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How to succeed in the mobile game space by Lloyd Melnick

Customer satisfaction

How to develop repeat customers

by Lloyd MelnickMay 12, 2015January 4, 2016

Most people understand the importance of selling to your existing customers, or monetizers in a free to play environment, but most efforts and features are built around attracting new customers. That despite the fact that the probability of selling to an existing customer is 60-70 percent while the chance of selling to a new prospect is 5-20 percent, according to Marketing Metrics. A recent online article from Matt Perl called “5 Sexy Rules of Customer Retention,” (better named than any of my posts) discusses five straightforward ways to improve sales to existing users.

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Reward your customers

You often give incentives to new users, give repeat customers some reward. As Dan Ariely has written, free is very powerful, so giving your customers something free (with no strings attached) is a very powerful tool. I once wrote how thank you notes can help your business, as they can provide a low cost way to give back something to your customers.

Recognize customers from their online footprint

The goal is to recognize customers automatically when they come into your game or encourage them to register. The less friction involved (if you can identify and track automatically without violating privacy issues), the more customers you can touch in this way. Company or product portals are a strong and deep way to tie together a customer with your brand and if your customer comes to you without any pushing than you are doing a great job. Continue reading “How to develop repeat customers” →

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It’s about the customer journey, not the touchpoints

by Lloyd MelnickApril 21, 2015January 4, 2016

There was a great article in the Harvard Business Review, “The Truth About Customer Experience,” that shows more importantly than focusing on providing the customer with good discrete interactions you should focus on the entire journey. Interestingly, even if you have great metrics at each touch point (e.g., people are satisfied with onboarding, customer services call are resolved positively), overall customer satisfaction may be negative because of the holistic customer journey.

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The article uses the example of new customer onboarding for a pay TV provider to show how the journey can be negative even when each touchpoint gets positive feedback. As the article describes, “Take new-customer onboarding, a journey that typically spans about three months and involves six or so phone calls, a home visit from a technician, and numerous web and mail exchanges. Each interaction with this provider had a high likelihood of going well. But in key customer segments, average satisfaction fell almost 40% over the course of the journey. It wasn’t the touchpoints that needed to be improved—it was the onboarding process as a whole. Most service encounters were positive in a narrow sense—employees resolved the issues at hand—but the underlying problems were avoidable, the fundamental causes went unaddressed, and the cumulative effect on the customer was decidedly negative.”

The root of the problem is that many customer focused functions (sales, CS, community management) are siloed in different organizations that have individual and insular cultures. These groups shape how the company interacts with consumers but although they may aim to optimize their contributions they lose focus of the customers desires.

The article describes four ways that companies can overcome this problem, effectively embedding the customer journey into your operational process. It is not about removing the functions but building an internal system that looks at customers holistically. Continue reading “It’s about the customer journey, not the touchpoints” →

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How the marketing 4 P’s have changed

by Lloyd MelnickMarch 17, 2015March 6, 2021

Most business schools based their marketing teachings on the 4 P’s (Product, Place, Price and Promotion) but they have not adjusted these pillars for the current reality. An article in the Harvard Business Review, “Rethinking the 4 P’s,” provides a great framework for building your marketing strategy going forward. Rather than the 4 P’s, they suggest a SAVE methodology. Although developed as a B2B marketing framework, SAVE is also relevant for consumer marketing and growth.

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Solution

Rather than the traditional focus on “Product,” either a good or service, the SAVE approach has you focus your offerings on the needs they meet. Do not concentrate on features or technology, but focus on what your customers want and then build your offering to meet their needs.

Access

Instead of “Place,” retail locations (online or physical) or distribution channels, you should develop an integrated cross-channel presence that considers users’ entire customer journey. The point here is that it is less important to be available through a specific channel or a device but to understand your customer and be available when, where and how they would want it. Continue reading “How the marketing 4 P’s have changed” →

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Why free stuff or lower prices don’t keep customers happy

by Lloyd MelnickMarch 12, 2015April 6, 2015

One lazy and ineffective way to keep customers happy is to lower prices or give them more things for free. Companies that do not know their customers well, or do not want to, often respond to the question of how to increase customer satisfaction or retention by lowering prices. In free-to-play products, this tactic involves giving users more virtual currency.

The lazy answer

This response is often a knee-jerk reaction to the question of “How do we improve our customer relationships?” It demonstrates that the person/company does not want to address the true dynamics of the relationships. Everybody would rather pay less for a product or get bigger free bonuses and rewards. It does not reflect any understanding of your users, their motivations or why they use your product.

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The reality of customer satisfaction

The reality is that users and players are motivated by many factors and rarely is cost the primary reason they use a product. The exception is companies that are focused solely on being a low cost provider, the Walmarts and Aldis, and for them price is the greatest lever to increase user satisfaction. In other cases people are driven by unique features or experiences that builds a bond with the product.

