Drilling Down Newsletter # 22 - July 2002 - B2B
Software Example, Measuring the Cost of Queuing Customers
Drilling Down - Turning Customer
Data into Profits with a Spreadsheet
Customer Valuation, Retention,
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In This Issue:
# Topics Overview
# Best of the Best Customer Marketing Links
# Tracking the Customer LifeCycle: B2B Software #3
# Questions: Measuring the Cost of Queuing Customers
Hi again folks, Jim Novo here.
This month we've got the usual "best of" Customer
Marketing article links, the third installment of the B2B
Software Real World Example, and a fellow Driller wondering how to
measure the cost of queuing-up customers.
A special note: I'm on a panel at the upcoming Search Engine
Strategies 2002 in San Jose, CA
Perfecting Paid Listings
Tuesday, August 13, 1:15pm - 2:45pm
This is an "advanced class",
for people who have some experience with
paid listings but are looking to really crank up the ROI on them.
Copy, tracking methods, tips and tricks, all up for grabs. Yours
truly is of course addressing metrics and tracking...
If you're around the show, please try to say Hi, I always like to
put a face with the typing!
OK - Let's do some Drillin'!
Best Customer Retention Articles
This section flags "must read" articles moving into the paid DM News archives before the next newsletter is delivered. If you don't read these articles by the date listed, you will have to pay $25 to DM News to read them from the archives. The URL's are too long for the newsletter, so these links take you to a page with more info on what is in the article and a direct link to the article.
Note to web
site visitors: These links may have expired by the time you read
can get these "must read" links e-mailed to
every 2 weeks before they expire by subscribing to the newsletter.
10 Reasons to Do Web Site Analysis
July 14, 2002 DM News
Well, there is really only one reason I can think of - to make more money.
So this is really a list of 10 areas you should analyze to help you make more
money. But it doesn't tell you "how". To find out
"how", click here.
From an Ugly Duckling to a Swan
19, 2002 DM News
Kim MacPherson knows a thing or two about e-mail marketing, and proves it in
this article. It's DM 101, but folks still don't get it, and this article
lays it right out for you. If you want some ideas on how to measure the
success of elements like landing pages, click here.
Tracking the Customer LifeCycle:
Real World Examples
Note: If you are new to our group and want to know more about the following ongoing discussion, the background theory is
The prior example, Hair Salon, is here:
Latency: The B2B Software Example #3
Recall where we left off. Several reports have been generated
describing the time it takes between customers ordering add-on
modules. The first shows a longer purchase cycle for the average add-on, and the
second demonstrates this "Latency" happens because later add-ons are taking much longer to be purchased than they were last year, even though the first add-ons seem to be
purchased more quickly.
Why does this matter to the CFO? Cash flow is decreased
because sales don't happen as quickly as they did last year - there is
more profit in the later add-ons. If this is not enough information, you can read Part One of
this case here,
Part Two here.
Fearing another phone call right away to the CIO, the CFO thinks:
What I have here is change. There has been a significant change in the way this business works for some reason. Change doesn't happen in a vacuum though, something must have caused these changes to happen, a significant event now being reflected by these average weeks between add-on purchase numbers. What could it be?
The CFO remembers the heads of biz dev and marketing saying the company was "penetrating the overall market more deeply, and as we penetrate further and further, add-on sales seem to have slowed". Was this the change the CFO was looking for? What did it really mean, in terms of how the business may have changed?
Getting the heads of biz dev and marketing on the phone again, the CFO asks if this market penetration situation had created any changes in the way the company does business. The CFO hears for the first time about a new trade campaign and a new sales person hired to address a particular market segment. This is
must be the change the CFO was looking for!
Gingerly, most humbly, the CFO calls the CIO once again. This time, the CFO wants to see average number of weeks between add-on installs by add-on
by salesperson. After a promise to review the hiring freeze is extracted
by the CIO, this report is delivered:
Average Weeks between Add-On Purchases
by Add-On, and by Salesperson
(click the link to pop-up a chart
And there it is. Clients of Salesperson # 1, # 2, and # 3 are purchasing add-ons at the same rate they did last year. The clients of the new salesperson # 4 are purchasing in a dramatically different pattern, with much shorter cycles purchase cycles in the beginning and much longer cycle purchases later on. Literally, the LifeCycle of the customers in this market segment are different from the LifeCycles of the average customer from previous years, and dramatically so.
It takes these customers on average 14% longer to purchase any add-on - 9.8 weeks versus 8.6, or 1.2 weeks. Over the entire purchase LifeCycle of the add-ons, this increases the purchase cycle by 4.8 weeks (1.2 x 4). If this new segment is doing a lot of dollar volume compared with the old segments, this could significantly affect sales and make add-on purchases look soft - even though they are in fact getting purchased!
At his moment, the head of biz dev appears in the door with another person who turns out to be new Salesperson 4. The CFO looks up and the head of biz dev, somewhat sheepishly, introduces the new salesperson.
"Glad to meet you", the CFO says. "By the way, can you tell me something? Do the customers in your new segment purchase and install our add-ons in the order we suggest in our operations manuals?"
