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CPM Pricing Will Ultimately Put EMSPs Out Of Business March 5, 2008

Posted by Elana Anderson in Customer Analytics, Database Marketing, Marketing, Marketing Technology, Web Analytics.
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11 comments

After my tirade yesterday against volume-based CPM pricing in the email marketing sector, I was disappointed to see the recent post on Bronto’s blog announcing the vendor’s move towards a volume-based pricing model:

For the last five years, we have priced our clients’ subscriptions by the number of the contacts stored in the application (i.e., list size.) This worked great in the early days because we primarily had small business-to-business customers. As we grew and our business and product became more sophisticated, we attracted more sophisticated clients that send at higher volumes. Since list size mattered less and sending capacity mattered more to them, the model became tougher to match with our clients’ needs and trickier to manage operationally.

My perspective? This may be a way to be competitive in the short term, but ultimately it will put the email service providers (EMSPs) out of business. Simply put, it makes the EMSP nothing more than what I have long referred to as a “dumb pipe” – a platform for bulk pushing out messages. Despite the economic challenges I addressed in my previous post, most (to use Bronto’s words) “sophisticated clients that send at high volumes” are actively working to improve their ability to target and customize their marketing communications in order to increase relevance. As I also noted, this requires tools and the necessary skills to understand and leverage customer data. If the email provider doesn’t provide these tools and services, you can be sure that other providers will be there to fill the gap. Carpe diem.

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CPM Pricing Is To Blame For Bad eMail Marketing March 4, 2008

Posted by Elana Anderson in Customer Analytics, Database Marketing, Marketing Technology, Online Marketing.
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13 comments

One of the issues I am currently working on is to understand what it takes email marketers to move beyond “fire and forget” (or “batch n’blast”, whatevah) marketing. I find that while marketers intellectually agree that more targeted, timely, and relevant email communications will be better received by customers and increase response, basic economics is a major barrier to progress in that direction. Why? Because email marketing is so darn cheap that every campaign delivers ROI – even if the campaign is totally untargeted (You ever wonder why spammers still spam? They make money doing it).

Relevance Isn’t Free

I’ve spoken with a few dozen email marketing leads from large companies and strong brands in recent months. Their hearts and minds are in the right place. Broadly speaking, they:

  • Are concerned about opt-outs, unsubscribes, and long-term engagement with their email programs.
  • View email as a tool to develop customer relationships.
  • Are working hard to employ tactics – like multi-layer targeting, segmentation, and event triggers – to improve the relevance of their communications.

Unfortunately, as these marketers strive to improve their email communications, they inevitably run into a series of challenges including:

  • Availability of timely, high quality data
  • Access to skills that know how to turn data into actionable information
  • Operational knowhow to automate data-driven processes

Wait… I’ve heard these problems before! In the 1990’s, when I worked with catalogers, financial services firms, and telcos to build some of the first big database marketing environments. Interactive marketers today sound just like big direct mail marketers did then.

Unfortunately, for the interactive marketing folks, the similarities stop there… Even though the highest percentage of upside from a marketing database typically derives from new streams of revenue, direct mail is so expensive that the mailers can justify a marketing database and a top-notch analytics team to help manage costs. Unfortunately, since email marketing is so cheap, interactive marketers can’t make the same argument.

Email Marketing Grew Up Out Of Advertising, Not Direct Marketing  

Email CPM (cost per message) pricing was borne out of mass advertising which has historically focused on how many eyeballs see a message. Take a huge list, send the same message to everyone, and pay volume pricing – the more you send, the cheaper it is. OK – perhaps this made sense in 1997 when email marketing was a novelty but, let’s be honest, this pricing model is totally out of whack with how marketers want, and need, to leverage email today.

To their credit, leading email marketing service providers (EMSPs like Responsys, e-Dialog, Epsilon, and Cheetahmail) have been actively working on the applications that they provide to deliver:

  • Access to a richer dataset.
  • Tools that support data slicing/dicing and more granular targeting.
  • Improved campaign design and management functionality like event detection, rule- based dynamic content and dialog campaigns, and improved campaign automation.

