- Agreed to trade with him regularly
- Agreed to put aside a share of the profits to fund one cartload of food once a month for the poor farmers of Darsanapur.
Monday, March 10, 2014
Monday, September 17, 2012
Database scoring involves selecting the most important customers of your total customer list.
Typically, database scoring is done so that a limited marketing budget can deliver maximum benefits.
A very common technique is using the RFV to score databases.
This is a short story to show how it works:
There was once a very successful businessman who owned a number of sari shops. He had 3 sons called, Master R, Master F and Master V. Very bright youngsters too!
One day, the sons approached the father asking to be taught the business of sari shops. The business man was wise and knew that the only way to learn was by doing. And that the most important lesson to be learned was customer relationships.
So he asked his sons to come the next morning to one particular store. There he gave each of them a present. And he asked them to give it to any one customer from this shop who they felt was most deserving to be given a present. He gave them a month to do the job and said that they would all meet again in one month in that very store at the same time.
1) Master R was in a hurry. Why do tomorrow what you can do today? He saw a lady paying for a sari at counter and immediately gave her a gift. “Thank you ma’am,” he said. “We’re so happy you visited us today – please come again soon. Here is a small gift to keep us in your thoughts and come back soon.”
2) Master F was more patient. He had spent some time at this same store before and knew of a college teacher who visited every Saturday. Every Saturday, she bought a sari and gave it to her best student of the week (she taught at a girl’s college) the following Monday. The saris she bought were not expensive since they were for students and the college teacher wasn’t particularly rich. But the customer was a frequent shopper so Master F waited for Saturday and gave her the gift. “Thanks for being our regular customer. Please do keep coming. Here’s a little something for you”.
3) Master V was a little more like his father. He waited for an entire month. Then he pulled up the details of the customer who had the highest bill. He realized that she had bought 4 saris at one go! He drove to her house – a mansion quite a distance away from the shop. Upon entering the mansion he learned that she was a rich industrialist’s wife with three teen-age daughters. She had bought them all saris for Durga Puja. So he gave her gift, thanking her for the business.
The three sons met their father at the end of the month. He asked about their gifting experiences.
Master R, with his usual impatience jumped in. “I realized that the sooner I gave the present to a recent customer, the higher the chances of that person coming again. So I gave the gift to the first customer I saw buying a sari, hoping she could come again soon out of gratitude. In fact, she did, only yesterday! So I believe I’ve invested the present most profitably.”
Master F laughed at R’s simplicity – he explained how he waited for a week for the teacher who came in regularly and gave her the gift to keep her loyalty and frequency of visits. And in fact, she did come again on all the following Saturdays too!
Master V found this all absurd. He explained how he had identified the most valuable customer of the entire month and had given her the gift only yesterday. If she comes again, she would indeed be profitable. He showed every one the value of her bill to prove his point.
All 3 began arguing. F and V felt that R was being impulsive. Why the rush? R argued that time is money. And old customer does not even think of us as much as a recent customer does. So the sooner he got the gift to work for him, the better.
R and V felt that F was wasting money. The teacher would have come anyway. Why bother with a gift? F argued that keeping a loyal customer was far more cost efficient than trying to create a loyal customer.
R and F scoffed at V. “You really think that woman will want more saris after buying so many the last time? She also lives so far away!” they said. V argued back, “She likes our stuff. She has spent so much with us. One more visit and she’ll give us far more value than either of your customers.”
Their father intervened, “Let me get this straight. R: You think the most recent customer is the most likely to buy again if you give her a gift. F: You think the most frequent customer is likely to buy again if you give her a gift. And V: You think a customer with highest historical value is most likely to buy again if you give her a gift. What if I say you’re all right?”
The boys look puzzled.
The father then pulled out a long list in which he had meticulously recorded actions of every one of his customer with their dates of visits and purchase details for the last 3 years. He then gave the boys 10 presents again and said, “Why don’t you take a day more and try again? Tell me whom you would give these 10 presents to. We’ll meet tomorrow on this.”
This time, the boys knew they were on to something. Otherwise their father wouldn’t have parted with this list, which he updated every night and kept locked up in safe. After some fighting and quibbling, the boys prioritized all customers and agreed on 6, who were:
Very Frequent (came in at least once a week) + Very Recent (all of them had come to one of their sari shops the previous day) + High Value (all of them had purchased over ten saris each in the last one year)
There was no dispute there – these 6 customers needed to be given presents. But there was some trouble deciding on the last 4 gifts. They had to decide between:
- High Value customers (those that had purchased 20 saris last year but not come even once this year?
