RENEGADE THINKING from the CEO of Renegade, the social media & marketing agency that helps clients make more out of less by transforming communications into "Marketing as Service."

Q + A on Relaunching Brands w Kyle Schlegel, CMO of Louisville Slugger

05/30/14

kyle schlegel

Relaunching an old and established brand is tricky business.  There’s always the risk that you will alienate your long-time customers as you try to appeal to appeal to a new generation of potential buyers. Knowing this, the marketing team at Hillerich & Bradsby Co. (the parent of Louisville Slugger) decided that rather than steer away from the brand’s illustrious past, they would embrace it while finding fresh ways to engage a new generation of consumers. Coming from Procter & Gamble, H&B’s new CMO Kyle Schlegel had to figure out how to put this plan into effect despite working with a modest budget (by P&G standards) and an entirely different corporate structure.

In the interview below, you will learn how Schlegel and the H&B team revitalized the Louisville Slugger brand by taking a “grass roots” approach, listening to their customers and engaging consistently in social media.  You will also quickly understand why Schlegel was voted a Rising Star at last year’s CMO Awards.

Drew: You face a similar challenge with the Louisville Slugger brand that you faced with Old Spice: younger, “hipper” brands are infringing on your market share. What do you think Old Spice did in terms of marketing that made its resurgence so successful and how do you plan to apply those same lessons to Louisville Slugger?

On Old Spice, the team realized three critical dynamics to the future success of the brand.   The future of the brand had to be rooted in its past in some way, it wasn’t going to happen overnight. We also had to be comfortable with a generation of consumers that may have been lost and focus instead on the entry point consumer that would be the lifeblood of the brand for decades to come.  In restaging the brand around 2000, we explored the full history of the brand and worked closely with consumers on which, if any, of those elements were relevant moving forward.  We next laid out a multi-year plan that would help get us get ever closer to the goal of the #1 brand in the market and, more specifically, the #1 brand with young men.   Finally, we identified a couple of programs that helped expose and sample the brand to the next generation of consumers, including a sampling program in middle schools, where more than 90% of 5th and 6th grade boys received a sample.   These choices set in motion the changes over the next decade and the global success that followed.

On Louisville Slugger, we are taking a very similar approach.  Our team explored the history of the brand and the sport to understand exactly which elements of the foundation would stay in place and where evolution – or even revolution – was necessary.   Next, we looked at a plan over a 3-5 year window where relevance could be regained, consumer by consumer.  Finally, the team had to make changes to the brand and focus in ways that wouldn’t allow us to attempt to regain the “lost generation”, a necessary but difficult choice to instead focus on the next generation of players. 

Drew: You just updated the Louisville Slugger logo for the first time since 1979. How do you balance modernization with respecting the traditions and history of the brand?
We did not take the change and steps to get there lightly.  Throughout the journey, we engaged with every key stakeholder, from pros to amateurs, from retailers to employees and from ages 8 to 80.   Each of these people are “players” when we think about our brand purpose…”we exist to make players great”.    We quickly learned which elements of the brand were sacred (i.e. the oval within the logo) and which elements could cease to be used (i.e. TPX & TPS sub-brands) in service to the ultimate goal of rebuilding relevance with today’s players.

Drew: A CMO has a lot of choices in terms of where they invest their time.  What have been your top priorities in the last 12 months?
I joined a company and team that had not placed a significant focus and investment on marketing in past years.  My first 18 months in the role have really focused on building marketing fundamentals, clarifying strategies and helping to narrow these strategies on the most impactful activities.   The brand restage was job #1 and took energy from everyone in the organization, leading into market in April 2013.  Last fall, the full impact of capability building and the restage took center stage as the brand launched the first fully integrated marketing plan across retailers, grassroots, media and PR, supporting the 2014 product line launch.

Drew: Have there been any big surprises in terms of what’s worked really well and what hasn’t?
Going from Procter & Gamble to Hillerich & Bradsby, Co. has come with a learning curve for sure.  Overnight, the structure, funding, scale and capability of P&G went away.  In its place, a new set of circumstances took its place.  While the reduced scale and funding are certainly challenges, the autonomy, flexibility and focus are refreshing.  This biggest positive surprise was in the restage.  We were able to pull off the biggest change in the history of a 129 year old brand, supported fully by a new campaign, and do so in less than 12 months; an incredible achievement by the full organization.  On the flip side, we have made a choice or two that I anticipated would work better.   One example was email marketing with top young players.   Through our grassroots relationships, we thought access to databases of thousands of young players would allow great scalability in communication but we learned quickly that this generation of player was not receptive to email marketing campaigns and we had to quickly shift to more one-on-one communication.

Drew: You operate in a relationship-based business. How do you improve loyalty among your customers?
Quite simply…show them you’re listening.  We are working more and more with young athletes and reaching them in more channels.  Each time, this gives us an opportunity to cede some control for where the brand is going and give them a say.  When we show them we’ve heard them by baking their ideas into our brand, loyalty comes with it.  This will be a bigger focus for us going forward.

