Evidence-based marketing: myth or reality?

Apparently a Facebook ‘Like’ is worth £7. Isn’t that brilliant? If you have a hundred thousand followers that makes your social media strategy absolutely rocking news. The question is, says Felix Velarde of digital CRM agency Underwired, how many of you really believe it?

We ran a campaign for an FMCG client a while ago, in which we emailed a segment in the customer database using very specific messaging – it was relevant, timely and well-designed. The click-through rate (CTR) of 88% was staggering in anyone’s book. I’d like to say every campaign we run gets that kind of result, but occasionally we crash and burn too. Anyway, wow, what a great result. But what does it mean?

The digital marketing industry seems to be founded on metrics and key performance indicators (KPIs) of variable – if not downright dubious – quality. If you judge any of the industry awards you will know that half the entries benchmark against industry standards which in a lot of cases appear to have been made up on the spot: “Campaign X achieved a CTR of 12.3%, beating the industry standard 8% and therefore deserving of a Gold.”

This is where I have the first of my issues: even if there *is* an industry standard click-through rate, does it really apply to your campaign? Our campaign got an 88% CTR because it was highly targeted to a known audience expecting the email with a fantastic proposition. If it had achieved 12.3% or even 24.6% it would have been a failure. The truth is that no matter what the CTR is, one thing it is not is evidence of anything that isn’t either subjective (“I say, that’s awfully good isn’t it?”) or comparative (“Blimey, did much better than last time!”).

The second of my issues is that all these benchmarks aren’t evidence of sales. And hard revenue really is the only figure that ever matters (and before you ask about brand consideration or sentiment, these are both abstractions of sales – higher brand consideration may imply higher resulting sales, though you’d have to test it to find out if it’s really useful). So what is the *evidence* behind the assertion of success? How do you track from the planning phase through the campaign, to the reality of the effect on sales?

Well, it’s pretty easy in e-commerce. Straight-through processing (which is what the financial industry calls tracking the customer from first contact to order) in digital is quite simple these days. Ad tracking (display, affiliate, PPC and natural SEO) is relatively easily linked to website analytics, thence to email service providers (ESP), back to websites and even passing through couponing and promotion systems. It’s been done plenty of times by the big brands, and even small brands can buy integrated services. So if you’re an online retailer it’s pretty straightforward.

If you’re an FMCG brand you can still do it, although you may need to be a little more sophisticated about it. For example, this might mean matching your customer segments to commercially available purchase data and running regular surveys to track buying patterns in your base and cross-checking them against buying behaviour. If you’re a retailer you can find mechanisms to collect customer data and purchase behaviour at Point of Sale and match this data back to the single customer view.

The trick here is to get real data about whether your campaign actually worked, as opposed to seeing floating KPIs that may or may not indicate the same thing – but which provide no scientific basis for decision-making. How many times have you seen “successful” campaigns stopped? There’s a simple reason: there was no evidence to show they generated a profit. If there had been and they had produced £26 for every £1 spent, nobody in their right mind would stop them. Evidence is critical. Myth or reality? Evidence-based marketing is the only thing you should be *allowed* to do!

2013 will be the year of Total Customer Engagement

The year ahead will be marked by a number of really interesting developments in how we engage with our customers. One that has caught up with us – and which marks a sea change – is the advent of the Generation Y customer base. Gen-Y uses mobile as its main medium of interaction; if you’re not using mobile to engage with younger customers then you’re probably missing the biggest trick available, though it has been a very slow start since the trend first became apparent five, or so, years ago. Just in passing, to give you an idea of how trends break, let me illustrate this briefly…

Imagine your customer base is, potentially at least, a million strong. And say on day one a single person uses mobile as their main device for browsing the web, and every day that number doubles. By the end of the first week, 64 people use mobile. By the end of the second week that’s 8,192. That’s the point at which as a business you might start thinking there’s a trend. In actual fact it only takes another seven days and that’s your entire customer base. If you didn’t engage in a mobile strategy after two weeks, you missed it. Trends accelerate in an exponential curve – and in the internet age a trend can look slow for a few years, when in fact the numbers are doubling every month. Mobile is one of these, and if you target people born after 1982, that means you’ve got to jump, now!

