by Stan Phelps
The house we bought in Norwalk is a beautiful old stone colonial that we refer to as “Het Stenin Haus” (Dutch for the stone house). Did I mention the house was charming and old? In the first five years we renovated the kitchen, upgraded the bathrooms, replaced the windows, overhauled the sleeping porch, landscaped the backyard and refinished the attic. The first project was the kitchen. A total gut and rebuild. Our contractor Brian hired a helper to patch and paint as the job was concluding. He referred to himself as Ritchie. Ritchie moved over with his family from Bosnia about 10 years ago. Ritchie was a quiet nice guy with an engaging smile. Even though he was doing a small finishing job you could tell he took great pride in his work. Ritchie’s true specialty was taping.
One day I came home and found Ritchie patching a crack in the ceiling of our back hallway, which is next to the kitchen. I was a little taken back and at first a little defensive. This wasn’t part of the job and I saw a bill coming. Ritchie just smiled and said not to worry as he was doing it for free. He saw that it needed to be fixed and had some extra material. That made quite an impression. Guess who was top of mind when we had our next painting project? We developed a long term relationship with Ritchie. Over the next three years we would engage him on almost every project in our house. Each time he exceeded our expectations and did a little something extra. Ritchie turned a couple hundred dollar job into tens of thousands of dollars of work.
The Longest and Hardest 9” in Marketing
In 2008 I launched a blog called 9 INCH MARKETING. Nothing personal with the title I assure you. Nine inches is the average distance between the brain and the heart. I refer to those nine inches as the “longest and hardest” for any marketer, given the goal of winning the heart of your customer. My first dedicated post was about the concept of lagniappe {Endnote 1}. With each post I included a small section called “Today’s Lagniappe” with a fun extra bit of trivia, a joke or a story. My first guest post on another blog, Drew McLellan’s “Drew’s Marketing Minute,”{Endnote 2} was about the concept of lagniappe. My first Slideshare presentation {Endnote 3} was also about the concept of lagniappe. Can you see where I’m going here?
In September 2009 I wrote a post highlighting Wells Fargo and a concept called marketing lagniappe {Endnote 4}. That post would be the spark plug that ignited my passion and became the impetus for starting the Purple Goldfish Project {Endnote 5}.
Here is an excerpt from the original post:
9 INCH AXIOM – Little things
“Sometimes the littlest things can make a big difference”
Andrew was telling a story about how he was using the drive-thru at his local Wells Fargo bank. At the end of the transaction the teller asked him if he would like a sucker. Andrew was perplexed until he realized it was an offer for a lollipop. He drove away with a smile on his face. That lollipop was a small token or “marketing lagniappe” from Wells Fargo. It’s a practice that goes a long way towards increasing customer satisfaction, especially when it is unexpected.
80% Rule – Wells Fargo understands the importance of servicing the needs of their current customers to fuel growth. Here is a quote about cross-selling from their website : {Endnote 6}
The more you sell customers, the more you know about them. The more you know about them, the easier it is to sell them more products. The more products customers have with you, the better value they receive and the more loyal they are. The longer they stay with you, the more opportunities you have to meet even more of their financial needs. The more you sell them, the higher the profit because the added cost of selling another product to an existing customer is often only about ten percent of the cost of selling that same product to a new customer.
That last sentence deserves repeating. IT COSTS 10 TIMES MORE TO ACQUIRE A NEW CUSTOMER THAN IT TAKES TO UP-SELL A CURRENT ONE. Nearly eighty percent of Wells Fargo revenue growth comes from selling more products to existing customers. The average Wells Fargo customer carries over five products which is more than twice the industry average.
Their focus on serving existing customers has two tremendous benefits:
It reduces attrition. Well Fargo loses less customers each year compared to its competitors.
It provides a competitive advantage against companies that only offer one or a few products.
A Project is Born
In late 2009 I launched the Purple Goldfish Project and started the blog Marketing Lagniappe {Endnote 7}. The project was an ambitious attempt to crowd source 1,001 examples of marketing lagniappe. Early in 2010 I started a video podcast {Endnote 8} with Jack Campisi. The ball was rolling. My friend Doug Pirnie once told me that everyone has a book inside of them. If that is the case, this one has been bubbling inside of me for the last eight years. I’m glad to be finally letting it out. I hope you enjoy it and profit by it.
Prologue
“Real generosity toward the future lies in giving all to the present.”
- Albert Camus
TWO STORIES OF MARKETING LAGNIAPPE
The first is the story of a boy from upstate New York named David McConnell . {Endnote 9} At the age of 16 David started to sell books door-to-door. When his fare was not well received, McConnell resorted to a little lagniappe. David would promise a free gift in exchange for being allowed to make a sales pitch. The “little something extra” was a complimentary vial of perfume. It was a signature extra as David concocted his original scent with the aid of a local pharmacist. McConnell soon learned his customers adored his perfume, yet remained indifferent to his books. Soon he would concentrate solely on cosmetics, starting a company called the California Perfume Company that would soon become Avon Cosmetics in 1886. Who knew the first Avon Lady was actually a boy? Today, despite competition from hundreds of American and foreign brand name cosmetics, Avon is #1 in sales nationwide, with Avon Ladies ringing doorbells coast to coast.
