No, this is not an article about fracking, drilling for gas and oil in shale. This is about drilling down into big data. We’ve been using the term for a long time and it provides a useful metaphor for data analysis. But we’ve conditioned ourselves to think of drilling down only to a superficial degree and that needs a rethink.
When data wasn’t big and analytics relied on less robust hardware we were only able to scratch the surface of our data, a practice that survives to this day. Scratching often means looking for insights only at the end of business processes. So for example, we look for signs of churn next week or the next best offer today, or to forecast the next sales deadline. All of this is valuable but not enough. If we’re doing our jobs right, we should be using powerful analytics to perform root cause analysis to better forecast events so that we can either avoid them entirely or further enhance our likelihood of success.
What if you could go further into your data so that rather than simply discovering someone or some business that was about to leave your service (churn, non-renewal) you could find those moments of incipient danger and correct a problem at the source? You can but it requires change, not more hardware or better software though those things are always welcome, but a different way of framing the challenge in front of you.
Too often we make assumptions about some aspect of business and then collect and analyze data about it. That’s a good approach as long as the assumptions are valid and accurate but too often they are not. When we assume something we are building an ad hoc model of what we believe reality is and that’s a good thing. Modeling is the heart of all kinds of progress in any number of fields of human endeavor but it’s not something we do particularly well in business with some exceptions.
As Nate Silver writes in The Signal and the Noise: Why So Many Predictions Fail-but Some Don’t, “We need to stop and admit it: we have a prediction problem. We love to predict things — and we aren’t very good at it.” You might recall that Silver called 49 out of the 50 states correctly in the 2012 presidential election. This man does not have a prediction problem.
Retailers might be an exception; they model heavily and they do a good job. They collect customer and store data so that they can model the ways they set up stores and plan the assortments that they stock. Those models mirror very closely the clientele and traffic for an individual store. When it comes to online business and B2B business we aren’t there yet because it’s both a different and a harder challenge.
Finding a solution in the online world starts with figuring out your model before you make any assumptions and before you implement something. (This is not your business model but your approach to customers, which is part of the business model.) It’s surprisingly easy to do if you take a two-step approach to analytics.
Step one, build a realistic model of your business by asking your customers. I call this discovering your moments-of-truth and I write about it in my new book, Solve for the Customer, which will be available shortly. As you know if you read this space often, a moment-of-truth is simply any time your customers expect you to live up to a promise whether that’s a product, company, or brand promise irrespective of whether the promise is expressed or implied.
Knowing your moments-of-truth you can build customer facing processes in Step Two. Your processes and supporting software will meet customers where they live, so to speak. The best way to do this is with journey mapping software because it lets you examine all of the contingencies and define sub-processes as appropriate. It’s also the logical place to define metrics that will tell you if you are meeting your goals in your moments-of-truth.
For example, customer onboarding is a good example of a moment-of-truth and there are many analytics vendors that focus on customer health as a function of how quickly customers get down your learning curve. People at Scout Analytics, for instance, tell me that there is a direct correlation between customer longevity and how fast they onboard. Knowing this, smart vendors deploy customer success managers to ensure that onboarding is swift and trouble free.
You can identify moments-of-truth like this throughout your customer lifecycle and often those moments do not automatically require expensive human intervention. But having a moments-of-truth approach plus good analytics, rather than assumptions, enables a vendor to deploy resources where they’ll be most beneficial to both the customer and to the vendor.
None of this is hard. In fact once you change your frame of reference (a.k.a. your paradigm) from ad hoc assumptions to dedicated and conscientious modeling, it flows. When we move from random approaches to modeling, which incorporates a bit of statistics (and that is what analytics is about to a great degree) we pass from a framework of art to one of science. That’s what’s happening right now in many areas of front office business and it’s why I’m saying we’ve arrived at a new science, Customer Science.
The headline in today’s New York Times is to the point and dripping with déjà vu—“Twitter’s Market Valuation Suggests Wall St. Sees Huge Growth Potential.“ For those who’ve been around a while or who just remember the Facebook implosion there’s a sense of here we go again in the news. You will recall that Facebook had a staggering IPO that raised billions and gave the company billions more in valuation but then the stock promptly tanked unable to generate revenues and profits commensurate with the valuation.
