Author: christopherskinner4136

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Nudging Nudge Theory: The importance of customer segmentation using predictive data

There is a lot of talk about Nudge theory these days. Nudging someone is smart, works and the concept should be utilized by all organizations to better serve customers and itself.

Created by Richard Thaler, Nudge Theory proposes the idea that you can influence people towards a specific desired direction by using positive reinforcement and indirect suggestions, a tactic often referred to as ‘nudging’. Nudge Theory is used widely in business within marketing. It often manifests as a way to subtly convince a customer one way or another that a product will benefit them personally – not just the company they’re giving their money to when they make a purchase.

“By knowing how people think, we can make it easier for them to choose what is best for them, their families and society.” – Richard Thaler and Cass Sunstein.

The problem with Nudge theory is how to utilize it. People are complex individuals. There are 16 personality types alone according to the Myers-Briggs classification. If we look into why people make decisions while using only ‘data of the past’, we quickly run into problems. I have personally found 2 theories that have not changed in a few years across a variety of customer CRMs:

  1. Only 2 to 4 personality types are profitable for any given product sold.
  2. There is a 20x difference in conversion between the best and least performing personality.

Having a theory of your customers’ next moves based on their traits and personalities is a prerequisite to Nudge Theory performing well. If you apply a Nudge to your high performing personalities (customers or just prospects), Nudge works well. Having some understanding of what a customer might do is better than having no data at all. If we average all customers or even our best performing customers into one bucket, we should only expect average results.

We are living in a time where segmenting customer types are now possible at scale. We see it work very well for multi-national brands that have localized products, such as Ford, McDonald’s, Burger King, Starbucks and the like. eCommerce technologies are more than capable of deploying the same.

Combining ‘data of the past’, sales data and action histories with theories of people is a clear way to scale organizations. Ultimately, using Nudge after you create these theories of your customers will create a roadmap to success and differentiation in a world of unclear averaged messaging and promotion.

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Let’s Fix Digital

In 2013, Christopher Skinner was the keynote speaker at a Google ThinkFinance event in Mountainview. Five years is a long time when you’re thinking about digital, yet the concepts here still ring true. Let’s revisit each lesson from the presentation and apply it to 2018 digital thinking.

1. The Customer Journey is Just Like Dating

Would you walk up to a stranger on the street and ask them on a trip to Paris? No. To get there, you suggest a coffee date, then a dinner date, and then the romantic getaway. You need to treat your potential customers the same way. If you show them the big discount or offer right away, you’re going to have a low response rate. No trips to Paris or the checkout.

2. Think of Your Business Like a Lawn

And the blades of grass are your profits. When you’re watering and fertilizing, you’re making the grass grow – that’s your branding. When you’re mowing – that’s your Direct Response. Your lawn needs both these efforts to grow its greenest and its best. By the same token, a healthy marketing strategy is made up of Branding and Direct Response efforts in perfect balance.

3. Stop Looking Over the Back of the Boat

This is our favorite metaphor. In 2013, we did not have our prediction technology, but we were on the way to making it. MakeBuzz recommended strategically buying media, using your data to see where they live and what they do to make predictions. Now, we look well beyond basic demographics. We look at human activities to make our predictions. We’re at the crow’s nest on our ship seeing what’s ahead.

4. Pay Attention to Real Social Circles

Offline word of mouth is still a thing! In 2013, a study found that 93% of word of mouth is offline. We expect that statistic to be unchanged since then. So how did we suggest to get people talking in 2013? Concentrate media in geographic areas.

With our predictive technology, we’d tell you to do more than that. We are more precise. Tailor your message to your best customers. Reach out to potential customers in a way that delights them so they will start conversations. We think Netflix is particularly good at this. They create shows to entertain certain personalities, which end up creating a buzz (think of Stranger Things!).

5. Your Brand Search Terms are Not Gifts from God

Back to our previous concept, you need to put effort into your branding to begin awareness. No one will search for you if they have no idea who you are! Create awareness before pushing a potential customer to buy your product (have a coffee date before a trip to Paris!).

Certain people will accept your brand, and others will not. Focus on the right groups. Google won’t help. Use tools outside of GA.