Does not create competitive advantage

The biggest mistake in throwing free stuff at users or players (or lowering prices) is that it does not create competitive advantage. Your competitors can easily match or beat what you are doing. If you are giving away five dollars worth of product daily and they want to steal your customers, they can give away $10. You end up with a race to the bottom in terms of pricing, and when you reach the bottom nobody has a particularly good business other than the companies built to compete on price (again, the Walmarts and Aldis).

Determining what creates satisfaction for your users

The first step is understanding what about your product or game motivates people to use it. There are several ways to build this understanding (listed in my order of preference): Continue reading “Why free stuff or lower prices don’t keep customers happy” →

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How bad profits can kill your company

by Lloyd MelnickFebruary 26, 2015April 6, 2015

I came across an article from 2012, “Is Your Company Hooked on bad profits?” by Fred Reichheld, a Bain Fellow, that is very relevant to today’s tech companies. Bad profits are revenues earned at the expense of customer relationships. These bad profits are generated usually with short-term revenue goals that over a longer period make your customers more likely to churn.

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Examples of bad profits

As a consumer, you probably have many examples you can list of bad profits. Some of these are banks charging late payment or bounced check fees not in line with their costs. It could also be rental car agencies charging you more per gallon if you do not return your vehicle with a full tank of gasoline than you would pay for a fine French Bordeaux. It could be a wireless phone company charging you crazy international roaming fees. Maybe a fitness center locks you into a one year contract because they know you won’t be happy in a month. And it could be a free to play game company tricking players into spending premium currency by creating misleading buttons. Remember how AOL made you jump through about twenty agents to cancel its service? Unfortunately, these examples are too numerous to list. Continue reading “How bad profits can kill your company” →

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Turning unhappy customers

by Lloyd MelnickNovember 6, 2014December 1, 2014

I have always said the best measure of a company and its customer relationships is not how they avoid unhappy customers but how they deal with unpleasant situations. Inevitably, you will do something that some customers do not like. Rather than focusing on avoiding the inevitable, there is more value in building a strong plan to react to these unhappy people and turning them into a resource. In fact, if they are engaged enough to complain to you rather than just go to a competitor, unhappy customers have the potential to be VIPs if you handle them appropriately.

A recent KISSmetrics blog post by Josh Brown, “5 Ways to Turn Your Unhappy Customer Into A Valuable Resource,” provides strong tactical advice on addressing unhappy customers. By applying these tactics, you not only improve the word of mouth the users generate, but also increase lifetime value by building customers (or players) who will continue to purchase your product.

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Make your customers feel heard

The most effective way to be liked and admired is by listening to other people, a philosophy around which Dale Carnegie built a career. It is no different when dealing with your customers. An unhappy customer often cares more about being heard and understood than having their issue resolved. This means you need to listen to them and acknowledge their problem, not simply fix it.

As the Brown writes, “if you respond to an unhappy customer by immediately trying to get to a solution, it can possibly backfire and make the customer even more upset. Being unhappy or angry with a company or product puts the customer in a highly emotional state, so the first thing you should try to do is get them into a more agreeable frame of mind.”

Social media is often an opportunity to leverage this principle. You may see multiple Facebook posts about a problem and immediately fix it. While that sounds great, if you do not acknowledge the posts and communicate with the active community, they may not be satisfied and can negate the impact of the fix. Continue reading “Turning unhappy customers” →

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Optimizing customer service is not about keeping everyone happy

by Lloyd MelnickApril 8, 2014April 14, 2014

Customer service is a function that is usually neglected in the tech or game space. A recent article in the MIT Sloan Management Review, “The High Price of Customer Satisfaction,” shows companies can also err by focusing on creating too much customer delight. The article points out that customer satisfaction is the most widely used metric to measure and manage customer loyalty because companies assume highly satisfied customers are good for business. The article points out that the reality is not as simple as the belief that high customer satisfaction optimizes profitability. In the article, the authors look across industries and find the correlation between companies’ customer-satisfaction levels for a given year and the company’s performance (as measured by stock price) only explains 1 percent of the variation in a company’s market return. Another study by Bloomberg’s Business Week actually shows a negative relationship. Although you can poke holes in these studies, overall the relationship between customer spending and customer satisfaction is very weak. Because of this and similar research, many consultants and authors have argued that achieving customer satisfaction is a waste of money. The authors, however, conducted extensive research and uncovered three critical issues that keep customer satisfaction from generating higher revenue. By understanding these three issues, any tech or game company (which I think will find them very familiar) can create a better customer service strategy.

