04 Oct How many diamonds are there in a coal heap?
In the previous post I outlined the similarities between diamond mining and current marketing approaches. In essence the idea is that using techniques like clustering and modelling to refine data into manageable amounts for analysis are fine but modern technology allows the processing of all data, which means you can find all of the diamonds not just those in your ‘cluster’.
Now let’s have a look at how many ‘diamonds’ you might find.
Below is a graphic from Don Pepper’s excellent blog. He uses it to show the different types of Customer Interactions and the processes available to support them.
The sectors can be characterised as follows:
- Business as usual. These are your normal, everyday interactions and you have completely automated processes to cover them. The customer is not engaged.
- Problems, Risk. These are your interactions that fall outside the norm and you need to take action, eg. ATM not working, Internet bank is down. You don’t have completely automated processes. The customer is not very engaged.
- Predictable Events. These are normal, predictable interactions and you have completely automated processes to cover them, eg. Your car loan ends in 30 days. The customer is engaged.
- Unpredictable Events and Surprises. These are not normal or usual. You don’t have automated processes to cover them and you need to take action, eg. I have inherited a large amount of money, I am having a baby, I have lost my job. The customer is very engaged.
As you can imagine, the opportunities that you are looking for (in marketing) are those in quadrants 2, 3 and 4 where the customer is increasingly engaged (and receptive). These are your opportunities.
By the same token, you should avoid trying to engage a customer in sector 1 as it has little or no success. In fact it is disruptive and can lead to dissatisfaction, eg.
“Can I tell you about our new Credit card?”
“No. Just give me the cash and leave me alone.”
Most banks have something to address sector 3 (your car loan is about to expire), but they don’t have anything in sectors 2 and 4. By their nature they occur sporadically, last for a short period of time and then disappear. These are Events. Sector 2 is most likely a service opportunity and sector 4 a sales opportunity.
So, this is a fine way to explain about different types of interactions, but the picture looks very different if you take into account the volume and frequency of each type of interaction. Then it looks something like this. The numbers of interactions are taken from several bank sources and from research published in Banking Strategies Feb 2004.
That means a customer will transact with you about 203 times a year (not counting checking their balance, etc.). During this time they may experience 2-5 problems and have 2 or so predictable events. Finally they may have only 0.28 significant Events happen to them.
So now you can see that you are looking for somewhere between 0.28 and 2 sales and service opportunities out of over 200 interactions.
I believe there are two things to learn from this graphic.
- How can I detect these opportunities?
- What do I do for each type of interaction?
The answer to the first is Event Driven Marketing. This is the approach to detect changes in customer interactions and behaviour and to act upon them (at the right time).
The best answer I have for for the second is outlined in the picture below.
Simply, if a customer has an Event or a problem then contact them – immediately. If the Event is predictable then the timing is not so crucial (anytime this week is fine).
Lastly, if the customer is just conducting ‘business as usual’, then leave them alone. Strangely enough, despite this, most banks I know just can’t resist and their marketing is something like “My next best product offering for you is x – even if you are not interested in taking it (today).” It won’t get you anything. it will cost you money and it will irritate them.
Maybe now you know why most Banks average sales of 1%-2% for their leads compared to the 18%-54% that our customers get from EDM.
What do you do?