Wednesday, December 31, 2014

The Math of Ending Homelessness - the undiscovered Marketer Testimony -PART 2

The Hidden Marketer's Testimony in the Social Media Age

Ever since we published  "this is the article to end the word "homelessness"?!!"

back in Feb 12, 2012, we got some feedbacks and comments, asking us to prove the Math.

http://iduidu.blogspot.com/2012/02/this-is-article-to-end-word.html


That article was on the corporates, especially the big corporates, on why the 4.5 million (homeless rate at 1.5% of US population)  homeless presents a golden life time opportunity for branding/marketing  to any one single person- by helping these people get back on their feets, providing their products for free, nurturing them.


This is because people, in general,  appreciate favors  and will look to return favors.

They have heart and memory.
Especially in time of need and crisis.

Compare this  to some random mass marketing branding ideas presented to an average person who hates ads and don’t need your help or favor.

Since the article, agitated readers have been bombarding  us to prove the numbers, the cost and benefits of it.

So here we are. We stand tall,  and we will prove the math. 

So behold, the naysayers.

Without doing an actual statistical sampling experiment of customer loyalty and payback within a population  of  homeless people(since what we suggest here has never been done in human history), we will come out with a general, but yet convincing approach ( an old fashion one)  of web  data research and mathematical reasoning.

Huh?!! is this even possible ? 

This simple mathematical model must prove 2 thesis.


One, the cost/benefit  analysis  must  prove that the Benefit Value  or Customer Loyalty Value a homeless customer will return to the brand in his entire lifetime  is clearly greater than the  Value of the help given by the corporates to the homeless NOW  to help him return to normal employment.( which historically is about 1 year of help, since avg time for unemployment is less than a yr- about 9 mths)

But, equally important, it must also prove the 2nd thesis- that this Cost is smaller than the cheapest method of obtaining  a lifetime loyal customer.  Otherwise one could argue logically "why do it , if there is a cheaper alternative?"

Historically, the cost of acquiring a Loyal lifetime customer off the cheapest ad market-the ppc web mkt-is less than $100 in most industries(will prove later). At less than $100, one could assume it is definitely worth acquiring a loyal lifetime customer as the Future Value or Profit this customer will return for the rest of his lifetime is greater than $100.


To prove the above 2 thesis true simultaneously,  first, one would have to formularize  the Cost  of acquiring a Homeless lifetime loyal customer. 

Once this number is derived, the corporates will just have to spend less than this number  within 1 yr to help the homeless become employed to justify the 2 thesis -these homeless in return, with or without contractual obligations, will become loyal lifetime customer.

Mathematical Details  below to arrive at the Number-


Step 1- First  we will  derive the cheapest Value or cost a corporate will pay
for a  normal converted customer (non loyal and loyal)  from the ppc web ad market.

We will be using marketing data that focused on  the following 6 industries- the ones the homeless need help most.

 Food- namely delis and fast food joints who threw  millions of food away
Lodging-namely hotels that provides excessive lodging and minimal utilities. 
Job/Career Agencies- to help place jobs and provide career training and web use, 
Retailers in Clothing and Drug Stores  that provides clothes and  hygiene products, 
Banks to provide small short term credit card  loans for daily misc necessity, such as daily transportation, mobile phones, utilities, haircuts etc.
Health insurers to provide basic health insurance.

We will use the most reliable, cheapest ad market for cost/benefit data - the web PPC (pay per click ) ad market to first derive the cost it takes to capture one normal  customer.

http://www.smartinsights.com/paid-search-marketing-ppc/paid-search-display-network/google-adwords-conversion-rate-averages-by-industry-infographic/

It shows the average  NEW customer conversion cost ( we take the average of google Search ad cost and Display cost )below- 

Food - under Shopping- a $0.895 per new customer
Lodging - under Travel -  a $0.42 per new customer
Job/Career - under Jobs - a $10.96 per new customer
Retailers -  under Shopping- $0.895 per new customer
Banks and Health Insurers - Fianance-  $18.91 per new customer

The numbers above encompass BOTH loyal returning customers and New customers. Thus
we need to slice out the already loyal returning ones to derive the number purely for the New customers.
Hence, we need to multiply the numbers by a  factor of 1.33-based on the fact that customers are 25% loyal after 5 years, which mean 75% of the conversion sales are first time buyers or buyers switching brands doing ppc. (not all ppc conversions are first time buyers, 25% are old loyal customers) 

http://www.forbes.com/sites/marketshare/2013/01/07/is-brand-loyalty-dying-a-slow-and-painful-death/


STEP 2
Next, from step 2 to step 4, we will derive a multiplier that shows how many times more valuable a loyal homeless is compared to a Normal loyal customer.

