Cookies, toasters, triggers: this is the new marketing jargon. Technology is changing the way marketers operate just as they have come to terms with the idea that mass markets no longer exist. The core realisation is that treating customers as individuals may provide real competitive advantage.
As Stan Rapp, keynote speaker at this week’s IDM Symposium and chief executive officer of Rapp Collins Worldwide, says: “Everything else exists to make the customer relationship happen.”
The starting point for this move to one-to-one communications is often an assessment that other forms are too wasteful. John Orsmond, chairman of ARM, notes that a user of mass direct marketing who relies on rented-in data is likely to be wasting at least 35 per cent of that data through poor targeting.
“You can reckon on enquirer databases of pre-qualified, interested prospects giving you a 40 per cent greater likelihood of purchasing,” he says. “If you use fusion techniques for profiling, you can reckon on a 60 per cent improvement in targeting.” Those two steps forward are significant ones. First, there is the reduction of waste by using internal data. Second, you can analyse that data to identify the most valuable segments.
Orsmond cites one example of an automotive client, whose database showed that ten per cent of the population accounted for 46 per cent of purchasing behaviour. What role remains for mass marketing once such a finding has been brought to light?
Reaching this stage does require a database, however, which has until recently been a significant stumbling block. As Neil Muranyi, sales director at The Database Group, says: “Analysis is the driver. You can’t do one-to-one unless you have in-depth, individual information. That is why you have to move up to group or segment level to deal with data en masse if you don’t have it at individual level.”
Data has been at a premium, forcing marketers to use aggregated information, which begins with the assumption that individuals can be grouped together. Recently there has been a change, with the population appearing to become more willing to tell marketers what they want to know.
As The Henley Centre found in its Dataculture 1995 report, 69 per cent of consumers want to know more about the companies with which they regularly deal. To allow this to happen, 66 per cent will trade their personal information if it results in better service, while 53 per cent will trade for discounts or promotions.
Similar findings emerged in research carried out by the Direct Mail Information Service. Consumers were asked if companies provide them with enough information. The automotive sector fared best (60 per cent said “yes”), followed by retail (55 per cent). In travel, a slight majority thought they were told enough (51 per cent), but for household goods (47 per cent), appliances (46 per cent), and food and drink (45 per cent) there was clear evidence that consumers want to know more.
This opens the way for communications to deliver more information and convert interest into sales. In the food and drink sector, for example, 57 per cent of consumers said receiving direct mail made them more likely to buy from the company. It is this realisation that is fuelling the growth of customer databases.
Now, more than ever, databases can be populated with rich information. Martin Kiersnowski, managing director of ICD Surveys, notes: “We have 150 different fields of information which can be attached on a standard basis and 3,000 non-standard fields.”
With 8 million households on file, which he predicts will rise to 10 million this year, marketers are armed with a tremendously powerful and predictive resource.
“The most powerful indicator is not a complex algorithm or a detailed profile, it is that this person buys a certain product. If you can get sufficient volumes of data on people who buy your brand, you don’t need to worry about the other stuff,” he says. Nor is ICD alone in having built high-volume databases. The combined NDL/CMT lifestyle survey, marketed by Calyx, now covers 80 per cent of British households.
With the data increasingly available, the focus has turned to the media. According to Miriam Mulcahey, lead media consultant at The Henley Centre: “The technology is there for mass customisation.” Digital TV is about to break in the UK and may change television from a mass to a one-to-one communications vehicle.
The Henley Centre’s Media Futures 97 report says: “One of the ironies of digital technology is that it provides television with the opportunity to exploit both mass and niche markets. As such, it could be the ultimate medium for the mass customisation of marketing messages.” Combining the database on viewers or subscribers with a marketing communications strategy that wants to talk one-to-one could lead to TV ads that are personally addressed.
Adrian Baker, business development director at Aspen Direct, says: “Marketers can use the Internet to offer an interactive and bespoke site for each user. The Net is now effectively converging with the database to provide the opportunity to be very personalised about the content and the way in which each consumer views the site.”
The Henley Centre predicts that households may soon be infested with toasters – household goods that talk to each other and act on information about the householder. So your fridge could soon be on the phone to the supermarket to order the beer that you have just run out of. Alternatively, the beer company may be able to put a message onto a panel on the fridge saying: “You’ve just run out. How about a nice cold Brand X?”
To exploit these opportunities, marketers are having to get smarter. The use of triggers for communications is one example of allowing data to drive activity. Tim Pottinger, divisional managing director of The Computing Group, explains: “A lot of people are doing triggered mailings once events happen. To the individual, they appear more personal. It is moving down the road of one-to-one. The trigger could be as easy as the anniversary of a renewal, or date of birth, including age bands, when a product is purchased.” It might also be something more complex, such as a change in lifestyle or lifestage, such as the birth of a child or reaching 40.
But this is where that which is technically possible bumps into that which is humanly feasible. Francis Smith, head of data at IMP, believes putting power into the hands of consumers through interactive media does require a cultural change. He says: “It is difficult to write a business plan to respond to consumers as and when they ask for information. It is easier to say you will mail everybody in January. This is a difficult hurdle to get over, because it is the plan that releases budget in the future and there is a fear of lack of control.”
During the past two years, technology has overtaken the industry’s ability to exploit it. “Marketers have had a long period of being ahead of technology, of wanting to do things that technology didn’t do. Now the technology has leapfrogged, so marketers need to get out of that frame of mind,” says Smith.
But there is another disjuncture: between what marketers might want to do and what the public is ready for. John Wood, client services director at Turnbull Wood Hayes, says: “I take issue with consumers being left out of the debate. How much do they want to be treated with that kind of personalisation? The issue is always about getting response, not giving people the information they want. A lot of what is done just irritates people. If you get a response from two per cent, that means the other 98 per cent hate your guts. That is not what you want.”
There are also those who doubt whether the potential to communicate one-to-one really is supported by the apparent wealth of data now available. Peter Bell, marketing manager of CDMS, says: “I don’t think one-to-one is possible, although that is probably heresy. I don’t think we will ever get sufficient data, therefore the communications people receive will of necessity not be as personal as it should be.”
And Mulcahey suggests consumers do not always want to be as interactive as the technology and marketing strategy suggests they should be. How many people will want to interact with their new, flat-screen digital TV rather than just sit on the couch being spoon-fed messages?
As a result, marketers are beginning to recognise that one-to-one communication is not always the best use of their resources. In particular, it is too expensive to be used on customer segments that might not be profitable. The solution could be to adopt mass customisation.
Andrew Robinson, business development director at Harte-Hanks IFM, says: “Mass customisation is about creating the feeling that it is one-to-one, despite the fact that it isn’t. It gives you the best of both worlds. It can allow a marketing organisation to maintain a relationship without going into ridiculous detail. Eventually, you get to the point where to take it beyond fine targeting stops being cost effective. Then you have to weigh up the added-value elements of your marketing against the cost of making the sale.”
The danger for large organisations is they get attracted by the examples quoted by marketing gurus of companies which deal with every customer as an individual. For a florist, this might be easy. But it is exceedingly difficult for companies such as Tesco or NatWest to replicate that same feeling in a different environment. How do you make millions of people feel warm towards you?
What might be concluded is that while everything is possible, not all things are desirable. One-to-one might be too expensive, too hard to manage, or too intrusive. As Robinson says: “The reality is, some people may reject the idea of something completely tailored to them.”
The database is here to stay, but don’t throw away the old marketing plans just yet.