Drew: One of the big challenges a CMO faces is organizational given all the different marketing channels.  How are you addressing these organizational challenges?
We’ve taken a long look at our marketing organization and how the roles are split, leading to an evolution in the team and the responsibilities.  We increased our staffing by nearly 40%, better clarified tasks (especially things like social media) and worked to provide the right training and the right time to help folks succeed.  Our industry has some natural segmentation and we’ve addressed that within the organization but then, on top, gotten people into new roles that allow for future focus areas, like social media, graphic design and retailer marketing.

Drew: Innovation is a sexy word but not as sexy to a CEO as ROI.  Have you been able to link your innovative marketing activities to the kinds of business metrics favored by CEOs?
The other big surprise, going from CPG to sporting goods, is the relative lack of timely, in-market data.  At P&G, ROI could be broken down to every element of the marketing plan and was available within 2-3 months of execution.   In my new life, shares cover only a portion of the market and often trail my more than 12 months.  We’ve sought to offset some of these challenges by trying to triangulate around some of our biggest spending areas, including working closely with our field sales reps to help provide insight into what is happening at the store level and how that is being influenced by our marketing efforts.  We have also shifted dollars into more digital programs (SEO, social) that allow us to better connect those activities with conversion data to aid judgment and future planning.   Transparently, we’re not there yet, but we’re attempting to add new tools each quarter.

Drew: Marketing seems to be getting increasingly complex in terms of ways to spend and ways to monitor. Has it gotten more complex for you and if so, how are you dealing with that complexity?
My change from P&G to H&B has come with a good balance of increased and decreased complexity.   The significantly smaller budgets led to a reduction of touchpoints (i.e. TV not possible) but the introduction of a robust grassroots focus comes with new challenges and decisions.  So far as grassroots are concerned, we are a part of nearly 400 individual events but limit this complexity by working with partners in this space that work closely with our team to preplan, execute and track.

Drew: How are you integrating social media into marketing efforts at Hillerich & Bradsby? Have social platforms proved to be a valuable channel for your brands?
Social media was not part of the marketing focus 18 months ago but has become one of our top two marketing priorities, including our #1 media investment.   In that period of time, we have increased our social following by more than 30X to nearly 500,000 fans across channels.   With our limited media budget, we’ve used the majority of that spending in SEO and in driving increased engagement in social media.   We now have an incredible audience and, in a sport where something newsworthy happens every day, we have a treasure chest of content and the highest engagement rate of any brand in the industry.

Drew: Do you agree with that notion “that marketing is everything and everything is marketing”  if so how have you extended the boundaries of your job beyond the normal purview of the CMO?  Asked differently, as CMO, have you been able to address the entire customer experience?  
I completely agree with the sentiment.  Anywhere and everywhere someone comes in contact with the brand should reinforce the brand purpose, the identity and should help get someone closer to demonstrating their allegiance.    Beyond the marketing department, we’ve worked very closely with all other functions.   The two where the most energy has been spent are with Sales and the Louisville Slugger Museum & Factory.   With Sales, we now have strategic marketing discussions with each retailer and have increased our priority here by creating the new position of Director of Retail Marketing.   In the Museum & Factory, we have a built-in competitive advantage.  With over 270,000 guests per year, this provides us with an opportunity to tell the history of the brand and provide a sense of the sport and where the brand is going next.  With consumers from 8 to 80 “in house” every day, we’ve worked closely with the Museum staff to ensure the customer experience is complementary and additive to everything else we do.

Q + A on Leadership w Stephanie Anderson, CMO, Time Warner Cable Business Class

05/28/14

stephanie anderson

Sorry Kermit the Frog, if you think its hard being green–try being a CMO. The demands are relentless, the barriers to success are often as large inside the company pond as they are out of it and the timeframe for delivering meaningful results are a de minimis hop or two away. So finding a CMO who knows how to not just survive but thrive under these conditions is worth celebrating — which is exactly what The CMO Club did when they recognized Stephanie Anderson with their President’s Circle Award late last year.

During her tenure as CMO of Time Warner Cable Business Class, among other accomplishments Anderson reorganized her group, established a Customer Experience and Knowledge (CEK) team and most recently led the launch of PerkZone, a multi-dimensional customer loyalty program.  (Proud disclosure: TWCBC is a Renegade client and is part of the team that created and manage PerkZone!)  Here is my interview with Anderson conducted around the time of The CMO Awards.

Drew: A CMO has a lot of choices in terms of where they invest their time.  What have been your top priorities in the last 12 months?
I think when you are in any leadership role you need to spend the right proportion of time with key stakeholders and constituents to get the job done in a collaborative way, without being too far into the details or overshadowing your people.  I use my boss’s rule: 1/3, 1/3, 1/3.  A third of my time is spent with my peer group and up, making sure they all understand the strategy, focus, and priorities for Marketing, Advertising and Offers and 1/3 is spent with my direct reports (3 GVPs and 2 VPs) helping them with priorities and any people/budget issues, and 1/3 out in the market, with customers, suppliers, vendors, events, continuing education, etc.

