Marketing 4.0: Moving from Traditional to Digital (Part 2)

Marketing 4.0: Moving from Traditional to Digital

Concept Synthesis and Local Application:

I am currently the Director for Finance and Accounting Operations at AIG Shared Services Philippines (ROHQ). I used to be an OFW in Libya for 3 years as a Chief Accountant for two large construction firms. Because of the civil war, I was repatriated back to the Philippines and joined AIG back in 2011. It has been 6 years now and my career with AIG and the role has expanded from being a Manager to now a Director for my organization composed of over 200+ people with 15 Managers managing a combination of Gen X, Y and mostly millennial generations of F&A staff. I can consider my digital journey as something experiential and felt like taking the Digital marketing course will really compliment my strong finance and accounting background. With the hope of applying whatever I learned from taking this course.

Part 2: New Frameworks for Marketing in the Digital Economy

5 The New Customer Path

1.      Understanding How People Buy (from 4As to 5As)

Changes shaped by connectivity lead the way for a need to update our understanding on how people buy. From a simple straightforward and primarily personal path of the 4A’s (aware, attitude, act and act again) to 5A’s or (aware, appeal, ask, act and advocate). This gives the new customer path reflecting on the rise of the social influence which oftentimes seemingly personal decisions. Loyalty is redefined as not just retention and repurchase but the ability of satisfied customers to recommend the product to others. Also, in the connected world the brand’s initial appeal is heavily influenced (either negatively or positively) by how it is perceived or the bias during the conversation in customer forums of netizens. This applies to AIG business as well when customers buying behavior are significantly impacted by its connectivity to the digital world. Buying insurance policies before digital age seems to be personal decisions but has now become heavily influenced by the brand’s appeal during customer forum or discussions.

2.      Driving from Awareness to Advocacy (the Ozone3)

A customer’s decision across the five A’s (aware, appeal, ask, act and advocate) are usually influenced by a combination of (a) own, (b) others’, and (c) outer influence. Outer comes externally and influence primarily initiated by brands through advertising and other marketing communication, sales force or customer service staff. Outer influence is both manageable and controllable. Others’ influence comes from either external environment like close circle of friends and family as word of mouth. Others’ influence is difficult to manage and control the outcome of its influence although a community marketing can be done. One’s influence on the other hand comes from within oneself through past experience and interactions with several brands, personal judgment and evaluation of the brands, and ultimately individual preference toward chosen brand. In today’s world One’s influence is always swayed by both others’ and outer influences. In the insurance business this is also true. Although insurance customers have always relied on themselves in the past through their experience of the products they bought, still the opinion of others will significantly impact his buying decisions and most of the time also the criticism or any bad publicity a brand has will also impact his buying decision. For example prior the 2008 world financial crisis, AIG brands are not marketable at all since they are one of the biggest players in the CDS that led to the crisis. Nowadays and after AIG has repaid the debt to the US government, its policies and products begin to pick up its momentum in terms of sale as customers are now trusting the brand because of its reputation of being able to honor its debt obligations and repaid the US government with profits.

3.      Summary:  Aware, Appeal, Ask, Act and Advocate

In the digital economy, customer path should be redefined as the five A's—aware, appeal, ask, act, and advocate—which reflect the connectivity among customers. The concept of Marketing 4.0 ultimately aims to drive customers from awareness to advocacy. In doing so, marketers should leverage three main sources of influence—own, others', and outer influence. This is what we call the O Zone (O3), a useful tool that can help marketers optimize their marketing efforts. Connectivity seems to have changed the buying behavior or the customer path through both external and internal influences. Key to understanding the critical touch points and also determining what intervention a company or a brand can do to be able to adapt to these changes and influences. It needs also an understanding of whether the influences are manageable or controllable or whether it makes sense putting marketing efforts on it.

a.       How can your brand identify and leverage the most critical touchpoints in the customer path?

