The Funnel of Love

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Not since college did it seem like a funnel could possibly be the path to a relationship. (And even then, let’s be honest.)

The marketing world uses the funnel as a metaphor to describe the narrowing of prospects from all potential consumers to ones that convert. Dating lends itself naturally to the funnel metaphor, describing the uplifting phenomenon of how all the fish in the sea winnow down to The One you catch. As schools of fish drop out along the way, the funnel identifies which steps have the worst conversion rates with the most opportunity for improvement.

It all comes down to AIDA: Awareness, Interest, Desire, Action. Each step along the funnel represents Dating Offender archetypes, perhaps a depressing study, but with knowledge comes the power to increase your luck in the Funnel of Love.

Step 1 – Awareness. Even the best products fail if no one hears of them. The same applies to people: The New Girl, The Shy One, The Hermit. The antidote to Step 1: GET OUT THERE.

For Jill, being in a relationship meant being a recluse (along with the come-hither paradox of wearing sweats while entirely avoiding sweating). Jill found herself single after three years of this charming behavior, and to remedy her awareness quandary, she instituted The Single Turnaround Plan: working out, dressing up, and going out — increasing her awareness (and attractiveness) by about 82 percent. Jill excels in the remaining AIDA steps, so heightening awareness remedies her problem.

marketing-conversion-funnel-300x300Walt, on the other hand, maximizes awareness because he flushes his chances further down the funnel (i.e., when you get to know him). Walt is the dating equivalent of Viagra e-mails: sleazy, unwelcome, and shameless. He plays the numbers game, knowing if he spams everyone with his bad lines, a certain small percentage of women (read: the very drunk and insecure) will be fooled. Walt (literally) boasts a shockingly high success-to-attractiveness ratio.

Step 2 – Interest. As Walt illustrates, you can excel in awareness, but lose it all by Step 2 if you create negative impressions. Interest is epitomized by the Set-Up Test: Can your friends trust you will make them look good if they set you up? Or do you give blind dates a bad name?

Kate falls squarely into the former category, the universally Interest-ing category. In the two minutes she was single, Kate had more set ups lined up than she could fit in her own organic date schedule. Maddie was brainstorming matches for Kate, briefing her on the bachelor behind door number one. “Is he your type?” Maddie asked, passing her iPhone with his Facebook profile pulled up.”Sure, he’s cute and sounds nice,” Kate said. “Am I his type? Does he like petite blondes?” Maddie (one herself) arched an eyebrow, “Who doesn’t?”

Step 2 also includes the natural attrition of those simply not on the market for the product you are peddling. In non-dating terms, you may be aware of a dog-walking service, but you’re probably not signing up if you don’t own a dog. So circling back to Step 1, there’s no point soliciting increased traffic of cat lovers only to certainly lose them in Step 2. One dating market equivalent of non-dog owners is the declared Eternal Bachelor.

The keys to increasing conversion in Step 2 are need identification and demonstrating benefits. Reid knows he falls into the generally Interest-ing type: tall, handsome, twinkling blue eyes, funny, Ivy League pedigree. But he also guarantees Step 2 success by articulating his value proposition of being a good cook and foot massager, tricks he rolls out by date two that usually get him all the way to about Step 4.

Precisely what deal are we closing? A date? A committed relationship? The Whole Fairy Tale? We might need a bigger funnel.

Step 3 – Desire. By this point, your product has awareness and you’ve sifted out those not in your market wheelhouse. Now the task is to convince your captive audience that your specific product is aspirational and best meets their needs, relative to their other choices on the market. Desire gets down to the nitty gritty: Do the specifics of your product meet their needs and evoke their desires?

the_conversion_funnel_600Kitty is a master of Steps 1 & 2. She is to meeting men as the Top 1% is to making money. And she possesses looks and charm to earn nearly 100% interest. But she tanks when it comes to Step 3, due to an addiction to drama and instability worthy of a soap opera, which combined make suitors think there must be a lower-maintenace substitute good.

Step 4 – Action. Not until Step 4 do we get to the ABCs: Always Be Closing. Customers know you, they’re on the market for you, they’ve decided your model fits their needs, but can you coax them to take the plunge?

Precisely what deal are we closing? A date? A committed relationship? The Whole Fairy Tale? We might need a bigger funnel. In the original AIDA model, Step 3 could be interpreted as the dating process and Step 4 as marriage. But more sophisticated later models drill the funnel deeper by adding follow-up steps to account for customer retention. The Customer Relationship Management perspective would make Step 3 flirting, Step 4 dating, and Steps 5+ closing the deal.