Drew: Have there been any big surprises in terms of what’s worked really well and what hasn’t?
Not any big surprises about what has worked.  But, one that continues to baffle me is that I have had challenges drawing a straight line conclusion that direct mail influences the web or overall leads, even though we have used purls, phone numbers, vanity urls – but over time, without the DM in our industry you start to see a reduction in overall sales related calls.

Drew: Big data is a big part of the CMO conversation these days.  How are you tackling big data?
This is a tough one.  We are revamping our database as we speak to not just be more encompassing, but really more searchable and friendly.  The data is useless without the ability to pull together the storyline and make decisions based on what you find out.  That is the challenge.

Drew: Innovation is a sexy word but not as sexy to a CEO as ROI.  Have you been able to link your innovative marketing activities to the kinds of business metrics favored by CEOs?
Yes, and more importantly in my case our CFO (who has the office next to mine!).  I, myself, actually drive us harder than the CFO because I want us to always be spending on relevant, revenue impacting marketing initiatives.  I think the easiest and most enjoyable is SEM.  The toughest is loyalty and brand – but we do prove the link to revenue or reduced churn or improved consideration in everything we do.

Drew: Marketing seems to be getting increasingly complex in terms of ways to spend and ways to monitor. Has it gotten more complex for you and if so, how are you dealing with that complexity?
More sophisticated, not necessarily more complex.  The depth of knowledge you can glean from online activity to inform offline is sophisticated, and extremely useful.  We have one marketing team that has all digital and mass for that reason – because of the relationship between on and off line.  Also, while the analytics can seem daunting, the end results generally help you make better decisions overall, so now you may spend a bit more of your budget tracking, learning and understanding and less on the actual tactics because you’ve mastered and fine-tuned them.

Drew: How do you stay close to your customers when you operate in so many markets and have so many different types of business customers?  
Not so well on the low end, but we are changing that.  We serve very small, small, medium and large enterprises.  It’s easy when you are dealing with a national customer to be responsive, available, etc.  but in the mass world of transactional, very small and small, it becomes harder and pretty soon your relationship is boiled down to email and a monthly bill.  We do have newsletters, are building a value–added benefits program for small business and try to send them information that can help their business grow and/or stay healthy.  It’s getting better as we use campaign and life cycle management tools, but there’s always room for improvement.  Our job is collecting and keeping customers.

Drew: One of the big challenges a CMO faces is organizational, given all the different marketing channels.  How are you addressing these organizational challenges? 
I am going for Best in Class in this area.  I recently implemented what I call an “outside in” structure that takes the customers and competitors in the segments we serve into consideration.  So I have a lead GVP of Small, a lead GVP of mid-market and Channels, and a GVP of Enterprise and Carrier business.  They run the marketing end-to-end for their segment including offers, competitive, life cycle strategy and then I have two functional teams that are shared resources – one is mass & digital and the other is customer experience and knowledge for all of the database and research/retention etc.

It’s a new design, but I believe any structure that puts the customers/prospects at the core of it should work out!

Drew: Content marketing is a hot topic at the moment. Are you increasing your investment in this area?
Content marketing is hot – but not new.  Being in technology, that is the way we work – be relevant, educate and then solve.  I would say yes, we are increasing our investment here but not because we are following a content trend, but because our own thought leadership and solutions have advanced and we need to be able to tell our stories quickly and with the prospect or customer in mind.

Drew: As CMO, have you been able to address the entire customer experience?   
Yes, I actually have a Customer Experience and Knowledge (CEK) team.  We work very closely to survey and research what customers/prospects want, pilot the findings in market and then implement across the company, working especially close with our care organization and field operations.  We all own the interactions as employees of TWC, but my team has the ultimate accountability to make sure we capture and harness the best experience possible and deploy that across our business.

Branding, Content Marketing & Reverse Osmosis

05/21/14

snehal desaiMarketing never gets boring to me because each company, brand and sub-brand has its own unique challenges.  This is certainly the case for Snehal Desai, Global Business Director of Dow Water & Process Solutions, a division of Dow Chemical.  Snehal and I had a long conversation about the subtleties of marketing a sub-brand with multiple product lines aimed at multiple verticals with multiple constituents all while remaining true to the parent brand’s vision.  And if I haven’t built up the challenge enough, keep in mind that these folks are selling highly-technical things like reverse osmosis systems that separate salt from water.

How Snehal and Dow Water tackled this challenge is well-worth pouring over (sorry, couldn’t resist the pun) if for no other reason that it is a cogent reminder that if you focus on your customer you’ll rarely go astray.  As you will see, Dow Water puts a lot of energy into creating educational content (seminars, white papers, studies, models, etc.) that has helped drive the perception that they are experts, not parts manufacturers.

