Monday, August 26, 2013

Protecting Revenue Streams

The 3 “Ps” of Queuing

By Michael Schweitzer - Director, Integrated Insight
and Joni Newkirk - CEO, Integrated Insight

Unless you are an Apple devotee, camped out and partying while you wait for the next technological gadget to be released at the stroke of dawn, it is unlikely that waiting in line is ever a pleasure.  Businesses know this and generally go to great lengths to reduce wait time or at least make them tolerable.  But some waits are more important than others and could inadvertently affect revenue more than you think.  Paying attention to the 3 “Ps” of queuing - don’t make people wait to park, pay, or pee – can positively affect your revenue.

Inability to find a place to park is the first opportunity to lose a customer completely.  Some will avoid your establishment entirely; others may have the mindset to “come back later” but never follow-through.  The more discretionary the product and the more substitutes available, the less likely a customer will feel the need to wait.  And while a potential customer may be willing to put up with difficult parking on the first visit, if the routine is repeated, they may never give you another chance.  Analyzing parking challenges is particularly important to businesses who share space.  If your parking lot is solely yours and the parking capacity matches the capacity of your establishment, not a problem.  But say for example, you operate a breakfast and lunch restaurant in a strip shopping center that also houses several other businesses, all with heavy traffic - your potential customers may find themselves circling the lot and eventually opting for another venue.

Similarly, big events such as sports, concerts, festivals, etc. often do not have dedicated parking sufficient for the event.  The cost of building a parking garage is often prohibitive, even considering the revenue stream from parking fees.  It then becomes a scramble for guests to find space in the surrounding area.  Some venues have successfully published “area parking” charts and many street smart entrepreneurs offer their lawns for rent.  But if a potential guest routinely finds parking a hassle, they may think twice about attending future events at the venue.

Eliminating or shortening lines for accepting payment can also improve revenue capture.   Much has been written about queuing theory and behaviors customers will exhibit when lines become too long.  Some will jockey to another line, others will renege and leave once they tire of waiting, and still others will balk immediately if the line is longer than they are willing to wait. Whether in-person or by phone, making a customer wait to pay is putting potential revenue at risk.  Holiday shopping is probably the best example.  Most customers are making discretionary purchases.  The longer the wait at check-out, the more opportunity a customer has to re-think a purchase they don’t really need.  Next time you are in a store with a long line, look around – it is likely you will see abandoned merchandise near the check out that people have decided is not worth standing in line for.  These are lost sales.  Grocery stores introduced Express Lanes to accommodate shoppers with just one or two items who are not willing to wait behind a shopper with a full cart.

Finally, long waits to use restroom facilities can be a detriment to purchase in a couple of ways.  Think about an event such as sports or a theater performance with a defined intermission.  If guests wait too long to use the restroom, they may not have time to grab a drink or a bite to eat as well.  Since restroom lines are notoriously longer for women than men, groups of women visiting together are particularly at risk.  Similarly, if guests are aware the wait is long for restroom facilities, they may consciously avoid drinking to ultimately avoid having to wait for the restroom.  Either way, the result is lost revenue.

By focusing on reducing wait times to Park, Pay and Pee, you will not only bring relief to your guests, but your revenue streams as well.

Monday, August 19, 2013

Email Frequency

Is there a “sweet spot” for the in-box?

By Sue O'Shea - Director, Integrated Insight

My email in-box is always full.  Some brands send me emails every day, some only once a week or less.  So when putting together my brand’s direct marketing strategy, much discussion takes place around the email calendar.  Specifically, what is the sweet spot for the in-box?

My thinking has always been, given the right conditions, once a day can be effective as long as fresh content and something interesting and relevant is being shared with subscribers.  If not, you’ll have a low open rate, high opt out rate and generally be thought of as being annoying or, worse, spamming.  Because I have always worked with ‘lean and mean’ teams, I have opted for once a week, measured the performance and adjusted as needed.

For additional insight I did some research and discovered the following three interesting perspectives on email frequency.

The marketing SaaS company located in Cambridge, MA has conducted and published research on frequency.  However they recommend testing to determine the optimal frequency because every brand’s campaign, goals and subscribers are unique.

The five recommended steps are:
  • Establish Your Hypotheses
    • Determine what specific results you expect to see from these tests so you can identify success.
  • Choose a List Segment
    • Your email list is already segmented so select one segment to test and ensure it is sizable enough to provide meaningful data.
  • Establish Baseline Metrics
    • Establish your current performance metrics for that sample such as open rate, deliverability rate, unsubscribe rate, and click-through rate for the sample.
  • Create and Schedule Your Test Emails
    • Create a handful of test emails to rotate through the list sample and schedule them for the sending frequency you outlined in the hypothesis.
  • Measure and Analyze Results
    • Measure your results against the hypotheses and the baseline results you recorded. 
Then start all over again.
Silverpop, the global provider of email marketing and marketing automation solutions, suggests in the blog post "Time to Whack Your Email Program with the Behavior Stick?" by Loren McDonald, to test then go one step further:  combine the customer's behavior, or lack of it, with dynamic and automated message tracks that trigger in real time.

McDonald suggests “ building out dozens of automated email programs that launch based on customer/subscriber behavior (action/inaction – such as visiting a specific Web page), events/dates (birthdays, purchase or registration anniversaries) and other triggers such as price changes, inventory status, new content becoming available, etc. The shift toward behavior-based triggers greatly increases relevance and delivering "the right message at the right time," but also then drives the timing of your regular broadcast or promotional emails.”

