Category Archives: Digital Marketing

Social Media ROI

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Every now and then I hear that it is hard to find out what is the ROI in doing social media. Honestly I find such statement to full of baloney? The old adage “there is no such thing as a free lunch” comes to mind… why would a business take the time and money and do social media without knowing what the ROI is ?

Sadly most business think about social media is all about awareness… The problem with awareness is how do you know, what is working?  And how do you know that because of a social media campaign people are coming and buying and how many more people are they bringing based on the experience they had on your website, your store, etc.  Awareness is nice to have, but that awareness needs to mean something.

Before starting a social media campaign … understand what outcome you want to drive i.e. define success 

Just like when you take on any new business venture there is a success criteria that you have in mind. You may not hit the target in a straight shot manner but you want to minimize the variance between you want to be versus where you get to … (which is why I have always wondered my christopher columbus is called a great discoverer because he was way off the mark on reaching India but that is a blog for a different day) . The same concept applies when you start a social media campaign… what is the outcome that you want to drive ? Is it to Maximize buyers of your product and services? Is it to minimize the time to discover you product and services or is it to make sure that influential people are talking about your product or service … So know the outcome you want to drive … and please let it not be “awareness”. Here are some examples of how can you calculate some elements of Social media ROI.

Net Promoter Score

When you start a social media campaign, the ideal state is to know the economical value of each of the followers you gain on twitter or have an additional like on your Facebook page. In order to understand Net Promoter Score.

Start with the baseline on where you are at before the campaign. Know when the campaign ends … please do not keep a campaign running for long time otherwise it is a useless process

My example of calculating a Net promoter score is as follows  :

An additional follower on Twitter brings in 5 additional followers (amplification factor of 5)

NPS = Net increase in sales / Net growth of Twitter follower based on the campaign

Now you can know the amplification factor and you know the economic value of each follower

Spending

When you run a social media campaign, it is best to run a campaign with a special URL. Why a special URL ? Well thanks to the wonders of the web we have entered a new world of behavioral segmentation instead of the age old demographic segmentation.  The web allows for great flexibility to learn and know exactly what potential clients are doing when they get to your site. When you run a social campaign have a customized URL and have your website instrumented with your favorite analytics tools.  With your customized URL you can validate if you see increase in purchases based on the social media campaign.

Net increase traffic = Traffic after campaign – Traffic before campaign

% of Buying versus visiting = # of Purchases/ #Net Increase in traffic

A good barometer would be at least 10 % of visits generated are actually buying … but if your visits are just 10 people from the whole campaign …then there is something that is generally wrong with your site.

Loyalty

How many users are returning ?? This question is usually looked over as we are usually smitten by net new transactions  versus existing ones. Remember the existing clients are the ones that got you here and yes those new clients that you acquired via the campaign if they return to the site and purchase more, well that is good too.  Thanks to Cookie technology on the web, marketers and technologists know whether you are new visitor or returning visitor. In this case you want to look at

% Returning visitors = #Returning visitors/ Net increase in total traffic

% Purchases made by Returning visitors = # of Purchases/ #Returning visitors

if the Returning visitors percentage is high (i.e. over 50%)  that means the most responsive group to your campaign has been your existing client base .. which is a good thing … but then you have to ask yourself the following questions

Are these clients bringing new clients ? ( Going back to our NPS discussion)

What are the additional things are they buying ?

What is the average size of purchase for returning clients ?

These are the kind of questions that will help you develop and maintain a social media program and increase investment in social media outreach programs

Earned Media Value

If you end up using an agency to do your work… then it makes sense to hold them accountable for the work they are delivering. Thanks to Web analytics we can hold them accountable if there is a white paper campaign based on the business goal you have identified then  make sure you have elements in place for the right attribution of such efforts and have identified the right KPI. Don’t just stop at looking the #of downloads or the # of Shares of your content … look how that actually impacted the overall sales or whether or not the link back actually helped your ranking on Google’s SERP results.. these things matter. You can also look at overall sentiment data as well such as

# of Negative Mentions/ # of Positive Mentions  (High percentage means you have brand problem)

If you are resolving issues via Social media as in support then you want to look at things like

Avg. time to resolve an issue

# of complaints received/ # complaints resolved

Frequency of contact with the client on the complaint

These are just some examples of Earned Media Value. You are building a presence for your brand and with your community.