Drew: Can you talk a little bit about your brand, Dow Water and Process Solutions, relative to the corporate brand, The Dow Chemical Company, and how you distinguish between the two?
That’s a good question, because Dow as a company is very large. A lot of the time customers are thinking about the product that’s doing a certain function for them. As such, we are continually looking at the balance between leveraging the large company presence, investment on Dow’s capability and history. But we don’t lose sight of the fact that we have customers that are specifically buying, and have been buying for years, what’s come to be known as the Dow Water & Process Solutions suite of products. So we think first with respect to our customers and the things that they want the most from us.

Drew: I want to clarify a bit on Dow Water and Process Solutions. Would you describe it as more of an ingredient brand?
I would definitely say it’s more of an ingredient brand. For example, there are a variety of ways that one can separate and purify water. We make the technology that does the actual separation and purification. For example, we make the membranes that separate the salts from the water. So we make the guts, the advanced separation steps, and are in that way almost always inside a system.

And because we’ve been operating in this environment for decades and the very nature of b-to-b marketing, we actually do have a relatively high level of awareness among our users. But that’s also one of our brand challenges, to be able to remind people of the work we do.           

Drew: Were any of the sub-brands that you recently purchased well known enough to considered the generic brand in their categories and if so, did you keep those names?
We purchased Rohm & Haas in 2009, which was a very well known chemicals company that had a very strong position in ion exchange technology. With that company came a set of customers that knew exactly what they wanted. So depending on the sub-application, certain trade names did resonate more than others.

Once you start to really get into specifications, the customers don’t want to change them. The last thing you want to do is shoot yourself in the foot because you felt like it would make it more economical on a naming and literature basis, and find out you lost a million-dollar order because they decided they don’t like the new product because it was not what they expected.

Drew: So there’s the Dow brand and then there’s Dow Water & Process Solutions.  How are the guidelines defined? Is there a Dow brand oversight team that you as the marketer of Dow Water & Process need to go through?
There definitely is. We have a corporate public affairs group, which is the group that’s responsible for making sure that the brand standards are followed. What we do is work with that team to develop business brand standards, which might stretch the corporate brand one way or another depending on the audience a specific business is trying to reach. This way we are able to target our audience with the appropriate brand image while still staying true to the greater Dow brand.

The corporate Dow brand work supports this notion we’re trying to impart to our customers, which is to think of our job as providing solutions. We cover so many areas – if you think about a category like health and nutrition, the medical space, or energy storage, we have many, many different plays that are already going on in those spaces. People don’t always put it all together. So there’s this idea that we would be using the website and a branding approach to these market segments. In many ways we’re writing white papers to help talk about the broader issues that would interest consumers, like provisions of clean drinking water, cleaning up waste water, and the whole idea of sustainability.

Drew: Interesting. So “good” from a sustainability standpoint is that message to serve around a good, corporate citizen, and you guys help fill that role?
Yes, and you can always look at it as both a blessing and a curse. Because with that role also comes the need to balance between talking about almost philanthropic good then what we really do, which is helping companies, helping municipalities, and really driving a sufficient, low-cost, reliable provision of separation and purification services. If you look at some recent product launches such as ECO FILMTEC™ reverse osmosis elements or SEAMAXX™ reverse osmosis elements, sustainability is intrinsic to the value proposition and is in fact, what our customers expect. They are looking for improvements such as lower energy requirements, less chemical requirements and resistance to fouling. All of these benefits, while operational, are also sustainable.

Drew: How much and how important is consultative selling? Can you give me an example of how you “campaigned” it?
It’s the way we do business. It’s the way that our sales team and our technical sellers do things in the marketplace. We do seminars. We actually have projection programs that allow us to model some systems for people to help them make some choices on what options they might have, the tradeoffs, etc. We did some brand study work around three or four years ago. They did some good external studies and surveys. One of the things that people said they bought was expertise. They were buying the knowledge of the people that they were working with.

So that’s always something that our customers always talk about. They rely on us to give them good answers. To help them solve problems that aren’t always directly related to the product that we sell. In fact, this is a core value proposition and our biggest differentiator against our competition. We have the best people in the business and the most expertise. Our customers rely on that.

Drew: With the person who’s buying your product and essentially reselling it to someone else, is there a combined branding activity?
It’s not exactly like that. It’s more like this: if you consider an equipment seller, and anybody can buy pumps, valves, and fittings on the market, the question then becomes one of “how does he differentiate himself?” One of the ways he can do so is to identify that the components he’s putting in the customer’s system is something that the industry knows and everybody trusts and is the best on the market. So that when he puts his bid in, and he actually calls out, “I’m using Dow XYZ,” that’s his way of saying, “Look, my bid with this technology is really the winning solution.”

But some companies are more collaborative. Meaning they’ll ask us for help. They’ll ask us if they can come in and jointly sell or help answer questions for the customer given the confidence that technology will work. And we do that. But that’s the industrial sector. We also sell into the residential market which is very different. That’s more about brand owners that are putting white good appliances into your house, so in that case, you’re talking about a consumer story. Building the confidence that these products are good and healthy for you, and they’re going to deliver what they say they’re going to deliver.

