Category: Marketing Analytics

I have been talking with several gift and specialty food multi-channel marketers recently to try to get a sense of what direct marketers might expect from the holiday season this year versus last. I chose to talk with gift and specialty food marketers, who do as much as 85% of their business in Q4, because they have had to develop solid processes for forecasting total holiday season demand; often forecasting to final from early catalog drops and just a few other mailings throughout the year. These folks are more likely to have a better handle on what this holiday season might look like than those who mail all year round and whose offers are not as seasonally sensitive.

Although the number of data points is too small to have statistical significance, there are some trends emerging that are worthy of sharing, based on what I’ve heard.

First, pure “Gift” catalog mailers this year have generally seen better results than last year beginning within 1 to 2 weeks into their early drop demand, and, for most of them, this is consistent with what they’ve been experiencing in recent past weeks. Where some have been “flat” in the catalog channel, web demand is up, driving the overall demand up over last year. Those who have reported their observations by channel are known to have robust matchback reporting. Others without such robust processes have not indicated channel by channel performance.

Some gift marketers are taking the additional profit from better performance, but most are re-investing in expanded circulation where infrastructure and inventory availability allows. In general, I expect that the “Gift” category direct marketers will likely exceed last year’s results, as viewed across all channels of demand, based on those we talked with.

Specialty Foods, which tend to have an earlier “early drop” due to the Thanksgiving Day holiday, had mixed predictions, based on our small sample, and no clear trend emerged. In one case where the specialty foods marketer also had other non-food titles, their specialty food business was off last year’s results by about the same amount as their other catalog titles.

I also contacted several non-gift marketers, primarily because these folks have regularly contributed to our past surveys. In general, they are predicting demand to be flat to slightly below last year for this year’s holiday season. Their offers are primarily non-gift soft goods to an older demographic.

None of the “ups” or “downs” of predicted results are huge for any of the folks I talked with. On balance, however, it would appear that during this holiday season, there will be more shopping for gift items via direct marketing than last year. Some of the big economic think-tanks are predicting a shift from shopping at retail stores to shopping on the web, which they say will cause a negative impact on available retail jobs this season. Whether the better results our gift direct marketers are anticipating is a result of new demand or simply a shift from retail store shopping is yet to be determined.

Regardless of the source of demand, however, the anecdotal “trends” we observed could mean a better year for gift direct marketers.

The goal of the “Summer Sale” initiatives by the USPS has been, since inception, to drive additional advertising mail volume (or at least halt the steady decline in advertising mail brought about by postal rate increases) through pricing incentives. The question is: How effective have these efforts been in achieving this goal?

This year’s incentive is a 3% reduction of postage costs for all mailers who apply a 2D (QR) bar code to all pieces in a mailing. The big, additional gain to the mailer, as we see it, is the opportunity for customers and prospects to scan this bar code with their mobile smartphone, which will then take them to a mobile commerce site (or other destination preferred by the mailer) enabling an additional non-invasive, zero-cost , multi-channel touch to the mailers marketing programs.

Based on responses to a recent poll we conducted, only 46% of responding catalog mailers will take advantage of this discount, and just 18% are taking advantage of the decreased rates to increase circulation.

We didn’t ask “why” to the low participation rate, but some responders volunteered reasons, and we have some, too. For one, this new summer sale was just approved in April leaving some mailers already “locked in” for print and name quantities for this summer. (Shifting mail into the discounted rate time period is not allowed by Summer Sale rules.) Secondly, for some catalogers, the cover “real estate” for QR codes on this summer’s books presents a timing challenge for catalog creative work. Another reason is that setting up an appropriate destination site was going to be problematic for those just getting into mobile commerce, given the compressed timeline for execution. Lastly, all pieces in a mailing need to carry the code to get the discount, requiring all co-mail pool participants use the 2D code for any to get the discount.

