Based on the use case which a company serves, there’s a natural limit to the number of interactions which it can have with the vast majority of its users or customers. For example, most people will check their social media profile once to a few times a day, go grocery shopping once or twice a week, and buy clothes somewhere between once a month and once a year.
These use case-specific natural limits should inform the frequency with which the companies serving these use cases attempt to attract users or customers to their service through private mediums like notifications and messages (I’m excluding email from this analysis because email lists have abused the medium to such an extent that email is fast approaching a public communication channel). While one attempt a day is reasonable for a social media site, it’s too frequent for the vast majority of grocery and clothing sites.
Despite these use-case specific natural interaction limits, many companies attempt to engage their users or customers far more frequently than suggested by their use case. Unless you’re part of the 1% of customers who shop for clothing each day, this is irritating. Such companies lose more from the 99% they irritate than the 1% which accept their attempted engagement frequency.
The ideal solution is to segment your users or customers to deliver relevant messages tailored to their personal usage or purchase frequency. If you can’t do that, it’s best to respect the natural limit to the number of interactions inherent in the use case you’re serving.
Companies that fail to do this likely incentivize their marketing team based on short-term usage or purchase metrics without taking into account the long-term user or customer churn that these actions cause. So this is the problem that needs to be addressed.
Insider, a predictive segmentation and real-time marketing tool for companies where we’re investors, yesterday launched its new marketing technology platform InOne.
In the words of Insider’s CEO Hande Cilingir, “InOne brings together all the technologies marketers need to deliver personalized experiences under a single, highly usable platform.”
And in the words of Insider’s CTO Sinan Toktay, “InOne powers personalized experiences with new and enhanced predictive modeling and segmentation technologies. Segments are only as good as the data behind them. Allowing marketers to act on ready-to-use segments based on the future behaviors of their visitors, we have transformed the way they deliver personalized experiences.”
In addition to bringing Insider’s predictive modeling and segmentation technologies under a single platform, InOne also introduces the Ad Audiences module to bridge the gap between marketing tech and ad tech. Specifically, Ad Audiences lets marketers optimize their advertising spend by pushing their highest value predictive segments into third party ad platforms like Facebook and Google AdWords.
A common and effective way to acquire new customers is to offer them a discount on their first purchase. However, when doing so, it’s important to verify the identity of incoming customers who claim that they’re new to ensure that they actually are.
This is why using email addresses to verify new customer identities is suboptimal. Old customers who want to take advantage of the new customer discount can simply create new email addresses and sign up as new customers. There’s no cost to creating a new email address.
If your gross margin on each sale is large enough to cover the cost of the discount, this may not be a problem. But most discounts designed to attract new customers require repeat purchase behavior for the customer who uses the discount to become profitable over time.
A better approach to prevent abuse is to verify new customer identities using mobile phone numbers. Getting a new mobile phone number costs more than the value of the discount offered by companies in most product categories. As a result, old customers don’t have sufficient incentive to get a new mobile phone number to take advantage of the discount.
If your company operates in a product category where the value of the discount you’re willing to offer to acquire a new customer is larger than the cost of getting a new mobile phone number, you might want to use other ways to verify new customer identities. For example, you might want to verify them using a home address.
This will be much more costly for you and will likely detract genuine new customers who don’t want to jump over the hurdles necessary to prove their home address. But you’ll be pretty sure that your claimed new customer isn’t just an old customer who bought a new home to take advantage of your discount.
Hande Cilingir, co-founder and CEO of Insider, a multi-channel online marketing technology provider where we’re investors, recently gave a talk at the Webrazzi Summit.
In her talk, Hande talks about Insider’s predictive modeling tool, shares how Insider uses this tool to segment and target its clients’ most valuable customers, and hosts LC Waikiki’s e-commerce director Salih Yilmaz to provide an overview of LC Waikiki’s experiences working with Insider.
Our portfolio company Modanisa is the world’s leading online fashion retailer for conservative Muslim women. Modanisa is fast expanding its international sales and it does so by actively using new online marketing tools that help it cost-effectively acquire new customers in its target geographies.
A great example of this is Modanisa’s use of Facebook’s Lookalike Audiences advertising product. Rather than simply serve Facebook ads based on target keywords, Lookalike Audiences lets you serve ads to Facebook users who display similar characteristics (such as location, age, gender, and interests) to the audience of your choice. For example, you can serve ads to Facebook users who are similar to your existing customers or similar to Facebook users who liked your company page.