Drew:  If you were to define the Dow brand, and then you were to define the Dow Water & Process Solutions brand, would there be differences?
Probably not. I don’t think they’re that different. Where the differences occur is when you get really right down to the specifics of the solutions and markets. People are telling you about sort of the things you did for them. Not the company, but the things your people and technology do. I’m not saying that every business in Dow is delivering the same set of attributes, but I think we pivot off of a lot of the same thing. It’s a strong technology base. It’s the ethic around reliability and consistency, a global reach. So I think we have a lot of similarities.

Drew: That gets back to enabling the channel, the consultative selling, all the content marketing that everybody wants to talk about now. It’s all in this category of doing versus saying. Do you feel like you have a luxury that other brands don’t have, in that you can build Dow Water & Process Solutions focused on the “doing” because the parent company is taking  care of the “saying” component?
You’re absolutely right. And yet by doing, as you say, that becomes the basis of the stories of what the company wants to say. As long as we continue doing well and enabling changes and differences in the market, then people are looking for ways to tell those stories in creative and inspiring ways. We are definitely lucky.

Final note: thanks to my friends at The CMO Club for the introduction to Snehal.

Why CPA is a Horrific Metric and Must Perish

05/20/14

Author’s note: a significantly shorter version of this post ran on MediaPost.com today, so read on…

CPA (Cost Per Acquisition) is a monster.  In slavish devotion, 41% of businesses consider CPA their top metric (according to recent DMA study) thus making ill-advised marketing decisions that further nourish the CPA beast.  Fiendish is an understatement when you consider the hypnotic power of CPA. After all, who wouldn’t, on first blush, want to determine how much it costs to acquire customers and then figure out how to minimize these costs?

Before providing proof to this thesis and suggesting an alternative metric, let me stop and pay homage to the monster’s creator.  Thanks a lot Google.  Before your arrival, businesses had a somewhat vague notion of what it cost to acquire a customer and even if they could make these calculations, it often took weeks or months.  Now the smallest of businesses can spend a dollar via Google and just about instantaneously know if that dollar resulted in a sale.

But herein lies the true villainy.  Because CPA is so easy to calculate, especially in the case of digital media spending, business leaders have become obsessed with this number and critical decisions are made in an effort to achieve the lowest possible CPA.  This seeming no-brainer for marketing then wreaks havoc across the organization as complaints, returns and churn rates rise while lifetime customer value averages drop.

CPA is Destroying Businesses
Lest you think I’m being melodramatic, let me provide two representative real world examples with the names changed to protect the innocent.  Company A is a tech company that when it first launched a decade ago had a game changing value proposition that helped them acquire several million customers who heaped praise on their service and served as willing brand evangelists.  But in the last 2-3 years, their competitive advantage slipped and the market stopped growing.

At weekly staff meetings, “new customers acquired” was the predominant metric determining not just the mood in the room but the actions for the subsequent week.  If one media type or promotional program was achieving a lower CPA than another, then dollars were shifted accordingly.  Meanwhile, the weekly lost customer count was completely ignored even if it exceeded the newly acquired figure that particular period.

So now we get closer to the real problem with a CPA obsession.  Company A drove down its CPA by running price promotions that attracted “switchers,” those savvy seekers of special deals who abandon ship once a better deal comes along.  These folks were also the first to complain, sucking up expensive customer service time, driving down sentiment on social channels and depressing employee morale.  This particular case does not have a happy ending so let’s move on to Company B.

Company B is a young digital services company that is growing leaps and bounds thanks to a ferocious sales culture.  Dialing for dollars, the sales team calls upon prospects, offering their services with one solitary goal—close the sale.  Management and marketing are all aligned behind this singular obsession, rewarding top sellers for their efforts and spending marketing dollars on lead generation that results in the highest close rate.  And though this goes well beyond CPA as a metric, the menace is parallel.

For Company B, the trouble emerged online as their reputation began to suffer.  Complaints about the ineffectiveness of their services bubbled up on organic Google searches as hundreds of newly acquired customers ranted on Yelp and other social channels.  Undaunted, Company B hired a reputation consultant hoping to drown out the negativity online rather than address the fundamental problem—as an organization, they were focused on the wrong metric (sales closed) leading to the acquisition of a consistent percentage of customers they couldn’t satisfy.

It’s Time for a New Metric: Cost Per Satisfied Customer
Here’s a fundamental truth: what you measure defines your organization.  Company A’s fanatical focus on short-term CPA meant ignoring churn, creating a customer service nightmare and diverting resources from new product development to fill the pipeline.  Company B’s dedication to acquiring any and all new customers as quickly as possible spawned a reputation problem that still dogs them to this day.

Having established the villainy of CPA, we can now turn our attention to a radically new yet simple metric solution: Cost per Satisfied Customer or CSPC (because an acronym is essential here!).  In this calculation, we seek to differentiate between all customers acquired and those that are actually satisfied with your product or service.  By isolating the characteristics of your happy customers and how you came to acquire them, you can then replicate this in future acquisition efforts.

