Advertisers are more vocal than ever about
what’s wrong with mass marketing. But defining the reverse — with so many ways to pinpoint, segment and sub-segment customers — is no day at the beach, either. A recent study at the
CMO Council found that while 60 percent of cmos say they are focused on reaching buyers in more relevant and contextual ways, only 15 percent believe that the companies they work for are doing a good
job at finding and integrating information about their customers from disparate sources.
Making better, and more precise, use of that data is what Precision Marketing is all about.
The Precision Marketing Journey
Precision Marketing is about using data-driven insights to deliver the right message to the right person at the right time in the right channel. It is critical to understand that this method involves a data-driven approach, which enables more rational and fact-based marketing decisions. Precision Marketing evolves the marketing practice beyond the realm of relying on mere intuition and gut checks. While experience remains essential to success, it is now necessary to gather and analyze all available insight in order to objectively guide your marketing decisions with more depth and precision.
Precision Marketing is about viewing the company, its products and its marketing messages from each customer’s perspective. What does the customer want? What does the customer need? Precision Marketing is customer-focused, but not in the same way as one-on-one marketing or 360-degree marketing. Rather than surround customers from all angles and blast them with messages, Precision Marketing looks at the customer’s view of the company.
The value of Precision Marketing is proven across industries, but it is important to keep in mind that the process is a journey. The journey will take time and effort, and it will be worth the effort and investment. Let’s consider the case of 1-800-Flowers.
The 1-800-Flowers Journey
With annual revenue exceeding $700 million and a database of 35 million customers, 1-800-Flowers is now the world’s leading florist and gift company. What’s impressive about this company, run by brothers Jim and Chris McCann, is their commitment to analytical leadership.
According to the McCanns’ recent book Analytics at Work, the company’s focus on data-driven decision-making is a core aspect of its overall approach to strategy. “We have a culture of analytics and testing,” says Chris McCann, president of 1-800-Flowers. “I say, ‘I know what you think — tell me what you can prove.’ ”
Some companies, like 1-800-Flowers, enjoy unprecedented insight into their customers. “Basically, we know who buys what for what occasion, for whom, and where it’s sent,” says Aaron Cano, formerly the vice president of customer knowledge management at 1-800-Flowers. This lets the company build extensive data sets and get to know more about each customer. 1-800-Flowers has customer info such as: customer name; occasion bought for; recipient name; recipient address; channel; demographic information.
The company employs its analytical strengths across all of its 11 brands, including Fannie May Fine Chocolates, The Popcorn Factory and Cheryl & Co. cookies. With these numerous distinct brands, one of the company’s core challenges is leveraging its extensive customer data to benefit all of the divisions. Given the company’s multiple channels of interaction (retail stores, phone, catalogues and online), analyzing all of the company’s customer data is an enormous task.
The company has made tremendous strides in dramatically reducing the time it takes to segment customers for a mailer or a catalogue. “It used to take two or three weeks — now it takes two or three days,” says Cano. “That leaves us time to do more analysis and make sure we’re sending relevant offers.”
The marketing team spent years trying to get a handle on all of this data. Marketing was tasked with mapping the data, identifying all possible touch points, cleansing the data and recognizing when customers moved between sales channels. Then, the 1-800-Flowers team was able to construct a custom dashboard and create underlying systems that made key data accessible to employees on demand. “Previously, business users had to rely on it to produce monthly reports. Now, they can access and analyze the data themselves at their desktops whenever they want,” says Ron Scala, director of information management for 1-800-Flowers.
The company’s loyalty and retention rates are powerful proof that its commitment to data-driven strategies has paid off. In fact, the company has increased its customer retention rate by 10 percent and increased the retention rate of its best customer segment to more than 80 percent. The more that 1-800-Flowers engages with its customers in the course of the year, the more likely customers are to discover one of the company’s other brands. “We’re successful because it isn’t just marketing that buys into the processes,” says Cano. “Merchandising, fulfillment, operations and finance all use the customer knowledge to make decisions as well.”
Perhaps most importantly, 1-800-Flowers is leveraging its data to create targeted campaigns and engage its customers in a truly personal fashion. “It takes a long time for an organization to become analytical,” Cano says. “But at the end of the day, our customers become more loyal to us because we’re relevant and we treat them like individuals.”
Deeper data on what customers do — such as how or where they use a product — enable relevance. “If a customer usually buys tulips for his wife, we show him our newest and best tulip selections,” Cano says. As Cano points out, Precision Marketing is a multistep, ongoing and worthwhile journey.
The Precision Marketing Framework
Adopting and fully implementing Precision Marketing is not about an instantaneous flip of the switch; it truly is a journey. This journey is not simple, but it is worthwhile, and your efforts and investments to navigate the journey will reap rewards. In order to guide you through that journey, we have created a Precision Marketing Framework, which includes three major milestones and a series of six steps.
The Precision Marketing Framework, in the simplest terms, is about following a logical, sequential and continually improving process. Here are the six steps within our Precision Marketing Framework and the major questions that each step strives to answer:
Step One: Determine your objective
What specific marketing objectives or business needs are critical to your company’s goals?
