, answering the phone, and doing all of those things.
So, again, I think marketing still has to drive that. And you know, if there’s a gap in the organization, it has to be addressed.
– You talked about the Chief Operations Officer, the CMO, and so, I want to talk about the Chief Finance Officer, the CFO. I think that the story that happens in firms and a lot of sense is the story that nobody can explain to the CFO how what we do affects the cash flows because CEOs and CMOS and CFOs, they see cash flow.
This is the language of the board. And what happened, historically, over the years as we talked about brands, and about satisfaction, and about delight, and about the good things that we all talk about, but they want to see the cash flow. And unless we are able to show the cash flow, nothing would move. The reason that you see what you see in call centers is that CFOs understand the cost, and nobody can come and say, “Wait a minute, if you let them talk more, maybe we’ll increase the retention rate that will bring you tomorrow morning $2.8 million in the next 5 years.”
The minute you move to the language of money, they will understand. And the issue is that we were not able to talk this language.
– Yeah. Can we go down this rabbit hole? Because I think this is really interesting. I know it’s not the topic but this is a change in the CMO landscape. I don’t know if you guys have seen this, I think you nailed it. So, 15 years ago, or even 25 years ago, if you watch Mad Men, Don Draper days, like, the CMO had no need nor no business understanding the numbers and finance, now I’d argue, and I talk to a lot of different people from recruiters to investors to CEOs, and they’ll all say something, big companies, and small companies, they say, “The future CMO understands numbers. But not only understands it, like, digs in deep.”
So, I think if you guys are in retention marketing, you’re naturally inclined to understand the numbers. But a lot of other folks in marketing, especially brand and creative don’t. And I think you do. I think that’s such a good point. And it used to be marketing was just a function of sales, right? 4.5% of sales goes back into marketing? Now, I think sales has to be a function of marketing.
You actually need to show me the dollars against that $50 million, $100 million, $150 million budget. And if I don’t, then your budget will be much much less next year. And if you don’t understand the P&L, you don’t understand the cost of staff, like the Professor said, you don’t understand, like, “Okay, we’re going to increase customer service time from one to four minutes, that’s got a huge impact,” that means additional staff, that means additional scale, maybe there’s social media elements there, but still increase cost.
But if you increase the CLV of a customer as a result, and you can show us some increased retention rates, which to your point earlier, it cost me way more to go acquire someone than to keep a customer. There’s a huge value there. But if the CMO doesn’t understand finance, they’re shot. And I actually think you’re seeing more of a shift of CMOs moving into the CEO roles. Brian Niccol, who’s now the CEO Chipotle, was the CMO of Taco Bell. And I’m seeing this more and more if they understand the ops, the P&L side, and the financial piece.
But if they don’t, I think CMOs will actually be doomed for a very short tenure.
– Yeah, I mean, I completely agree. I mean, a confession, I actually started out as an accountant. So, two of us.
– Nobody’s perfect.
– I know. I don’t like to talk about it very much. But it is. It’s critical. And numbers are critical. And that’s one of the, kind of, key things that, you know, I’ve been trying to focus on our company is, really, to move from, let’s call it subjective measures, to much more objective measures as much as possible. So, one of the things that would hopefully happen in the next couple of months in our company is we link our customer service system into our data warehouse and do things like, you know, predict the value of when a customer contacts us, depending on how they rate us after the call or what type of problem they contact us with, and really start to learn.
So, you know, things we asked about, in terms of how quickly we payout on bets, for example, we, you know, we found out recently that it can take up to an hour and a half after a match finishes before everyone gets their money. And you know, intuitively, people go, “Well, that’s not good,” but actually, now, we can start to measure the impact for when people contact [inaudible]. So, it’s really about trying to build what I call the knowledge base. So, actually, is get as much factual information as you can in different areas, be it customer service, be it your brand research, your quant research, and actually, you know, link it all together so you can actually start to measures and also use tools like Optimove to build campaigns off it.
– I think that it wasn’t a rabbit hole you went into, it’s a great segue to, you know, to the next question is, how do you measure or how do you build a business case for customer centricity and what would be a good result of this type of strategy? What are the KPIs that you’re looking to…which needles are we looking to move?
– I mean, it’s the traditional ones around, I think, retention. So, it’s, you know, it starts with the entire customer lifecycle. So, it’s bringing in new customers, it’s how well you keep them, getting them past the first moment of truth, the second, and as we’ve learned this morning, it’s continuing the second moment of truth after that, and just, you know, each, you know, maintaining the activity-based, how many days are active in each month, etc.
So, it’s just…once you’re at that level, it’s your traditional KPIs plus then things like customer satisfaction. And so, you know, be it…
– I would argue that it’s not necessarily the traditional KPIs because traditional KPIs, say five, six years ago, used to be performance, right? What’s your cost of acquisition? What’s your…? Those types of things. Customer centricity maybe shifts that a little bit.
– I mean, we talk a lot about the, sort of, the leading indicators. So, instead of, you know, looking at the lag indicators like performance it’s, you know, how many times your customers are active during the month, for example. The real thing, the fundamental things that drive the lag indicators, so it’s really getting, you know, further down into the lifecycle, to the events that actually create the value.
– I think, ultimately, why we’re doing customer centricity is because it allows us to extract more money from the customers so we can fuel the acquisition of new customers that are more expensive. So, keeping that in mind, if you are trying to maximize your lifetime value so that you can continue acquiring new customers, like, those have to become the metrics.
