Worth no more than…

We were talking to an HR executive recently, and came across something quite horrifying. The conversation went like this:

“How did you find Mr X, who I had recommended for the loyalty manager’s post?”

“Oh, he wasn’t any good. Incidentally, another chap from your office turned up on his own, Mr Y. He was ok, but he wanted Rs 12 lakh (1.2 hundred thousand). We reckoned that he was worth Rs 10 lakh, at most.”

“Who did you take ultimately?”

“Mr Z. He has 15 years’ experience, and came for 18 lakhs.”

We couldn’t believe our ears. How can you have salaries as different as Rs 10 lakh and Rs 18 lakh for the same position! One expects a range of ± 10%, but +80%! The profiles and responsibilities have to be very different for that to make sense. Were they?

Because if they weren’t, it tells you a good deal about how companies value CRM and evaluate CRM managers.

Who do we send the cake to?

Meet any B2B marketing manager and about the second thing he tells you is that he wants to do CRM with his customers.

“What exactly?”

“Send cakes and cards on birthdays. Take the relationship to the next level. There’s so much you can do…”

(To yourself) “Can’t think of one thing I want any of my vendors and suppliers to do for me except do my work, and not overcharge me – but maybe I’m ultra-professional.”

(To him) “Of course, of course, there’s so much one can do.”

“Yes, but you see the problem is that we don’t know who to send the cake to. The person who books the call may be just a flunkey, with no say in the decision. We want to reach out to the decision makers and influencers (with cakes). We have to do the ‘mapping’.”

And so it goes on.

While you wonder what stops them for doing the far easier job of sending B2B offers and deals, which, if they are meaningful, should land up on decision-makers’ desks.

Then you realise you are seeing a replay of one of our favourite excuses: Because the impossible cannot be achieved, the obvious shouldn’t be attempted.

We Indians are great at ‘change at the grassroots’ and ‘rethinking the entire structure’. No doubt these are necessary. But what are to do till we do these? Twiddle our thumbs?

What can you say about this man?

“He has bought Brand A. What does that tell you about him?” How many times have you heard this question? How many times have you had to made up a wonderful pen picture of this customer, based on this one single purchase and agreeing with brand manager’s reading of who constitute his market?

And how many times have you told yourself that this Sherlock Holmes act is totally absurd?

Holmes would at least have a well-used object, with plenty of tell-tale marks on it, to base his deductions on. All you have is a single purchase. And some completely unsubstantiated assumptions.

Yet brands’ creative and media plans are based on these mental gymnastics.

Is it so difficult to say, “The only thing we can tell about the customer is that he can, most probably, afford this brand. If we have additional data on customers, we can probably hazard a few more guesses. For instance, if we know that 67% of customers are Sindhi grandfathers with four-and-a-half gold-filled teeth, we can say, ‘There’s a 67% chance that our new friend is a Sindhi grandfather with four-and-a-half gold teeth.’ Beyond that we can’t say anything.”?

Why must we know our customers profiles? Why can’t we just restrict our interest to the whys and wherefores of their liking our brand?

We use many brands ourselves: In how many cases do we fit those brands’ (apparent) target markets? Or are we ‘beyond marketing’, non-slot-able, unique, different?

Lend your card

Would it make sense to ask loyalty programme members to lend their cards to friends and relatives during festive seasons? If there are exclusive offers to cardholders, and the primary purpose of these offers are to hike sales among heavy users, not necessarily to curry favour among them (‘Here’s your bulk discount’ vs. ‘Something special for someone special’), loyalty cards can become, in effect, reusable discount coupons. Members won’t, of course, mind some extra points on their friends’ purchases.

In short, card lending can do, more or less, what a referral programme does.

There are three immediately discernable drawbacks though:

(a) We may not get the card borrowers’ data, as we’d do in a referral programme;

(b) The card borrowers may be lost as prospects to the loyalty programme (Why should I become a member when I can enjoy membership benefits by flashing my friend’s card? Well, because you won’t get points. But I don’t buy often enough to collect very many of them. In that case, both sides are perhaps better off with you not having a card.); and

(c) The members’ data can get somewhat contaminated (Data says grandmother is buying itty-bitty bikinis; in reality, her next-door neighbour bought them, while swiping her card. This may not be so horrible though, as long as grandma doesn’t mind passing on the bikini catalogues, sent as a result of this purchase, to her neighbour.)

