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Growing Customer Relationships with Increased Relevancy

AMAC Peer ReviewedConnie Hill
VeraCentra
November 2010
www.veracentra.com

Read below or download the complete PDF


Contents
Introduction
What is Relevancy?
Why Relevancy is so Critical
Relevancy Works
How To Achieve Relevance and Improve Marketing Performance
Business Intelligence Unlocks Relevancy
Take Action on Customer Insight
Conclusion



Introduction

It is clear many organizations are accepting the notion of customer centricity as a business philosophy and a way to effectively compete in the market place and build shareholder value.  The customer centricity movement and reduced marketing budgets, combined with the pressure to deliver greater results has created a renewed focus on relevancy.

Relevancy is a win-win value proposition because it integrates the need for marketers to improve marketing results with the customer preference for purchasing and interacting with the company.  Executed well, relevancy can prevent customer defection, improve customer satisfaction and increase customer spending while reducing marketing cost.

Today’s demanding customers create new challenges for marketers looking to increase relevancy in their customer centric communications.  Marketers need to be equipped with new and effective technology tools, such as business intelligence to achieve greater customer understanding and contact optimization and event triggered software to manage the complexity of multi-channel communications.  Marketers must know when their customers buy, how they buy and what they will likely buy in the future. And they must be ready to respond to any customer interaction, across all channels, with meaningful and acceptable offers.

Failure to master relevancy can have a devastating effect on an organization’s ability to acquire, serve and retain customers.  This paper addresses the what, why and how of customer relevancy so marketers can best position themselves and their companies for growth and success.  

What is Relevancy?

At its core, relevancy means delivering individualized content, products and services to customers.  Relevancy is both strategic and tactical.   Relevancy stems from strategies commonly described as customer centricity, customer relationship management or customer - focused.  These strategies establish an individualized customer approach to prospecting, acquiring, cross selling, up-selling, servicing and product or service development.

Tactically, relevancy is delivered through marketing communications across all touch points within multiple channels.  Relevancy is commonly referred to as personalization or customization.  Yet, relevancy is that and more.  Relevancy also includes unique offerings, channel preference and precision timing.  For both strategic and tactical application, Adam Sarner, CRM analyst at Gartner Group, defines relevancy best.  He simply describes relevancy as, “basic demonstration of customer memory.”

The premise behind customer centric strategy is the creation of valuable customer relationships versus the conventional strategy to create product and service revenues.  For marketing, this means communicating to customers in a completely different manner using a mindset focused on customer requirements.

Traditionally, marketing strategy began with the product or service to be sold.  Marketing would identify a target market of potential customers likely to purchase their products or services and divide that audience into segmented groups. Messaging would then be developed for each group and pushed to the target audience on a mass scale.  If the message was heard or seen by the right targeted segment, relevancy was achieved.

Today, relevancy is much harder to achieve.  Marketers must start with the customer first, identify the products or services meaningful to that customer, create an offer that will resonate with this customer, execute a communication when the customer is ready to hear it, make it personal and deliver it in the channel the customer prefers.

Why Relevancy is So Critical

Why is relevancy so critical to marketers?  For one, customers demand it and marketing must meet that demand or risk losing customers.  The second reason relevancy is so important to marketers is that it works.  Customers are simply worn out by the tidal wave of meaningless non-targeted communications.  Customers respond to relevancy, which is proven by lifts in campaign response, as well as improvements in strategic customer metrics.

Customers Demand Relevancy

The explosion and mass adoption of social media coupled with the recent financial crisis, has caused customers to become more skeptical, conscientious and empowered all at the same time.  Today’s customers expect to be deeply involved in both the company and community dialogue that shapes the products and services they use.  And most importantly, they expect their voices to be heard in order for their dollars to be received.

Marketing’s Job Depends on Delivering Relevancy

Ignoring the customer’s cry for relevancy will be detrimental to marketers under pressure to increase response rates, achieve greater ROI, and advance the customer experience across all channels.   Consider the following:

  • Customers are increasingly disloyal. In the study Losing Loyalty: The Consumer Defection Dilemma, for the average brand, 52 percent of known highly loyal consumers in year one either reduced loyalty or completely defected the following year.