On aware stage, which serves as gateway and where customers are passively exposed to long list of brands from their past experience, marketing communications and/or advocacy of other, AIG-our company should optimize capturing the customer’s interest into the wide array of products and services if offers which is key to securing new business as well as repeat purchase of same or other products. On the appeal stage, where customers process the information or messages they are exposed to, AIG should make it a point at least to create short term memory of the good traits of the brand. On ask stage, as a window of opportunity, where customers out of the curiosity created in them will reach out to their resources – from friends, family, media, and/or directly from branch, AIG should ensure all channels are available to answer these queries which could potentially lead to purchase. On Act stage, where customers make a purchase, AIG should ensure that positive total customer experience will lead to a repeat purchase and regard the brand as a preferred one. On Advocate stage, where customers recommend the brand to others, AIG should ensure this segment of their customers is well taken care of as they act as free advertisers of the brand or the company.

 

b.      How can your business improve brand favorability and optimize marketing efforts by evaluating the three main sources of influence across the customer path?

The O3 is another tool that helps marketers to optimize their marketing efforts. When marketers manage to identify the importance of outer, others', and own influence, they will be able to decide which activities to focus on. When outer influence is more important than the rest, marketers can focus more on marketing communications activities. On the other hand, when others' influence is the most important, marketers should rely on community marketing activities. But when own influence is the most important, marketers should put more emphasis on building the post-purchase customer experience. In AIG where the influence is mostly on the outer and others’ sphere, it can focus on both the marketing communications and community marketing activities. It should also focus its effort on the post-purchase customer experience specially in processing of the actual claims. The positive experience created in this phase is key to improving its brand favorability over other competing brands in a highly competitive insurance industry.

6 Marketing Productivity Metrics (PAR Purchase Action Ratio and BAR Brand Advocacy Ratio)

1.      Introducing PAR and BAR

 In line with the five A's, two metrics are valuable to measure: purchase action ratio (PAR) and brand advocacy ratio (BAR). PAR measures how well companies “convert” brand awareness into brand purchase. BAR measures how good companies “convert” brand awareness into brand advocacy. Essentially, we are tracking the number of customers who go from aware (A1) to act (A4) and eventually to advocate (A5). PAR and BAR allow marketers to measure the productivity of their spending (mostly on advertising), particularly for generating brand awareness. PAR directly translates to Sales. BAR on the other hand, translates to sales growth.

 
 

2.      Decomposing PAR and BAR

In order to appreciate PAR and BAR, we should break it down into their elements. PAR maybe calculated by dividing market share by brand awareness. That means, roughly you can estimate the potential market share increase by increasing awareness of those brands. Low customer attraction means low conversion rate from aware to appeal. It means that customers who are made aware of the brand don’t find it appealing which may stem from poor positioning or poor marketing communications execution. Low customer curiosity means low conversion rate from appeal to ask. It means that customers don’t feel compelled to ask questions and research the brand further which may stem from company’s inability to trigger conversation and facilitate information sharing among customers. Low commitment means low conversion rate from ask to act. It means that customers or people are talking about the brand without necessarily making the commitment to buy and is usually caused by failure in the four P’s (Product, price, place and promotion). Low affinity means low conversion rate from act to advocate. It means that customers who have experienced the brand are not delighted enough to share and recommend the brand. This is usually a result of poor post-sales service or poor product performance.

When broken down into their elements, PAR and BAR scores reflect the process rather than just the outcome. Building customer loyalty is a long, spiral process of creating attraction, triggering curiosity, securing commitment, and finally building affinity.

A lower conversion rate in any given stage across the five A's reveals a bottleneck. Like a bottleneck in manufacturing, a bottleneck in the five A's reduces the productivity of the entire customer path. Identifying the bottleneck that limits PAR and BAR scores allows marketers to pinpoint the problem and fix it. Using this simple diagnostic process, marketers now know exactly what intervention to make across the customer path. Instead of trying to improve across the board, marketers may now focus their attention on what really matters. Altering the right bottleneck touchpoint often leads to higher PAR and BAR scores that are closer to 1. The objective to this entire exercise is to improve marketing productivity and avoid unnecessary waste in marketing spending.

Interventions to increase conversion summarized:

3.      Driving Up Productivity

Being the biggest benefit of connectivity in the customer path, customer conversation provides leverage and is essentially a low-cost way to build awareness without relying too much on advertising or without increasing the marketing budget significantly, and consequently increasing marketing productivity. In my company, advertising campaigns are being run in parallel to the customer conversation just to influence the direction of the conversation from outside in company’s favor. Driving up productivity means employing sets of strategies and tactics in order to address the underlying problems that keep customers from moving forward to the next stage in the customer path (5 A’s).

a.       How can your business adopt the new metrics of PAR and BAR to measure marketing productivity?

