Archive for March 2009

Engage different consumers in different ways – why segmentation is key

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Red 2 × 4 LEGO brick from the LDraw parts libr...Image via Wikipedia

One of the first speakers at the Marketing 2.0 conference in Paris was Conny Kalcher from LEGO, and if anything her presentation was an example of how good segmentation and really understanding your different consumer persona types can make a real difference to a successful social media strategy.

At LEGO, the core target is a young boy, and they group their customers into six groups

  1. Lead Users - people LEGO actively engage with on product design
  2. 1:1 Community - people whose names and addresses they know
  3. Connected Community - people who have bought LEGO and also been to either a LEGO shop or LEGO park
  4. Active Households - people who have bought LEGO in last 12 months
  5. Covered Households - people who have bought LEGO once
  6. All Households - those who have never bought LEGO

These six types of customers are defined based on the strength and depth of their relationship with the brand - from having no experience with the brand to being actively involved in it not just as a product but as a business. There are fewer Lead Users than there are Covered Households and when volume and closeness to the brand are combined like this it lends itself to neat segmentation of the marketing (and indeed the social media strategy).

Indeed LEGO uses a different approach for the top three segments than for the bottom three. This is the cut-off point at which customers become truly engaged. They are not just entering into a transactional relationship, but they actually care about the brand. LEGO uses social media to work with these three segments - from co-creating online with the Lead Users to engaging the Connected Community and 1:1 Community in online communities and social networks. These are, perhaps, the easiest and best people to engage and empower online and so the most efficient use of social media. They are the people LEGO wants to feel special, and the people they want to test new ideas and products with. They are also the people to keep engaged and close to the brand - the people who will spend most and be your biggest advocates.

Proper customer segmentation and persona profiling helps you to understand how your customers differ and how their needs differ. Social media and online communities let you treat different people in different ways and also to engage with them in the way they want to be engaged with.

Read all of our posts based on the Marketing 2.0 Conference here.

  • Community Marketing: three things to do differently (thecustomercollective.com)
  • Some brands will love the new Facebook (sharemarketing.wordpress.com)

Web Mission 09: The latest dispatch from San Francisco

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I’m just dashing between events, but want to keep everyone up to speed on my Web Mission 09 adventures out here in California.

Today we enjoyed a fantastic brunch at the penthouse apartment of Susan Best. With great views accross the city, this was an excellent place to mingle with San Francisco journalists and investors. My photo doesn’t quite capture the view - but at least you get a sense of the event.

Susan runs Best PR. They represent a range of great clients - the most exciting for our purposes being craiglist, a great example of social media.

I also got the opportunity to sit down with francis zadan from Corebridge. Francis runs a business that’s perfect for these cost cutting days. By providing a link between corporate telecom and IT systems his business provides a few neat telco features to clients and also cut costs - in particular for overseas calls. It’s a bit like an international phone card that routes calls in a more efficient manner. And that’s what i love about the business model. In addition to a ‘we can add functionality that will increase the value of your work’ there is a very clear ROI cost saving message that he can take to clients: ‘you’ll have paid for the system in 3 months’. Its a great message and something we’ve also worked hard at.

Whilst we think the most valuable benefit of an online community is in long-term engaement and brand building, it can be hard to predict exact outcomes for each brand. As a result, some clients who believe in the potential of a community, often buy  based on the ROI case of a solid benefit. For us that can be reduced support costs from user-to-user engagement or replacement savings of a real-world focus group when using a community for research. Food for thought…

That’s all from me for now - more tomorrow!

Read all of Charlie’s WebMission 09 blog posts here.

UK Web Mission 2009 kicks off

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The Web Mission 09 kicked off last night with a party hosted by GPBullhound and TechCrunch. It was a good opportunity to meet some of the other firms on the trip. And also an opportunity to meet the local UK Trade and Investments team (UKTI) in San Francisco.

One of the firms that came last year, Huddle, is here again and I caught up with Alastair Mitchell the CEO last night. For him, the highlight of last years WebMission 2008 was a meeting with Linkedin. The meeting led directly to Huddle becoming one of only nine partners to launch on the Linkedin Application Network.

Huddle is a team collaboration and project management application. It’s a great way to coordinate a remote team, track progress on a project and share ideas and files. Email sucks when it comes to managing a group and sharing ideas. Huddle is a simple platform for collaboratig on projects and Alastiar is hoping it will see off email usage for these sorts of tasks.

It’s a UK web start-up that’s really gaining some traction and clearly one of the success stories of WebMission. I especially like it because the use of the web as a driver of collaboration and working with Social Media tools to bring people together is also exactly what we at FreshNetworks care about.

Off now to our second event, brunch hosted by Susan Best.

Read all of Charlie’s WebMission 09 blog posts here.

UK Web Mission 2009 – time to go

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UK web communityI’m really looking forward to tomorrow’s trip to San Francisco as part of Web Mission 09. We’ve just been sent the itinerary and a great agenda has been organised by UKTI.