First, we  discuss the  the Lifetime Loyalty  Factor ratio.
Since a homeless that is being helped is going to be more grateful and loyal - lets assume a 80% loyalty rate compared to the already discussed 25% normal customer loyalty rate. Thus a homeless is worth 3.2 times the normal new customer.   The 80% loyalty rate could be even higher and guaranteed (100%) if corporates could set up lifetime loyalty agreements, signed by  the homeless, with viral word of mouth to friends and families, promised in exchange for helping them.

Thus this factor is 3.2 times.

STEP 3
Next, lets discuss   the Word of Mouth Referral Factor.

First,  how powerful and important in word of mouth in todays social media age?

According to the data at
http://www.zuberance.com/resources/resourcesStats.php
it is extremely important- more like instant  success or failure.  

According to the site,  76% of American talk about brands in a typical day. An average of 10 brands are mentioned everyday and 70% of brand mentions include a recommendation.

And according to link below, word of mouth has become the single most powerful reason why a customer will buy a product over all other marketing methods. This shouldn't come at a surprise in the age of social media, where buyers look for reviews, recommendations, complaints and friend referral before purchase, where word of mouth transmit among 5000 friends per user on likes of FB /twiter /linkedin/G+ in lightning speed to anyone, anywhere, anytime.

http://jackiehuba.com/2011/10/14-new-statistics-about-word-of-mouth-marketing.html

So how much more is the word of mouth Referral worth, comparing the fiercely loyal homeless and the normal loyal customer?

The answer is about 4 to 1, or a factor of 4.- a homeless loyal is worth 4 time more than a normal customer in word of mouth.

Why?




First, 





  • According to a study in the Harvard Business Review, customers who participate in a

  • referral program will typically refer four customers. The study pointed out that these 

  • numbers under-estimate true referral value. Referred customers make their own referrals

  •  in turn, and credit for these should be traced back to the original referring customer

  • Therefore, a company with 100,000 energized Brand Advocates can reach 60 million 

  • people - (100,000 Advocates x 150 people x 4 recommendations per year = 60 million) 

  • (Source: Zuberance via Forrester Peer Influence Analysis)


  • - See more at: 

    http://www.zuberance.com/resources/resourcesStats.php#sthash.LK8O8rUh.dpuf

    Thus from above, a normal  loyal  customer usually referred 4 converted customers in his/her lifetime on the first level.

    Secondly, 
    in our own analysis, we estimate that a  homeless will refer around 15 converted customers- at least 4 times more than a normal loyal would. Why?   Based on

    http://www.mamamia.com.au/relationships/how-many-friends-can-you-have-dunbar-number-150/

    a person could have up to 150 close friends in one lifetime. 
    Therefore the homeless being extremely loyal or bound by some agreement with the corporates, will refer to all 150 of their friends -compared to just 40 friends a normal loyal customer would.

    And Referral Conversion usually hangs around 10% conservatively. See link http://thefinancialbrand.com/48/the-harsh-truth-about-word-of-mouth-referrals/

    Thus 10% of 150 is 15 customers.

    But what about the 2nd level - meaning the referrals made by the converted referrals? 
    Only 25% of the referral customers will be Loyal ones and thus only 1 out of the 4 Normal referrals will refer to his  40 friends,  to yield another 4 customers.

    On the homeless side, 25% of the 15 converted referrals will be around 4 loyal ones, refering on the 2nd level, to yield 16 new converted. (4 referrals each )

    This still yield a ratio of  4 to 1 or 4 times the homeless has more than the Normal.

    On the 3rd level and every level beyond,   the same logic and math from the second level applies.

    So how many levels do we extend? We can extend to as many levels till the maximum limit of customers in the whole industry.   For some products, it could be huge and infinite level. For some newer products with much smaller total customers in the industry, it will be less, but still substantial.

    STEP 4

    Next, 41 % of homeless are families- meaning all 3.3 immediate household members are homeless, usually with kids. Around  9% are couples. And the rest  50% are single.

