Rajesh Jain’s idea of creating differentiated experiences for your best customers through ‘Velvet Rope Marketing’ and creating ‘Proficorns’ rather than ‘Unicorns’ are concepts that companies can adopt in these difficult and uncertain times to ensure a profitable business. The Founder & Managing Director of Netcore Solutions is clear that this is the best time for a CMO to adapt and become a Chief Profitability Officer using marketing technologies on the existing customer base.
Here are some excerpts from an interview with him…
Q] How are we looking at the MarTech scenario right now post the COVID-19 pandemic and how do you think companies will have to pivot themselves for the future?
In short term, of course, a lot of companies get hit because the volume of transactions go down. But I think once the recovery process starts, we are going to see a much more rapid shift to Digital. Even companies which have been operating offline will have to work out a digital model. Some of the factors we are seeing emerging from the current situation like social distancing, lower income and less discretionary expenditure are going to stay for much longer. Secondly, brands will have to position themselves as being an essential brand and not a discretionary one and will have to look at a digital way to engage with customers. We will have to think of this more like a third world war. It may sound scary, but the economic consequences are going to be really significant. Companies are going to have to rethink how they engage with customer and their core business models.
Q] Any particular business model you see coming out of this situation? Any particular segment within the MarTech space you see getting more traction out of this?
I think one important shift, which even otherwise was going to happen, and has been accelerated due to the current situation is the shift from AdTech to MarTech. AdTech is about customer acquisition, while MarTech is about customer engagement. In these times, one of the first budgets to reduce is new customer acquisition. Rather than spending money on acquiring new customers, companies are going to focus on the ones they already have. In about 18-20 months, there will be the shift away from third party cookies, which Google has said it will eliminate. So it is important for companies to build up first party relationships as they go forward.
Also, generally companies focus on ‘median’ customer marketing. They don’t tell you to separate customers based on Customer Lifetime Value (CLV) segments which are there. There is a tendency to protect the customer churning. But when marketing budgets get minimised, the key idea will be to focus on your best customers and create differentiated experience for them, which I call Velvet Rope Marketing (VRM). This means to segment customers by lifetime value based on Recency, Frequency and Monetary (RFM) value, taking the top 20% customers and deepening engagement with them by creating an amazing experience, the way they do in airline check-in counters, first class and business class, etc. Also, VRM is much more than a loyalty program. In a loyalty program, anyone can sign-up and collect points. In a VRM program, it is the brand that decides which customers are eligible for the differentiated experience. That is the shift which marketers will need to look at doing.
Q] You have also talked about the concept of ‘Proficorns’ vs ‘Unicorns’. How are they relevant during difficult and uncertain times?
Everyone loves Unicorn companies and are fascinated with them. Unicorns tend to raise a lot of money but there is also a lot of quick spending and cash burn in the quest for rapid growth at all costs. A Proficorn company has four characteristics: profitable, private, promoter-funded and having a reasonable valuation (say, $100 million or more). The whole mindset is towards profitable growth. In difficult and uncertain times, Unicorns fire and Proficorns hire. When the going gets tough the first instinct for Unicorns is to fire in order to control costs.
Q] There may be companies which need initial capital to reach a certain scale and volume before they become profitable. Where do they fit in?
Some industries and businesses require investment, but many a times, after getting investments, entrepreneurs tend to get into this burn business model – ‘Growth at all cost’. Their mindset is to grow the company and exit. For Proficorns, it is actually a mental model to view business from a long term perspective and take decisions accordingly. I refer to this concept from Simon Sinek’s book ‘The Infinite Game’ which talks about having a long term mind-set across various functions.
Rajesh Jain, Founder & Managing Director, Netcore Solutions was a pioneer in Asia’s dotcom revolution, creating India’s first Internet portals in the late 1990s. One of Jain’s early ventures, IndiaWorld Communications, was launched in 1995, and was acquired by Satyam Infoway in November 1999 for US$ 115 million in what was then one of Asia’s biggest Internet deals, remembered even today in the world of Internet Technology. Jain is an alumnus of IIT-Bombay (B.Tech, Electrical Engineering, 1988) and Columbia University (MS, Electrical Engineering, 1989). He worked at NYNEX, USA, for two years before returning to India to begin his entrepreneurial ventures in 1992. Netcore Solutions today is a global marketing technology company that offers AI-powered marketing automation and analytics solutions.
Q] The MarTech space is very competitive in India. Also there is a huge presence of international companies. How and where do you position Netcore?
Our edge comes from the fact that we have a full stack of MarTech services. Over time, marketers and enterprises will need to limit the number of vendors they deal with because every additional vendor means an additional integration point and sharing company data with someone else. Also, now there is a big risk that companies could go bankrupt or run out of funds. A lot of start-ups in the next 12 months are going to face severe challenges. Also, there is a cost of doing integration across multiple different technology components in the stack. At Netcore, we build a full stack marketing automation, including owning the channels of delivery, automation and analytics built into the system and then AI and ML, personalisation and CSM. That Netcore is in a strong position financially will help us differentiate even more. Companies get caught up in trying to reduce staff and cost, which inevitably hamper their customer relationships. Our core belief is that done right, marketers can actually be profit drivers of the companies at these times. The CMO should actually become the Chief Profitability Officer at these times, and use new technologies on existing customers and generate profits.
Q] Netcore acquired an AI chatbot start-up Quinto.Ai in August 2019. Then in Nov 2019, Netcore acquired Boxx. Ai. What are your views on AI and ML in the future and Netcore’s play in it?
In a way AI and ML essentially seeps through every part of the business. So, we are using the Quinto acquisition for the WhatsApp chatbot we created. Boxx.Ai again is a very good technology that helps personalisation of all kinds of communication. I see a primary shift in omnichannel personalisation and use of AI and ML in that. You need a lot of past data in order to be able to predict the future. So AI and ML are a big investment area for us.
Q] What are the specific gaps in your MarTech services today that you wish to fill with acquisitions or organic growth?
I will break it up in two parts. One I would call business as usual and business as unusual. Business as usual means we have to keep doing what we are doing right now, which is to sell our email and marketing automation solutions in India, South East Asia and US, where we have just begun. So there we will have some short term hiccups but we will benefit from the basic shift towards Digital.
In business as unusual, we really want to expand aggressively in the US so probably this is a good time to look at acquisitions there. From the technology side, especially the VRM idea that I talked about earlier, transaction data can best identify customers and start the next set of journeys and campaigns for these customers. So possibly it will be a good time to look at CRM, CDP and loyalty companies in India and South East Asia.
Q] What according to you are the MarTech concepts that marketers today have adopted very well and the aspects that they still find very challenging?
One thing that marketers have done very well is push notifications. All of us get a lot of app notifications so that is something which has been done very well. The one thing which they have not done very well is to figure out Customer Lifetime Value (CLV) correctly. Many companies have a primitive view of calculating CLV by just taking the average of transactions, which I think gives a backward looking view. As Peter Fader explains in his book, “Customer Centricity”, CLV has to be forward looking and a predictive measurement.