Will this Summer Sale produce results that will lead to the USPS goal of increasing advertising mail or at least reducing its volume decline? Maybe… maybe not… But this latest USPS effort, for those who participated, may tell us much about the benefit of providing customers and prospects an opportunity to try mobile commerce in an easy to execute manner, right from their catalog. Let me know your thoughts on this topic…and stay tuned for the results at summer’s end…

SMALL BUSINESS OWNERS KNOW HOW TO INNOVATE TO SURVIVE – SHOULD WE BE SELLING TO THEM OR SUPPORTING THEM?

In a clever twist that pumps up the suspense of the police drama genre, the CBS series “Criminal Minds”, stands the typical storyline on its head by asking not “who done it”, but “who’ll do it” or “what will they do next”. That show’s team of profilers sifts the details, stares at walls of seemingly disparate facts, and eventually see a link or a pattern that unlocks the key to solve the case and catch the suspect seconds before their next crime.

While, as planners, our suspense comes more from a ticking presentation bomb than an eminent slaying in a warehouse, our task is much the same. And those epiphany moments – they’re the gems that make a sweaty brow worth the effort.

One recent “aha” came on our ongoing case to understand the small business decision maker…

On the Case

We’ve been on this case for some time, and have lots of good insight and evidence. We’ve been reaching many of our targets, but want to better understand and better market to more.

But the small business decision maker is a wily character:

• Small businesses are defined very differently depending on industry – for example, annual revenue for finance versus number of employees for retail or services.
• Industry vertical can be a helpful guide in understanding unique business consumer needs, but needs within vertical are vast and unique (for example, “clothing retailer” wouldn’t really help you know whether it’s Diesel, REI, or a hand-made fashions boutique).
• The “decision-maker” is often two or more people (CEO, CFO, Department Head, Operations Jack-of-all-trades)
• There’s usually a gatekeeper watching the phone, mailbox, and possibly even the email box of the pooh-bah – filtering what reaches decision makers.

Thanks to a world that seems to be a steady mix of disruptive change of increasing magnitude, small business decision makers are also under intense pressure to adapt and survive as never before:

• Their decisions are hyper-critical to their business – the consequences are personal, professional and shared all at once. Being well informed and quick are essential to their survival.
• They have a financial budget and a time budget for everything – and they’re constantly re-budgeting as the dynamics around them change
• While thrift is important, flexibility is mission critical
• Constant change has increased demand on their decision making skills – if they’ve made it for more than a year, they’re likely very good at improvising

So what’s the AHA?

It’s a bit of that last bullet plus some direct insight from a recent focus group. In that group, one participant noted: “If I happen to be looking for [a widget] and see a subject line about it, I’ll open the email. Otherwise, I’m putting the solution together myself”.

Leaving the email open rate debate aside for a moment, what emerged for us was clarity around how small business decision makers approach problems to find solutions. They don’t wait for them. They don’t warm to them. They draw quickly on resources they have. They clock the time this decision is taking. They look for flexibility over savings. They attack, adapt and resolve to get a solution fast. They’re smart, innovative survivors.

In short, they’re scrappy.

So what are we doing with this scrappy insight?

The small business decision maker described here is more of an archetypal role than any one individual. We are eagerly working on many plot lines that are drawing out different detailed characteristics of who these people are for different businesses and situation.

One thing this broader insight is helping us achieve is a shift from seller to supporter. In the case of larger enterprises selling to the small business, it can often lead to more information sharing, provisioning for decisions with tools or reports and diagnosing the relative flexibility of offerings. For smaller B2B companies, a clear value proposition can be the starting point, then a committed initiative to create and build networks and earn case studies and strategic partnerships.

This may be a fundamental shift in what you’re currently doing, or could be additive. Your brand, your product and your means to genuinely become a meaningful partner to the “scrappy” innovator will determine what this insight may mean for you.

Enough reflecting for now. Back to the basement with the Plexiglas note boards, photo montages and machine-gun banter. We’ve got more cases to solve.

DO POINTS PROGRAMS ADD UP TO RELEVANCE AND ENGAGEMENT?

As one of the sponsors of the Loyalty 360 Expo in Orlando this year, our strategy team was there in force – looking and listening for innovation, trends and best practices.