But, as these vendors work diligently to provide their clients with the tools that they need to deliver targeted, timely, and relevant communications, they consistently struggle with downward pressure on CPM rates (which, today, are fractions of a penny per message). Last week I spoke with the CEO of a leading EMSP who told me that no matter what pricing elements they propose, prospects consistently turn the pricing into a CPM calculation to compare competitive vendors.

The Cost Of Relevance

While I am all for generating healthy competition amongst vendors, companies need to understand that boosting the relevance and sophistication of their email programs comes at a cost. What are the major cost components?

  • Analytic data mart: A “data sandbox” that provides an area to explore data, profile subscribers, analyze behavior, and identify key pieces of data that can be leveraged to increase the success of your email programs.
  • Analytics team: You have a sandbox, you need people that know how to play in it, develop business hypotheses, predict results, etc.
  • Marketing database: Different from the analytic sandbox, this operational marketing database is a simplified data structure and only incorporates the data required to define, execute, manage, and measure current email programs.
  • Campaign management and automation tools: These tools sit atop the marketing database. Marketing users (or service provider staff) leverage the tools to define, automate, and execute campaigns.

Recognize that all of the things I note above can vary dramatically in cost and scope and can be achieved in different ways:

  • In partnership with an email service provider.
  • In partnership with other providers (e.g., database marketing services providers like Merkle or Epsilon).
  • If you have the in house skills, internally in your own shop with support from your IT group.
  • A combination of the above.

Which way to proceed depends on a number of factors that I will be happy to address in future posts. But, the key point is… If you don’t do these things somewhere, you will not be able to improve the relevance and sophistication of your email programs.

Is eMail Doomed As A High Quality Relationship Marketing Channel?

Ultimately, I am trying to help email marketers build a business that will help them increase the revenues and longevity of the email channel. That case requires investment in improved data capture, data integration and management, and data analysis capabilities – all of which cost money. Email marketing specialists with deep knowledge of the channel are in a great position to offer these capabilities, but these vendors are stymied by CPM pricing. What will it take to truly move email marketing beyond its position as just another “mass advertising” channel?

It is URGENT that you give us a call… February 8, 2008

Posted by Elana Anderson in Customer Analytics, Customer Experience, Customer Experience Hall of Fame -- and Shame, Database Marketing, Marketing, Marketing Technology.
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6 comments

Have you noticed an uptick in the number of robot marketing messages that you are getting? I have and it’s making me crazy! For the last several years I have worked from my home office 2-4 days a week. In recent months, the number of calls that I am getting with robot marketing messages has increased dramatically.

Some of the messages are “transactional.” For instance, we get calls from Blockbuster reminding us that we have an overdue movie. But most of the messages are pure marketing. Yes, my phone number is on the DNC list, but these calls are coming from firms with whom I have a “preexisting relationship.” The company I bought my car from, financial services firms I deal with, etc. The most egregious, from my perspective, are the messages that come from my credit card company which go something like this:

Hello, this is Amy from your credit card company! Now, nothing is wrong with your card, but it is URGENT that you contact us immediately to discuss how you can lower your monthly interest rate….

The first of these messages came just after my wallet was stolen last spring (see my post on that descent into customer experience hell). What did I hear? “URGENT that you contact us!” I like to think that I’m a reasonably intelligent person but I must admit that it took me a second to realize I was listening to a pitch, not a customer service call.

It may be legal, but it’s the worst kind of spam

As a marketer, perhaps you’re wondering what’s wrong with this. I’ll tell you. For me as an individual, these messages are highly interruptive, irrelevant, and unwanted — not to mention misleading. If this came to me as an email, I could delete it without a second thought. It would be a little annoying but not annoying enough to write this post. These calls require that I pick up the phone and listen. They take more of my time and attention and they make me mad! 

I am not debating that these calls reach some people that probably consider a lower interest rate to be a very good thing. But, if my credit company bothered to do a very easy query against its customer databsae before teeing up these calls, it would see that I pay off my bill every month and don’t pay finance charges. Therefore, the interest rate is totally meaningless to me. For a company that I know employs fleets of statisticians and has very sophisticated customer analysis, I find this absolutely inexcusable!