    We assume a homeless has an average  immediate family of 3.3, based on web research of average US immediate family size. Agreements can be made to make all immediate family members making them Loyal to the brand. And why wont they be?  
    They will be equally grateful and loyal for helping the income maker of the family. 
    So when the corporate help the income maker, it gets the full loyalty  and support of the immediate family members.

    Thus a mathematical factor of 41% multiply by 3.3 = 1.35

    This number could be higher because we are not including in our analysis the parents of the adult homeless that may participate in our loyalty program.

    Other relevant  Info- 
    Some key  profile stats of a homeless include : 62% have a High School diploma, 
    17%% have  alcohol/drug use and 15% mental health issues, This stats should not affect our numbers much since career and addiction counseling is going to be part of the corporate help package, except   for the 15% mental health that needs counseling,  who could impede finding employment within one yr(most unemployment period for americans is less than a year- The corporate help program will sponsor and provide the help for one year). These 15%  will be excluded from our sponsorship program that goes across the 6 industries. Also, part of the 17% alcohol/drug use homeless may be excluded from the program if counseling cannot immediately minimize their problems for the sake of gaining full employment.



    STEP 5
    Next, comes the most powerful argument statistically.

    Volunteer Mobile Advertising - In desperate situations,  a  homeless is willing to do beneficial marketing activities presently and in the future that no other customers are ever  willing to do- branding activities like wearing   an attire such as tshirt or coat that displays the corporate sponsor logo everyday- the same way 
    athletes do everyday. 

    Ridiculous!? 

    Yes, Ridiculously overlooked-  Tiger Woods make over 100 mil a yr wearing logos.

    So, how much is this worth for a homeless?
    You will be shocked.

    If u constantly  commute and is always publicly exposed,
    according to http://www.businessinsider.com/jason-sadler-makes-500k-per-year-wearing-t-shirts-2012-6

    it is worth about $180 per day! And Sadler's company will pay you 25-35K per year as employee.

    Another program where advertisers will pay u 300-900 dollars a mth if u drive 1000 miles a mth in an active community, by wrapping  asd around your car- once u are employed steadily and can afford a car.

    And perhaps other  ad programs can be creatively constructed, such as wrapping a logo on your pet's scarf or leash. OR shoes, or bags/backpacks,  or jackets, hats, ties, bracelets. 

    The creativity is limitless and boundless.

    These activities, like wearing a logo tshirt or wrapping ad around a car for the rest of their working life are activities one wont expect a normal loyal customer would ever do in their lifetime- BUT the homeless customer happily would. And they would return your favor with a BIG eager, appreciative  smile.

    Final CALCULATION -
    it is time to derive our final calculation.
    We will however skip STEP 5 as the numbers are erratic, arbitrary, but huge - in fact  the Step 5 benefits are so huge that will actually make our whole analysis redundant!?  Step 5 alone is powerful and compelling enough to prove the greatest marketing opportunity thesis.

    Going from step 2 to 4 yields a factor of 17 meaning a homeless customer is worth 17 times  more than your normal loyal customer.
    This number could be a lot higher if we factor in the free publicity, public media coverage, the goodwill effect on branding, the viral word of mouth publicly and privately around the homeless individual, who is going to trumpet to the world how he was saved. These effects are priceless and difficult to gauge statistically in terms of additional sales conversion. But these are not to be easily forgotten.

    Multiplying 17, we will then  present the NEW Values.

    Food - under Shopping- $20.56 per homeless lifetime loyal  customer.
    Lodging - under Travel -  a $9.66
    Job/Career - under Jobs - a $252
    Retailers -  under Shopping- $20.56
    Banks and Health Insurers - Finance- $434

    These are the numbers that show  as long as it cost less than the Number  to help the homeless for 1 yr till he finds employment, then it is economically beneficial from a strict ppc (the lowest cost of advertising in todays age)  comparison,  for the corporate to help the homeless.

    Looking at the data , lets discuss each industry a homeless desperately needs to lift oneself 
    out of the street into full steady employment again.


    Food - a $20.56 per homeless.
    At first, this number seems minuscule. However, on second thought,
    fast food  chains throw away excess food each day so it cost them nothing except for  some coordination to provide this excess food to the homeless logistically. This is a no brainer - zero cost approach.
    Read this Article on solution and coordination here-
    http://idu1.blogspot.com/2012/08/super-serious-solution-in-ending-world.html

    In exchange, written agreement can be made to eat at their franchise every day for the rest of their lives after finding full employment- now how much is this customer worth?


