Conversation Agent - Valeria Maltoni

A Pragmatic Look at Marketing Trends

This post is part of a new series on industry conversations worthy of attention. New email subscribers will receive it as part of the weekly digest.

Marketing trends, or how we would call fads if they were with us for the long haul. It's hard to shift through search results and be impressed these days. Or find something pragmatic to do after reading/listening to some of those lists.

    Rand Fishkin has collected a list of top search results# for trends that are hardly new, hardly actionable, and hardly surprising, I might add.

    AI, voice search, chatbots, beacons, virtual and/or augmented reality, blockchain, native ads, video, ephemeral content, micro-influencers, mobile-first indexing, and mobile payments don't deserve to be marketing trends, according to Rand.

    They may seem actionable. But how could video or turning to the human side of marketing be considered things marketers can control or tactics that have proven to be effective? They're too generic, for starters.

    Any list should include criteria for making the list—why is this thing a thing? How is having this thing going to change our decisions about what to do? Is this thing a new development?

    Rand says:

Preparing for a recession by having excellent analytics and controls on cost of customer acquisition vs. lifetime value, on the other hand, strikes me as immensely actionable and wise.

Knowing which channels you're gonna cut, which you're gonna double-down on, where you can find more affordable growth vs. more experimental, etc.

Same goes for voice answers—determining a strategy to either get value from featured snippets in Google (which are what they use as the spoken voice answers for now), or prioritizing different keywords so you don't have to compete against featured snippets/voice answers.

    Jon Burg says we should not confuse technology (beacons), channels and behavior. He has a valid point. Many of the trends that circulate every year don't mix and match at least two of them, best if all.

    Hopefully, the interesting part of why this matters to you makes it to clients and customers. If you run a small business, you're not interested in the same things enterprise brands focus on.

    It's worth mentioning that something doesn't need to be a new trend to have impact on your business. Sometimes quite the opposite happens—missing the fundamentals can be the thing that gets you.

P.S. your search results will vary based on your browsing history, browser configuration, and region of the world. In fact, we have a fragmented view of the world at any one time.

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Related:

How to uncover opportunities in business trends

There's no ROI in Likes. The ROI is in Connection.

Ponte Vecchio, Firenze, Italia. Photo by me.

This article first ran on LinkedIn Pulse. It will not run in the new email subscription, because that is only for new articles on Conversation Agent.

You don't get connection from status. You get it by enlivening each other other, making people stronger through engagement. Status may give you self-esteem, but alone it does not create change. It's social energy that drives civilization. But we need to figure out how it works and how to use it to benefit from it.

    One month ago, I posted an open invitation to talk to 30 people in my LinkedIn network. My intent was to test some ideas about the science of networks. I wanted to learn more about the strength of online ties when isolated from popularity or any particular type of activity associated with status—e.g., viral article, award, promotion, photo opp with famous person, etc.

    Popularity and kudos draw a kind of attention that is hard to separate from genuine connection to a person. We want to be associated with winning, and it's more efficient to use proxies like existing wins to gain personal status. Status is not a proxy of change. To gain status we trade social capital and work. Social networks extract our social capital and work with the promise of status, but do not give us back something more valuable in return.

    But before we get into why it's important to understand how all these variables work in platforms like LinkedIn, a little more about what happened in the last 30 days.

How social capital accrues in networks

15 years ago, Duncan Watts wrote that networks evolve under the influence of social forces. His research found that we may do very well in one environment and do poorly in another. Because people change and situations change. In our physical lives, we're constantly called to choose how to respond to things that happen to us. Good things, and bad things. Our network therefore is dynamic.

    In real life, we interact with material things, including people. Interactions with people allows us to create social capital. The connections we make through physical activities—talking, sharing a space, doing work, etc.—create a store of energy. It is this energy accrued with physical action that transforms the connections into a durable network of relationships. This bond is the reason we can reach out to someone we worked with or with whom we had engaging conversations years ago, and rekindle the relationship. In cultures that value social aspects of connection, people literally pick up where they left off.

    More broadly, our responses to what happens to us in real life depend on the narrative we have running in our heads about who we are, our heritage, needs, and environment, how we see the world, and how we interact with people and things. Because identity is a very strong component of how we show up.

[this image is part of an introduction to a program I taught at the Bologna Business School]

    But many of us are also increasingly living a second (or third) life online. Here we can choose to have a different identity. In fact, social networks are finely built to bank on it.

How social networks use connections

Social networks like LinkedIn—where I chose to run my small experiment—are built to exploit the principles that underlie human nature. We seek status, and we want to do it as efficiently as possible. Eugene Wei has a very articulate explanation of how social networks do it. He calls it “Status as a Service,” which has a nice ring to it.

    As you'll see below, the words we use to tell the story are critical, so I changed them around a little. The general concept holds—social networks mine our work and social connections and capital to exist. They promise status, which is volatile and doesn't lead to change. Positive change is a store of value. Social networks use our value to increase their value.

    In the status game, cultural assumptions are in play as well. Social network algorithms are encoded with the cultural assumptions of their country of origin. LinkedIn, for example, is a U.S. creation and it incorporates the values Americans absorb in their environment—e.g., individuality, work hard, play hard = success, the sky's the limit, competition, efficiency, etc. Hence the cultural assumptions are based on the ideas that individuals should control their social and physical environment, anything should and can be improved, we should have as many choices as possible, and so on.

[I'm not picking on LinkedIn. I'm using it to illustrate my experiment because I ran the test here.]