Be responsible with this technology

I’m not suggesting that you never use this tactic to reach your customers. I am suggesting that you recognize that the phone channel is one of the most interruptive of channels (just shy of door-to-door sales) and if you choose to implement these automated phone campaigns you need to make sure that you are properly targeting your calls. Some suggestions:

  • Don’t use “preexisting relationship” as carte blanche to call. While it may be legal, there are customers out there that just don’t want the calls, period. I recommend filtering contacts that have registered for the DNC list out of the call list particularly if your list isn’t well targeted to customers for whom the message is clearly relevant.
  • Use data to target the campaign. If you have good customer analysis and response modeling capabilities then, by all means, use them. Even if you don’t, use basic queries to filter the list in order to screen out those customers for whom the message is obviously irrelevant. If you don’t have this capability, then you should not be running these campaigns.
  • Be more genuine in the communication. If you are properly targeting the message, then you can make a more genuine appeal to your customer. Rather than, “it’s urgent that you contact us!” empathize with the customer by saying something like, “we notice that you have been paying high finance charges over the last few months and we want to offer you the opportunity to lower your rate for the next three months…” If I ever do get in a situation in which I am carrying a monthly balance, then this kind of offer would come in handy and I would feel like my credit card company was on my side.
  • Be transparent with Caller ID. I failed to mention above that the calls don’t even have proper Caller ID (most say “unidentified number”). Although the FTC requires that telemarketing calls have proper Caller ID, apparently the rule does not extend to marketing phone calls where a “prior relationship” exists. I believe marketers should take the high road nonetheless and give customers the opportunity to screen the calls.

Demonstrating The Brand Value Of Email January 29, 2008

Posted by Elana Anderson in Customer Analytics, Database Marketing, Marketing Measurement, Marketing Strategy, Online Marketing.
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1 comment so far

I had the opportunity to catch up with Robert Raines, VP of Product Management & Creative Services at E-LOAN last week. I first met Robert several years ago when he was getting the company’s email programs off the ground. Robert shared with me some of the things that he’s accomplished since we last spoke and, as always, he had some great insights.

E-LOAN wanted to evaluate the impact of its email program 

Robert is a firm believer in testing and, more specifically, using control groups to measure the impact of email marketing activities. To determine the long-term benefit of its email program, the E-LOAN team created a randomly selected universal control group. While the control group still received transactional email communications (e.g., “We have received your application”), it received no email marketing treatment whatsoever for a period of 18 months.

To ensure that individuals selected into the control group were excluded from all email marketing efforts, the team created an exclusion table in its marketing database and automatically excluded the control group from any database extracts that were sent to its email service provider (Responsys).

What E-LOAN learned

What was E-LOAN looking for? The company wanted to evaluate the application rate of the mailed population vs. that of the unmailed population (the control group) over an 18-month period. As you might expect, at the beginning of the test there was very little difference in the application rate of the two groups. But, over time, the emailed population had a significantly higher application rate. So much higher that, according to Robert, the difference alone is enough to justify the total annual cost of the company’s email program.

Robert is also quick to point out that it’s not just about being in the inbox that matters. The E-LOAN team works hard to ensure that its email program is relevant and it uses a mixed strategy that includes broadcast messages (e.g., “The Fed has lowered interest rates”) and highly targeted, event-triggered communications.

Recommendations

Email marketers often complain that they don’t have enough staff and struggle to manage what’s already on their plate given the staff that they have. I believe that this complaint becomes a self-fulfilling prophecy… Email is cheap, just blast it out, and we’ll keep the bare bones operation going… To break through this cycle, email marketing managers should:

  • Devote 6-8 hours of the team’s time to implementing a test and measurement strategy. As a manager myself, I know that it’s possible to squeeze some amount of extra time out of the week. If you are really committed to making email marketing more strategic in your company, find 15-20% of someone’s time and focus it on test and measurement as Robert has done at E-LOAN. Sure, the E-LOAN test that I’ve shared here took 18 months, so start with something smaller. For instance, test the difference between a broadcast newsletter and a newsletter with dynamically targeted content.
  • Trend results over time. A quick test to show that targeted content generates higher open and click rates is indeed interesting. But, it’s more interesting to trend this information over time to evaluate the sustained value of a targeted vs. untargeted program.
  • Document a business case. If your goal is to improve the internal stature of your email efforts, get more budget, and grow your team, then it’s imperative to document your case. Avoid doing this at an individual campaign level and comparing metrics — like opens and clicks — against industry averages. Focus on the bigger picture and build a case that exposes the real business value of your efforts. What is the ROI of targeted vs. broadcast communications? Or, as in the E-LOAN example, do your customers buy more if they receive email marketing communications from you? This is the kind of case that your bosses need to free up more resources.