There’s another trend that’s been a few years in the making, but in 2013 it will have gathered a critical mass, and it’s going to affect you – like it or not. The trend is for Total Customer Engagement. In plain English this means joined-up marketing, the opposite in fact of the “silo” thinking that has driven marketing during the first couple of decades of digital.

Most companies today have a web strategy, which may include e-commerce. They will also have a nascent social media strategy, a Google Adwords programme, and maybe an eCRM programme serving segmented comms to different sets of customers, split by value, behaviour, demographics and motivations. All of which have given businesses learning and insights into how they engage with customers using ‘new’(ish) channels. What’s lacking is integration. The sea change in 2013 requires a fresh way of thinking about customer engagement, which puts the customer at the centre. The trends feeding this are the shift in the balance of power from brand to customer, driven by the shift towards peer decision facilitated by social media, and the power of collective reviews.

So how does a business tap into this before it’s too late to do anything about it? A shift of focus is required, meaning the marketer needs to understand where the consumer is going to be, on- and off-line, when they are at a moment when they are likely to change their view of a brand, ideally positively. If you can identify that, Customer Type A is likely to be on a mobile, using Twitter, when considering whether to shortlist your brand, then you can target them with the right message at the right time and in the correct format. By mapping where the customer is at each critical point in their relationship with you, and mapping a rational sequence of nudges to take them from pre-custom to loyal customer, and then creating a matrix of comms against medium for this map, then you have a plan for engaging them. This Total Customer Engagement plan gives you as a business several things: a plan that can be tested, benchmarked and improved; a brief for your team and their suppliers so they have specific tasks to achieve against your business’s Key Performance Indicators (KPIs); and a framework that can be adapted when new trends become apparent.

This kind of approach is essentially multi-channel and channel-neutral. It’s also measurable and of course by its very nature future proof. By investing in developing this kind of (actually very simple) framework and marketing architecture, it will protect you against the overwhelming trends that are often nearly impossible to spot early, but which end up rather too quickly having strategic impact. Do it now, before it’s too late!

Innovative marketing thinking shows results

FMCG marketing is hard isn’t it? As brands you don’t even aim your marketing to the people who buy your products from you – you’re doing the work you might argue you want the retailer to do. In addition, you’re also competing with retailers’ aspirations to become brand owners themselves, with Tesco recently launching its own non-Tesco branded ice cream and pet food.

The indirect path to sales means that traditionally it has been difficult to gauge the success of marketing activity. Because you spend three hundred thousand on a television commercial and your sales are three million, it would be useful to think your ROI was ten to one. But there are so many other factors (and costs) - PoS, real estate, press, sales promotion and so on. Attribution is nigh-on impossible.

In the age of digital, it has been frustrating that Brand Consideration, the old advertising-oriented KPI, has remained the principal yardstick for marketers. Why so disappointing?

Digital provides the ability to track everything in a communication journey - or to be more accurate, it provides the means to track every movement a consumer makes online. So we can see when they clicked on a listing in Google, visited the brand website, opted in to emails, opened, clicked and selected a voucher, redeemed it... it’s what in the finance industry is called “straight-through processing”. It means you can keep custody of a customer all the way through their journey along your online marketing process. In marketing terms this is pure eCRM.

Now, if you’re a retailer the end of this journey is a sale. You can then say with utter confidence “I put in £1, and £26 came out. People with kids are highly responsive, 19 year-olds are a waste of marketing money, so let’s stop spending money acquiring them.” But if you’re an FMCG brand and the grocer is your customer and consumers theirs, to get attribution you need to exercise a bit of creative thinking.