While mobile, referral, and geo targeting are cutting impressive new paths that cross into this space and customer experience and segmentation disciplines are maturing to gold standards, for me, one of the biggest trends may in fact be a fundamental shift in loyalty itself is taking place. That is that loyalty, when defined as a hard-line program of points building or quid-pro-quo behavior, is not a big growth area for most marketers.

Most of the dialogue and information at the Expo surfaced more debate than conclusion about what Loyalty was, let alone any trends clear growth opportunities. Some themes, however, ran through many conversations – and are areas that have been of great focus for us here at SolutionSet.

Those themes were the ideas of:
1. Engagement
2. Relevance

In essence, companies are running programs that achieve these things under a title of “Loyalty”. GameStop’s program was self described as more “CRM titled as Loyalty”. At Starbucks, points accumulation was is a good component of their program, but really only covers about a third of the overall relevance (monetary value customers gain). Their program also tied in community and recognition, which were arguably more emotional, compelling, and uniquely ownable for their brand.

The innovative new social and mobile developments are also pointing more to the ideas of “people like me” than “earn points to redeem”.

As our CEO, Zain Raj, has pointed out in his blog, traditional Loyalty programs are really just frequency programs. As I reflect on the term “Loyalty”, it also strikes me as a very company-centered, not consumer-centered term. It doesn’t seem to cut it with regard to talking about what this stuff is.

My suggestion is “Brand Fan Programs” – the effort to surface and exploit those attributes inherent in a brand and offerings that resonate with a customer group such that we can drive unique levels of relevance and engagement.

As with facebook, fanning should be measurable – and in a way more in tune with these efforts. Fans should have a lifetime value that can be maxed, referral and influence value that can be tallied, data profile completes that can be totaled, spend for return that can be optimized. The behavior, term and measure seem to fit – and fit with the important activities that make them happen: relevance and engagement.

It could be that the best course for a given brand is a more singular focus on a standards points/rewards programs (aka: Frequency Program), and that’s fine. I believe that there is greater opportunity at the higher relevance and engagement end of the scale, building a “Brand Fan Program” for our clients.

Yahoo! asked me to share key trends for CMOs over the next five years. The challenge, of course, was to do this in 200 words. This got me so excited about the future of our profession that I wanted to give the long version of my answer here. Here are some predictions:

CMOs will Become “Friends” with Data

A lot of us entered this field because we’re right-brained “creatives” who see numbers as the province of left-brained “bean counters.” To be successful, we’ll have to use both sides of our brains. We’ll need to mine the data for the insight it gives into customer behavior, then use our new-found understanding to drive attitudes about the brands we shepherd. We need to develop and implement whole brain capability to be successful. Behavioral insights from data can provide the guidance needed.

CMOs will Lead in Real Time

Gone are the days when we’d launch an initiative and then wait to see what customers thought of it. Now they react instantaneously—and we get immediate feedback. Not only will we have to cozy up to the information they generate, we’ll have to quickly digest and evaluate it. And then we’ll have to use it to strengthen our brand strategies. The velocity of change has never been higher, and we’ll need to act quickly on our customers’ needs and desires to remain relevant.

CMOs will Love Customers—Not Just Prospects

Everyone who knows me knows this is a pet peeve. Marketing in the last century was totally focused on acquiring new customers, often ignoring current ones. And there’s still too much residue of this form of thinking.

CMOs focused on customer acquisition ignore two very important points:

* In the digital environment, it’s never been easier for customers to switch brands. If they’re not getting what they want, another product or service is just a click away. We need to focus on creating brand rituals, not just habits and routines—because these are easy to walk away from. And we’ll never do that if we’re always chasing the next customer.

* Keeping current customers happy is also more profitable: “it’s cheaper to keep her.” It takes $17 of new business to replace $1 of lost business. And the average spend of a repeat customer is 67% higher than a new one.

