Organising chaos in response marketing

"Mallika Naguran, the world awaits your decision." I was pretty flattered to receive a custom direct mailer (DM) from The Economist some years ago with those words in a big and bold header on its typical magazine cover layout. It felt real, it felt special, it felt good.

However, it didn't lead me to subscribe.  

Perhaps I was one of the few who could not be persuaded to subscribe to The Economist although I was, and remain, a big fan of the publication. Bent on attracting new subscribers and retaining existing ones, The Economist has been running a specific campaign involving these DM kits from 2004 through Ogilvy.

The campaign was launched soon after a gap was identified in a customer contact strategy audit. "There was a shift from looking at traditional demographics to mindsets," Greg Carton, business director with OgilvyOne Hong Kong, says.

Further segmentation was done to analyse how targeted customers behaved in different geographical regions, with a view to shaping better-targeted marketing communications. They looked at how to increase loyalty among elite readers by identifying the right contact points and arriving at differentiated offers.

One reason for the low renewals, they found, was that readers could not keep up with the weekly publication to fully appreciate its editorial value. The marketing planners then came up with a solution: why not make it easier on subscribers? They were then given an option to receive highlights of "must read" articles via email weekly, helping them to cut to the chase. This proved to be a hit.

"It took us 12 months to get a 90% take up, which is a very good figure," Carton says.

Welcome to the organised chaos or "science" of direct response marketing, where good looking marketing campaigns and sexy loyalty programs are seldom enough.

There's a need to go beyond superficial comprehension of consumer behaviour such as buying patterns to understand what really goes on in customers' heads.

Call in the psychology experts to draw out their arsenal of analytics - "statos" or "psychos" whatever your pet term for them is - they will help you develop measurement and tracking tools with linguistic processes that could be point blank and scarily accurate.

The tools, systems and technology are in place, with intricate rules, complicated formula and incorrigible algorithms that would make anyone break out in a sweat.

According to some experts, technology and systems of CRM have not changed much over the years. The analytics still remains relevant, primarily due to the fact that a significant number of companies still do not go beyond exploiting descriptive demographics to employing psychographics in their marketing efforts.

The reason may surprise. "One reason why companies often do not act on the tonnes of customer data collected is what they might find out from them," Nik Laming, MD for Singapore and VP for Asia Pacific, Carlson Marketing, says. "Dealing with change can be rather uncomfortable for some, and may even cost some their jobs," he says.

Data Driven Experts say customer data should be as current and accurate as possible, but how often should a database be refreshed? "You need to constantly refresh the segmentation; ideally you want to move people up the value axis." He spoke about refreshing data at every possible interaction.

"Customer centricity has to be viewed as a journey, starting from the basics of gathering data to running it and using it. We need to move from revolution to evolution," he says.

Paul Hourihane, group managing partner, Go Partnership, says it depends on what type of category you are operating in. "It depends on the type of business: in an automotive industry, every six months; for mobile companies, monthly," he says.

How does one then get new information from an existing customer at every touch point without annoying them, often with similar questions, or becoming intrusive?

Hourihane says while there are creative ways of getting information, the most important thing is to "structure it right and make it relevant". A motorcar pre-launch in Malaysia, for instance, ran promotional banner ads in independent automotive websites aimed at 24 to 34 year olds who own at least a car. Go Direct tapped a motor journalist to run commentaries online on the new car. It topped it off with a free stay in Langkawi.

The banner ad and email campaign ran for 10 weeks with 30% response from targeted readers, garnering around 3,000 respondents and several sales leads. The internet was chosen for this campaign, as car buyers tend to research online before making a purchase.

Still Hourihane maintained, "The channel doesn't matter. As long as the promo is interesting, people will go for it." Data to drivers Hong Kong supermarket giant PARKnSHOP needed to bond with MoneyBack cardholders and increase mall visitorship.

Work involved analysing the basket behaviour of the cardholders to derive key customer segments and clues on customers' existing and potential purchasing habits. Relevant communications were aimed at the specific customer segment, leading to "meaningful dialogue" based on information shared by consumers.

"This set the foundation for ICLP to manage increasingly informed relationships for PARKnSHOP," Stephen Hay, GM of ICLP, Hong Kong, says. The campaign included sending versioned emails and DMs in the form of a childcare enewsletter relevant to needs of mothers and families. The repeat store visits thereafter saw an offer redemption rate of 15%, far exceeding the expected 3-5% rate that previous mass campaigns delivered. To heighten engagement, the mall encouraged members to share photos of their children in the e-newsletter.

"This element tapped into the group's emotional drivers. The overwhelming response highlights the true potential of customer relationship management, to elevate customers from mere respondents to brand participants," Hay says.

The application of behavioral analytics, beyond mere descriptive demographics, paid off. "We drew insights from customer data to arrive at targeted marketing strategies, and this in turn helped build active, loyal and profitable relationships."

Take plenty of attitude is what SPSS, a provider of predictive analytic software and solutions, advises marketers to do in a white paper. It states that incorporating attitudinal data into solutions is known to improve the result by 10 to 30%. See table on Incomplete Customer View for what might constitute attitudinal data.

Revving relationships In building profound and impactful relationships with customers, Carlson has identified three drivers of relationship strength: trust, alignment and commitment. "The result of treating different customers differently is an increase in the amount of trust towards, mutuality and alignment with, and commitment to the company over time," Laming says.

The company has developed RSx, a service marked tool to explain relationships with brands statistically. It combines both research and structural modelling measuring the impact of marketing and other factors on the strength of brand relationships and ultimately business results.

