Stoffer's Soapbox

Lead Gen: Evolving to Meet the Needs of the Millennial Generation

Direct marketers should heed these facts from recent Deloitte and Disney studies on the millennial generation:

• The average teen/tween uses their cell phone for ~3 hours per day
• 44% of teens use text messaging as their primary means of communication
• 58% of teens use their cell phone in class
• Millennials spend 51% of their online time at user-generated sites while the overall population only spends 24% of their online time at these sites

Clearly, the next generation uses voice and email communication less and is more dependent on text communication and social networks.

A lot of pundits, investors and entrepreneurs have written about the future of lead gen (see Jeremy Liew of Lightspeed Venture Partners's excellent post from January). All these predictions have to be viewed through the lens of the overriding macro trend here - which is that outbound calling will be even less productive in the future as customers move toward other means of communication. So, what will happen? Here are a few thoughts on how lead gen businesses and associated industries will have to adapt:

1. Lead vendor landing pages will give many options - (i) the ability to chat with a sales rep., (ii) use click to call via eStara or another vendor and (iii) fill out the form in a traditional way
2. Each communication channel will need to be trackable and CPL will be determined by ultimate conversion rates (e.g. a chat might have a CPL of $5 while click to call might be $40)
3. Lead forms will contain a space for IM screennames
4. All sales and customer service agents will have IM on their desktop to communicate with clients

I know I am missing many of the implications - please chime in with comments. What else will lead vendors and their clients need to do to adapt as the millennials age?

Intelligent Call Routing - Is LiveOps the Answer?

In most outbound sales-focused call centers, leads are assigned rather haphazardly, often based on some rudimentary skill sets or based on giving a higher volume of leads to the better sales reps. If these call centers learned to be more precise in lead allocation - and ensure that the right lead gets to the right salesperson - they could find a pretty significant lift in conversion rate and profit.

Some call centers have moved up a rung in sophistication by allocating leads based on propensity to convert - i.e. the majority of leads from the highest converting lead sources go to the best sales reps (of course there is a balance here - if you give new or low performing reps only the worst leads, they will never have a chance of improving). This is better but still not optimal - the highest converting lead source for one sales rep is not necessarily the highest converting for another.

Now imagine nirvana - a system that would dynamically determine which reps are best at converting which leads - for example, Susie is best at selling to associate's degree prospects from the South while Jon is best at selling to potential MBA students in the northeast. As the leads come in the door, the system would then allocate them across the call center to optimize whatever KPIs management wants optimized. Well, nirvana exists and it is called Live Ops. David Hornik of August Capital explains how LiveOps works in a recent blog post:

"LiveOps is in essence AdWords for people. The platform is able to measure and manage each individual agent in real time and route calls based upon the performance of each agent. And that routing doesn't simply rely upon data about the agent. It also relies upon information about the call coming in. If a call to the LiveOps' service is to sell a Ginsu Knife, the agent with the best track record of selling and up-selling will get the call. If, on the other hand, it is a call concerning front line product support, a different agent may have the best record of quick and effective resolution of support matters."

Perfect, right? Well, not if you have already invested millions in your call center infrastructure that still sits on the books. The only way to use LiveOps is to either outsource operations to a LiveOps call center or rip out your entire call center infrastructure and install the LiveOps Hosted Contact Center. If LiveOps or someone else would introduce a similar intelligent routing capability that sits on top of Avaya, Genesys, Cisco and other legacy call center platforms, they would have a huge profit opportunity.

Will U.S. For-Profit Educators Look Globally

30 years ago, banks were largely regional in nature. Today, big banks not only have a nationwide footprint in the U.S., but a huge international presence as well.

This begs the question: will the big U.S. for-profit education companies ever focus on international markets? Will there ever be a Citibank equivalent in the education space?

UOPX, Kaplan and others have  dabbled internationally, but Laureate is the only major provider who has a significant portion of revenues from international operations.  There are certainly acquisition targets out there: Veris in Brazil, UNITEC in Mexico and New Oriental in China come directly to mind. Valuations may be rich, but learnings from the US market certainly have synergistic value in maturing markets, especially with regard to marketing and online education.

Check out this presentation from Howard Levy, EVP of Kaplan. It not only gives a decent overview of the US for-profit market but highlights international opportunities as well.