Cost of fan acquisition

This is also an overlooked element on social media campaign. People tend to forget that social media is an investment and it does not come free. There is work involved and the cost is not just promotional material cost.  The cost of fan acquisition includes the following elements

  • Cost of the team involved in Social media outreach (Companies that do this wrong have a common pool of social media “experts” or have one person dedicated to an entire brand). Remember with social media you reap what you sow.
  • Time spent on researching the topic before developing the campaign ( there are ways to calculate this .. such as Looking at the hourly rate of the person hired and amount of hours spent on research)
  • Then obviously campaign development
  • Campaign execution and testing
  • Iteration

On the last point of iteration… believe me you will be iterating a lot during the campaign.  Although a lot of might be assuming that a social campaign can be time bound and it can be, but social program do not finish as the next social outreach starts as the prior one ends… all of this is all series a iteration.

Recommendation

This blog is by no means exhaustive… but it is a list of things that have worked for me. If you have any additional ideas and thoughts please feel free to share. I have value your opinion good or bad.

Don’t forget if you do social media with a goal and purpose in mind… you can have a lot of fun.

3 things you need to build a high ranking website

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I know there is a big business out there on helping clients get high ranking websites created (I do not think there is anything wrong with that). The problem that I have is that people treat SEO as if it is a way to outsmart search engines.  In order to be relevant in SEO world the cardinal rule is that you need great content.  With all the technicalities that are involved in building a high ranking site it actually comes down to 3 things. Yes I said 3 things and does not require the knowledge of any dark art (there are a lot of free tools out there that help you do this).

The Site needs to be “crawlable”  by Search Engines

What do I mean by this?  Well if you have spent the time to create a great website you need to make sure that the search engines can crawl the information and index your page. It is great that you want to have great AJAX and Flash apps on your landing page but if the search engine cannot read it then it is not useful.

The other element from an indexing standpoint is to make sure URL relevant having long and difficult to crawl URLs  just as an example this URL will never work

http://kkanakas.com/post-1/1235adasnwerwerokberweqfsrwerwerkhkjhsdmb?testing-123/

I mean look at the URL it makes you cringe… do you have any idea what that URL means?       now imagine what it would look to algorithm ?

So I implore you to create  pages that can be crawled by search engines

Use Keywords that clients will use to search for the product or service 

This is the other part people generally tend to ignore. There are plenty of free tools out there to show you which keywords people are using to search for products and services similar to yours. So you might be asking yourself why is this important ?  Well making your site readable and indexed by search engine is just one part of the equation.  You need to make sure you have right keywords as well.  Keywords tell search engines what your page  is about . This is important as it helps the search engine index the information in your page appropriately.

Caution: This does not mean you stuff you page with Keywords (search engine algorithms are pretty smart these days especially Google’s). You can have keywords or Keyphrase. A keyword is like “Pre-owned” and Keyphrase (or group) is like “Pre-owned Cars” the latter lets the search engine know that your page is about Pre-owned cars not pre-owned everything … Simple locations to include keywords are the following

  • Title tag
  • Meta tag description (this is the spot where most people stuff with Keywords please do not do that )
  • headline tags
  • Body copy

Make sure to have the Keywords or Keyphrase early on the web page to help with the indexing

Inbound Links

Out of all the  things that make your site rank high, this is the most important of all. Find the most important and influential site in your domain area and have them link back to your site. Since this is an important element it is also the hardest …. why ? because you have engage with some of the influencers on that the site and have them find your contribution useful to their site, so that they reciprocate in kind (although this is rare). This also means that you have killer content on your site that is meaningful. Natural links will occur over time as you engage more and also have structured content syndication plans. Having link backs from reputable pages is important as well (Pagerank or Web of Trust is your friend here). Search Engines are smart if you have artificially created linkbacks.  One thing to remember have minimal amounts of links from the referring pages otherwise you can cause link dilution.

As you can see SEO is not a dark art, but is more implementing a methodical approach to reach the goal of your website (there is needs to be a tight alignment between SEO strategy and the reason to exist for your website). There are several books and resources out there but one the best place that has worked for is http://searchenginewatch.com which is a comprehensive site to help out people (I am not in anyway shape or form affiliated with Search Engine Watch team, I just like their product)

anyway enjoy the new year celebrations

The value of the media that airs Super Bowl commercials will go the way of the Dodo bird

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Yes I know it is New years Eve and we all have festivities planned for the clock to midnight and ring in the New Year. Well as part of my goodbye to 2013 … I hope one day the media that charges astronomical amounts to air commercials goes away like 2013. 