Practically speaking, this is a bit more complicated than I make it sound but fortunately in the world of big data, not beyond the reach of most companies.  The key is the willingness to recognize the problem (not all customers are of equal value and some are even of negative value) and the solution requires more than changes in media buying and data monitoring, including an entire organizational shift from gaining customers to satisfying them on an epic scale.

For Company A, calculating Cost Per Satisfied Customer is not a stretch since their CRM system already tracks means of acquisition and length of service.  These two data points alone can root out the “switchers” who can then be further profiled against the rest of the customer base acquired in a similar timeframe, allowing for the isolation of problematic promotions and preferred prospect characteristics.  This data could deliver a rudimentary CPSC by dividing the marketing spend by the total of non-switchers acquired.

For Company B, getting to Cost Per Satisfied Customer is also doable.  First they would need to look at their customer satisfaction data and isolate both promoters and detractors.  Then they would need to model both groups looking for trends in terms of how they were acquired (lead source, sales person, pitch process) and business characteristics (size, ownership structure, vertical, location, years in business, etc.).  With this info in hand, it would then be possible to concentrate sales efforts on those types of prospects most likely to be satisfied and divide the costs of these efforts by the number of promoters acquired.

A slightly more sophisticated CPSC calculation requires the ability to bring together marketing spend (M), customer satisfaction data in the form of total satisfied customers (SC) and lifetime customer value (LTV). The formula looks like this:  M ÷ (SC x LTV) = CPSC.  And I have no doubt that data geeks out there could refine this more by factoring in the additional costs of servicing unhappy customers as well as a reputational quotient that blends in recruitment and retention savings when complaints decline.

Here’s the bottom line—Cost Per Acquisition is the wrong bottom line and leads to organizational problems that can indeed be disastrous.  All customers are not equal; some can help you grow and others might just put you out of business.  By focusing on Cost Per Satisfied Customer, you can shift marketing/promotional/sales efforts towards those programs that deliver customers you actually want today and for the long haul, thus extinguishing the CPA monster once and for all.

Customer-Centricity Spins Gold for Richline’s CMO Mark Hanna

05/12/14

mark hannaAbout seven years ago, Mark Hanna and his team at Richline Group devised a unique strategy for improving their business model that called for thinking small in order to think big. In the interview below (arranged by the folks at The CMO Club), Hanna explains how his company went from a “one size fits all” product approach to having over 40 retailer-specific jewelry lines.  Though this approach meant a lot more work for the Richline marketing team, it fulfilled Hanna’s desire to dramatically reshape its relationship with its customers, an effort that has paid huge dividends both in terms of higher customer satisfaction and increased sales.  Hanna reminds us all that ultimately, the fundamental role of marketing is to build customer trust and without trust, there is no brand.

Can you talk a bit about the structure of Richline and your role at the company?
We have four independent divisions or business units within our larger company. These include Richline Brands, Inverness Corporation, Rio Grande, and LeachGarner. There are synergies among them but they are very independent of each other and since I’m corporate, they all fall within my purview.

I’ve been CMO of Richline for 8 years and see myself as chief business catalyst, which means that I carry the marketing responsibilities for everything from outbound to services. I also carry the social responsibilities in terms of ecology and social responsibility issues and I have tremendous influence on our operations.

Does each division have its own marketing budget?
Each division has a marketing team, which reports to me, and each of those divisional Presidents develops their actual numbers for the division budgets. So each division has its own marketing mandate based on that division head’s objectives, as they each have very different markets, and I manage each of those four individual marketing departments.

Since you work in a more advisory capacity on the corporate level, how do you rationalize success? Since you’re not responsible for each of the four divisions from a line standpoint.
I think there are two ways to answer that. First, we’re a little textbook in terms of goals, strategies and tactics. And that’s done at the division level but those also roll up to the corporate level. At the corporate level, those goals and tactics are the collaboration among all the separate divisions. It’s about one group’s ability to greatly influence the direction of another group.  For example, our Brand Group has a good feel for the market and where it’s headed and informs our fabricated division in terms of what they should be making. Our division that works with the hobbyists, are all over the current trends and interpreting them in different ways, so there’s a big synergy among the divisions created by the consumer market. If you work back from the consumer to our divisions, they really do all influence each other very much. I personally manage the strategic planning process for each one of the divisions.

So that includes a lot of troubleshooting and making sure they set clear objectives, right? Do you also handle budgetary allocation among the divisions?
Yes, definitely on the objectives. And there are really two specifics that we run everything through: one is called “moats,” and the other used to be called collaborative benefits but I now refer to it “return on relationship,” in deference to Ted Rubin. The term “moats” I took from Warren Buffet, and it refers to services, products, and abilities that we own that no one else does. These are our corporate differentiations, our product differentiations, our service differentiations and it’s the single most important strategy we emphasize throughout the divisions, this creation and maintenance of moats.

What are some of your moats?
We’d really have to look at it division by division. But if we start at the fabrication level, their really strong moats are the ability to create precious metals in pretty much any format or any composition, strength, and consistency depending on the product. We have 100 variations of 14k gold, for instance, and our investment in tech is second to no one else’s. So the moat there, at the initial stage, is our precision and knowledge base.