What this might look like is engaged subscribers will receive three emails a week, inactive or low-engagement subscribers might only receive two emails per month.

National Geographic
The Marketing Sherpa article, "Email Marketing: Why National Geographic uses business rules and frequency caps"  highlights Eric Brodnax, EVP, Digital Products, National Geographic Society, who shared at the recent Responsys Interact 2013 in San Francisco steps about how they sought to overcome the challenge of increasing unsubscribes, particularly among the best converting subscribers who were receiving the highest volume of email. Brodnax suggests taking a very customer-centric approach - moving from campaign-led to customer-led marketing.

“What we saw was the retention rate was directly correlating to the number of messages they were receiving,” Eric said.

National Geographic used three learning’s to turn the unsubscribe problem around:

1. Ignoring your customer’s wishes impacts the entire business.

2. Your organization needs unified ownership of the customer relationship.
  • Without central oversight, it’s easy to mail too much.
  •  It’s often your best customers who are treated the worst.
  •  Problems compound as time passes.
3. Tailor your message to your (internal) audience.
  • Use analogies. Numbers don’t speak to everyone. In this case, Eric used the analogy of over fishing the ocean.
  • Be patient. You may need to repeat your message again and again.
  • Appeal to core values. Most companies claim to respect the customer and value collaboration.
The conclusion I've drawn from the three perspectives is that my approach works for my brand, but you simply cannot test and measure enough. Do more of it and measure what matters. Additionally, every brand in unique and has to determine for themselves their measuring stick for frequency success.  To take your email conversion performance to the next level, study subscriber behavior (action and inaction) and adjust frequency, and budget for research to understand what your consumer truly wants, not what your think they want.

Monday, August 12, 2013

The Psychology of Pricing Part II

A Balancing Act

By Laura Iles - Senior Consultant, Integrated Insight

In the process of evaluating pricing strategies, we all begin the same way: searching for the Holy Grail of strategies in our space, the one to maximize profits. Beyond the basic math, then, what is it that differentiates the leaders in an industry?

To answer that, we must consider the broader impact of consumer perception and behavior within the context of pricing decisions. Occasionally, strategies which seem less attractive become more valuable when the psychological impacts of pricing are considered, and vice versa.

Pricing strategies require a delicate balance of the company’s requirements and the consumer’s needs. Too often, companies employ a strategy that blatantly ignores one of those factors.

Dynamic Pricing

Dynamic pricing in particular conjures images of the airline industry. Customers feel obligated to monitor multiple ticketing options over a series of days in their effort to find one that fits their needs at the right price.

Of course, we all know of someone who has gone through this effort, only to arrive at the gate to discover that their seat is gone, the flight oversold in an effort to maximize profits.

To the consumer, this process is stressful, frustrating and dis-empowering – not the concepts you want associated with your firm.

Price Matching

Price matching strategies reverse this imbalance of priorities. As big box stores price match online retailers in an effort to cater to their customers, it leads to a decline in profits that ultimately hurts the company and the consumers.

Consumer –Targeted Pricing

Other stores, such as retailers Staples and Home Depot, have eschewed the low online price strategy and instead taken a multi-pronged approach. They combine dynamic pricing, shifting in response to competitor’s pricing, with variable customer pricing based on demographic factors. [1]

In one such example, customers on the Staples and Home Depot websites are targeted by location (using their IP address). Proximity to a competitor’s store lowers the price point they are shown, while proximity to a local Staples or Home Depot store raises the price point. Sometimes the difference is negligible, other times it is significant. In neither case is the consumer aware the pricing has been tailored specifically to them.

Consumer Reactions

The targeted approach is perfectly logical from a business perspective. The more competition, the more it begins to make sense to compete on price. In low-competition areas, higher online prices ensure you do not undermine your brick and mortar business.

Unfortunately, as in the airline and sports industries, consumers do not appreciate the idea of paying more than their neighbor for the same product. The secrecy surrounding the mere existence of the practice further aggravates their sense of distrust.

To date, these stores’ refusal to divulge precisely how the pricing is determined leaves shoppers with the uneasy feeling that that they are being penalized for the city in which they live.

Ultimately, the lack of transparency is damaging brand images and leaving shoppers wary of being monitored and targeted.

Learning to Love Dynamic Pricing

Compared to wholesale price matching or a flagrant disregard for the consumer’s experience, the targeted strategy in and of itself is a valuable one. There is nothing to be gained, for either consumers or retailers, by continuing to engage in price wars, slashing prices to match other retailers and cheap online sources. Dynamic pricing, in its various incarnations, works.

The challenge facing many companies today is to increase consumer acceptance of new strategies by introducing them in such a fashion as to highlight the benefits to the end user. High barriers to entry have, to a certain extent, protected the airline industry from repercussions relating to the frustrations around pricing strategies. For other industries, success will not come so easily.

The sports industry in particular has handled the transition into dynamic pricing well, and can serve as something of a model for other industries. Teams were slow to adopt dynamic pricing for fear of alienating fans, a stance which helped to reassure loyal customers.[2]

Since adopting dynamic pricing, several of the teams, along with one of the main software providers, Qcue, have been remarkably forthcoming in discussing how and why new pricing strategies were implemented.[3] As a result, the variable pricing has slowly gained approval among fans, while team images remain untarnished.[4]   

Transparency goes a long way towards dispelling customer discomfort with new pricing strategies. The most efficient and profitable system in the world won’t do you a bit of good if you damage your brand because your customers think you are taking advantage of them.