Managing Marketing: The impact of data and technology on customer retention and acquisition

Managing Marketing is a podcast hosted by TrinityP3 Founder and Global CEO, Darren Woolley. Each podcast is a conversation with a thought-leader, professional or practitioner of marketing and communications on the issues, insights and opportunities in the marketing management category. Ideal for marketers, advertisers, media and commercial communications professionals.

Steve Emanouel is the Managing Director of Spyglaz, a data platform that helps organisations identify customers most likely to churn. Here Steve talks with Darren on how his career has evolved since they worked together at JWT in the late 1990s and the role of direct marketing and digital technology in B2B businesses. They also discuss the strategic flaws in focusing on acquisition and the importance of customer retention for business success.

customer retention

 

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Transcription:

Darren:

Welcome to Managing Marketing and today I’m in sunny Collingwood catching up with an old colleague of mine, Steve Emanouel who’s now managing director of a company, an exciting company called SpyGlaz. Welcome Steve.

Steve:

Thanks Darren, thanks for having me.

Darren:

It’s great to catch up. Until we saw each other the other day it’s been too long.

Steve:

Twenty odd years

Darren:

Let’s just say too long but that was back in JWT days.

Steve:

That’s right.

Darren:

It was early on in both our, well early on in your career probably not in mine.

Steve:

Sure. It was a long time ago and very much a fun time. It certainly helped me sharpen my focus for where I’m at now.

Darren:

From my perspective you’ve had a really interesting career in that JWT was an agency role, but you’ve spent as much time on the marketing side, haven’t you?

Steve:

Yeah, I’ve been fortunate enough to have spent time on both sides of the fence so to speak so I guess the first half of my career was predominantly agency side and, in that sense, I learnt a lot about the nuances of marketing and advertising and helping clients get the best out of their products and services.

And then being a client myself for the other half of my career has also sharpened my focus around understanding what help and support clients need in order to be better at what they do and sell more of what they are trying to sell. The balance of the two worlds has really helped me develop the skill set that’s led me to play my role at SpyGlaz.

The transformation of direct marketing

Darren:

So, when I met you, you were very much a direct marketer and I remember in those days direct marketing was like the poorer cousin to main stream agencies.

Steve:

It was, and I guess it probably wasn’t as sexy as the main stream side of things.

Darren:

You mean licking envelopes.

Steve:

Licking envelopes and measuring response rates, working with data bases and all those sorts of things. Yeah it wasn’t the sexy side of things; it wasn’t putting things on TV and those sorts of things predominantly.

Darren:

But that’s changed.

Steve:

It changed massively. I think the tide has turned.

Darren:

It hasn’t just evolved, it’s like this switch got thrown.

Steve:

That’s right.

Darren:

But people don’t call it direct marketing, its data analytics and insights, it’s all these terrifically impressive titles.

Steve:

I think everybody’s reinvented themselves. It’s fundamental. I think the principles of direct marketing haven’t changed all that much. Like you said, it’s got lots of different fancy names now. Fundamentally the principles of getting your data right, analysing your data and making sure your data is working for you is what direct marketing was all about back then.

Darren:

My observation especially in a digital world is that everyone has come to technology from different perspectives. You’ve got your pure play tech people that have come very much from a development perspective and then you’ve got those that have come from advertising or design or some other part of the comms industry that have got in to technology and embraced it because you had to.

Then there is the stream of direct marketers or the one to one marketers or the interactive marketers–they had different titles back then. Of those three it seems to me that the interactive marketers had the smallest leap because they already had the methodology and strategy, all they had was new channels. Everyone else had to relearn marketing.

Steve:

In that sense it’s an exciting time for everybody because there’s so much change going on, so making sure you are constantly learning and evolving your skill and trade is the key to success in any industry, particularly in this one. So that’s where we find ourselves today is relearning, developing ideas to leverage data and make sure it’s working for the clients that we service.

There’s no doubt today, there’s an absolute abundance of data and part of the challenge that we try to work with, with clients and some of the conversations we have with clients is that there’s so much data they don’t quite know where to start.

Darren:

Your first job out of university was as an analyst. So very much from the get-go you had a data focus.