How do you measure your own success as the corporate CMO?
This is where our discussion will get into talking about return on relationship, because all of my goals are based on the growth of our business and the growth of our profitability. My goal is that we become the biggest go-to company among retailers. It’s like life insurance – you’re investing premiums and they continue to appreciate. We see our investments in these and “return on relationships” as the same thing. Growth of business over time is really about how strong our relationships are, how strong the trust is. Improving that trust every year is my single most important goal.

Have there been any specific marketing initiatives that you can point to as having really helped build those relationships? 
In 2009 we identified our biggest weakness as not having control of the consumer touch points. We were pretty much a company presenting our wares to a buyer and had very little influence over how things were packaged, how things were displayed, how they were advertised. So from 2009 onwards, we made it our priority to gain that control. We identified 20 key customer touch points for each of our brands. And it became the single best focus that we ever made and the most important strategy we’ve developed over the last few years.

The first thing we did was look at our market, look at our customers, which are the major national jewelry chains, shopping networks, mass merchants and department stores. If we sell something to one of them, we can’t sell it to another. So the strategy became going from national label to private label and creating very specific multiple private labels within that category of products. In karat gold for example, we have 14 retailers carrying assortments of products within a reasonably small range of innovation all under different names. And what that did for us was take away channel conflict. It multiplied the marketing stress because we had to create everything from brand guides to color guides for 14 instead of one. But it absolutely shot our sales through the roof because we took away channel conflict and allowed each retailer to create their own margins and positioning.  It got us on this track of being very in control of this vast number of private label collections of which we now have 42.

How do you keep things straight and get down to who controls what between both of your marketing department and the marketing departments of the retailers? 
We’re very careful, and it’s all proprietary. Everything is done on a project basis together with the internal sales and product teams of the store we’re working with. Most of our customers have a single sales team associated with them. So we can keep it pretty straight. Collaboration, at all levels with the retailer, follow the same path.

How do you manage, since you’re dealing with four divisions and 42 different brands in retail, how do you set the big picture for these folks since you obviously can’t be involved in the day to day sales?
First, you come back to the word moat, and the idea of customized reality testing versus the differentiation that we’re providing. Secondly, it’s not all on the marketing department as each of those brands is associated with a retailer and that retailer has an internal team, a product development team, an operations team, a customer service team so that ultimately, we become the organizer of that team and the catalyst for that team to walk in the customer’s shoes. And there might be occasional conflicts but for the most part, everyone is focused and it’s a lot of work but the system seems to work quite well. At one point in time everyone is focused on one brand and one customer. We honestly have so few sales and marketing conflicts; we work side by side with the sales teams at these companies and it creates a bond, not an antagonism.

The world is about trust and transparency. At some point in time there’ll be a day where we can say, we’re Richline, these are all our brands and you can trust them. And to do that we need to be socially conscious, we have to be absolutely able to live in a glass house. That’s why improving customer trust has always been my single most important goal.

Social Media Innovation + GRAMMYs CMO, Evan Greene

04/21/14

evan greene

As CMO of the Grammys (officially titled National Academy of Recording Arts and Sciences),  it would seem that Evan Greene doesn’t have to go out on a limb to create engaging content. Most fans are already engaged, eagerly awaiting the next photo or tweet about their favorite music artist. But he and his team maintain that the biggest contributor to their success is their dedication to listening to those fans and joining them in dialogue, which is not quite as easy as it sounds.

To dig into this more, I had the pleasure of moderating a breakout discussion with Evan at The CMO Club Inspiration &  Innovation Summit in New York City last month.  It was a lively conversation with about 40 other CMOs covering a wide range of social media challenges, many of which Evan and I addressed on the spot (and rather pithily I might add!).  Since I am not a great notetaker, I recorded Evan’s responses, which are transcribed below for your reading pleasure. Given the GRAMMYs extraordinary success overall (ratings were 2nd highest in 21 years) and on social (13.8 million tweets during the show generated 862 million impressions), you’ll want to read on…

Could you talk a little bit about your planning process?
Our campaigns need to engage people and if they don’t, then social media is not going to help and we usually abandon it. It’s really for us about having a very respectful, two-way dialog that we think is engaging on a daily basis. We don’t come from the standpoint that we’re the authority, that we’re the expert, that you should listen to what we say, that we want to tell you what to listen to, who to follow, how to dress, what to do. We simply want to be where music is happening. We want to be a credible voice in music.

And the thing that we’ve discovered, the sort of the universal truth that we’ve hit upon over the last couple of years, is that people generally are looking for two things. They’re looking for discovery and they’re looking for community. And if we can enable the idea of discovery and empower the concept of sharability, then we are, by default, going to be leading to a greater, more robust community.

Can you share some of the innovative things that you’ve done in the last couple of years?
Innovation really is simply how do you add more to the conversation to make it more interesting on a daily basis? So some of the things that we did this year were simple, but engaging. For example, we’ve now live gif-ed our nominations show and the Grammy awards telecast. So we’re now creating gifs in real-time.

