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Tuesday, June 12, 2018

When You Can't Believe Marketing Research Findings

(A Note:  Our background is marketing research, so this issue may strike you as somewhat hypocritical.  But, we've always prided ourselves in fielding thoughtful marketing research and encouraging our clients to be equally guardful in how they interpret research results.  So consider the following as an example of what can happen if one either naively interprets research findings or actively seeks findings to support a business proposition.)

If we unquestioningly accept marketing research findings many of us will be pretty excited to hear results of a research study cited by the Huffington Post.  According to this research, “70% of millennials are willing to pay more for a product that makes an impact on issues they care about.”1  Since there are over 53 million millennials now working in the US, spending as much as $2.45 trillion annually, their willingness to support social cause marketing sounds like a 'fact' that’s too good to be ignored when contemplating marketing strategies for the future.

But, Proceed with Care!

However, things often aren’t always what they seem.  Just a few months ago, in a story about social cause marketing for this column (March 14, 2018), we cited Tom’s Shoes as a preeminent proponent.  Virtually every discussion of social cause marketing includes Tom’s.  We, too, cited the company known and widely praised for its policy of giving away one pair of shoes to children who can’t afford shoes for every pair of Tom’s it sells.  Tom’s is widely praised for this policy and its contribution to the company’s apparent success.  A societally positive ‘slam dunk’; a huge strategic success.  But a May 3, 2018 headline from Bloomberg (“Even Wall Street Couldn’t Protect Toms Shoes from Retail’s Storm”) describes a markedly different reality.  While Tom’s did generate revenue of $91 million in the fourth quarter of 2017, it reported only $8 million in profit and is currently carrying about $350 M in total debt .

So, What's the Problem?

It seems the bulk of Tom's’ business is based on its $54 a pair trademarked Alpargata slip-ons. That’s the shoe that for every pair Tom’s sells, they give a pair away.  But unfortunately (for Tom’s) competition has entered the market, and no matter how sincere potential customers were when they told researchers they’d pay more for a product that “makes an impact on issues they care about”, in reality more and more are buying bargain alternatives.  Tom’s and its touted social cause marketing is in trouble!

For example, Skechers has created a shoe it calls “Bobs,” which mirrors Tom’s design, mimics Tom’s charitable business model and sells for half the price of Tom’s shoes. Then, discount stores like Target and Payless joined the frenzy by selling their own knock-offs of Tom’s that can be found for $20 or even less.  At the end of the day, consumers’ cash register behavior has proved far different from their ‘lofty’ answers to marketing research questions.

This ‘disconnect’ really shouldn’t come as a surprise.  For years marketing researchers have wrestled with the challenge getting honest answers from respondents.  Instead, many survey/study participants answer by positioning themselves as the person they think they should be, or the person others expect them to be, rather than the person they actually are!  We are all familiar with surveys that would suggest the public loves to attend the opera or reads the classics over pulp literature.  (These are all the result of social desirability bias.)  And, research which allows such departures from reality suffer the consequences.)

A Better Predictor

When it comes to money and the support of noble causes it might be more reliable for researchers to think like the traditional direct marketer.  As Ed Nash (a direct marketing legend) is reported to have frequently observed, “the only research I care about happens when a prospective customer looks at my product and decides to open her/his wallet and hand over the cash to make the purchase”.

Attitudinal research has its place, and sometimes it’s the best information one can get (or for product concepts, the only customer input you can get), but it’s hard to find anything more reliable than measuring actual consumer behavior.  Thanks to today’s online sales and our ability to make various offers, using various promotions, at varied prices to potential customers, we can come closer to Ed Nash’s classic skepticism, than would ever have imagined!  Given multiple options and our ability to track, not attitudes but actual purchases made with consumers’ own very real money, we can observe which choice(s) they actually make.  Such results will better support generalization to which product mix(es) should work in the broader market.

10:12 pm edt          Comments

Tuesday, January 16, 2018

How Well Do You Convert Leads Into Sales?

Most of us have worked in a sales capacity; if not by title, then by need.  We’ve seen how difficult it is to uncover leads and how it’s even tougher to actually close on them.  We've found a study that documents the difficulty of lead discovery and quantifies how pitifully low conversion rates actually are.

A Broad and Objective Analysis

The study is from Implisit and was conducted in the business-to-business environment.  It offers more understanding of relative conversion-to-sales rates from various different lead-sources.  Based on input from nearly 500 US-based companies Implisit reports that:
Only 3.6% of leads from customer-referrals and employee-referrals convert to sales.  Imagine, 1,000 leads producing a paltry 36 closed sales!  However, 3.6% looks pretty hot when it's compared to conversion rates from other lead-sources.  Consider:

  • 1.6% for website leads
  • 1.5% for Facebook/Twitter/Social Media leads
  • 0.8% for advertising and marketing leads
  • 0.6% for trade show leads
  • 0.5% for webinar leads 

While discouraging, these closure rates probably aren’t a complete surprise. If you consider it further, the superiority of personal recommendations (referrals) shouldn't be a surprise at all.  We’ve previously cited research from Nielsen and other organizations to reinforce our belief in the power of personal communications versus institutional sources.  People simply trust other people!

There's No Hiding From the Numbers

Yes, Implisit gathered these numbers in a B-to-B environment. No doubt many consumer products enjoy higher close rates.  But even so if generating new sales weren’t so critical we might be tempted to ‘throw in the towel’ on the lot.  After all, the highest conversion rate is a measly 3.6%! 

Or, the Reality

The answer might just have to be one of generating a lot more leads - the most productive type of leads - those generated by customer and employee word of mouth.  Unfortunately, no matter how great your product or service, even the most loyal of customers usually don’t generate the level of word of mouth you deserve.  And strange as it seems, even those people whose paychecks are dependent on your company’s success (your employees) may not be of the mindset or have the total corporate picture needed to speak to their friends, neighbors, relatives or strangers about your brand.

Turning Customers (and Employees) Into Everyday Advocates

Positive word of mouth can be an incredibly powerful force in encouraging potential customer to consider and buy a brand, but it doesn’t easily happen without some facilitation.  Both customers and employees need a well-orchestrated word of mouth management program; one that provides them:

  • Motivation
  • Opportunity
  • Content
so they can effectively lobby for your brand.
Until such individuals are reminded of their connection to your brand they won’t be motivated to promote it.  This holds unless and until an incident or event occurs that provides them with an opportunity (and content) to share about your brand.  Unfortunately, most such opportunities are moments of failure; and the news that's disseminated about your brand is negative.
But we all have the chance to 'arm' our customers and employees with positive stories to tell; providing them both with opportunities and content.  And, the amazing truth?  It's all free!  Your everyday advocates are just waiting to be activated!
4:51 pm est          Comments

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Measurement, Management, Optimization
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