Spend or Save? - Tactics to Survive a Recession

Spend or save? – what are your tactics to survive an economic downturn or recession?

History shows that at times of economic down turn or recession, one of the major impacts to business is either a lack, of or slow down of decision making – particularly in terms of marketing spend or customer communications.

Clearly it is important at any time to understand the value and return on investment of your spend and also the potential impact of hesitation or the ‘Ostrich Syndrome’ – but when things are tough it’s not just important, it’s essential.

Through Customer Insight, we can examine trends in customer behaviour and most importantly value – this enables critical decisions to be made about where and how to make the best use of potentially limited spend to positively influence customer actions and decisions.

How much do you really know about your most profitable customers?

What proportion of your customer base contributes limited or no profit to your business?

Which customers are ripe for development – and when?

How much do you understand about the customer journey, your interaction and the touch points – by individual?

What impact are your communications having on customer behaviour and spend?

If you can’t answer these questions accurately – the chances are your spend isn’t working hard enough for you and at worst your messaging and communications are confusing, unrewarding, impersonal, and have little or no impact. The good news is that the answers probably lie in your data – all we need to do is find them.

Now is not the time to postpone or cancel your interaction with your prospect or customer base – but it is absolutely the right time to pay much more attention to whether your communications add any value to your relationship with the people that can influence your business future – it costs surprisingly little to find out!

Online Retail and Customer Insight – The Perfect Partners?

Online retail not only offers companies an efficient and economical sales route over more traditional channels but also provides an invaluable resource of customer data and behavioural trends. The only question for marketers is how to put this wealth of information to best use?

In my view there are two options:

1) Sit back and do nothing hoping that the various presumptions about your customers and their buying trends continue to hold true
2) Unleash the power of your data through a combination of customer insight solutions to understand the unique nature of each customer’s buying behaviour.

Any business focussed on acquiring, developing and retaining the right customers - and in doing so benefiting from increased profits - will of course choose the second option. So which customer insight solutions can be deployed and what are the actual benefits that can be realised as a result?

Propensity Modelling - Through the profiling and segmentation of existing customers, propensity models can be designed to predict how they may behave in the future, based on past events and score them accordingly. This greatly increases the chance of a successful campaign by only communicating with prospects for which your message is relevant and avoiding indiscriminate mass-marketing. Essentially propensity modelling helps target the right audience to reduce cost and positively impact customer conversion and up sell.

Cross-Sell Modelling – The purpose of cross-sell modelling is to identify product association trends in transaction history. The analysis would identify trends of which products customers are most likely to buy in conjunction with another product. Whilst business knowledge and intelligence says that some products and services will naturally go together, analysis usually uncovers hidden associations. These associations can be used to drive cross-sell and up-sell opportunities by marketing and promoting the items together with the ultimate effect of increasing the value of each customer’s order.

Retention Programmes – In the current economic climate businesses are being forced to focus on their customer retention programmes (and in some cases formulate them). Of course the more astute companies will have prioritised this tool throughout – research shows ‘that acquiring a new customer costs five to seven times as much as maintaining a profitable relationship with an existing customer’, (Marc Fleishhacker: Ogilvy Consulting). The difficulties with retention though are; are you retaining profitable customers; and ensuring that your message to a customer at risk of lapsing is relevant, timely and delivered via the right channel. The mistake that many companies make is to take a broad brush approach to retention and target customers in large clusters with the same message. EWA’s Critical Lag programme is specifically designed to address this problem. It involves analysing the frequency and time lapse between customer’s purchases or interactions to identify lag trends. Based on this analysis, individual customer communications can be tailored to deliver specific messages designed to encourage customers to continue their relationship.

I have highlighted just a selection of the customer insight programmes that can be used others such as geo-demographic profiling, the application of the Pareto principle, impact assessment and forecast mapping will provide another layer of valuable, detailed information.

Deploying any customer insight programme is of course just the first stage, determining how you incorporate the insight gained into your marketing communication programme becomes the next focus. So look out for the second part of this blog in which I will focus on the types of customer communications that insight programmes can drive.

When is a lapsed customer not a lapsed customer?

What defines a lapsed customer? Tricky question isn’t it, is it a customer that hasn’t bought from you in last six months, twelve months, or eighteen months even? Now I know some of that comes down to what your company produces, (for electrical retailers for example, it’s probably not that unusual to see “regular” customers who purchase once every eighteen months), but surely there must be a way of actually quantifying which of your customers have actually lapsed or are in danger of doing so?