Just for the record I am not against commercials! If a commercial encourages someone to do something whether emotional or otherwise is a great thing. The problem I have about the medium airing traditional commercials is that the attribution model really sucks!  Yes I have heard the excuse that certain commercials are “branding” or “awareness” campaigns hence are not measurable! I think that is just a bogus argument! For a “branding” or “awareness” campaign to truly work, there needs to be action that attributed to the campaign, such as more visitors, increase in sales etc. The problem with a commercial airing and the ensuing increase in sale is not directly implied it is best a proxy … which is ridiculous in this day and age.  Why is it that the traditional media companies are charging millions of dollars for mere seconds ? 

The reason I believe is because of something called value to media versus value to customer.  Advertisers in general focus on impressions but there is very little ROI  to show for (there is a fix for that but apparently a lot of folks have not made the leap yet).  Traditional media companies thrive on impressions (whether they convert for business, that is a different matter) and because they own rights to certain events that guarantee eyeballs (i.e. impressions) to advertisers they charge for the medium not for the customer utility.  I understand that Super Bowl commercials are an institution but really! What is the effectiveness of that medium (besides the proxy attribution world we have been living with)? How do you know that some one bought something because they saw a particular Ad on TV or because of a bill board on Times Square? 

This is why I believe the web and mobile will change all this … we are gradually working towards a model where we can attribute what actions caused our clients to do anything whether buy, visit our site, interact with our mobile app etc. Some of the more effective Super Bowl Ads are by Coca Cola (because you get text something back the company). So if a customer found something valuable out a commercial they are willing to text something back … which then feeds  into brand loyalty and potentially future acquisition of a Coca Cola Product. 

In the past commercials relied a lot on the “Halo” effect of their commercials and the traditional media companies made a mint by charging an arm and leg.  In the future traditional media companies need to revisit their business model in order to survive in the commercial world and figure out how they plan to incorporate the “value to customer” angle,  “value of media” is going away  just like 2013.

 

Happy New Year everyone !!  Looking forward to a great 2014!

Lean Enterprise actually means Lean Enterprise not just Lean Development

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There seems to be a lot of content being posted around Lean development and Lean software delivery.  We have a lot of thought leaders giving examples of how leans startups manage to get things right in the context of software development etc.  In the middle of this hype people tend to forget not everyone gets Lean right. In order to get Lean working properly in a organization it is not just development that needs to implement lean practices but the entire organization needs to be lean, yes I mean marketing, Sales, Design, Support all of them need to be lean not just development. In the case of startups since the lines of communications are smaller and the relationships are fluid. The prime outcome in a startup is to make sure that not only the engineering output is good, but the market messaging is right, the pricing model encourages conversions, the sales model and approach is the right one etc. Fundamentally what we are trying to prove is that our solution ,based on product/ market fit, resonates with the market we are trying to go after. Which implicitly means Lean is not just a development only thing.

       In a startup people may assume this to be a “no duh” kind of thing, but this is very profound change in large organizations. Large organizations have made their business effective building a “silo’ed”base optimization models. What do I mean by that? In large companies ( based on my limited interaction with friends and families)  every department optimized for their silo i.e. Product Development is optimized for product development, marketing is optimized for marketing, sales is optimized for sales etc. etc.  an each vertical is optimized but they not optimized horizontally i.e. to optimize the overall outcome of the business.

Everyone is optimized for their vertical but not for the overall business outcome

What makes matters worse is that in all the verticals, they have different KPI’s, definitions of success, and have different definition for the customer (which is again another nebulous term). So when you have each vertical optimized you are in fact optimizing for your vertical and not for the overall business.  What companies like Amazon, Google, Apple, and others have taught us, is that it is always horizontal …  You need transparency across these various organizations and have the right set of KPI’s that not only drive sales plans but also things like design considerations, financial modeling, marketing campaigns, support models etc.