We also expanded the size, the scale, and the scope of what we call our social media command center onsite at the Staples Center during the show where we have more bloggers from more diverse areas from more diverse music genres and we try to get more people to tell our story for us. Because it’s one thing if the GRAMMYs talk to you about it and tell you about it. It’s another thing if people that you know and like and respect and trust are telling you about it.

How does content marketing fit into this discussion?
For The GRAMMYs, it’s all about content. Granted, we’re a non-for-profit trade organization, so we don’t have the budgets that you probably think we do. But we’ve made a pretty sizable investment in our content infrastructure because we want and need to be creating a lot of content. For example, we want to be creating engaging, short, episodic video pieces that are easily digestible and easily shareable.

In a lot of ways we’re fortunate because music overlaps and enhances so many different areas. A good example is the intersection between music and sports. So six years ago, at the Beijing Olympics, the biggest story was what’s on Michael Phelps’ iPod as he’s going in to compete for 8 Gold medals.

So we thought, since there’s always been that overlap between music and sports, we created a content program called Champion’s Playlist where we talk to professional athletes and say, “What’s on your iPod? What do you listen to to train, to get motivated before the big game, before the championship?” And this starts to become a shareable experience where you can now overlay what your playlist is with your friends’, you can see how some of these famous athletes, how their playlists overlap with your own. This gives us the opportunity to create a leaderboard, et cetera.

So you’ve done all this stuff. How do you measure it and do you try to differentiate social metrics from your broader metrics?
The easy answer is what are your ratings and how much money are you generating. Well, I look at it another way.  I see all of that as a consequence of everything else that we’re doing right on the front end. If we spend a whole lot of time on the front end, being really true to and respectful of our brand, and really making sure that we do the work to fill the pipeline, and if we create that conversation, if we create that relationship with music fans everywhere, then we’re going to be rewarded by people watching the show, we’re going to be rewarded by 99 percent positive sentiment. We’re going to be rewarded by the fact that our marketing partners are more engaged and happier than they’ve ever been before. Our revenue is going to increase. I think if we focus on the revenue and we focus on the ratings as the objective, it skews the narrative and it skews the story.

It used to be how many Facebook friends you had, right? And then it was, what’s the sentiment? But now the questions are getting a lot more detailed and a lot more sophisticated. And so that’s why listening is changing all the time. That’s why you need people who have access to the full Twitter fire hose. You need people who are doing more than just sort of skimming the surface with Google analytics.

We spent a lot of time talking about listening as a customer service channel and I think everybody recognizes that as a doable thing in social. I’m curious if any of you are listening for customer acquisition opportunities and if you’ve been able to systematize that and talk about that.
It is about credibility, and gaining the trust of your customers. You need to be where your customers are, and not necessarily only your own Web-site, and seek to create evangelists. So if your business is photography sales, you go to a photography forum where people are talking about a new camera. So, from a social media standpoint, don’t try to sell people with a link to your website and a price. Rather than talk about this new camera, utilize the buzz that is already happening organically, and re-tweet or re-post other credible voices in your community. Trust and credibility are powerful tools toward acquisition.

Well, you also brought up an interesting point which is sort of empowering employees to be social voices for the company as opposed to trying to control the conversation centrally.  Can you explain the advantages of this decentralized approach?
The key is, I think there’s so many divergent conversations happening all the time about all our respective businesses and the key is how do you channel those conversations. How do you channel all those disparate conversations into a cohesive dialogue? And I don’t know that there’s one answer to do that but one of the things that we did is we created what we call our Social Media Bible which has all of our correct URLs. It has all of our proper hashtags, all of our handles.

We distribute that to all media, and all of our friends, fans, and followers. We distribute it to artists and managers, labels, anybody that can possibly be having a music conversation. Now whether or not they’ll follow it is another story. But when everybody’s got the same consistent inputs and the same data, the results are usually stronger than they would have been otherwise.

Do you have any ideas as to how one can track word-of-mouth marketing and be able to then put some type of ROI to it?
I think one of the biggest fallacies and one of the biggest misnomers about social media is that it’s free and easy. And I think right now, the next big step is figuring out how you can track word-of-mouth marketing and be able to put an ROI on it.

How do you measure measurement analytics? What’s the value of having a bunch of Facebook friends? Is it the aggregation of tonnage? Is it who’s passing it along? All of that is being parsed right now and I don’t think anybody’s got the answer but there are some companies that are getting a lot smarter about it.

How do you approach social media innovation?
We try a lot of different things and the down side of trying a lot of things is that you fail sometimes. But every once in a while, you get it really right. And if nothing else, we’re always learning. Sometimes we make the right move, sometimes we don’t but we’re always in there. And frankly, the deeper you are into social media, the more you hear about trends first. So you can sort of pivot down the river and play around over here and see if it works and if it does, great! If it doesn’t, you just come back to where you were.

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