    As a result of both forces—cultural assumptions based on values and how social networks are built to exploit human nature—something happens to our online identity. In the real world, when we make decisions we ask three fundamental questions—Who am I? What kind of situation is this? What would someone like me do in this situation? Our answer is based on context. When we talk about identity and the web, the context changes based on the features the technology offers and how the algorithm is programmed. Online, authentication, representation, communication, personalization, and reputation drive identity.

    The sum of components social networks use to drive activity and build a business on top of it are designed to reward certain kinds of behaviors. They use questions we ask in real life like “what does this mean to me?” and “what should I do?” to their ends. Therefore the avatars and updates we see here and elsewhere don't fully represent what's really happening to us. They don't provide information about the context in someone's life, how they feel, what we need right now. We know even less about the latent opportunity in the hundreds or thousands of links we have, which go way beyond our physical limits.

What I learned in my experiment

30 days after I shared my invitation to reach out on LinkedIn, I learned that the proven aspects of the science of networks work. Social capital accrues in physical networks. It's a store of energy that has remarkable durability.

    Based on the research, for social distance to create a strong connection or tie in a network, we need at least two dimensions or two things in common to come together. In my test, I found that the two strongest things in common that created a reason to connect—and stay connected—were:

• Physical engagement—geography was helpful, but not critical
• Work—as in having done something together or witnessing actual work

    Both dimensions are very much a product of life in the real world. Network density created with physical engagement is thus much stronger. In person, we exchange a type of energy that is most closely associated with feeling alive.

    It should not come as a surprise. This is the social energy that created entire civilizations. Social capital is based on engagement in actual things we do. Work influences how we relate to one another. Together, these two social dimensions make connections durable. Which is why sharing a physical space with someone or something (like nature) creates a richer experience.

    Without exception, every single person who reached out from past connections had shared a physical space with me, and witnessed my work. We were colleagues, they came to the events and conversations I organized, we spoke on a panel together, we met frequently to talk about our work and lessons learned, we were part of a community of practice.

    People who were not already connected with me also reached out through warm introductions—second degree links, same type of work and problems we solve, people looking for help in the physical world. Phone and video conversations are a good step in the direction of forming a connection. A step toward durable connection includes working on a project together and meeting over coffee or at an event. Context and opportunity drive timing here.

    Prominent science of networks researcher Albert-László Barabási says, “replace the corporate ladder with a social bridge.” We should think more about how our physical presence and our work impact others. Some of the great stories I heard in the last 30 days bear witness to the power of reaching out to others and comparing notes. The activities that don't scale—meeting in person, working on a project together—create the most value.

    The context in which we operate is more fluid today. Professional associations are no longer enough of a social bridge. Brian Eno popularized the term scenium to indicate a collaborative space for dialogue and mutual influence. That's a much more appropriate vehicle for durable connection, because it translates across jobs, titles, and situations.

    As an example of scenium, Ted spoke about booking a space to meet with peers who did the same kind of work to ask questions, learn from each other, and solve common problems. Bruce talked about partnering with peers in the science of complexity to offer workshops and teach people how to problem solve. The positive effects of building a physical context for connection create cumulative influence.

    If it's in person and personal meetings that open more doors, why spend more time on LinkedIn than in real connections? Because we're social, and it got us there.

How the status seeking monkey brain gets us

When I explored the difference between power and status, two major dimensions in social hierarchy, I elaborated on the work of Adam Grant. But I got it slightly wrong. Because I didn't pay enough attention to the definitions of power and status. Power is the ability or capacity to perform or act effectively. It's our capacity to do things, to affect change, to use information to make each other stronger that gains us social capital. That is power in a very literal sense.

    My small experiment illustrates how social capital is a durable store of energy. Building social capital is worth out time because it generates energy, which converts into power. Status, however, is not a proxy of change and is not worth more than our time.

    What I should have said is that when we believe we have no power, we think status will help us get heard. Some say status is something we earn through respect and competence. Maybe that's true, maybe we should just work on developing our skills, on being useful, and people will find us.

    But the hard work should go to building social capital, because that accrues over time, rather than putting too much stock on status, which is volatile.

    The status seeking monkey brain developed in response to evolutionary forces. it prompts us to look for the most efficient path to building social capital. Eugene Wei says social networks work because they not only encourage this aspect of our nature—they optimize for it. Hence we end up trading social capital and work, which take time to build and create, for badges and stickers.

    Seriously, I've been on LinkedIn for 15 years and the return on any energy I put into it has been mostly self-esteem. LinkedIn has not given me anything more valuable in return for my work and social capital. In fact, its algorithm has optimized many of my articles out of sight even from my personal network. Which is why I still maintain a personal blog to store ideas. The higher density in topics over the last 13 years takes advantage of Google's search algorithm, but also of the durable connections I've made over the years through my work. (You can subscribe by email.)

    My time is much more valuable as a creator. Hence why I'm writing an article instead of publishing a status update. I can use this article as a vehicle to test and work on my ideas and intellectual property, while the status update is engineered to boost my ego. I promised to publish here, but I believe in keeping my work all in one place I own and will update the last two posts on Conversation Agent soon.

How social networks work on us

Social networks' promise is to make it more efficient to connect with each other. Who would disagree with wanting scale? But we better watch out who benefits from it and calculate the costs, even as it's much harder to quantify intellectual work. If we look through the actual “Jobs to be Done” lens for social networks based on the seven deadly sins, LinkedIn's fit is greed.