I am not advocating that we go ahead and create a gargantuan database across the organization to address this issue. If that was the case this problem would have been solved a long time ago and architecturally and from a business perspective it does not make sense….
This is not just about technology, it is also about Organization, processes, and values (Just like Clay Christensen highlights in his several books on innovation)

Lean Marketing 

Traditional form of Marketing focus on front loading activities and the notion of ROMI (Return on Marketing investment) is at abstract notion at best. What you usually hear from immature marketing organizations is that we are spending too much time on analysis and less time on execution.  Nobody asks my marketing what you analyzing? The only reason why analysis takes so long is because marketing does not know what they are looking for. Which is why most marketing organizations need to think about outcomes they want to drive right from get go. Otherwise during crunch time the only thing a marketing organization can do is cut people in order to manage costs.

Lean Sales 

With the internet traditional sales models are under severe pressure. Internet makes the cost of sales more effective by introducing a powerful amplification and sales channel.  Gone are the days when you sold something and did not care whether a client used the product or not, until you decided reconnect with the client. The internet has allowed the recency, frequency and monetary value model to scale (regarding the RFM model please read Jim Novo’s seminal book Drilling down ). Lean sales requires that companies put people in effective relationships and use the internet in places where basic relationships will do. But getting do this stage requires a well defined focus and better integration with Marketing, Product Development, and other disciplines within the organization

Lean Design

Thanks To Apple people are at least taking this discipline seriously, but what people tend to forget is that Design is integrally driven by data. The notion of rapid prototyping can implemented not just from a product design perspective, but also into sales, marketing, advertising buys etc. 

Lean Support 

Going back to the recency, frequency model this is an often missed piece of the puzzle, the folks at 37 signals (the team that built basecamp have done this) . You can actually use lean principles in support along with the data pile that exists in various organization. Support data can provide insights on product experience, what to A/B test? Try out different types of support offerings etc.
Although this is not a comprehensive  list of areas that Lean touches. Lean is an company thing not just optimizing a division thing. Unfortunately people forget the overall objective of Lean is to improve the business not just one pillar of the business

A/B testing is not new!!! We are just realizing the importance of it and Starbucks a technical company

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Lately I have been hearing a lot about how great A/B testing is and that it is  the best thing since slice bread!  Please understand I am a big fan of A/B testing  but let us get real, this is not something new. The web like everything has an amplifying factor of a million, which is why it is like some hot stuff … just like BigData … it just did not happen over night and someone had some sort of epiphany and lo behold a phenomenon was born!  Everything takes time to take hold and become a phenomenon ….  and while it is taking time to take hold there are a series of A/B tests that are going on to make sure what takes hold and what does not. Practice that learn form the results survive and those who don’t well they perish!

I am from a software development back ground so oh BTW agile development, continuous delivery, DevOps or as I like calling it BizOps are all forms A/B testing.  
A/B testing is so ingrained in our lives we just don’t realize it (just ask the hospitals and the Pharmaceutical folks, they have doing it for quite some time).  I believe one of the best A/B tests that marketed well was the “Pepsi Challenge” by John Scully… to bad he messed it up for Apple though. 
Why are A/B tests important ? Well because they help us build relationships (again us not realizing it). Everyday there are several A/B tests happening my house…. how can I make daughter do her home work ? or what can I do to improve my wife’s experience in being my wife everyday … (BTW sometimes I do get lazy … and pay the price). I would go even further to say A/B tests are so ingrained in our DNA, we just don’t realize it. I am going to share 2 old stories and an example of how A/B testing working even today outside of the web context … there are so many examples to choose from which makes it even harder….
 Early human hunters
         Imagine you are part of an hunter tribe in the early days of mankind, and you realize that you need to hunt something big to keep the village fed during the winter months. Back in the day when when did not have robots, the chief of the tribe would select one of their stronger men to go and hunt alone. The validation if the person came back alive with the hunt it was a successful expedition. Imagine you start realizing that the male population of the tribe is getting thinned out because of the lack of predictability of your hunt ( you realize sending one person for a hunt is your control group), this time you decide you are going to send 2 together with the explicit instruction that they work together and try to get a bigger animal. As luck would have it the coordination works now you figure out that sending one person alone does not make sense because sending 2 people for the hunt gets a better outcome for the tribe.. Next time you try sending out a larger hunting party to see what they can get. Hence you see humans have been at this A/B testing stuff for a long time… it is just that now we can do it a greater scale and with lot less loss of life.