I will leave insights on those advanced steps to those with higher bottom-of-funnel conversion rates than I.

Ready, Aim…

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Kinsey is to New York as Alice is to Wonderland. She is wide-eyed, optimistic and wandering around the dating scene like she just plummeted down the rabbit hole. Is she dating anyone? “No, I suppose I’m not!” What’s her type? “Anyone, really!”

cheshire-cat-10When Alice asked the Cheshire Cat for directions, he wisely countered: “That depends a good deal on where you want to get to.”

“But I don’t much care where,” young Alice replied carelessly, inspiring the sage advice: “Then it doesn’t much matter which way you go.”

Oh Alice. The marketing world would prescribe STP – Segmenting, Targeting, Positioning – to the Alice’s and Kinsey’s of Dating Wonderland. STP is the ultimate focusing matchmaker, helping identify potential consumer options, select one, and then tailor her marketing efforts to the selected group. Its magical focusing powers work in just three steps:

Step 1: Segmentation. The many fish in the sea can be divided into groups based on several dimensions: geographic (convenient or long distance, suburban or urban, uptown or downtown), demographic (20s or 40s, Christian or Jewish, Top 1% or the other 99%), behavioral (gym rat or couch potato, party girl or good girl, high roller or penny pincher), and benefits (constant companion or free-reign autonomy, partner or sugar daddy, housekeeper or trophy wife).

Not every segment will want you, but enough will that you shouldn’t waste time and resources on those who do not.

To be useful, segmentation schemes must be:

  • Relevant: Do segments frequent a particular place or respond differently to marketing? When Jocelyn was momentarily single, she had to make the (ever wise) decision between two exes, one whose relationship complaint was she was too social and one whose critique was that she was not social enough (men). These two segments (segmented behaviorally) would respond differently to Facebook posts of Jocelyn dressed up, champagne flute in hand, so Jocelyn had to pick a lane or risk alienation.
  • Sizable: Is there a sufficient potential to warrant attention? Take Adam, who sits on the other end of the  focused-unfocused / naiveté-cynical spectrum from Kinsey. He is gay, Jewish, Persian and German, and he knows exactly what he wants: a gay, Jewish, Persian, German mate. Of course, unless Adam is a literal narcissist, statistically he is probably out of luck.
  • Accessible: Can you identify and reach segment members in a targeted way? Jessica has outgrown late nights and bars and other places she used to rely on meeting people; moreover, she has outgrown dating people who like late nights and bars. She wants to behaviorally segment to find someone who enjoys nights in, but she is not sure where to find them if they are busy enjoying nights in.

 

targetStep 2: Targeting. So many segments, so limited by targeting. How’s a girl (or boy) to choose? With segments identified, the next step is choosing one target. An attractive segment has sufficient size and growth, is not overly saturated with competition, and, perhaps most importantly, is compatible with you.

STP requires an honest evaluation of your strengthsScreen Shot 2013-01-06 at 3.16.18 PM. One of the great axioms of life: Not every segment will want you, but enough will that you shouldn’t waste time and resources on those who do not. Pick a segment that values your offerings so you can capitalize on your strengths rather than fight your weaknesses.

While you are at it, when possible, choose a market not overly saturated by competition – or at least where you have a natural compatibility advantage. STP works because consumers prefer – and value at a premium – things that exactly meet their needs. You can have success in a large, saturated market if you serve a niche of the market better.

Step 3: Positioning. What is your value proposition? Alas, the essence of positioning is sacrifice, so this step is where the Kinsey’s of Wonderland have to push their limits. A positioning statement and its three elements help communicate and focus a value proposition:

  1. Target Segment: Who is your segment? Where do you find them? How do you communicate with them? What do they value?
  2. Point of Difference: What are the key benefits you deliver to this segment?
  3. Frame of Reference: Who is your competition for this segment, and how could you serve the segment better? Take a Miami club opening filled with 20-year-old 100-pound models. Here a mere mortal’s competitive edge is not a shorter dress, but rather witty repartee. (Or perhaps the moral of this exercise for Alice is to avoid going among the mad people.)

The Bottom Line: Balance Sheet vs. Income Statement Relationships

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Kate is about 10 blissful weeks into dating Greg. You ask her how it’s going, and she quite literally glows as she says “wonderful, we’re so in love.” It would be nauseating, but Kate is too adorable to harbor such negative feelings against, so instead, you share in her honeymoon too.

