Category Archives: DataBase Marketing

Managing MultiChannel / Omnichannel Mayhem

Analytical Culture, DataBase Marketing, Web Analytics

So, you’re saying to yourself, all this talk about Control Groups and Measuring dis-Engagement and Relationship Marketing, is there any other reason to care about this stuff besides Campaigns?

Yes – addressing MultiChannel Mayhem – the fact that few companies have a solid plan for really optimizing the multichannel system.

Kevin shows us why MultiChannel Mayhem matters here. Turns out multichannel customers are not always the best customers. Of course, you knew that, right? I mean, you have relationships with multichannel vendors you conduct through a single channel, right? And you would consider yourself a pretty darn good customer, right?

The reason Control Groups, Measuring dis-Engagement, and Relationship Marketing are so important is they comprise an entire MultiChannel Interactive Marketing System. It is pre-built and ready to go, customized to take advantage of and optimize Interactive Customer Relationships, where sometimes the most profitable Marketing is to do none at all.

If you are an analyst / technical background, you would probably be more comfortable studying the system from the bottom up, from the very measurement-oriented idea of Control Groups up through Measuring dis-Engagement to the Marketing Strategy idea of Relationship Marketing – what, how, then why.

If you are a Marketer, you would probably be more comfortable studying the system from the top down, from the Marketing Strategy idea of Relationship Marketing down through?Measuring dis-Engagement to the measurement-oriented idea of Control groups – why, how, then what.

Why should you care about this system? Because addressing the problem of MultiChannel Mayhem is built right into the model, along with all the cultural and organizational tools you need to implement.

Let’s go though a common challenge with Multichannel Marketing and see how the system solves it. First, we need some assumptions:

  1. The goal is to optimize the MultiChannel system for Return on Marketing Investment?- not sales, not share, etc.
  2. Given proper measurements, people will make rational decisions.
  3. The general concept of long-term customer value?is important to the company and people act accordingly

Now, let’s address a common problem – no controls on who uses the customer database or what it is used for. Any division or channel can market to any customer at will, doing whatever it is they want to do, regardless of previous messages.

This is a mess, and you know it. Customers are being bombarded with conflicting brand and offer messages.

Here’s how the above system solves that problem:

1. The division or channel that acquires the customer owns the customer exclusively for some period of time. After all, they started the Relationship, they invested in acquiring the customer, they should get the rewards of the Potential Value they have created. No other divisions are allowed to communicate with the customer without the permission of the acquiring entity.

2. The acquiring entity retains this exclusivity to the custome only as long as they can maintain an active Relationship with the customer. Once dis-Engagement has grown significantly, the customer is open season for any division or channel. This is why it is so incredibly important to define and measure the dis-Engagement process. The customer is evolving, and this rule ensures the company is flexibly responding and evolving with the customer, following the Relationship, and maximizing value.

3. After the initial acquisition and subsequent dis-Engagement, whichever channel or division has the most current relationship owns the customer. If a customer defects from one channel to another, the “ownership” passes as well.

4. The channel or division with the most current relationship can at any time sell communication permission (basically, rent the list of customers Engaged with it) to other channels or divisions if it wants to. This is not only a nice way to help offset acquisition costs, it also creates an internal marketplace of relationship permission, where only the communications which generate incremental customer value survive the Controlled Testing process.

If you have to rent a list of new customers from the acquiring entity and pay for that list, you are going to be more thoughtful and careful regarding what kind of communications you send. Realizing that prior communications are going to affect the success of your communications to this rented list, you are going to tend to stay on brand message and within established communications guidelines.

In other words, this construct enforces financially responsible testing.

The rental fees are negotiated between buyer and seller. The seller can charge different fees for access to different segments, for example, known best buyers cost more to rent than predicted dis-Engagers. Any segmentation you want. This is a CPM-based rental fee arrangement to keep list access prices fair across channels. I suppose you could go to CPA, but that’s probably going a bit too far, given the lack of ability for some channels to track such things.

5. If the customer is a true multi-channel customer – active in multiple channels or divisions simultaneously – then all channels the customer is active in have permission to communicate with the customer  Any activity with any division or channel – including service requests – indicates Engagement is current and resets the dis-Engagement clock to “Currently Engaged”. This addresses the above scenario Kevin has painted, which is more like the reality of multichannel relationships – they ebb and flow between channels over time.

From the company point of view, this system is a self-regulated, self-optimizing customer value generating machine. It ensures that from whatever channel or division perspective you view the system, the strong survive and the weak fail, but the Potential Value of the customer is always maximized.

6. If, from a Strategic perspective, the Company wants to intervene in this system, that is permitted, as long as there is compensation to the Relationship-generating asset gatherers.