  • Lack of relevancy advances customer defection.  A 2009 CMO Council study revealed that 63 percent of consumers have or are considering abandoning a brand altogether because of irrelevant emails and junk mail.

  • Customers are less forgiving.  According to the Relevancy Report, 75 percent of people continue to receive promotions for products already purchased.  And, according to a Harris Interactive poll of over 2000 adult consumers, 80 percent of customers will never go back to an organization after a negative experience.

Marketers must act quickly to convert outdated product-focused promotional programs into relevant communications that are meaningful to customers.  In doing so, marketers will meet their mandates to improve response rates, achieve greater ROI and improve the customer experience.   
 
Relevancy Works

Customers Respond When It is Relevant

Customers today are overextended with the demands of family and work and they appreciate communications that are fast, easy, personal and relevant. Marketers that use relevancy demonstrate to their customers that their organization understands who they are, can anticipate their needs and can provide offers unique to them and their particular situation.

Relevant communication is a great way to launch an ongoing dialog with your customers because it demonstrates your commitment to creating a relationship that inspires customer confidence and loyalty.

The overwhelming majority of customers in a recent CMO Council study state that, regardless of channel, relevancy is what they valued, if not required, in maintaining a brand relationship.

Marketing Campaign Performance Improves

Customer response to marketing relevancy can be demonstrated through increases in campaign response rates, greater campaign ROI and higher revenues generated per campaign.

What response rate are you achieving now and what increase can you expect from personalization and relevancy?

According to the DMA (Direct Marketing Association), “(general) response rates range from an average of under 2% to 4.5%.”  These stats represent response rates from standard direct marketing campaigns.

PODi, (Print on Demand initiative), performed a similar benchmark study for response rates in loyalty programs plus response rates in the same DMA categories.  However, this benchmark study reflects response rates from personalized and relevant campaigns.  In comparison, the study demonstrates relevancy achieves response rates of 3.6% versus 2% for traditional direct programs, a lift of 80%.

At the strategic level, key customer metrics such as customer retention, customer satisfaction and value are improved when communication with relevancy is achieved.


Source: Response Rate Report: Benchmark Information for Relevant Marketing Programs, Carlson

Customer Metrics Improve

In a study performed by the Aberdeen Group (April 2010), those companies that are achieving high levels of customer understanding and creating highly relevant communications are out-performing companies with lesser competency. 
The study revealed top performers delivered 91% customer retention rate versus low performers at 62%.  Top performers achieved 88% customer satisfaction while low performers achieved only 32%.  Perhaps most detrimental to the low performers in this study was the fact that year over year customer spending was down 9% while top performers enjoyed a 6% increase. 
 


How To Achieve Relevance and Improve Marketing Performance

Now that we established why relevancy is critical and how marketing performance benefits - what does it take to achieve relevancy?

Unfortunately, many technology, tools and processes are outdated and don’t fully support delivery of multi-channel relevant communications.  According to Suresh Vittal, Forrester Research, “Many marketers are abandoning their traditional product focus and trying to adopt a more customer centric one.  But doing so requires the use of numerous technologies that facilitate deep customer understanding and better targeting of offers.”  (Eight Marketing Technologies that Enable Customer Centricity).

Business intelligence applied in the marketing environment can be a powerful way to achieve the level of customer understanding needed before relevant programs can be designed and executed.  Add a customer interaction platform that support business rules, triggers and personalization, and marketing now has the technology tools needed to deliver relevant communications cost effectively.

Business Intelligence Unlocks Relevancy

To achieve higher levels of relevancy, marketers must work to transform their basic customer database into a 360 degree view of the customer.  Contact information, demographics and lifestyle scores aren’t enough to drive relevancy in today’s environment.  Marketers need greater customer understanding and they need it fast.  Waiting for the technology team to provide reporting can create a missed opportunity with the fast moving customer.  And flat reporting processes aren’t providing the insight marketers need to create the type of relevant communications customers respond to.