    In phase 1, LinkedIn was focused on creating a mechanism people could use to provide proof. We accrued some status with connections–initially tied to real life. The network effects were more proof-derived – e.g., physical engagement, work history, search and discovery. Groups where the mechanism where we could share our “proof.” See LinkedIn—phase 1.

Barabási says that in the absence of proof of performance, networks determine success. In the absence of intrinsic value metrics for work, online proof of likes and volume activity confer status. Vanity metrics vs. actual results. Hence the number of links indicating a bigger network size started becoming a proxy of proof. The logic then goes that since others give status to us, we seek the shortest path to getting it. Groups with moderators and discussions were a good idea early on to have enough content and sustain a level of activity to bring more people into the network.

    For a while groups grew steadily, but eventually they plateaued. Because volume is harder to sustain in a smaller network. When LinkedIn grew beyond a certain size, groups were no longer enough. To keep more people on the network, activity needed a broader platform on which to provide more kinds of proof.

    Hence the content streaming engine on the home page, which got an upgrade with automatic refreshes in 2012. Introduction of the content stream created more visibility to the status potential people could gain through proof, people tags, and likes. Other features that had less velocity were minimized in the new design. See LinkedIn—phase 2.

Eugene Wei calls a version of this mechanism “Social as a Service.” The content streaming function on LinkedIn favors short, spontaneous updates over links to articles and even posts like this one. Over a certain threshold of activity, the stream becomes noisy. To keep the noise-to-signal ratio within certain limits, social networks introduced the algorithm.

    Links take people elsewhere, so they're not as desirable as articles on the platform for the social network. But articles like this one take time to read and thus create less activity, or take more time to create activity. By taking over, the algorithm changes the constraints.

    The velvet rope no longer works when everyone is in… so the network needs an artificial construct to maintain some form of caste system. It's the same mechanism airlines use for points programs—to keep people aspiring and paying for a higher place. On LinkedIn, we pay with actual work and social capital to maybe provide proof and get status.

    “Status relies on coordinated consensus to define the scarcity that determines its value. Consensus can shift in an instant,” says Wei. Good news for LinkedIn and other social networks, not so good news for us. In the absence of concrete ways to measure influence or obvious evidence, perception of success creates success—vanity metrics win over actual results.

    We seek status, social networks seek activity—we keep the flywheel spinning at a personal cost in time, energy, and attention.

Why we should not undervalue social capital

Creating any durable advantage using work in social networks is hard—because this kind of network traffics in proof and status. Hence the games. No matter what we say about games, they can be gamed, and social networks will continue to tweak the algorithms to keep up on the flywheel.

    They're not dissimilar from older forms of games in concept. Being published in Harvard Business Review confers a certain status. While it's probably easier to get in now that HBR has a website that needs content to keep readers coming back and subscribing, there are still certain standards we need to meet—published authors and academics seem to fare better.

    Lists like Thinkers50 and the top professional lists in any field also have a certain set of requirements. How about the TED and TEDx franchises? We go for awards and recognition by our peers because they increase visibility. In 2018, after issuing the list of winners, the World 50 Best restaurants announced a change. The organization noticed that the same “best” kept trading positions at the top. To make room for new entrants, they retired winners to the Hall of Fame.

    Wei says, “Life is nothing if not a nested series of status contests,” and I tend to agree with him. With a caveat, which is the genius of social networks like LinkedIn and why they keep people coming back. It is the apparent promise of meritocracy, that anyone at any point could score big in the status game that keeps us producing work to use for proof. We keep trading social capital for a potential promise of status to stay in the game.

    Social currency does affect behavior. From a psychological standpoint, actions like sharing imply altruism and affinity with a group or cause and desire for self-expression. But they also signal need for validation, and need for social status recognition. When our name is called out, we're more likely to engage (unless we don't know about it, or care about this type of signal.)

    We should not undervalue social connection. Network may not be something we actively create, but it's something in which we engage actively. Our energy is a source of power. How we choose to share information can either help us make each other stronger, or it can take away from us.

    We're alive through physical engagement and work. These are real. Status and proof are volatile. Others dictate the rules of the game. I would rather use my work to transform the power of an idea into something tangible. Thank you if you're among the 30 plus people who chose to engage in real life. Let's keep that door open and keep creating social capital.

    There's no ROI in likes. The ROI is in connection, and we don't get connection through status. We get it through social capital. That's how we feel alive and do our best work.

Implications for business

Corporate environments rely heavily on email, messaging programs to communicate, and (sometimes) Intranet or knowledge portals to share information. There are plenty of meetings, but they often malfunction—that is the consequences don't match the intent. People try to do too many things at once without an organizing principle, or are not clear on what they're trying to do.

    We crave connection and purpose at work, but we hardly ever create the space and formats to engage social capital and do the work together. As for the flow of information, results vary wildly—from not having access to relevant information to email chains that provide little to no context and are hard to sort. Somehow, there isn't time to address the questions for which we most need answers.

    In fact, many organizations may function like social networks in that status and proof become seemingly more important than social energy and work. It's not thus surprising that engagement is down, and work is not alive.

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P.S. There's a reason why I used the image of Ponte Vecchio for this article. It's a great example of a meeting place that has connected parts of a city and the activities of its citizens for centuries. It was even spared in the WWII bombing. Because people recognized it as the beacon of civilization. But lately it's become a crowded stage for selfies in one of the major European cities that continue to experience rapid growth in tourism numbers. To the point that many are talking about overtourism. I was there last December and experienced it. Overtourism creates an artificial environment where hosts and guests, locals or visitors, feel the quality of life and quality of experience has deteriorated considerably. This means extraction of value without putting value back.