Then around week 10.5, the honeymoon threatened to be rained out. We’re drinking beer out of wine glasses (naturally) on a new rooftop bar, and she announces solemnly that it may be over with Greg. What happened? He cancelled plans the night before just an hour in advance, and hadn’t apologized fully. Sweet southern Kate looked dazed in disbelief, and my 30-out-of-30 “J” on Myers-Briggs empathized with the tragedy of a cancelled plan. But in the scheme of life/relationships, this was Not A Big Deal.

Here’s the problem: The early days of dating are Income Statement Relationships. Without a base of equity to draw on, even a minor expense can bankrupt a young relationship. You are living paycheck to paycheck, date to date, call to call, text to text.

 Income Statement:  Revenue – Expenses = Net Income (Loss) 

An income statement records revenues and expenses, which net out to create either a profit or a loss for a specified accounting period. Not coincidentally, this period in relationships follows the financial quarter system, forcing relationships to review the bottom line after that magical three months. Many relationships, of course, dissolve around this time. But the lucky ones take the profits accrued in that first period and translate them into equity. And the Balance Sheet Relationship is born.

A balance sheet is a snapshot of a partnership’s condition, measuring assets, liabilities, and equity of the shareholders. While an income statement indicates a company’s current operating conditions — and so can be a good indicator of future health — a balance sheet measures how sold the foundation is — and is thus a measure of history.

Balance Sheet: Assets = Liabilities + Equity

Retained earnings — known as profits on the income statement and as equity on the balance sheet — link the two financial statements. Once there’s sufficient equity to warrant drawing up a balance sheet, the net income from each income statement period either builds or draws down equity on the balance sheet.

The early days of dating are Income Statement Relationships. You are living paycheck to paycheck, date to date, call to call, text to text.

Darwinistic accounting favors Balance Sheets to Income Statements. Problems that bankrupt an Income Statement Relationship often don’t move the needle in a Balance Sheet Relationship. Back when the world was falling apart in 2008, income statements dried up for even the formerly most profitable firms, and the only companies left standing were those with healthy balance sheets. Likewise, when real problems hit in relationships, those that have a base of accrued equity to draw upon — and have established a good credit record to borrow in the really bad times — can survive the same issues that could kill even a very promising, profitable new relationship.

On the other hand, there’s a lot of baggage and seriousness that comes with Balance Sheet World. While a balance sheet with several homes doesn’t stink, there’s a carefree freedom to not having the overhead and liabilities that accompany those assets. Plus as relationships get more grown up (clearly speaking out of my wheelhouse here), some of the shared assets become illiquid (children being a prime example), and a relationship that has long since been drawing down equity in each period persists because the balance sheet is too established.

But back to lighter things I know more about. Greg apologized charmingly and profusely, and in the make up process, converted his expense into a revenue. Kate and Greg are about a week off from the end of the quarter, and the analyst consensus predicts a positive bottom line. Welcome to the Balance Sheet Relationship. (Prepare yourselves.)

Performance Issues

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Alas, relationships aren’t all bath tubs on sunlit beaches. Inevitably, even the best employees and relationships sometimes feel more like cold showers. The key to being a successful manager is catching performance issues before they escalate into commercial-worthy problems.

But first we must play Nancy Drew to identify the type of issue:

  • Competence Issue – Lacks the ability to perform up to the standards of the position. Not every job nor relationship is a good fit — you don’t always figure this out from a CV and a few rounds of interviews. Typically results in termination.
  • Training Issues – Capable of meeting expectations, but lacks adequate training. Many times poor perceived performance is the manager’s fault for not providing the proper tools. In relationships, this often comes down to communication, and trusting that, as a wise ex once put it, “we are on the same team with the same goal of making you happy” — and then teaching your partner the tricks of the trade.
  • Performance Issue – Lacks commitment. Defined as:

Performance Issue = Demonstrated Competence + Loss of Commitment

Performance issues are the most frustrating cases because promising candidates have proven they are capable of performing the job splendidly, but then.they.just.stop. Why?? (That’s always the question.) Workplace disciplinary procedures define the differential as loss of commitment, which sounds about right for relationships too.

As scary/sadistic as “disciplinary procedure” sounds, it is the adult/professional alternative to either ending a potentially great relationship or tolerating an unhealthy one.

Work place disciplinary procedures are designed for performance issues to ensure conduct meets the position’s standards. As scary/sadistic as “disciplinary procedure” sounds, it is the adult/professional alternative to either ending a potentially great relationship or tolerating an unhealthy one. Disciplinary procedure is really just a formalized path for communication (always a good thing!) through three steps, of course:

  • The Verbal Warning: The fair warning that serves both parties through providing feedback, validating reasons for loss of commitment, and giving the opportunity to improve.
  • The Official Warning: When the problem persists, at work this escalates to a written warning, and in relationships this is the ultimatum.
  • The Dismissal: Situations that inevitably frustrate both parties should be put out of their misery.