For example, when launching a new channel or product line with no customers to start with and no cash flow. The Company, on behalf of the new channel or line, pays rent to all the other channels for the permission assets they have generated. The channels still get a return on their assets, and for the Company, it’s simply accounting for a real cost – the cost of cannibalizing existing sales in another channel / line or acquiring the customer.

From a practical perspective, whether money actually changes hands or not in the permission marketplace is a company culture thing. The more sophisticated database marketing companies will often force real monetary exchange because they understand customer value so well.

Other companies might simply run debits and credits in a spreadsheet, creating more of a “list exchange” type of scenario but one that still provides controls on (for example) inundating best customers with communications and ignoring defecting customers. These credits can be used to pay for other cross-channel marketing activities as well, for example, the mail order division wants to put catalogs in the web division’s outbound shipments and pays with credits received from the web division’s use of catalog e-mail addresses.

A self-regulating, self-optimizing system for Managing MultiChannel Mayhem, built on Relationship Marketing, Measuring dis-Engagement, and Control Groups to keep everybody in the system honest.

It’s really no different than, say, optimizing a PPC campaign – except it’s only about customer communication, and instead of optimizing across keyword sets and landing pages, you are optimizing across the entire company, every campaign in every channel against each other.

So, do you have Multichannel Mayhem at your company?

If so, does it matter to you or not? Matter to anybody?

If it does matter to you, do you think the system above would address the problems you have?

Can Marketers (and Analysts) Have it Both Ways?

DataBase Marketing, Measuring Engagement, Web Analytics

Well, the Framework for Engagement did not generate much discussion.  Perhaps it was too technical, or not technical enough.  That duality is always a problem when you are trying to unravel an issue at the junction of Marketing and Technology; you have to speak down the middle and sometimes, you don’t “engage” either audience.

So let’s try attacking this issue in another way…from the “generally accepted Marketing speak” perspective. 

First, a couple of short definitions:

Brand – the actual personality of your company or products, the experience and feelings people have when they think  about and interact with your company or products.

Branding – the act of trying to communicate this brand or product personality to people though media.  As we know, this Branding effort can project an image that is different from the actual Brand.

Here is what is happening:

1.  Marketing communications used to be one-way, and the “media” was in control of these communications.  This was the era of Branding, where companies tried to establish a personality and set of benefits associated with products.  For the most part, the only challenge to this effort, unless it was a spectacular failure or blatantly false, was conversations over the backyard fence with neighbors.

2.  Marketing communications are now at least two-way, if not many-to-many.  This means in terms of the shear volume of communications, it’s more often Brand (the true personality or experience) than Branding being communicated, e.g. “the customer is in control of your Brand”.  While I don’t think this is true, I think it is possible to allow the customer to take control of your Brand, but you have to give up control for that to happen.

3.  With Brand more important than Branding, companies need to pay more attention to the actual product and service experiences they deliver.  This means product design and customer service / experience become much more important than they have been in the past, relative to Branding and media.

4.  Direct Marketers have always been hyper-sensitive to Brand – the products and experience – because that is all they have.  In a one-to-one Relationship with the customer not fueled by GRP’s, if they screw up the Brand part, they are toast.  They can’t afford to do business any other way but being deeply thoughtful about the end customer. 

This is why, for example, most catalogs and TV Shopping networks were very early winners in e-commerce and established a lot of the best practices, especially on the back end – they already got all this.  Same business, different medium.  Web analytics was happening at these companies way before it became accepted as mainstream.

This is what interactivity with the customer brings to the table.  It changes the customer Relationship.  Yes, the web is different, as is TV shopping.  It requires a lot more focus on actually delivering on Brand promises.  It requires more empathy with the customer, requires streamlined and flawless operations and execution.  Because now that every person can “be the media”, it is possible for a company to allow customers to take control of the Brand.  But they have to give this control up first, by not understanding the fundamental changes interactivity brings to the table through the shift from Branding to Brand as the centerpiece of Marketing execution.

Here is what needs to be done: 

1.  Unfortunately, most Marketing people have skills that are aligned around media and creative, not products and service.  This is unfortunate, and is leading to the Deconstruction of Marketing and rise of the Chief Customer Officer.  To correct this, Marketers need to expand their skill sets, and interact more deeply with Operations / Customer Service.

2.  For most Brands outside of packaged goods, Media dollars need to be shifted away from mass media and more into direct / database Marketing and yes, into Operations.  Personally, I have used Marketing budget to pay for customer service testing and upgrades, because I know how important they are when dealing with interactivity.  Apparently, I am not alone, as some of this is starting to happen already.  For example, $100 million out of TV into direct at Talbot’s.