Alexander the great and the Persians
This one is an example of not only A/B testing but also of Big Data versus Smart Data. Imagine the small army of Alexander taking on the might of Persia and yet Alexander’s small army bought the behemoth Persian empire to its knees.  Prior to the confrontation with the Persians, Alexander had a lot chance to experiment with other armies that the Greeks took down, he was able to implement strategic plays and work out ways to make his small army into a effective execution machine. I am not saying that the Persian Army lack discipline, they actually fought by the book (i.e. something that worked before should work the same way except now they have the bigger size).  Persian Army did not challenge their conventional norms and just assumed that their army would just function as well with the larger contingent of soldiers (they did not A/B test) and in the context of Alexander they  were so drunk with the size of their army that they did not take into account the terrain and it’s advantages offered to Alexander’s army. Plus the motivation that Alexander had made it very clear that they were moving forward not backwards actually helped the army to be more creative.
Another example of A/B testing at work and with some significant constraints too (actually all good A/B tests work with constraint, this is no different). Although it helped Alexander and team to win over the Persians … they eventually got as lazy with their power just like the Persians became

StarBucks !
I think starbucks is a great technical company. We all joke that there is a Starbucks every two blocks in the big cities. But what is going on here? Yes I know their menu across the all the a starbucks is the same but there is a subtlety. Have you noticed how starbucks promo’s are different in their different stores (even if the stores are just blocks away). Starbuck A/B tests so many different variants of coffee drink (just of the non-fat, soy based, vanilla bean latte that you drink next time). They know exactly which store has a demand for what type of variant of their coffee and it’s volume. Which helps them manage their inventory better…. which is why I believe this company may have it’s rough patches but it will come through …because they are always testing what take the Starbucks experience to the next level!

I know this was not one my regular types of Blog post…. But I wanted to make a point about A/B testing, DevOps all these new “Buzz Words” are great to push us forward. But we need to take a step back and look at this is in the grand scheme of things. What we are witnessing is the extreme scale of what we have always done without thinking twice and now we are applying in a more conscientious and effective ways to enrich our lives.

Let me know what you think and if you have any stories to share feel free to share your thoughts on with me on Twitter..

BTW A big shout out to my readers in Tanzania ! I hope you find my content useful !

5 Web Metrics to track for online commerce for Newbies

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After my April blog on vanity metrics and real metrics (http://goo.gl/7KYj5) I have had a chance to meet several people,who are curious about web metrics but do not know where to start. I agree someof us a very adept at reading the googleanalytics blog and come up to speed to read Avinash Kaushik’s blog Occam’s Razor. Very few blogs cover how getstarted and what to focus on, over the last few years I have narrowed 5 keymetrics that work for me (BTW there is a certain level of comfort-ability oneneeds to have in order get these metrics). These metrics are multi-purpose aswell, they not only show you how your business is doing but also highlight theweb experience that a potential client might be going through via your website
The 5 metrics that have worked for me (especially if I want to track the buying funnel) are as follows:
  • · Exit Rates
  • · Churn Rates
  • · Cart Abandonment rates (this is needed if youhave a e-commerce site)
  • · Average Days to Purchase
  • · Average visits to Purchase

I am not inferring that metrics like Unique Visitors, Pageviews, Bounce Rates etc. are not relevant. They are,it just depends on the goal you want to accomplish. In the case of this blog the assumption is that there is a web site on the internet that is just starting and wants to do some level of commerce

Exit Rates:

I am big fan of exit rates because to me they can tell you which page of your web presence is leaking. Please do not confuse this with Bounce rates. Bounce rates are metrics that anyone who lands on your page and then just leaves. If your page has a clear call to action (CTA) and you have a high bounce rate then that is something to look into. Exit rates focus more on the page flow of the session i.e. which people did not just land on the page but more about how people navigate their way during the session
Here is an example of an exit rate
Monday
Page 1 -> Page 2-> Page 3
Tuesday
Page 2->Page 1-> Page 3
Wednesday
Page 2 -> Exit
Thursday
Page 1-> Page 3-> Exit
Friday
Page 2 -> Page 3 -> Exit
In the case above the exit rates would be calculated asfollows
· Page 1 would be 33% (3 of 5 sessions included Page 1)
· Page 2 would be 50% (4 of the 5 sessionsincluded Page 2)
· Page 3 would be 50% (4 of the 4 sessionsincluded Page 3)
Why are exit rates important? They give an idea of how youlead generation activities are performing especially in the context of thefunnel. In the case shown above I would want so see why Page 2 and Page 3 havehigh exit rates? You should ask yourself the question like are you call toactions not compelling enough?