- Highly Frequent customers (those coming every day but buying very cheap, low margin saris)?
- Very Recent customers (all that came in this morning – hoping that they will come in soon again if they receive the presents)?
“But how should we decide which customer is more important?” asked the boys sheepishly. “An infrequent customer with high value or a very frequent customer with low value or a very recent, high value 1st time customer?” he continued.
“You test!” said the father. “You test by giving presents to those coming in once a week, and to those buying 5 saris at one go and to first-time customers.” See who comes back to buy more. Then you you’ll know what works for you and which parameter to value more after scoring.”
The boys were mixed with exhilaration and confusion. They now realized the value scoring the list (database) their father had given them testing to refine their marketing strategy. They were excited about building their own learning and experiences into scoring.
Learning: All other things being equal
- A Recent customer is more likely to respond to a marketing stimulus than a less recent customer
- A more Frequent customer is more likely to respond to a marketing stimulus than a less frequent customer
- A customer having given historically higher Value of business is more likely to respond to marketing stimulus than a customer having given less value to the business
Thursday, April 12, 2012
- Coalition Loyalty initiatives are basically cooperative marketing efforts and can emerge from commitment from a variety of like-minded stakeholders with a common purpose - these could be tenants of a mall, various businesses participating in a common card-based points initiative or business owners on a high-street.
- Before one can see the benefits, stakeholders need to commit to value – new cars as in this story, or more commonly, points, central CRM software and other such infrastructure as is necessary. This commitment of value is a crucial prerequisite to design and communicate a compelling proposition to customers for inducing profitable behavior change.
- Information is the life-blood in coalitions. Beth Carrots in this story used a card that could be tracked to know more about her customers and then used that information to create value. Without a strong and committed process to gather and leverage information, the coalition can fall flat.
- Marketing framework, Financial management of points, Communication, Technology infrastructure and Partner management are 5 critical functions, typically best served by a neutral centralized entity. This entity can collect fees for points dispensed, pay out funds for points redeemed and use the breakage in points to fund program management and member communication.
- Credit becomes a useful tool to deliver a bump in sales and to access information, otherwise not necessarily accessible. A bank-issued credit card, debit card, prepaid card or other such device is normally a great tool to make this happen.
Monday, January 9, 2012
Once upon a time in a small village in India, lived a potter who had 4 daughters called,
- East Devi,
- West Devi,
- North Devi, and
- South Devi.
Every day, the potter made 20 pots. And each daughter carried 5 pots on her head and walked to the four corners of the village. They sold each pot for one rupee and every evening, each daughter carried 5 rupees back home collecting a total of 20 rupees a day for the potter.
The potter only made twenty pots each day, because each of his daughters could carry no more than five pots on her head.
One day, East Devi was approached by a stranger who made her an interesting proposition. She described this over dinner to their father, the potter.
East Devi: I was approached by a man who said that he could buy all of my five pots for 2 rupees each instead of 1 rupee. This is because he can sell them for a much higher price in the neighbouring village, Ram Gaon.
However, he has a broken arm and cannot carry loads. So he needs me to carry the 5 pots for him to Ram Gaon.
I can make 10 rupees a day instead of 5 rupees. But I will have to spend the day carrying pots for him to the Ram Gaon instead of selling them in our own village. Besides, my chappals are torn so I need new chappals to walk so much every day!
Potter: That sounds good. We can make 5 rupees more every day, and I can make you chappals from the leather than I had bought from the fair last Diwali.
So it came to pass that the Potter made East Devi chappals and she helped deliver pots to Ram Gaon. The family’s income went up by 5 rupees a day and they were all very happy.
About a month later, West Devi was approached by a stranger who made her an interesting, albeit very different proposition. She described this over dinner to their father, the potter.
West Devi: I was approached by a man from Lakhan Gaon. While he offered me our current price of 1 rupee per pot, he offered to buy 10 pots every day, instead of the five I sell, because people from Lakhan Gaon love our pots. He is also very strong, and he can carry all ten pots to Lakhan Gaon himself! So I don’t have to carry them like my sister.
