Paul Otellini at Web 2.0 on the future of the web and its implications

Interesting talk by Intel's CEO - Paul Otellini on the future of the web. You can see some steps in this direction with some of the newer iPhone apps. What also impresses me is the level of attention paid to the future of the web and how it affects enterprises and people by a CEO of a large company. I think that level of high level engagement helps engage the entire company from the top down in figuring out what this could mean for the company in the future and how best to get ahead now.

My favorite videos

I hosted our Global Internet Marketing summit last week here in Dallas. It's basically a session where we get together as an organization and review where we are and talk about where we should be going. In the course of two days I played a few videos which fit in well with some of the themes of the discussion and have been my personal favorites for a while.

Here they are (in the order I think I played them at the Summit):

1) Thank You

2) Information R/evolution

3) Silly job interview

4) Debunking third-world myths w/ the best stats you have never seen

5) Sway

6) Argument clinic

7) Predicting the Next 5000 Days of the Web

8) Do schools kill creativity?

9) How to manage your staff?

10) Ideas that spread, win.

11) Habbits of happiness

12) Building a windmill

Incredible stuff. On another night, I will come back in and give you guys some context to the videos. But they pretty much stand on their own. Watch as often as you'd like - I have always gotten something new and different each time. :)

Pain Point: The Power of Customer Intelligence

An ex-colleague of mine who now works in Vegas told me this story a while ago. I loved it and I just read about it in a book called "Super Crunchers" so I know he wasn't pulling my leg. This story reinforces the power of Customer Intelligence for organizations.

So this particular casino (Harrah's) has found that customers exhibit the behavior as displayed in the chart on left. The likelihood of them returning is not affected by a lot, until they lose a certain amount of money (called the pain point) at which point the probability that they will return takes a dramatic fall. So what would you do if you were Harrah's in order to maximize revenue potential from each customer. Well, ideally you'd like to take the customer as close to his/her theoretical pain point and then have them stop so that the likelihood of their return stays high to ensure future revenue. It's a little like the goose that laid the golden eggs, you don't want to get them all at once, otherwise you don't get much in the future. But how do you drive this customer behavior? Why would a customer lose just the amount of money you want and then stop? How does the casino know what each person's pain point is? I can assure you mine is pretty low - unless I've had a few drinks ;)

You know those reward cards at casinos that people get and are swiping all over the place? Yup, you got it. They are providing real time data to the casino's Customer Intelligence systems. This allows the casino to know by the moment how much money each customer is winning or losing. This tells them where the customer is on the x-axis above. To calculate the other dimension, the casino relies on other demographic, psychographic and past visit data points. All these data points are plugged into a regression formula to calculate each customer's personal and individual pain point.

So for example, if a certain customer who likes to play blackjack is a certain age from a certain part of the country with certain past visit behavior, the regression analysis may predict a $1400 pain point. As this customer approaches his pain point in losses, the casino sends in a "rescue team". These guys pull you away, they get you a free steak meal, comp your room, give you tickets to a show and much more. Guess what? Not only did that customer just lose $1300, but the next morning he's feeling really good about his entire experience. Six months later, you can already hear him: "Man, Vegas was fun! We should go back again!"

Gotcha!! :)

What happens in Vegas, is driven by Customer Intelligence.

And there is no reason why this sort of analysis and revenue maximization should only happen in Vegas. What are the missed opportunities at your company? Think of the data you probably already have that could be used in driving the effectiveness of your sales and marketing programs? Give it some thought, I promise you there are lots of opportunities you have not discovered yet.

Reaction: Google B2B Executive Summit

So I am headed to Mountain View tomorrow for Reaction - a Google B2B Executive Summit. It is a 1-day event on thursday July 31st with a range of speakers in the morning and 6 breakout sessions in the afternoon from which you can chose to attend two. I don't have the invitation handy - but when I do I will outline what the agenda looks like. Following the conference my boss and I will be attending a Google Advisory Board which is a much smaller set of key executives from 4-5 companies interacting w/ key Google management. This one will be particularly interesting to engage in. I am specially interested in hearing what other B2B marketers are thinking about and how they are approaching what are bound to be similar environments and challenges that we face.

Look for an update from the event or soon after.

Customer Retention versus New Customer Acquisition

Why is it that we as marketers get sucked into the sexiness of acquiring new customers at the absolute expense of retaining existing customers? This in spite of many studies that have quantified the value of customer retention. For example, the study by Fred Reichheld of Baine Consulting who showed that:

1) Companies can lose up to 50% of their customer base over 5 years.
2) Acquiring a new customer can be 6-7 times more expensive than retaining an existing one.
3) Companies that increased retention rates by as little as 5% saw improved profitability from 5% upto 95%.