Steve:

Very much so. Back then it was all about a lot of what people still do today, that is profiling their customer, understanding who bought our products, understanding what their demographic profile was and again ultimately trying to understand what their purchase and behaviour triggers were so that the comms team and the broader marketing team could leverage the information to help grow the business, so yeah I got a good foundation.

Darren:

So, when you left agencies way back then and you started working as a marketer, where did that direct marketing focus land?

Steve:

Predominantly down the business to business path. I moved into the client side soon after my agency time and spent a bit of time in the business to business client side of the marketing world. And business to business even to this day is still predominantly direct marketing based. When you are marketing yourselves to a business there are so many more elements that you need to factor in to be able to get that business to do whatever it is you are hoping them to do.

My skill set sort of fit neatly into that sector if you like and I worked my way through the corporate world across that part of my career, leveraging those skills across various organisations.

Is it “sales and marketing” or “marketing and sales”?

Darren:

One of the observations I’ve made with marketing in a B2B environment is that in some organisations marketing is a support to sales and in others marketing helps lay the ground work for sales. So, in one it follows and the other it leads. Have you experienced those differences?

Steve:

Absolutely it’s fair to say that the B2B world is one of those ones where marketing is led by sales. Sales very much maintain a traditional one to one relationship with clients. Developing the marketing strategies to support the sales team is often very difficult because so much of it is done one to one.

On the other side of the coin working in organisations where marketing is the lead driver is equally as exciting but perhaps a little less tangible in the sense of being able to measure the outcomes of some of the things you are doing. In this day and age being able to measure everything is so easy.

Darren:

One of the big changes is content marketing and using that as part of an inbound marketing strategy in that B2B space. We are seeing a lot of successful companies using content as a way of bringing their B2B clients to them and then having an automated marketing conversion process to almost qualify them, so you can hand to sales a qualified hot lead that they then build the relationship with and maximise the conversion.

Steve:

So, what an exciting time it is for marketers to have all those tools at their disposal to be able to drive things in such a tangible measureable way. Being able to play that role of physically handing leads over to your sales team must be extraordinary.

Darren:

It’s interesting isn’t it; B2B is not as high profile from an agency’s perspective as it is B2C.

Steve:

No, it’s not.

Darren:

Marketing advertising to the customers is that sexy end still in agencies. And yet, when you look at the dollars spent and the return on that investment B2B has to be one of the big drivers of business.

Steve:

It absolutely is and as I said before there are so many elements to B2B marketing strategy that you need to take into account. And I think on that basis that B2B marketers are traditionally more accountable for what it is that they’re outputting because the tools that they create are going straight into the hands of salespeople who then have to take it and they’re going to get feedback straight away. Whereas a B2C marketer might not often get feedback instantly.

Darren:

Or at all.

Steve:

They’re either waiting for the research report to come through or whatever the case might be. So, I think the skill set of the B2B marketer; they’ve got to be much more nimble and agile on their feet to be able to move with the times as they get the feedback from the sales people.

Why is more time and money spent on acquisition than retention?

Darren:

If we switch across to B2C, especially going back to direct marketing, it’s interesting that companies seem to (in that B2C space) spend a huge amount of money, time, and effort on acquisition compared to retention.

Steve:

Well, it’s fascinating isn’t it? It’s one of those discussions that has been around for years; the balance between acquisition versus retention. I think in this day and age everybody has a view. Certainly, the clients that we’ve come across in our time at SpyGlaz have shown us that acquisition still seems to be a focus for many.

Darren:

Is this the sexy part?

Steve:

It is the sexy part; there’s no question. But fundamentally one of the interesting changes that the digital revolution has brought about is that we all know that consumers of any type have so much choice.

And often, with the amount of tools that the consumer has at their disposal, the challenge of getting new customers is a lot more difficult than it used to be. So, what we’re starting to see is a trend back towards customer retention.

Companies want to make sure that the foundations they’ve built to establish their brands in the first place still remain strong. And often that’s as simple as trying to hold on to the customers that you’ve got.

I don’t think there’s either one way or the other. I think there’s always a good balance between acquisition and retention.