You have to start measuring repeat purchase rate, and lifetime value of a customer, and the equity of all of your customers, and is that growing or shrinking. But it doesn’t really change the metrics that we were looking at before, we just have to look at it less in silos. Whereas, before, we might say, “Well, paid search has to grow 10% and affiliates has to grow 15%,” and whatever those metrics used to be, now, we’ve got to look at it more holistically and say, you know, “We’re going to spend this much money on marketing, how much lifetime value can we deliver on that and then how do we continue growing that so that we can continue spending and acquiring new customers?”
– So, professor, I know this is probably your area of expertise in terms of looking at what comprises LTV, how the social affect it comprises. So, do you want tp talk a little bit about that?
– Yeah. So, first, as I said, I think that above every CEOs desk should be one number, which is the customer equity. What we think is the customer equity, as of today, and it changes, and it changes all the time, and what we do in the firm is to try to fit this number, to try to understand how changes that we will make will change the number.
One of the issues is indeed the social influence and then going back in it, and you’re right, I mean, customer acquisition costs are going up. So, we have two ways to deal with that. One of them is the money loop, we have current customer will bring us money and so on. The other way is the viral loop. So, we have current customers talk and they bring us other customers. When a customer talks, he actually increases customer equity through increasing the lifetime value of other customers.
And this is quite hard for the people in the word of mouth industry, for example, to understand, social media. They should talk the lifetime value language as well because word-of-mouth is, actually, the value of word-of-mouth is how much I change your lifetime value or your lifetime value. So, it’s, again, it’s all about cash flows at the end of the day.
And whatever we do in the firm should be connected to the cash flows. We are here to create the systems that will enable us to understand the connection between what we do and customer equity.
– I think that, in this case, attribution would be very tough to measure the, you know, the different circles, is there any type of, you know, equation or any type of way to measure? Is it even quantifiable?
– I think that we all have to acknowledge that we deal with uncertainty. And this is something which is very fundamental because we’re doing a very poor job of teaching it.
– CEO’s gotta know it, you can’t measure marketing. I’m just kidding.
– No, no. We never know because, you know, lifetime value is into the future. Whatever we do is to decrease uncertainty. So, let’s say the uncertainty is 80%. And after we do all the good things that we do, it’s going down to 40%. So, still we will not know a lot, but we’re in much better case. And again, in business schools, we are not good in teaching that because we talk about a deterministic world, “They should have done that and that and that.”
But it’s all about uncertainties and we don’t really know. We need to understand probability probably much better than we do. And actually, there are tools and, you know, Optimove, now what Pini showed above is actually based on Markov chains and so on. There are tools to deal with uncertainty and to acknowledge uncertainty. We will not know but we will be able to know better than otherwise.
– I’d like you guys to touch upon any very key obstacles that you came across when, you know, bringing this transition to the board where we’re talking about, okay, now we want to strategically invest in our customers. What obstacles can we foresee? People here that are, you know, in the audience and are looking to do this change, what obstacles would they be able to, you know, to come across?
– I’d sum it up in one word. When I joined Fortuna, three and a half years ago, it was legacy. So, it’s legacy issues in, sort of, two places. One would be the technology, we just couldn’t measure anything. It was, you know, it’s really difficult to know what’s going on, you know. Some countries, we didn’t even know how many phone calls we were getting, for example.
Just, you know, crazy stuff like that. So, one side would be the, let’s call it the infrastructure legacy, and the second is, what you talked about culture, and it’s the culture and the people legacies, you know. The old way of thinking about things. And, you know, lots of generic statements like, as I mentioned, customers are price-sensitive. They’re very price-sensitive. Customers don’t want this, customers want that.
And not open to testing and learning and researching and understanding people better. So, it’s those two things. Overcoming the historical legacy and inertia around those things.
– Yeah. Because we’re dealing with uncertainties and we’re coming to the board and we’re saying, ‘Hey, you know, we’re going to be more customer-centric. We believe we’re going to get a lifetime value of X,” the first question you’re going to get is “Well, how much is this going to cost me?” Like, what do I have to lay out now in order to get to whatever that vision is?
And that’s something that you have to really think through and really understand and plan for because it’s a tough conversation to have with any board or any management team.
– Yeah. I mean, yeah, they nailed it. It’s always cost and scale. That’s pretty much what it’ll always comes down to. “How much will this cost me?Can we scale this quickly enough if it works?Can we shut it down if it doesn’t work?” So, just having very clear goals, expectations, timelines, and KPIs around what’s working, what’s not, even if they’re software KPIs, and not quant-driven, and that’s okay.
But if you’re not clear with that because you’re not sure of it and you avoid the conversation, that’s much harder, and then marketing loses all credibility.
– I think that the one big big obstacle is the incentive system. As long as boards are incentivized on the next quarters or manager or us or as long as we incentivize people in a call center to get people off the line, then you can talk about customer centricity however you want. I mean, it’s the issue, and we all should ask ourselves, “How do we incentivize?Do we really take the long-running in that?”
And I think that that’s still an issue. I think that still companies are driven by short running, and in short run, cost always wins.
– So, I think this discussion went to a lot of very interesting angles on, you know, customer centricity in the way, you know, heads of marketing look at this initiative. Gentlemen, thank you very much. Again, Jackson, Darren, Lev, and Professor Libai thank you very much.