Stamp Out Customer Churn - Plugging Holes In The Bucket

Learning A Costly Lesson From The Wireless Industry

By David Miranda

It has been a well known tenet in business that it costs five times more to acquire a new customer and retain an existing one. It seems like good business sense, therefore, to make a concerted effort to keep the new ones happy and contented and plug that expensive "hole in the bucket". More often than not today, executives place too much emphasis on the acquisition side of the equation as evidenced by the bulk of their brand's marketing budget dedicated to "filling the bucket" with little committed to "fixing the holes".

Take the major wireless carriers, for example, and their relentless battle for market share of the over 220 million wireless consumers in the the country. Cingular, Verizon, and Sprint Nextel account for 168 million of the total, or roughly over 3 of every 4 wireless consumers in the market.

The chart below illustrates the Wireless Big Three Report Card Of Acquisition vs. Retention.

Roughly, for every one new subcriber each month, they lose two so they have to keep acquiring that many more to compensate. There are, obviously, large holes in their respective buckets and it is very expensive to keep ahead of the curve. In an article by USA Today, the CEO of Sprint/Nextel admitted that he and his management team "made some tactical errors in execution. "One was a whopper." the article goes on to say, the management team "did the one thing no service company can ever afford to do: neglect its customers."

The following chart illustrates the impact of churn. Customers that have a better than expected experience, for example, are a low risk to defect. The opposite is also true. A bad experience will almost always guarantee a lost customer. Most people, however, fall into to the "okay" category. It should be noted that these customers are highly vulnerable to poaching by competitors.

The recognition marketing lesson here is clear: recognize and fix the holes in the bucket. Customer retention and recognition must get the management attention it deserves.

P&G, Others Build Mobile-Marketing Budgets

Could Be Signal That Medium Is 'Out of Trial Mode'

By Alice Z. Cuneo

LOS ANGELES (AdAge.com) -- Procter & Gamble, Microsoft Corp. and other major marketers have set aside a piece of their ad budgets -- albeit a small piece -- for mobile marketing, representing a "significant shift" for the emerging medium. Major marketers are beginning to take third-screen media seriously as a potential advertising venue.

Mainstream now

Any money put toward mobile ad platforms last year came from marketers' discretionary funds, but now mobile marketing is a dedicated line item in their budgets, Jay Emmit, president of the Americas, mBlox, a global mobile transaction firm, told some 400 attendees at the 2006 Mobile Marketing Forum. "It's a significant shift in the advertising world -- [mobile marketing is] now mainstream; it's out of trial mode," he said. The banking and financial sectors were responsible for some of the more innovative uses of the emerging medium in the past year, as when MasterCard used text messaging as part of its fraud-alert program.

P&G, which won the Mobile Marketing Association's first Overall Excellence award, has developed the Ad Lab, a program where key marketing executives on more than a dozen brands have been educated in mobile opportunities such as mobile video and text messaging. As a result, a flurry of new efforts and programs will be rolling out from P&G brands starting next year.

Lingering issues

Still, mobile marketing continues to have its hangups, Mr. Emmitt said. Mobile companies don't have a foolproof method of ensuring that ads for sexually explicit material, gambling and other adult-aimed content will stay off cellphones in the hands of kids. Wireless carriers led by Sprint have begun to warm up to providing marketers with targeted mobile advertising opportunities, a move than may not find fans with privacy advocates. Marketers and agencies are also demanding better measurement tools. "I want data," said Eric Bader, senior VP-digital at MediaVest. There's "not a lot of 'M' in the CPM," meaning there's not a lot of mobile included in ad rates determined by cost-per-thousand (CPM) consumers.

Another stumbling block to mobile marketing's success is the inability of marketers and media buyers to buy ads across carriers: In the current setup, ads with each wireless service provider need to be negotiated individually. Kim Olson, marketing director, Sprint Mobile Media Network, said marketers need to present strong, compelling mobile offers, "not just put a logo up." She declined to answer a question from the audience on the carrier's share of ad revenue.