There are nine core RSx questions with a seven-point scale to establish trust, alignment and commitment. Drivers of these three elements are researched and the relationship between each is mapped to end results. In a recent survey of leading retailers, Carlson found efforts to build better relationships with consumers enhanced customer recommendations, retention and intent to shop more across the board (source: Carlson Relationship Builder 2007). The more targeted the communications, the better the result. This perhaps isn't quite as surprising considering that no two customers are alike.

Carlson carried out another relationship strength survey with customers of a major airline company to help it craft a more meaningful customer engagement program and to optimise its marketing expenditures. Solution analytics deployment included a relationship strength index, behavioural modelling and predictive modelling. This derived a more targeted communications especially with tiered value customers through their preferred means of communication - email, DM, web and/or phone calls.

The airlines subsequently found a change in customer response to their frequent flyer program including significant revenue increases in valuable member groups while the total impact to airline soared in tens of millions of dollars. It also enabled them to identify high value customers within a week of frequent flyer program enrolment.

In a 2006 survey by SPSS and Yankee Group, it found only 50% of organisations were applying advanced analytics to their data to drive predictive insight. Even fewer took the next, innovative step of using the insight to maximise the value of each customer interaction by delivering a great customer experience. Science of prediction The name of the game is not just understanding your customer, but also to predict his behaviour or value in the future.

According to Laming, this is done through identifying groups to understand, for example, who are likely to stay as a customer, translate into a high value customer or when he is likely to return to the store. "There are enormous paybacks to predict that some high value customers are going to leave you," Laming says.

This new knowledge empowers the client to create a specific activity for each group. To address a lapse in shopping interest, for instance, the retailer could offer a promotional offer such as a discount coupon on their favourite item. This phenomenon has given rise to a new term called "customer innovators" and major retailer Coach considers themselves one of them.

"To get sales right, you need the right people in the right place at the right time," Patraic Reagan, director of business analysis at Coach, stated in a case Getting your attention through personalised marketing "Customer centricity has to be viewed as a journey, starting from the basics of gathering data to running it and using it. We need to move from revolution to evolution." Nik Laming, Carlson Marketing

"But to do that, you must be predictive rather than reactive. You have to design the best customer experience ahead of time so that at every location and at every customer interaction, impeccable service turns into long-term relationships."

An IDC report found the median ROI for projects that incorporate predictive capabilities and technologies was 145%. The benefits that help to drive this ROI can come in a range of different forms, Nucleus Research stated. They include direct savings due to a reduction in marketing campaign costs, lower acquisition and retention costs, or even lower equipment and staffing costs.

The ROI could also come from using predictive analytics to increase productivity, improved service levels or higher profits as a direct result of more targeted cross selling and up selling. Management consultants Peppers & Rogers have outlined four attributes to becoming a predictive enterprise in a white paper, starting with getting down to the basics in looking at the source of problems to innovating within the entire organisation.

According to Colin Shearer, senior VP of market strategy, SPSS, companies do not take pains to clearly identify specific problems that needed to be solved using data mining or predictive analytics. "It has to be driven by a business goal, such as reducing churn by improving the customer service experience on the web, which then translates into an analysis goal.

Once the analytical piece is complete, it then has to be mapped back to the original business goal and the results deployed to improve business outcomes." Tricky technology Technology has enabled marketers to get closer with their consumer base. In the web medium, the use of interactive graphics like Adobe software has raised the bar in consumer engagement, with Flash Video and Flash Web allowing real time feedback from viewers during video streaming.

Marketers can also hire the services of email marketing service providers for effective interactive marketing instead of building their own proprietary technology which could be too cumbersome and costly. A recent Forrester report on email marketing solutions picks Responsys and e-Dialog to lead the email market.

"Responsys and e-Dialog - both small, independent email marketing service providers - offer exceptionally strong segmentation and data integration capabilities, as well as open architecture and flexibility. Responsys has a fabulous campaign automation tool; e-Dialog's strategy services are one of its greatest assets," it says. While there are various analytic technology, systems and tools in place to crank up consumer relationship management solutions, there exists the possibility of getting side tracked.

"There's a danger of building the great predictive model if you take away the human element. You could be promoting meat to vegetarians," Laming says. Hourihane too cautions against relying too much on predictive insight. "Sometimes it works, sometimes it doesn't. Sometimes you learn more from your mistakes," he says. He believes while technology has become a utility in the science of response marketing, fundamentals of marketing still reign.

"The 80- 20 rule and all those sort of things are still applicable; it's just a way of applying it. Customers have many more channels now and therefore the marketer has many more channels too - so it's more of an opportunity rather than disadvantage," he says.

Because we have moved from traditional to digital marketing, there is a need to keep your ear to the ground to look beyond acquiring new customers to figuring out how they can be retained. "A lot of marketers are focused on new customer acquisition, whereas an 80-20 rule would apply different," Hourihane says.

"In this case, 80% of business could come from 20% of customers. And 80% of these customers look like your old ones. So the 80-20 rule applied twice helps you stay focused." Perhaps for those of us who are biting nails over the unknown realm of predictive marketing, we can take heart with Hourihane's maxim.

"There are two things in response marketing. One, know what you are supposed to know - a lot of people look outward rather than inward. Next, see what rules you and what that brings with your franchise. Then figure out the opportunities they bring," he summed.

Since the science of response marketing can be made orderly after all with a bit of help from psychographics and related technology, we can safely recline, feet up on the table, to read The Economist, from front cover to cover.