Best case scenario, step one works and it’s all happily ever after. Worst case scenario, in the most severe situations, you skip steps and move straight to Code Red Dismissal. If only there were a pill to solve the problem….

Milking It

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Consider the plight of milk: a G-rated dairy product forever branded with an R reputation.

Your mom always told you that you can’t give away the milk for free and expect anyone to buy the cow. If your mom was a convenience store retailer, she might have told you to put the milk in the back of the store.

That’s the age-old store execution dilemma: where to locate the destination product (read: the product most shoppers are looking for) to maximize sales. In convenience stores, that product is the milk. In dating, it tends to be the “milk” too.

Make the milk harder to get.

A store must decide how to balance the two factors that drive sales:

Sales = Basket Size x Traffic

Unfortunately (you knew this was coming) a tradeoff exists between basket size — what a customer spends — and traffic — the number of customers. Not shockingly, convenience store customers are looking for easy (hence the type of establishment they frequent). Their goal is simple: to get milk, and to get in and out as quickly as possible. The store that makes accessing milk easiest — by putting it right up front — creates the most convenient experience and will be rewarded with the most traffic. But consumers probably will buy just milk.

On the other hand, if a store puts the milk in the back, customers are forced to spend more time in the store on the quest for the milk. They linger in the aisles, get to know the store, and usually find other things they want, growing the basket size. And if a store does a really good job merchandising, it may even convert some customers into shopping there for more than milk. But it will also alienate customers just looking for convenience.

In the convenience store metaphor, eliminating milk-only sales may or may not be a good thing, depending on the inverse relationship between traffic and sales, but in the non-metaphor real world, basket size should universally be chosen over traffic. The convenience store lesson: Make the milk harder to get, or (referring back to the distribution article) trade up from the open-24-hour-convenience-store business to a superior distribution channel.

 

Who Moved My Boyfriend?

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Everyone likes cheese. And the good-slash-bad news is it's everywhere.

I always give up cheese for Lent. It’s a good spiritual exercise (everything has cheese, truly) and has the added benefit of erasing five pounds (who knew everything has cheese?). I highly recommend it.

More relevantly, this year I also abstained from the “Who Moved My Cheese?” metaphorical type of cheese: dating. (Notably 40 days and 40 nights of dating abstinence was a 5-year personal record.)

Places there are no cheese: my last relationship and apartment 7D. So unless I am escalating this abstinence commitment to nun level — or adapting my wheelhouse to the sushi delivery guy — I need to run the maze.

When I first read “Who Moved My Cheese?” about 6 six years ago, I read it in the way I read most things: As a relationship book. Which I am pretty sure was not Spencer Johnson’s intention, as his succinct best seller sits in the esteemed business section of Barnes & Noble (or iBooks — clearly dating my reading here) not the maligned self-help section. But I stand by my relationship-biased interpretation of “Who Moved My Cheese?” in 150 words or less:

Cheese (here: a happy relationship) is what makes you happy. But cheese can go bad over time, so you must do a regular sniff test to make sure it’s not turning blue. Sometimes you can salvage a relationship by sniffing out trouble early, and sometimes you just need to throw out the cheese. This is tough because you remember how good this cheese was, how much you paid for it and what it took to find it, and you truly want to believe you just smelled it wrong and it will be better again later.

But This Is Clearly A Lie. There are two places in your life not serving cheese: Your Last Relationship and Apartment 7D. I tell both you this, reader, and myself, as Lent is now over. Unless I am escalating my abstinence commitment to nun level — or adapting my wheelhouse to the sushi delivery guy — it’s time to trade my dairy ban for running as my health measure of choice and run the maze.

Directions to cheese: Step 1: Exit your apartment.

With our cute new neon Nike Frees on foot, let’s run the maze together. Here are my tips for the road: Running the maze requires a Yes Attitude, as in you say YES to every invitation. Attend benefits. Go to happy hours. Accept blind dates. Run on the WSH not looking like you just rolled out of bed. You won’t meet someone every time you go out, but on the other hand, you certainly won’t meet anyone if you don’t. And besides, running is good for you.

Managing Your Distribution

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One of the key choices in any marketing plan is ‘place’: Where should you sell your product (read: You)?

The first step in selling yourself (admittedly that sounds wrong) is identifying your target market.

