The other day I was looking at messages I’ve received on LinkedIn via their Inmail and Sales Navigator tools. One was from a company selling accounting software to small businesses. Another was from someone inviting me to an event in London that evening and five were from people selling e-commerce solutions; website design for start-up’s; that kind of thing.
If any of those business developers had looked at my profile, it would have given them the vital insight to save them the effort:
- I can’t attend an event in London because I am on assignment in Thailand.
- I work for a large company with a separate accounting department (so I’m neither an influencer or decision maker for accounting software)
- I’m not involved in building the company’s e-commerce sites
“But that’s not how it works!” I imagine some of you cry.
We aim to reach an enormous number of leads, expecting to convert say 0.1% into potential customers. This places my value to any of these businesses at less than one thousandth of the value of a single sale or I’m guessing around $1. Yet if they were able to ask me a couple of qualifying questions as party of the selling process
“Do you work near London?” “Are you involved in selecting your accounting systems?”
then perhaps my value goes up in line with their improved conversion rate.
However, it’s rare to get the opportunity to have this kind of interaction with a potential customer, but they can “ask the qualifying question” by looking in the data on LinkedIn – how many employees are there in my company, where is it based and so on. I’m going off on a tangent already. Not surprising really as it’s been around five years since my last “confession” in a blog post so it’s going to take a little while to get back into the swing of things.
When us marketers plan an activity such as the above, we are persuaded by the big chiefs and their finance departments to calculate the Return on Investment (ROI) and our hero status rests on the cost to reach these prospects compared with the number that have been converted into customers. Use LinkedIn as a channel and it doesn’t cost very much. This is a reasonable approach but it only provides an incomplete picture. If you follow this thinking and you want more customers, then run the same campaigns frequently – and send follow up messages:
“I haven’t heard from you about my accounting software”
“When can we talk?”
“I’m appearing at an accounting software convention, want to come?”
The answer to all these questions? A frustratingly small click away for our much-admired sales people.
This approach is of course focused on short-term impact. We look at each of the campaigns and see what ROI has been achieved. Perhaps there’s nothing wrong with this kind of evaluation for LinkedIn lead conversion campaigns.
But try to apply it to the world of Game of Thrones and you’ll see where it starts to fall down. If a consumer wanted to watch Season 8, one of the (legal) options was to subscribe to cable TV. Surely an easy job for any marketer:
“Want to watch this really popular show? You have little option other that to subscribe here”
It probably looks like a very successful campaign. But how many subscribers cancelled when the show ended? Not so great when you look at it that way. The long-term value of a repeat customer should be considered, monitored and measured in many businesses. When we evaluate campaigns, here’s a different dimension that is often forgotten.
Not so at My Wardrobe, who were working hard to compete with Net-a-Porter, but sadly closed the wardrobe doors in 2014. They knew if they could persuade a customer to buy from them once, then it’s not too tricky to win them back for further visits. Placing the value of a customer on their first transaction only and to achieve a healthy Return On Investment, they couldn’t give away much in terms of discount.
But My Wardrobe knew the value of a customer over their lifetime was much higher. A single outfit purchase is fairly likely to lead to a follow-up order. They knew that a new customer had a high probability of returning more than once and had the data to show what this might be worth, on average, let’s say over a year. They could invest a gift of a £25 gift card for some customers who were previously valuable over a 12 month period (say 3+ orders of £150) but whose shopping had died down.
This Customer Lifetime Value is an essential indicator that I haven’t seen used often enough in practice, with retailers instead focusing on the short-term goals.
This also reminds me of a story I heard back in 2004. A man walked into a bookstore (sounds like a a joke – suggested punchlines please…) in Sydney. He had some very specific demands that would take considerable time for staff to fulfil, and the order wasn’t a large one. “Do you know who I am?”, he said, and the staff didn’t. So a super-smart member of the store team looked him up on their loyalty system and found that he was a further education lecturer who, every few months, purchased many books for his students as their course material. This made him one of the store’s best customers and they naturally went the extra kilometre for him. If they had evaluated him at face-value on the one-time purchase then they would be looking at a different situation all together, and probably one without the lecturer.
Looking at customers through the lens of their lifestyle value may be a critical step in the path towards building a long-term relationship with them. Short-term metrics such as those I describe may make marketing expensive, as your customer relationships become short-term too. Acquiring new customers is not speed-dating but a gradual seduction, getting to know them better through qualifying questions and listening to them, before asking the key commercial questions. Naturally you can achieve this through story-telling on digital channels and measuring a potential customers’ level of interest by their interaction with your content.
Evaluate a customer over the length of a healthy relationship (and not just the first date) brings more benefits for everyone and (back to me) it gives me more compelling messages to read and optimistically, makes me worth more than $1.
What do you think? How do you measure the value of your customers? Is there a place in your life for mass-mailings?