Resources:

My gratitude to Peter Tunjic for the conversation that helped me clarify my thinking, and for his contribution to Defining Value with a Capital Idea.

Watts, Duncan J., Six Degrees: the Science of the Connected Age, W.W. Norton, New York (2003)

Barabási, Albert-László, The Formula: the Universal Laws of Success, Little, Brown and Company, New York (2018)

Thanks also go to Quartz for distributing Eugene Wei's article on Status as a Service, which gave me an insider's view into the mechanics of social networks. It was very timely and thought provoking.

Find the description of the project in The Network: 30 People in 30 Days

Welcome to Conversation Agent

Hi, I'm the founder of Conversation Agent and here's what I do and what I speak about. This site is about the impact of technology and culture on business and human behavior. It's been around since 2006. Feel free to get in touch. Here are some of my best articles. You can subscribe to this site via RSS or subscribe by email to receive articles before they're published and additional resources.

 

How to Practice a Culture of Innovation

“Creation is the most valuable part of learning,” says Dave Perell#. Getting started is key. You could remix or re-frame ideas. Remixing paves the way to learning. Re-framing ideas is a useful cultural practice to take them further.

    This has been a positive outcome of the web — facilitating serendipity and providing access to people (almost) anywhere in the world.

    A creator mindset enriches interactions. When we move with the movement of ideas, we gain momentum; when we resist it, we get stuck.  

Cultures embrace and resist change

    Our thinking is often the product of mainstream culture. Culture and cultural signals or norms influence us greatly. Cultures are designed to both embrace and resist change, based on compatibility, readiness, and speed.

    When the rate of cultural change is non existent, the tribe provides the cultural context. In this environment, individual thinking is not seen as useful. Organizations used to be very homogeneous. Even with the broad adoption of social media, there's little variance, except across departments. But silos block serendipity.

    Individual thinking is not prized on the other end of the spectrum, when the rate of change is maximum. In an increasingly complex and changing world, we go with the flow to fit in and manage uncertainty as if it were risk.

    Eamonn Kelly and Steve Weber say there's a delicate balance between risk and uncertainty in a changing world#. They say that businesses today need to balance avoiding the downsides of risk and embracing its opportunity.

    Value is beyond incremental improvements. They say:

The world has always been a complex and uncertain place from the perspective of anyone trying to create value over time. But without inappropriately flattening out the past and indulging in the fantasy that the “good old days” were simple and straightforward, we should acknowledge the obvious fact that business today is indeed faster-moving, more interconnected, increasingly global, and both bigger and broader than it has ever been. Moreover, competitive pressures frequently lead to radical changes in our business models and ultimately generate unanticipated problems.

 

[...]

 

As the pace of change accelerates, many executives have the very understandable feeling that uncertainty and risk are increasing at a faster rate than is quantifiable and manageable.

    Organizations typically pay attention to their internal and market environments, and less attention to “the world of political dynamics, economic growth, technological development, social and demographic shifts and changes in the physical environment.”

    These external factors are a blind spot. Yet they're a useful context to explore for innovation. Unanticipated problems can create the opportunity to try new ideas.

    We should learn to distinguish between uncertainty and risk. Because it will help us understand how the dynamic nature of risk has changed our work.

Problem-solving is the test ground of innovation

    All the easy problems are taken. Problem-solving now involves few certainties and right answers. But there's never been a more prolific context for finding new problems to solve due to the rapid change we're experiencing in so many industries.

    This has been going on since 1944. In On Living a Revolution Julian Huxley says:

“Whereas at the beginning of this period (300 years ago ) the rate of new discovery and invention was such that the digestion of a major change extended over the better part of a century, it has steadily increased until the process of digestion must now be accomplished within a decade. 

This is something new in history. The better part of a century is a long human life-time, and within that span, adjustment both personal and social is comparatively easy. 

When the time available for digestion of a change is reduced to a single generation, then, though individual adjustment is more of a problem, social adjustment is still not too difficult. 

But once the rate of major change has overtaken the rate of social reproduction, and is down to a half or a third of a generation, a new and formidable problem is introduced. The individual himself is asked to recast his ideas and his attitudes once or even twice within the space of his active working life.”

    [h/t Peter] The accelerated speed of change has vast implications. With Artificial Intelligence (AI) and automation now coming for our cognitive jobs#,  we need to reinvent our professions to cooperate with machines, rather than merely cope.

    By far the most challenging aspect of this rate of change problem is that we're also called to rebuild our identities. Each of us seemingly sits alone on top of a mountain of everyday decisions and actions for which there are no easy answers.

The upside

    There's an upside to the discomfort of individual change and reinvention imperative. One that sits in the middle between social thought with public distribution and private thought with individual challenges.

    Networks of collaboration are the business equivalent of community building in the social sphere. They provide us with a cross-skilled group gathered around a project. This construct creates a mechanism to build momentum and protect individual thought at the same time.

    Instead of fighting or adapting to the disruption brought about by innovation, cross-skilled groups accelerate it to get on the other side. The group dynamics that engage with collaboration facilitate a cultural shift where independent thinking has value.

    Distributed networks are also more resilient. Many organizations have spread their risk across the globe — diverse suppliers, partners, customers, and new ideas and processes are all opportunities to remix and re-frame business practices.