5 Keys to Success in a Hot Transfer Environment

Bill Rice is hosting the Leads2007 conference in Florida in mid-August (I'm 90% certain I'll get there). I am looking forward to speaking with other companies that are using an upfront telemarketing team (or the lead vendor Double Positive) to transfer hot leads to their sales team. Despite all its advantages, a hot transfer environment does make lead allocation a much more challenging task. After implementing such a system, I have laid out 5 Keys to success below:

1. Beware the Inverted Pyramid. In a traditional push system, where reps are assigned leads, many companies assign the most leads to their highest performing reps and the least to their lowest performing reps.It is easy, in a hot transfer environment, for this to become inverted. Your worst reps likely have the lowest average handle time and, if proper controls are not in place, will take the most transfers. I challenge each of you using hot transfers to stack rank your sales force by conversion rate - I'd bet your top performers take the fewest transfers and your low performers are burning through leads.
2. Avoid "Cherry Picking" by Setting Clear KPIs for Management and Sales Reps. The sales team is likely used to getting judged on absolute number of sales -  in education, the metric is enrollments. I cannot stress how important it is to change this to reflect conversion rate - otherwise, the incentive is in place for a sales rep to take as many transfers as possible and "cherry pick" the easy sells
3. Mandate that low performers take only a prescribed number of transfers per day. If you have the technology for intelligent routing, build this into your business rules; if not, at least put manual rules/processes in place
4. Aggressive performance management. By design, each lead is more valuable in a hot transfer environment (you probably pay 3-4 times more per transfer than you do per lead). As such, your low performers in this environment are far more harmful to your bottom line than bad performers in a traditional push environment. So make a quick call on letting people go - if it is clear someone, once fully trained, will at best be a mediocre performer, let them go quickly
5. The corollary to aggressive performance management is aggressive and constant hiring. Aggressively recruit top talent constantly, from staffing agencies, competitors, local universities and elsewhere in the local business community. And make sure you have a rigorous hiring process - this is not just using a behavioral profile to screen upfront, but also encompasses the interview process as well.  As an example, when I hire admissions advisors, they have three interviews: (i) standard behavioral; (ii) a roleplay over the phone using a sample call flow and (iii) they get 20 minutes to prepare a ten minute presentation on a topic of my choosing. If they pass these three tests, I'll put them out on the floor for a half hour next to one of my best reps so they can see what the job is like (also, it''s amazing what candidates might say to someone they view as a peer).

I'm curious to hear from others their experiences in implementing hot transfers - lessons learned and pitfalls to avoid.

Branding in For-Profit Education

In the traditional direct response business of for-profit education, companies have increasingly taken the leap to more branded advertising (e.g. UOPX branding the Cardinals stadium) in order to differentiate themselves in a competitive marketplace. There is a great article in Harvard business Review this month that sheds some light on the issues our industry will face as we move toward a greater brand spend - titled "If brands are built over years, why are they measured over quarters."

As for-profit educators move toward a marketing model with increased branding dollars, they will initially have trouble meeting the major sales goal they are traditionally measured on quarterly - conversion rate of direct marketing leads.  In the short term, for every dollar of spend taken away from direct marketing, operators will need to increase the expected conversion rate of their sales force to meet sales goals. There is no reason to believe this is possible - and it is likely that an increased focus on branding will have a negative short term impact on financial results. So, similar to a traditional CPG brand, where there is a tradeoff between promotional spend and branded advertising spend, for-profit educators must balance the long-term benefit of branding versus the more short-term rewards from increasing the lead buy.

Here I ponder two big questions: (i) will for-profit educators be able to make the right short-term/long-term tradeoffs as they allocate their marketing spend between branding and direct response marketing and (ii) will the companies that have recently gone private - Laureate and EDMC, have an advantage as they will be able to make long-term investments without quarterly Wall Street scrutiny.

I'll end with an interesting quote from the article- which speaks to managerial incentives and how the decisions made today will affect our industry in the many years to follow: "The use of short-term sales data as a yardstick for brand performance can interact in unfortunate ways with the tenure of a brand manager—which is typically quite brief, often less than a year. Any brand manager who takes a long-term perspective—investing in advertising or new-product development—is likely to benefit the performance of subsequent managers, not her own."