3.  Marketers (and analysts, of course) need to change the way they look at customer measurement.  If the customer relationship is now different, it has to be measured differently, measured interactively.  I run media, I get response, that measurement is not accurate with existing customers.  I drop catalogs, I get response, that measurement is not accurate with existing customers. 

Because now you have Interactivity, and you have always-on scenarios that are self-perpetuating, people can visit or order from a web site any damn time they want – regardless of marketing stimulation.  The key variable to understand is not response, but what you get from the customer without doing any “outbound” marketing at all.  This is the true measure of your success with Interactivity – how “engaged” the customer is with your Brand.

If you are addressing Interactivity properly and doing a good job with the Brand – design, experience, service – consumers will want to interact and  / or purchase from you regardless of and sometimes even despite your marketing efforts. 

That is the way Interactivity works. 

In fact, it can be argued that the better you are at Interactivity and Brand, the less you will have to spend on Media and Marketing, because interactivity begs continuity – you don’t need to spend to drive response, because you have an ongoing relationship, the customer is drawn back to you time and time again through the power of your Brand.  That’s what you wanted, right?  A Relationship?

Engagement?

So I ask you, Marketers and Analysts.  Can you have it both ways?

You wanted Interactivity, now you have it.  Now that you have it, are you going to go about your business like nothing has changed?  Will you continue to measure your success in the many-to-many media world using the one-way media measurement model of “response”?  Or are you going to learn the ways of Interactivity, shed the old models, and begin to learn how Customer Interactivity works? 

After all, if all this Interactivity with customers is really new and very important, then shouldn’t “Strength of Relationship” be the most important KPI you could ever measure to determine success?

In other words, are you going to Measure Customer Engagement and dis-Engagement rather than Response as the true benchmark of your success in an Interactive Marketing world?

What are your comments on the above?  Does the scenario I painted on what is happening with Marketing / Brand / Branding make sense to you?  What about my suggestions on what Marketers need to do to address these changes?  What did I get right or wrong?  What is holding you back from making these changes, if anything?

A Framework for Engagement – e-Mail Example

DataBase Marketing, Measuring Engagement, Web Analytics

Let’s take a specific example of what I was talking about in the last post in this series to show you what a Relationship Marketing Strategy looks like in action. I have stated, for example, in this interview, that email is both taking credit for sales that would have happened anyway and generating more sales than you think it is.

These statements are both accurate at the same time. When you use Control Groups to measure the incremental behavior generated by e-mail campaigns, what you find is both effects occur at the same time but each one happens with a completely different behavioral segment – Engaged versus dis-Engaging. Unfortunately, in most cases, the net effect is e-mail falsely takes credit for more sales than it doesn’t get credited with accurately, because the Potential Value (likelihood to buy) of the Engaged is far greater than that of the dis-Engaging.

Against a graph of Response by how long ago the last click in an e-mail occurred, these dual effects on the actual response rate of an e-mail drop versus control group look something like this (red line).

Click picture to enlarge:

On the left we have the highly Engaged, and moving to the right, the pattern of dis-Engagement. On the left, we have a much higher percentage of “would have bought anyway”, which decreases as we move to the right. The portion of the blue bars above the red line represent buying activity in the control group – they bought without receiving an e-mail.

As we move to the right, this effect decreases, until the blue bars are now below the red line  The space between the blue bar and the red line represents sales made because of your e-mail that were not tracked back to the e-mail drop. Often, this is a result of simply not tracking the “campaign tail” for long enough, which is difficult to do without using a Control Group to find the long-term lift.

The implication: for commerce, you should be sending a different message to these different behavioral segments depending on where they are in the LifeCycle if you want to maximize profit. In the segments with highest likelihood to buy, you should take it easy on the discounts; one way to optimize commerce profit across the entire engagement spectrum is to use a Discount Ladder.

For all other business models, it’s highly likely that you could benefit from the same approach, if you have clear value KPI’s and understand this dis-Engagement process.

Now, I am well aware the above sounds insane to offline retail folks. Most if not all of you lack the data to measure these effects, but that doesn’t mean they don’t exist. For the folks that do have the data, the day will come. Hey the web is interactive, the web is different, right? Well, yes it is, so why measure the effect of promotions like they do offline if you have a superior method of optimizing for profit?

When a visitor / customer is highly Engaged, they often generate visits or sales without needing any Marketing at all. That’s what the Relationship Marketing Strategy is all about – the Relationship drives the business. That’s why, for example, people have found that including a lot of relevant and customer-focused content in a commerce newsletter gets higher response rates than just sending people coupons. It’s why creating a new customer kit drives higher repeat purchase rates – it’s the Relationship building. And that’s why you will find (if you use Control Groups) that for the highly Engaged, your e-mail program is taking credit for sales it did not generate, and that if you are providing discounts to the highly Engaged, you are probably wasting money on them.