    We've known about the necessity to revolutionize ourselves since 1935. In The Harvest of Victory, Esme Wingfeld Stratford says:

“Life is the adaptation of creature to environment. 

In the pre-human past the tempo of that adaption has been limited, so that a revolutionary change in the environment has always meant the death to the species. 

Man, in the Machine Age, has contrived to revolutionize his own environment – an unprecedented feat. The crucial question is whether with discourse of reason will enable him to perform the equally unprecedented task of revolutionizing himself. 

Failing that, his civilization, and possibly his species, are doomed, if only for the reason that the energies he has succeeded in exploiting are incomparably swift and potent to destroy than to benefit, and if not controlled by adequate intelligence, will inevitably do so.

    Coping strategies, while useful, don't provide significant and sustained advantage. It's more useful to open up and listen, to create our way into the future, building on networks of ideas and people.

 

[more book recommendations here]

Brand Building Toolkit, Personal is the Best Form of Personalization

Personal is the best form of personalization and is stronger than a faceless company brand today. Connection is a result of interactions that over time leads to trust and often love of the kind you cannot bribe.

    We respond to knowing whose hands or thinking have made something. Influencer marketing is hot because it's about human impressions. Friends and people we trust are our closest influencers. Facebook's organic reach continues to decline.

    While many mainstream brands distributed through retailers are declining, many direct to consumer products are connecting with people. Publishing on your own domain is still the best way to build relationships with your customers.

    My web hosting company is offering a sweet deal this week — up to 75% off on new shared hosting plans and upgrades. I switched to SiteGround two years ago and have not looked back.

    If you're in the market for a fast, affordable WordPress hosting company, take a look at SiteGround. If you sign up, I get a small referral fee. I don't recommend many things, and I waited two years to have enough experience with three different domains on this service to tell you.

    So if you're going to be a publisher in 2019, I cannot think of a better way to start than with a low risk commitment to a hosting company that makes it easy. Get your account now until end of day on Cyber Monday to take advantage of the 75% off special.

 

We Have two General Models of Storytelling. One is Ancient. One is New. It is Only a Matter of Time Before they Collide.

 

We're all storytellers with an audience. Telling stories is how we make sense of our lives.

    Stories have an infrastructure of data and information. When things change in the data — we have more, or different inputs — the story gets updated. Whoever is able to find more accurate information that is up to date and reliable and can connect the dots and see the hidden patterns has an advantage.

     The essence of all storytelling is the way events change, says Christopher G. Moore#. Whoever owns the digital storytelling platforms wins. He puts forth an interesting thesis.

    Today we have two general models of storytelling, he says:

1./ the ancient model familiar to many is local, personal, based on low information, on sharing personal reports, it's anecdotal, it focuses on actions that changed behaviors and lives, talks about things like courage, or warns about disloyalty, etc.

    Typically the storyteller is a member of the community, we're audience and storytellers at different times. There's a a psychological safety and payoff in this model. We merge facts with anecdotes to share beliefs, dreams and aspirations, light the imagination. These kinds of stories helped weave the community together.

2./ the new model started developing after WWII with the advances in computer science. Hence began a model of storytelling based on scientific inquiry and Methods. With the ability to process large data sets, we have been able to discover new patterns.

    Some industries like banking, medicine, and transportation have invested heavily in this model of storytelling. We call this model predictive. This kind of story is not really personal, it's about a larger number of people like you who share your fears and needs.

    Algorithms are better at digging and finding patterns in large data sets. They don't need to worry about the necessities of life.

    The two types of stories are like oil and vinegar, they repel each other. Says Moore:

We have a generation who are getting their stories from the global library, and the international group of story-tellers are transmitting stories that may conflict or contradict what they learned at home or school. As storytellers compete for the attention of an expanded global audience, the stories essential to sustain local cultures are threatened. Stories that inspire are no longer exclusively based on local elites, celebrities or events.

[...]

The statistical story has disrupted and threatens to displace the anecdote.    

    But at the same time we have a hard time shedding the subjective story. Because it feels more real. This is interesting because since the early days of social media we've been noticing how people relate more readily with a person — a representative of a company — through their subjective voice vs. a brand or company.

    The reason why we feel more connected to a subjective story is that it influences our emotions. The statistical story keeps changing based on updates and fixes. We have a hard time connecting to that. But the statistical story can make us more efficient, improve our decisions.

We’ve never had a period where the global population has been under intense pressure to shift their identity and reality from myths, legends, and fables and embrace a radically different kind of storytelling with a new rank of story-tellers.

    Which is why we're resisting and retrenching into the personal and local. Imagine telling your children a story bout probabilistic outcomes! The one thing anecdotal stories teach us well is the topic of being human.

    We're witnessing the clash between the two storytelling models. I found the article stimulating, I had not thought about story in this larger context.

 

Customer Lifetime Value

 There's a reason why you've been on hold with customer service for an hour says the Wall Street Journal, that company may have decided you're not profitable. It's one of the stories I shared in the most recent Learning Habit issue.

    Algorithms determine Customer Lifetime Value (CLV) by keeping a tally of how much money a customer spends. It's important to remember that CLV is about profit and not just revenue. Companies determine the CLV of a person as a score. The score may include geography — the zip code of where we live — and the number of returns we make.

    What else could be part of the score? Some algorithms may include website and customer service interactions, social media activity, marital status — many of the things marketers asked for years in warranty cards and contests, for example — in addition to transaction records.

