Non-Line Blogging

My last blog post in collaboration with Avinash Kaushik included a wonderful free souvenir.  It was an Excel workbook that we created to help with all the tricky sums you'll need to crunch when you begin a life time value analysis of your business.  The blog has generated lots of queries about the topic that we thought we would remind people there's a tool to help!

So, feel free to download the "Life Time Value Workbook" and use it to kick-start your LTV journey.  One Worksheet helps you understand just how different your "best" and "average" customers may be.  Simply plug in a few facts about order values, number of sales a year and how long they have been customers for and BINGO the spreadsheet shows you how much profit you make from different customer types.

The second worksheet takes you though a much more complicated LTV model for a specific customer segment.  It lets you make projections up to 5 years ahead and builds in the "Net Present Value" calculations so that you can impress your Bean Counters that you recognise there is a risk involved in spending money on marketing.

One final thought.  You'll need to do some rummaging around in buckets of data to get some of the customer information - don't expect it all to be waiting for you in your web analytics tool.  For example, you may not have "repeat orders" consolidated for individual customers - you'll have to run a few reports to get a basic "single customer view" and then tot up their total spend and total orders for a given period.  

Once you have that data, you can rank and segment the customers into best, average and worst.  Or, by adding a source code, you could split your file down between "email list rental" versus "affiliate" customers, or people recruited by "price offers" versus "partner offers".  You should be able to see patterns emegring that will have a profound impact on your future acquisition and retention activity.

Our blog and the comments will give you much more food for thought.

Enjoy! 

I have been meaning to write a piece about life time value for many months.  It's the most important metric for marketers focussed on optimising long term value for their organisations, yet in the digital world we have not really embraced it.  This is partly because the industry is not old enough to need to worry about customer segment performance in 3 or 4 years time, so we could put it down to a "capability-maturity" thing.

However, as we drag ourselves out of recession now may be a great time to consider whether you are recruiting the "right" customers and using the "right" metric. By happy co-incidence I was invited by the wonderful Avinash Kaushik to work with him on a piece on life time value and the results of our endeavours can be found here on www.kaushik.net.

Happy reading!

Here are a few definitions from Wikipedia to get the blog rolling:

Serendipity is the effect by which one accidentally stumbles upon something fortunate, especially while looking for something entirely unrelated

Behavioral targeting uses information collected on an individual's web-browsing behavior, such as the pages they have visited or the searches they have made, to select which advertisements to display to that individual

Stalking is a term commonly used to refer to unwanted attention by individuals (and sometimes groups of people) to others.

We’re not short of data in digital marketing.  In fact, we’ve too much of the stuff.  Let’s take the marketing of expensive holidays:  Every couple of years in the Hughes household wanderlust overcomes us and a couple of weeks in delightful West Wales will not quite tick all the R&R boxes.  So, sensing this restlessness, I venture onto a few travel web sites and see what destinations like Thailand may offer us that Wales can’t.  (Sunshine seems to be the short answer).

20 years ago I went on a Kuoni holiday with my parents and, as it was a great success, I thought I’d check out the delights of Kuoni once again, so Googled the brand and went to their site.  I say this to demonstrate that key drivers to branded search could well be deeply emotional , not just seeing a Kuoni banner a few days ago – oh! the perils of attribution modelling.  Anyhow, I now left a rich stream of data across the Kuoni website and was maybe a couple steps nearer to knowing what I wanted.

Meanwhile in a distant galaxy far, far away...some analysts were piecing together this trail of data. 

• Total pages in session – check. 
• Depth of content viewed  - check.  
• Total time on site – check. 

We have engagement!

Cue the scary music. 

A few days later I am on the Autotrader website looking to replace my recently-written off Fiat Punto (that’s a long story), and what appears before me – a display ad for Kuoni.  But this is not any old banner – it has behavioural targeting under the bonnet:

“Thank you for visiting the Kuoni website” whispers the disembodied voice of the banner.

