The old distinctions between above-the-line campaigns which build brands and below-the-line campaigns which generate response and sales are blurring. Advertisements are featuring direct response telephone numbers and Web addresses, while direct marketing agencies are describing what they do as “targeted advertising”.
But if direct marketing does have the power to build brand equity, new rules are necessary to evaluate campaigns. For many agencies and their clients, the solution to this has been to supplement conventional DM measures, such as response and sales conversion, with attitudinal research imported from advertising tracking.
But while measures which track changes in customers’ perceptions and attitudes have become commonplace in DM, response rates are more often rated as the acid test of campaign performance.
There is even a question mark over whether attitudinal research is valued for its ability to reveal customers’ perceptions, or merely regarded as a proxy for non-existent behavioural data. Adrian Jarvis, Tullo Marshall Warren (TMW) senior data planner, says: “Companies often spend an incredible amount of money on market research when they lack transactional data, but once they get strong results on behaviour, the budget for attitudinal research evaporates.”
This may be expedient, but it is ultimately self-defeating, because as Jarvis points out: “To build strong strategies you need to know what consumers think, what they are doing and how much value that gives you.”
These contradictions expose, above all else, a lack of strategic clarity at the heart of many campaigns. Jon Voelkel, a partner at Craik Jones, says: “The reality of communications is often at odds with the lifestyle theory of segmentation that direct marketers profess. The high-street banks are a case in point. They claim to be building a relationship with the customer, but their communications are driven by product plans, not by an understanding of the customer’s needs.”
The issue is not that response rates and sales conversion are irrelevant to strategic DM: ultimately profitability depends on sales. The problem is that in too many instances the so-called marketing strategy is not a strategy at all, but merely a series of tactical promotions.
Furthermore, in many such cases only short-term criteria, such as cost per response and short-term return on investment, are used to evaluate the success of the campaign, thus denying the role that responsive communications play in developing long-term customer profitability.
Basic response measurements may be the starting point for evaluating campaign effectiveness, but should not be viewed as the end goal. The real test of DM’s value to the business is the effect of successive communications on customers’ long-term propensity to purchase, and their overall attitude to the brand. To know that, you need robust mechanisms for tracking customers’ behaviour against the entire range of communications to which they have been exposed.
Andrew Aylett, planning director with international below-the-line marketing agency Tarantula, which has developed relationship marketing programmes for packaged goods companies, says: “The trick is to go beyond counting the coupons, and to use responsive advertising as an opportunity to develop a dialogue with potentially profitable customers.
“Through regular contact you can evaluate the worth of developing the relationship, based on criteria such as trial, conversion, frequency, weight and range of purchase.”
Without doubt, responsive campaigns have a role to play in identifying profitable customers, and in developing their value to the business. Talking regularly to consumers not only helps to build brand preference, it may also reveal opportunities for introducing customers to other brands within the portfolio, and encourage brand advocacy. But for all these strengths, it is important not to overlook the risks of becoming over-reliant on responsive devices.
An age-old problem which bedevils DM is that the most responsive consumers may not be high users, or even potentially high users, of the brand, but simply people who enjoy filling in questionnaires and redeeming coupons and incentives.
Even more limiting than this, however, is the fact that across industry sectors, just over ten per cent of consumers who are mailed, called, or e-mailed in campaigns typically respond. In some sectors, such as financial services and utilities, average response rates are even lower.
Gaining insight into the brand attitudes of non-responsive consumers goes to the heart of strategic marketing. In the absence of customer feedback, it is difficult to construct strategies to build brand preference. Furthermore, a poorly executed campaign can quite easily meet its short-term targets, but compromise the future of the brand in the eyes of potentially valuable customers.
Ian Taylor, a managing partner at below-the-line advertising agency Lowe Direct, says: “Traditional measures don’t evaluate the damage that poor DM can do. A response rate of three out of nine may generate a positive return, but what if the other six recipients found the communication poorly targeted or irrelevant to their needs?”
Favouring short-term response over long-term customer development carries particularly heavy penalties for businesses which offer goods that are specialised or beyond the means of most buyers. Which is why manufacturers of luxury products, such as premium spirits and high-performance cars, have led the way in using attitudinal research to evaluate the impact of DM on unresponsive targets. The DM campaigns developed for Land Rover by Craik Jones are a classic example.
Only a small proportion of drivers can afford a Range Rover, so a key objective of its campaign since 1991 has been to get more luxury car-owners to consider the Range Rover as a potential next purchase – as well as to generate immediate response and sales.
After the initial campaign, which exceeded its test drive and sales targets, Craik Jones commissioned quantitative research to examine the advertising effect of the communication on non-respondents. The results demonstrated a range of positive attitudinal shifts. The most significant change was that 25 per cent of people who had received the mailing but not responded, now had Range Rover on their consideration list, compared with just one per cent of people drawn from a control group.
Post campaign evaluation provides vital insight into which customers to develop and which messages should be used to reach them. However, as Lowe Direct’s Taylor points out, it is important to evaluate alternative scenarios, as well as actual outcomes. “No company would dream of spending a couple of million pounds on above-the-line advertising without testing. But it is a step which is often overlooked in DM.”
Running segmented tests to discover which types of creative perform best for different groups of customers takes DM a step closer to customer-focused communication. However, to demonstrate genuine customer empathy, campaign evaluation needs to move beyond brand image and explore the ways in which DM communications affect customers’ experience, rather than merely their perception of the brand.
The techniques for developing a more empathetic approach need not be sophisticated. Some of the best examples of permission-based marketing have come from the charity sector. For example, the award-winning Botton Village campaign, run by social marketing consultancy Burnett Associates, achieved a spectacular increase in donor contributions by giving supporters the freedom to choose when and how often they wished to be contacted.
Allowing customers to take control of the communication process represents a radical departure for DM. But while the majority of businesses have yet to be convinced of its benefits, many strategic agencies believe that permission-based marketing will be made inevitable by new media developments.
“Getting yourself taken off a conventional mailing list is often extremely difficult, but with electronic media all you need to do is click on the link that says unsubscribe,” says TMW’s Jarvis.
These developments are opening a scenario in which consumers may come to dictate the media through which DM communications are received, the frequency of contact and the content of the communication.
These trends are already apparent in the communications produced by new media companies – such as Amazon – which reflect individuals’ purchasing preferences, and contribute positively to customers’ experience of the brand.
The emergence of a new type of DM which combines communication and service experience extends the debate over campaign evaluation. From a research perspective, the Internet poses some unique challenges to DM.
These include issues which are functional – such as how to establish which Website a customer was using when responding to a banner ad, and how to judge whether customers found the site easy or difficult to navigate – as well as more strategic issues concerning the relationship between customers and brands.
But while conventional DM media have treated sales generation and brand building as two separate issues, the boundaries are far less clear-cut in the interactive world. And that has major implications for the way in which campaign effectiveness is analysed.
Understanding customer attitudes and behaviour is every bit as crucial to DM in the digital age as before.
But attitudes and behaviour are influenced by a complex interaction of factors. These include exposure to interactive and conventional communications, advertising and, most crucially, personal acquaintance with the brand. All of this points to the importance of developing more integrated methods for evaluating customers’ total experience.