Online companies have raised the eyebrows of privacy advocates who think web generated data should only be archived for a specified period of time. And while some companies have bowed to public pressure and only keep data on customer searches for a maximum of three months, others have not acquiesced. When it comes to privacy concerns, should Internet based companies be required “to forget?”

Neuroscientists have long claimed the act of forgetting is important to the processes of the human mind. Humans have a need to forget especially because each day our brains deal with tons of trivial information and clutter, not to mention hundreds if not thousands of marketing messages.

Therefore, our mental processes must prioritize which facts should have more importance than others—such as ‘where are my car keys?’ versus ‘what did I eat for lunch last Thursday?’ We must forget, because according to neuroscientists, our brains would overload if we captured every detail of our lives.

Yet, unlike the human mind which has a fixed capacity, computer data stores (i.e. disk, tape etc) are getting larger and cheaper to manufacture thereby allowing companies to keep more transactional details very inexpensively.

In fact, thanks to accelerating technological change, companies can now take advantage of less expensive data storage to keep transactional data for longer periods of time—with the ultimate goal of mining data for insights to improve the customer experience.

However, data retention policies of considerable length run head first into concerns from privacy advocates. For example, according to a Washington Post article, online search companies have policies in which they actively keep query data from 3-18 months, and in some instances longer. Their rationale? Online search companies say query data is used to improve their algorithms, optimize search results, and provide advertisers better targeting.

Privacy advocates, however, argue that search queries often contain personal details, and taken collectively can reveal a complete picture of the person using the search engine. Ultimately they say, too much power in the hands of a few key search engines is a privacy nightmare.

To effectively meet customer needs in a very complex and fluid economic environment, companies must be able to collect and analyze data to understand customer behavior, drive better communications and respond to changing customer needs. That said, the benefits of data collection and analysis must coincide with responsible behavior.

Questions:

• Should online companies be required to “forget” what they know about their customers and transactions? If so, what is the cut-off point?
• Should corporations advertise that they quickly “forget”—much as Ask.com has?
• Are consumer privacy concerns regarding data collection policies more bark than bite?

Ever since Chris Anderson penned “The Long Tail”, it’s commonly accepted that products with low sales volume can, en masse become bigger markets than sales of blockbuster products. However, a recent Economist article takes a different angle, suggesting that marketing executives should in fact, make the big bet and go after the blockbuster “hit” product.

Back in 2005 when “The Long Tail” first hit bookshelves, Wired Magazine editor Chris Anderson advocated business executives should, “forget squeezing millions from a few megahits” and instead focus on niche markets where sales volume from obscure products can potentially tally big profits.

Mr. Anderson made a compelling case that just because a product or service isn’t a “hit”— doesn’t mean it won’t make money. Citing concrete examples from Amazon, Netflix and music service Rhapsody, Anderson argued when it comes to consumer choice (especially online), more is better and “fringy fare” can be extremely profitable. In fact, one key conclusion from “The Long Tail” is to “embrace niches.”

Is the mass market dead? Is niche marketing the wave of the future? The author of an Economist article titled, “A World of Hits”, suggests otherwise.

A key premise of the Economist article is that in fragmented world—with abundant choice—blockbusters matter more than ever. Citing television examples such as “American Idol”, “Survivor” and others, the author says that “top programmes are holding up well” and often at the expense of lesser entertainment options.

The article also mentions that “hits” are important in the music industry. For instance, even as overall album sales have declined 18% in Britain since 2004, albums occupying the number one spot have actually increased in sales. In addition, managers at Spotify music service disclose the most popular tracts on Spotify now account of 80% of streams. Moreover, in a rebuke to niche marketing—for a six month period, 1.5 million tracks on the service weren’t touched at all!

In fact, the author of the Economist article concludes, “Just because people have more choice, does not mean they will opt for more obscure entertainments.” In fact, a few examples show the opposite is occurring:

• The top three US newspapers have all held onto subscribers much better than local/metro papers
• Vampire movie, “New Moon” earned more in a day than any other film in history
• The Lost Symbol by Dan Brown sold 1 million copies in the first day
• In the past ten years, the top ten best selling books in Britain increased from 3.4 million to 6 million

Adding more fuel to the fire, research firm SNL Kagan calculates that between the years 2004-2008, movies that cost more than $100 million to produce, “consistently returned greater profits to big studios, than cheaper films.”