Darren:

I agree except that when we look at overall marketing and investment and people talk a lot about brand but pure investment in brand can be as little as 10 to 20%. Then you can have up to 70% in acquisition and the balance (that little bit on the left), almost as an afterthought, is retention.

And it worries me because it’s so much time and effort filling up the bucket (and the bucket’s a great metaphor for this) and yet there are these big gaping holes because there’s so much churn these days because consumers have choice that there’s not a lot of time and effort put into retention, certainly not from an investment point of view.

It could be in time spent thinking about it and analysing it but I’m not sure that companies are spending as much as they should.

Steve:

I couldn’t agree more. Again, we’re seeing that a lot with the clients we’re talking to, and the evolution of more and more tools that will start to make the challenge of retention easier for organisations, we’ll start to hopefully see a shift towards that.

Darren:

I’m wondering, on a very disclosing moment, a client said to me, ‘we focus on acquisition because that’s what we’re measured on.’ So even if we add half a million customers and lose 600,000 of them (i.e. a deficit of 100,000) we’ve still created half a million customers and that’s all we have to do.

And so, I’m wondering whether it’s because the organisation looks at it from that perspective that if I keep acquiring customers then somehow, I’m in front because they won’t lose more customers than they acquire. And they also see that as measurable spend because there is no measure of lifetime value of customer.

Customer only has value in a financial period; you can’t carry that across. Are these the two fundamental flaws in the way we measure business performance that stop people focusing on retention?

Steve:

I couldn’t agree more, and I think more and more it’s that whole ’well I’ve ticked the box because I’ve secured X number of new clients or customers this particular month’ mentality that’s driving a lot of that.

I think the mentality is also driven predominantly by ‘I’ve got that customer on board; the responsibility of growing that customer is now moving to another area whether it be retail stores, the online space or whatever.

And so, the departments in charge of growing that business are almost thinking in silos; my job is to get the business in, it’s the other part of the business’s job to cultivate that business and grow it.

Darren:

And ultimately retain it.

Steve:

And ultimately retain it and I think it’s that dichotomy of roles that people aren’t seeing from a structural perspective in terms of how changes in the way people think can ultimately affect and impact the amount of customer retention that an organisation is able to maintain.

Darren:

I never quite understood that argument. Every business measures its churn from its base. So, if you could actually work out the percentage that you can reduce that churn you must be able to show a return on investment.

Steve:

Exactly. Not as many companies that we’ve seen are actively measuring churn. I know it’s a concept that everybody is familiar with but whether or not it actually rates on an organisation’s performance dashboard is interesting.

There’s a lot of marketers, salespeople, CEOs and CFOs that talk about it but I’m not actually seeing a lot of it appear on the core KPIs that a lot of organisations are looking at. They’re still looking at sales, growth, margin and the traditional KPIs—top line growth as opposed to understanding the composition of that top line growth.

Is that top line growth coming from existing customers growing their spend or is it coming from new customers entering the business? And I think they’re the sort of fundamental changes that need to happen from the top down in order to get the emphasis back on retention that needs to happen.

Identifying the customers most likely to churn

Darren:

At SpyGlaz, just explain a little bit about how you’re helping marketers and businesses with that.

Steve:

Essentially, SpyGlaz is a business intelligence platform designed to help with customer retention. It uses machine learning algorithms (that people are becoming more and more familiar with) to analyse your transactional sales data and other data as well. We can plug in lots of other data sources.

We start to look at the behaviour in that transaction data to provide you with a prediction as to the relative propensity for that customer to churn. So, essentially what we’re able to do through this machine learning algorithm is provide you with a percentage probability of each customer churning based on their history.

We know that somebody’s past behaviour is the best predictor of their future behaviour.

Darren:

A nice Dr Phil quote there. So, it means you can much faster and easier identify which customer is most at risk of churning? Which would make it easier then to specifically target or deliver programmes that could help them stay in.

Steve:

Exactly right. So, our algorithm can churn through millions of records of data in seconds and then it provides you with that output. And then the beauty, for a marketer, salesperson or organisation, is to look at that listing and prioritise the allocation of sales resources, marketing budgets, and resources business-wide to focus on that particular segment.

