Kevin Hillstrom at Vircomm14 - 'Mine that data - A cold hard dose of reality'

Kevin Hillstrom, President, MineThatData http://blog.minethatdata.com [email protected]

1

A Cold, Hard Dose Of RealityWith an Uplifting Conclusion That Proves Your Value!

Kevin HillstromPresident, MineThatData

2Kevin Hillstrom, President, MineThatData

http://blog.minethatdata.com [email protected]

A Frustrated Executive

“Yes, we have a Community Building team. They’re off in ‘fun-land’ engaging with customers, participating in conversations.

Meanwhile, I’m just trying to keep from getting fired. I have to figure out how to save the business so that the Community team can get paid to have ‘fun-time’ with customers.”



Dell Has An Unequaled Community, Right?



Fun-Time At Dell

Dell Facebook Likes, Early 2013 = 4.7 Million.

Dell Facebook Likes, Winter 2013 = 6.4 Million.

Dell’s 2nd Quarter Computing Division Sales = -5% to 2012.

How might the Community team at Dell defend the work they do? Sales = Down.



Pepsi Reduces Their Super Bowl Investment



12 Months Later - $350,000,000 Lost Revenue

http://adcontrarian.blogspot.com/2011/03/social-medias-massive-failure.html

When tested in practice, a shift from top-down interruption-based marketing to bottoms-up social media community management resulted in $350 million in lost sales … and, Pepsi fell to 3rd place, losing ground to Diet Coke. Sales fell 8 times faster after the shift in strategy than before the social media strategy was initiated.



Communities In E-Commerce

Black Friday sales dropped for the first time in seven years. I guess Communities didn’t generate enough value to cause sales to happen, right?



Communities Allegedly Generate Value

If 4.7% of our customers generate 100% of our word of mouth, then are 95% of our efforts nearly pointless? Are the 4.7% biased in any way?

http://www.mackcollier.com/customers-social-online-word-of-mouth/



Communities Increase Spending By 20-30%?

If engaged, connected community members spend 20-30% more, then wouldn’t our businesses be growing so fast, across the board, that our results would be amazing?!

http://www.mackcollier.com/customers-social-online-word-of-mouth/



You Can Argue That All Of Social = $0

US GDP growth the past four years is about equal to historical averages, during the “age of communities / social”http://www.multpl.com/us-gdp-inflation-adjusted/table



Fashion Communities Don’t Buy Anything?



Why Focus on Community if $ Isn’t There?



#OhBoy



Bad News – Engagement To Sales Ratio = Low

http://simplymeasured.com/blog/2013/08/15/how-to-tell-if-your-twitter-campaign-actually-worked/?utm_source=twt&utm_medium=soc&utm_campaign=blg





Communities – Beyonce

Oh look, Communities works – just ask Beyonce!!



Communities – Beyonce

Did Communities using Social Media cause the success, or did past history, name recognition, and a “surprise” cause success that spread via word of mouth?



Communities – Lady GaGa

With a community of fanatics, Lady GaGa should be able to sell tens of millions of CDs when a new CD is released … right?!




The album is performing so bad that prices are heavily discounted – sales dropped 81% after the first week – a catastrophe.




“ARTPOP will be written about one day as a huge marketing failure, unique in every way.” “… where are all of her fans, her ‘little monsters’? They certainly didn’t like what they heard.”

“She directed the entire campaign, went against the advice of others, and wound up losing a ton of money ($25 million seems severe, but lots) for herself and for Universal Music.”

“… ARTPOP has sold just 300,000 copies in two weeks, down 75% from her 2011 album. And sales dropped 81% the following week.”

http://www.showbiz411.com/2013/11/26/lady-gaga-artpop-poops-out-second-week-drop-of-81

Clearly, her community had nothing to do with this drop, right? I mean, she had a huge, engaged community, right? If true, then her community, her fans, had nothing to do with prior successes, right?





Communities – Who Needs Fans?

Burger King Norway gave a free Big Mac to customers to get the customers to not like them on their new page – and most accepted the offer! What’s up with that?

http://www.fastcocreate.com/3023025/should-you-be-ditching-a-ton-of-your-facebook-fans-heres-why-burger-king-did-just-that





And So What If “Brands” Don’t Participate?

In the 4th quarter of 2013, Amazon only sent four (4) @ replies on Twitter.