These are substantial and concrete examples that the “blockbuster” isn’t dead. However, let’s be fair to Chris Anderson, especially because he doesn’t advocate giving up on blockbuster products or services altogether. “Hits still matter,” he says, as a way to lure customers to an online or offline location. From there, recommendation algorithms (online) or trained personnel (offline) can steer customers towards other products or services that may be just as enticing as the blockbuster.

Long tail vs. the blockbuster? Perhaps there’s room for both.

In the Economist article, Jeff Bewkes, head of Time Warner says as much, “Both the hits and the long tail are doing well.” And going forward, a steady stream of profitable niche products/services alongside a stable of blockbusters may be the ultimate “win-win” approach for enterprises.

Questions:

• With a potential audience of one billion, is a one-shot commercial on the SuperBowl worth $3.1 million (USD)?
• Movie makers would love to always churn out “hits”, but they’re usually few in number. How can studios determine in advance which movies will be popular?
• Long tail vs. blockbuster. Do you favor one approach over the other?

Related article: HBR “Long Tail Economics, Give me Blockbusters“

To forecast the future, marketing leaders often look to the past. But the past isn’t always a very reliable gauge of future conditions. For proof, we need to look back to a day-in-the-life of a turkey, and implications of not preparing for possible “extreme” events around the corner.

First, let’s start with a fun exercise courtesy of Wilmott Magazine. Let’s look at damage estimates of earthquakes in California from 1970 to 1993 in the table below. Can you make an educated calculation of losses due to earthquakes in 1994?

Taking a look at the distribution of data, notice the low end is “0” and at high end, the most damage caused was “129”. So what’s your guess?

If you’re like me, you probably guessed wrong. Using the above numbers as an “anchor”, most people would reasonably assume that 1994’s earthquake was either an average of the above numbers or perhaps a bit higher than 129. Maybe you even threw out “129” as an outlier in the dataset. To be honest, I guessed around “200”.

The correct answer is “2217.2”! FEMA estimates that every year earthquake losses in the United States add up to $4.4 billion a year. But then, some extreme outliers can really skew that number, especially years like 1994 where just the Northridge Earthquake in California alone tallied $20B in damage!

Let’s get back to talking turkeys via a parable from Nassim Taleb, author of the “Black Swan”. Dr. Taleb reminds us that fat, dumb and happy is probably the best way to describe the life of a turkey. They’re fed and nurtured for three years straight. Day after day, they expect the same thing. But then, one fateful day arrives and the “life” of a turkey ends quite abruptly.

Can we accurately predict the future based on reviewing and analyzing historical data? Sometimes, but we have to make assumptions of similar conditions, a normal distribution, and event independence. Complex systems will have none of these characteristics. Dr. Taleb says as much; “Real life isn’t a casino.”

Indeed, the parable of the turkey and the earthquake loss estimation exercise show us that predicting the future in complex systems can be a futile exercise because there are so many unknowns, changing conditions, and inter-connecting relationships. Extreme events that carry a huge impact happen, and some would argue they’re happening a whole lot more often as interlocking financial markets and globalization become commonplace.

Should prediction exercises be avoided? Nassim Taleb would argue otherwise; “We need to start thinking of the inconceivable,” he says. And while we cannot determine the exact probability of tomorrow’s events, we can “get a general idea about the possibility of their occurrence.”

And that’s where scenario planning comes into play. Bill Ziemba, author of the aforementioned Wilmott Magazine article says, “Getting all the scenarios and their probabilities right is impossible and doesn’t matter much anyway. What is important is to cover the board of possible occurrences. Then you will make sound decisions with risk under control.”

The fact is, like the turkey, we just don’t know what tomorrow will bring. So, plan for the five to seven most likely occurrences and then develop contingencies based on those scenarios. French microbiologist Louis Pasteur says it best, “In the fields of observation chance favors only the prepared mind.”