Churn Rates

Churn rates deal with how are you retaining the people thatyou already have. This metric is borrowed from the Mobile operator industry. Ifyou are not seeing people renew (as inthe case of SaaS offerings) or even if you see that people that sign up for atrial once and do not return again (prospective customers). For the latterthere is a stronger content play especially if you selling downloadable onpremise solution. What you want is that after they download they come back toview more content and other key things back at your site. You can complementthis metric with some of the social media metrics especially for prospectingclients as in which user decided to comeback and contribute to forum or posteda comment on a blog post etc. You canalso track based on the cookies you have placed for a particular user etc.There are various ways to track churn via the web.

Abandonment Rate

If you have an ecommerce site then you should track thenumber people filled their shopping cart and then decided not to followthrough. If you are using Inside sales for closing your deals, then you need totrack the inside sales metric of loss percentages for every lead that came inthe funnel and the opportunity was lost.

Average Days to Purchase

This is about how long it takes some to purchase. This theweb term for the average sales cycle i.e. how long does it take to closebusiness. This metric can help you identify whether your offering hasself-evident value. Products are just tosimple and convert easily to sale others usually take a long time and that youwant to fix.

Average visits to purchase

This metric is about how many times a user visits beforethey purchase. This metric gives you an idea of how frequently someone iscoming to your site before they buy. This metric can help in making sure theright content is available to provide the right level of information to assistin the buying decision. This can also help optimize the web experience and helpyour clients go down the funnel you are guiding them too.
Like I said in the beginning of the blog, these are the metricsthat will help you get started. Not only will these metrics help you understandyour web business but also improve your web experience as well. I look forward to hearing your thoughts aboutmetrics that help you in your web business. You can contact me @ kkanakas on twitter with your comments

Sales & Marketing is dead, Long live Sales & Marketing (Data driven that is): Customer Lifetime Value

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Sales & Marketing is dead, Long live Sales & Marketing (Data driven that is): Customer Lifetime Value

Anytime someone says that they work in a creative field hence they cannot measure the creative output of their work is a concerning statement. I would argue creativity stems because you are trying to drive an outcome. So how do you know that your creative juices actually resulted in the outcome that you wanted? 
We don’t have to look far, remember the dot com bubble or the housing bubble? The reason why bubbles happen is because you work under the premise that everything will be rosy and hence you become creative to drive that outcome.  You may realize it but the premise of everything being rosy is a constraint, which provides you the basis to operate.
Unfortunately we don’t think about measuring right out of the gate.  This is what usually happens, we start down a path to do something, and then stuff happens and suddenly we have the epiphany that we need to track it and measure our progress.  By the time you get to the last part you are overwhelmed because the infrastructure to measure your progress becomes an excel spreadsheet and tracking progress becomes a manual and tedious task because results from the various elements of your value chain are stored in different repository and you are out of luck….. Does this sound familiar?
One of my favorite metric in any sales and marketing effort is something known as Customer Lifetime Value (CLV). CLV is a very simple premise what is the value of a customer to your business starting from the time of acquisition to a set amount of years.  Now I know that the term lifetime word sounds intimidating because you really don’t know. Which is fine, but in most case using a time horizon of 3 to 5 years usually works.
So the obvious question is how do you calculate customer lifetime value? The elements that make up the calculation of customer lifetime value are as follows:
Acquisition Cost (AC): This basically means what does it take to acquire a set of customers based on various segments etc. The initial cost of acquisition is usually captured in the investment you make in your sales force, advertising, marketing, PPC, etc. initially, to get potential clients in to the funnel.  If it takes a lot to get you noticed the first time, you are not alone.
Marginal Profit per Customer (M): If you have dealt with microeconomics you know what this is. If you have not gone through an economics 101, that is fine too. What this is the measure of profit that you continue to add to your user base. This is not just the initial booking, but also the subsequent renewals that you get. You need to know this for the various time slices in your overall time horizon

