Response Analysis – easy to do, so why is it ignored?

Generally, a business will put in a huge amount of work to win a client – pitches and proposals adding up a significant portion of dedicated resource. But once they start to use a businesses service, sometimes the dedication placed in winning the business seems to dwindle. Admittedly, this isn’t all the time, but the potential for it to happen is there.

In terms of data, data purchases / sales and predictive modelling, one of the easiest traps to fall into is to fail to fully “close the loop”. If a data services business wins a client with the aim of providing targeted prospect data or implementing a Customer Insight solution, invariably there would be a scoring process for the client’s existing data. This could be using a client’s own variables / values, an appended set of variables and flags, or a mixture of the two.

With the data scored, the next stage of the project begins. If its prospect generation, then the scores should reflect a prioritisation within the service providers own data source. If it’s an insight service, then the initial aim should be a schema for promoting and prioritising customers based on current & future campaigns and incentives. Either approach will provide a set of data that is intended for marketing purposes. These processes are fundamental and the core of what is proposed by the service provider, and bought into by the client.

But where to go from here? A fire-and-forget approach (as discussed on this blog previously) is easy, and hassle-free. It’ll result in some success and some failure. Because of the thought put into the process from the outset there’s also a chance that a client would come back to the service provider and ask for a repeat of the data file. And because of a shift in the data due to time lapsed, new prospects may appear, and old prospects may disappear.

However, this isn’t using effectual test-and-learn techniques; the process isn’t benefiting from valuable response analysis. If you can begin to understand why some responders agreed with the predictions, and why other responders seemed to appear out of nowhere, then a contact strategy can be finessed. In fact, there’s a strong argument to suggest that because a client has taken positive action in order to source or score their data prior to marketing, that very activity changes the make-up of the data over time – in effect, what you knew before may now be irrelevant, because an insight has driven a fundamental shift in strategy. Admittedly, a dramatic swing in a target market is quite unlikely! But the increased use of insight must be constant and self-training, rather than piecemeal and self-fulfilling.

CRM 2.0?

Well - it's been a while, hasn't it! My 2010 resolutions to post regularly disappeared in smoke. Let's see if I can improve in 2011!

As a result of some discussions online today, I started thinking about the things I'm interested in : the next stage of serving consumers information versus requesting information.

There've been quite a few fads, next big things and new hopes within marketing over the years. Customer contact has been the consistent focus, and we’re into the third decade of the internet now. But so far, nothing has really revolutionised the way that customers and retailers interact. It’s a two way process, sure, but it’s always been call-and-respond.

Indeed, going way back, we started with serving up print advertising and TV advertising, with retailers seeing the opportunity to get into people’s homes through new technologies. Then the customer took control (to a certain extent) by responding; using vouchers or cut-outs to redeem a service or request information. From there we moved into cold calls, and blanket mailings, to more advanced profiling for targeted direct marketing. The customer then had the power to manage contact (preference service registering), use the info as research, or disregard. Driving customers into stores, the advent of the Internet and online shopping gave way to a “library” approach to high street retail – browsing in store and securing deals online. In turn, personalised emails became a norm. This seemed to continue the cycle into the 21st century; service providers exploiting new technologies to gain more and more presence in front of their (increasingly) unwilling targets.

However, we’re now in a situation such that a new technology has developed with the people serving information, the advertisers, marketers and service providers, playing catch-up for the first time. Social media is the buzzword, and will quite possibly go on to define the last five years, and the next five. But because of the nature of its development, it is full of potential but fraught with danger.

I’d like to think that the biggest challenges we have to negotiate are general sensitivities to privacy and the “focus group” nature of the medium. Because of social media, we’ve got a fantastic opportunity to communicate with customers / interested parties directly, and immediately. However, we need to make sure that we don’t cross the spamming line once again, and instead engage in a two way conversation that provides genuine value and engagement. This approach has always been the gold standard of which 99% of businesses have fallen short. Just because it could be easier than ever to speak to customers doesn’t mean that we need to repeat the intrusive, bullish attitude that could often be the end product of dependence on constant outbound comms. Balancing ease of access with the simplicity and appropriateness of the message could come to define success or failure in the next 5 years.

Immediacy – How long can businesses wait for success?

Historically on this blog, I’ve talked about how businesses can make the most of their existing customers and data.  In a perfect world, the success that can be achieved by mining what is currently owned would be able to steer most businesses through these tricky times.

Unfortunately, more often than not, this isn’t enough on which to squeak by.  Other activity can be critical.  And as the pressure builds on businesses to keep alive in a difficult market, the length of time allowed for a particular strategy to succeed shortens.  This is a problem – sometimes a “long tail” payoff far outstrips the initial quick wins.  But as businesses begin to strive for immediate results (sometimes to the exclusion of a longer term strategy) are these quick wins doing more harm than good?

