Richard Fouts

A member of the Gartner Blog Network

Richard Fouts
Research Vice President
2 years at Gartner
23 years IT industry

Richard Fouts guides digital marketers on best practices for evaluating and deploying emerging digital marketing techniques to ensure marketers make fully informed decisions about their marketing investments. With extensive experience in brand management and marketing communications ... Read Full Bio

The Mother of All Marketing Metrics

by Richard Fouts  |  December 10, 2013  |  3 Comments

Jack says, “Hey, how are things in marketing?” 

Jill responds, “YOY revenue up 6%. Listen to the earnings call.”

Jack walks away, secure that marketing is having an impact on revenue. Sure it is; but revenue as the ultimate marketing metric 

  • Is a rear view metric. It analyzes what occured in the past
  • Can lead to marketing myopia (meaning, you’re so focused on today’s revenue with today’s solutions, you miss out on patterns that reveal what customers are starting to value right now … or what they will value in the future).
  • Is popular in sales-driven cultures versus market-driven cultures

 You know the story …

… the company that experienced rapid YOY growth (maybe 30%) then one year started on downward spiral and failed?  Everyone starts asking, “What happened?” and it’s a sincere, authentic question. How could SwissAir (so financially stable, it was once dubbed the “flying bank”) end up in bankruptcy court? Circuit City, Digital Equipment, Betamax … so many others from the annals of history that tell similar stories. 

Show me a failed company and I’ll show you a sales driven organization that valued revenue as the mother of all metrics. The one thing failed organizations overwhelmingly share: an obsession with analysis of the past at the expense of seeing the future.

What are indicators of future value?

It’s important to look in the rear view mirror. You need to understand past results. But make sure you analyze things that signal how customers are shifting what they value. For example:

  • Which webinars are attracting the largest audiences, and why?
  • Which pages on the web site are generating the most traffic?  
  • Are you getting more inbound inquires?  If less, connect the dots. If more, what are they asking for?  Which inbound inquires were you unable to fulfil? Which inbound inquires didn’t make it into the pipeline due to lack of an offering?
  • Which of your thought leadership efforts is generating the most conversation? In both the blogsphere and the Twitterverse?
  • How are people responding to your comments on other blogs?
  • What are your primary rivals doing to better compete?
  • What are non-traditional rivals doing to better compete?
  • What is the business press saying about your sector’s future?
  • How is Wall Street rewarding or punishing your competitors?

Appoint a futurist

This type of work won’t get done without an owner. Hence, I am starting to see many marketing organizations assign the role of Futurist (can be a part time role you even rotate; doesn’t have to be full time). Have this individual produce a quarterly report that connects the dots among the various items you’ve identified as indicators of the future.

Predicting the Future is Hot

One can conclude that understanding the future – is one of marketing’s hottest trends right now, based on the success of firms such as KXEN, Opera Solutions, IBM Predictive, SAS and a score of other providers that market predictive analytics. Books on predictive analytics are also flying off the shelves.

Customer Lifetime Value (CLTV)

This metric embodies both past and future. Past, in that it helps you identify what your highest value customers bought previously.  And, analyzing the buying patterns of your highest value customers provides insight into how they are changing.

For example, Harrah’s (the Las Vegas hotel/casino) compared the “take rate” of a Challenger offer given to high value customers versus a control group. The control group got the existing offer (which bundled a hotel room discount, two free dinners, and $30 in free chips). The Challenger offered no bundle; rather $60 in free chips.

Customers preferred the Challenger because it was “easiest to fulfill” even though the alternate offer was the better deal.  This insight was used to update other offers as well as construct new ones. The big bonus to marketing: the offer that was cheapest to implement turned out to be the highest generator of positive return.

Harrah experiment underscores a trend we’re seeing eveywhere. Convenience rules.

In closing

Ask marketers how they’re evaluated, and the most common response is pure and simple: Revenue. In fact, most marketers will equate revenue as the mother of all metrics.  Mind you, revenue is the lifeblood of any organization. But, be aware of its limitations.


Category: Digital Marketing Marketing Strategy Strategic Planning     Tags: ,

Is the Customer Always Right? (psst! …it depends…)

by Richard Fouts  |  December 9, 2013  |  2 Comments

Whoever said “the customer is always right” forgot to include  … depending on his or her value.