What To Expect From Your Web Analytics Tool (Web Analytics Series, Part 2) January 15, 2008

Posted by Elana Anderson in Customer Analytics, Database Marketing, Integrated Marketing, Marketing, Marketing Measurement, Marketing Technology, Online Marketing, Web Analytics.
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4 comments

In my post just before the holidays, I shared a framework to help marketers think about how web analytics contributes to data-driven marketing effectiveness over time. Marketers agree that they want to deliver more relevant and timely communications, establish a two-way dialog, and generally be more customer-focused and integrated, but many are struggling to make positive progress. Use the framework to understand understand the maturity of your data-driven marketing practices. Then define your objectives and timeframe for making incremental progress. In this post, I want to discuss how marketers can use their placement on the framework to define the key requirements for their web analytics tools. I work with an awful lot of firms out there that are not getting the benefits that they should be out of the technologies that they purchase. Why? Well, I think one key reason is that they are overly aggressive in their expectations of what they will achieve and over what time. The result is a lot of wasted technology — and wasted time.

Web Analytics Maturity Framework

If we were more realistic about what we are trying to achieve (i.e., the business outcome) with our web analytics tools then I believe our learning curve around how to effectively understand and leverage the data would actually accelerate. Why? Because we wouldn’t be constantly struggling with the technology. The free tools on the market are getting better and, while they are not sufficient for marketers that are beyond Stage 1 maturity, they will meet the needs of many. Here is a starting point to help you get beyond vendor eye candy and align functional requirements with business objectives:

Stage 1: Site analysis

Key questions you need to address:

  • How many visitors are coming to my site?
  • How are visitors using my site?
  • How are visitors finding my site?

Core functional requirements:

  • Visitor analysis
  • Referrer analysis (pages and keywords)
  • Strong library of parameterized “out of the box” reports

Comments on the market: These capabilities are table stakes to enter the web analytics market and most of the solutions out there do a reasonably good job here. Expect a more limited library of reports and more limited customization features from the free tools.

Stage 2: Site optimization

 Key questions you need to address:

  • How can I increase site visibility?
  • How do content and taxonomy influence desired action?
  • What would improve site navigation?

Core functional requirements:

  • Path analysis
  • Page and scenario drilldown analysis
  • Drop-off analysis
  • A/B and multivariate testing

Comments on the market: This is currently an area of focus for leading vendors in the market. The once-standalone optimization players – like Offermatica (acquired by Omniture), Kefta (acquired by Acxiom), and Optimost (acquired by Interwoven) – have been acquired and other vendors are looking to add these capabilities through acquisition or organic development. Given current client emphasis on customer experience management, expect this to continue to be an area of hot competition in the near future.

Stage 3: Segment targeting

 Key questions you need to address:

  • How can I logically group site visitors?
  • How can I target visitor content by segment?
  • How can I leverage site learning in other communication?

Core functional requirements:

  • Segmentation model templates
  • Ability to persist segments
  • Ability to create dynamic segments and apply them historically

Comments on the market: Leading web analytics vendors like Coremetrics, Omniture, Unica, and Visual Sciences (acquired by Omniture) offer segmentation capabilities but this is an area where vendors differentiate.

Stage 4: Individual customization

 Key questions you need to address:

  • What is the best content for an individual based on prior site interaction?
  • Should I reach out to an individual customer NOW?

Core functional requirements:

  • Individual visitor profiles retained over time
  • Ability to match profile to current visitor context – in real-time
  • Ability to unify profiles when visitor identifies

Comments on the market: A few leading vendors are really just starting to focus here. Omniture’s recent acquisition of TouchClarity is a good example. Unica is also working on integrating it’s web analytics and campaign management modules in a meaningful way. But, overall, the vendors are just getting started at figuring this out.

Stage 4: Integrated marketing

 Key questions you need to address:

  • How are customers using online and offline channels in the buying process?
  • How can I optimize online and offline interactions?