First you need a benchmark. You need a database of your consumers, you don’t need many, ten thousand is plenty. And you need to have some real general population sales data, segmented into meaningful customer groups. You can buy this from Nectar or Dunnhumby. You then need to segment your own customer data exactly the same way so it’s comparable. On day one you look at purchase behaviour in your base versus that in the same segment in the general population. Run your eCRM marketing campaign. Then ask the same people about their behaviour. If the behaviour in your base has changed and that of the population hasn’t, then you have effectively isolated the results of your marketing activity - you actually know what effect you have made on sales.

We’ve successfully done this for a number of major brands. If you could increase footfall by 11% or purchase frequency by 3% imagine how much extra revenue you would be generating. FMCG marketing may be indirect, but with a little creative thinking it sure can be lucrative.

The Chicken & The Egg

Which comes first, technology or strategy? I suspect most of you will say strategy – I bet, however, most clients actually do it the other way round. In the world of CRM and database marketing (whether it’s executed online or in mixed media), if I had an egg for every time a client delayed strategy projects while they go through procurement for the tech to support it, I’d have the makings for an awfully big omelette. Logically of course strategy should come first: work out what you want to do and why you want to do it, test the theory, then build the technology to support a plan that works.

Yet – and see if you recognise this – budgets consistently get spent on technology first. Sorting out the Email Service Provider (ESP) before working out what kind of segmentation is required, or what kind of multi-channel tracking is required, seems absurd. Going further upstream from that, spending large amounts of money on a Single Customer View (SCV) before working out how you’re going to monetise one also seems counterintuitive. I’m not sure of the rationale; is it that “if we have the technology, we’re ready for anything”? More likely in the days of recession, where a company has surplus cash but needs to cut costs, the argument for making a large technology decision means it can be moved to capital expenditure and accounted for on the tax bill.

But this means marketers are then constrained to playing catch-up, beholden to the decisions made based on the balance sheet instead of based on customer marketing requirements.

On a macro level it’s a bit like hiring an ESP to do CRM strategy – the answer will only ever be ‘use email’, never multichannel or SMS only; likewise, by buying the SCV platform or the CRM system before deciding on what you’re going to do and why precludes things like the advent of social, or whatever the next mercurial marketing channel change turns out to be. If you’ve invested in the big technology, you’re stuck with solutions that use it. Or of course you’re stuck with a white elephant, a capital expenditure project that sits in the corner waiting for you to realise the people with the manual have long left the company.

In fact, this is precisely what happened when CRM was invented. Huge IT installations were sold to firms that wanted to amortise spare cash, then never got used, and eventually when the ‘high-ups’ started asking questions CRM became a dirty word. That was twenty years ago, and today’s marketing decision makers must remember what happened else it happen again. And now that marketing and technology are intimately entwined, this kind of monstrous over-investment in IT without a clear strategy for what it will actually be doing for marketing can no longer be blamed on the egg-heads when it goes wrong. It’s now everyone’s responsibility, especially marketing’s, to make sure the investment is supportive, not directive.

Neglecting Creativity

There is a tension between old and new. And it’s not a new story. Our new media age – the one started in 1994, not the venerable namesake we’ve been reading for (just) sixteen years – has always been predicated on a tension between the advertising and virtual paradigms. These elicited two different approaches to creative thinking: one founded on engaging customers in a simple comms journey (see the TV ad, then see the press ad, then respond to the DM pack), and one founded on the novelty of the medium. This was fertile ground for upstarts finding brand new ways to compel people to come to and then engage with online brand campaigns.

Over the past dozen years this grew and, some might say, matured, so that the kind of brand idea that works beautifully in interactive media could have a traditional expression – integrated campaigns reached back to TV and creativity started to have an holistic expression, when done well. When done badly the phrase “Like us on Facebook” was simply stuck on a poster...