And then it gets a little more scary.  A couple of page loads later, my stalker says

“Thank you for your interest in Thailand”

Now at this point some people may be looking over their shoulder to see if some Peeping Tom is behind all this.  For hairy old digital marketers like me it’s not a problem – good luck to Kuoni for using all this data in a positive way.  But I can’t help feeling that some customers out there will be a little spooked by all this, which leads onto my real point here...

The medium is the message.

I often use an Amazon email as an example of “as good as it gets” in digital marketing.  A few months ago my TomTom SatNav died and I wandered on to Amazon to check out prices of a new one.   24 hours later I got this delightful email with the wonderful copy...  

I’m a little more comfortable with this “email stalking” because the terms of engagement are different to display advertising:  I leave myself logged in on Amazon because I can do useful things like “buy now with 1 click” and  I expect Amazon not to shout general email offers at me...I am delighted when they notice things that could be worth re-visiting.  Similarly, I like it when they say on the web site

“Hello David Hughes.  We have recommendations for you”

They remind you of things you may have been looking at and fire up the old “collaborative filtering” engine to make things even more relevant for me.   Virgin Atlantic  have a delightful personalisation box in the “My Booking” area that reminds you how long it is until the next time we meet.  They could probably serve that up to me as a banner when I’m on Autotrader, but just wouldn’t be right and proper, would it?

Less is more.

I may wish to keep myself anonymous in certain media, but expect/demand more personal touches at other times.  I do not always expect to be singled out for personal treatment and when strangers start talking to me like long, lost friends I begin to feel uncomfortable.  I’m talking here about a slight shift in creative tone that would have the same relevance but in a less threatening way...

“Latest ideas and greatest offers for Thailand Holidays”

...could have been equally powerful from Kuoni but with far less emotional damage! People like it when they "accidently" stumble upon something fortunate, especially when looking for something else unrelated!  Maybe Amazon has mastered the science of "dynamic serendipity", where people think that stumbling upon relevant things is pure luck!  After all, Amazon don't say:

Last night between 7.21pm and 7.28pm you viewed the Garmin Nuvi 225 pages for 4 minutes, the Navman S30 for 2 minutes and then you had a quick look at the Tom Tom ONE v4.  Here are some special offers.

That would be stalking.

But, Behavioural Targeting is wonderful! 

Wherever I have seen it used, behavioural targeting generally drives up opens, clicks, conversions, average order values and drives down costs per outcome.   It may well be that Kuoni have tested the “less” versus “more” intrusive copy and the ones I didn’t like pushed up sales...so there, they would say.  But for many consumers this “stalking copy” can create the wrong feeling, a sense that something sinister is happening on the interweb.  It's a question of using the right tone and not relying too much on the data to drive the conversation.  The whole BT industry nearly came clattering down in Europe a couple of years ago with Phorm and British Telecom’s sneaky attempts to get it in under consumers’ privacy radars.  Let’s hope that over-friendly creative techniques don’t have a similar impact on people’s goodwill.

American author Will Rogers is attributed with this rather caustic one-liner from the 1930’s.

"When the Okies left Oklahoma and went to California, the average intelligence of both states went up."

It has since been used by many people, including  Robert Muldoon, the former New Zealand Prime Minister, about his countrymen migrating to Australia.  I’m proud to say that I am personally responsible for improving the average health of many cancer patients – another example of the “Will Rogers Phenomenon”.  A while ago I was at the un-healthy end of the “Stage 2” cancer segment, but after a couple of scans and no change in my overall condition I was popped into the “Stage 4” cancer segment along with some really ill people.  In that single action I had improved  the “average health” of both segments . How barmy is that?      

These examples show us that averages can be misleading and confusing. So, what do we get when we open up our web analytics reports or our email campaign dashboard?  Averages!  I’d like you to stay awake long enough to convince you that averages are a bad, bad thing in digital marketing and here’s why...