The second story is about a company founded by a social worker and a psychologist with a passion for good food and a commitment to healthy living . {Endnote 10} Without the capital to open a restaurant, Stacy Madison and Mark Andrus began serving healthy pita bread roll-up sandwiches in Boston’s Financial District. Their lunch cart was popular and soon lines started to form around the block. To make waiting more palatable (literally), Stacy concocted a lagniappe for customers waiting in line. Each night they baked the leftover pita bread sprinkled with seasoning to create different flavored chips. The chips were a huge hit and soon Stacy’s Pita Chip Company was born. Stacy's experienced rapid growth, doubling sales every year which led to a multimillion dollar acquisition by Frito Lay in 2005.
Preface
“In marketing I've seen only one strategy that can't miss -
and that is to market to your best customers first,
your best prospects second and the rest of the world last.”
- John Romero
Marketing is changing…
One could make the assertion that marketing has changed more in the last five years than it has in the previous 25. Power has shifted. The consumer has a bigger voice and traditional “tell and sell” marketing has taken it in the shorts.
Let’s countdown the Top 10 ways:
10. Retention is becoming the new acquisition in marketing
It now costs up to 10 times the amount of money to acquire a new customer than it does to keep a current one. {Endnote 11}
9. We heard it through the grapevine
90% of customers identify word of mouth as the best, most reliable and trustworthy source about ideas and information on products or services. {Endnote 12}
8. Zip it or Zap it?
86% of consumers skip TV ads. {Endnote 13}
7. There is always an alternative
Over 70% of consumers will abandon a brand because of a bad customer experience. {Endnote 14} [Does that make the other 30% masochists?]
6. Consumers don’t know what they like...
They like what they know or what their friends know. According to McKinsey
, 67% of all consumer decisions are primarily influenced by word of mouth. {Endnote 15}
5. Pardon the Interruption
In the 1970’s the average consumer was exposed to 500 to 2,000 messages a day. Today it ranges between 3,000 and 5,000 per day.
4. Love is a battlefield, for customers and marketing
Survey says: 94% of business leaders say customer experience is the new battlefield. Pat Benatar could not be reached for comment. {Endnote 16}
3. Forget the water cooler
Social has become a game changer. Today’s satisfied customer tells 3 friends, a pissed off customer tells 3,000. {Endnote 17}
2. Double the Pleasure in Marketing
Customers gained through word of mouth have 2 times the lifetime value than regular customers. They also bring in twice the number of referrals. {Endnote 18}
and the #1 reason marketing is changing...
1. Search is a game changer
Forget about your cross-town rival, your competition is now just 1 click away.
PART I:
WHAT IS A PURPLE GOLDFISH?
Chapter 1
The Biggest Myth in Marketing
“The search for meaningful distinction is
central to the marketing effort.
If marketing is about anything, it is about achieving
customer-getting distinction by differentiating
what you do and how you operate.
All else is derivative of that and only that.”
-Theodore Levitt
TALL TALES FROM NYC
A few summers ago I was in New York City with a colleague. Brad and I were at a trendy rooftop bar. One of those places where a bottle of beer is $14. We were waiting to meet a few people before heading over to a networking event. I noticed a guy sitting on his own for over 15 minutes. It was obvious that he was waiting for someone. I decided to strike up a conversation about waiting by offering my standard line:
“Do you know that we spend 10% of our life waiting?”
We started talking about waiting and I stressed the importance of being on time. Right then this guy shook his head and said something I’ll never forget:
“There is no such thing as being on time. Being on time is a fallacy. You either are early... or you are late. No one is ever on time. On time is a myth.”
This was a complete paradigm shift for me. I immediately starting thinking about how this applies to marketing and meeting customer expectations. I’ve always thought that the idea of meeting expectations was a surefire recipe for losing business. It almost guarantees you will fall short. It’s similar to playing prevent defense in football. Prevent defense only prevents you from doing one thing... winning.
This new paradigm has only made it clearer for me. Meeting expectations is the biggest myth in marketing. Santa Claus, the Tooth Fairy and Meeting Expectations. Kids cover your eyes and ears... they are all myths.
In business you either fall below expectations or you exceed them. There is no middle ground. It bears repeating:
“There is no such thing as meeting expectations.”
In a world where 60-80% of customers describe their customer satisfaction as satisfied or very satisfied before going on to defect to other brands, {Endnote 19} “meeting expectations” is no longer an option.
CHOOSE YOUR PATH WISELY
There are two paths that diverge in the corporate woods. Many companies take the wide first path and are happy with just meeting expectations. Others consciously take the narrower and tougher road deciding to go above and beyond to do more than reasonably expected.