This week I asked a client to conduct some quick-and-dirty sales analysis; she found that a whopping 8% of her customers contribute 93% of her revenue. Yet – her direct sales forces responds to every customer demand the same. After segmenting customers by value (low, medium, high) she is starting to see the downside of “egalitarian marketing.”

For example, here is how she recently approached a simple direct mail effort.  


Fewer people got the piece (costs were cut in half) but response rate was 500% higher than her previous campaign. What CMO doesn’t want to hear you generated 50% response versus 10%?

This approach, often called value-based marketing also has a big impact on pipeline management. For example, converting 2 out of 100 prospects (to customer) generates a measly 2% conversation rate. The smarter, value based marketer converts 2 out of 10 prospects with  a 20% conversion (at far lower cost) by being more relevant.

 Yes, Virginia .. less really is more.

 What are the attributes of your high-value customers?

You can’t practice value-based marketing if you don’t segment customers by value. It’s an important activity. But you need to get your BU or service line managers involved to help define value – and you need help from IT to align your efforts with the requisite data management requirements and practices.

Once you do this, you’ll love the synergies.  For example, one banking marketer told me his highest value customers have a portfolio of services: large cash deposits, credit cards, auto loans, perhaps a mortgage.

His first priority is to make sure these customers never leave.

Hence, the bank’s value-based marketing initiative informs its retention program.  

Value-based marketing informs smarter up-sells

Value based marketing helps you identify who is just one cross-sell away from becoming a high-value customer.

In the wireless industry, a marketer might define a medium value customer as multiple cell phones from a family plan, a data plan … and land line service.

  • Value-based marketing entices these customers with the benefits of bundled high speed Internet and TV services.
  • If a medium value customer bites, it enters our high-value strata (and the offers that goes with it, for example premium channel packages and a DVR)
  • If we get a response, the customer enters our elite platinum category. After tracking performance, we find that moving customers up the value ladder with product bundles is a particularly effective action. 

When Should You Fire a Customer?

This is an option if the customer produces negative value. Sticking with our wireless industry example, a customer might receive a heavily subsidized handset, then flood the call center, not pay their bill on time (or at all). This customer is fired (by being disconnected and turned over to collections).

Every company has these type of customers. You may not fire them, but you certainly want to migrate them to higher value status or to a lower cost channel (or let them fire themselves).

In Summary

Value-based marketing requires you first understand the spectrum of lifetime value for your customer base so you can categorize them (in buckets such as high, medium, low), then manage them appropriately. I saw one marketer define this at 80 years, the hopeful length of an average life.  This doesn’t work however. A more reasonable number is three to five years, which gives you room to respond, manage and maneuver your tactics in shorter time intervals to maximize profits.

Of course, operationalizing value-based marketing is not trivial. Many of you, especially event marketers – do a good job, targeting customers that have never attended an event differently than those that always attend your events. But as an organization wide practice, value-based marketing is spotty. 

Watch Gartner for Marketing Leaders in 2014 as we do deeper dives into this topic and its operational implications.

Postscript:  I’m told Marshall Fields originated the phrase “”the customer is always right.” Others claim it was Harry Gordon Selfridge, the founder of Selfridge’s department store.   




Category: Digital Marketing Marketing Strategy Strategic Planning     Tags: ,

Is My Toothbrush a Wearable Computer?

by Richard Fouts  |  December 3, 2013  |  4 Comments

Now that there are more non-human devices connected to the Internet than people, the Internet of Things rivals the Internet of People.  As these things transmit usage data, it opens up a goldmine of opportunity for digital marketers.

In fact, one of our recent Gartner predictions highlighted the coming revenue influence originating from wearable computing.  Though our use cases focused on devices we literally wear, like smartwatches, computer embedded in clothing, glasses or contact lenses, co-author Julie Hopkins and I also include wearables such as cars, refrigerators and toothbrushes.

It started when Julie asked me if her Buick constituted a wearable. It’s a fair question. Automobiles are indeed something we frequently – wear.  And as a wearable, Julie’s Buick monitors her behavior – while she’s wearing it – which it analyzes to provide actionable advice. It won’t be long before her Buick (which already has human-like qualities through voice-driven GPS wearables) say things like “… based on your past 90 day driving habits, I’ll need new tires in February versus the planned date of June.”  (These same driving habits might also get leaked to State Farm).