However, since he will spend the whole day carrying and selling pots, his condition is that I should cook food for him. So every day, while he is in the market selling pots, I will have cook food for him and take a lunch box to him so that he can eat when his work is done.
So I too can make 10 rupees a day instead of 5 rupees but will need a lunch box to carry his food. Can you make me a lunch box, father?
Potter: That sounds good. We can now make five more rupees. And I can make you a lunch box from clay and wood that I can get from the forest.
So it came to pass that the potter made West Devi a nice lunch box and she helped deliver lunch to Lakhan Gaon every day. The family’s income went up by an additional 5 rupees a day and they were all very happy.
A month later, North Devi was approached by the temple priest. She described her conversations with the priest, over dinner with her father, the potter.
North Devi: Dear father, the temple priest met me today. He uses one pot every day to plant a tulsi sapling. And he then gifts the pot with the tulsi sapling, as a special blessing to one person every day.
He is aging and finds it difficult to keep up. So he told me that we would be willing to pay 10 rupees for just one pot. However, I would have to spend the morning with him to fill the pot with good soil from the field. Then select a good tulsi sapling, plant the sapling in the pot, recite the holy mantras (prayers) and then deliver the pot with the sapling to the home of the person he chooses that day.
I would love to do this. But, father, you will need to teach me holy mantras and how to plant tulsi saplings.
Potter: That sounds very good. We can now make five more rupees. And I can teach you all about planting tulsi saplings and mantras. My mother taught me and I still have her book of all prayers that I can give you. You will also earn some blessings for our family.
So it came to pass that the potter taught North Devi mantras and the art of nurturing tulsi saplings and she devotedly helped the temple priest. The family’s income went up by an additional 5 rupees a day and they were all very happy.
By now some villagers started missing the lovely pots that they were so used to buying from the potter’s daughters. With three corners of the village now not being served, things were getting complicated.
Among those who missed the pots, was a very sharp kirana shop owner called, Mr. New Channel. Mr. New Channel had four sons who had completed their schooling and were now looking for work.
Mr. New Channel was very sharp and quickly learned about why the villagers were getting an irregular supply of pots. He called his youngest son, Liaise Singh who was good friends with South Devi and whispered something into his ears.
That evening South Devi shared her experiences with her father over dinner.
South Devi: Dear father, I spoke to my friend Liaise Singh today. He presented me with a proposition from his father. Liaise Singh and his three brothers would like to start earning a living. And they can help us make us all more money too!
Our fellow villagers are missing our regular supply of pots. Mr. New Channel is willing to buy 20 pots from us every day at fifty paise each. His four sons will carry them to the four corners of the village and sell them for us, just like my sisters and I were doing a few months ago.
And instead of me earning 5 rupees, we can now earn ten rupees by selling 20 pots to Mr. New Channel.
Also dear father, you’re growing old and also spending so much time helping my sisters with chappals, or making food boxes or teaching them mantra’s. I’ll spend my time making the pots and you can rest all day.
But you’ll have to bring me clay from the forest every day to make all the pots.
So it came to pass that the potter brought clay every morning for North Devi who made beautiful pots. And while Mr. New Channel’s son’s sold 20 pots in the village, her sisters sold pots in their own unique ways with support from their father.
The family’s income had now doubled from twenty rupees to forty rupees and they were all very happy.
Over dinner one night, the potter remarked, thinking back on the events of the last six months.
Potter: Hmm! I spoke to my brother in the city who has an MBA about what has happened with our pot-making business. And in his own style he described how the core driver of our success has been, “Relevant Engagement.” He said,
East Devi got us double the price but needed transport support
West Devi got us double the volume but needed meal vouchers
North Devi got us into a pottery solution but needed training
South Devi helped us scale operations but needed price discountsEach of you has doubled your income but so very differently!
Moral of the Story:
One-size-fits-all approach to Channel Loyalty Initiatives rarely succeeds.
Channel Engagement programmes are not about rebates and discounts only. Nor are they about doling out gifts and freebies.
A strong engagement initiative begins with a candid situation analysis and empowers your channel partners to succeed with respect to needs of their customers in turn.
Designing this may be difficult and time-consuming and requires effort to gain insight.
But the result is Strong Relevance and alignment of resources towards mutual Win: Win.
Channel loyalty manifests itself as an outcome.