    In theory, CLV is a prediction of the net profit attributed to the entire future relationship with a customer. But is it not missing something?

Crippling flaw in CLV

    Michael Schrage says#:

Innovation must be seen as an investment in the human capital and capabilities of customers.

[...] serious customer lifetime value metrics should measure how effectively innovation investment increases customer health and wealth. Successful innovations make customers more valuable. That’s as true for Amazon, Alibaba, and Apple as for Facebook, Google, and Netflix. No one would dare argue that these innovators don’t understand, appreciate, or practice a CLV sensibility.

    In other words, what has the company done lately to keep customers coming back for more? This is the value of a brand to a person or fan. When done well, companies can partner with customers in creating value. Cost reduction, advocacy, product ideas, feedback and data sharing are just some of the upsides.

    Part of the brand reinvention of a business where we grew revenues to position it for an acquisition included partnering with the ultimate users of our products to gain insights on the state of the market. That qualitative information helped us shape our forecasts and quantitative tracking.

    This kind of valuable personal involvement tends to get lost in all the talk about engagement in social. An overlooked yet effective marketing tactic continues to be making the customer better. In fact, investing in customers increases their value to the business.

Other dangers of CLV

    What happens inside the organization should not be discounted from CLV. It's not a number plucked from thin air, it's the result of a calculation we make based on the business we run.

    Bill Gurley addresses other dangers of overly focusing on customer lifetime value for Internet businesses. My observation is that once we find a formula, we typically become enamored with the formula and forget where it came from and that the point is not the formula but the behavior we're trying to predict.

    Data looks back, we're terrible at making predictions, especially when emotion is involved. Gurley# has “reasons to avoid worshiping at the LTV altar.” Some of his points are useful to seeing a broader definition of customer lifetime value:

• It's a tool, not a strategy — confusion of output and inputs. Things like average revenue per user (ARPU) and customer acquisition costs (CAC) are outside our control.
• The model to calculate CAC is confused and misused — for example, customers who seek out a business on their own or as referred by others should not be calculated as a cost. Many discount “revenues” rather than marginal cash contribution. All future variable costs of supporting the customer should be part of the equation to estimate future contribution.
• Business is not physics, the formula is not absolute — complex adaptive systems cannot be modeled with certainty.
• CLV variable tug at one another — imagine a balloon. When you squeeze in one area, the air moves to another. Raise prices and you increase churn, increase customer service support and cost goes up. The problem keeps moving because it's very challenging to have cheaper, faster, and better all at once.
• Purchased customers underperform organic customers — this is almost on every metric. Once businesses are done pampering the top customers according to their definition, they'll likely need to buy more customers to replace those that have walked away because they were treated poorly (as in not deemed valuable enough).
• Marketing dollars could go to the customer — in servicing the customer, giving the customer a better reason to buy more. This is value left on the table when a business follows the premise that CLV is entirely the responsibility of customers. Jeff Bezos says, “More and more money will go into making a great customer experience, and less will go into shouting about the service. Word of mouth is becoming more powerful. If you offer a great service, people find out.”
• An obsession on formulas is blinding — effective public relations, social media, and word of mouth require more creativity and an open mind. They reward businesses with some of the best reach money can't buy, the spontaneous testimonial and recommendation of customers.
• Tomorrow never arrives — focusing overly on the past, as in data about purchases, and the future, as in lifetime value, discounts the potential value of a simple single action and decision today.

    The problem includes timing. Which is as much art as science. Few things in life are certain. While CLV can be useful. What's the lifetime cost of getting value wrong?

 

Ignoring 2 Billion Internet Users is a Missed Opportunity

 

Of the 4.2 billion people online in the world#, only a little over 2 billion are on Facebook (mostly mobile use#.) This is not an overlooked opportunity. Access is not the same as reach ― especially the kind of reliable reach a business builds by creating value.

    Other means of communicating and interacting with clients that have not gone out of fashion and are algorithm-free to deliver value to brands and clients (win/win) are:

• Websites ― an ad-free product experience easy to underestimate, including product updates.
• blogs ― subject matter expertise, behind the scenes that humanize a business, translating technical and scientific information, building authority (both for search and expertise), developing a strong point of view and voice.
• communities ― learning with customers, discovering answers to common issues, opening the door to peers supporting peers, product and execution ideas, good will. evangelism, advocacy.
• mailing lists and email ― direct connection to topics of interest, signal intent.
• word of mouth ― recommendations, reviews, value-driven influence.
• events ― learning with customers, building community, face-to-face interaction, signal intent.

    It's not an exhaustive list of purpose and meaning. But likely a good starting point for organizations that want to expand opportunity beyond the 2+ billion users of social media. We all want to better our lives, improve our lot. Especially younger people want brands to make their lives easier#.

    People want to read honest communication about products and services, they expect brands won't let them down and will act with integrity at all times#. Having nothing to hide is not the same as being intentional about doing the right thing, and saying something useful#.

“Seventy percent of people around the world believe brands’ motivations to share is based upon self-centered desires to increase profits, rather than part of a sincere commitments to their customers.”

    Identity, communication, and growth are interdependent. To move others, we need to own our communication, and meet halfway in understanding what's on people's minds. it's not just as simple as a translation process. Identity is involved. 

    But all of this, including eCommerce where applicable, is in service of a solid business model and a marketing strategy (complete with margins and costs) that works for your specific brand(s) and market(s).