Not so fast

Not all attendees were convinced that mobile has turned the corner. Courtney Jane Acuff, associate director, Denuo, said many marketers have not made a commitment to an interactive budget, let alone a mobile-marketing budget. "There's a big difference between a discretionary budget and an actual budgeted dollar," she said. Ms. Acuff added that next year, when the 2008 broadcast TV "upfront" ad-selling period is conducted, she will watch to see if mobile is included as part of the offerings. That "will dictate whether mobile is happening or not," she said. "It didn't happen this year."

A study this month from JupiterResearch found 22% of companies advertising online also are doing mobile marketing. Overall, the study predicted mobile ad spending to more than double from a predicted $1.4 billion this year to $2.9 billion in 2011. A number of the conference's attendees, particularly those representing the wireless carriers, noted the fragile nature of mobile marketing in light of the threat that comes from unscrupulous marketers, such as spammers. "Those in it for the short term: We will find you all and kick you out and never see you again," said Christopher Black, director-mobile marketing and interactive media, Cingular Wireless. And one conference speaker had some old-fashioned advice based on lessons learned from the internet's growing pains. "Pop-ups -- don't do it," cautioned Greg Stuart, president-CEO, Interactive Advertising Bureau. "Don't let it happen."

Recognizing Smart Brands Can Do Dumb Things

Always Remember The Customer Knows Best

By David Miranda

Back in the 1980's, the world's most valuable and recognizable brand, Coca-Cola decided that their core product needed a new formula. In the years leading up to this decision, Coke had been victimized by The Pepsi Challenge where Coke customers participated in blind taste test across the country preferring Pepsi to Coke.

Coke decided to do their own research testing a new formula with Coke drinkers and discovering that more preferred the new taste than the old.

The decision was made. The introduction of New Coke to considerable media fanfare as the Chairman and CEO of The Coca-Cola Company, Roberto Gouizeuta announced the new formula.

The result was one of the biggest marketing blunders in history. Almost immediately, loyal Coke drinkers rebelled with protests and boycotts that filled the consumer and trade media. Their message? What have you done? We want our old Coke back.

Of course, Pepsi was delighted. It's eventual Chairman and CEO, Roger Enrico later wrote a book entitled, "The Other Guy Blinked: How Pepsi Won The Cola Wars".

But what happened? Coke had some of the brightest marketing people in the world. It's SVP of Marketing, Sergio Zyman, an architect of New Coke, was recruited from Pepsi. How could smart people make such a dumb decision?

The answer, in hindsight, is that no one asked the right question. The research they did was sound. When asked which they preferred in blind taste tests, they did, indeed, choose New Coke.

What was the question they didn't ask? They did not ask "Would you be willing to give up your existing Coke for New Coke? Had they asked this question, they would have received a resounding no. What Coke failed to take into consideration was the very thing that made Coke a great brand - brand loyalty. This misjudgement was fatal for New Coke.

Of course, there was a happy ending for Coke. They immediately pulled New Coke and launched Coca-Cola Classic.

There is a critical marketing lesson here and it's not that loyal patrons will resist change. It's you cannot get the right answers unless you ask the right questions.

Coca-Cola Classic is a trademark of The Coca-Cola Company. All rights reserved. 2006

The Mobile Medium Coming Of Age (And Size)

U.S Trails In Percentage Of Usage Compared To European Stats, But Not For Long

By David Miranda

The mobile medium, in the U.S., is on the verge of becoming a powerful and ubiquitous marketing channel in much the same way it become in Europe and Asia. This fact is confirmed by a recently survey by M:Metrics and a conclusion by its CEO below.

"The growing adoption of major brands using SMS and the substantial consumer response rates indicate a couple of important trends: mobile as a commercial medium is on steroids; and multimedia convergence is real." - Will Hodgman, CEO, M:Metrics

The above statistical chart shows clearly the penetration of content and applications by the over 220 million mobile subscribers in the U.S. with almost 74 million consumers or 38%, for example, utilizing text messaging. This number, albeit growing exponentially, still pales by comparison to statistics in the U.K. (85%), Spain (83%), Germany (81%), and France (71%) respectively.

What does this mean for marketers? It means that if mobile is not currently an integral part of your marketing strategy, better get busy at extending your brand to the mobile channel or risk deferring first-mover advantage to your competitors.