For a turkey, today may appear like any other “normal” day. However, tomorrow could be the chopping block.

Questions:

• Nassim Taleb says, “It is only in very rare circumstances that probability (by itself) is a guide to decision making.” Does this mean that historical data analysis isn’t worth the effort?
• If chance favors the prepared mind, what’s the “next unexpected twist” that marketers should be looking for?

Charged with finding new markets for growth, many Western marketers are eyeing China’s rising middle class and terrific GDP numbers. And while getting Western products and services into the Chinese market is hard enough, the ability to compete and thrive in China takes mastery of specific skills and processes. Success also involves a drastic change in mindset.

As one of the few countries in the world showing positive economic growth, the future of China sure looks promising. And to take advantage of a very large marketplace, Western companies like Pfizer, Astra Zeneca, Goodyear and others have established beachheads in Chinese markets. However, an Economist article titled, “Impenetrable” reminds readers how truly difficult it is to sell foreign goods in China.

To be sure, some companies are thriving in China. The Economist article cites luxury good makers, airplane manufacturers, and commodity producers as successfully penetrating China. Yet, for every success story, there are a dozen works in progress especially in fields such as pharmaceuticals, banking and insurance and telecommunications. In fact, Ronald Schramm, a professor at the Chinese European International Business School says that the impact of Western firms’ total sales in China are little more than a rounding error.

Why all the difficulty? Western firms must deal with the fact that for all the excitement of capitalistic economic zones in China, most of the enterprises in China are state owned. That means Western companies must deal with plenty of costly and unending red tape from protective Chinese authorities. And while China joined the World Trade Organization in 2001, there is much work to be done to level the playing field for Western companies to effectively compete.

Yet, all hope is not lost. Digging a bit deeper for strategies to penetrate and prosper in Chinese markets, I interviewed Globe Trade founder, Laurel Delaney. Ms. Delaney argues that companies doing business in China need to change their mindset and think of China as an investment that will pay off over the long run. She says, “It takes tremendous time, incredible patience and phenomenal preparation to do business in China. Many companies just don’t have the stamina, perseverance or dollars to last — yet, if they hang on and keep working on it, they will eventually find success.”

The path to successfully navigating Chinese markets also involves avoiding the biggest blunders. To that point, Ms. Delaney mentions the number one mistake a Western marketer can make when looking to China for growth is attempting to go it alone. “You need a strong and effective team and good “Guangxi” (relationship) when doing business in China,” she says. “The stronger the team you assemble breaking out of the gate — the greater your likelihood of success in developing business in China.”

Ms. Delaney also mentions the types of local talent, needed “on the ground” to propel success. First, she says, Western companies should set up a peer-to-peer advisory board consisting of legal talent, an individual with M&A knowledge, a transportation and logistics “superstar”, a banker and a governmental contact. It’s these people that can help a Western marketer iron out issues and challenges they’ll likely face.

In addition, outside of setting up a joint venture with a company, consider hiring local talent to help market to Chinese consumers. According to Ms. Delaney, someone on your marketing team, “(needs to know) native tongue languages of China, is smart and masterful at communicating which includes marketing/advertising, has experience with your product or service offering, and has a history of proven success.”

China is an economic giant and is poised—eventually—to be the number one economy in the world. For Western marketers, finding ways to get your products and services into China is definitely worth strong consideration. Success in Chinese markets won’t come easy, and it won’t be cheap. China’s markets hold great promise, but also peril for companies that lack determination and endurance for the long-run.

Questions:

• A Business Week article notes that in many instances the Chinese government has of late, “strengthened its grip on the economy.” Is there any hope for Western companies to sell their wares against state owned companies?
• Green industries are often cited by futurists as an area where the United States and other Western nations can create competitive advantage. And yet, currently, 35% of the world’s solar cells are made in China. Will the next Green revolution take place in China?
• Beijing University professor Michael Pettis says, “There is little real innovation or branding ability in China.” Does this provocative sentence scream “opportunity” for Western marketers and their associated products/services?

In the United States, ZIP +4 assists marketers in targeting customers by city, neighborhood, or street, but geospatial location intelligence can help marketers perform much deeper analysis. And “analysis” is where the real value of geospatial lies.