Probability that the customer will stay (p): Like the measure says this is the probability on whether the customer will stay with you after they have tried your products (switching costs may also be a factor here).  In order to derive this number you have to have the something called the churn rate.  Churn rate is basically a measure of how many customers are leaving you vs. staying with you. The probability measure is basically (1- the Churn rate).
Discount rate ( r ): This is the rate that you will use to discount future value  in terms of current value.  In most cases if you are familiar with NPV, you can use the weighted average cost of capital (wacc) as the discount rate
Formula for Customer Lifetime value
CLV  =  -AC + (M1 + C1) p/ (1+r) + (M2 + C2)p2/(1+r)2 + (Mn+Cn)pn/(1+r)n
Now there are other factors that I have not included in this blog such as the capability of the product or service in question. For that matter the ability to deliver capabilities quicker and incorporate feedback into product and service quickly etc. These are all elements that can help increase the customer life time value of your product or service. The net is  with the arrival of Cloud and Big Data technologies is naïve to think that traditional sales and marketing can survive, data driven sales marketing is the future and it is here to stay now matter how creative you claim to be.  Bottom line any creative idea has to be something that is
  1. Measurable
  2. Testable 
  3. Try-able

Otherwise you are just making stuff up to make yourself feel important. Which might help you in the short term but long term you need to know what is going on to consistently reward yourself  and react to changes in the market place. You can contact me @ kkanakas on twitter with your comments


Web Strategy: What is a good bounce rate?

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I don’t know how many times I have heard that question, that is like asking how many times do get acknowledged when you say hello?  Sorry to sound to presumptuous here but it would be a wasted conversation because the person asking the question does not understand the web or even does not know what outcome they want to drive and hence ask for a “prescriptive” set of numbers so that they can measure against.

 Why is it hard for people to be more outcome driven? Because bounce rate although they are an ok metric, it is contingent upon other factors such as :
Location: If you are targeting a particular geography and you have high bounce rates from sources outside of the geography should you care ?
New vs Returning: This is another factor that you need to consider on the bounce rates. New users are great but if you have a higher rate of people returning then that is a good thing
Device: What are the devices people using to come to your website? If you find a high bounce rate because your site is not mobile optimized.Then you should do something about that
Medium: How are people coming to your site? SEO, Email campaigns, Social media, Paid Search, organic etc. If you break up your traffic this way you will be able to see what are some of the more effective mediums to reach out to your clientele.
All these divisions/ segments are interrelated I guess the net of this blog is that know you what your outcomes are and segment accordingly.  Bounce rates are great start if you don’t know web metrics but what you should be really looking at are exit rates (thanks to Avinash Kaushik: http://goo.gl/qjpn0). To me exit rates are more revealing about the leaks in your conversion funnel and what you need to fix. 
Another more important metric would be churn rates, similar to exit rates except churn rates focus on the customers you already have. What are you doing to take care of your existing customers and at what rate are they leaving (http://goo.gl/t1ADj).

So when some asks you about what is the ideal bounce rate? Please take the time to educate them and let them understand what outcomes are they trying to drive ( Increase registrations, downloads, donations, buy products etc,)

Caveat: If your company is obsessed  about bounce rates, then you have a good inkling that the organization has never thought of the web as a viable channel and you have long road to educate people.

You can contact me @ kkanakas on twitter with your comments

How do you get respect for a Strategist without any real world experience? You don’t!

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People usually say that Strategists can only think of crazy ideas because they are not the actual “doers” of the work. If they were “doers” then they would not  be coming up with such crazy ideas.

I pride myself because I come a technical background myself. Even though I am a strategist myself and I don’t condone strategists that do not have real world experience  and coming up with ideas. Actually I have really little respect for such people, because they are mostly people that do not like to upset the apple cart. Since Strategy can be so nebulous, it can be made to appease anyone’s thinking especially if people end up designing a strategy based on the HiPPO rule.
          I prefer working with people that have been through the trenches and can empathies with situation of others. Strategist who have history of being the “doers” and getting s*it done are usually the ones that come out on top, everyone else just rides their coat tails.
What you think ?
You can contact me @ kkanakas on twitter with your comments