We start tomorrow with an early morning VIP reception at Virgin Atlantic’s Heathrow Lounge before hopping aboard the flight.

On arrival, TechCrunch and GPBullHound are hosting us for the first of a series of drinks receptions.

Sunday is a full day of relaxing into the SanFran way of life with a little networking thrown in.

On Monday we’re heading over to the GooglePlex and then on to Microsoft’s Silicon Valley Headquarters.

Tuesday is a day of meeting and pitching to VCs and on Wednesday we’re spending the day at Oracle’s Headquarters. Thursday is our day at Web2.0 Expo followed by a reception hosted by the British Consul General in SF.

And amidst all this we also have a load of other meetings arranged, dinners booked and parties to attend. I suspect sleeping on the flight home will be a breeze.

Before embarking on this sort of trip, it’s never clear exactly what one might get out of it. But I think I’m hoping to learn a lot from what’s going on in The Valley, to develop some new ideas for our business and to make some great connections.

Most of all I am looking forward to spending a week with other entrepreneurs. I always find that time spent among entrepreneurs is incredibly valuable. It invariably raises my personal level of ambition, leaving me inspired to achieve more in less time.

I’ll be trying to blog on a daily basis throughout the trip and you can read all of our WebMission 09 blog posts here.

The lies behind online ratings and reviews

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Ratings and reviews lie. Simple, subtle lies, but lies all the same. And I suspect most people will never know.

This is Part2 in a series about Ratings and Reviews. To read Part1 click on: Introduction to Ratings and Reviews


“Professional” reviews

The first time I realized what a con ratings could be was when I visited Dubai. I was travelling with a group of friends and one of them booked the hotels. It was quite a surprise to hear we’d booked into a 5-star hotel for what seemed like a 3-star price. It transpired that this was not because my friend had negotiated a great deal, but because hotel stars in Dubai are dispersed as liberally as banking bonuses. Dubai is the land of the 7-star hotel and I’m afraid that has nothing to do with the Burj Al Arab being better than the 5-star Carlyle in New York or Cipriani in Venice.

Thankfully, one of the great things about online consumer-generated Ratings and Reviews is their potential to overwhelm organisational bias assuming a large number of “real people” comment. However even apparently unbiased people give biased reviews. Alongside a trick of averages, these biases help cloud the validity of ratings and reviews. 

So how do online ratings and reviews lie?

There are four key ways in which ratings and reviews lie. There may be more but these are the ones that jump out at me.

1. There is no “zero” score.
Ask most people “When is a product good or bad?” and they’ll say above 2.5 is good and below 2.5 is bad. The assumption is that 2.5 is the mean average score that can be awarded. However that’s simply not the case. The vast majority of five-point scales force you to allocate 1,2,3,4,or 5 stars. If you thought a product or service was rubbish, you cannot give it zero; that does not count as a rating. As a result the mean score that can be awarded is 3 not 2.5. This is great for retailers who have ratings and reviews on their site as most items will appear to be better than average even when they are not.

2. Self-selection bias in ratings and reviews
There are three kinds of purchase bias that add to “the lie”. The first is self-selection bias. Ask me to rate the restaurant behind my office and I won’t. I’ve never eaten there because I don’t like the way it looks. As a result I have selected myself out of being able to review its food or service.

Thus, ratings and reviews’ second lie comes from the self-selection bias inherent in the need for people to have experienced a product or service before rating it. I know that restaurants which sell all you can eat buffets for £3.50 serve poor quality meat, so I’m not going to buy and I’m not going to review. The people who do review are those who for a given product or service had a reasonable expectation that it would fulfill their needs when making the purchase. Hence the group of potential reviewers is biased from the outset.

3. Choice-supportive bias
The second type of purchase bias comes post-purchase. Choice-supportive bias describes our tendency to recall positive feelings or memories to the choice we made. We tend to remember the positive things about the options we chose more than we remember the positive attributes of the alternatives we did not select.

4. Post-purchase rationalization
The third and final purchase bias is post-purchase rationalisation. This bias comes from our tendency to retrospectively justify our decisions as rational ones. We humans prefer to feel that we made good selections not poor ones. So if you ask me whether or not I liked a product that I just spent my hard earned money on, you’re going to get a positive review more frequently than you get a negative one – we like to feel our past choices have been rational and well made.

It is the sum of these biases that results in an average five-star review of 4.3. That’s a long distance from 2.5.

Despite the lies, Ratings and Reviews are great

I’ve had a bit of a go at Ratings and Reviews, but that does not stop me from liking them. They are excellent tools for online retailers and they do a great service to customers. Just like a review on the back-cover of a book or a politician’s statistics, we should always treat claims with care. And so long as that’s done everyone still stands to benefit. For one thing, if ratings and reviews are considered on a relative basis (as is often the case) then the absolute number does not matter in the least.

And let’s be honest, right now, anything that encourages people to buy more is a good thing for the economy and for all of us.

What do you think?