“Utterly Useless Average Metric” Number 1 – Site Conversion Rate

Let’s take an “average” site conversion rate.  It’s probably 3%.  That’s average.  But just a couple of simple steps gets us to a better place – how about conversion rate between new and repeat visitors, or conversion rate by source of traffic? A couple of clicks and you’re somewhere exciting.  As Avinash Kaushik would say “BAM!! Context, Baby!”  You find that repeat visitors are probably 3 times more likely to convert than first-timers, or that people coming from your Facebook invitation-only group convert 10 times better than people clicking on banners.  So get into some pretty basic segmentation to give some meaning to what you’re doing.  Here’s how Matthew Tod of Logan Tod demonstrates it.

See, conversions from banners are much worse than “average” and conversions from previous customers is much higher than “average”.  In short, it looks like people don’t buy on their first visit from any source, but will probably buy if they are returning visitors or past customers.  We could drill further and find out what products drove highest re-purchase rates, or what creative/media gave the best conversion rate....there may be some winners lost among the “average”.  More segmentation; more context; more correct actions taken!

“Utterly Useless Action” to improve average site conversion rates? Turn off your marketing.

I’d like to thank Matthew Tod for this one, too.  Promotional activity will drive prospects to your site and they are unlikely to buy...but some of them will.  Trouble is, they drag down the average conversion rate.  So switch off all your campaigns and watch those averages soar. The only people who will come to the site will be your family, close friends and past customers - and they love you.  Average conversion much better, sales volumes plummeting. 

Be careful what you wish for.

“Utterly Useless Average Metric” Number 2 – Email Click-through rate

Here is a list of average metrics from Mailchimp. 

Email marketers feel a sense of “market sector envy” creeping in as they look jealously at how big the averages are elsewhere.  Art has a 26% click-through rate and Arts_Music has a feeble 5%.  And what about Education getting a whopping 181% click-through rate?  Does the average relate to how good they are compared to other sectors, and if you have a low average are you a bad, bad marketer? 

The trouble here is that we are worrying about “soft” outcomes – even if we do improve our average open and click rates we will not necessarily improve our revenue, or net yield. 

If you want to improve your click-through rate you could probably make everything you wanted people to know about on a web page.

"Find out how many points you earned last month - click here"

Bingo!  A quick and easy way to improve average click-through rates, and here's another...

“Utterly Useless Action” to improve Average Click-Through rates?  Don’t mail non-openers.

So let’s really improve the average click-through rate.  Below is a graph showing what happens when you mail lots of "emotionally un-subscribed".  If the number of customers (who love you) is low, then the average click through rate will be, well, average!

But stop mailing people who have not opened for over a year as part of the same campaign.  Drop them into a different programme and the composition of the file will change.  You will have fewer non-clickers and your average click through rate will shoot up like this:

I have been banging on for years about “open” and “click” rates being “soft metrics” and I’m sure I’ll blog about that again soon.  In the meantime let’s all just agree that improving “average” click through rates is an utterly meaningless objective. Getting the “emotionally un-subscribed” to click on something is good, but judge yourself by what “outcomes” you deliver and then you’ll be adding value to your marketing activity.

We really need to segment out the non-openers and treat them differently (test From fields, Subject Lines, Preview Panes, time of day, day of week, text only messages etc etc) and you will be able to improve the open rate for non-openers.  Just don't mix them up with your best customers or you'll never be able to be relevant and engaging to all of them.

So there you are.  If your company's "bean counters" want you to improve averages, tell them that it may not be what they really want.  Increased clicks, sales, order values by all means.  But not averages, please. 

And how about this for one final silly average...Twitter users have more than the average number of ears.  That’s because nobody has 3 ears (apart from Davy Crockett with his “wild front ear”), but a few people will have only one or no ears.  So dividing the total number of ears by the total number of users we have a figure of 1.99 something, so most people have more than the average number of ears.  

As I said, Barmy, isn't it?