A good strategy, now more than ever, needs to be built with different time frames in mind.  If structured properly, a strategic plan should incorporate;

• Short Term Goals (Repeat purchases : retention)
• Medium Term Goals (Up-sell or Cross-sell : development)
• Long Term Goals (New Customers / Win-back : activation and re-activation) 

As you might expect, the ease with which these goals can be met relates to the timeframe in which they can be achieved.  Retention is relatively easy (relatively being the key term!) to implement, re-activation being arguably the most difficult.  Yet look at bottom line value of these goals.  A repeat purchase, although easy to induce, arguably does little to extend the lifetime value (LTV) of the customer*.  Development is more difficult because it takes the customer out of their existing sphere of behaviour, but if successful should allow for an exponential growth in their LTV.  And the difficult activations provide a previously non-existing revenue stream.

So, although the quick wins give the business a much needed short term shot in the arm, true growth cannot be achieved without long term planning.  Ignore the future at your peril!

*N.B : again, relatively speaking.  A customer purchasing twice that you would expect to purchase only once has the potential to double or triple their LTV.  However an argument could be made that this is actually a “re-activation”.  Historically, a win here refers to a customer with a long-term loyalty to the brand buying a product “out of cycle”.

Can ex-customers actually be better than new customers?

Well, no.  Obviously!  Ex-customers no longer provide revenue to your business.  In some cases, if the relationship you had with the customer soured to an irretrievable point, an ex-customer could even be detrimental to your business.  If this is the case, a small research project might help you to address some sticky points in your overall customer experience.

Too often your focus will swiftly move from an ex-customer to your newest acquisition.  But there is so much to learn from your old customers that can ensure your new customers are as fruitful as possible.  Perhaps you might even reactivate some of your old customers; what a bonus that could be, in an age where buying lists of data can often have mixed results.

Fundamentally, old customers can tell you a huge amount about not only what you can expect from your new customers in terms of length of loyalty, overall spend, purchasing patterns and even (if you profile the data) who your new customers are likely to be.

Old customer and transaction data is gold dust.  Nothing can tell you about your business more than how your business has performed in the past (although if your business has had a radical brand overhaul in terms of product ranges and targeting, then perhaps the best you can get out of your old data is who not to target).  Too many businesses ignore what they already own.  If you can harness the knowledge that’s trapped inside your old data, then you can make significant savings on marketing and acquisition, savings that will be reflected in a larger profit margin. 

As part of understanding your old data, it can help to amalgamate the data sources together into one customer system.  This will allow you to see which customers flip from active to inactive over a certain period of time.  It will also ensure that when your new data becomes old data, you’re in a stronger position to apply what you have learned and ensure your business is always moving forward.

Why CRM fantasy and reality can leave businesses disillusioned

According to a recent survey carried out by salesforce.com, “73% of CRM users do not use 50% of the functionality available to them in their CRM systems.”

I think it can be true that often businesses buy an off-the-shelf CRM solution almost as a panic buy because they feel they either; need a way to manage their data, (be it customers or prospects, or both) or that they “need a CRM system!”. If a majority of businesses are not using a large amount of functionality to them there could be all sorts of reasons. I’ve encountered a lack of knowledge, a general disregard for a new way of working and even businesses that were sold a toolkit that didn’t meet their specific requirements at the time.

I believe that in the minds eye of any business in question, a  “Data Warehouse”, is envisioned as having one of two capabilities;

• a Lead Management Portal designed for a salesforce
• a Customer Relationship Management tool for Marketing and Analysis

and what you often find is that the term “CRM” is used interchangeably for either tool.  Far-sighted project managers would plan on having both systems interacting – we shall come onto that in a moment.

I'd argue that in terms of implementation of infrastructure, there needs to be a distinct difference between a Lead Management portal and a CRM system.

The portal should work in two ways - assisting the Sales function in storing researched or bought information for cold leads, and as a storage system for existing customers that have been segmented / selected for targeting for a given piece of activity, to be carried out by the sales team.

The CRM should be a data warehouse of existing customer behaviour that (in a perfect world) allows for two-way interaction of data; the customer can see what they’ve bought and when, and the business can see both individual and overall customer behaviour.

If a business chooses to bring both those functions together, to classify them as either a CRM OR a Portal ultimately leaves one aspect of a business poorly served. Both systems should interact and learn from each other, and seen as an overall Enterprise (for want of a better word) solution that both benefits a business in the short term and allows for scalability over time.