    What you choose to share in social media and online (review sites, forums, communities, etc.) depends very much on the value you get. That includes a broader array of online media, as applicable, as well as face-to-face interactions in store and at events.

    We're often so focused on task at hand, and context at hand that we overlook opportunities to get help, or learn something new.

    Case in point, just last week in talking with a woman who comes to the same Barre studio I go to we discovered she's looking to take her small business to the next level. I'm quite familiar with her client base, their key questions, and health options.

    All communication is persuasion, those started by organizations, and by customers and clients. But not all communication is helpful when it's not consistent, useful, and integrated into a cohesive conversation. Experience is a form of impression, but we don't get to share it when we're not focused on strengthening relationships.

    Facebook is indeed not the only game in town (there's overlap with social media use#). There's more to digital than social media... and more to solving real problems.

    Bonus points for thinking about identity as a lens to understand the web.

    More on #storytelling next...

    

Social Media is Growing up, Good News for CMOs

 

Every second, 11 new people sing up to use social media. Think about that for a moment. The world has four billion Internet users#, and more than three quarters of them are active in social media, thanks to more affordable smartphones and mobile data plans. 

    Nearly a quarter of a billion new users came online for the first time in 2017. In the U.S., where smartphones, tablets, and desktops have been ubiquitous, the people tuned into social media are approaching 70 percent of the population#.

    It's a mature market. And a well formed habit, with frequent check ins ― in fact, daily for about three-quarters of users on Facebook and 60 percent on Instagram.

    This is good news for CMOs who are tasked with the creative and more recently the analytic aspects of company's growth. Social commerce is bringing together aspects of branding and relationship building with transactions.

    It's also creating the need for new skills, and capabilities ― risk management and leadership are likely a new addition for CMOs who have been expanding their role to include business innovation, customer experience, and financial savvy.

    A look quick at the landscape.

Where and what are people doing in social today?

    On the desktop# they're on:

• Facebook (46 percent) reading news and checking in with friends/family (9 percent posts, 5 percent interaction), which means that organic reach is a pipe dream.
• YouTube (20 percent) connecting with influencers and product reviews
• Reddit (18 percent) in online forums, think word of mouth
• Instagram (1 percent) because it's mobile native, though Stories are becoming desktop friendly. What's interesting is that though mobile posts are still hovering at around 10 percent, interaction is hovering at around 94 percent.
• Twitter (8 percent) on desktop sees a total activity at around 81 percent, but interactions have dropped to 1 percent.
• Pinterest (2 percent)
• LinkedIn (1 percent)

    Visual engagement dominates. Instagram's is quite high with relatively little posting. What looks best? Beauty ― 27 percent of posts and 32 percent of interactions ― Auto and active wear also have a favorable ratio of interactions to posts. Brands that use user-generated content and influencer tactics do well.

    Brands with limited product assortments and those that are less enticing visually ― such as explain why sectors such watches & jewelry and CPGs have a smaller interaction to share of posts ratio. Retail brands likely invest in channels where the conversion is more proven.

        In 2015, Pinterest introduced buyable pins, and brands found that the average order value what the highest of all social networks at $50 per order#. Because brands make it easy by highlighting popular products, featuring sales, and explaining shipping, 68 percent of users shop or find a product in 2018#.

    With such good penetration of social media, especially in the U.S., it's not surprising that people are starting to shop using Instagram’s shoppable accounts (41 percent of brands adopted them) or Facebook's Shop Now button (17 percent of brands use it).

    In addition to product discovery, potential people are also looking for customer service.

What are brands doing in social?

    The categories taking advantage of the content/commerce integration are retail, beauty, fashion, active wear, and consumer electronics.

    In customer service Twitter is still king. Having a team there is a good investment for brand management. 67 percent of people have used a company's social media site for service, compared with 33 percent for social marketing#.

    Just like with site's uploading times, people reward prompt responses. Poor social media practices impact brand image, and the bottom line. Leading brands have created a proven process to know how to handle inquiries in social ― private vs public ― and have the power (and evidence) to make things right.

    Positive wins over negative. The customer is always right, even when the details may be fuzzy. Responding to feedback is a good way to build relationships. After all, we like positive reviews. They have power. Mobile conversion increases by 133 percent.

    Brands that have been consistent in using social to improve their overall customer experience, make every customer special... and count.

    Though it's convenient to use Twitter for people and brands alike, many still experience how customer service in social is not fair, and may get expensive for problematic issues. T-Mobile is an example of a brand that reaches out to answer questions, concerns, or to address disparaging tweets.

    Brands selling consumer electronics, active wear, beauty products, retail, fashion, and auto have upped their customer service activities on Twitter between 2016 and 2017. While CPGs, and beverages have decreased them.

    I still remember when eCommerce site social discovery went mainstream.

What are the key social commerce trends?

    Sales revenue from social media were greater than $30 million in 2015#. In February 2016, US retailers surveyed by RIS News and Gartner attributed just 2% of their revenues to social commerce. But the estimated $50 million sales in 2016# tells a different story.

    “Social media is growing up. Which is why I'm writing about social again ― it matters to business, and even more to brands.”

    Below, I highlighted some trends I've seen in the last couple of years.

    It's a small world. Product reviews have sway ― think Amazon, where 90 percent of people check them before buying. 67 percent of women still consider online reviews very influential when they purchase from a brand they know. 43 percent of people check then for an item they purchased, to compare their experience to that of others#.

    Social targeting has a dark side. Those pesky retargeting ads that follow you around can be spooky. But some companies have been doing it well.