A ZIP + 4 code according to Wikipedia; “uses the basic five-digit code plus four additional digits to identify a geographic segment within the five-digit delivery area, such as a city block, or a group of apartments.” And since the introduction of ZIP + 4 in 1983, this feature has assisted direct marketers (not to mention the USPS) in saving millions of dollars in costs.

While some marketers may decide that ZIP +4 is enough for customer targeting purposes, they’re missing out on a whole level of analysis available from geospatial that can help squeeze more return on investment from scarce marketing dollars.

The term “geospatial” describes a specific type of analytical software combined with geographic data. Going much further than simple ZIP +4 formats, geospatial comes to life via the transformation of a customer address into geographic coordinates (latitude and longitude). With geospatial, a whole host of marketing analytics is now available to marketers. Examples include:

• Map locations. By overlaying geospatial data types with a mapping tool (such as Google Earth) marketers can pinpoint store or office locations in proximity to customers.
• Calculate distances between locations. Stores, offices or distribution centers can be precisely calculated and then evaluated to examine if they are too close or too far apart. For example, marketers can determine the midpoint between two stores to meet the needs of an under-served customer segment. With geospatial, there’s no guessing, whereas it’s pretty difficult to calculate the distance between locations with ZIP +4.
• Marketing by the mile (or less). Suppose you have a specific store location and you want to market to households 5.1 miles to the north, 2.5 miles to the south, etc; essentially building your own polygon for direct marketing purposes. With geospatial capability, you can do this exercise; ZIP +4—not so much.
• Disaster planning. When an event occurs, let’s say a hurricane is brewing, will you be able to see which stores will be in its path? How about households? How might this event affect your ongoing or future marketing campaigns?
• Risk management. Customer concentration or density analysis (Fig 1) can identify specific areas in which you may be taking on too much risk.

Figure 1. A visual example of density analysis. Source

Some marketers want to know, in comparing ZIP +4 vs. geospatial—which is best? The answer depends on your specific problem, resource constraints, and level of analysis required.

ZIP +4 can help a marketer drill down towards a fairly small area for targeting and the process of converting a mailing list to ZIP +4 is relatively inexpensive. Whereas, adding geo-spatial capabilities usually involves use of an analytical infrastructure (database and hardware), software applications (i.e. data integration and visualization tools), and both technical and business know-how to perform analysis and act upon newly discovered information.

ZIP +4 may work best as an inexpensive way to improve customer targeting. However, as seen from the above marketing examples, geospatial capabilities open a whole host of analytical options for marketers that ZIP +4 just cannot match.

Questions:

• With three billion mobile phone users in the world (and growing) will “location” become an increasingly important component of marketing in the next 3-5 years?
• A business intelligence infrastructure is a necessary pre-cursor to geospatial analysis. What does this say about the skill sets marketers will need in the future to perform such analysis?

It’s the fourth quarter,  and for most companies with a fiscal year starting in January, it means it’s marketing budget time. To kick things off, here’s a favorite quote of mine, author unknown; “You can’t steer a ship that’s not underway.”

There’s a lot of debate regarding the relevance of strategic planning. Some view strategic planning as a waste of time since most strategic planning is either a futile once a year exercise that is dusted off the following year, or an endless cycle that drags through September of the following year without clear goals and outcomes that are actionable.

The other school of thought is act now, plan later. Plan along as you move along–and keep moving.

There’s something to be said for both.

Overall, the marketing planning process for the next fiscal year should take only about 8 weeks. You need to plan for the following year, get leadership buy-in, establish funding and then start with execution.

Of course, as the business adjusts, so you also tweak your plan—nothing is set in stone. You don’t want to sit in the water going thru endless cycles, but you also need to plan so that you don’t become reactionary to changing market dynamics.

Do your strategic marketing planning, but don’t spend more than two months on it. And then get going. Don’t be a victim of analysis paralysis.

Besides Wall Street bankers, the poor of the world need access to financial liquidity too. But loaning money to individuals lacking credit history and formal employment can be a dicey proposition. Indeed, pitching financial services to people in the rural hinterlands takes effort, patience, and a tolerance for risk. It also takes marketing—but perhaps not in the way you might think.

