Where is the risk in marketing?

Ultimately, risk is simply a numbers game. By considering the right numbers, marketers are able to make strategic decisions that will gain support from financial directors and boards alike. For example, many marketers are in a position where they need to review budgets and potentially make reductions. However, should trimming 12 per cent off direct marketing costs necessarily result in a loss of 12 per cent of business?

Without applying statistics across key data, this 12 per cent reduction is simply a random decision. By crucially looking at the right numbers in the data, however, a 12 per cent reduction in activity could actually only bring about a 3 per cent reduction in business – clearly a far better return.

Nonetheless, while the concept may indeed sound simple, the reality is far harder to achieve. The information which will drive this decision making is not derived from one single variable or data source. In fact, it comes from overlaying multiple data sets such as customer data, prospect data, geo-demographics and credit data. As a result, marketers need to be careful as a ‘one size fits all’ approach will simply not work.

Entwined with this data must also sit information such as consumer appetite, affordability and acceptance, as well as the lessons learnt from direct marketing. Stratifying response and conversion models, the interaction between variables and the ability to use the right data for the right model in the right way will guarantee a successful campaign.

This scientific approach must be applied to both customer and prospect activity alike. Brand damage can be witnessed in both areas and it is vital a business understands the customer or prospect’s responsiveness to and acceptance of the offer. Therefore, to avoid the risk of brand damage or wasted budgets, products and offers should only be made available to individuals who match the strict criteria.

Businesses therefore need to stop making knee-jerk responses to situations and rely far more on the intelligence which can be gleaned from data analysis regarding who to target and through which channel. Only once this is understood can a business be sure that cutting costs in marketing will not affect the success of its activity.

By aligning activity through response models, credit thresholds and acceptance rules, an holistic approach will be achieved. In order to do this, some businesses may find they need to adopt a new approach to modelling, while others will need to review old scorecards or models, as any that go back to last year will simply no longer be performing.

The best piece of advice I can offer is to ensure marketing analysis is utilising the best data available, which may mean changing suppliers and sources. Nevertheless, with the consumer environment changing at a pace, it will only be the companies that are flexible, utilise the most up to date information on consumers and understand targeting that will survive.

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