Baine amongst others has also published studies that demonstrate the clear link between customer loyalty and improved profitability. Some of it is quite simple really, depending on your cost to acquire a customer and the average revenue transaction they perform - it may take a few purchases for you to break even.

For example, if the customer acquisition cost is $50 and the average revenue transaction is $10 - then it takes an average of 5 purchases before you break even on just the cost of acquiring that customer. So that customer does not drive your profitability until the 6th purchase. Hmm.

And w/ marketers maniacally focused on new customer acquisition, companies continue to lose many of those same customers before they contribute to the company's profitability. So why do we continue to behave in this manner?

Here are some of my hypotheses:

1) When managers focus on growing their business as most of them are most of the time they tend to make the simple (yet often inaccurate assumption) that growth will be driven by new customer acquisition. As such they often ask for regular dashboards on "How many new customers have we added in the last month? quarter? year?" The assumption is that once we have found them - we will keep them. Right. Wrong. But nevertheless this continued scrutiny from general managers and sales managers on new customers drives the behavior of the marketers in the direction of new customer acquisition.

2) There is something innately more sexy about finding a new customer. Marketers are like hunters or fishermen/women. They get an immense thrill in the hunt and a tremendous sense of victory when they rope one in! Wow - what a great feeling that is. It just feels incredible - after all it is the reason we exist . Right? To help our companies find new customers. Well, yes. But that's not all.

What do you think? Why do marketers fall into this trap? And what can they do to avoid that?

Brands I Love: Lexus

In the late 90's my wife and I leased a BMW 3-series convertible. We had it for three years, and our plan from the very beginning was to walk out of the lease and right into the purchase of a 5-series. However, in spite of how much we loved the car and the drive; our experience w/ the local dealership here in Dallas left a lot more to be desired.

Every time I took my car in for servicing, I remember walking away w/ at least a $1000 charge for something or the other. Getting the loaner car was a terrible experience. You had to walk into a shoddy little "Enterprise" office in one corner of the dealership and then fill out paperwork - all that so you drive off the lot in a Ford Escort.

There were several instances where we had some serious gaps in communication with the dealership. So much so that several times we would just succumb and pay just to move on with it.

At the end of the 3 years, my wife and I couldn't wait to get out of that relationship. And our intention of moving into a 5-series. Ha! Are you kidding? Not even once did we consider it.

What did we do instead?

We bought a Lexus GS300. Slightly used w/ about 21K miles on it. We bought it from a place we found on autotrader.com. At the advice of a few friends, I took the car to a Lexus dealership for an inspection. $92 later, we were told except for the fog lights everything else was in great condition. We closed the deal.

For the next three years, we took our Lexus to Park Place Lexus for our servicing needs. Our experience with Lexus was night and day when compared to our experience w/ BMW. You drive in, check in w/ your service rep, and a loaner Lexus (usually an RX300) was ready to go. All that was needed was a quick copy of my insurance and drivers license and off I went w/ a copy of today's Wall Street Journal and a mint.

Three years and never did I feel like I was paying for stuff that I didn't feel like I should be. Perhaps I was, but I still never felt it. And that perception was all that mattered for us.

In 2004 when we were expecting our first child, we upgraded into a Lexus GX470 lease for four years. And just a few months back returned that back and bought a Lexus GS350. We expect that we will probably be Lexus customers for life. We look forward to owning at least one Lexus at all times for a very long time to come.

I could be saying the same thing about BMW. But I am not. Even as we looked to buy our last vehicle, we narrowed the field down to two finalists: Lexus GS350 and a BMW 535i. And the new Classic BMW dealership seemed to have all the "niceties" that we have always admired about the Lexus service experience.

But the key question for us became the following: "Since we were planning on purchasing the car, which car would you like to be holding outside of its warranty?" The answer to us was a no-brainer: the Lexus. Ain't no way I want to be holding a BMW outside the warranty. I immediately start to think of the $1000s I spent on almost every trip to the BMW dealer. Would my experience be the same if I were to purchase a BMW now? Maybe not. But good luck to BMW in trying to convince me otherwise.

Besides we have grown to love Lexus in many many ways. We have fallen in love with the Lexus ride. All the amenities in the car. And the topper for us: the impeccable service.