6. Profitability is Like Chicken Soup

In other words, it’s not the same from one end of the bowl to another. A variety of markets exist in one city, changing from one zip code to the next. You can now bucket your customers based on personalities.

It seems like advice from 2013 would be irrelevant, but good concepts take a while to become outdated. If you follow an overarching strategy and guidelines you can update your tactics. In 2013, we were really into bucketing customers by zip codes and media, but now we think you should bucket customers by their shared traits.

Once you understand people at a people level, you can move beyond media tactics.

Got some questions for us? Write to us and we will be happy to help!

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Combine these two stories

Combine these two stories and you have a hint at how to build a business operating system.

You can’t just quantify business metrics and call that strategy and you can’t ignore metrics needed for creative endeavors.

Don’t Let Metrics Undermine Your Business. Tying performance metrics to strategy has become an accepted best practice over the past few decades. Strategy is abstract by definition, but metrics give… Read more.

Leading with Trust. Companies invest CEOs with the singular authority to address high-stakes challenges and make tough decisions. However… Read more.

Trust and strategy are hinting at where to find real growth strategies. Not a complete story but a start.

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How you can combine your CRM with predictive analytics

Amsterdam

We all know travel and especially hotels is a difficult business. High cost, lacking the technology needed to sustain disruptive forces, travel need a break.

“Hoteliers can build loyalty and trust with guests with the help of CRM technology. This technology can provide a complete view of the customer through the predictive analytics and data-backed insights needed to effectively prioritize customer experience and deliver the personal attention guests have come to expect.”

Hotels are onto something. Brands have few real ‘sources of truth’. One is CRM. When we append rich data to this data set, we discover it can be highly effective at establishing a baseline of rules based on predictive analytics and direction. Once this is established, we can apply machine learning to our outreach, such as apps and websites.

“According to a Deloitte Consulting white paper, Next Gen Hotel Guests Have Checked In: The Changing Guest Experience, “hoteliers need to turbocharge the guest experience and tune into their needs to drive loyalty and increase repeat business.”

With data mined from a CRM system, hotels can create customized guest profiles to better anticipate preferences such as room category and view, package types, restaurant recommendations, and rates.”

Predicting expectations and why people buy, what they need in-market and out is possible via trait theory and connecting traits to CRM data. Instead of clogging a CRM, we can segment personality and emotional traits that are causal to the buyer, without violating their privacy or experiences.

CRM does not need to be the system of record but can be a sophisticated or simple data platform that predicts outcomes.

If we can predict loyalty and create a total addressable market based on who should be a loyal customer, we no longer require customers to jump the hoops to loyalty. We have a great theory of who already are loyal. CRM can be a modern way to drive greater value. It’s not the simple data set of who bought what anymore.

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Business OS x Customer Delight x CRM look-alike = growth

psy·cho·lin·guis·tics
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noun

  1. the study of the relationships between linguistic behavior and psychological processes, including the process of language acquisition.

My work involves this study of linguistics and the psychological process through the gateway of customers and what they buy. By no means do I perform psycholinguistic research and it’s pure form. Instead, I look at real-world human behaviors and convert them into a series of personality traits — all predicted. Theories of customers. Then, connecting traits to sales data, you have some understanding of why people make decisions that impact their pocketbook and the services and products they bring into their lives.

Why do this?

I’m amazed in the decades I have been around that marketers, really don’t understand what I want. I want to be delighted and surprised.

Some of the best examples of delight come from the off-line world. When is the last time the banner ad make you cry? Certainly, the real world can and so can video, compelling written stories, even the old 30-second commercial when given enough time, can work their magic.

Pick up a magazine, a real-world magazine that matters to you. One time I was in Germany and noticed that they had 10 different versions of fishing magazines. I can’t read German that well but I did notice how diverse the subject matter is. The obvious is saltwater vs. streams vs. lakes and of course what you can catch. What was fascinating to me is how marketers used different magazines for diverse products and services. Example: Lake fishing, Audi. Saltwater, BMW and so on. is this random or do they have a great understanding of their audience?