Core functional requirements:

  • Calculate and retain key profile metrics
  • Track metrics longitudinally
  • Open data model and facilitation of extracts to other systems

Comments on the market: Today, you’re mostly at the mercy of your internal IT shop when it comes to the level of data integration sophistication required to help marketers in large companies integrate their activities across channels. Some firms call upon their interactive agency, systems integrator, or database marketing service provider to help. But, each approach has its challenges. It may make you feel better to know that no one has nailed this one and that gives us all something to aspire towards. At the end of the day, I believe that if the web analytics vendors want to be part of the solution then they need to hire (or partner) with database marketing gurus in order to make real progress.

Web Analytics Needs To Grow Up (Web analytics series, Part 1) December 11, 2007

Posted by Elana Anderson in Customer Analytics, Customer Experience, Database Marketing, Integrated Marketing, Marketing, Marketing Measurement, Marketing Technology, Online Marketing, Web Analytics.
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3 comments

Last week I was privileged to spend the day in the company of several thought leaders in the field of Web Analytics. Dr. Alan Hall, Avinash Kaushik, Judah Phillips, and I participated in several taped panel sessions that focused on how to best leverage web data to improve marketing effectiveness and how to effectively leverage investments in web analytics technology. We were joined by, Steve O’Brien, Akin Arikan, and Karen Hudgins from Unica which sponsored the get together. What struck me most about our conversations (on camera and off) is how committed each of us is to moving Web analytics beyond what today is largely a passive, report-centric discipline towards one that:

  • Improves the effectiveness of individual customer interactions
  • Actively contributes to the understanding of the customer
  • Is a key part of improving marketing’s ability to measure across channels

Five key stages of web analytics maturity

One of the bits of original thinking that I contributed to the discussion was a framework that breaks down five stages of Web Analytics maturity.

Web Analytics Maturity Framework

Don’t pay attention to the stages for the moment… This is not a new picture (I pulled the base graphic from a from a client deck I presented in 1998). And, few would disagree. If a marketer is not leveraging any data to drive marketing communications, just adding a little bit of filtering or segmentation will have a tremendous positive impact on results. But, at some point, our ability to continuously improve results through segmentation levels off. At that point, the way to get the next hockey stick impact on results is to use individual customer data. Definitely not new thinking, but I think it helps level set us that is what “1:1” or “customer-centric” (you pick the cliché) marketing is all about – using knowledge about the individual customer to drive interactions that, at the end of the day, benefit both parties.

This framework can also help us think about how we are using the mountains of web data that we’re collecting to help us move up and right on the chart. I break the role and the progression of web analytics down into five stages:

  • Stage 1 – Site analysis: When we get started, we’re really just trying to get our arms around the data and the traffic on our site. The focus is to understand how visitors are getting to the site and what they’re doing there. But you also need understand why they’re there and whether they were able to accomplish what they set out to do. How do you do that? Avinash suggests that’s quite simple, ask.
  • Stage 2 – Site optimization: The goal, of course, is to avoid analysis paralysis and look for ways to leverage the insight we are gaining about how visitors access and use the site to drive more visitors to the site, to optimize the experience of visitors once they are on the site, and to help more visitors accomplish what they were trying to do.
  • Stage 3 – Segment targeting: As we continue to focus on improving customer experience, we inevitably start to look for ways to segment visitors into different groups either through data explicitly provided by the visitor or through insight inferred from the session and prior interaction data. We then apply the segmentation to customize visit experiences and target content.
  • Stage 4 – Individual customization: At some point, our ability to continually apply finer segmentation and impact results levels off. That’s when we start to apply individual-level web interaction data to customize online interactions.
  • Stage 5 – Integrated marketing: Of course, the holy grail of all of this is fully integrated and customer-centric marketing in which we seek to integrate insight from online behavior with what we know of an individual across other channels. And, we do this in order to inform and optimize all interactions – regardless of channel – with the individual.

The sad part of all of this is that few companies have matured their Web analytics capabilities beyond Stage 3. In fact, I’d estimate that 80% (not based on a quantitative study!) of firms are at Stage 1 or 2. Why? Well, it’s darn hard! There’s tons of data to wade through, the industry is learning as it goes, and the technologies that help marketers move up the curve are still pretty immature and poorly integrated.

So, how will this framework help?