Four!

Sales during the 4th quarter increased 20%.

More proof that engagement is irrelevant, and you don’t need a community to succeed.http://simplymeasured.com/blog/2014/01/24/the-10-most-engaging-brands-on-twitter/?utm_source=lin&utm_medium=soc&utm_campaign=blg



If You Participate, Do Your Sales Decline?

Nokia is lauded as one of the top ten most engaging “brands” of Q4-2013 on Twitter.

And yet, Nokia’s sales are about half of what they were in 2007.

Does this mean that engagement / community causes businesses to sink into oblivion?

http://simplymeasured.com/blog/2014/01/24/the-10-most-engaging-brands-on-twitter/?utm_source=lin&utm_medium=soc&utm_campaign=blg



Community Experts Contradict Themselves

4 – Your desire to sell will have to take a backseat. This is the most important lesson to creating valuable content for customers, and the most difficult for most brands to grasp. The great thing about social media is that it makes things happen indirectly. What this means is that you have to stop thinking of social media and online content as a way to directly drive sales. Instead, view these tools as a way to directly create value for customers, with the understanding that doing so will indirectly lead to sales.

Mack Collier - http://www.mackcollier.com/brands-guide-to-creating-content-that-earns-attention/

http://www.mackcollier.com/brands-guide-to-creating-content-that-earns-attention/

http://www.mackcollier.com/brands-guide-to-creating-content-that-earns-attention/



Describe The Sales Potential Of This Strategy

Describe to your CEO, right now, how a game of Tic Tac Toe between KitKat and Oreo generates an increase in annual profit for either company?

http://www.slideshare.net/bengrossman/10-social-best-practices-from-the-best-social-brands-of-2013




Describe The Sales Potential Of This Strategy

We give any customer named “April” a free flight on April 1. How do we respond to community enthusiasts named “June”? Or what happens if your name is “Roger”?http://www.slideshare.net/bengrossman/10-social-best-practices-from-the-best-social-brands-of-2013




How Should Your CEO Respond To This?

“Community First, Then Business”. Why does the Community expert get to ignore business while everybody else must focus on business first?http://www.slideshare.net/bengrossman/10-social-best-practices-from-the-best-social-brands-of-2013




Communities: They’re Not About Selling?

“When it comes to social media, no one is looking to be sold to. People are on social networks to be entertained … don’t harass people with sales pitches.” Amy Hall http://socialmediatoday.com/amynhall/1917321/3-rules-engagement-successful-social-selling

“You have to woo potential clients by being enchanting and engaging.” Trish Forant http://www.salesforcemarketingcloud.com/blog/2011/10/social-media-engagement-is-the-key-to-social-selling/

“Social Media is not strictly about sales … in fact, attempting to sell something over social media is guaranteed to backfire.” Joe McKendrick http://www.skyword.com/blog/the-impact-of-content-marketing-for-engagement-on-social-media/

http://socialmediatoday.com/amynhall/1917321/3-rules-engagement-successful-social-selling

http://www.salesforcemarketingcloud.com/blog/2011/10/social-media-engagement-is-the-key-to-social-selling/

http://www.salesforcemarketingcloud.com/blog/2011/10/social-media-engagement-is-the-key-to-social-selling/

http://www.skyword.com/blog/the-impact-of-content-marketing-for-engagement-on-social-media/



A Disconnect

What is the most important metric when building a community? Engagement!

What is the most important metric in business? Sales and Profit.

Notice the disconnect?

Maybe if communities are designed to “not sell”, then the result is to “sell nothing”????????



Kevin is just a big, dumb “HiPPo” (Highest Paid Person’s Opinion). He

simply doesn’t ‘get’ how you can “harness the

power” of Communities.



Maybe Community Experts Don’t Understand How

Business Works?



Business Success = Sell Products / Services, Pay All Expenses, And Have A Lot Of Cash Left Over At The

End Of The Year.



Community Success = Engage With Customers,

Build Relationships, Solve Problems.

#OhBoy



New Definition Of Community Success =

Engage With Customers, And Build Relationships

That Lead To Quantifiable Sales And Profit Gains.



Why Must I Prove Engagement = Sales / Profit?

Your Executive Team, regardless of your opinion of them, is compensated and rewarded for both short-term sales/profit, and long-term sales/profit.

