e4m MarTech League: 'Core pillar of VRM is ability to identify Customer Lifetime Value'
Rajesh Jain, Founder & Managing Director, Netcore spells out how to create a Velvet Rope Marketing (VRM) experience for consumers
Rajesh Jain, Founder & Managing Director, Netcore, on Wednesday spoke to Dr Annurag Batra, Chairman & Editor in Chief, exchange4media & BW, as part of e4m MarTech League Leadership series. The topic of the virtual discussion was ‘Velvet Rope Marketing: CMO’s transformation to Chief Profitability Officers.’
The big idea: VRM and the art of profitability
Starting off the virtual session, Jain explained the meaning of Velvet Rope Marketing (VRM) saying, “In every business, there are certain customers who are disproportionately more valuable than the others. We need to take care of these customers very well. But before you do that, you need to identify these customers and see who is the largest contributor to your revenues. Then, it is about creating an experience that ensures that they don’t churn away. When the best customer goes, it’s a big loss for any business, B2C or B2B. It is about creating VRM experience to essentially make sure that they stay on. Then comes the long tail of customers. There are some among them who have great potential to be best customers. It is about identifying them early and reading signals from the data customers leave for brands. Then apply the same ideas by taking data from the attributes of the best consumers. Ensure that the acquisition of new customers is also optimized.”
He further advises, “Ensuring good customers don’t go and the future good customers are acquired will make a huge impact on the profitability of the business.”
Building a Proficorn in the age of Unicorns
“Now there is a post-COVID world and consumer behaviour is going to change significantly. CEOs and CMOs in a world, where profits are under pressure, need to look at creating a new path to profitability. That is where I coined the word Proficorn. The mindset of a Proficorn is differnt fom a Unicorn. The definition for Proficorn is a company that is profitable, private and is promoter-funded not public so they have actually built the business with the profits of the business reinvested. In this scenario, there are three key differences in the mindset of a Proficorn and a Unicorn. The first is, at times, a lot of Unicorns tend to fire people. Whereas, Proficorns tend to hire because you got to go against the conventional wisdom. This is a great time to build businesses. If you have the capital to invest right now to make the right decisions on growing your team, you’ll come out very strong," stated Jain.
Understanding Customer Lifetime Value and Best Customer Genome
Jain remarked, “One of the core pillars of VRM is the ability to identify Customer Lifetime Value. So, essentially you are going to bear Customer Acquisition Cost (CAC) but what is the customer actually worth? If the CAC is going to be more than the lifetime value of the customer, you are going to lose on that acquisition. So, figuring out Customer Lifetime Value (CLV) is very important. What we have done is used cutting edge marketing models to get a forward-looking predictive value on what the CLV for every customer is going to be. Calculating CLV does two things: Segment customers and let you take attributes of the best customers. What are the methods by which you can actually get them to do additional transactions? That’s where the additional idea comes in which we call the ‘Best Customer Genome’. So, I can look at all attributes of different customers and then say these are the attributes that are shared among the best customers. It is about taking the other customers and leading them towards becoming like the best customers.”
Now when you are looking at acquisition, it will be about using the data from the MarTech world for AdTech. “Using the data which is sitting in my CRM or CDB system and use it for acquisition. Traditionally, these work in silos but if we can cross-pollinate data between them, companies can reduce their cost of acquisition and acquire better customers that will be more profitable for them”, he commented.
Skill sets required to breakthrough in the VRM space
Jain said what companies now need to think of is this new emerging world of data engineering, data analytics, data science, and AI. “For instance, in collecting customer data, the first step is collecting data at every touchpoint. So, if you are a B2C brand just selling through Amazon or Flipkart, you may not get data about your end customers. Maybe (you an get it) through putting something in the packaging like a QR code, a link where someone could get an additional warranty on and where the customers have an incentive to tell you who they are,” he explained.
On a parting note, Jain concluded, saying, “Companies need to hire employees that make consumers go digital. It is about creating a brand presence online and strengthening it. It is about collecting data at every touchpoint that you have with the customer. Based on all this data, it is also about how do you pipeline data engineering, analytics, and figure out how to use ideas like VRM. This will improve the entire experience of getting the best customers and identifying them. Marketing professionals who can understand this new emerging world of data analytics, data sciences will definitely have a big demand and advantage going forward.”
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