That got me to thinking, can digital media one day reach this and delight me with surprising things that exist in the world that I’ve never heard of.

Do I have to rely on my friends and family to tell me about new things?

Must I come up with a need in my life, a job to be done, and then guess at what product or service is going to fulfill that need?

Can marketers find the efficiencies of what digital has promised and combine it with customer delight, a real-world KPI that Amazon is focused on? Can you bring what works or has worked so well in stores, some stores, and bring that experience online in an economical way.

After 20 years of doing this type of work, why are things still so basic? We’re still talking about topics that I was executing and creating in the late 90s. All of that stuff should be dead and buried and we should have moved on by now.

It’s time for a paradigm shift that includes protecting our privacy, stopping unnecessary collection of data and yet, give people what they want. It can be done and it will be done.

What solves this problem starts with a few basic things:

The business operating system. You must have a mechanism in place that rewards creative, innovative ideas. You can’t just keep rewarding what worked in the past based on what some spreadsheet jockey tells you to do. It’s a flawed system that sets up a recipe for disruption.

You have to understand customers and what delights them. That’s not just a creative or marketing topic, it’s again an operating system that can next what’s inside of your CRM with a predictive CRM, a look like CRM of future size.

Having a theory of customers is critical. It’s integral to the above two items. Theories of customers cannot be solely based on surveys, clicks, and cookies. It can’t be based upon media alone — although that is a great feedback mechanism. It has to be based upon real-world theories of people. Theories have to be tested and they have to have causal connections to revenue.

These ideas are starting to get built into some of the best companies that will in the coming decade, wipe out the incumbents at an ever-faster pace. Organizations need to immediately budget for customer-centric answers yet dial into to significant changes in revenue.

What’s the best way to kill a competitor, grow, and do it fast.

Business OS x Customer Delight x CRM look-alike = growth

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Innovation Articles over time

Here are a few articles and one program I like about disruption and innovation. We debate what it means and if it exists. What worked so well for a few decades is now changing. Change is good and we should expect much more to come.

Unfortunately, disruption theory is in danger of becoming a victim of its own success. Despite broad dissemination, the theory’s core concepts have been widely misunderstood and its basic tenets frequently misapplied. Furthermore, essential refinements in the theory over the past 20 years appear to have been overshadowed by the popularity of the initial formulation. As a result, the theory is sometimes criticized for shortcomings that have already been addressed.

What Is Disruptive Innovation? The theory of disruptive innovation, introduced in these pages in 1995, has proved to be a powerful way of thinking about innovation-driven growth. Many leaders of small, entrepreneurial companies praise it as… Read more.

Bringing new technology to market is a crap shoot, right? Wrong, says innovation guru Christensen. Follow his four rules to a new science of success.

The Rules of Innovation. Bringing new technology to market is a crap shoot, right? Wrong, says innovation guru Christensen. Follow his four rules to a new science of success… Read more.

As a social science, business does not lend itself to provable operational rules. As appealing as disruption theory might be, the context and actions of many parties create unique circumstances each and every time. There is no guarantee that new technologies and products will disrupt incumbents, just as there is no certainty that existing companies must be disrupted. Instead, product leaders look to patterns, and model their choices in an effort to create a new path.

The Four Stages of Disruption. If we’re so aware of disruption, then why do successful products (or companies) keep getting disrupted?… Read more.

Each of the disruptive forces we highlighted would be challenging on its own; taken together, they can seem daunting. Yet the opportunities for the economy, business, and society that these global forces generate are equally compelling and are already creating new prosperity for those quick to harness them. Embracing the trends while mitigating their negative impact on those who cannot keep up and on our environment is the new imperative of our era.

Navigating a world of disruption. We live in an era of disruption in which powerful global forces are changing how we live and work. The rise of China, India, and other emerging economies… Read more.

A new programme designed to inspire senior leaders with responsibility for driving growth through disruption.

Discover, discuss and reflect on the forces of change and disruption within organisations, industries and the world, and turn these into new and unique opportunities for driving business growth and creating value for today’s and tomorrow’s customers.

Driving Disruptive Growth.A new programme designed to inspire senior leaders with responsibility for driving growth through disruption… Read more.

