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

How to measure ROI for email campaigns

ROI isn’t just about measuring. In times like these, to be brutally honest, it’s about winning. 

ROI (Return on [Marketing] Investment) really needs to be measured in financial terms to make the sort of sense your Financial Director wants to hear, although if you look at ‘value’ as the output, value can be defined in a number of ways. You could for example define value by how likely a customer is to speak highly of you, though it’s almost impossible to establish a financial value to this. Some of the wilder social media agencies will tell you a Facebook “Like” equals £10, which is every bit as useful as a Tweet being the same as a gumboot!

For simple - monetary - ROI, there are two approaches. You can either track your customer all the way to a completed online sale, or track changes in behaviour against a benchmarked control.

You can add a time dimension to this too by looking at the long-term value of a customer - the Customer Lifetime Value (CLTV) - which may be very different to their short-term value. If you’ve ever subscribed to TM Lewin or Richer Sounds emails, where there’s a constant barrage of sales until you capitulate, you’ll know all about balancing an increase in short-term spend against burn-out. In other words, milking the customer too hard usually increases churn... I may buy three times in quick succession but then you’ll lose me forever.

A customer must, by law, have opted in to your email communications, so you know who they are and, provided your email service provider has half-decent tracking and you can tie their purchases to emailed call to action, then you can see the ROI immediately - you spent X on the campaign, which drove Y sales. Presuming you spent less than the extra profit you generated, it’s probably worth doing again. Over time you can then see curves of drop-off in response and optimise your communications accordingly.

Tracking against a control (or baseline) requires a scientific approach and segmentation (perhaps low, medium and high spenders, defined by behaviour, demographics and motivation). This kind of approach will give you the means to track changes in purchase behaviour and attitude towards your brand over time – powerful stuff, In practical terms, if you have a benchmark (for example Tesco data) then you can compare your audience with Tesco’s and factor out TV campaigns and see the actual effect your email campaign is having.

You’ll probably be able to ascribe certain characteristics to a set of customer segments, for example average purchase frequency, average transaction value and CLTV. (For what it’s worth, you’ll nail 80% of everything you need to achieve with segmentation in around six or seven key segments.) If there’s a clear difference between the reactions of two segments to your campaign, for instance if one segment responds by spending twice as much every month, then you can probably guess which segment to spend the most money on.

This approach also tells you where to spend your advertising budget, because obviously you want more people like them... and conversely you can stop spending money on acquiring more people into the lowest performing segments.

Taken only at its face value, ROI is about working out what you got in return for what you spent. But it’s so much more: it leads you from email marketing to eCRM, and that’s a transformational shift. ROI is about gaining an understanding so you can spend less on low profit customers and more on high profit customers. When you do that, you start winning.

Web Designer Magazine – Career Path Series

An interview with Felix Velarde, Managing Director, Underwired and Jason Holland, Creative Director, Underwired

WD: What is the key advice that you would give to a designer that is thinking about starting his or her own studio?

JH: Be creative but relevant - for each pitch or portfolio item, have a business case for why or how your creativity will increase the clients return on investment and not just look great.

FV: And concentrate on doing the best work you can do. If you are the lead creative, be the lead creative – don’t get bogged down in production work. Your time is more valuable even if given free if you’re producing work that inspires clients.

WD: What prompted you to set up your own agency?

JH: The feeling that I not only knew where I could take my own career, but where I could take the industry. It was at a time of my life that I could 'risk all' and put everything into a new venture, with Felix Velarde as the Entrepreneurial skill and my creative vision.

FV: I've done this four times successfully now, the last two with Jason (our previous agency became the digital arm of Lowe). The key driver was having a vision of how we felt design for marketing could and should be - and really wanting the freedom to realise that vision. Doing it for ourselves meant we could concentrate on high quality without the baggage of projects we didn't want but working for someone else would have inherited.

WD: Do you think the current business climate is conducive with setting up a new digital design agency?

JH: Yes - but there are far more small companies (as a percentage of the whole) than large agencies than there have been, so clarity for what you do is very important.

FV: If you get it right - yes. There are very few overheads for a small company, you can be lean and focused, and operating in a recession will give you skills that will stand your in good stead once it's over.

WD: Should new digital agencies specialise or offer a full service?

JH: I believe in specialists, even if it's just what is seen from the view of a possible client. Start small within your client's organisation and prove your worth - then you can offer your wider set of services. For example, we are famous for our eCRM expertise, but this encompasses lots of disciplines like email, websites and social. The platform of real strategic insight into customers has opened all sorts of doors for us.

FV: Full service comes with scalable processes, and that makes it almost impossible for a small agency to compete with an established operation. I agree with Jason - if you specialise everyone knows what you do, and if a client needs that, they know who to turn to.

WD: What skills do you wish you had when you started your studio?