In the dusty and dry northern Indian state of Uttar Pradesh, farmers pray for rain. Ample rain means the difference between a bountiful harvest allowing farmers to sell excess crops and starvation. This year (2009) has been a particularly harsh year for drought, as the monsoon season has been “meager” with roughly 20% less rainfall than usual.

With sporadic rainfall, farmers must find a way to even out their cash flows and this usually means borrowing. However, the Reserve Bank of India cites, “more than half (of farmers) do not access credit from either institutional or non-institutional sources.”

Into the gap come micro-lending institutions; companies or entrepreneurs offering small loans to the poor. Loans traditionally range from $50 to $300 (USD) and sometimes more. While interest rates are usually quite high, the economics of risk management and defaults requires these loans to price in a premium.

Micro-lending can be quite profitable—with an average return on assets of 5%, yet the poor still must be educated as to concepts, value propositions, and contractual terms of these financial services. This is where marketing plays a role.

A WSJ article, “What Works and What Doesn’t Work in Rural Finance,” describes trials and tribulations of an Indian company attempting to set up the infrastructure to make micro-finance possible. Banking in remote regions like Uttar Pradesh isn’t as easy as setting up a branch with tellers and an ATM. In some places, electricity is scarce and dirt roads can be challenging to navigate. So the Indian micro-finance company had to take an alternative approach.

First, the micro finance company decided to build franchisees via a partner network. This was probably a very smart decision, especially since some of the risk of failure (and success) would be born by others.

Second, the micro-finance company had to overcome trust issues as only 59% of the adult population of India utilizes a bank account. Many of India’s poor would likely be very suspicious of anyone offering to loan them money. To counter this, the micro-finance company hired local individuals with the realization they would likely be better received into the community than new settlers to the region.

In so far as mistakes, the micro-finance company set up franchises with new kiosks and slick neon signs to create attention and attract visitors. However the neon signs intimidated the villagers and actually drove traffic away. The micro-finance company learned its lesson, dismantled the neon signs and instead created signage that used “traditional painting techniques used in village homes.”

Another mistake was to bring out slick marketing materials filled with financial jargon that most Western consumers expect. “We realized that (this approach) doesn’t cut ice with villagers,” one of the micro finance entrepreneurs noted. So the company provided the franchises with less flashy marketing materials that simplified the message.

As marketers, we can look at the successes and failures of this micro-lending roll out and chastise the entrepreneurs for not understanding the value of localization. But to be fair, how many of us (in the Western world) would have made similar mistakes?

It seems counter-intuitive, but as our flat world becomes more globalized and inter-connected, localization strategies will actually take on added importance. Marketers, as we push forward into new markets and emerging economies, we should leverage what we can in best practices and processes, but we should also realize one size will not fit all. In most cases, niche marketing—while time consuming and potentially costly (in the short term)—will drive higher returns on marketing spend.

Questions:

• India has 192 official languages, a very diverse geography, strong religious faiths, a caste system and two dominant opposing political parties. Is better segmentation and targeting the recipe for marketing success in India?
• Many of India’s poor don’t have access to credit, insurance, or savings. Do you see a potentially huge opportunity for financial services—not only in India but in other countries?
• Micro-lending has a goal to “improve people’s lives.” What lessons learned can Western Financial companies take away from this mission statement?

Related: 10 Questions for Muhammad Yunus

With daily pressures for instant results, deadlines and executive demands for a six- to nine-month return on investment, most marketing executives are challenged to think strategically. A key question confronting marketers is, “Should marketing and the marketing budget be managed for the long-term or the short term?” Your answer probably depends on whether you view marketing as a wedding or a marriage.