I am not so sanguine about Twitter’s chances. Could we be heading for a repeat with Twitter or possibly something worse? I am not a financial guy and I don’t dispense financial advice so don’t sue me, but the stock looks like a kite on a windy day. It will come back to earth when the wind eases or your mother calls you home for dinner.
Beyond Twitter there’s a bigger thing happening. Google and all of the job sites and Craig’s List-like sites erupted on the scene during the first Internet Era and gobbled up the job listings and display ads that had been the life blood of the print industry for many years. The result has been a nuclear winter in print and journalism to the point that we are seeing magazines and newspapers shutting down or going electronic to save costs and stay afloat.
If you go further back, TV’s emergence in the 1950’s reduced radio’s impact for similar reasons. The entertainment experience was better or at least different and with the audience went ad revenue so that some of the biggest stars of radio had to transition to TV with their shows intact. Early quiz shows and even Groucho were things you could close your eyes to and not miss anything. Before TV, radio was the mass medium everybody talked about around the water cooler and though the era was also one of the movie industry’s golden ages, movies didn’t sell ads so the movies are a different discussion.
What all of this shows is the transition of media going hand in hand with the migration of ad revenue. Today we’re witnessing a great migration and transition from broadcast media to social media but I wonder how long it will last. Print dominated for centuries, Radio, barely fifty years before collapsing into a semi-homogenized stew of music.
TV has had about a fifty-year run too and it is collapsing into reality-and-sitcom-mediocrity or fleeing into the margins of low budget high concept cable. TV’s collapse is partly its own making as a shrinking revenue pie is being shared by hundreds of cable channels where there had once been only three networks. TV was surprising in another way because the technology-cost of production curve has favored lower cost technologies that reached the same or greater sized audiences.
Bucking the trend TV shows are expensive to make, hence the latter day reliance on “reality” themes that employ average people, little script writing or directing, and much more editing and post-production, which is computer-cheap to do these days. TV was saved from the tyranny of the technology-cost of production curve by the cost per impression curve which was an artifact of a population boom.
But the technology-cost of production curve came roaring back with social media and the advertising it hopes to generate and in some cases already is generating. This explains the popularity of Google, and now Facebook and Twitter advertising models. Social beats everything on the cost per impression curve because the technology is ubiquitous and nearly free and the content is free and often compelling. Everyman is a producer and consumer and the advertisers need only stand back and regard the analytics.
However the thing nobody talks about which therefore worries me is audience or market saturation. We already routinely filter out TV ads in numerous ways, so how long before we do the same with content linked ads? Can’t be done? Ha! Get creative. Or consider this: the Internet stream is still free and analytics are getting better and better so how long before conventional advertising, regardless of form, is completely bypassed by vendors?
A vendor buys an ad because it needs to reach an audience that it can’t reach in any other way or as inexpensively. But in a big data utopia it’s possible to know enough about the entire market to simply segment it and take a direct approach. That’s why I am not so sanguine about the Twitter IPO. Sure, there’s time for the social vendors to make some big bucks but in the longer term I think I can already see their demise. It was written in print, and broadcast on radio, and then TV and Cable.
Social networks won’t go away just as print, radio, and TV have not, but it’s a matter of time before some enterprising people figure out how to do social marketing or something like it better, faster, and cheaper. Then the cycle will start anew.
It’s only Tuesday but announcements are flying around San Francisco like electrons around a Uranium nucleus. I am here for a few days as a guest of Oracle to receive a comprehensive briefing on the company’s products and directions (more on that soon) and if that was the only thing going on it would be substantial. But today, Salesforce is making announcements that extend its marketing cloud with the addition of Social.com.
Social.com further extends the company’s growing franchise in things named dot.com like Desk.com, Work.com, Data.com and, of course, Salesforce.com. And while you’d expect the company that has led the social business revolution to eventually come out with something like this, you will be surprised to learn that Social.com is a social advertising platform that leverages the strengths of Radian6 for social listening and Buddy Media for social campaigns all integrated with the company’s flagship CRM to produce an advertising paradigm that stands Mad Men on its head.