  • Want an athlete? Target Nike. Join a soccer league — or make an effort to not look homeless at the gym.
  • Want a do-gooder? Go Toms. Volunteer, or attend charity benefits if it’s more a good-on-paper requisite.
  • Want a hipster? (I’m not going to pretend to know hipster brands.) Take the L Train to Brooklyn.
  • Want a WASP-y pretty type? Brooks Brothers time. Head taxi to Dorrians (if you want him to be 23) or the Union Club (if not).

Once you’ve chosen a channel, remember this: Keep your distribution channels clean. Your distribution choice sends a quality signal. Good luck selling at Neiman Marcus if you’re also selling at everyday low prices at Wal-Mart. Dive bars (and the low-cost transactions that occur with frequency there) are the dating equivalent of Wal-Mart: high-volume, low margins, and bargain-hunter-friendly. You won’t typically find high-end shoppers there, and if they are, they are bargain hunting for cheap-and-cheerful disposables, not investing in family heirlooms. On the other hand, I love the Hamptons in the summer — weekend after weekend of Worth Avenue-worthy shopping sprees.

Good luck selling at Neiman Marcus if you’re also at Wal-Mart.

But there are thousands of Wal-Marts and only about 40 Neimans, so there’s a tradeoff between margin and volume. And we have to be honest with ourselves as marketers: You want to choose a channel that’s appropriate for both the target audience and the product. And frankly, you may find Neimans shoppers snobby and impractical.

Calculating Relationship NPV

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I am gagging a little as I type this and imagine you surely will as you read it, but stick with me here: Before you next open your heart, open Excel. That’s a terrible thing to say, and there’s probably no need to be so extreme — the math required you can do in your head, unless you are the total opposite of me and prefer Excel. But back to the point, which is this: Sometimes the work of the heart needs to be outsourced to the head, because the heart can irrationally hope. But you know what doesn’t irrationally hope? Net Present Value. (Heartless financiers.)

Here’s how it works: Net Present Value uses the time value of money (here: happiness) to appraise how much value long-term projects (relationships) add to a firm (you), by discounting incoming and outgoing cash flows (for better or worse) over a multi-period time horizon (life) back to present value to evaluate a suitor’s investment potential (date ‘em?)

As an amazing firm with assets and experience to offer, naturally you are pitched many projects. Individual prospectuses must be evaluated for their own merit, but as is true with so many things in life, there are types:

  • The Muni Bond: A safe relationship with a long horizon of steady but modest positive dividends. No risk, but no big upside. (The Safe Relationship.)
  • The Junk Bond: A long shot with a high-payoff. For the non-risk averse who are willing to lose it all and start over repeatedly on the quest for the big win. (The Out of Your League Reach.)
  • The Bubble: Seductively promises immediate gains — and Everybody’s Doing It — but totally off-set by losing the investment in the next period. Should be rejected unless you can get out before the burst of period-2 outflows. (The One Night Stand.)
  • The Angel Investment: Requires seeing potential, upfront investments, faith and patience for the chance of a high payoff over a long time horizon if you bet right. (The first-year med student.)
  • The Industrial Project: Boasts seductively high returns in early periods but certain late-period clean up and restoration costs off-set prior period gains. (The Devastating Break Breakup… or The Code Red Clinger.)

You don’t need a relationship consultant to tell you that negative yield projects, where the costs outweigh the benefits, should be disregarded from consideration immediately. But positive yields are a little more complicated and must undergo another layer of scrutiny.

The key variable in NPV calculation is the Discount Factor. If the question is only whether a relationship adds value, use after-tax weighted average cost of capital (WACC); in non-finance mumbo jumbo, WACC addresses your general standards of life happiness. Someone whose life is generally awesome has a higher threshold for entering a relationship or even accepting a first date (so many other fun things to occupy an evening!) than someone whose only investment hurdle is Law & Order reruns.

But you’re popular, and in addition to your own standards, you have many suitors competing for your affection. And alas, in both business and dating, choosing investments often is a mutually exclusive affair, and in those cases, the Reinvestment Rate, which accounts for opportunity cost of the next best alternative, should be used as the investment hurdle.
To compare investments fairly, the discount factor needs to account for the relative risk of investments, discounting risky cash flows more heavily than guaranteed ones. A 10% chance of a 1000 (with relationship utility as the currency) return should be discounted more and valued less than a 50% chance of the same return, but a question of individual risk aversion and capital reserves must answer the more complicated question of weighing that 20% chance of 1000 versus a certain return of 200.
I leave it to you to decide what goals for returns you have and what risks you are willing to tolerate to get them. And please note this fund advisor’s Invest At Your Own Risk Disclaimer.