I ‘eurekad’ when I read Caples the first time, but when I started reading again! –

John Caples’s Tested Advertising Methods is a book I will unhesitatingly recommend to any copywriter. As I will recommend his How to Make Your Advertising Make Money and Making Ads Pay.

So what I am about to write is, for me, sacrilege. Yet it must be committed.

The tests that Caples talks about leave a lot to be desired. I was just going through Tested Adverting Methods (5^th edition, revised by Fred E. Hahn [a revision that does it only harm]) again, and found the inadequacy of the data particularly puzzling.

Take the famous example where Caples says changing an ad headline from “Repair Cars – quickly, easily, right” to “Fix Cars – quickly, easily, right” increased response by 20%. He gives no information about what the actual numbers or percentages were, or where the ad came out.

So let’s suspend belief for a while and pick some numbers out of the Web.

The average weekday circulation of a newspaper in the US (whatever that is supposed to mean!) in 1940 was 21,902 and the Sunday circulation was 61,659 (Please see this section of The State of the News Media 2004 report at journalism.org).

Tested Advertising Methods came out in 1932, so here are our assumptions: (a) The circulation was not too different in 1932 (we have no reason to do that, but the data at the site is only till 1940) and (b) Readership was equal to circulation (again, a rather silly assumption, but the purpose of this to explore a possibility and not to prove a point).

The situation we can imagine goes like this:

The ‘repair’ ad could have pulled up to 201 responses

And the ‘fix’ ad 20% more, that is, 241 responses

Without the response rates being significantly different (at a 5% level of significance).

Had the ad come out on an average Sunday newspaper, the responses could have gone up to 209 and 250, respectively, without the response rates being significantly different.

The same complaint can be made against the comparison between “Save one gallon in every ten” and “Car owners! Save one gallon of gas in every ten” where, on testing in a daily newspaper, the latter pulled 20% better than the former.

Another famous example is the one where “Hay Fever” pulls 297 sample requests while “Dry Up Hay Fever” pulls 380, a ‘27% increase’. The increase in response rate (assuming the ads came out in average newspapers on weekdays) could have been between 0.15% and 0.61%.

In quite a few cases, neither response rates nor responses have been quoted; we’re simply told A did better than B.

Now, if the differences in response rates were not always significant, from either a statistical or business perspective, the businesses involved in those testing decisions would not have gained or lost much.

The trouble lies elsewhere, with direct marketing copywriters who believed the ‘tested’ fact that ‘straight and simple always out-pulls the creative’ and put their own careers into jeopardy, because that belief is almost always seen as an excuse for lack of talent.

To all such writers, and to writers who have not yet formed their beliefs, I would recommend this site: Statistics Every Writer Should Know. A little knowledge may be a dangerous thing, but none at all can be disastrous.

PS: I used an Excel template from Aczel & Sounderpandian for my calculations. My calculations are at http://docs.google.com/Doc?id=dd3bjnd7_28rt37t and the templates are available here.

“We have to strengthen primary education.”

Every time I hear someone say that we need to strengthen primary education to solve the reservation issue, or develop sports at the grassroots level to get an Olympic medal, or rewrite the law books to get justice, I’m reminded of the sales manager who keeps asking for more leads to improve sales.

Of course, more leads will help. But so will more conversions. Better bookkeeping. Salesmen who know something about what they are trying to sell.

Getting leads is hugely dependent on the market, converting them to sales has a lot to do with our efforts. Why don’t we work on what is difficult to improve, instead of waiting for that impossible day when the fundamentals will change?

3 problems with multiparty loyalty programmes

The future may well belong to networks. But multi-party loyalty programmes need to solve three problems before they get there.

First, and the most obvious one, is the technology hurdle. How will these programmes ensure that the software that runs the unified loyalty programme smoothly links with the separate transactional, sales and marketing software and CRM databases (I assume that all participating companies will not equate ‘giving points’ with ‘taking care of customers.’)