Now Julie has a decision to make. Improve her driving habits and defer the cost of new tires (not to mention a potential insurance premium hike) or sustain her current driving behavior (which she says is a lot more fun) and incur the cost. To influence her decision, her Buick downloads specific guidelines it gets from the dealer to influence her decision towards cost deferral.

This scenario, where cars record driving behavior and warn us of unnecessary tire wear, is close. And it continues after we park and go upstairs (where our connected refrigerator says “based on your current eating behavior, you’re on track to lose 10 pounds by your sister’s wedding”).  

Then there’s my $50 Beam Brush, which syncs with my smartphone to record brushing time (data that can be tracked and shared with dentist and my insurance company). Yes, Beam Brush is managing an insurance company pilot to test consumer reaction to receiving incentives, such as lower rates, in exchange for data. Of course, the same data could be used to support a rate increase.


The data marketers get from my sensor-equipped things also helps them plan. For example, Susan Stribling of Coca Cola told AdAge recently, “We’re able to attain a significant amount of data which allows us opportunities to leverage new product ideas. (Coca-Cola has 12,000 data collecting devices in burger joints, move theatres and college campuses which feed usage data back to Coke).

Of course, there’s that nagging issue that still lingers. Whose data is this, anyway? What do you think?


Category: Applications Digital Marketing Marketing Strategy Strategic Planning     Tags: , ,

The Latest Innovation in High Touch Marketing is Not What You Think

by Richard Fouts  |  November 27, 2013  |  1 Comment

“High touch” was one  the many adjectives we threw in front of marketing a couple of decades ago. Unlike “touchpoints” which was rooted in multichannel marketing – high touch refers to degrees of personalization.  For example, once you’ve researched cars, you go to a dealer where a salesman steps in to help you complete the purchase. Personal realtors provide another example.

Department stores picked up on this concept with “personal shoppers” that brought high touch to buyers of high-end apparel and accessories.

Of course today, things look different. My personal shopper at Bloomingdales is a piece of software that guides me through an online store, making recommendations for the navy suit I’m considering (supported by product reviews from my peers). I even upload a photo of myself (or match myself to a similar facsimile) to see how  the latest Brooks Brothers suit would appear on me (versus the one from Calvin Klein) . While this describes a scenario that is highly convenient, I sacrifice the experience of actually feeling the fabric.  That could soon change.

The latest extension to high touch marketing could come, quite literally, to a touchscreen near you. The technology, known as  “tactile rendering of 3D features” brings small, electronic pulses that trick your fingers into perceiving bumps and texture.

Granted, there are other reasons to get in my car and drive to the store, but this invention provides one more reason to shop from my desk (and avoid traffic, crowded parking lots and lines). 

Score another point for the digital experience.

Tactile rendering for flat screens is being developed by the same company featured in Welcome to the Experience Economy  namely, Disney. In their landmark book, authors  J. Pine and J. Filmore compare economic evolution to a baking a cake. 

First, mothers made cakes from scratch, later opting to save time by buying a “cake in a box’ (where they added water and an egg before baking).  Next, they procured custom cakes, made to their specifications from high touch bakers (happily trading their time for the $25-40 price tag). In the final stretch of economic evolution, the authors note working mothers are quite willing to write an even bigger check, by outsourcing the whole birthday party. 

The authors’ thesis: as per capital income rises, economies evolve from commodity and product based economies to service-based economies – ultimately ending in economies where providers compete on staged experiences. What the authors didn’t foresee was an economy that conquers time and space. If we extend their scenario one more step, we might illustrate the global party, where people from other countries experience the event from their computers, avoiding the cost of an airline ticket. In the virtual world, opportunities for cost avoidance introduce a knee in the cost curve – and the price tag of the total experience starts to fall. 

Creative minds in emerging technology continue to focus on how real world experiences can be replicated online – at less cost than those provided in the physical world. It’s already convinced many people to watch movies at home versus physical movie theatres. In this latest twist, couch potatoes have yet another reason to stay home.

While emerging technology promotes one type of high touch – will it continue to dilute high touch social interactions?