PAR and BAR are useful metrics to better evaluate how effective marketers are in driving customers from awareness to action and finally to advocacy. It measures the productivity of their marketing activities. But in order to drive productivity, we should be able to identify where the bottleneck is coming from. The bottleneck can either come from the following: (a) low customer attraction, (b) low customer curiosity, (c) Low commitment, and (d) low affinity. In order to address it, we should know what the underlying cause is and together we can employ the right strategy/tactics or the intervention needed to address the bottleneck. For AIG, being a known brand in the insurance industry, the most common bottleneck is in the low affinity. This way the business can intensify engagement with its loyalty program and customer care strategies or tactics in order to increase its PAR and BAR scores.

b.      How can your business trigger favorable customer conversations in order to drive awareness without increasing the marketing budget significantly?

In my company, advertising campaigns are being run in parallel to the customer conversation just to influence the direction of the conversation from outside in company’s favor. Driving up productivity means employing sets of strategies and tactics in order to address the underlying problems that keep customers from moving forward to the next stage in the customer path (5 A’s). Top-of-mind recall brand is always the goal in influencing customer conversations that the company triggers as a leverage tool.

7 Industry Archetypes and Best Practices (Channel, Brand, Sales and Service Management)

1.      4 Major industry Archetypes

The major industry archetypes can be summarized in below: AIG is in Funnel archetype.

2.      4 Marketing Best Practices

Marketing best practices differ in each of the industries: brand management, channel management, service management, and sales management. AIG’s best known for its strong service management.

3.      Summary: Learning from Different Industries

In analyzing the generic five A's framework and evaluating conversion rates across the different stages, we identify four major patterns for various industries: “door knob,” “goldfish,” “trumpet,” and “funnel.” Various industry types can be placed under any of these patterns, each with a specific customer-behavior model and a different set of challenges. We also identify four different industry groups based on BAR statistics, each representing a set of marketing best practices: brand management, channel management, service management, and sales management.

a.       Which archetype best describes your industry?

AIG Shared Service is in the fourth major pattern which is the traditional funnel. In a funnel category, most purchases are well planned and customers are highly involved in the purchase decisions. In fact, this is the only pattern in which customers go through each stage of the customer path on the road to purchase and advocacy. They ask questions about the brands they like and eventually purchase the brands if they like what they hear from the conversation. They advocate only if they have experienced the product themselves. The funnel pattern is found mostly in consumer durables as well as in service industries. In a funnel category, the overall customer experience really matters because customers do not skip any stage and may drop brands from their consideration sets anywhere across the customer path. The act is especially important for customers given that they would like to immerse themselves in the purchase and usage experience. Hence, unlike in a door knob category where positioning can be superficial, in a funnel category, positioning must be deeply rooted in the actual experience. It is important for brands in a funnel category to manage multiple touchpoints such as advertising (aware and appeal), website and call center (ask), sales channel (act), as well as post-purchase services (advocate).

b.      What are some of the key improvement opportunities for your business based on that archetype?

AIG Shared service being on a funnel pattern, should improve both their commitment and affinity levels. This illustrates the significant challenge faced by durables and services brands to balance between sales and after-sales service. One way is for the business to intensify engagement with its loyalty program and customer care strategies or tactics in order to increase its PAR and BAR scores.

c.       What is the key success factor in your industry? How can you learn from other industries?

A key success factor in the insurance industry is maintaining high commitment and affinity levels. In industries where BAR is low and the BAR range is high such as in the service industry, key success factor is service management—managing service processes and service people as well as physical evidence. Further, we can learn from the strengths of the other industries for example in FMCG or CPG industry which banks on their brand management – developing sound positioning and executing it through marketing communications. In the retail industry, channel management is key or developing Omni channel presence and driving customers to buy. In Industries where competition is tight and customers generally unwilling to recommend brands, success factor is sales-force management—managing productive sales people and driving the right sales activities.