Second, sooner or later, the programme will need to play the role similar to a points market. This will entail ensuring that points accounts (members’ and marketers’) are properly settled and points-to-purchase ratios are commonly acceptable. For example, the trade in points (which are, to all intents and purposes, deferred discounts) is bound to lead to deficits and surpluses, and problems within individual companies.

Even if these two are solved by importing experts from other fields, there remains a third problem: A multiparty loyalty programme lessens choice, for both customers and marketers.

Let’s take customers first.

With single-party loyalty programmes, as a customer, I will not be penalised for buying petrol from my favourite brand and staying at my favoured hotel: I get points on both counts.

On the other hand, if petrol companies and hotel chains tie up, I lose if my favoured hotelier is not my petrol brand’s (loyalty) partner.

I may, though, reason that I’ll reach the loyalty rewards faster by pooling points from different sources; decide that the hotelier’s petrol partner is not so bad after all; and switch.

(For sure, the number of rewards redeemed will go up [as compared to stand-alone programmes], but this shouldn’t hurt marketers very much if they pool their rewards budgets. Unfortunately, we don’t know how much the redemption rates and amounts will increase.)

It may be argued that since consumers usually buy from a number of brands, there is no conflict of interest between consumers’ need for choice and multiparty programmes rewarding only purchases within a set of brands.

I suppose the matter is somewhat more complicated in real life. While customers may well buy from a number of brands, in frequently bought categories like groceries, credit cards, air travel, and telecommunications the basket is not equally split: A particular (favoured) brand takes the lion’s share. And it is inconceivable that any multiparty programme should have all or most of any member’s favoured brands.

Rationally, that may not be horrible. The consumer just needs to enrol in multiple (multiparty?) programmes and get his fill of points from multiple sources. Now, if only consumers were that rational.

Let’s take the marketer’s point of view. Suppose he wanted to run a sales promotion. As long as he didn’t tie up with other brands, the whole paying population was his market.

Once he gets into partnerships, he limits his choice, at any rate, his first choice, to his partners. There is perhaps little to suggest that his partners’ customers will be his best prospects. (It’s like some direct mail companies agreeing to exchange lists exclusively - an arrangement that is extremely unlikely to benefit any.)

There will certainly be some overlap, but what else can one expect with promiscuous consumers and markets dominated by a few major brands. (The drivers of any multiparty loyalty programme will have to major brands, though many small ones, and even single outlets, may join it… with limited rights, and even more limited powers… primarily to rent loyalty infrastructure and services.)

I don’t think there is any empirical evidence that shows this fear to be misplaced. There are, of course, quite a few multiparty loyalty programmes. There was, of course, the USSR.

Why Indians don’t read

Why can’t you do any direct mail or, for that matter, long copy ads in India? Simple. Indians don’t read.

But opening your eyes shows you that there are more papers, magazines and books than ever before, and more bookshops. And there is the www. While much of what is written in the world, for work or pleasure, is never read, surely enough is read to sustain the writing, financially and physiologically (Almost all sperms don’t make it, but enough do to make 9 billion of us).

So what’s going on?

While I haven’t got any surveys to refer to except this one, I suppose a simple and possible answer may be obtained if we look at a family’s reading. The calculations are here: http://spreadsheets.google.com/ccc?key=pjtNNMP33DgsJnLoV4Sy1Pw&hl=en_GB. (The logic is not different from the explanation to the GMAT paradox.)

As is apparent, each member’s reading goes up, yet the average, dependent on the number of members, keeps fluctuating – and in two cases, goes down.

It can easily be that, in the larger market, readership is going up, as is each individual’s reading; yet the average reading is going down because neo-literates form larger and larger fractions of the population (while the bibliophiles’ fraction, and their power to influence the average, keeps getting smaller [though their numbers increase]).

In short, simply asking where an average came from could have led to a very different explanation, and decision!

A possible list business?

My previous rant notwithstanding, the paucity of reliable lists is the biggest hurdle to sensible direct marketing here.