That said, as a statistic “73% of CRM users do not use 50% of the functionality available to them in their CRM systems”, it would be interesting to see, over time, if the second percentage begins to fall as confidence and understanding grows within the business. 

The main problem when buying an off-the-shelf CRM is that assumptions are made on behalf of the reseller and the purchaser.  The best, and in my opinion, only way to set up a CRM system within a business is to have any external consultants / service providers working almost as a member of staff, rather than a sales person set to “fire-and-forget”.  That way, the consultant will share the investment into the system, investment that should pay back in the short an long term.  This personal investment should ensure that the second percentage drops in a very short space of time.

CRM – Why it works, or why it doesn’t

I’ve recently been wrestling with the the whole idea of CRM implementation and usefulness.  Fundamentally, I feel that the concept of a Customer Relationship Management process is sound.  It allows for co-ordination of data pools into a single centre which can be interrogated as required.  This seems a logical and sensible step for any business – a cleansed, centralised dataset of all customer touch points.   However, I feel that from this point in, the idea of CRM starts to become tarnished.

CRM doesn’t work because it ascribes a set of values to a customer.  It doesn’t work if it fails to work for customer.  Once data is mined, then the customer can be spammed with tenuously-linked offers, potentially placing their business at risk.  Even if automated buffers or triggers are in place, then the likelihood is that unnecessary contact is minimised.  At this point, businesses lose faith in CRM, and CRM doesn’t work.

CRM does work if it isn’t treated as “fire and forget”.  Automation doesn’t mean that the requirement to think is removed.  Too often, the implementation of a CRM system is seen to suggest that there is now less requirement to work with customer data.  The opposite is true.  Successful implementation of a useable, and (and this is incredibly crucial) regularly maintained and updated CRM system means that much more work is now required. 

The establishment of a centralised base should be planned not to simply amalgamate as much data together as possible, but built with a clear purpose in mind.  Data should be structured so that access to data is not compromised (a user should be able to “roll up” and “roll down”).   Most importantly, the base should be built so it lends itself to strategic thinking.  It isn’t enough to identify customers who spend the most; you need to know what their story is, and be able to tell this story with the data.  This is the central premise of the “R” in CRM.  Empathise with your customer, provide them with information; help them use their account history, for example – neatly implemented recently by Tesco (external link).  Irrespective of near-Orwellian approach to grocery shopping that the ClubCard has provided, the tying up of offline and online that Tesco constantly works towards would be impossible without a fully functioning centralised database and a huge amount of thought.

Ultimately, I believe that CRMs do work.  But they don’t work by themselves, and they certainly don’t work in just one direction.  They work for the business, but for the customer too.  They should be scalable, and built with the companies current and future aims in mind; as such simply lumping all data together and then using it as a contact / mailing list is a certain route to failure.  Use it to create discussion, generate true customer insight and improve planning and communications, and it will eventually become indispensible.

Decrease spending, increase efficiency

Happy New Year!  Marketing Week, (4 Jan 2010) has again given me a juicy topic for Momentum Analytics’ first blog post of 2010.  It argues that campaign targeting will take centre stage in 2010.  Throughout the majority of these posts, I’ve discussed approaching data as a ”business critical resource” in a relatively abstract manner.   A colleague of mine consistently hammered home the point that when it comes to data, analysis and genuine, revenue-driven insight; “Garbage in, Garbage out”. 

So.  How do you justify outlay on something relatively intangible?  Marketing Directors, media planners, Direct Mail marketeers can all justify thousands of pounds (even hundreds of thousands of pounds) on creative and copy, because it is possible to interact with it, to visualise it.  Investment in data and analysis is much more difficult to come by.  This can have knock on effects on campaign monitoring - how often is campaign activity

• quantified (either as stand alone performance, versus previous performance or versus a prediction)?
• tracked back to customer data?
• fed into the next piece of activity?

All this campaign activity is designed to increase revenue – often seen (correctly) as a measure of success.  Yet it should not be the only measure of success.  Indeed, if a campaign budget can be reduced by 20%, with a loss of 2% to the standard response rate (i.e. 2% response drops to a 1.96% response rate) then this should be deemed a success also.  And the most effective way to achieve wins at the beginning and end of a campaign?  Analysis.

Efficiencies of campaigns has always been a constant metric on which performance has been measured.  With a difficult, pressured and stressful 2009 still fresh in the memory, we should press for an increase in campaign efficiency by smashing down knowledge silos that build up in businesses of all sizes.  The emphasis should now be on joining up internal resources to best benefit the business.  You quite probably already hold information in your business that can save you thousands of pounds and make cost-per-response work in your favour.  Use what you already own to make make sure that your business only receives one form of successful CPR this year.