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FLASHBACK ARTICLE FROM SEPTEMBER 2010
Last month I introduced the concept of the Five R’s of the Best Business and Marketing Planned Actions. This month, we will dig into those five areas: Right client, Right message, Right service, Right time, and Right price.
The Right Client
Here the basic idea is that companies need to allocate resources toward individuals who are likely to respond favorably—and profitably—to whatever message is directed toward them and away from individuals who are likely to respond unfavorably or favorably but unprofitably. This concept seems to be lost on our industry as we seek all takers of our service at any price.
The Right client may be all customers with a specific value index to the company, who, for example, may be elevated to higher levels of customer care or receive a special rewards package. The right client may be all consumers who have a certain “style concern” for a specific type of event or single aspect of that event type – and who, in this instance, may be sent an offer for a co-branded service package that reflects his/her affinities regarding one specific element of their style.
Following are some possible considerations regarding “Right client” decisions:
• Is the client likely to respond favorably to the message/offer/treatment . In other words, is he/she likely to buy the product or service, appreciate the treatment, respond favorably to the message?
• Is the individual likely to recommend your products and/or services to others?
• What is the customer’s decision-making process?
• What information/interactions are needed for the client to make a purchase decision, and how long is the decision-making cycle?
• What key criteria (price, convenience, quality, brand association) are at the forefront of the client’s purchase decision?
• How will the client likely put the product and/or service to use once purchased?
• What type and frequency of support will the client require after the purchase to make them a repeat client?
The Right Message
Today, there are more ways to interact and transact with prospects and clients, from direct mail, e-mail, texting, bridal show kiosks, phone, and mobile devices. The Right message for directing a particular action depends on any number of factors, including the nature of the action, the economics of using one message modality over another relative to the potential value that could be realized, and both the inferred and the stated message preferences (if known) of the individual being targeted.
Following are some possible considerations regarding “Right Message” decisions:
• Which message modality is the most effective and/or efficient in directing the desired action, based on previous campaign results, client situation, etc.?
• What is the target client’s stated message preference, if any?
• What are typical client response behaviors to the message?
• What is the cost-to-serve relative to other message options (tied also to individual client value)?
• What is the optimal message mix for interacting with the target client if there is more than one message modality?
The Right Service
Directing a service can take any number of forms. These can include sending a message, recommending, presenting an offer, extending an invitation, and providing a solution. The different varieties and permutations of messages, recommendations, offers, invitations, and solutions are practically infinite.
Pareto’s Rule states that most companies derive the vast majority of revenue and profits from a small percentage of customers, the right service may be no service. Indeed, doing or offering nothing at all—thereby preserving resources—may be the most appropriate service in many cases. You don’t always need to offer or provide every service that you are capable of and more critically – you don’t need to own every piece of equipment personally know to man. Seek out the resources and co-branding with those around you. In other words work together instead of against each other. Decide who will make the expense of purchasing certain equipment that each of you can rent/utilize from each other for the mutually and financially beneficial aspects of your businesses.
Following are some possible considerations regarding “Right Service” decisions:
• To what extent is the service customized to the perceived wants, needs, interests, situation, etc. of the client?
• If an offer, does it make sense to bundle the offer with other company products/services?
• What actions should follow, based on purchase sequence contexts?
The Right Time
An article titled “The Perfect Message at the Perfect Moment”, published in the November 2005 issue of the “Harvard Business Review,” made the following assertion: “When you talk to your clients is just as important as what you say.” The authors envisioned a computer model that communicates with customers “at the exact moments the customer deals with the company, be it during an address change or the purchase of a baby seat.”
Indeed, the most effective driver of Right-time decisions lies in the area of event triggers. An event trigger increases the probability of another specific event occurring shortly. To cite a common example, an engagement ring company might make a marketing pitch after noticing a customer made a large deposit or a credit inquiry while perusing the ring section of their store. This is merely the beginning of a cascading series of events that typically involve the same types of event professionals. Meaning, the DJ is in this chain of events, yet we wait to become involved in this typical progression of cascading events until far later in the series. Thereby, nearly negating our own value.
The key to setting the event trigger dominoes in motion is pattern recognition. The moment a pattern changes is often the right moment to take action. Indeed, a deviation from a person’s normal purchase behavior can serve as an excellent early indicator of an impending event in his/her life. The detection and recognition of the deviation can then be used to trigger a specific action.
Observation; How often do you see a man in a jewelry store looking at rings outside of when he is planning to propose?
Advice: seek out these fractures in general patterns of life, which fit into events with cascading elements involving your business.
For example, in anticipation of the arrival of a new baby, parents-to-be naturally tend to make a significant number of baby-store purchases. Given the ability to detect and recognize this pattern, a financial services company would be in the enviable position of being able to put forward specific products geared to the new parent, such as a life insurance policy or an educational savings account plan and have those specific offers present in the area that the soon-to-be parents can see them.
