Friday, 17 February 2012

Derek Holder, co-founder of the Institute of Direct & Digital Marketing

The death of Derek Holder is sad news for the direct marketing industry. His vision, drive, persuasiveness and determination helped bring the direct marketing industry into the light. What the IDM did in terms of education, standards and career development for innumerable people at the forefront of measured marketing cannot be overstated. The IDM, tucked away in Teddington, trained most of the people who practice the disciplines of customer engagement, imparting rigour and best practice.

I met Derek a dozen years ago. I had already spent half a dozen years building digital agencies with very bright people, and I wanted to start proving that digital had a genuine place in the marketing mix. I was invited to be a guest presenter on an IDM course. What I learned while I was there led to a fascination with measurability and accountability, and this in turn led to me founding the first eCRM agency, Underwired. Derek encouraged my thinking, and gave me the freedom to teach at the IDM, running one day courses (including the current Practical eCRM masterclasses). I owe Derek a lot.

I once went on a speaking tour of various cities in the north of England. Derek presided, and along with Joanna King we set off in Derek's green Jaguar. That tour was marked by two things: awful weather and flooded towns, and Derek's tirelessness - undercut by a propensity to fall asleep at the most inopportune moments. We had a great time, spreading the word about how to do direct and digital to the very highest standards, driven by Derek's passion for the industry. We'll all miss him.

Identifying and prioritising quick wins in email marketing and eCRM

In a recession the pressure on marketers can be intense - more bang is needed for less buck, and every penny has to be justified. Boards and Finance Directors are constrained by a natural conservatism, based on the desire in the uncertain financial climate to de-risk as much of the business as possible.

On the other hand, there's an imperative towards cheaper, more auditable marketing channels. In theory, digital presents the greatest opportunity. For example, if your company traditionally uses direct mail to communicate with your customers, there are instant savings to be made simply by switching from post to email: if you're sending 100,000 mailers out, with each costing 50p in print and postage, then the switch to email will save you an instant £40,000, and probably £45,000 the second time you do it.

But, and it's a big but, if you don't know where to start, then making this kind of switch can be fraught with costly mistakes and a fair amount of fumbling. Making decisions about what to do requires intelligence, experience and a clear view of what the expected returns are likely to be, and that's difficult for most marketers new to channels like eCRM (Email Customer Relationship Marketing). Whilst the conversion from postal to digital seems like a no-brainer, in practice, your brand and your customers may not be suited to email at all, and you may have a major flop on your hands if you make the switch without some testing. ECRM, which provides marketers with - in theory - total tracking from customer to email sent, response behaviour and eventual value, lends itself perfectly to testing and experimentation.

If you want to find out the answer to a yes/no question and you want to test it before you make a decision based on the answer, then you will need a minimum of 383 people in order to get an answer you can be 95% confident, with plus or minus 5% accuracy, reflects your entire database. So if you want to test whether you'll get the same response rate to an email version of your campaign versus your DM campaign, send the email version to 383 people in your database selected at random. If you run segmented campaigns, do the comparison between 383 people in each segment and your control. Only once you've got the answer should you roll out the change across the whole customer base... but by then you will have numbers you can show to the budget holders, which justify the change based on cost savings and minimised risk.

There are of course a number of different things you can tweak to great effect. For example, you could spend money on:
  • Improving segmentation
  • Improving open rates
  • Improving the effectiveness of calls to action
  • Switching people from call centre sales to web sales
  • Expanding your database.
All of these are potentially valid ways to increase the value you get from your eCRM activities. In some instances the value can be enormous. Say you're sending a million emails a month, and getting 2,142 orders worth £50 each. Increasing your open rate from 15% to 16.5% and your click-through rate from 15% to 18.75% will take your annual revenue from nearly £1.3 million to nearly £1.8 million - an increase of around 38%. That half a million in incremental revenue is enormous - provided it costs less than the profit margin on it to make the changes required. Again, it really comes down to how you decide what to focus your energies and investment on.

In my experience, working with brands like Tesco Kitchens, Harveys, Laithwaites Wines and Sony, there are always a number of different changes you can effect. As you can probably tell, I'm a stickler for the numbers; I always want to know what levers I can pull, and what effects that will have on the revenue. Given a variety of possible improvements, all of which will come at some cost, then you clearly need to know what to focus on first. Once we have identified what these opportunities are for a given company, we will always try and attach some numbers to them, and I believe that when you are planning what you do during 2012, when your focus should be on lowering risk and increasing the returns you get from marketing, this is a critical first step.

And in uncertain, recessionary times like these, having confidence in your marketing plan is what differentiates you from your competition.