Darren:

Steve, it sounds brilliant, but I can already hear the Telco marketers going, ‘yes, but our prepay customers churn on price. Well, all you have to do is match the price that’s in the marketplace and we’ll keep them.’ But it’s not just price is it?

Steve:

Not at all and in fact, one of the beauties of our algorithm is that we haven’t created a cookie-cutter algorithm to apply to every single business. Every single client we work with we go through an initial discovery phase and that discovery phase is about learning some of the nuances about their customers and what does make them tick.

We then work through the various data formats the client has and we factor them into the construct of the algorithm for that customer. So, if there are particular nuances in your data that you believe influence customer behaviour we can then provide you with that churn prediction that’s going to be tailored to your business.

We can factor in seasonality, social media contact, a whole raft of different online and digital data that you may have. It’s not purely about how many did they buy, how often, and how much for?

Darren:

Almost anyone could do that already.

Steve:

Exactly, so the beauty of the work we’re doing through SpyGlaz is we’re tailoring our algorithm to suit each customer and ensure that they get a level of outputs specific to their business that they can feel confident in as they choose to redirect resources to focus on retention.

Darren:

I can see from what I know of you and your background that this really appeals to you. It’s really about relationship marketing and you’re using technology to be able to identify those customers.

It’s also interesting for me because it sits in that line between sales and marketing, which people get bent out of shape over, don’t they?

Steve:

Well, it’s interesting you say that. One of the recent case studies we’ve just completed with a small organisation out in Burwood. A ten-person business; they sell antenna parts to lots of antenna installers, and a classic case of there was a sales team and there was the owner and they weren’t perhaps seeing eye to eye over what the relative priorities were.

We went in and sat down with the owner and ran the algorithm through their data and we were able to tell him things that he’d never known about his customers before and instantly he was able to share that with his sales team and get this unification that he’d never had before.

Darren:

An alignment? An agreement between their perspectives on their customers.

Steve:

As a result of that they were all on board with the subsequent follow-up strategy, which consisted of simple things like picking up the phone and calling the top 20 per cent of customers, sending out emails.

So fundamentally, the process by which you engage your customers doesn’t necessarily always have to change. It just has to be perhaps a renewed focus on a particular segment.

Darren:

Well, it brings a strategy and a framework to the way you manage your customer base. But then going back to the original point here, which was that companies spend so much more on acquisition. I’m wondering have you had any experience, even as a marketer, of where you’re able to prove that retention gives you a better ROI than acquisition? Because everyone knows their cost of lead and conversion.

Steve:

There’s no doubt, and quoting numbers off the top of my head might be a challenge, but in my previous life we developed various retention tools such as loyalty programmes and a whole raft of tactics like that. And there’s no doubt that growing the business of the customers you have is far easier.

So, whether it’s B2B or B2C these people have a relationship with you, they have a connection to your brand and your business. And focusing on them and showing them the love that you need to show them on a regular basis is more often than not the key to success for a new organisation.

The lack of B2B focus in traditional advertising agencies

Darren:

Now I want to change direction here because before SpyGlaz you started your own agency. Interesting choice, you started off in bank marketing, you then went into agency, and then you worked client-side. And then you started your own agency. What happened? Was it a brain aneurism?

Steve:

No, I don’t know why. I felt I could do it better, which is the genesis of a lot of people starting a business. From my perspective, having spent a lot of time on the client-side the B2B sense I absolutely felt that the skill set amongst the agency world when it came to B2B marketing was non-existent.

Darren:

Pretty good analysis.

Steve:

I dealt with a lot of high-end agencies, medium-sized agencies, and small agencies and all of them apply B2C thinking to a B2B marketplace. You can to a degree do that but if you’re looking for success it’s not going to work because there are so many other factors that influence a B2B purchase choice.

You know, things like cash flow, staff retention and all those sorts of things impact a B2B sale and you can’t always apply B2C thinking.

I started that particular business up with a business partner who came from a similar background because we honestly felt that sitting across the table from a B2B marketer that we could add more value because we were at their level of understanding straight off the bat.