In my experience, marketing is most effective when it is treated more like a marriage than a wedding. Conceptually, here are a few things that make a marriage work:

• Committed to the long haul (hopefully)!
• Focused on planning for the future (allocating resources to fund different priorities)
• Allows for conflict and cooperation (give and take—working towards a win/win situation)
• Constant communication is the norm

Driving the analogy home, marketing is more effective when, like a marriage, it is focused on:

• Building stronger, and long term relationships (with customers, internal customers, partners, sales teams etc…)
• Constant communication (with the parties above)
• Driving a deeper understanding (in this case, of customers and competitors)
• Seeking to influence the “bigger picture”–not boxed into the “day-to-day” minutiae
• A continual process—a journey of improvement, as opposed to marching towards various destinations

I had a wedding many moons ago and it was fun, but anyone who is married knows—the hard work begins after the wedding. Does the same thing hold true for strategic marketing?

Are some marketers avoiding the “hard work”—the process, the long term focus, the constant communication, the deeper understanding, the bigger picture etc because it’s easier and more fun just to open up an excel spreadsheet and move dollar amounts around to the different columns?

When presented with a budget of say, $500K, I’ve seen many marketers quickly approach it this way: A dash of industry associations, a pinch of direct marketing, maybe a tradeshow or two? How about a couple of display ads in the national IT publication?

Where’s the groundwork? The plan to meet business goals? The multi-year plan to expand to new markets? The portfolio review? And how much investment is it going to take to get there?

I propose that marketing should n more like a marriage than a series of weddings. Not to say execution of events and marketing deliverables isn’t important, but marketing should seek to influence the direction of the business, not just plan for the latest display advertising campaign.

Is marketing in your organization, more like a marriage or a series of one-off weddings?

Should marketing be treated more like a marriage? I’d love to hear your opinions…

With limited customer service resources, companies are challenged to deliver access to service in an expedient, fair and cost-effective manner. Since customers hate to wait, how can a company balance available resources and service—to effectively meet and/or exceed customer expectations? Queue management can help.

Where customers have to wait in line for service, you can be sure the science of queue management is involved. Queue management is the design of customer flow to and possibly through some function (cashier, customer service, help desk agent etc.). Processes can be documented, calculated and optimized and are sometimes enabled or automated by technology. But not all queues are created equal.

In a WSJ article, “Justice—Wait for it on the Checkout Line”, author Carl Bialik discusses how different industries react and adjust to improving customer wait times. For example, in an effort to speed service and ensure fairness (first come, first served) Wendy’s has long implemented a single line to order food. And most airlines, with the exception of the red carpet treatment for frequent fliers, also have implemented a single line for customer service.

Undoubtedly, most of us have experienced the aggravation of Murphy’s Law of queues—that the line next to you, will finish first. To address this issue, most transactional businesses (with the exception of grocery stores) have implemented a single line (or queue) for service. A single queue helps speed service and more importantly, gives waiting customers a sense of fairness that they will be served in an orderly fashion.

So your customer wants fair, but he/she probably also wants fast. And while you may think you’re delivering speedy service, your customer likely perceives something entirely different.

The above WSJ article cites a study by Richard Larson a professor at MIT which showed that customers waiting in line for a Boston Bank “overestimated their wait times by 23%”! So, customers often think they wait longer than they actually do, and get especially irritated when others get service (unfairly) after arriving later.

Now let’s add something else to the mix – suppose you are a business that has segmented your customer base and identified your most profitable customers. What if you wanted to design processes for them to “jump the queue”—allowing them to go first?

For example, in an effort to reward their most valuable customers, airlines often let passengers with status board an aircraft first. Some airlines employ priority baggage handling where bags in effect “jump the queue” by coming off the conveyor belt first. Passengers without status often look at this special treatment as unfair—at least until they achieve a level of status and start accruing special benefits!

Indeed, it’s a tricky balance to deliver a different level of service to a customer segment –especially when that treatment is visible to your entire customer base.

Technology can and should play a critical role in optimizing customer queues, especially when there is more demand than resources:

• A global grocer based out of the UK uses sensor technology to “count” how many people enter a store location and then “predict how many tills will be needed up to an hour in advance and monitor average waiting times and queue lengths.”
• Disney uses technology to create “virtual queues” such as FastPass to “track guest activity and smooth out demand by scheduling a future time slot for guests to return to an attraction.” This practice helps reduce wait times and allows guests to enjoy more attractions in the park instead of waiting in long lines.
• Automated call distribution systems allow for the intelligent routing of priority customers to agents with the right skills to assist them.

