Wednesday, 3 December 2008

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!

Monday, 1 December 2008

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.