Seth Godin wrote about this in a post entitled “ Once in a Lifetime.” {Endnote 20} He touches on these two paths:
This is perhaps the greatest marketing strategy struggle of our time: Should your product or service be very good, meet spec and be beyond reproach or… should it be a remarkable, memorable, over the top, a tell-your-friends event?
The answer isn’t obvious, and many organizations are really conflicted about this. Delta Airlines isn’t trying to make your day. They’re trying to get you from Atlanta to Salt Lake City, close to on time, less expensive than the other guy and hopefully without hassle. That’s a win for them.
Most of the consumer businesses (restaurants, services, etc.) and virtually all of the business to business ventures I encounter, shoot for the first (meeting spec). They define spec and they work to achieve it. A few, from event organizers to investment advisors, work every single day to create over-the-top remarkable experiences. It’s a lot of work, and it requires passion.
You can’t be all things to all people. Your strategy defines which path you will take. Don’t get caught in the mushy middle. It boils down to the simple issue of meeting expectations. If all you want to do is meet expectations, then you are setting yourself up to become a commodity. If you are not willing to differentiate yourself by creating valuable experiences or little touches that go “above and beyond” for your customer, you will languish in the sea of sameness. Choose your path... wisely.
To under-deliver or over-deliver, that is the question
In today’s climate you need to stand out by answering two important questions:
1. What makes you different?
2. Is that differentiator a signature element?
Creating small unexpected extras can go a long way to increasing retention, promoting loyalty and generating positive word of mouth. Investing your marketing budget in current customers is the lowest hanging fruit in marketing. Focusing solely on prospects in the purchase funnel and neglecting actual customer experience is a recipe for disaster.
SHAREHOLDERS VS. CUSTOMERS - WHO COMES FIRST?
My friend Jarvis Cromwell of Reputation Garage recently asked an interesting question, “Why are corporations in business?” He proposed that there are two sides of the argument:
1. Milton Friedman’s theory that the sole purpose of a corporation is to drive shareholder value.
“There is one and only one social responsibility of business,” Friedman wrote back in 1970, and that is to “ engage in activities designed to increase profits. ”{Endnote 21}
2. Theodore “Ted” Levitt’s theory that companies are solely in the business of getting and keeping customers.
“Not so long ago companies assumed the purpose of a business is to make money. But that has proved as vacuous as saying the purpose of life is to eat... The purpose of a business is to create and keep a customer.” {Endnote 22}
So – what comes first? The customer or the bottom line?
The last 100 years have seen corporations solely focused on the bottom line. The approach has been win at all cost with little or no regard on external effects, collateral damage or customer experience. The problem is that only pursuing the bottom line can neglect the customer. This was outlined in an article from HBS by James Allen , Frederick Reicheld and Barney Hamilton {Endnote 23}:
Call it the dominance trap: The larger a company’s market share, the greater the risk it will take its customers for granted. As the money flows in, management begins confusing customer profitability with customer loyalty, never realizing that the most lucrative buyers may also be the angriest and most alienated. Worse, traditional market research may lead the firm to view customers as statistics. Managers can become so focused on the data that they stop hearing the real voices of their customers.
The entire premise of What’s Your Purple Goldfish? is that the customer must come first. Customer experience should be priority Number One. Stop focusing on “the two in the bush” (prospects) and take care of “the one in your hand” (your customer).
Chapter 2
Value is the New Black
“Price is what you pay. Value is what you get.”
- Warren Buffett
THANK YOU GROUPON
DEAL is no longer a bad four letter word. It’s a badge.
Value is becoming the new black. In challenging economic times, the climate forces both brands
and consumers towards a “value” model.
Consumers are expecting more value. According to the Brand Keys Customer Loyalty Index , {Endnote 24} successful brands are those that stand out because consumers think of them as valuable. They don’t see the term value as synonymous for cheap.
Brand Keys analyzed consumer values, needs and expectations and offered the following trends:
1. Value is the new black: Consumer spending, even on sale items, will continue to be replaced by a reason-to-buy at all. This may spell trouble for brands with no authentic meaning, whether high-end or low.
2. Brand differentiation is brand value: The unique meaning of a brand will increase in importance as generic features continue to propagate in the brand landscape. Awareness as a meaningful market force has long been obsolete, and differentiation will be critical for sales and profitability.
3. Consumer expectations are growing: Brands are barely keeping up with consumer expectations now. Every day consumers adopt and devour the latest technologies and innovations, and hunger for more. Smarter marketers will identify and capitalize on unmet expectations. Those brands that understand where the strongest expectations exist will be the brands that survive and prosper.
4. It’s not just buzz: Conversation and community is increasingly important, and if consumers trust the community, they will extend trust to the brand. This means not just word of mouth, but the right word of mouth within the community. This has significant implications for the future of customer service.