Less volume, more results

Even if you have focused on keeping existing customers, you still need to acquire new ones. So what does prospecting in a downturn actually look like?

THE ISSUE

Are you prepared to tell your shareholders that their business will contract this year? Few would be happy to learn that their investment is being deliberately shrunk by 5 per cent, even if that is what is happening to the overall economy this year.

The reality is that, despite the high-profile shift towards customer retention strategies, they are not enough on their own. Even if you did not lose a single one to a rival, there would still be customers who moved out of the market through age or lifestage events, came to the end of the consumption cycle for your product or service, or simply died.

All customer bases contract, regardless of how well tended to they are. Which is why customer acquisition has to be part of the overall business strategy, epoch of zero-base budgets and financial constraints.

Undeniably, acquisition has become as tainted a concept as investment banking or MPs’ expenses. In the collapse of financial institutions, one thing that came to light was the apparently reckless pursuit of new customers in volume, regardless of their risk or value.

No more. Even if the board is persuaded of the need to continue to prospect, the model for how it will be done has changed profoundly. It is still a numbers game, but now those numbers are not total new customers brought onto the book, but return on investment, customer lifetime value and bad debt ratios.

Many of those metrics have been alien to marketers whose primary task was to bring in new customers. Handed a target for new accounts, they went out to find the data sources which would help them hit these goals.

Intrinsic to this approach was an acceptance of a high degree of wastage. Whatever the direct marketing industry might have said about targeting and propensity modelling, what individual direct marketers did was more about propping up campaign volumes.

How much thought was given to whether the same level of response and sale could have been achieved with a lower volume of input data? That is the question now being asked. It has profound implications for the way direct marketing is conducted, the way data is used in campaigns (and when), and for the data owners involved. To keep their own customers, they are the ones now being forced to change the way they work.

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The Supplier’s View

Dawn Orr
Managing Director Scientia Data

“Old school” direct marketing is indeed guilty of a multitude of sins. Out-of-date data and a breathtaking lack of targeting and propensity modelling has seen campaign after campaign mercilessly carpet bombing Great Britain with mismatched offers – incurring considerable consumer wrath and environmental damage in the process.

However, chances are you’re as tired as I am of being tarred with this all too shoddy and wasteful DM brush. Direct marketing 2.0 (“Neo-DM” anyone?) is seeing a paradigm shift from volume- to value-based approaches emphasising response rates, ROI and customer lifetime. Big is no longer beautiful and a more cost-effective mix of transactional data is the new king. Or queen. Whatever floats your data boat, basically.

That it took the worst recession in living memory for many marketers to (re)place data insight at the centre of their CRM strategies is rather unfortunate, but better late than never, I say. Gone are the days when marketers could simply “spend and append” their way to achieving sales targets by ad-hoc database management strategies and/or buying in any old raw files.

Nowadays, a smarter and, dare I say, more sophisticated DM praxis is required – one which has a more nuanced and detailed view of entire product/service consumption cycles. The key to this is developing a better understanding of the wider transactional and behavioural environment. Finding the optimal combination of data, “sticky” creative and integrated, multi-channel delivery designed to generate the best response rates and ROI possible should be at the top of the To Do list for every marketer.

DM’s old retention/prospect dichotomy is nigh on redundant.

The twin hallmarks of this new data modelling best practice are activity and affinity. Taken together, both are the reason why warm transactional data (ie, prospects who are purchasing across a number of product/service categories within a one- to five-month window), is such a hot marketing item at present.

By demonstrating real disposable income and purchase activity, transactional data offers marketers a veritable treasure trove of data mining and targeting potentials by which they can increase sales. DM’s old retention/prospect dichotomy is nigh on redundant in a more dynamic data environment in which transactional behaviour is being constantly updated.

Marketing remains, ultimately, a numbers game. But with data sourcing and analytics growing ever more powerful and intuitive, we’ve already reached the point where we can be incredibly creative with data. That’s a confluence of data sourcing, computing power and behavioural insight which is going to change forever how direct marketing is conducted.