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Why Marketers Omit the Most Important Part of Their Story

by Richard Fouts  |  November 22, 2013  |  3 Comments

Have you ever known anyone who triumphed over extraordinary circumstances? Sure, we all have.

  • Seven years ago, doctors told my youngest sister she had four months to live. She proved them wrong by fighting back hard – and today she’s back on the stage, pursuing her theatre career with a vengeance (doing four shows per year).
  • In Who Says Elephants Can’t Dance, Lou Gerstner recalls a time when his company was hemoraging cash, so dramatically that bankruptcy was imminent (his turnaround plan brought IBM back, even breaking its pervious performance records).
  • When a couple of 18-year-olds (Sean Parker and Shawn Fanning) launched a publically available mp3 file sharing platform, it was shut down by court order (but re-emerged to re-define an entire industry).

As marketers your stories may be as dramatic as this, but you have some good ones. Stories of customers who conquered the impact of a tough situation – with solutions that you provided. Yes, you were the shining knight on the white horse. Perhaps you helped save a business, or brought a product back from the dead, or maybe you impacted a  decision that sent a campaign into the stratosphere.

Whether a story features an aspiring actor, the CEO of a global corporation or a kid in a dorm room, overcoming impact creates story drama. And as ordinary humans, we tend to remember those stories.

But as marketers, we tend to omit the impact part of our tales. That’s unfortunate, because without impact, there’s no urgency to act. Without impact, there’s no business case.

If the impact part of the story is this critical, why is it so often omitted?  Because it’s hard work. Stories of how your solution mitigated (or exploited) quantifiable impact takes some effort. But it’s worth the dig. If you can cite real impact, you’ll join the pool of memorable stories, versus those that are forgotten as soon as they are told.

Your story doesn’t have to have a mind-blowing, game-changing impact. One of my favorites is from the Ford Motor Company – with stories of shoppers whose full hands impact their ability to open the darn trunk …

When shoppers approach their vehicle, they have their hands full, which is why the trunk of the Ford Focus opens with a simple wave of the foot — beneath the rear bumper.

Or this one from my older brother, who has stopped blaming his children for an impact that caused him to sacrifice his favorite toy…

My sportscar became impractical after we had the twins and I dreaded giving it up, but now that I have my Mercedes SUV I wonder why I waited so long to buy it.

Or this one from a provider of perishable goods:

My bakers collectively throw out a ton of food each day, because they can’t anticipate buyer behavior. Now, with predictive analytics they know what to sell – and when - which has increased profits in our European stores by 20%.

Hopefully you’re observing a pattern in these stories, where negative impact – is crushed  by the marketer’s solution.  So before you launch into your product story, take a step back and consider your buyer’s situation – and the impact it is creating on things such as productivity, time-to-market, employee morale, or the bottom line.

The higher the impact, the better the business case.  The better the business case, the higher the urgency to act.


Category: Digital Marketing     Tags:

Why Retail Customers Engage More with Email than Social Media

by Richard Fouts  |  November 10, 2013  |  3 Comments

When people say “email is dead” or that “email is no longer effective” it sounds  like classic kill-the-messenger tactics. You wouldn’t permanently abandon your automobile, even though it consistently fails to perform when you enter the expressway at 5pm.

Same with email. You don’t abandon it because you get junk. In fact, consumers prefer to engage with email more than social media when it comes to learning about and shopping for products.

According to Milward Brown’s study of 1,209 internet users, only 7.6% respondents said they never visit a retail site after clicking on the retailer’s email. More than 77% said they do some of the time, with the remaining 15% saying they often or always go to the retailer’s site. 46% of respondents said they never use social media for shopping.

Email’s trump over social media, at least in the retail space, comes down to one thing; personalization.  Years ago, I conducted focus groups around the United States on loyalty. When asked, “why are you loyal to your favorite retailers?” people in five cities across America consistently ranked “because they know me” as their number one answer.

In the digital relationship, this attribute isn’t quite as personal as a human being saying “Hello, Richard .. nice to see you again” when I enter the physical store, but it underscores the most prominent feature of today’s successful marketing: recognition of the customer as an individual versus a faceless member of some larger customer segment.  

Read the full report, Retail Marketing, from AdAge, which contains key findings from the Milward Brown Digital study. 