3 things that need to be considered when Job Mapping with Jobs to be done

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My first blog after a long summer break, I hope all of you had a safe and sound summer as well.  I did catch up on a lot well-deserved reading but somehow my reading list from amazon has not gotten shorter. I bet you if Amazon did a customer lifetime value analysis on me, I think Amazon has probably made quite a pretty penny off of me just on books.
When I wrote the “Jobs to be done” write up on my blog, I did get a few feedback from folks who read it.  Some of them mentioned that the “Jobs to be done” notion sounds great but it is mostly theoretical (Cleary some folks have not read Clay Christensen’s Innovator’s solution), because when have to jobs you want get done in real life there are constraints. To which I thought a little bit and realized, and a little inspiration from the book The Fortune at the Bottom of the Pyramid by C.K. Prahalad, that innovation is not limited by constraints but actually happens because of it. With realization I went through the process of retracing my steps on activities which forced me to improvise or bootstrap projects in the past, the reason I had to improvise were because constraints along with a few other things such as effort and risk. Considering these limits in mind I did proceed to execute with a series of actions.  I know this sounds trivial because this behavior is so ingrained in us that most of us don’t think twice.  So this blog is dedicated to those 3 things that me realize I had not done justice to my earlier blog on “Jobs to be done”.

Constraints

For innovation to happen constraints can come in various forms. These constraints could be the usual suspects like finance/budget, resources, business model at a micro level or these constraints can be imposed at a macro level such as Political, Environmental, Social, or Technological. There is a reason why such decision-making tools exist whether it is the SWOT analysis framework or the PEST analysis framework. These tools allow us to look at the constraint in an objective way and figure out the right course of action.  I mean think about if these constraints were not put in place how would we have gotten some of the greatest innovations of our time. These constraints become even more relevant as our economy moves on from a post-industrialized society to knowledge driven society. Just think about the Reinvent the toilet challenge held by the gates foundation with a very simple constraint “it should be useable by 2.5 billion people that do not have access simple, hygienic, and sustainable toilets”.

Effort

Beyond the constraint this is usually the top most thing in our mind. I know it because every time I have been given a project my initial request is always more resources and the answer usually is work with what you have.  Because of this limitation, I am forced to improvise and work around ways to get my job done. My usual formula is the get the maximum efficiency with the most minimum amount of effort but it does force me to think in ways that I would not thought in an environment that is more comfortable. That is the other thing comfortable surrounding means bad news to me it means you are going to go stale pretty quickly  (that is topic for a blog later)

Risk

This is the other big one. With everything you do there is an element of risk. The only question you have to ask yourself is what is the threshold you and are team can withstand.  I know there are plenty of books and magazines that romanticize the notion of risk taking, which sound a hell of lot cooler than saying that before a so called rock star CEO was about embark on a risky proposition he/she was sweating bullets. Which is why I am a big fan of things like continuous integration, delivery, A/B testing, and data driven analysis. All these paradigms help reducing the cone of uncertainity that we know as risk. But with all these tools that we have to help us make better decision a few complimentary tools help us in making the right decisions and they are “Observing people and what they do, and sometimes just plain listening”.  Both these non-technical elements that give you ample insight on what you need to do next to innovate (Yes, engaging LinkedIn groups can be a proxy provided that you actually engage in dialog in those groups)
I would like to add a fourth element to this as well (Yes, I know I said 3 things in the blog title, but you folks have not heard from me throughout the summer, so I feel compelled to share with you a little bit more).

Metric

What is the measure of success that people use for the job they want to get done? This dawned on me the other day that in the West, we don’t think about price when we know that a product has a high level of performance and reliability. But if you think about products in the emerging markets, performance is the least of the concerns, their threshold is so low that they want to be able to do basic things at reasonable price.  In both these cases you can observe that the metric of success for one constituent is performance whereas for the other constituent it is the price.  You can take a performance product and place it a price sensitive market but at best you will skim the market but if you listen to price person you might design a product that could not only work in the emerging markets but also in the rest of world there by creating a new market (this is part is a bonus).  The intent of this section to make sure success metric is not forgotten. Too often we get carried away by other things but really do not pay attention to actual metric that will define success for the target constituent. This is something we need to pay attention do and it might just be a statement like “Minimize the time to reinitialize after an emergency to eject thrusters”
Just take a look at what GEis doing on this whole notion of reverse innovation, it really shows that they looking into all 4 things, when it comes to the jobs to be done framework and it’s implementation.
As always I look forward to a very enriching discussion. You can contact me @ kkanakas on twitter with your comments