Nothing beats reaching the right buyers with the right offer at the right time, after all. With the likes of transactional data and online lead generation, the future’s already here, folks. And for marketers and consumers alike, mark my words – it’s going to be an exciting and mutually beneficial ride.

The Clients View

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Richard Anderson
Director The Data Planning Group

There’s a certain tyranny with all things new – particularly when the aggressive pursuit of new customers is done at the expense of loyal, existing clients. In recent years, too many marketers have been obsessed with wooing switchers.

We’re all too familiar with the switcher drill/ consumers are offered incredibly attractive introductory offers – usually via DM – only to leave at the first available opportunity. When viewed both individually and collectively, these sales “one night stands” definitely permitted many marketers to meet their quarterly sales quotas.

But the long term brand- and financial implications of this “wham, bam, thank you ma’am” approach didn’t get much of a look in.

Until the current recession hit, that is. Virtually overnight, many companies had to grapple with the uneasy fact that there aren’t endless numbers of new consumers out there with viable credit scores ready to purchase products and services. The expensive switcher party was well and truly over. And in the cold light of dawn, it was time to clean up the mess.

Online is virtually maxed-out at present

Many marketers are finding that smaller, better managed and more targeted campaigns are resulting in substantially increased conversions and greater ROMI (Return on Marketing Investment).

This is a very good thing. Adverse market conditions seem to be making a lot of marketers actually think before they Direct marketing – not just adopting a “one-offer-fits-all” approach.

But before you press send on your next e-mail campaign in the mistaken belief that online will provide you with a cheap, accessible channel by which to spam your way to recession-busting sales glory, think again.

My observation is that online is virtually maxed-out at present. Open- and click-through rates are in freefall as punters are being inundated with unsolicited offers. It’s as if we’ve come full circle and are repeating the mistakes of old Eighties-style direct mail, in fact – only digitally and not via letterboxes.

Marketing is ultimately a numbers game. But as Dawn’s alluded to, the question that savvy marketers need to ask is, “where and how can I leverage the best return from my client data?”, not simply, “how can I spend the entire available direct marketing budget?”

Big is good. But unless your campaign data is properly segmented, clean, permissioned and transactionally warm, you risk becoming a marketing direct Forrest Gump.

Afraid to say, but stupid is as stupid does, after all.

THE SOLUTION

There are a number of things that might help to bring this recession to an end. A population boom. A rise in consumer confidence (and therefore spending). Or a discovery of the real economy and what it means to do business in it.

With the credit crunch still being felt, consumer optimism remains fragile. Until mortage lending returns, house prices will stay depressed. That means a lack of equity being created which homeowners can leverage. Tight credit also means households can no longer spend more than they earn each year.

So we have to try and understand what the real economy is and how to get our deserved share of it. Consumers are starting to rediscover the habit of living within their means. They are still spending, but they will prioritise companies who work with them and appear to offer added value.

Paying back debt will also enable households to start to plan more strategic purchases. Next year could be the time when cars do get replaced, along with brown and white goods. Investment products may start to look worthwhile again, for example pension funds which keep their value in a gently rising stock market.

Yet some buying habits have been changed, probably for good. This is not just a shift in what people buy, but critically in how they do it. The move online of research and comparison shopping has been profoundly accelerated. What that means for marketers – and data owners especially – is that it is vital to be able to spot buying behaviour and purchase triggers. Consumers now tell us when they are ready to buy – or more likely, move into a market to make a purchase without any marketing stimulus (and sometimes using stealth to avoid it).

So companies have to be ready to spot these moves, work out something about the individual and reflect it in messages that are highly relevant. It is a data-driven process in which information flows out from the consumer, as an online action or contact, gets associated with information the marketer (or supplier) already holds, and is immediately deployed. Working like that also means changing the numbers. Say hello to cost per customer and lifetime value by acquisition cost – and to moving out of recession

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