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Tuesday, October 27, 2015

The Customer Equity-Mindset

About 17 years ago, I was meeting with a client. As we talked, he answered several questions from customers and very quickly sorted out problems that staffers brought to him on the fly. I complimented him on how he moved through his day as he asked me a barrage of media questions and I told him that I was especially impressed with the way he fielded questions and complaints from customers.

“Don, it is simple,” he said. “I have a Customer-Equity Mindset.” With that, I began to laugh and he did, too. “That is a pretty fancy term”, I said. “What is it exactly?” He answered--“Customer Equity is the present value of anticipated lifetime revenues that current and prospective customers generate, minus, of course, the costs to retain and acquire those customers.” Reduced to uncontrollable laughter but intrigued, I asked where he heard that. With a big smile he told me that it was from a HARVARD BUSINESS REVIEW article that he had read a year ago. He remains the only fast food maven that I have ever met who not only read but memorized segments of the HARVARD BUSINESS REVIEW. The conversation that we had regarding it has stuck with me vividly all these years.

What my client explained was that by adopting a Customer Equity Mindset his whole approach to business changed and his success soared.  His interpretation went like this: “Customers are the source of my firm’s revenues. Also, they drive my expenses and investments in plant and equipment. So, every time I increase Customer Equity I increase the value of my company.”

How to do it? Simple stuff but always worth repeating: Keep your customers especially the good ones longer. Grow revenue from present customers, and work to acquire new customers who can ad value, improve customer retention procedures and LISTEN to everyone especially the complainers. If you do that you can improve products, services and goodwill.

He actually did training about a Customer-Equity Mindset. His 17 year olds behind the counter were drilled on the nuts and bolts of it. He told me that if one could make it permeate throughout the organization, sales had to go up and you would hang on to existing customers. He loved new customers but always made sure he did not lose many especially when a new competitor threatened. What he was fostering is what others have called “Loyalty Based Management.” There was great trust built with employees and with his customer base.

In the rush to get to this quarter’s or years profits, many ad agencies and broadcasters seem to neglect this issue. And the siren’s call of new business, while vital to any enterprise, should not overshadow your existing base.

My client was not a dreamer. He took a concept and made it his corporate mantra. Do you really have a Customer-Equity Mindset?

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Saturday, October 17, 2015

Sleepless Ad Agency Staffers

Several weeks ago, I sent an e-mail to both selected Media Realism readers and ad agency contacts asking them the age old question, “What keeps you up at night?”  Some of the responses were light hearted and included: “My teenage sons, my nasty boss, and my idiot clients.” Interestingly, no one said, “Nothing” makes them sleep deprived. Surprisingly, one person sent me an e-mail that I found particularly poignant. With his permission, I will share parts of it with you.

“When you met me 25 years ago, I thought that I was going to be the next David Ogilvy (you probably thought I was obnoxious). I was going to write brilliant long copy with spectacular headlines and my spreads would appear in the best magazines. You warned me even then (bravo to you), that things were changing. Obviously, things did not turn out as I expected.”

“I am now in my early 50’s and will be facing two big college tuition bills very soon. To put it simply, I am frightened. I feel that I am slowly fading into irrelevance. Some of my colleagues are finished as they have shown an unwillingness to adapt. I am not one of them but I am a realist. When I read that by 2020, many advertisers will be putting the plurality of their advertising into mobile, it gives me pause. That may never happen but what if it does? What do you need an aging writer who earns six figures for when the mobile message is truncated and is there solely to elicit direct response? I have had a great run despite some disappointments but do I realistically have 10 more years?”

“Technology is great but is rapidly washing away our old processes, modes of work and even some markets. I do not feel that advertising is doomed but it will require an entire new skill set by practitioners and very soon. Tech may overtake creativity and Big Data will drive sales far more than conventional media.”

When I showed these edited comments to others, some say my friend is an alarmist. A few said that he articulated their sentiments quite precisely. These people came from media, creative, account management and agency ownership.

Perhaps, British writer Samuel Johnson (1719-1784) put it best with the acid comment: “Nothing concentrates one’s mind like a date with the hangman’s noose".

As always, I would love to hear your opinions on this topic.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a comment on the blog.

Saturday, October 10, 2015

An Ad Man For All Seasons?

It is hard to believe but it has been approximately seven full years since America was hit with an economic downturn that we now refer to as “The Great Recession.” The downdraft tested many companies, people, and portfolios. Recently, I talked to a seasoned ad man about the recession and its affect on ad agencies.

He went through the usual delineation of issues that many struggled through but then said that he knew a number of agency chiefs who could survive easily through anything. As we talked, I had to disagree. Survive yes, but prosper and grow all the time was something that I am quite unfamiliar with in this business.

To me, business professor Don Hambrick of Penn State nailed it when he wrote, “An executive who is well suited to leading a firm during one period may be ill suited for the next period.” Many chiefs can look effective when the wind is at their backs. Can they adapt to more challenging circumstances?