A portion of the Engaged segment would have bought anyway, and the fact that you dropped a coupon in their lap with e-mail is simply coincidence. Or, if you send a coupon every week on the same day, the customer simply waited for the coupon they knew they were going to get so they could make a discounted purchase they would have made anyway at full margin. That’s how e-mail takes credit for sales it does not generate, and anybody who is managing to ROI / profit should care deeply about this.

Now, if you’re a “share” thinker, this subsidy cost related to “would have bought anyway” doesn’t matter to you, because any sale the other guy didn’t make is a good sale. But last time I looked, you can’t put share in a bank account, and the logical extension of this share mindset is you can get 100% share by selling product below cost, so I have never understood it. If your directive is increasing gross sales, that’s pretty much the same thing – you get there by unproductive ad spending, which in the end is the same thing to the bottom line as selling product below cost.

By the way, I’m not saying the Engaged should receive no communications, but they should get a different kind of communications tailored to their behavioral state.

On the flip side, no matter what your directive, you should care about not getting credit for sales your e-mail generated. E-mail to another segment, those in the process of dis-Engaging, almost certainly generates sales you are not tracking and not crediting to e-mail. And that’s because the dis-Engaging are changing their behavior with the company for some reason. They are seeking alternate channels, for example. In other words, they are responding to your e-mail but they are not responding through your e-mail, they are not using whatever devices or links you give them in the e-mail but are still making a purchase because of the e-mail. Again, you don’t see this unless you use Control Groups.

A third segment, the dis-Engaged, does’t respond to your e-mails at all. And they’re not going to, because your company is now irrelevant to them. The company has not been tracking the dis-Engagement process so it didn’t take any specialized action to slow or stop the dis-Engagement. In fact, the company is probably just damaging their Brand by sending these folks any e-mail at all.

This is Relationship Marketing Strategy; it completely redefines how you communicate with customers based on where they are in the Engagement / dis-Engagement cycle. And it works amazingly well.  The bottom line is customers remain customers longer – this Strategy tends to extend the LifeCycle – with the result customers end up with higher LifeTime Value.

Are you surprised? You shouldn’t be. People talk about this incessantly on the web all the time, don’t they? Relevance? Customer centricity? Customer experience? Blah blah blah?

Then how come so few people are using a Relationship Marketing Strategy? How come so few are using Control Groups to measure the true net influence of e-mail? Why are people blasting out the same irrelevant message to all their customers once a week? A lot of talk and very little action, methinks. Perhaps you just needed a framework to put everything into perspective, a roadmap to getting it done?

Now, I realize many folks in the community don’t have the tools they need to measure dis-Engagement; typically only the high-end tools have metrics like Recency and Latency and even though Google Analytics tracks Recency, it isn’t easy to do much actionable segmentation for that metric in the tool.

There’s a very simple reason for this, if you think about it – it’s a lot harder to measure something that doesn’t happen than measure something that does happen. After all, servers are all about requests, they’re not really thinking about “did not request”, if you know what I mean. That job takes a database that’s remembering the last date a request was made forward in time, and calculating “did not request”. That capability is a lot more expensive, at least for now.

But, I hope the “tool problem” doesn’t mean the community will ignore the concept of dis-Engagement while screaming to the skies about how important Engagement is to measure. Those of you with access to a transactional database don’t have to wait for web analytics tools, you can profile customers for Engagement and the dis-Engagement process right in the transactional database with a simple query tool. And I hope you now have a Strategic framework to think about why dis-Engagement is so important, at least from a Marketing perspective, so when you get your hands on that high-end tool, you will know exactly what to do with it.

If you really take some time to think about the ramifications of the Relationship Marketing Strategy that Engagement is a Tactical part of, you just might come to believe that dis-Engagement is even more important to measure than Engagement.

To summarize this series, the idea of Engagement, and a lot of notions surrounding it – customer centricity, relevance, and customer experience – are concepts within a Marketing Strategy known as Relationship Marketing that tosses out calendar-based communications in favor of communications based on the customer’s relationship with the company.?The ability to do this depends on an understanding of the Customer LifeCycle, the results of each interaction between the customer and the company over time.? The LifeCycle?is tracked using various Engagement metrics, including dis-Engagement, which typically is the first sign?of a problem with the customer Relationship.

If your company is having trouble understanding why Engagement is important to measure, perhaps it’s because senior management lacks the context of the Customer LifeCycle for taking action and the strategy of Relationship Marketing as a game plan. Maybe you should send a link to the Wikipedia definition of Relationship Marketing to the CMO or CEO and ask, “Is this what you want? Because if you do want this, I know how to measure the success of it”.

Questions or comments on e-mail engagement and response?

Have you ever heard of the strategy called Relationship Marketing?