JH: Delegation - I'm still working on it 16 years later!

FV: I wish I'd understood Gross Margin Percent - it would have made life an awful lot easier in the beginning.

WD: What would you have done differently when you set up your agency?

JH: Nothing - even the big mistakes have shaped what I do and how I do it today.

FV: I'd have sought out a mentor sooner. Having an experienced hand to give you advice and steer you towards opportunity and away from catastrophe, even if it costs a few grand a year, is well worth it. 

Nudge Factor

Yet another unrepeatable offer! Bang, Flash!! 25% off today only!!! Ugh. We recently lost a pitch. Not a huge one, but the client was nice, the brand was fascinating and the task was really quite challenging. The client didn't go for us. Or rather they liked us and loved our work but were sold by another agency who offered them a whopping great discount on an email marketing campaign based on some hard-hitting promotions. Which sort of goes to show that on occasion, when you've got one chance at a sale, making the Big Offer is often the best course of action.

Being bitter of course rarely gets you where you want to go. It does make for a very excellent basis for an article which is all about what not to do if you have a marketing, rather than a selling, job to do. And you're reading this because you're in marketing, after all. You may even run email marketing campaigns. I am sincerely hoping you may actually run eCRM programmes, or even better, want to transform email marketing into eCRM and then evolve that into multichannel eCRM. Which is about more than just a series of offers - it's about building relationships around value exchanges that are mutual, and which actually lead somewhere.

Let's start at the beginning for a minute, if you'll indulge me. ECRM is about the journey you take your customers on. Segmentation allows you to create a meaningful, relevant journey for each distinct customer type. In my own business we focus on what we call 3D segmentation - who, what and why, with the "effectiveness" dimension having been beautifully articulated as far back as 1972 when 'need states' were beginning to be discussed seriously as a component of marketing. (If your agency produces personas, they're probably at about 1983, a terrible year for music.) This customer journey takes the form of a series of incremental steps from the first moment they self-identify to the moment they stop ever being a customer, prospect or advocate. Put yourself now in the customer's shoes on this journey. How many times in a row will you want, or tolerate, a 25% off offer? And how many times will you see one before you start to think that's the normal price?

Imagine you're a brand like Domestos (forgive me Unilever, I plucked it out of thin air). You can hit your potential customers with offers all day every day, and quite a lot of them will work - or at least when Joe has already decided they need a bottle of cleaner an offer might either sway them from own-brand, or reduce the margin from someone who would otherwise pay full price. But Domestos is a premium brand. Discounting is not the way to become successful. Discounting is the way that economies rebalance themselves, it's not the way companies make money because it's much more about fundamental survival. Domestos must look to other ways to engage with customers. ECRM with its customer journey and relevance and, ideally, with an understanding of what makes the customer tick, provides this opportunity.

Because really an offer on its own does not make Domestos interesting or engaging, it just makes it cheaper.

We create customer journeys on the basis of the nudge. The nudge says to a customer, because we understand something of the considerations in your life, here's something of a little value, in exchange for a few moments of your attention. If we can do this with some charm, a modicum of relevance and a dash of intelligence, we might get to engage their attention... and if we can get it really right, this may snowball into increased consideration, purchase frequency and even - gasp! - loyalty.

Imagine you're, say, a cleaning brand(!). How about singling out mums with young children. With permission to contact mum, perhaps obtained (and here I may sound a little hypocritical) through some kind of one-off promotion, we could use this demographic insight to plot some engagement. In Keystages 1 and 2 (and later) kids start to learn about hygiene. Perhaps over the course of three months we could send mum on a journey where our value exchange is all about providing her with a heads up about what her kids will be learning, followed by some materials so she can support the learning they do at school when they get home, with some fun activities (preferably not ones which increase her workload, and especially ones which involve creating a mess the kids might run away from!). Follow-the-curriculum, colouring-in activities, downloadables, uploadables, word games - I'm sure you can think of a whole string of things you can give mum which will help her help her kids keep healthy. Not to mention having a cleaner house as a bonus...

It's a series of nudges along a journey to brand loyalty. And you don't really ever need to do any selling. You don't need to say 'Domestos keeps your house safe' out loud, it's implicit in the exchanges of value and values you've transacted with your customer along the way. At some point, one of the little nudges may even involve a voucher or a promotion, just to cement the relationship. You may give them a social space they can meet other mums in too, so long as you listen to their advice to you and you respond in a manner consistent with your brand's values.

ECRM is, or at least never ever should be, about banging on about buy buy buy (I was going to say "Harpic on" but that would have been a bad pun too far). It's about nudging, gently, so your customer wants to go on your journey with you. Because if you can take customers on your journey, while the discount merchants may sacrifice margin for survival, you'll have loyalty delivering straight to the bottom line.