With Christmas nearly upon us I was wondering what presents digital marketers would like to find in their stockings.  A perennial favourite toy across the world is Lego and, whilst we’re probably a bit too old/busy/grown up to get any this year, the joy and wonder of the little bricks is brought to life with these fantastic advertisements from 2006.  

Then I began thinking that, just like some children these days, digital marketers have too many toys to play with.  We should play more often with the fantastic tools we have or we should be using our imagination to make the most of them. 

Display Advertising - Just add imagination

What do you see when you look at a 728 x 90 Leaderboard display ad - just some pixels (a digital Lego Brick?) or a wonderfully flexible and creative marketing format?  

Here are some games you can play long into the New Year with your digital ad inventory:

• Frequency capping – it’s amazing how many campaigns still get deployed in a wasteful, sub-optimal way...work out how many times people need to see an add before it wears out, and make sure your ad budget goes further by serving it to somebody else
• Format testing – so they didn’t click on a leaderboard, so re-assemble the pixels into a sky or an MPU and measure the impact of format on response (interactions or clicks...you choose).
• Contextual targeting – find out from publishers how they can deliver ads based on page content and do some playing (testing).  The click-through rate uplift should pay for the incremental costs and your conversion rates should grow too.  
• Behavioural targeting – make 2010 the year that you unwrap individually targeted ad deployment.  It will mean that you can alter your creative to suit people who are in different stages of the consideration and purchase funnel, based on what they have been viewing and clicking recently.

Email recipients are like snowflakes - every one is different

What do you see when you look at an email address?  Just another name to blast a standard message to?  The wide-eyed marketing child will see some wonderfully exciting opportunities to create imaginative messages that make email more interesting for the customers and more successful for you. 

Here are a few traditional email marketing games to get you started...fun for all the marketing family:

• Acquisition tools – if you’re renting data, ask the list owner what variables they hold and then deliver different versions of the same message.  For BtoB that should be different subject lines, opening paragraphs and calls to action based on “job function” or “industry sector”.  For consumers you may know their lifestyle and affluence from geo-demographic variables that list owners like Acxiom hold...have different propositions for less affluent and older prospects or use a different creative for young professionals.  Let you imagination run free!
• Conversion - as digital marketers we sit on the most valuable real-time prospect data so let’s get it out of the toybox and play with it.  Who clicked on an email link but did not complete a successful outcome?  Who looked at deep product pages on your site but did not buy?  These re-marketing campaigns should deliver 4-16 better conversion rates than one-size-fits-all messages so start building them.
• Retention – send different message programmes to your newer customers, or have a different tone of voice for purchasers of specific products.  Build “personas” (imaginary friends?!) to help with your tone of voice, imagery and calls to action.
• Re-activation – how do you know when you’ve lost a customer?  Probably when they’ve not bought for a specific time period.  So develop a “win back” programme with the first message triggered by a “date of last purchase is more than 60 days".  And be relevant...”we’ve noticed that you have not bought from us for a little while....” is a good start.

Fuel your imagination – get reading!

It’s good to know that even digital marketing kids can find pleasure in moveable type. When I was growing up the “must have” book was the BBC’s “Blue Peter” annual.    This year you ought to be asking Santa to bring you the wonderfully comprehensive “Web Analytics 2.0” by Avinash Kaushik.  Weighing in at more than your festive turkey, with 450 pages that gives you just over a page a day for all of 2010! 

But aside from being a real “value for money” present, this book encourages us to explore our world of data.  It’s partly a “how do they do that” book (go on, admit you’re not really sure how “multi-tabbed time on site is calculated, are you?), but it’s also an activity book along the lines of “what shall we do today to make sense of our marketing”.  With information covering pure web analytics, analytics for search, email and social media and links to further reading it is as near to a “Boys Own Annual” that digital marketers can get.

So there you have it.  Some ideas for kindling your imagination in 2010.  And we’ve not even touched on multi-variate landing page testing, search marketing or social media experimentation...better leave some of those for your birthday!

Here's wishing you a peaceful Christmas and an imaginative New Year.