And then there’s the question of how best to reactivate those lapsed customers; or more importantly, stop customers getting to the lapsed stage in the first place.

Something as simple as a personalised email can be the solution - but if you’re thinking of sending bulk email campaigns to all your “lapsed” customers, stop right now. Treating everyone the same is not the answer! And here’s why…

Imagine your business sells electrical components to the repair industry, supplying buyers from the one-man-band, TV repair man to big household name electrical retailers.

You have a considerable pot of loyal customers who purchase regularly but who each have quite unique purchase patterns. The big electrical retailer buys large quantities of components on a weekly basis whereas the small TV repair man buys the odd component once or twice a month. Both are loyal customers and both purchase regularly - in their own way.

And this is the key point to make. If the TV repair man went for a month or two without purchasing, it wouldn’t be too far outside of his usual behaviour but if the big electrical retailer didn’t purchase for two weeks that would be a problem. Treating both the same when it comes to being lapsed (i.e. contacting them after six months of no activity) would mean potentially losing a lot of revenue as you would have six months without the big electrical retailer buying from you. Also by this stage, they’d have most likely gone to your competition so trying to reactivate them would be nearly impossible.

So as you can see, treating each of your customers as individuals is absolutely key to managing any lapsed customer programme. It removes the broad-brush approach and means that whenever a customer lapses or looks like they might, you’re on the case immediately and can hopefully stop them going elsewhere.

So how do you go about implementing a programme to address the issue of lapsed customers? Well one way would be to consider EWA’s “Critical Lag”.

Critical Lag is a programme designed and developed by EWA’s Customer Insight team to identify customers whose buying habits show the potential to lapse. It can then deliver customer specific communications to significantly improve retention, reduce churn and help to build brand loyalty.

In a nutshell, Critical Lag is a set of business rules and algorithms which can be deployed to a marketing database and used to determine when a customer has fallen outside of their usual or expected purchase behaviour. This will trigger a communication to the customer. The key thing to remember is that Critical Lag looks at each customer’s unique purchase behaviour and only triggers a communication when they cease – or change - that behaviour.

The communication that follows can be sent in a number of different ways, that’s really down to you and the type of products you sell; but as with all marketing campaigns, relevance is key. So perhaps an email designed to encourage customers to return or to promote relevant products. Segmenting your customers by value is also worth considering so the most valued customers (in terms of their value to you) would perhaps receive a phone call with an incentivised offer whilst other medium value customers might receive a simple “we miss you” email or text message.

To give you an example of where this programme has been successful, Critical Lag has been implemented by EWA for a retailer as part of their customer communication programme. Over a three year period the programme has increased annual revenue by around 7%, generated approximately £1,100,000 of additional orders and has increased customer retention by 20%.

So, as I’m sure you’ll agree, a lapsed customer may not always be truly lapsed and treating your customers as individuals will always deliver better returns than lumping them in with the herd.

But what are your experiences, is customer churn a major problem for your business, and are you acquiring fewer new customers than those that you lose? We’d love to hear your thoughts.

Being Green can help your profit margins

Everyone is talking about going “Green” and corporate social responsibility. But unlike a lot of people, we at EWA are doing something about it and so can you.

EWA understands the benefits of going Green, not just to the planet but also to a company. We are not suggesting you become eco-warriors, although we would be more than happy if you do become one! We don’t want to brainwash you or make you feel guilty about the way in which your company operates its marketing campaigns. What we will do is help you do your bit. ‘More action and less talk’ is what we say.

Over the last few weeks I have monitored my post. The amount of untargeted, un-personalised direct mail I receive each day is amazing. Not only is this hugely damaging to our planet, but it costs the companies who produce it a small fortune. None of this post has had ANY relevance to me at all. Now, I’m a girl who likes to shop, but I’ve not made a single purchase or registered with any of the companies that have contacted me. If I had been sent information related to products that are relevant to me then I would have been more likely to buy from the companies concerned. I’m afraid to say all the post I received went in the recycling bin, apart from one mailing that was delivered on recyclable paper which I actually took the time to read. What a huge waste of money and our planet’s resources.

Direct Marketing can cost companies huge amounts of money and because of the untargeted nature of some campaigns; often little return on investment is seen. Some surprisingly do not even monitor the campaign’s success or track the volume of responses. As my Mum would say, “you may as well chuck your money down the drain”!

In today’s world, being Green does not only help the environment, but can also help your company’s profit margin too, something I’m sure you are interested in. So what can you use to help you become Green and see a better ROI from your marketing campaigns? The answer is simple - Customer Insight.