Where the ancient and honorable advertising paradigm has been unsolicited, one to many and relatively untargeted, the Salesforce Social.com approach is pretty much its opposite — engaging, transparent and targeted. Just what the doctor ordered in an era when broadcast media in all its forms is in an economic death spiral (keep the media, FF the ads) and too many companies are still dipping a toe in the social waters rather than splashing around and learning to swim.
This changes that. Salesforce has an impressive array of customers already piloting the products, which are scheduled for GA in the Summer 2013 Release including Ford, General Electric, HP, Caterpillar, Burberry and Unilever.
As I look at this, it strikes me that social advertising is nice but what still needs to be fleshed out is fulfillment. It’s one thing to stoke demand with better targeting but it’s another to close the deal — otherwise, why bother? This announcement alludes to the importance of integrating CRM to the process and I suspect this is not the end of the story. There has to be a fulfillment piece that extends through CRM and ultimately connects with ERP and logistics — perhaps an alternative channel to ecommerce? So this is an important announcement but it sets up additional announcements that could be even bigger.
Over and out.
Marketing is taking CRM by storm; while we’ve all been fixated on social media, many companies — both vendors and end customers — have been acting more broadly by acquiring and extending marketing solutions.
At the recent Microsoft Convergence 2013 held in New Orleans in March, the company put a lot of emphasis on marketing. Microsoft presented sessions on Marketing Pilot, a recently acquired and renovated marketing campaign company, and at the show announced its acquisition of Netbreeze a marketing analytics company.
Also, at the end of last year Oracle bought Eloqua and Salesforce has introduced its third cloud dedicated to, what else? Marketing. There are other examples too of free standing marketing companies like HubSpot and Marketo or companies like InsideView, a marketing intelligence company, growing like weeds. So what’s going on?
It would be a natural conclusion to say that marketing had been the final CRM frontier and that companies had reached stable points in their sales and service solution rollouts so they simply embarked on marketing. But that’s rather simplistic and it violates a cardinal rule of business — spend money to make money or to save it, but don’t spend just to spend.
To appreciate what’s going on you have to step back and take a more nuanced view of the market place and the economy at large. When the economy tanked nearly five years ago it took with it a lot of jobs and capital, which resulted in slackening demand and that slack is still with us. Advances in technology are eating up even white collar jobs today and all of this has a depressing effect on demand.
Also, interest rates continue to test the zero lower bound as Paul Krugman might say, in part because corporations are flush with cash and because consumer borrowing is still lackluster. There isn’t enough demand for capital so rates luff like a sail in a headwind. Not enough people have jobs and banks, especially today, won’t lend to people who don’t have the means to repay the way they did in, say, 2005.
So, this is a long-winded way of saying that demand is slack, that customers are the rate limiting reactant in the economic formula. When demand is slack, companies without a clue hire more sales people, savvy companies step up their marketing games to help identify likely customers without spending the expensive resources involved in putting a sales person on the road. And all of that is a long-winded way of saying that marketing is hitting its stride because demand is slack.
You could argue that in other times and circumstances, for instance when there is no demand such as at the beginning of a new market, a niche or a category, it makes sense to do missionary selling and marketing is a bare bones affair dedicated to generating PR and brochures. But this is not then.
Today, most markets are not new. Customers have already bought version one or two and are smart about what the next edition ought to deliver. They’re also happy to not spend their money if they can’t get the deal they want. Oh, and by the way, there’s a lot of competition today so forget about those 65% gross margins that version one delivered, that’s not on the table. Smaller margins have little room for expensive and risky approaches to the market.
For all these reasons, and some others, marketing has become the hottest ticket in town and most of the CRM vendors have demonstrated an understanding of this reality and they are acting accordingly. Consequently, marketing vendors are having a field day.
This won’t last forever, nothing does, at some point the wheel will turn and there will be whole new fields to conquer with some new idea and the need for the elaborate, scientific and statistically based marketing that we are now constructing, will fade away. We’ll probably hear some company talk about expensive and over engineered marketing approaches in favor of sleek new ideas about the relative importance of sales over marketing, like they just invented the wheel.
But for now, demand is down, margins are under pressure and competition is tough, tough, tough. And marketers are getting their day in the sun.