lead by letting go

“Steve Austin, astronaut; a man barely alive. Gentlemen, we can rebuild him. We have the technology. We have the capability to build the world’s first bionic man. Steve Austin will be that man. We can make him better than he was before. Better, stronger, faster.”

These opening lines from the 70s TV show “The Six Million Dollar Man” are what came to mind this morning when I received this email from Aeroplan.

Now, I need to make it clear up front that I am not a big Aeroplan user. Most of the purchases I make are for small ticket items.

And, not only have I not heard from Aeroplan in over a year, but today’s email immediately left me with unanswered questions:

• How many Airmiles do I have? I know I could go to the website and find out, but why not put it in the email? Saves me time, and helps me decide what to do about it.
• What can I buy with my Airmiles? And, most importantly where can I go to redeem them? Again, I could go to the website. But why not make some suggestions? Aeroplan stores detailed purchase history, so it shouldn’t be that difficult to tell me this information.

All of this begs the question: What is the focus? Is it to get Customers or to keep them? [Disclosure: I follow companies like Aeroplan because I'm in the business of helping organizations keep their Customers longer.] In the case of Aeroplan, I know it’s to get them because of the previous emails I’ve received from them and have tracked their Customer acquisition and retention efforts for over 5 years.

What I don’t know is what most of the people do with the email they get from the good folks at Aeroplan. I’m writing this blog post, but how many are going to delete it? In other words, how many are actually going to redeem their points before they expire? And more to the point, is this email increasing the number of people who do so? Does Aeroplan know the value of a Customer whose airmiles/points are close to expiring?

As with many loyalty programs, there is a greater focus on getting Customers to sign up for the card than to use it. Why? There are several reasons:

1. Acquisition (the processes used to get Customers) is easier to measure than retention (the processes used to keep them). Counting the number of Customers you get is a lot easier to do than counting the number of Customers you have kept through retention programs. People criticize retention efforts by saying Customers would have bought anyway. And that it’s a waste of money and resources treating them nicely.
2. Acquisition is easier to do than retention. With acquisition, mass marketing and other impersonal methods are used to bombard prospects with generic offers. It’s not all that important that we know very much about a prospect’s preferences. If one method doesn’t work (low return on marketing investment), we keep trying other methods until we get one that works. Keeping Customers – retention – is more difficult, but only in the short-term. If we want to retain existing Customers (about whom we know something), means recognizing them as individuals and show them that we remember and understand their needs. In retention, we demonstrate that understanding by providing products and services that meet and even anticipate their needs.
3. Acquisition is ‘product’ focused. Most companies are organized along product lines. To get Customers all you need is to put someone in charge of selling a new software package, magazine subscriptions, executive education or adventure travel and make compensation and incentives geared to product sales. The process is easy to implement, measure and everybody understands it. Retention or Customer focus means organizing so that managers become responsible for Customer segments. Compensation and incentives must be realigned to new measures based on how well managers do at reducing attrition or churn and building greater loyalty and sales to Customers in their segments.
4. Retention means using a database strategically. There are very few companies today that don’t have a database. From sole proprietors to large multi-nationals, most databases are used to achieve tactical objectives such as cost reductions and operational efficiencies. Very few use Customer data strategically to determine long-term Customer value, group Customers based on that value and provide appropriate recognition and rewards to higher value Customers.
5. Measuring retention means testing Customer groups or segments. Everybody tests messages. Very few people test Customer segments. To find out if the Customer would have bought anyway involves creating Customer segments. Customers with higher value will remain Customers longer than those with low values.

The irony in all of this is that companies like Aeroplan have invested millions in people, processes and technology. Even in small firms with several hundred Customers, the technology is being used to what amounts to an automated version of the old hawker’s cry “Don’t just stand there. Buy something!”

The real potential of the technology – to improve the organization’s understanding of the Customer’s needs, is nowhere close to being used to full advantage. Is it any wonder that there is no Customer loyalty when companies repeatedly compete on price or the latest whizbang gadget? The Customer has no alternative – they behave that way because they’re being made to do so.