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Doe or Die — Is retail innovation slow?

“It all comes back to the customer — To avoid this type of needless innovation, retailers should look to become shopper-centric in every aspect of their business” That statement 3 years old. We are seeing how modular business architecture speeds the pace of disruption. 3 years ago has introduced a number of new ways to shop and not shop.

I don’t think it is “do or die” but do or slow change and eventually become meaningless. Kmart did not die as fast as it should. We still have legacy stores because many serve a purpose and are not served by new. It all takes time for people to change. Maybe slower than we all like.

Do or die: How retailers can innovate in an age of disruption. Pretty much everyone agrees the traditional retail model needs to change—how to do so is another matter…

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Independent Hotels Marketing

Hotel America, Amsterdam 2015

How independent hotels can win direct bookings. With the explosion of the “digital way of life,” the traveler’s customer journey has become increasingly complex, which…

From the article…..

While I like this article I would love to see more travel companies focus on brand building and product.

Here are some marketing initiatives in this category:

  • CRM marketing initiatives with pre-, in- and post-stay messaging aiming to engage the customer, remind of booked services, inform of hotel location, local tours and activities during stay, recommend and upsell services, and make sure guest experience is at its best.

Segmenting customers by traits can yield some ‘not so obvious’ answers about why people buy. Putting people first can yield better product-market fit and less reliance on media. Traits tell us what will delight them.

  • Upselling and engagement marketing initiatives.

Same answer segmentation by traits drives better up-selling of the right product to the right person.

  • Marketing automation with drip and event-triggered marketing initiatives.

Something that is needed. But watch the over-reliance on media and what marketing should be doing. Shall I say, product again?

  • Guest recognition programs.
  • Loyalty marketing initiatives.

Loyalty and the old satisfaction profit chain model, just updated with A modern approach to CRM can make this quite valuable.

Travel is an exciting vertical. It’s overdue for a rebuild as it’s been 20 years of the same basic methodologies. Companies that do not invest in customer delight and product will find it much harder to mask these problems.

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Every business can operate at multiples more, comments on CDPs

Multiples

Not by making people work harder and longer but by doing the things that are innovative and more valuable. It is a mixture of many things.

There’s a lot of modern economic principles that don’t help innovation. Innovation is not efficiency. The results of innovation drive great efficiencies but are often capital intense efforts that drive out the older, less efficient system in the long run.

When we examine wealth creation, we don’t see linear thinking. Think about Google. They started as a free search engine. They acquired paid search technology. The initial investment is small compared to the bets they make today. The present value looks nothing like the initial presentation for money.

When you look at CDPs, there are many limitations to these technologies today.

What Can You Do With a Customer Data Platform?

“Other customer data solutions lack one or more of those capabilities: CRM systems handle just limited amounts of rigidly structured data, marketing automation offers limited transformations and external access, DMPs work largely with anonymous profiles. These are not flaws in those systems, whose designs were optimized for other purposes. But they do mean those systems are not well suited to creating unified, sharable customer profiles. That’s what CDPs are designed for and that’s why so many marketers are now using them to solve that part of their customer data challenge.”

Why are CRMs so limited and yet the opportunity to build things that scale a business are so close?

An Overview of Customer Data Platforms (CDPs)

“CDPs are the next step in the evolution of data management systems, using data from platforms such as CRMs and DMPs. They are a critical component of your martech stack if you intend to do true data-driven customer-centric marketing campaigns across multiple channels. CDPs can help you get a 360-degree view of your customers, and deliver a unified experience to them at all stages of the buying journey.”

Why CDPs Can Fall Short for Marketers (and What to Consider Instead)

“Customer Data Platforms (CDPs) are a popular topic among B2C marketers looking to manage all of their customer data in one place. This is especially true as consumers are more conscious of their privacy — and as personalization continues to be the #1 priority across every industry.”

I think we will see further advancement in predictive data sets that are not based on ‘data of the past’. We will combine theories of customers (theories of the future) with data of the past. Are CDPs ready today? It looks like a great promise but too much complexity and not enough customer centric prediction. Stop making complex technologies and chasing too many data points.