Category: Digital Marketing     Tags:

Taking the Risk out of Risk

by Richard Fouts  |  October 31, 2013  |  Submit a Comment

In my PR days, I crafted a speech for my CEO – to be delivered at a town hall style quarterly update. That speech, at his insistence, encouraged the rank-and-file to “learn to take more risks.”  I was one of the poor saps that took his advice to heart – and proposed a plan to apply some aggressive b2c style tactics against, what I considered, a bland b2b marketing plan.

My plan never saw the light of day because it was deemed too risky. And I quickly become known as that “reckless guy from PR.” In an ironic twist, my proposal to take a risk –  proved too risky. It’s a scenario we see repeated many times, particularly in social media. Plans to “go social” are heavily diluted to flush out any sign of potential risk. These plans fall straight into the market noise. Why? Because social is a medium that ignores blandness. It demands some level of risk if you’re ever going to be heard.

How do you balance the organization’s need to reduce risk, with a medium that begs you to take risks?

For starters, you and your CEO need to specify the organization’s risk tolerance. If you don’t, you leave people to specify it themselves. When people aren’t sure how high the risk hurdle is, they guess – and they mostly guess wrong. Hence, the risk mantra becomes a hallow battle cry.

Start by crafting the three key dimensions of any risk management plan:

1      Identify the risks (e.g., people might criticize us)

2      Calculate the probability of the risk’s occurrence (e.g. high)

3      Craft your plan to mitigate the impact of the risk, if and when it rears its ugly head

Not a bad approach – and one risk managers have practiced for decades. But my colleague Jennifer Polk has an even better idea: eliminate risks before they occur. Okay, now it’s getting interesting. Check out Jennifer’s research for how Maker’s Mark, assaulted by customers after its decision to dilute its alcoholic content, converted risk to opportunity.

Or how O2 used social media to squelch what could have developed into a PR nightmare. Even the best laid plans carry risk. But – the beauty of social media: you can use the very platform that caused risk – to mitigate risk. Or take Jennifer’s advice and crush the occurrence of risk before it has the chance to see the light of day.






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How to Break Washington Gridlock

by Richard Fouts  |  October 13, 2013  |  2 Comments

The current stand-off between the White House and Congress reminded me of the negotiation project, conducted by William Ury at Harvard back in the 1970s during the US-Soviet cold war.

Ury provides a litany of advice for getting to an agreement without giving in, based on his research, which you can read here. There’s one piece of advice however, that forms the cornerstone of his philosophy, “Getting to Yes.”  Become the other party.

Mind you, it requires some thespian skills because it’s not just seeing the situation from the other point-of-view but adopting the opposition’s character, for example h/her personality and persona. This gets you close to understanding what the other party wants (even if you fundamentally disagree with their positions) by creating empathy.

I remember trying it before entering negotiations with my customer (the German Airforce; a man named Dieter) to wrap up a contract for the delivery of three automatic test stations. Using Ury’s advice – I scripted – and predicted what  “I as Dieter would say” as I immersed myself in his personality and positions. This exercise helped me see where he would likely be coming from once the session began.  I had worked with Dieter for two years, so I knew him well. 

Imagine my surprise when Dieter practically recited my script verbatim. Now here’s the funny part. I actually sent Dieter a copy of the book prior to these negotiations. He obviously read it, congratulating me for being  “on script.”  When I articulated that he had also followed my script (but that he had twice jumped ahead) … we both got a good laugh. Bottom line: we negotiated what we both considered a fair and equitable deal.  Niether of us felt we had given in.

I have a feeling if Obama became Boeher … and vice versa … the two would reach an agreement.


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How do Consultants Approach Digital Business Transformation?

by Richard Fouts  |  October 3, 2013  |  3 Comments

I’m just about to publish results of interviews with 13 professional services firms who enlightened me on how they approach transformation engagements. Here’s a sneak peek:

Approaching digital transformation within traditional project structures doesn’t work.  It’s difficult to set quantifiable objectives if the ultimate business model you’re driving toward is unknown. Transformation puts you in discovery mode; treat it more like a scientific experiment versus an engagement with a known deliverable.