Social media has arguably taken the place of the TV ad. The best of them – love them or hate them – have won rafts of awards at creative festivals, and some apply real imagination to addressing the problem of consumers’ passing attention to creativity. And of course social media campaigns are cheap – or at least relatively so in the face of TV advertising’s mountainous resource and financial costs – a fact that plays well in a prolonged recession. With social substituting for the TV spot we’re almost back where we started.

There is another movement encouraged by this recession, happening in parallel. Recession pushes marketers, or at least budget holders, towards accountable activities. The rise and rise of CRM (made sexy by renaming it to eCRM) is due to customer journeys based on the prevalence of both big and small data and delivery using fully auditable digital channels. There are citable cases where £1 spent generates £26 of revenue, and where £200k of spend has built loyalty programmes with a million participants. So brands have moderated their attention towards the trackable, towards ROI-based, evidence-based marketing.

And this is where the tension comes back into the equation. We run the risk of reducing marketing to a spreadsheet, to highly defined segmented customer journeys which lead consumers inexorably from first to second to third purchase and which increment customer value in ways which impact the bottom line fantastically well. No bad thing, in principle. However without creativity, the engagement of consumers is reduced to efficiency and effectiveness and loses the thing that makes brands sing. Process and data are the lubricants to making marketing work. But creativity is the glue that makes consumers adore brands. Feeding creativity back into the mix is the big challenge for all of us. If we can get it right – and believe me we’re trying – then I believe we can build the next media age, one that once again is revolutionary.

Press release – Underwired wins Mitchells & Butlers

Mitchells & Butlers, the UK’s biggest restaurant and pub group which owns the All Bar One, Toby Carvery, Harvester and O’Neills chains amongst others, has hired specialist digital strategy agency Underwired. The company’s annual sales are close to £2 billion and across the group’s 1,600 businesses it serves 435 million drinks and 125 million meals each year.

Underwired has been engaged to help the company develop its digital customer engagement and data strategy. The agency, whose other clients include Sony, Bupa, Harveys Furniture and Holidaybreak plc, recently became independent following an MBO in March.

Paul Madden, Head of Digital at Mitchells & Butlers, said of the appointment:  “The digital channel continues to grow in importance to our customers and we are constantly looking at new ways to improve our online services and the levels of personalisation we can provide. Underwired has demonstrated a clear strength in the area of customer relationship management and understand how to maximise engagement through a robust data strategy.”

Felix Velarde, Underwired’s Managing Director, commented:  “Mitchells & Butlers owns brands we’re all very familiar with, and their customers are exceptionally engaged. This provides rich territory for some fascinating strategy development work, and we are extremely pleased to have been selected to work with the digital team on this project.”

Underwired’s other clients include Sony, ASICS, Bupa and F. Hinds.

Press release – F Hinds appoints Underwired

F Hinds, Britain’s leading independent family jewellers with over 100 high street shops, has appointed specialist digital strategy agency Underwired to build its online customer engagement programme. The retailer, which was established in 1856, serves around 2 million customers every year.

Underwired will develop the brand’s digital marketing strategy and will work closely with the board of the brand.

F Hinds’ Andrew Hinds said of the appointment, “We have a close relationship with many of the customers who use our shops and we want to be able to extend that to provide the same quality of service to them online. Our outlook is long term and hard sell is an anathema, so we only want to be in touch if we have something relevant to offer our customers as individuals. We chose Underwired because their approach mirrors ours and because they are straightforward and focussed on the simple things which matter the most.”

Underwired’s Marketing Strategies Head Matt Button commented, “We’re very excited to be working with such a well established retail business. We will build a long term strategy using our experience and expertise from working with other retailers that remains true to the values and ethos of F. Hinds.” Button was previously Head of CRM at retailers Waterstones and HMV, where he led award-winning customer engagement and loyalty programmes.

Underwired’s clients include Sony, ASICS and Bupa.

http://www.fhinds.co.uk
http://www.underwired.com