How interesting that an element of the car manufacturer's brand would be service at a dealership? More and more car manufacturers have realized that now and you can see that in the continuous evolution of dealerships and service processes. You can have the best product, but if every three to five months you get a real bad experience somehow associated with that product ... well then.

On the other hand, with Lexus our experience was just perfect. And here we are in our 3rd consecutive Lexus. And there it is, another brand I love. The Lexus.

Wondering what all this has to do with Internet Marketing (IM)? Can you see what this may have to do with Marketing? If so, that's really what's important. IM in my opinion is built on the foundations of marketing principles. And if you are going to try to learn and practice solid IM principles, you are more likely to be successful if you build on a marketing foundation.

Dallas Historical Society Award for my father-in-law: Raj Seekri

The Dallas Historical Society has announced the recipients of the 2008 awards for Excellence in Community Service. Amongst the winners is my dear father-in-law: Raj Seekri. Here's a blurb from today's Dallas Morning News:

For Education-Teacher:

Raj Seekri. As a former teacher of mathematics at Eastfield College and as an adjunct professor at the University of Texas at Dallas, he now serves as a full-time professor of mathematics at Richland College, where he is held in highest regard by administrators, colleagues and students. As one of his many admiring students has written, "His ability to translate the difficult subject of mathematics is surpassed only by his deep and devoted love for his students."

Congratulations to Daddy. A well-deserved honor.

Here's to many more teachers who inspire us to strive for more and more.

Recommendations on LinkedIn

My hypothesis is that people with very full descriptions and lots of recommendations on LinkedIn are suspect.

Why do I say that?

Well, let's just say that I have seen many a LinkedIn profiles of people whom I have known very well. People who have worked with me. Worked for me. And there are these flowing recommendations which I read and can only stop myself from falling over! What the heck?? Is this the same person I worked with? Are you kidding me? Come on.

And the worst thing is that I see some recommendations from people who I KNOW think otherwise. Beyond belief!!

My hypothesis is that when people get an email from others asking for a recommendation (repeatedly) they can only but say good things. Most people struggle to give their honest feedback especially in a public setting.

So in my experience, I usually ignore the LinkedIn recommendations.

Nor do I ever ask for them.

The way I see it. If somebody wants to recommend me for something, it means a lot more if it comes on its own, unasked. And if not, well then there's a new feature for LinkedIn.

The Non-Recommendation. Give the rest of us a chance to set the record straight. :)

Brands I Love: Whole Foods

A few days ago, someone twittered the following question: "What brands do you love and why? How far would you go to show your love for those brands: t-shirts, tattoos?" So that got me thinking: what brands do I love.

I love Whole Foods. I love everything about Whole Foods, The food, the smells, the diversity of products, the people, the samples, the beer selection, and much more. I am there almost every saturday morning - usually picking up the same things again and again. I love the hustle and bustle in the store. It feels very Austin to me. And that's great 'coz I love and miss Austin!

I love the paper bags that stay standing in my car trunk on the way home (as compared to my trip to Kroger which usually results in all the groceries all over my trunk on the ride home - in order to prevent that I usually have to spend an additional 5 minutes and tie every plastic bag at the top). 

I also love this drinking water (on right) at Whole Foods. It is easy to pick up and I can hold up to four of these bottles at the same time. Many drinking water bottles don't have an easy pick up mechanism and that means multiple trips from the garage to the refrigerator in the kitchen. But with these bottles in two easy trips I can take eight bottles into the house. No problemo!

A wide variety of fresh organic food. An attempt to purchase food from local farms. Clear labeling of fruits and vegetables so you know where your food comes from.

Did I mention all those samples? I love those. I know it's a trap to get me to buy more. And it works for me. Almost every weekend, I come home w/ some new cheese that was being sampled, a bottle of wine or a 6-pack of beer to go with it. Now if they had some beer sampling - we'd be all set. :)

A trip to a grocery store is usually considered by most (husbands) as a chore. But every saturday morning, as I leave Whole Foods - I feel good. I feel good about myself. I feel as if in some small way, I have done something good. Whether it's true or not is another story, but Whole Foods successfully manages to create that perception. I feel as if I am getting healthier food. I am buying from local producers thus removing the cost of distribution from the environment. I am contributing to the Whole Foods foundations that are helping small and independent producers of food around the world. All of that while my groceries don't get scattered all over my trunk, and I can take the bottled water from the car into the house in two quick short easy trips. I'd say that's a win-win.

Those are a few reasons I love Whole Foods.