For example, most projects are all about delivering on-time and on budget and keeping risks at a minimum. Transformation is about discovering real breakthroughs in current performance versus marginal improvements. It’s about taking risks and working iteratively against unknown outcomes using agile principles of operating. Consultants call it discovery oriented project management where theories are developed to build hypotheses, conduct experiments and launch-and-learn.  Other advice:

Keep your core team small:  Staff a core team of six to eight business leaders, comprised of C-Level executives (or one of their direct reports) from marketing, operations, finance and sales. Large teams are not as equipped to work fast – and speed is important especially if you’re being threatened by agile startups. Many decisions will need to be made in real time, another argument for a small empowered team.

Understand customers as users:  B2B organizations in particular, may know their buyers (division managers, procurement arms or corporate buyers) but know little about the people that actually use their products.  After intensive observations many companies find ways to play a larger role in the customer’s day. Fedex and electronics distributor Ingram Micro for example, embraced this exercise to find ways to use their business infrastructure to push their services further up the value chain.

Engage cognitive & behavioral scientists.  Be open to staffing transformation engagements with cognitive and behavioral scientists who understand how the digital customer perceives problems, uses information and analyzes data.  These guys come to the process with no biases or preconceived notions of how things should be done. They also ask second-order questions ( “Is there a better way to decide how we replenish stock?” versus “What stock should we place on shelves today?”).

Approach the old and new in parallel.  Think of transformation as parallel tracks. The first re-positions your legacy model to an altered marketplace leveraging the value proposition that has worked in the past. The second develops new sources of growth through an internal, startup-style business unit. This dual approach is occurring at Xerox, Barnes and Noble, Nike, the New York Times and scores of companies going through customer focused digital transformation.  

Get inspiration outside your industry: Most of you insist on consultants that deeply understand your sector. You’re not wrong to insist this, but be open to staffing these engagements with an expert that may have a moderate understanding of your sector, but with a high degree of empathy and expertise in the area you want to impact, for example customer service, delivery, loyalty or user experience.  

Don’t treat transformation as a one-time initiative. Every organization needs to build transformation expertise into its core competence, because this exercise will come around again.  For example, research from Innosight reveals that in 1958, corporations on the S&P 500 lasted in the index for an average of 61 years. By 1980, that had fallen to 25; today it’s just 18 years. This rate will only accelerate as digital techniques mature.  

As Damian Kimmelman, founder of the disruptive data business DueDil likes to remind us, “With the internet barely 20 years old, there’s much more anarchy to come.”




Category: Marketing Strategy Uncategorized     Tags: , ,

Pondering the Future Marketing Organization …

by Richard Fouts  |  October 2, 2013  |  1 Comment

Dealing with the realities of the digital business has shaken marketers to their core – in sectors facing “obvious disruption” – for example, media, travel, entertainment, financial services and retail. Now, marketing organizations in all sectors realize innovation is not an option – as the nexus of forces, the Internet of Everything, and business models becoming software provide rich sources of growth for everyone. The question is no longer who’ll transform next, rather when? 

As the digital business movement accelerates…

  • Marketing teams, big on ideas but short on resources, will forge deeper partnerships with providers (even competitors); they’ll get more aggressive in crowdsourcing ideation to customer advocates (to innovate faster and expand their value propositions); they’ll find more ways to sell products online, move toward massive customization, and make data driven customer insights part of more decisions. Out of sheer necessity, marketers will get more aggressive in distributing tasks to other functions.


  • Marketers will also push their teams to adapt to an even more collaborative buying process as customers and prospects find it even easier to tap each other’s opinions through social networks, mobile apps and wearables (which will quickly move beyond the health and fitness markets). Marketers that resist designing experiences for the mobile/social, collaborative-hungry buyer will lose; those that skillfully encourage these interactions will win, not only share, but margins and growth; 


  • CMOs will lean on their teams to diversify – to grow beyond their traditional markets – and through digitalization – sell new products to new customers (e.g., through internal startup-style businesses). CEOs are seeing how emerging technologies make it possible to tap markets that were previously unavailable due to geographic constraints (or customers too hard to find through old demographic models) – and they will expect marketing to step up.


This is just the start of a growing list. What exciting, career-enhancing, stress-provoking, late-night-coffee-drinking, off-the-wall ideas are on your mind about the marketing organization of the future?









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