They didn’t have to teach us about the sales process behind their particular business. It was always a case of we know what these customers of yours are looking for; let’s just focus on how to fix it.

Darren:

Was it 10 years?

Steve:

12 years.

Darren:

12 years running an agency. I get a lot of people approach me, they’ve left a big agency and they’ve got this idea of starting an agency and my standard cynical response is; ‘exactly what the world needs; another agency’.

What was the biggest challenge in starting an agency from day 1 and opening the doors (and you have to say, 12 years is the sign of success for a business) so what was the biggest challenge in making an agency successful?

Steve:

Quite simply; people. You need to surround yourself with good people. When the business was started it was myself and my business partner, so we dealt with all the client challenges, issues, and opportunities and in that space, it is very easy to control the output that the agency creates because you’re the one creating it.

But as your business starts to grow and you need to delegate more and more of that responsibility out it’s a challenge to ensure you’ve got the right people that can live your culture, understand your values, and be able to articulate the appropriate strategies at the right time.

And fundamentally what hasn’t changed in agencies, in my opinion, since day 1 is the ability of any person to just strike up a relationship with a client because the true challenge in the agency world of building your business is having a relationship with your client. Where the client tells you things and gives you insights that they’re perhaps not realising they’re giving you.

We all rely on research and research is critically important of course but sometimes just sitting across the table and having a cup of coffee with your client, understanding the real things that annoy and frustrate them about their day are the little pearls of wisdom that you get that help influence a creative idea or a strategic idea.

Really understanding your customers at that level is key.

Darren:

It’s really interesting you say that because feedback we often get from clients when they’ve been through a pitch or selection process is that the attitude agencies bring to the table really annoys them, which is that the agency is the expert, and they’ve got all the solutions, and the client doesn’t have a lot to add to that. I think that’s part of what you’re saying.

Steve:

Absolutely.

The importance of agencies to go beyond advertising

Darren:

The other thing I’ve noticed (and I’d be interested in your observations) is that marketers are expecting their agencies to be able to think beyond just advertising and to be able to frame the broader business case or challenge. Do you think that’s also something that’s happened over recent times?

Steve:

No doubt and I think some agencies will struggle with that. But there’s no doubt that there is more accountability for agencies to be able to add value at that particular level. I know I started to see that more and more towards the end of my agency business time.

It’s becoming more and more challenging for agencies. Gone are the days when you’re just asked to come in and design an ad for a particular magazine. It’s a lot more involved than that and I think the skill sets that people need to have, whether starting agencies or working for agencies are expanding more often than not.

Darren:

In your agency, with that B2B focus, were you dealing as much with marketers as you were with salespeople or was it primarily marketing?

Steve:

No, it was probably a good 60/40 in favour of salespeople. More often than not it was the salespeople that were driving the agenda and the marketing people were still involved in that process, but they were there to work with us once the strategy was developed.

More often than not it was a collaborative and collective process but often led on the client side by their sales team. Then once we had agreement at the strategic level then we would work with the marketing team to make it happen.

Darren:

So, Professor Marc Ritson, who’s got an opinion on almost everything to do with marketing, he famously said that sales and marketing are at completely opposite ends from each other. He said the purpose of marketing is to drive margin and value and the purpose of sales is to drive volume.

He said the reason that they’re at different ends is that if you ask a salesperson what they want, they want more sales by having more varieties that are more accessible at a lower price and a marketer will be wanting greater margins, premium, and building brand.

So, do you agree with that observation?

Steve:

In some respects, I do but I like to keep the definition about the two worlds more simple than that. To me, what I was always espousing to my clients and the staff that I used to work with on the client-side was that the job of marketing was to bring the buyer and the seller together.

Particularly in the B2B sense but it also works in the B2C. By bringing a buyer and seller together the interaction will happen and then it’s up to the quality of the product and all the other things to make that sale happen.

In my opinion if you always kept the definition nice and simple: bringing the buyer and seller together, sales will happen, margin and volume will grow, but the core principles haven’t changed in my mind and that is the job of the marketer is to bring the buyer and the seller to make that happen.

Making marketing and sales work together

Darren:

I have a slightly different view of the world and it depends on the strategy of the company. When it’s sales led, sales are definitely looking at marketing to help them push the relationship to delivering in financial terms.