So where are the Decision Makers (B2B) and High Net-worth Individuals (B2C)? Besides credit card companies and loyalty programmes, ‘VPP’ (Very Probable Prospect) contacts should, logically, be available with:

• Builders and housing societies
• Business associations
• DRTV companies (anyone who can buy a Rs 2,999 magic tummy-trimmer over the phone may not be in the Ambani and Big B league - in all probability he makes far less than the assistant brand manager does - nevertheless he is, sorry to say, somewhere near the top of our unfortunate country’s income pyramid)
• Organisations and trusts (based on charitable cause, religion, and language-based)
• Private colleges, MBA institutes and education companies (get the students’ parents)
• Sports and fitness clubs
• Trade magazine subscription departments (e.g., magazine’s for, say, the film trade, for CAs, for doctors and engineers) and
• Tour operators.

While none of the lists would be very large, together they should be sizable. Besides, the list is far from exhaustive.

This much is obvious. Yet, we don’t know of list brokers who maintain and market these lists. Worse, the owners of these lists are not known to approach direct marketing agencies. (If they approached brands directly, the latter wouldn’t keep asking us for lists.)

Demand exists, but little supply.

Why? Perhaps because the demand isn’t big enough. Yet.

Perhaps the grey market forbids legitimate trade.

Perhaps because it’s the ‘Indians-cannot-read’ syndrome.

Perhaps it’s because of the cold calling disease that infects brand managers. Which club secretary would want to be responsible for members receiving bizarre sales calls in the middle of meetings?

But what if someone went to these list owners with this proposition: “I will update (“I am calling from the club. May I please confirm your address? Is it 123 ABC Street?” “Oh, no, my dear, that’s where great-grandfather lived during the Sepoy Mutiny.” and so on.), clean and standardise your lists; I’ll obtain consents from the people on the list (Give permission to mail for an x% reduction in membership/maintenance/subscription fee, which I will make up); and
I’ll market these lists. (Profiling may not be required. One doesn’t need to know the annual household income of a club member when the membership fee is a quarter of a lakh a year.)

My only conditions are that I will have the exclusive contract for marketing your lists; I will get a commission on every deal; and if I can prove that somebody other than me has traded the data, you will have to pay a fine.”

This will undoubtedly take a good deal of time and money. It’ll probably fail a few times before taking off.

On the other hand, investors are supposed to be waiting with money to throw on India’s emergent economy.

Why doesn’t someone import a list expert from the US and start this business here?

Demented Dialogue

Prospective Client: What databases can you get me? I have a 5,000-seater call centre, which I’m ramping up to 7,500 next week, and 10,000 by the end of the month. I need to give the girls and boys leads to call up.

Anxious Agency Executive: We do five loyalty programmes, for X, Y and Z… and P and Q. That should give you, let’s see… X has 1½ lakh ‘active’ members, Y has 3,000 members, we have some 2,000 odd in P…

PC: Thousands and all my people will finish in a day. I need lakhs.

AAE: I’m afraid then you’ll have to advertise.

PC: Why am I talking to you then? Ultimately, that’s what you guys bring to the table.

AAE: We could help in taking forward the communication with the people who respond to the ads.

PC: So what will you do? All you guys want to do is mailers. That my ad agency can also do. But who has time to read these days. I throw away everything I get. Honestly, when was the last time you read something? Only copywriters read what they write. In India, nobody reads.

AAE: What about your own database? Surely you have a house list, now that you have been in this market for a couple of years.

PC: That you don’t worry about. Tell me what lists you have? Actually, you guys have got your priorities all wrong. Some agencies have understood databases and focussed there. You people just want to do mailers. I’m telling you mailers are dead. Just call and sell.

AAE: You mean you can sell your complicated B2B/financial/health/whatever product over the phone? Without reading anything? Or seeing a website?

Incidentally, when was the last time you called the number on your ad? I called a fortnight ago. It took me three calls to get through. And I am yet to receive the brochure I requested for.

And who told you that direct marketing agencies do lists anywhere? Lists are a separate business in the West. Do you have any idea how many people you need to maintain lists? Do you ask a film director to make film? Or a doctor to make drugs? So why should a direct marketer bring his own list?

And how many times a list has to be rented to recover costs? Do you think any list in India gets hired often enough to make it worthwhile for the list owner to keep it updated?

And how many lists are stolen and sold every day, to the biggest brands? How shamelessly brand managers boast about having other brands’ lists? And how much it’d cost to run a call centre in a legit way?

PC: Throw out this idiot!

Kahan kahan se chale ate hain…