Ambassador Joseph Kennedy is widely credited with coining the now proverb, “When the going gets tough, the tough get going.” I have witnessed agency leaders who seemed bored or a bit disengaged during good or middling times, yet rise to the occasion when their shop has its back to the wall. Suddenly, they make tough decisions, stay hands on and drum up significant new business in very trying environments.

Some analysts go even further and say that some firms grow at times because they seem to be near perfect fits to the current marketplace. Management and staff are not exceptional but rather are at the right place at the right time. Remember when the internet first started to gain real traction as an advertising medium? Some shops had big gains as they had keyed on the emerging platforms early on. A few years later some early mobile players had similar success. Were they that good or was it simply that in the valley of the blind men, the one eyed man is King and the competition was playing catch up?

Please do not misunderstand me. I am not saying that these people were mediocre. Sometimes success is due to many factors not the least of which is a bit of luck. Granted, there are some people who are excellent forecasters and seem to see what is happening a bit earlier than the rest of the pack. Some 90+%, however, see the trend after it is clearly in place.

Life, business, and the free market are all full of bumps in the road. Leaders react to them differently. Few, if any, perform well through all of them.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.

Thursday, October 1, 2015

Is All Research Cooked?

Several weeks ago, I began work on this post. I sent feelers out to a number of people asking if they thought research reports in broadcast and advertising were often manipulated. As I finished a draft of the post and was waiting for a few more responses from my panel members, the Volkswagen scandal broke. So, I deliberately delayed putting this post up until the smoke had cleared a bit.

Mark Twain set the tone for questioning research when he said in the 19th century: “There are three kinds of lies--lies, damned lies and statistics.” Most people say that a clever analyst or executive can spin data in such a way that even poor performance can look much better than it really is.

Responses to my query often had the tone that, “Yes, you can always find a way to lie with statistics.” Now, some of that is not as heinous as you might think. Most of us have been or are in situations where you have to put your best foot forward when research goes against you. A magazine may have a declining audience and circulation but the average income of the remaining readers may have risen smartly. Or, a cable channel that is not growing finds that it does well against certain demographic groups that are highly attractive to advertisers. Where the wheels come off is where people want the research to mirror their pre-existing notions of their brand or media property.

Decades ago, I was an earnest young media analyst who was sent alone to a fairly important client to give a state of the media world presentation. We had no power-points  in those days but I did have a slick deck of acetates and after several rehearsals I faced the music with Mr. Big. The presentation went well and the clients asked many questions and there were frequent nods and smiles as I worked my way through the material. The boss, the marketing chief, told me that he would like to keep slides #2, #17, #31 and the final one. I said of course but wouldn’t you rather take the entire deck. He smiled, said no, and told me that I had a done a very thorough job. Later I found out that he had recommended a course of action to his president and used my four slides to back it up. Of course, by selecting those four slides, and only those four, he had rigged the deck in favor of what he wanted to execute for his brand.

Another time, a year or so later, a client asked me the purpose of research. I said what I still say today--”The purpose of all research is to reduce uncertainty. There is always risk with a new brand and we can never eliminate it but solid research is an important hedge as you begin to market a brand that you are betting millions on.” He seemed to agree and then asked the same question to a contemporary of mine who was the research director of the company. The young fellow said, “Research is the search for truth, sir.” The boss started laughing so hard that he spit his coffee out on the conference table. “That’s rich, son,” was his reply as the young fellow scurried for napkins to clean up the mess.

A year later, the young guy had lost his innocence. I sat in on a research presentation from an outside company. When he was done, the marketing chief thanked the presenter who left. He asked me what I thought and I related how some of it mirrored what was going in media at the time. The young fellow said, “Boss, what do you want me to say in your executive summary to the board?” Somehow, the search for truth was no longer a goal. Both of the players have died so I do not feel horrible telling the story for the first time. Yet, the nagging issue is how much of this type of behavior goes on?

Some of my kitchen cabinet weighed in:

“I don’t think everyone is lying. But, all of us at times try to position things favorably either about our brands or what communications tools to use. It is VERY hard not to have some baggage with you.”

“The big companies are the worst. Remember, 30-40 years ago when the tobacco companies would commission studies saying that smoking was not bad for you? And, I am sure as more evidence comes out about corn syrup that food and cola companies will commission research that will mysteriously exonerate them.”

“When I worked in radio, even if we got killed in an Arbitron ratings sweep, we could always find a few ways to spin the numbers to make the station appear to be first in a few things. Were we crooked? Not really."

A few people wrote that they wonder why some marketing chief and CEO’s even bother to do research. Some get furious looking at customer verbatims about poor service and say, “Impossible. Our customers all love us.” Their attitude often strikes me as “don’t confuse me with facts, my mind is made up.”

When is research the straightest? Some tell me it is when one company is considering buying another. They look carefully for accounting tricks, maybe do customer research, and are brutally honest about how good the company’s product(s) are relative to competition. Once the purchase is made, suddenly key people want to protect themselves or push a specific agenda regardless of what the research is telling them.

So, is all research cooked? No, but much of it is shaded or manipulated a bit.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com