When it comes to customer service, every business must consider its capacity, and required service levels based on customer expectations and then balance these variables with available resources, costs and fixed architectural constraints.

However, a word of warning; getting the service queue wrong could be a prime reason why your customers aren’t coming back. Richard Larson, the afore mentioned MIT professor, says he remembers a time—23 years ago, when he wasn’t served on a first come first serve basis at a local department store. He hasn’t been back since.

Questions:

• The WSJ article notes that at grocery stores there seems little time to exchange pleasantries with cashiers as management systems track the speed of each transaction. In the name of optimization are we sacrificing a “better” customer experience?
• Is self-checkout the savior for long wait times?
• When it comes to waiting in line—would you take fairness over fast? What about “valuable” customers that get to go first—any resentment?

A hotel manager looks out in the lobby and notices a guest with a Hermes tie. Another is carrying a Prada handbag. In an instant and through “the power of the glance,” the hotelier decides these folks “look right” and are worth giving special attention. Unfortunately, this hotelier has probably just thin-sliced his or her way to lower profits.

No surprise to anyone, some upscale retailers and hotels are looking for visual cues to determine the service level they should provide to customers. According to a somewhat dated 2007 WSJ article, “The Gatekeeper: How Posh Hotel Sizes Up Guests”, some hotels are sizing up guests based on what car they park in valet, or what they’re wearing when they walk in the door.

In addition to keeping a record of the spending of hotel guests, the staff of the Peninsula Beverly Hills looks for signs of wealth and sophistication in guests. The article notes,

“The hotel’s managing director, Ali Kasikci, is something of an anthropologist of status signals. He is highly aware of the delicate hierarchy of fashion and symbols of influence, and he looks for small details to tell him what a pair of jeans and a T-shirt can’t.”

In the article, Mr. Kasicki spots a Hermes tie and a Charvet shirt among his wealthy guests and says, “It’s like a skunk. There’s enough scent being sprayed around that you can connect the dots.”

And while as of last year, Mr. Kasicki has recently moved on from the Peninsula Hotel to the Montage Beverly Hills, undoubtedly he’s still thin-slicing; segmenting and treating customer’s differently based on his seasoned observations and intuition.

It’s also a dangerous strategy.

Malcolm Gladwell, in his best seller, Blink, defines the concept of thin-slicing as, “the ability of our unconscious to find patterns in situations and behavior based on very narrow slices of experience.” Essentially, it’s the ability to see patterns based on extensive experience in a particular field or discipline. In the case of Mr. Kasicki, his years of hotel experience at the Peninsula and Four Seasons give him visual cues and “distinctive signatures” of which guests can afford his services.

Here’s the problem with intuition however. Solely relying on “at a glance” decision making, or decision making based on gut instinct can be very costly to our business and careers. For Mr. Kasicki to make better decisions on which guests should receive special attention, both observational data (visual cues) and hard numerical data are necessary.

It’s probably challenging in a service business like high-end hoteling, to not consciously or unconsciously segment and then treat customers differently based on how they dress or what they drive. However, even Mr. Kasicki admits that sometimes he gets it wrong when it comes to sizing up his guests. For example, the article notes a poorly dressed retired pharmaceutical executive is one of Mr. Kasicki’s wealthy guests!

It often makes sense to build loyalty programs, marketing campaigns and service/product offers to keep valuable customers spending money with your company. A good segmentation strategy, based on quantitative data, can help a company determine what customers to keep and which ones to let go to the competition.

For example, a data-driven customer profitability and life time value (LTV) analysis could show that while an individual is a frequent guest to a high end hotel, they also tend to bargain for the lowest rates, berate the service staff, tip poorly, steal towels and swipe hotel fixtures.

In an era of fierce competition, taking care of your most profitable and valuable customers has never been more important. Just don’t base your definition of a valuable customer on criteria such as he or she “looks the part.” Even Gladwell admits, “We are often careless with our powers of rapid cognition.”

Can you judge a book by its cover? Providing better levels of service to your top customers is a good strategy, but close your eyes for a moment and let your data speak to you for a comprehensive picture of who is “valuable.”