Avoid money losing delighters

Strong customer service (CS) scores are normally considered universally good for business but the data is not as clear-cut. There is a downside to devoting resources continually to raise customer satisfaction levels. As companies cannot usually quantify the costs associated with raising customer satisfaction levels, you cannot determine the value of an increase. Often, the return on investment for improving customer satisfaction is trivial or negative. Although higher satisfaction scores can increase revenue, the costs of getting the higher scores frequently outweigh the benefits. Pricing is a great example of this phenomenon.

One key factor that drives customer satisfaction is low prices, as satisfaction and price are almost inversely related. Thus, lowering price tends to be one of the easiest ways to improve satisfaction levels (in the game industry, which could be the same as giving away premium currency). The problem is that most companies and products, low prices are often bad for business and there is not much room to drop prices and remain profitable. The authors used examples of a large financial services institution and Groupon to illustrate this point. With the financial institution, the majority of customers were highly satisfied. Unfortunately, over two-thirds of these highly satisfied customers were also unprofitable for the company. The customers’ high satisfaction was driven primarily by their belief that they were getting great deals, which they were. Each time the company underpriced its offer, these customers bought in large quantities. The problem was exacerbated as the more they spent, the more additional services they expected. With Groupon, there is a usually negative relationship between customer satisfaction and merchant profitability. Four of the six top performing categories of Groupon offers in terms of satisfaction were money losers for the merchants. These four categories, as they were so popular, generate half of Groupon’s volume.

These examples show that customer satisfaction and profitability are often not aligned. There are other ways to improve customer satisfaction, a better customer experience or more innovative products. However, not all alternatives will be profitable. Moreover, not all customers can be profitably satisfied; some will not pay the necessary price for the level of service being offered. Others demand a level of service that more than offsets any revenue they provide. The point of this issue: you must understand the profit impact of efforts to improve customer satisfaction.

Smaller often equals happier

While conventional wisdom suggests that higher satisfaction would lead to higher market share, the author’s research shows that high satisfaction is a negative predictor of market share. They use some very obvious examples to make their point. McDonalds has lower customer satisfaction scores than Wendy’s but much higher sales. Target, Sears and JC Penney all consistently outperform Wal-Mart on customer satisfaction but there sales and profits fall way behind. The primary reason for this seeming contradiction is that the broader a company’s market appeal relative to the offerings of competitors, the lower the level of satisfaction. Gaining market share normally comes from attracting customers whose needs are not completely aligned with the company’s core target market. Thus, smaller niche companies can better serve their customers while companies with large market share must serve a more diverse set of customers. This data suggests you should not necessarily benchmark against the companies in your space with the highest customer satisfaction levels, they are probably niche players that by design are tailored to their individual audience. It also shows that you a focus on improving your score may not improve your profitability.

The importance of being number one

Improving customers’ share of spending with your brand often represents a far greater opportunity than efforts to improve customer retention. Many companies assume that higher customer satisfaction scores will result in a greater share of customer’s wallet. The research, however, shows virtually no correlation between satisfaction and wallet share. They hypothesize this occurs because customers now have divided loyalty (they are not committed to a single brand), more customers partially defect than completely defect from a business or brand. This is particularly true in the free to play game space, where players will partially defect to another game or app. The weak relationship between satisfaction and wallet share leaves many companies unable to identify what they can do to capture a greater share of customer spending. They tend to believe that customers who consider themselves completely satisfied are more likely to give the bulk of their spending in the category to their brand. The goal then becomes to get that number up. Unfortunately, company’s satisfaction or NPS (Net Promoter Score) is a poor indicator of the relative preference that customers have toward the brands they use. Customers normally divide their spending among multiple competing games or brands. Since not all are equal in satisfying customers, those that better satisfy will get a greater share of customers’ spending. The measure that really impacts revenue is the relative rank that your brand’s satisfaction level represents compared to your competitors. Satisfaction is relative to competitive alternatives.

How to succeed with customer satisfaction

Using customer satisfaction to increase profits While focusing simply on high customer satisfaction is not a profitable strategy, using it appropriately has huge benefits. Continue reading “Optimizing customer service is not about keeping everyone happy” →

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Lloyd Melnick

This is Lloyd Melnick’s personal blog.  All views and opinions expressed on this website are mine alone and do not represent those of people, institutions or organizations that I may or may not be associated with in professional or personal capacity.

I am a serial builder of businesses (senior leadership on three exits worth over $700 million), successful in big (Disney, Stars Group/PokerStars, Zynga) and small companies (Merscom, Spooky Cool Labs) with over 20 years experience in the gaming and casino space.  Currently, I am the GM of VGW’s Chumba Casino and on the Board of Directors of Murka Games and Luckbox.

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