Build a Culture of Experimentation

Converted: The Data-Driven Way to Win Customers’ Hearts is a fun read packed with insights from Neil Hoyne’s work with more than 2,500 marketers as Google’s chief measurement strategist over more than a decade. The book focuses on how marketers can build relationships with customers that have higher customer lifetime value (CLV). Neil also talks about how to nurture a culture of experimentation to optimize the customer journey based on a steady stream of insights to predict and boost CLV. I’m looking forward to having Neil as a guest on my podcast, The CX & Culture Connection soon!

The book is organized around three imperatives. The first is for marketers to focus on conversations rather than transactions. The second is to focus on building relationships with customers that have higher CLV and to engage them in ways that increase their CLV. The third is to focus on more effective change management practices, which Neil captures under the banner of “self-improvement” for marketers acting as change agents within their companies. Let’s touch on each of these themes in turn. I highly recommend reading the full book, and sharing it with others, as it will spark more insights than you’ll get from this review alone.

Conversations

Marketers are investing in establishing relationships with customers to improve the targeting of their advertising as well as to deliver more personalized omnichannel experiences along their customer journey. However, many companies are not yet realizing an attractive ROI on their investments in their mar-tech stack. Neil focuses on the need to start simpler and take a pragmatic approach to build insights and foster a culture of continuous experimentation. This aligns to my own experience and the focus of my book and podcast, both called The CX and Culture Connection. Investing in technology doesn’t deliver value on its own, unless paired with sustained leadership commitment to nurturing a more customer-driven culture.

That said, you do need better data to enable continuous conversations with customers along their customer journeys. Without capturing their permission to email them, message them, or curate other personalized experiences, you aren’t having a conversation but pushing ads to less engaged customers. Capturing a unique identifier enables you to piece together all their experiences (what I call an Experience Collage in my own book), and orchestrate them using AI and machine learning, together with more personalized human-to-human interactions. These conversations are a chance to listen and learn from your customers about what matters most to them. Just as you can mine customers’ social media sentiment to build insights, you can also treat the increasing number of direct interactions with customers as a valuable source of insights. This unstructured data now accounts for more than 90% of the data companies have about the customer experience and are growing exponentially, helping you to speed your company’s insights to action loop via continuous experimentation.

Relationships

It’s not enough to listen better and personalize the experience for your customers. You also need to focus your experience design efforts on your customers with the highest CLV. Neil argues that acquisition of customer segments with the highest CLV is one of the most important contributors to enterprise value. While it costs more to acquire a customer than to retain a customer, it helps to acquire customers with higher CLV to begin with, while also designing your end-to-end customer experience so that you have higher customer retention, spending per customer, and lower cost-to-serve. Relying on advertising and promotions to acquire customers and sustain their engagement without insights into their CLV results in significantly lower profitability.

Neil focuses on the value of experimentation to drive improvement in the right business outcomes. You can move customers up the ladder for their CLV by getting them to engage in more profitable behaviors, but it is hard to move customers from one end of the scale to the other. At MMA Global, the marketing association at which I’m a CX subject expert, there’s a great body of research called the Moveable Middle Growth Framework (MMGF). Your Moveable Middle have some engagement with your brand but aren’t yet loyalists. Targeting your advertising based on brand favorability has a much higher ROI than other approaches to targeting and compared to broad reach alone (up to 5x more). Similarly, there’s a much higher ROI from moving your neutrals on NPS up a couple points than trying to turn detractors into neutrals.

As Neil points out, journey analytics can be used to help you identify early indicators for higher CLV and use look alike analytics to focus your marketing acquisition efforts on customers with higher CLV. Then you can use experimentation to improve not only your acquisition efforts, but journey orchestration to boost customers’ CLV further. In some cases, the optimal actions to attract and retain customers with higher CLV may appear counter-intuitive. For example, Zappos found that customers with the highest CLV had higher return rates, so it offered them a 365 day return policy with free shipping both ways.

Self-Improvement

CX is a team sport. There is only so much any leader can do without enrolling others to get your growth flywheel spinning and make it spin faster. It’s great that Neil dedicates a full section of his book to how you can influence others and overcome barriers to change. This is a key area of focus for the books I review, and for my own book, The CX and Culture Connection (click here for a full set of my book reviews).

Neil emphasizes the need to address four questions if you want to drive the greatest impact:

• What’s the hypothesis?

• What data supports it?

• How would you test it?

• What would the company do differently, based on the results?

This has much in common with the leading practices to enhance an organization’s decision-making effectiveness as laid out in Decisions Over Decimals by Christopher Frank, Paul Magnone, and Oded Netzer. Check out my podcast with Christopher and Oded here (episode #17) and my review of their book here.

Neil also includes some pragmatic advice on how to foster a stronger culture of experimentation. One nugget is to reward ideation, not results. Another is to create a separate pool of funds for experiments so that they don’t burden business-units focused on hitting their short-term metrics. Neil recommends setting aside 10% of your marketing budget for experimentation. I’ve seen similar results from my own work with clients. To get the best results, combine these more formal approaches with other approaches that tap into the informal organization to reinforce the right behaviors, mindsets, and collaboration networks in the organization. Incentives matter and impact behavior, but there are other equally powerful approaches to spark the energy of your organization and build a cultural movement.

I hope you enjoy reading the full book and checking out my upcoming podcast with Neil, which will be added here, too, once it’s available. Be sure to like and subscribe to my podcast, The CX and Culture Connection, on your podcast platform of choice. I hope these spark some great ideas for you!