Typical Executive:• ₤150,000 per year base salary.• ₤100,000 per year bonus, based on sales / profit

improvement.• Stock Options or Equity that pay when future business

success comes to fruition.

The bonus, by the way, is the biggest motivator for an Executive.




How does an Executive earn a bonus?

Typical Bonus Structure:• 50% of bonus is paid if annual sales goals are exceeded.• 30% of bonus is paid if annual profit goals are exceeded.• 20% of bonus is paid if personal goals are exceeded.

Do you see the words “engagement”, “community”, “customer satisfaction”, or “social” in any of the three aspects of an Executive Bonus payout?




Executive Motivation:1. Greatly Increase Annual Sales.2. Greatly Increase Annual Profit.3. Perform Exceedingly Well On Personal Goals.

If we want Social / Communities to resonate with the “C-Suite”, then everything we communicate has to align with Sales, with Profit, and with Personal Goals.

Otherwise, why would the Executive listen to us?




If you want to have success … stop speaking the language of the Social / Community elite … and start speaking the language of the Executive!



The Language of the Executive

If Social / Communities are all about Engaging Customers, then you must Engage with your Executive Team. You must demonstrate you are helping them achieve their goals.



You Connect Customers To The Company!

You connect customers to your

products / services – yielding $ for the

Executive.



You Matter!

You Are Important!



Community Value Varies

I generate 70% of my annual revenue from my community.

Businesses between ₤1 and ₤10,000,000 in annual revenue, catering to a younger customer, will frequently generate 25% to 50% of annual revenue from their community.

Then, the relationship changes.



Community Value Varies

Once a business is +/- ₤50,000,000 … a different set of dynamics occur … the community begins to lose power as a sales driver.

Once a business is +/- ₤500,000,000, communities generally yield +/- 1% of annual volume. However, 1% of a very big number is still a big number!!



Know Your Customer / User

If this is your customer … age 60 … do not expect great results from your community building programs.

S/he is likely to respond to old-school tactics.




If your customer / user is +/- 45 years old, you’re entering prime “community” territory.

Here, communities can be a viable marketing strategy.




If your customer / user is +/- 30 years old, it may be that community / social is your marketing strategy!



Know That Your CEO May Be From A Different Generation Than Your Customer



Customers Have Value

Find somebody who analyzes customer behavior. Ask this person three simple questions.

1. What is the probability of a customer who purchased in 2012 buying again in 2013?

2. If the customer buys, how much does (s)he spend in 2013?

3. What % of sales flow-through to profit?




Example:

Customers who bought in 2012 have a 40% chance of buying again in 2013.

If the customer purchases, the customer spends ₤200 per year.

35% of sales flow-through to profit.




Simple Customer Value:

40% repurchase rate times ₤200 per customer = ₤80.

35% flows-through to profit … 0.35 * ₤80 = ₤28.




We now know two important facts.

First, each customer that your community impacts is worth up to ₤80 per year.

Second, each customer that your community impacts is worth up to ₤28 profit per year.

These are metrics your Executive Team understands.




Say your community is able to diffuse 5,000 situations where customers are angry with your brand.

5,000 * ₤80 = ₤400,000 net sales / sales turnover. In addition, 5,000 * ₤28 = ₤140,000 profit.

Executives love this stuff! And you paid for your own salary!



Incremental Value Matters, A Lot

Say your community improves the purchase experience for a customer.

It is common to find that community marketing activities can improve customer spend by +/- 10% per year. If that is the case, then we can quantify the impact of community management on the business.



Incremental Value Matters, A Lot

Say you have 30,000 customers in your community. Assume you increase the value of these customers by 10%.

₤80 * 0.10 * 30,000 = ₤240,000.₤28 * 0.10 * 30,000 = ₤84,000.

Again, you more than paid for your annual salary, and you helped the Exec reach her goals!



New Customers = Double Value!!

If your community recruits new customers, you get to “double-dip” – that’s a good thing!

You get the value of the initial transaction.

You get the value of the customer over the next twelve months!




Say your community adds 1,000 customers per year.

1st Transaction = ₤100 * 1,000 = ₤100,000 net sales / sales turnover.

1st Transaction = ₤35,000 profit.




In addition to the ₤100,000 sales & ₤35,000 profit, we earn the downstream benefit of our efforts:

1,000 new buyers @ ₤80 each = ₤80,000 sales.