"No, they don't" said Salesperson # 4. They install them in a different order, because they are having some difficulty installing a couple of the add-ons, and usually delay those to the end of the purchase cycle when they have more experience with the applications. Is there something we can do about that?"
The CFO just smiles, and thinks:
Looks like I just found the money to pay for unfreezing some hiring in IT.
"I think so", the CFO tells new Salesperson #4, calculating
on the fly the improvement in cash flow if these add-ons were installed
"I really do think so".
That's it for the B2B Software Example using Latency. The
Latency metric is a rock-solid behavioral marketing tool - a bit
blunt, but always a good place to start, sort of like the rough
sandpaper or the ripsaw. I often find when beginning a project,
hunting around for Latency variances does not provide the answer, but
serves up plenty of clues to get you going down the track.
The B2B Software Example points out the need for reconciling the differences between financial and customer
accounting in a customer-centric business. For more on how this
concept applies to CRM implementation, you might want to read this case study I
wrote, or the companion article on how this issue affects employee incentive
Employee Incentives Lead to CRM Failure?
If you are a consultant, agency, or software developer with clients needing action-oriented customer modeling or High ROI Customer Marketing program designs,
If you are in SEO and the client isn't converting the additional
visitors you generate, click here.
Questions from Fellow Drillers
Q: Are you familiar with (or can you refer me to someone who is
familiar with customer satisfaction around queuing up for service?
A: Frequently Asked Question for sure, and not one there is a
lot of statistically believable data on...at least that people
are willing to release. Kind of a sensitive subject, as you
Q: I work for a large bank. We have perceived queuing
problems in some of our branches - generally due to layout
restrictions. I say perceived because although a queue is long, it
moves fairly quickly with the actual wait time to see a teller often
less than 5 minutes (at par with our competition).
However, customers grumble when they walk into the branch and see
the line and continue to grumble out loud until they reach the teller
and then continue to communicate their dissatisfaction to the teller.
Do you know if any work has been done in this area with other large
companies that tend to have long queues (like airline ticket counters,
Thanking you in advance for your response.
A: I think this issue is an illusion. Let me tell you what
I mean. For e-commerce, somebody like Gartner does a survey that
says people hate shipping charges, and every web site kicks in
"free shipping". Guess what? People have always hated
shipping charges since 1850 when the catalog business started.
And why not? It looks like extra cost to the customer. But
if you run your business correctly, you price with shipping in mind
and manage costs so that you still make a profit.
It's just the way the business works. Given the choice, which
do you think consumers would select of the two alternatives, higher
product prices or shipping charges that are fair and reflect what the
consumer knows is tangible cost of delivery? Sure they complain
- but they still buy.
People have always hated queues. And why not? They are
frustrating and perceived as a waste of time. And the
alternative is? Raise prices to the consumer to cover extra
staffing? But if you run your business correctly, you price with
queues in mind and manage costs so that you still make a profit.
It's just the way the business works. Given the choice, which do
you think consumers would select of the two alternatives, queues or
So perhaps "queues" are being raised as an issue to
deflect other service problems which are the real cause for whatever
angst the company has, something to blame which is not really the
Regarding "solving your problem", I don't like
benchmarking as a solution. Your bank has a unique persona
created by advertising, staff training, corporate initiatives, the
kind of customers it attracts, and so on. How can you benchmark
against companies who have a different persona?
And - most importantly - does benchmarking really provide any
insight that is financially relevant and actionable? What action
do you take knowing this information? What if their bank
queues up low value customers, and you are queuing up high value
customers? A disastrous decision could result from not
understanding the customer value involved.
Sounds to me like this issue is location-driven, which is perfect
for an internal study. What the real question is here, I expect,
is this: are these queues costing the bank money, and how much would
it be worth spending to fix it (ROI), if at all?
If this problem is specific to branches, set up a simple metric and
use it to compare branches with no/short queues to branches with
frequent/long queues. Perhaps annual churn of high total value
customers? Annual churn of multi-product customers?
Percent defection of whatever-you-call-best-customers?
Take three branches with long queues and compare them to three
branches with no queues. Do the queues make a difference where
it matters - on the bottom line? What if your best, most
profitable customers never are in a queue, and so do not churn
at a higher rate in branches with queues versus branches with no
queues? And then what does the bank think of solving these queue
Let me know if you have any other questions or need further help
with this issue. A great question, and a perfect example of one
that needs to be asked in the context of customer value rather than
I can teach you and your staff the basics of high ROI
customer marketing using your business model and
customer data, and without using a lot of fancy software. Not ready for the expense and resource drain of CRM?
Get CRM benefits using existing resources by scheduling
That's it for this month's edition of the Drilling Down Newsletter. If you like the newsletter, please forward it to a friend - why don't you do this now while you are thinking of it? Subscription instructions are at the top and bottom of the newsletter for their convenience when subscribing.
Any comments on the newsletter (it's too long, too short, topic suggestions, etc.) please send them
right along to me, along with any other questions on customer Valuation,
Retention, Loyalty, and Defection right here.
'Til next time, keep Drilling Down!
- Jim Novo
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