Use the framework to understand where you are today and what you want to work towards and over what time frame. Each stage of maturity focuses on unique business objectives, requires a different level of analytical savvy, and demands different functional capabilities from your supporting marketing technology.

Over the next several weeks, I will continue to drill down on this topic with additional posts. Please add to the discussion by commenting and providing feedback on the blog or feel free to contact me directly.

Five steps to understanding customer retention December 4, 2007

Posted by Elana Anderson in Customer Analytics, Database Marketing, Marketing, Marketing Measurement, Marketing Strategy.
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18 comments

 I recently responded to a question from a network that I participate in.

What is achievable customer retention and is there a level of customer retention that is not profitable to reach?

I’ve talked with a lot of marketers about this question and, frankly, there is no easy bake answer. It’s easy to look for a quick published statistic or benchmark and call it a day. But, how much does knowing that your retention rate is better than your competitor’s really help your business? It may help CYA, but it doesn’t help your bottom line.

IMO: marketers rely way too much on benchmarks (open rates, click rates, retention, etc.). Rather than rely on industry benchmarks (I don’t even know of a comprehensive source for retention by industry), I encourage marketers to:

  1. Establish a baseline for current average retention. Examine your customer base to understand average retention. Better yet, do it by customer segment if you can.
  2. Understand the timeline to customer profitability. Every business has different acquisition and services costs so if you don’t already know how long it takes for a new customer to become profitable, then you need to figure it out. Subtract your costs to acquire and serve the customer from average customer revenue over time. Companies that are really good at this use individual customer revenue and get into cost minutia to attribute costs at an individual level and even include costs like physical plant and electricity. But, if you’re just getting started, keep it simple and stick with averages.
  3. Set a target retention rate. The longer it takes to become profitable, the higher the retention rate needs to be. Establishing and monitoring a retention KPI will tie retention directly to business performance.
  4. Define marketing tactics to improve retention. If current retention is not at the target level, then set improving retention as a key business objective and drill down into a series of tactics aimed at moving the needle. Don’t shoot in the dark though. Engage a statistician to do some data analysis to better understand what key factors that correlate to longtime customers or customers that attrite. Then, establish marketing and customer service practices and campaigns that are specifically focus on encouraging the factors that are correlated with long-term customers.
  5. Measure results consistently. Periodically, reevaluate the retention rate to see how what you are doing is impacting customer retention. Make sure you are also considering metrics that help you tweak your programs at a tactical level too. Specifically, are the tactics you have implementing really encouraging those factors that correlate with long-term customers?

Direct mail: Not dead yet (and won’t be any time soon) November 12, 2007

Posted by Elana Anderson in Customer Analytics, Database Marketing, Integrated Marketing, Marketing, Online Marketing.
Tags: , , ,
7 comments

Thank goodness it’s Veteran’s Day — I have a USPS-free day to clean up all of the mail that is piling up all over my house. Must be the season, but I’ve dedicated a few posts to the direct mail industry lately (I promise that I’ll find someone else to pick on once we get through Christmas). Just to give you some more proof that direct mail isn’t going to die on the vine any time soon (article from Direct Magazine):

Early next year, Neckties.com going to make its first foray into direct mail, says Herschberg.

We have a direct mail campaign we’re going to be working on after the fourth quarter,” he says, noting that while the firm’s younger customers prefer to shop online, they tend to spend less than their older counterparts.

“People in 50s and 60s more likely to be swayed by combination of online and direct mail,” says Herschberg, conceding that the direct mail effort is “something of an experiment.”

Neckties.com is not alone. Per my previous assertion that ecommerce is actually responsible for increased direct mail circulation… I get a ton of mail from Netflix. If Netflix bothered to match its rented list to its own customer database, they would find that my household (thanks to my husband) is already one of its most active customers (my husband rents movies weekly and has rated over 1900 movies Netflix.com to date!). I have also recently received mailings from online mailings from ecommerce stalwarts like Overstock.com.   

To continue my rant… The most ridiculous catalog I’ve gotten so far this holiday season is the one that was entirely dedicated to field hockey from Longstreth. I’m sure it’s a fine company, but my household has no interest in field hockey (I’d love to know where the shoddy analytics that determined I am into field hockey came from)…. The connection must have been that mouth guard I ordered for my daughter (as required by her SOCCER coach) through one of Amazon.com’s merchants…. My request to Amazon: Don’t just pass me off to the to the privacy policy whim of your partner merchants! Take some ownership and add functionality to your ecommerce site to allow customers to opt-out of catalogs and email when they buy from a partner. 