How much would it cost Aeroplan to make these changes? Probably not a lot in real dollars. They’ve got the technology. The real ‘cost’ is in the travel distance needed to change mindsets from simply getting people to sign up for the card to getting people to use the card. For some firms, that’s a lot points.

Ever since I started working in 1976, I’ve had this feeling that there should be a better way to organize a business, to make it more effective, to deliver more sustainable results.

I’ve worked in a variety of industries and sizes of companies and learned is that it’s not enough for just a few individuals to care, a healthy organization is one where the attitude of caring extends from the board to the person who sweeps the floors.

In this video, Traci Fenton, Founder and CEO of WorldBlu, Inc., explains the concept of organizational democracy.

This week I ran into an attitude that I haven’t encountered since I worked in the printing and graphic arts industry. I asked town council for the opportunity to present Able Networks’ plan for a Regional Broadband Network in Eastern Ontario. I have received moderate to strong interest from neighbouring municipalities.

The reply I got was “our MIS plans our set for four years, you’re welcome to bid at that time.” First of all, I wasn’t looking to bid. And, who uses MIS anymore? This is a sign of where these folks are right now.

And, setting your plans in stone, as it were, for four years? Come on, the world is changing every day. How can we assume what we’ve decided will be adequate for one month let alone four years?

The town is really a beautiful place, lots of amenities for recreation, reasonably priced homes and relatively low taxes. It’s been getting more and more difficult to attract residential and consumer investment over the last few years.

Our base over the last 25 years is light manufacturing and a some big employers have left (one quite recently, 200 jobs, just closed down). And no one has come in to replace them. These jobs are gone. And they’re not coming back.

A few years ago, we had an effort to bring “high tech” here. This effort failed badly. The committee no longer meets, and I believe it has been disbanded.

The current council appears to be hanging its hat on tourism. Not a bad thing, though the town needs something else to rekindle and rebuild its economy. It needs a vision of the future, one that is not based on the success of the past. It has to be based on how people will live, work and play in the future.

In this century, natural resources and proximity to markets don’t add up to much. Not when you consider how easy it is to buy what is needed to make a product or service and ship it thousands of miles to sell it.

A massive shift in wealth creation is already underway. What began as a movement of labour overseas to reduce costs and increase profits, is being combined with a catch-up work ethic by people in those countries to create totally new, power-house economies.

Wealth comes to those who organize and innovate around opportunity. In the words of Albert Einstein, “We can’t solve problems by using the same kind of thinking we used when we created them.”

I hope our council opens their eyes before it’s too late to stem the tide.

This CBC News article (broken link removed) discusses Nortel’s plans for ‘new’ optical technology. In it, the president of Nortel’s Metro Ethernet division confirms they are “seeing significant demands for bandwidth.” [Update: 22 October 2009, the news article has been removed from the CBC web site. For an alternate version of the same story, visit this page.]

Also, he uses a phrase “hyper-connectivity, where every device that should be connected to the network, will be connected, the staggering bandwidth demands will only continue upwards.”

These statements confirm and would concur with what I see in the marketplace. And yet, they’re also misleading to a point.

What the article doesn’t mention is that this technology has actually been around for a long time. It’s been held back so that the duopoly (phone & cable cos) can figure out how to make the most money using their closed network business model.

What the article also doesn’t tell you is that this technology is targeted at operators’ – an industry word for phone and cable company – core network, not the edge, which is where the real problem is. This infrastructure, the copper phone wires and coaxial TV cable coming into people’s homes and businesses, is simply not adequate. It was never designed to handle the “current industry top standard of 10 gigabytes per second.”

Next time you have a chance, ask the folks at your local phone or cable company what their plans are to deliver 10 gigabits to your home and business.

Yes, bandwidth is exploding. All the duopoly is doing is making it cheaper for themselves to move all these bits around inside their network. They’re still not doing anything to give you and me decent bandwidth at a reasonable price.

What can the Open Source Software movement teach us about marketing?

Put down that report. Turn off your Blackberry. Get out of the car/plane.

Get out and talk to your Customers. Ask them to tell you what it’s like to do business with your company. Ask them to give you the unvarnished assessment of your performance. Don’t do a survery. Don’t hire a marketing company. Get off your duff (you too, CEOs) and find out what it’s like to be a Customer.