CMOs will use Ideals to Rally Customers

Powerful ideas capture customers. It used to be about “value”—offering a quality product or service at a fair price. Now a brand must have “values”—ideals its customers share. Being green. Local sourcing. Giving back to the community. Customers are loyal to brands that mirror their values (and this is an important way to build brand rituals).

CMOs will Target Individual Customers

We’ve been so good about reaching homogenous groups: the coveted 18- to 35-year-old demographic, for example. But every customer believes that he or she is unique—and expects to be treated that way. And with the rise of data on each customer, we’re now able to see them one at a time. This has made 1:1 marketing campaigns viable—and they’re another strategy for creating brand ritual. Treat each customer as a distinct person with unique needs. They will appreciate this by making your brand a part of their lives.

Bonus: CMOs will Love Multichannel

I only had room for five trends, but here’s an important sixth. The infatuation with digital will be replaced with the reality of a multichannel approach. Some customers will want to do everything online. Some will want to go to a store. Some will want to speak with a person on the phone. A 1:1 approach will accommodate all of them.

Of course the future already is here. Smart CMOs are using tactics in some if not all of these areas. Make sure you’re among this group—and you’ll be forecasting the direction of marketing in five years!

Over the past couple of years, as postage and other offline mailing costs continued to rise while response rates declined due to a weak economy, prospecting for new customers became an increasingly more expensive proposition. As a result, many catalogers reduced their spending on acquiring new names, which limited, stopped, or even reversed house file growth. Understanding that house file name counts decline over time without continual replenishment from fresh names, catalogers knew that they needed to do all they could to retain their existing active customers. Additionally they sought to identify lapsed customers who could be successfully re-activated to replace more costly new name acquisition programs. The thinking was that the natural decline in house file names could be avoided or at least minimized, if these retention and reactivation efforts were successful, especially in 0 – 24 month recency segments which traditionally provide the margin to run their businesses profitably and provide funding for new customer acquisition.

Perhaps due to the length of this recent economic downturn, many catalogers, who knew they needed to retain 0-24 month house file counts as best they could, placed increasing emphasis on re-activating lapsed customers. While on the surface this looks like an acceptable way to offset the cost of acquiring new names, in reality, re-activated customers do not generally perform as well as new-to-file customers, given a similar cost to acquire, over time. We are now beginning to see the results of that shift in strategy; more single buyers vs. multi-buyers in customer files, declining performance in some multi-buyer segments, etc.

Is re-activating lapsed customers a bad strategy, then? Not necessarily. Is retaining and nurturing current active customers an adequate strategy to maintain house file counts when new name acquisition program results are below break-even? Probably not. So, should we continue prospecting even when results are below break-even? In some cases, yes.

How do you decide on a strategy? How will you know if it’s working? You need to be able to measure and monitor promotion costs and contribution of customer groups over time, based on original source. In other words, measure and monitor your customer’s Lifetime Value (LTV). By observing customer promotion cost and purchases over some time horizon, typically 6-12 months (or more, depending on where you begin to see significant performance differences and/or your tolerance for risk), you’ll know how much you can afford to invest in a name, based on the expected return you’ll receive within your LTV time horizon. If you make decisions about new name acquisition, customer retention, or re-activation investments based only on initial campaign performance, you will likely make some wrong decisions. For example, as a rule of thumb, new customers acquired from your web site (web as original source channel) typically have a LTV much lower than names acquired through an email or catalog original source channel. Catalog original source channel LTV’s are significantly higher than email.

Also as suggested above, the LTV for re-activated customers (those who used to buy from you, but have stopped buying) are typically lower than the LTV from new-to-file customers (those who have not bought before, but have an interest in you now).

Going further, you shouldn’t just evaluate LTV by original source channel. Evaluate LTV of customer groups by original product or product category purchase, prospecting name source, reactivation campaign effort. Evaluate LTV of customer groups based on any special retention offers you’ve made measured against LTV of other customers in the same segments that were not made the offer (assuming you have groups that are large enough for statistical validity).