    Lodging -  $9.66 per homeless.
    Hotels - this one seems complicated depending on geography but in todays internet age where hotels.com can figure out how to sell u excess inventory cheaply, there should be zero problems allocating the excess empty rooms to the homeless each day- the  homeless will just pay for utililitues, which could be minimal on minimal usage.  The complaints for this solution is that the decor, smell and ambiance of the hotel will be affected,  but steps could be taken to make sure the homeless MUST show up cleanly and organized and at a separate entrance or  live at a separate section of the hotel. Once again, agreement can be signed where the homeless will only vacation at their brand for their lifetime once he gains steady employment.

    Job/Career - $252 per homeless.
    The number is so high for this industry that it is clearly a no brainer to provide the excess free counseling
    on career, job search , resume service, aand even alcoholic/drug addiction counseling services. It doesnt cost the job agencies a dime since the overhead and staffing is usually fixed per mth in their ongoing operation.
    In return the homeless must use the same career office for jobs/training for their lifetime.

    Retailers - $20.56 per new homeless

    $20.56 may suffice for wholesale Shirts, ties and shoes and hygiene products to make sure the homeless appear neat and tidy for jobs and interviews. Totally feasible and not unachievable.
    In return, they will shop at the brand for the lifetime.

    Banks and Health Insurers - Finance-  $434 
    Banks to provide small short term credit card  loans for daily misc necessity, such as daily transportation, mobile phones, utilities, haircuts etc.. Loans of around $150 per mth (or $1800 per yr)for the above would suffice.The default rate according to 
    http://en.wikipedia.org/wiki/Payday_loan#cite_note-7
    is around 10-20%- lets use the median 15% for our analysis.

    So 15% of $1800 is $270 loan loss, which is  still smaller than $434. This number doesn't include interest income north of 15% made on the good customers. 


    Health Insurance at $40 per mth, $480 per yr runs close to our number of $434- totally achievable.
    Agreement can be made for the homeless to bank and service all their credit cards,loans, insurance, mortgage and all other  financial needs for their lifetime.

    And remember, all the above analysis does not include the viral word of mouth intangibles in step 5, which will clearly make the whole analysis a further no brainer.   

    SUMMARY

    So yes!  Our original thinking and premise in our first article stays strong, and yes!   

    ZZZZZzzzzzzzzzzzzzzzzzzzzzz.....snore snore! And then more Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz........

    We are still shocked that the corporates are still hibernating and has not awaken to this line of thinking!????!

    For the above to work, players in the above industries should collaborate to assure the homeless are well taken care of from  day 1, to assure that they appear neat and tidy, and  not disruptive to any businesses.

    So how many homeless are there? Is this segment big enough to be worth all the effort ?

    About 1.5% of population are homeless - that translates to around 4.5M homeless..

    But why stop at the homeless segment?

    Almost one out of sixteen people in the USA are living in deep poverty.
    People with income 50% below the poverty line are commonly referred to as living in deep poverty; Census figures show that, in 2012, 6.6% of our population, or 20.4 million people, were living in deep poverty.
    This segment is even better to assist economically speaking, since they dont have the problems some homeless have, and have lower default rates on loans.

    Under the new Thank You economy and the Mighty Social Media Influence of the  Word of Mouth Referral,  the day to unveil the Marketing Network for the underprivileged awaits?

    =================================================
    =====================================================================
    end of blog
    P.S.
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    For other critical blogs of Idu, see Index below.
    And visit our main idu site at  www.iduidu.ning.com
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    Blog Index:

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    The single Superhero Skill one could ever have... Even Superman cant beat this

    Paying Students to attend school ?!

    LifeSkills for Success- only for the privileged?!



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    http://idu1.blogspot.com/2015/12/ending-era-of-failures-why-good-ideas_31.html
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    Future of Work = Aligning one's Passion and Life Purpose with Work

    http://idu1.blogspot.com/2015/12/future-of-work-aligning-ones-passion_31.html
    Future of Work = Aligning one's Passion and Life Purpose with Work - Part 2

    How we got it all wrong in Gamification - the only One Variation that works

    Finally, The Enabler to solve all social problems


    On Charity and Non Profit Leadership-

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    Super Serious Solution in ending world hunger - Yes Seriously Serious


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    This is the article to end the word ”homelessness”?!!

    The Math of Ending Homelessness - the undiscovered Marketer Testimony -PART 2


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    du 爱嘟! HAPPY秘笈 - 幸福 秘诀 part 3

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