Business intelligence software, designed for marketing, is the ideal solution to collecting customer data from disparate systems and to support marketing with easy to use tools to analyze customer activity.  With business intelligence in place, marketers can perform data mining and querying to extract important insights about customers that drive the development of relevant communications.

The Customer Data Mart Serves as a Customer Memory Bank

Most business intelligence solutions rely on data stored in a data mart.  If relevancy is “a basic demonstration of customer memory”, then the data mart is the repository for memories stored in the “memory bank”.

A standard marketing database takes on a multi-dimensional customer view when combined with behavioral data, such as response and visits and transactional data, such as purchases and interactions with your call center.

The data mart is populated with customer data housed in the varied applications throughout your company.  The beauty of a data mart is that it supports different formats and different data structures, which means it’s easy to extract data from any application -- and then load that data into a data mart for marketing’s use.  
 
Self-enabled Analysis Provides Freedom for Customer Insight

Many marketers still rely on spreadsheets or multiple custom reports to analyze and track customer activity and information.  In the Aberdeen Group study, Providing a 360 Degree View of the Customer, senior marketers reported subordinates spending up to 16% of their time searching for customer data.

Business intelligence provides marketers with real time data from all sources so that customer understanding can be achieved through self-enabled data mining, queries and data visualizations.   The ability to slice and dice data means more insight becomes available.      



Predictive Analytics Helps Marketers Foresee Customer Needs

Predictive analytics expands on analysis by applying advanced statistical and reporting techniques to reveal customer propensities.  Based on the customer data within your data mart, analytic studies can be performed to develop models and scoring to help you achieve even higher levels of customer understanding and even greater marketing ROI.  Customer attrition and churn models, customer contact optimization and cross-sell, up- sell analysis for example, provide marketers with deep and specific customer insight to develop relevant communications that improve marketing performance.

Take Action on Customer Insight

Insight is only the first step to relevancy.  The next step is to use that insight to create meaningful offers to customers and deliver that offer when the customer is ready to hear it.  By applying business rules for contact optimization and by using event triggers, marketers can increase relevancy in their customer communications, improve response rates and achieve greater ROI while improving the customer experience.

For example, a national specialty cleaning service combined the traditional customer database with the order/transaction data and call center data.  Through analysis this company was able to better understand their customers.  Specific service request patterns emerged with some customers ordering cleaning every three months, some every six months and some once per year.  The company also discovered that a high percentage of customers used the service only once and never requested additional service.

To address the issue, the company tested a simple reminder program.  Using triggers and business rules to vary offers, based on the timeframe pattern identified within the data, the company launched a multi-channel, multi-offer customer reminder program.   After running the program on a weekly basis for six months, this company achieved 40% lift in revenue from repeating customers over the control group which received no reminder.

Conclusion

Relevancy works! Achieving high levels of relevancy needs to be top of mind for today’s marketers.  Relevancy improves marketing performance by producing lifts in response rates and increases in revenue per customer.  The precision targeting inherent in relevant communications eliminates waste, reduces costs and improves ROI.

If relevancy mastery is ignored, marketers risk customer defection and reduced customer loyalty.  Conversely, mastering relevancy can improve customer loyalty and customer satisfaction and generate more revenue per customer.

Business intelligence and contact optimization and triggered software are powerful marketing tools that enable marketers to craft and execute relevant communications cost effectively.  With relevancy, marketers can best position themselves and their companies for growth and success.

About VeraCentra


Offering the first on demand business intelligence solutions designed specifically for marketers, VeraCentra helps marketers succeed in an increasingly competitive marketplace by providing marketing intelligence software and automated multi-channel communication systems. Designed for marketers responsible for customer acquisition and retention, VeraCentra enables marketers to harness vital marketing data for fast analysis that fuels smart decisions and to manage the complexity of executing multiple messages to multiple customers in multiple channels.

Offering cross channel marketing services since 1988, VeraCentra is trusted by national brand leaders including Costco Wholesale, Intuit Software and Johnson and Johnson.  For more information please visit www.veracentra.com or call (707) 224-6161.