Evolution of Online Advertising

Check out this great post from Sean at Double Positive on the evolution of advertising online - Sean discusses the evolution from CPM to CPC to CPA in this post. I am sure his next post will speak of Cost per Transfer - as this is the basis of Double Positive's business model and an emerging trend in outbound consultative sales.

One interesting theme Sean discusses is the rapid growth of lead aggregators like Lending Tree and Advertising.com - he writes, "Lead aggregators essentially disintermediated the advertisers’ brand from the user UNTIL the lead was sold to the advertiser." I would ask: Did these aggregators also reduce the ability of online advertisers to craft a unique brand identity?

In online education, some companies give these lead aggregators 75%+ of their overall media spend.  If you look at the landing pages for several different schools, they have no differentiation in messaging. Check out this Classes USA landing page for Kaplan -  it has a stock photo in the upper left corner that could be used for any other school and the first paragraph reads: "If you want to begin a career in accounting, the Associate of Applied Science in Business Administration/Accounting will give you the credentials you need to achieve your professional goals."

If I go to 10 other schools, their Classes USA landing pages sound essentially the same. So a customer's first interaction with the Kaplan brand gives that customer no differentiation and no reason to choose Kaplan. Not an ideal state of affairs for Kaplan and other education companies. I think what you will start to see is Kaplan and others asserting more control over lead aggregators and more tightly controlling the image and messaging potentially customers see when they hit those landing pages.

Spacetime - Bringing the 3D Web to Life

Continuing my recent fascination with the immersive web, check out SpaceTime, a new 3D browser featured today in tech crunch. I was widdling away time this evening waiting for my fiance Amanda to come back from a business trip by searching for flickr images and eBay listings on SpaceTime. Definitely runs too slow and the lacks the features to be an everyday browser but it is very addictive.

Generational Disruption in Media

Rajil Kapoor of Mayfield has a great post on Generational Disruption in Media, where he speaks of how "the services that appealed to one generation (e.g. those of us in our 30s like Yahoo, hotmail, etc) tend not to appeal to a new generation (e.g. those in the 20s or teens like MySpace, AIM, etc)." This is a great follow-on to my recent post hypothesizing that the "Webkinz/Club Penguin" generation will not be satisfied with MySpace and will want a web experience that is fully immersive by nature.

Ning - building social networks around your brands

I don't know how I missed this one months ago but a colleague of mine today pointed me toward Ning, the latest project from Netscape co-founder Marc Andreesen, which allows anyone or company to set up a social network with all the latest bells and whistles virtually for free (see article in Information Week). Ning has 61,000 social networks in place, ranging from individual sites to powering social networks for CBS TV shows.

With minimal set-up costs, Ning makes it that much easier for any B2B or B2C facing company to use social networking as a marketing tool. GM has had a great deal of success with its FastLane blog -  why wouldn't it, for example, build a social network around its brands - for example, a social network for Corvette owners.

Of course, the hard part is still building a vibrant network, but at least the toolkit now comes virtually for free.

Virtual Worlds are for Real but Second Life is Today's Prodigy / AOL

We are beginning to see widespread adoption of virtual worlds. According to a post in the Lightspeed Venture Blog, kids and teens have pushed at least 6 immersive worlds to over 2 million users a month. Interestingly, the highest level of adoption comes from our youngest consumers ages 10 and below. Club Penguin and Webkinz target this demographic (both at 4.1 million UU/month).

So what happens when these kids grow up? They will not be happy with MySpace and Facebook-type social networks as they stand today. They will want a more immersive web experience. Even when surfing the web, people will want immersive experiences - imagine going to toyota.com and having the site set up as a virtual world, with virtual car dealers, virtual test drives, etc. Now imagine there is a standard (forgive my lack of technical jargon) which enables these virtual worlds to be linked together  so I can drive my toyota car to the Apple store. Now, Linden Labs is trying to create such a world in SecondLife, which sits outside the standard web. But, in ten years, today's under-ten year old generation will spur the whole next generation web to standardize around immersive virtual experiences.

I can't imagine there continuing to be many virtual worlds that do not link together. And I cannot imagine today's youth accepting Linden Labs or any one company as the gatekeeper of their web experience.