Following are some possible considerations regarding “Right time” decisions:
• When will the target client have the greatest receptivity to the message/offer/recommendation/treatment – and be most likely to respond in a favorable way?
• What sequence of client purchases (“purchase career path”) should inform the timing decision?
• What key event triggers should inform the timing decision?
“Just like hitting a baseball, timing is everything when talking to your client” observe the authors of the “Harvard Business Review” article. “If you don’t provide the right message using the right delivery vehicles at the right time, chances are your customer will ignore your hard-crafted pitch.” Thus, going to someone else who hit the timing just right.
The Right Price
The Right Price is an area fraught with opinion and controversy. I’m not going to provide you with a hard and fast number; I will provide you with a way to create a valid pricing matrix that will be ideal for you and your company regardless of what those around you are charging.
The best way to start most things is in the beginning, but not here. We need to start at the end – meaning; How much do you want to make? Realistically, and not some whimsical number you came up with just by picking a number out of the sky or based on what your competition lied to you about regarding their annual income was.
So here is the smartest way to decide what your pricing should be.
• Decide how much net (after the bills are paid and toys/equipment is purchased) profit you’d like to make per year. It doesn’t matter if you are full time, or part time, or a hobbyist.
• Calculate, as closely as you can, what your monthly bills are, i.e. rent, phone, utilities, gas, insurance, music services, repairs, all the business expense related items, and multiply that by 12.
• Decide what equipment, lighting, audio, office, business, etc. you desire to purchase during the course of the year and total that number.
• Decide how many shows you want to perform per year. This can be you as a sole operator or your team as a multi-system operator.
• Take dollar amount from #2 & #3, add them together.
• Take the total of #5 and divide it by the total number of performances you have chosen from #4. This is the amount of money you need to make at each performance just to cover your expenses. You have NOT made any money yet!
• Now, take the dollar amount you chose for #1 (your desired net income) and divide it by the number of performances you chose for #4.
• Add the total dollar amount from #7 to the total amount from #6. This is how much you need to charge per performance to make the net amount of money you desire to make each year. This is regardless of FT, PT, Hobbyist, or your comfort level when you ask your clients to pay you. This is the bottom line for your pricing per event.
Of course you can play with these numbers at any time to achieve the balance you want regarding income, number of performances, family time, and many other considerations.
But this is the basics of deciding intelligently what you need to charge, what your pricing should be based on, and where you can move within your pricing to accommodate the other “R’s”.
Don’t deceive yourself, there isn’t a successful company out there anywhere in the world that hasn’t basically done these numbers to know the value and pricing of their product or service. How do your think McDonald’s decides to price a hamburger. Have you ever tried to step up to the counter and tell them that you don’t think it’s worth what their asking for that particular burger. But, you are willing to pay them less because you are on a tight budget.
Yet we hear this pricing objection all the time in our industry and most people go with it because they have no idea of what it costs them for each performance let alone what it takes to make a profit.
Bringing the Best Business and Marketing Planned Actions to Life
Getting to the Best Business and Marketing Planned Actions means continuously optimizing the trade-offs among objectives, constraints, and other decision variables to achieve the desired business outcomes. By the way, it’s unfortunate that the term “optimization” has become such a buzzword. Most companies use it to mean “better.” In fact, it should be used to mean “empirically derived to maximize stated objectives within specified operational constraints efficiently.” I know a mouth full.
At least that’s how we use it at the Gonnello Group, where we build small business decision making models that map the relationship between multiple input variables to the range of decision choices available to the user of the systems and to the business consequences and drivers, such as losses and profitability. The goal is to find the optimal decisions under a stated set of business constraints which we establish with each client in order to identify the optimal action to take on each prospect or client.
Consider, for example, a decision model for medical diagnostic companies that takes into account a broad array of inputs to determine what set of business and marketing actions to take for each individual physician. The model allows companies to create profit curves that show the projected increase in patient volume being seen by individual doctors. By understanding each physician’s response, companies can understand how to move the needle regarding patient and physician volume. The output of the decision model informs all five R’s: Right client (which patients do physicians see), Right time (when to visit and how often), Right service, (which treatment levels to adjust), Right time (the number minutes spent with patients) and Right price (what is covered by insurance and what the patient for each procedure and visit pays).
The possibilities of business and marketing optimization are capturing the imagination of many marketers and businesses, according to a recent survey from Forrester, which listed contact optimization technology as the number-two item on professional marketers’ wish list of enterprise technology. I’m willing to predict that the concept of Best Business & Marketing Planned Actions will soon usher in a new era of business and marketing improvement.
Right client, Right message, Right service, Right time, and Right price.
Think – Creatively
Act – Responsibly
Feel – Passionately