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?

A Framework for Engagement – Implementation

DataBase Marketing, Measuring Engagement, Web Analytics

Like I said in the last post, I’m sure there are quite a few different reasons why folks want to measure “Engagement”, and not all of them have to do with Marketing. But if you are talking about Engagement as a metric to be used in Marketing, now you have the complete framework for why (as opposed to how) it is so important to measure Engagement – to define the LifeCycle of the customer, in order to communicate and act in the most customer-centric, relevant way possible. Logically, this approach drives higher profits.

The LifeCycle is about both Engagement and dis-Engagement. If you are in the Marketing camp, you can’t just talk about measuring Engagement. After all, if Engagement is really important and valuable, then dis-Engagement has to be really important and valuable in the opposite way – it’s a bad thing. Dis-Engagement means, literally, that your company is no longer relevant to the customer.

In some businesses, online display advertising for example, it’s not clear that dis-engagement really matters, at least in the current model from the perspective of the advertiser. Hey, an impression is an impression, right? Who cares what happens after that. At least they’re talking about some kind of engagement metric – Duration – which should relate to the quality or the likelihood of an impression. Not much more they can do, in my opinion, for that business model. But from the perspective of the site owner the ads run on, dis-engagement should be a big deal – especially if you paid something to get that visitor to come to your site in the first place.

So, we have Engagement, and we have dis-Engagement, which it seems nobody ever talks about. I sincerely hope that changes in the future as we move forward.

Now, how do we track the LifeCycle, how do we actually implement? It’s really very simple in concept:

1.Define / Measure Engagement – any way you want to, as appropriate for your business; whatever activity or combinations of activity you feel appropriate

2. Measure dis-Engagement – the absence of Engagement, as in the visitor / customer stopped doing whatever it is you define as Engagement for your business model

3. Take some kind of Marketing or Service action to slow or reverse the dis-Engagement with dis-Engaging folks

That’s not very hard, is it? No. If you’re looking for some kind of model to follow for planning and managing LifeCycle communications, take a look at Satama’s REAN.

However, even when you get the LifeCycle and learn to react to it, the system is not optimized yet. The Relationship Marketing Strategy is not optimized until you start predicting dis-Engagement, and taking action to try and re-Engage the customer before they completely dis-Engage. Because once your company becomes completely irrelevant, it’s very hard to change that for the visitor / customer – much harder than if you act before or when the dis-Engagement is occurring. You can’t have an “annual re-Engagement campaign” and fix this – you have to fix it as it is happening, meaning you throw out all calendar-based communication and communicate based on where individuals or segments are in the LifeCycle.

Fortunately, dis-Engagement is usually a process – unless the company screwed up in a really big way. And this dis-Engagement process is fairly uniform and actually quite easy to predict with simple tools. The company most often becomes irrelevant to the visitor / customer over time. In other words, the company gets second chances, the customer often gives the company leeway to become relevant again. So as a company or analyst, the key is to:

1. Recognize dis-Engagement has begun with a customer or segment

2. Have a re-Engagement plan and implement the plan before the company becomes irrelevant to the customer

I’m pretty sure most people reading this know what comes next – how to measure dis-Engagement and act on it – given I have plastered this information all over my blog and web site. If you don’t know how to predict dis-Engagement and the triggers you can use to take action, this is a good place to start. Depending on your business model, you should probably also take a look at what Theo proposes in terms of Kind and Degree for survey work once you have dis-Engagement behavior as a trigger for the survey.

For most web sites, regardless of what you are using as a metric for Engagement, a good clue the dis-engagement process has begun is when a visitor stops visiting, posting, commenting, buying, or whatever is key to generating value on your site. The challenge is you have to recognize this non-event has occurred right away, because the longer you wait to try and re-Enage the visitor / customer, or ask why they are dis-Engaging though a survey, the less likely it is you will be successful. And in case you are wondering, those of you with e-mail tactics that consist of relentlessly pounding your list with the same messages and offers regardless of visitor / customer behavior are not addressing the re-Engagement issue – trust me. Think about it.

I’ll get into how a Relationship Marketing strategy affects e-mail marketing and measurement tomorrow in the next post.

Does the above make sense to you? Questions? Criticism? Problems? Let me know, leave a comment.