    Brands like Wayfair are dependent on digital media to drive traffic to their mobile apps and websites, because they're online-only brands (business model.) In 2016, Wayfair, the home good retailer that gets 10 million unique page views every month in the U.S., sold more than 7 million items from over 12,000 brands.

   Targeting becomes easier after product discovery. For that, they used Pinterest. They were one of the first retailers to use the pin it button on their site. It also helps that they have a sound understanding of target customers, perfect for Pinterest. The company upped its game in 2018 with AR/VR collaboration#.

    Online relationships are becoming more personal. Brands that do well here solve a real problem. It's the problem that drives who is attracted to the brand. This makes it much easier to get to know the people you serve, including the reasons why they use social media/each channel.

   “This is why Instagram is doing so well. It's simple... and relatable.”

    User-generated-content (UGC) has a role here. Brands that focus on showcasing how their customers experience a product or service, or their lives are better (engagement) with a curated appearance (accessible) are very appealing ― at the tune of millions of followers.

    Influencers play a role. But brands need to become savvy about who is influential for their customers. It's 2018, we're been talking about this at least since 2011... yet so many are still getting it exactly wrong. It's the brands' responsibility to figure out what works. (This conversation deserve its own post.)

What are the implications for CMOs?

    The role of the CMO has been expanding in the last several years. Technology has been a trend for a while, but it wasn't until recently that it really became a focus for marketers. Data and analytics is the reason. In 21015, Scott Brinker said:

The “marketing technologist” label is simultaneously a big tent and an emerging field. It’s a big tent because it includes people from digital marketing, marketing operations, IT, software product development, ad operations, and agency creative technologists. Their official titles, backgrounds, and job descriptions vary tremendously.

Yet there’s a unifying bond between them — applying technical talent and capabilities in the pursuit of brilliant marketing. [...] It’s an emerging field because, as a percentage of people working in marketing and IT, these hybrids are still relatively rare. But they’re multiplying, rapidly.

    We're all familiar with operational types of technologies ― email, enterprise resource planning (ERP), networks (including security) ― and the need for CMOs to have a good working collaboration with CIOs and CTOs who have been on the front lines of operational tech for decades.

    Strategic technologies may cover manufacturing and distribution, but also involve the systems we use to find customers, service clients, and optimize the product/service value chain. Building efficiencies is part of the work. The more important part is to keep connecting all technologies to solving a specific problem.

    Over the last decade, corporate leaders have been expecting CMOs to elevate their activities from brand and marketing campaign management to business growth and revenue generation for the whole organization#.

    CMOs expanding skills and capabilities. This means:

• becoming a customer expert ― do we have an understanding the whole customer journey? Are we partnering with other leaders to execute strategy?
• making marketing that makes business sense ― how does marketing support the goals of other groups and executives? How does it translate into financial language?
• complementing the art with the science ― does the team have the right capabilities and skills? Are digital/quant people collaborating with traditional/qual people? Are different points of view being heard?

    To these I would add a more specific consideration for leadership skills ― they come into play not just with growing and running the team, but also with a C-level mindset to run the company.

    Finally, especially due to social media's revival ― and its usefulness as a testing ground for product innovation and community building (not just reach) ― risk management seems not far on the horizon. A few years ago, it was about developing an understanding and appreciation of risk communication.

    With social media taking on a bigger role in commerce, the ability to analyze risks and expected value. Social media keeps people connected, especially in extraordinary circumstances... and today, much of Twitter and other social networks qualifies for surprise. CMOs can make this good, or it could be bad news.

 

Additional Resources:

Understanding Audiences in a Connected World

The Many Faces of Marketing

How a Culture of High Performance, Radical Honesty, and the Motto ‘we’re not family’ Drives MarTech Choices

 

Sizing up the Problem

If innovation is part of your goal, then how you work and who's working on the problem matters even more. The first questions to ask are what's the size of the problem we're trying to solve? Then figure out the scope and who you need in which role based on it.

    Design the organization so that every function contributes to advancing toward the goal. Talk about what needs to get done, and time frame. Use feedback to highlight what works in the moment — hey, what you just did there was great. Do more of it.

    Stop doing everything else that doesn't create value around solving the problem. Seems simple, right? Not easy to do. But starting from the problem gives you a strong chance to change culture. Because it means your behaviors shift based on something concrete.

    Patty McCord was the chief talent officer at Netflix for 14 years. She helped create the Netflix Culture Deck# that got 18 million views.

    “Actual company values are the behaviors and skills that are valued in fellow employees.” Hard work is not important, results are. Brilliant jerks, no need to apply. Focus on performance and responsibility, rather than rigid process. These are three good reasons people liked the deck.

    Setting the appropriate context around the problem controls for the solution more effectively than trying to control the people working on it. Strategy, metrics, assumptions, objectives, clearly defined roles, knowledge of the stakes, and transparency around decision making are all ways to embrace context.

    Size of the problem matters a great deal in a technology company. In that kind of organization, you plan six months ahead. What does the problem look like in six months and how do we get the right skills to work on it?

    It's easier to have honest conversations with people when you're working on a defined context and time frame. You also know who you're missing on your team. It's based on the deltas in skills/experience.

    The video below from Recode's 2018 Code Conference (h/t Fred Wilson#) also spells out an important point about sizing the problem to hire the right person for the role. At minute 11:42 McCord talks about how companies keep hiring the same people they already have.

    Honesty and feedback are the tools of knowledge workers.