1,000 new buyers @ ₤28 each = ₤28,000 profit.



Add It All Up!

In my example, there’s a lot of benefit to a community – benefit that helps Executives meet their goals.

In my example:• ₤850,000 net sales / sales turnover.• ₤267,000 profit.

Oh!



Then There‘s Product Information

Say your community recommends a new product or service.

Say your company launches the product / service, and generates ₤150,000 from that product.

You (and your community) is the cause of that revenue. Take credit for it! You did this!



Where Possible – Compare Equal Customers

₤250 - ₤500 Buyers In 2012.• Non-Community Buyers Spent ₤80 in 2013.• Community Buyers Spent ₤88 in 2013.• Incremental Gain is 10%.

Do not pick “community buyers” and say they are worth ₤88 (hint – Pinterest). Do not compare “community buyers” to other, lower-value customers. Equalize your customers!



It’s Not Your Fault When A Business Is Dying

Many community-centric businesses are not experiencing growth.

This is not the fault of the community manager! If anything, the community manager is slowing the rate of decline.

Your efforts may stave off the slow death of your business, or help reverse the trend.



Know Your Metrics

What is the probability of an average customer buying something in the next year?

If the customer buys something, how much will the customer spend?

Multiply these two metrics together – then multiply by your profit factor.



Know Your Metrics – Then Fight Back!!

Once you know that you are generated three, four, or five times your annual salary in profit, you can make a case for getting more resources, more help!

You matter.

Your work is important!



You!



The Executive



What You Create For Your Company!



You Matter!

You Are Important!



Questions?

Kevin HillstromPresident, MineThatData

[email protected]

http://blog.minethatdata.com

mailto:[email protected]



Community Workshop: Coffehouse Chain Mocha Madness

Mocha Madness was created in 2009 as a London-based competitor to Starbucks.

With thirty stores, Mocha Madness is one of the fastest growing coffee-centric businesses in the UK.

Predictably, the brand differentiates itself from Starbucks with Chocolate!




Mocha Madness is looking to differentiate itself from Starbucks. The product (chocolate-centric) might be sufficiently differentiated, but many perceive Mocha Madness as a Starbucks clone.

The Owner and CEO have different views of how the “brand” can relate to customers.




The owner (female age = 39) feels that Mocha Madness should be a warm brand that embraces community.

The CEO (male age = 62), an old-school retail operator, thinks that product is the answer – that customers just want coffee at a fair price, and wants to get in-and-out of the store quickly.



Starbucks Community (Liked by Owner)



Best Buy Community (Liked by CEO)




Things to know:

1 – CEO and Owner do not see eye-to-eye. The CEO is results based, likes everything proven. Owner is brand-focused, thinks everything will take care of itself if done well, over time.




Things to know:

2 – The CEO receives a bonus equal to 100% of his salary if annual sales increase by ₤5,000,000 and if annual profit increases by ₤1,000,000 this year.




Things to know:

3 – The average customer is 37 years old, 75% female.

4 – The average customer buys in-store 3 times a week, spending ₤5 per visit. The company generates ₤1 profit from each visit.




Things to know:

5 – The average store has 1,500 customers who purchase at least one time per year.

6 – At 30 stores, and 1,500 customers per store, annual revenue = ₤34,000,000.




Your job:

1 – Knowing how the CEO and Owner disagree, what would a community-centric program look like at Mocha Madness?

2 – How would you inform customers of the new community-centric program?




Your job:

3 – How would you build the size of the community over time?

4 – How would you reward the community for their ideas?




Your job:

5 – How would you measure the success of the community? How would you tie your measurement plan to the sales / profit bonus structure given to the CEO by the Owner?




Your job:

6 – How will you convince the CEO that branding is as important as immediate ROI?

7 – How will your efforts generate enough ROI to pay your salary.




Your job:

8 – Provide one or two examples of community programs that you hope to emulate. What do those programs do well?




Divide into three teams.

You have 45 minutes to complete your proposal.

You will present your results to me – I am the CEO of Mocha Madness.




Go – And Have Fun!

Kevin Hillstrom at Vircomm14 - 'Mine that data - A cold hard dose of reality'

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Transcript of Kevin Hillstrom at Vircomm14 - 'Mine that data - A cold hard dose of reality'