So, what do you do if you don’t have a system for analyzing customer LTV? In the past, when those of us who called ourselves direct marketers were only concerned about our catalog channels and didn’t have promotion history in our databases, we could estimate 12 month LTV for a single channel from approximations of our advertising costs, margins, segment contact strategy, etc. and could be reasonably comfortable with the results. This approach would give us a good comparative view (even if not a totally accurate P&L view) of different lists, media, re-activation programs, acquisition season, and product group original source performance over time, which allowed us to rank our options for new customer acquisition or re-activation by ROI. However, in today’s multi-channel, multi-touch environment, this approach falls woefully short in providing guidance for decision-making.

Here are a few suggestions for getting solid LTV analyses for your decision-making:

1. Capture promotional activity and costs for all your channels in your marketing database by customer.
2. Make sure your matchback solution isn’t “unfairly” weighted to a specific channel. Use a balanced approach to attributing demand dollars to your pool of potential triggering promotions and their associated costs, so you can create an accurate customer P&L over time.
3. Make sure your LTV reporting tools are “user selectable” by time horizon, date, and the criteria against which you’ll evaluate your name groups (original source, product category, channel, etc) This will give you an opportunity to easily create a series of reports for a progressive analysis of key LTV variables.
4. Keep your data as granular as possible in the database, available for LTV reporting at a detailed level or rolled up in your analysis (i.e. detailed LTV by specific list, rolled up to measure LTV by list category, rolled up further to all response lists vs. all co-op lists, etc.).
5. Make sure you continually review your LTV’s against the LTV measures you used at the time you established your strategies, to make sure those strategies are continuing to support your profit and growth goals.

With the right data and analysis format to turn the data into information about how your customers are performing over time, you can answer the questions posed in the third paragraph of this post with some degree of specificity and confidence. Re-activating customers, using retention programs to make good customers better ones, and investing at a cost below breakeven to acquire new customers could be exactly the right thing for you to do, provided you can identify, through a robust LTV analysis and reporting system, groups of customers and prospect names sources, by original channel, source, product group, etc that generate an acceptable LTV. Using this information, you can then develop an intelligent strategy to re-build your house file counts and return to profitable sustainable growth.

In the past, for most mailers, creating an LTV analysis was essentially an annual or bi-annual major “project”, and seen as a necessary, occasional “audit cost” to make sure your business is on track. If you can execute #1-4 above, doing #5 no longer has to be an occasional “audit project” but instead a useful ongoing analysis to help you in setting and monitoring your customer file growth, acquisition, and contact strategies and your on-going LTV analyses won’t seem much more difficult to pull together than your typical end of season performance reporting exercise.

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If not, you should. When direct mail hits your prospective customers whether in the B2C or B2B space, we almost always see a rise in traffic to the website. Obviously, this means that people who receive your mail are looking to find out more about you.

What do you do about this information?

Well, first you should try to measure it and determine the lift in sales via your website from this increased traffic. This lift can be attributed to your direct mail channel, connecting offline marketing and online sales.

Second, you should try to influence the traffic by analyzing how they are finding your site. Are they coming in through direct load, search engines or social media? If most of the traffic is coming in through search engines, you should think about bidding up your best performing keywords at when the direct mail hits, or timing your day parts to take advantage of the direct mail timing. The same goes for social media. Be active in the social spaces when your direct mail lands.

Simple, integrated strategies like these can improve your overall marketing performance and drive sales.

Let’s address the elephant in the conference room. Everyone’s talking about apps, social and email, especially brick and mortar businesses looking to get ahead in the online world. You’d be crazy not to. But here’s a little secret: Direct channels can be just as powerful for the “traditional” online-only business. Yes, even today.

According to last year’s Channel Preference Study by ExactTarget, direct mail influenced 76% of Internet users to buy a product or service online. As our own Jeremy Gustafson recently pointed out, research suggests that online shoppers who receive a catalog in the mail spend 163% more (on average) than those who don’t.

We’ve seen it time and again with many of our own clients, most recently Tiny Prints. Here are a few of the tactics that truly pan out:

Multiple formats. Keep things fresh. People tune out when they see the same old thing. This holiday season, we’ll be delighting Tiny Prints’ customers with multiple formats including a mailer and a catalog.