What problem are you trying to solve?
Is your objective measurable, achievable, relevant and timely?
Here are four popular objectives from which many marketers choose: customer retention; customer growth; customer reactivation; customer acquisition.
Step Two: Gather data
What customer data will you need?
From where will you obtain your data?
What other vehicles will you leverage to gather data?
The following are possible data sources:
internal data; external lists; focus groups; polls and surveys.
Step Three: Analyze and model
How will you engage your analytics team?
How will your analytics team utilize the data to generate insights?
How predictive is your analytics modeling?
Here are deliverables an analytics team might produce: portfolio analysis; segmentation; industry models; custom algorithms; recommendations.
Step Four: Strategize
Will you use an existing campaign or create a new one?
What content and creative will you incorporate into this campaign?
What offers are you prepared to present?
What must your message express in order to resonate with your target segment?
How will you measure your success?
Your strategy may incorporate one or more of the following delivery channels:
direct marketing; email campaigns; banner ads placement; telemarketing;social media; mobile communications.
Step Five: Deploy
How will you execute your campaign?
How will you implement the tactics in your selected channels?
How will you use your data to engage with the targeted customers?
Step Six: Measure
Did the campaign deliver the anticipated results?
What did you learn?
What worked? What did not work?
What can you improve upon?
How will you incorporate these findings into your next campaign?
As a part of a partnership with Best Western, we redesigned their loyalty statement to increase customer engagement, drive customer loyalty and generate incremental revenue.
Best Practices at Best Western
“A lot of companies find themselves doing the same things over and over. At Best Western, we definitely test new marketing ideas to see what moves the needle,” says Tammy Lucas, managing director of marketing programs at Best Western International. According to Lucas, Best Western Rewards members represent some of their most active and invested customers. “Our rewards statements have typically been reporting rather than response vehicles,” Lucas says. “With the help of InfoPrint and the cmo Council, we identified ways to expand our interaction with customers.”
Best Western, always interested in innovation and fresh ideas, was open to testing new types of marketing tactics that could grow and enhance customer loyalty. Best Western wanted to run a campaign that would be delivered to Best Western Rewards members through a redesigned loyalty statement. The purpose of this trial was to increase revenue through incremental bookings and grow awareness for the hotel’s co-branded credit card. Best Western was also looking for a way to promote its new loyalty program, “More Rewards, Faster,” which helped its members earn double points or miles if they booked stays during a set period of time.
As Best Western and Ricoh launched this campaign within a four-week design and delivery window, the use of relevant messaging was a key area of focus. Using basic business rule data analysis, we were able to identify which reward members would receive a co-branded Best Western MasterCard offer and which members already had one and thus would receive a reminder to use it.
The campaign included two statistically equivalent groups of 50,000 each. The first 50,000 members served as the test group receiving the old statement, and the second 50,000 received the redesigned statement with customized offers.
This promotion was completed and delivered during the autumn of 2008 with results scheduled for measurement four weeks after the launch. Unfortunately, neither company expected what was about to happen in the u.s. market. The promotion for travel and credit was received by Best Western’s loyalty members the same week the u.s. stock market crashed. Both companies were left hoping for the best, but anticipating a lackluster campaign.
The results were impressive, especially considering the economic turmoil taking place at the time: The test group earned a 278 percent return on investment (Figure 2.2). This 278 percent roi was achieved by implementing the Precision Marketing Framework. As the Precision Marketing Framework prescribed, we determined the objective for the campaign, gathered and analyzed customer data to segment customers and create a relevant offer, strategized the campaign and delivery channel, deployed it and measured the results. The results delivered an almost twofold increase in Best Western’s roi metric. An indirect benefit was that the new statement design represented a 40 percent decrease in the use of paper, providing a significant green benefit. Thus, Best Western proved that it could produce superior results while contributing to greater environmental sustainability.
In addition to generating a triple-digit roi, Best Western also realized the following:
39 percent lift over the control group for number of stays;
34 percent lift over the control group for number of nights stayed;
30 percent lift over control for revenue generated;
500 percent lift over the control group applying for the Best Western Rewards MasterCard.
The most important result was a 15 percent uptick in the response rate. None of the results were possible if customers had not responded to the relevant information and registered for the promotional program. Relevant content, delivered in a clearly defined statement, drove customers to engage. “We are delighted in the results of this trial and our work with the cmo Council and Ricoh,” Lucas says. “This pilot really does underline our ongoing commitment to rewarding our loyal customers and our commitment to continually deepen our relationships with them.”
Take the Precision Marketing Journey
Adopting an analytical approach to your business and marketing practices — which we term Precision Marketing — is a multistep, evolutionary journey. You can begin to realize improving and impressive returns with simple steps forward using the Precision Marketing Framework. In each of the customer implementations in which we have been involved, not a single customer or business has chosen to abandon the Framework after having learned it. We believe that these rewards are available to all businesses willing to take the steps and begin the journey.
Precision Marketing: Maximizing Revenue Through Relevance, published by Kogan Page, 2012.
Sandra Zoratti is vice president of marketing at Ricoh. Lee Gallagher is director of precision marketing solutions.