But I think increasingly the world has changed and that model is going by the wayside. But social media (the concept of social selling), means that brands, even B2B brands, need to build a reputation and awareness before the salesperson even makes contact.

Marketing has a most important role in B2B by actually laying the groundwork that attracts the B2B customer so that the salespeople can then build the relationship.

So, I see that the two have very different roles but they’re complementary. The only decision that a CEO of any B2B organisation needs to make is are they going to be sales led or marketing led? There are no equal parts; it’s going to be one or the other.

Steve:

Yeah, it‘s interesting. I think we’re going to see a lot more hybrid roles appearing. I’ve noticed a lot more titles out there that say General Manager; sales and marketing. I think there is a genuine attempt by some organisations to bridge that divide and I think that’s great.

I think that, fundamentally, the CEO’s job is to make sure that everybody is working towards the same goal and that is business growth.

Darren:

Top line growth, minimised costs, maximum profit, shareholder value.

Steve:

Yeah, if that starts to develop and the gap between sales and marketing is finally bridged,  I think that any company that gets that right is on a winning formula.

Darren:

You just said something that makes me smile, which is sales and marketing, because I always say to people, ‘whatever order you put them in shows your strategic bent’. Because if you say, ‘sales and marketing’ you think sales leads marketing and if you say, ‘marketing and sales’, marketing leads sales.

Clearly, you’ve had enough time working on the marketing side and being brow-beaten by the sales director, ‘we need more bunting to go on the events. The reason we didn’t make sales this month is because you didn’t do the brochure I wanted.’

Steve:

Yes, you’re late with the print or something, no, guilty as charged.

Darren:

Look, Steve, it’s been terrific catching up and having a chat.

Steve:

Thanks, Darren.

Darren:

So, SpyGlaz, what’s the future, what are you working on at the moment, where are you taking it?

Steve:

We’re working on a number of new clients at the moment. We’re having conversations with people from the banking sector right down to the B2B sector (small, medium, and large). We’re about to launch a new website: SpyGlaz.com, very soon, in the next few weeks.

We’ve produced an instructional video, which we’re about to release, which you’ll see on our website shortly. I’m heading over to the States, so we’ve got two offices. Our head office is in San Mateo, which is in California (in the heart of Silicon Valley).

I’m heading up the Asia/Pacific office which is here in Collingwood, Melbourne.

Darren:

It must irritate the hell out of you being in Collingwood, being an Essendon supporter.

Steve:

It does actually.

Darren:

Why aren’t you wearing your jumper? Fear of being killed.

Steve:

Yeah, I’ll get beaten up if I walk down the streets. But look SpyGlaz is on an exciting path and we’re hoping that more and more people adopt the notion of predictive analytics and understand how it can help make customer retention a lot easier for them.

Darren:

So, if there are marketers (and there are marketers listening to this podcast) what is it that they need to be considering, why should they be calling you?

Steve:

If you’re looking for a very simple way to grow your sales line through a focus on customer retention we’d love to hear from you.

Darren:

Well, that’s 30%. The other 70% are all about acquisition.

Steve:

Well, they need to change. Fundamentally, one of the reasons why retention has often been put to one side is it’s been perceived as a difficult beast to master and to measure.

We’re very confident with SpyGlaz that not only can we help you identify easier ways to make it happen but the ways in which we can provide a tangible measure of the improvement of customer retention is something that we’re very proud of with our product.

So, give us a call, log into our website, we’d be more than happy to help you.

Darren:

You can’t give your mobile number.

Steve:

Fair enough.

Darren:

Final question; you’ve worked agency side and client side, which is your favourite?

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About Darren Woolley

Darren is considered a thought leader on all aspects of marketing management. A Problem Solver, Negotiator, Founder & Global CEO of TrinityP3 – Marketing Management Consultants, founding member of the Marketing FIRST Forum and Author. He is also a Past-Chair of the Australian Marketing Institute, Ex-Medical Scientist and Ex-Creative Director. And in his spare time he sleeps. Darren’s Bio Here Email: darren@trinityp3.com

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