Customer Insight is in my mind a green weapon that all companies that care about the planet and profit should be using. Customer Insight is the collection, deployment and translation of information that is essential for a business to acquire, develop and retain the RIGHT customers.

Customer Insight makes sure all communications to potential clients and existing customers is relevant to them as individuals, avoiding mass marketing, huge amounts of paper wastage and cost.

Customer Insight is an essential marketing tool in an increasingly competitive market place. A greater understanding of your customers will help you position products to them that are relevant and help promote loyalty, something that can only be good in today’s financial climate and above all it will give you piece-of-mind that you know your customer and what they want better than anyone else. You will increase your profit, save money AND help save the planet. Sounds good doesn’t it? So why not give it a try and see if you can do your bit and go Green with the added bonus of a bigger profit margin.

The winning formulae for a successful contact centre

We would like to think all our contact centres are successful. It’s about having that winning formula that EWA uses and tailoring it around the client’s specific product and again the use of appropriate language, using clear and concise messages.

It’s also about holding a conversation with customers so they don’t feel you are following a script. It’s also about taking responsibility and ownership of the customer’s problem, and delivering at the right pace with clear consistent messaging.

Some of our successful contact centres included the Department of Health, where the contact centre can have very difficult calls to handle. Its messages need to be delivered with empathy rather than sympathy, which is where EWA can provide expertise.

Getting the right people for a successful contact centre to run like clock work is also part of the winning formula. We can give basic phone training, a lot of product training, but we also have to give people the freedom to convey their personality during the communication to the customer. An individual also needs to be confident in dealing with calls in the contact centre. It’s about product matching too. If you work in our adidas contact centre for example you have to have an interest in sport or it’s never going to work for the caller because you are not going to be able to talk knowledgeably and confidently about the products.

What are the challenges faced in managing a contact centre?

One of the main challenges when working in a contact centre is relying on inbound traffic and managing the peaks and troughs of those calls. It’s all about finding the right balance between having enough staff to manage the incoming calls but still retaining cost effectiveness for clients.

It’s also about staff motivation. A number of contact centres can be dealing with highly emotive subjects, quite standard and even boring subjects, so staff motivation and retention is key in managing a contact centre. It is also about measuring and monitoring the output and it depends on the individual’s interpretation of customer service.

We can all give examples of bad customer service but may struggle to recall an example of good customer service. A recent study showed that 80% of companies believe they deliver a superior customer experience but only 8% of their customers agreed. So whilst a company might think they are doing a great job, you are only as good as that customer remembering the conversation. You do have to go over and above what you believe good customer service is to make a great impression.

Listening and delivering the message is also important. Another of the challenges is that the customer may not really know what to ask you. Perhaps they have a letter which does not make sense to them and they are angry as a result. You really have to listen to them carefully and deliver the correct answer which they may not even want to hear, so it’s important the agent conveys the message in a positive manner.

Call duration brings about its own challenges. A client may measure us on our call duration, and then we have to keep those calls short and deliver a high quality level of customer service which can be something of a contradiction.

Again the bottom line is ensuring that there is consistency in delivering key messages to customers and managing all the challenges that we face.

Can your data and Customer Insight help you avoid the credit crunch?

There’s no doubt about it, it’s tough for most UK businesses at the moment, we’re in the middle of an economic downturn and consumers are becoming increasingly cautious with their money. But do businesses already have the means to help them avoid the worst of what may become a full blown recession without knowing it?

So what am I referring to? (And no it’s not Mervyn King’s mobile number!) Well in a word… data, and more specifically, consumer and transactional data.

Most businesses have a huge amount of information at their finger tips. Every time a customer buys your products or services you collect information on them, whether it is their contact information, details of the products or services they have bought, when they bought them or the communications they have responded to. All this information can be collated into a marketing database and through the use of Customer Insight, really help you to understand your customer’s behaviour.

“So what” I hear you say, “how is knowing what my customers buy going to help me avoid tough times ahead?” Well it all comes down to relevance, by using Customer Insight to help you market relevant products through relevant communication channels to people who are statistically likely to buy them, you can seriously increase the level of responses to your marketing campaigns and remove the reliance on above the line marketing. All this equals less expense and more return from your marketing budget.

So before you begin to worry about your customers spending less and going to the competition look at the one thing already in your possession and make your data work for you.

I’d like to hear you thoughts on the topic I’ve discussed. Is Customer Insight helping you during the credit crunch?