“Relationship” Marketing November 9, 2007

Posted by Elana Anderson in Customer Experience, Database Marketing, Marketing, Marketing Strategy.
Tags: , , ,
7 comments

I just started cross posting some of my blog entries on the CustomerThink site. This week’s post generated a lot of discussion about misguided attempts at relationship marketing. Here are some of the examples that were raised (I’ll summarize from the comments):

  • T-mobile birthday card (with balloon): Described as an “expensively produced standard letter,” the birthday greeting reached a customer with a record of service issues and it arrived late! The customer’s reaction? Not impressed — probably not upset enough to quit T-mobile, but upset enough to blog about it. (example from Graham Hill)

  • Pet birthday card from insurance company: According to Gywnne Young, who submitted the comment, “The card wasn’t edible and it didn’t squeak. So it went in the recycling bin. And far from the warm fuzzy feeling I’m sure the company meant to give me, I was left with a feeling of disgust.”

  • Got you back: “A major electronics retailer regularly sent a birthday card to individuals from a database of prospective customers. One recipient was so incensed over this invasion of his privacy that he took action. After a little Internet sleuthing, he found the name of the company’s CEO, and then found out his wife’s name and HER birthday. Then he sent the CEO’s wife a birthday card, and asked her how she felt about receiving the card, including the obvious insincerity of the sentiment inside the card. The program was immediately pulled.” (example from Andrew Rudin).

Now, let me share a couple other examples with you which had a totally different effect.

  • Recognizing a personal milestone:  When Scotiabank customers pay their final mortgage payment, the bank sends out a letter thanking the customer for her business and congratulating her on reaching the milestone. Internally, bank employees have dubbed the letter, “the wedding invitation,” because it is printed on fancy stock and doesn’t include the typical marketing speak, colorful logos, or offers. Two weeks later, the branch follows up with a phone call: again congratulations, thanks for business, anything we can help you with in the future (no pressure, no pitch)… According to individuals I have interviewed at Scotiabank, this program has yielded an incremental balance lift of $500 per contact (that adds up).

  • Birthday greetings from Bill: For as long as I can remember, I have received birthday cards from Bill. The cards were always handpicked and contained a personal message from Bill. I had never met Bill. Who was he? He was my grandfather’s financial advisor.  My sisters and my cousins all got cards from Bill. And, when several of us had enough means of our own, we too became Bill’s clients.

  • Mom loves the holiday wine and cheese: My mom (a science professor at William and Mary), is very skeptical of marketing (and doctors). She doesn’t fall for anything. That said, she literally gushed over the wine and cheese basket that she received last Christmas from her financial advisor. The basket came with a card and a personal note. She knew it was “marketing,” but it succeeded in giving her the “warm and fuzzies” nonetheless.

What’s different about these examples and what works?

The examples that work are:

  • Between parties that have a significant relationship: What kind of relationship do you have with your mobile company or insurance carrier? Probably not a personal one.  

  • Not a marketing pitch: What!?! Can marketing be subtle? In fact, Scotiabank’s restraint in foregoing the glossy insert or list of latest offers significantly contributes to making these communications more real and sincere for the recipient.

  • Personal and sincere: Scotiabank’s restraint contributes to the sincerity of the message as do the handwritten notes or even just the signature from the financial advisor.

Relationships come from sincere interactions

Maybe we’ve all gone a little too cuckoo over the term “relationship” marketing. Let’s be clear, relationship marketing IS NOT blasting a message to a semi-targeted list. And, I don’t think I’m in the minority here, but most customers really don’t want to have a relationship with the company they buy their toilet paper from.

Here are my top line recommendations to would be relationship marketers:

  • Only be personal when you have a right to be: I plan to crack a bottle of champagne if I ever pay off a mortgage! And, I wouldn’t be upset at all if my bank sent me a card recognizing my achievement. However, if the envelope was stuffed with glossy pitches aimed at securing more of my money, I think I would be a tad perturbed.