It turns out that this is much more effective than keyword-based targeting. During an 11-day campaign in March when Modanisa used Facebook’s Lookalike Audiences product for its advertising to Facebook users in Germany, the company achieved a 4X higher return on ad investment than previous keyword-based campaigns in the country.
Insider‘s co-founder Hande Cilingir recently gave a talk about web and mobile real-time personalization at the ArabNet conference in Beirut.
In her talk, Hande defines real-time personalization, shares global and regional e-commerce statistics to show why it matters, and gives examples of how Insider’s customers use the company’s software to deliver personalized user experiences.
Our portfolio company Meal Box operates primarily as an online restaurant. Customers submit orders online and their food is delivered ready-to-eat to their home or office. This online-first approach lets Meal Box largely avoid the costs of operating offline locations. These costs include rent and restaurant staff.
However, as part of its growth strategy, Meal Box recently started launching select offline locations. These come in two forms.
The first is what we call Meal Box Express locations. These are small locations with limited seating and staffing (similar to the offline locations of some pizza delivery chains like Domino’s). They serve as a customer acquisition channel for Meal Box which then directs these customers to its higher margin online channels. The economics are such that the branding and cheap customer acquisition channel made possible by the Meal Box Express locations justifies the locations’ rent and staffing costs. While this is not the case in all countries, both of these costs are relatively low in Turkey. Meal Box currently has 3 Express locations (one tenth of its total 30 locations) and plans to roll out more in the future.
Meal Box’s second offline format is a flagship restaurant in the Astoria shopping mall. This is a medium-sized sit-down restaurant within walking distance from several office buildings in Istanbul. The flagship restaurant not only serves as a customer acquisition channel to drive online sales, but also a location for people working at nearby offices to repeatedly visit to get healthy and fast home-made Turkish food. This is a rare combination that isn’t offered by the other restaurants in the area. Meal Box doesn’t plan on opening more than a handful of flagship restaurants in the future, but they make sense on an opportunistic basis.
Online businesses have higher margins than offline ones. However, you need to acquire customers to be able to enjoy these margins and offline formats are a great way to do this. This is especially true in a space like food where customers need to trust you before putting the food you make into their bodies. Meal Box’s offline locations help build this trust.
I was recently speaking with the founder of one of our startups about the right approach to marketing for his business. The startup recently parted ways with their chief marketing officer (CMO) and our founder stated that he didn’t believe that early stage startups should have a marketing department. Instead, he stated that all departments should be thinking about how they can better serve customers in order to grow demand for the startup’s product.
I agree that all departments should work with the ultimate customer in mind. For example, the IT team should build its infrastructure to minimize server down time and page load speeds as the company scales, the operations team should deliver products in the right condition to customers on time, and the product team should build referral loops into the product to facilitate new customer acquisition. However, this doesn’t mean that there shouldn’t be a specific team responsible for creating demand at an early stage startup.
After digging deeper into why our founder concluded that a marketing department isn’t necessary for early stage startups, we discovered that the underlying reason wasn’t because the startup didn’t need such a department but because of how the department mistakenly thought about its role. Specifically, the marketing department had thought that its responsibility was to allocate a fixed marketing budget across different channels. By taking a predetermined budget that it had to spend each month, it didn’t distinguish between the relative customer value generated and customer acquisition costs of different channels. It simply spent on the most common channels which come to mind when you think of an internet startup’s marketing (search engines, social media, affiliate networks, …).
A startup’s marketing department’s role isn’t to allocate a fixed budget. Instead, its role is to drive as much customer value as possible per dollar of marketing spending. This resourceful approach enables the discovery of creative strategies to gain new customers while avoiding those traditional channel segmentations that don’t make sense for the startup’s specific context. It’s not about properly allocating a fixed number of dollars but about creating as much leverage as possible with every marketing dollar you spend. If spending doesn’t make sense, it doesn’t matter if it’s budgeted. You don’t do it.
Placing the relevant team in charge of growth or demand creation rather than marketing may help the team’s members internalize their responsibility to drive customer value at the lowest possible number of dollars, and hence the highest leverage. But whatever you decide to call the team, getting the right customers through the door at the right cost is a very important role for early stage startups. It deserves its own team.