Short and sweet vanity URLs. Take customers to a destination landing pages with an easy-to-type URL. It’ll give you a great way to track traffic while providing customers with the exact content they came to find. Imagine trying to direct people to various mile-long links for Christmas cards, party invitations and photo books. Yikes.

Personalization. Take the opportunity to talk to customers, but do it in a way that reinforces your brand. For our catalog’s front cover, we added the customer’s name to an actual card design. It was an attention-grabbing way to introduce the offer, and it showed how a real product could be customized.

Sweet offers—that expire. Give your customers something they want. For our first touch, Tiny Prints created a steep offer for early bird shoppers that had a limited window to create a sense of urgency. Initial positive experiences are crucial to getting the word out over social channels throughout the holiday season.

A word to the wise: Once a prospect or returning customer arrives at your website, be ready to deliver. The Tiny Prints brand promise is strong, combining the thickest, most luxurious cardstock in the industry with unique designs, premium printing and exceptional service—and they deliver on it. Can you say the same?

Email remains one of the most effective and inexpensive ways to engage, educate, and compel customers to act. Today, getting results means staying on top of the latest industry trends and building on what you know about your customers. We have it down to a science.

Timing is everything
Customer relationships are a lot like dating. Once you’re introduced, you need to strike that careful balance of staying in touch without coming on too strong. Here are three rules of thumb to progressively get more involved in your customers’ lives: 

• Start out friendly. Send a welcome email within minutes of registration. To optimize delivery rates, be sure the email asks customers to add you to their address books. Offer incentives to first-time buyers.
• Be responsive but not needy. Use event-triggered emails to confirm an activity and upsell products or services.
• Stay top-of-mind. Maintain regular touchpoints that correspond to your promotional calendar. Some suggest weekly and others, bimonthly. Map out specific drive periods, develop the messaging plan (and offers), and tie back, if you can, to the appropriate customer group.

Out with the old
Thanks to iPhone and other mobile devices, customers have less time for your message, and less space in which to see it. Your design needs to render well regardless of where and how it’s viewed: images on or off, preview pane or full screen, cell phone or desktop. And you need to work harder to grab the customer’s attention while they’re on the go. The new rules:
 
• Remember 50 character subject lines? Today it’s better to bring them down to 45 or less. Be sure to make your first three words count.
• Put your most important message top left for immediate viewing in most preview panes. Provide a clear, simple, and compelling call-to-action right at the top.
• Image-based emails are fabulous for conveying a premium brand image. But unless you’re selling luxury products or vacations, it’s better to use HTML text and colors for your layout. Most email applications disable images by default, and if your text is embedded in an image, your customers may not see it at all.
• We used to think using ALT text behind images was enough. While it’s still a best practice, you can’t count on it to deliver your message. Some browsers will display only 20 characters or less of ALT text, and others won’t display it at all.
• Be where your customers are online, and ask them to connect with you. Highlight forums, social networks, blogs, and mobile apps to maximize brand engagement.

One size does NOT fit all
Content is king now more than ever. If you come across as a bore, you’ll kill your open rates, so use your data to get to know what appeals to different segments of your customer base. Then use those insights to tailor compelling, actionable creative offers and messages to each audience.  Consider developing unique email streams that are based on specific customer segments. Your offers and tone should be different for new users, loyal customers, and those who haven’t engaged with you in more than 90 days.

Aggressively target and profile
Continually gather data throughout the customer lifetime to keep content relevant and fresh. For example, look at purchases and behavioral data. One of the best ways to find out what your customers want is to simply ask:

• Collect data during registration. Make it simple, and ask questions that will help you understand what types of messages the customer prefers and how often they’d like to hear from you.
• Direct customers to preference centers for progressive profiling.
• Periodically conduct surveys and short polls.

Always look at the big picture, and refine your touches. By striking a balance with your content and number of emails delivered, you’ll keep customers from getting overwhelmed by email and effectively build long-term loyalty.