  • Look for opportunities that positively impact customer experience:  Think about marketing from the perspective of service. Part of marketing, by it’s nature, will always be to inform but more marketers need to seek our opportunities to offer proactive service and pleasantly surprise their customers. Rather than sending an insincere birthday card, another wireless carrier called customers that had experienced a series of dropped calls to APOLOGIZE and offer a break on the monthly bill.

  • Expand your definition of “relationship marketing” to include community: What can a firm that doesn’t have a substantial — or even direct – relationship with its customers do?  Recognize that it’s not about the toilet paper! Take a look at P&G’s Home Made Simple. Note that the site isn’t simply hawking products — in fact, you won’t even see a single product above the fold. Customers get tips on managing their household, decorating, and healthy living as well as coupons to try new products (but, again, the product marketing appears secondary). P&G gets valuable market research information and a group of customers that are convinced that the P&G is genuinely interested in them. Del Monte’s social community of dog lovers is another good example of how a firm can engage and build relationships and gain insights that allow the company to better understand customers and innovate (see the case study).

Let’s gather some more examples

I’d love to further peel apart the good examples from the bad so, please, add comments here or send me your examples as well your reaction (positive or negative).

Home Depot: Say it ain’t so! November 5, 2007

Posted by Elana Anderson in Customer Analytics, Database Marketing, Marketing, Marketing Measurement, Marketing Strategy.
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Home Depot Kids WorkshopIf you have kids, maybe you’ve heard of the free workshops that Home Depot runs the first Saturday of every month. My kids just love these events. When we go, they don their bright orange aprons (courtesy of Home Depot) and announce that they are going “to work.” This weekend, as the remnants of hurricane Noel hit our coastal town, my husband and I decided to head over. While he shopped, the kids and I built pirate ships (I only suffered a few hammer bruises). I also chatted a bit with the employee running the workshop who told me that corporate is planning to cancel the program. NOOOO!

Why are marketers forced to be so short sighted? 

Please keep in mind that I don’t have confirmation that the program is indeed being canceled – my intel here is a short exchange with an employee who may have been misinformed. But, it did get me thinking about marketing and how focused on the short-term marketers are forced to be. Sure, measuring the impact of a marketing program like this is hard. Maybe the short-term ROI of program is limited (although our exit bill was ~$120), but Home Depot execs shouldn’t discount the fact that the program fosters a bunch of little do-it-yourselfers who become Home Depot brand advocates at the tender age of 5.Before canceling this program to save costs, Home Depot needs to examine the impact:

  • According to Home Depot’s website, an average of 75 kids/store attend the workshops each month. With 2100 stores (and an average of 1.5 kids/adult), that’s 105,000 adults in the store on the 1st Saturday of the month that likely wouldn’t have been there otherwise. Now assume that 10% of those adults spend $100. That’s $1,050,000 each month. Now, consider the flip side, cancel the program and the parents don’t come in and spend – that’s an annual loss of $12.6 million.

  • It’s also not unreasonable in the least to think that the program has some additional brand impact on the parents of these kids. Again, let’s conservatively assume that 10% of the parents make one additional trip to Home Depot and spend $100. That’s another $1,050,000 per year.

  • Home Depot says that over 17.5 million projects have been completed in the workshops since 1997. I’m sure there are quite a bit of repeat visitors so let’s assume that the program has reached 6 million kids since it was initiated. That’s a lot of brand advocates with future purchasing potential. Once again, take a conservative assumption: let’s say 1% of those kids grows up to spend $300/year. That’s $18,000,000 per year (in today’s money).

Starts to add up, doesn’t it? Now, I don’t know much about Home Depot’s business or have any insight to average order size and that sort of thing so it’s hard to go on, but I think I’ve made my point. I wonder if the execs are evaluating the program based on costs and fluffy returns or quantifying the fact that the program:

  • Drives traffic into the store.

  • Yields (by my back of the napkin estimate) $13.7 million/year now.

  • Creates future buyers.

I sure hope the marketing folks at Home Depot are presenting the powers that be with numbers and not just shrugging their shoulders about the value of the program. Even though some of the numbers may not be auditable based on available data, I’ve always found that presenting numbers based on realistic (i.e., totally believable estimates) is a very powerful tool for getting senior executives on board with a marketing strategy or a program idea.