The New Realities of Successful

Direct Marketing

August 22, 2013

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Today‟s Speaker

Heather Fletcher

Senior Editor

Target Marketing

Michael Lowenstein, PhD, CMC

Chief Research Officer, The Relational Capital Group

Thought Leadership Principal, Beyond Philosophy

Moderator

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About the Presenter

• Over 35 years of B2B and B2C management , research, and consulting experience; passionate about brand-building, offline and online communication approaches, and customer behavior

• Focus on major and evolving new marketing and customer behavior influence trends

• Author of 150+ articles and white papers, and several customer-centric marketing and customer experience books, including –

– Customer Retention (1995); The Customer Loyalty Pyramid (1997); Customer WinBack (2001), One Customer, Divisible (2005), and…

– The Customer Advocate and the Customer Saboteur (2011): Linking Social Word-of-Mouth, Brand Impression, and Stakeholder Behavior

– New ebook, A Customer-Centric Year, now in development

1. The rise of mobile and impact on direct response design

and execution

1a. Consumer requirement for omnichannel information and

purchase

2. Effect of perceived brand trust, and emotional and relationship

behavioral drivers

3. Satisfaction measurement is so „80‟s, and the need and

availability of accurate, actionable, and real world performance

metrics

4. The name of the game is customer dialogue, inclusion and

collaboration/involvement

5. The reconsidered importance of, and new techniques for, direct

marketing analysis, modeling, and testing

6. Addressing the downstream behavioral power of customer

experience

Today‟s Webinar: Examining Six

(Maybe Seven) Critical New Direct

Marketing Realities

New Direct Marketing Reality

#1 and #1a:

#1 - The Rise of Mobile and Impact on

Direct Response Design and Execution

and

#1a - Consumer Requirement for

Omnichannel Information and

Purchase

Web and Content Personalization

• Site personalization algorithms/application tools much more prevalent –

for both B2B and B2C visitors

• The names of the game are leads and conversion, keeping visitors on the

site, driving multiple page usage and visits, and monetizing visit results

• Functionality can‟t be sacrificed for design/graphics (which actually drive

down page visit time), nor can emotional engagement

• Must also drive offsite, offline and digital behavior

• Increasing emphasis on in-the-moment and real-time content/messaging

• Test, test, and retest using A/B and multivariate tools: Most designers

apply usability approaches such as ethnography, think-aloud tests, sorting

techniques, observation, and live site methods - - NOT NEARLY ENOUGH!

• Modification of classic customer behavior research approaches needed

Evolving Active Inclusion Of Mobile

Device Requirements and Channels

• In mid-2013, 56% of Americans own a Smart Phone

• 15% of global Internet users now on mobile; increasing at 50% per

year, and not expected to slow over the next few years

• Priority need: Site design modification or transformation

• This includes menu simplification, easily identifiable branding, text

size reduction, links to full web site

• More focus on display responsiveness, sized for fingertips

• Content, especially (based on study results), must be optimized for

mobile viewing; example of high email deletion on mobile if not done

• Focus on in-the-moment and real-time marketing content, for online

and offline/digital social sharing

“Engagement” and “Social” TV

• Customizing content experiences via photos, bonus clips, games, etc.

• Principally aimed at reality TV shows, but also applied to build viral

interest in mainstream programming (The Wire, Sopranos, Homeland,

Breaking Bad, True Blood, Dexter, Doctor Who, Jersey Shore, etc.)

• Digital content offered as video-on-demand, through online and

mobile formats (to provide immediacy), proven to deepen relationship

for program and sponsor; can also boost viewership of main program

• Notable failure, Fringe: Fox created the Observer, a mysterious character

with a unique, bald-headed look. To raise interest in "Fringe," Fox had the

Observer show up on other shows, including 2009 All-Star game and a

2009 episode of “American Idol” However, little crossover between sports

fans, reality TV fans, and sci-fi fans, making a promotion an odd fit.

• Example: Last Chance Kitchen, 11 minute episodes of eliminated

candidates from Top Chef. Created 24% online reach lift for Toyota

Building in „New‟ Email Campaigning

• Email is a preferred communication method: Trustworthy, relevant,

conversational, and can be omnichannel

• Trend to hypertargeting and simplicity: short messages, custom

designs and/or microsegmentation, emotional focus on engagement

• Trend toward more real-time marketing support

• Significantly more mobile emailing

• Digital mailbox modification will create more personalization

• „Share-worthy‟ email content to create more social value, downstream

neural communication

• „Transactional „ proactive emailing on rise: account alerts, password

resets, order updates, receipts, shared content, etc.

Is Email Generating Leads/Return Visits?

• Does it have a „hook‟ (i.e. USP), subject line, and a call to action?

• Is it micro-targeted according to individual customer interests and

needs?

• Does it reflect buyer/user/influencer personas?

• Is it tailored to buying/customer life cycle stages?

• Is it using social media tools – shares on LinkedIn, Twitter, Facebook,

Pinterest, etc. – to extend value of campaigns?

• Is it „hygienic‟, i.e list accuracy, opt-in/opt-out strategy, message

consistency by medium?

Don‟t Undervalue or Underuse Offline

Communication

• Ed Keller (Keller Fay): 15% of population are creating 1.5 billion brand

impressions every day

• Though digital media and viral campaigns get a lot of attention, and

may increasingly start conversation, much of the actual dialogue still

takes place offline (B2B and all demographic and lifestyle groups of

B2C consumers, per The Face-to-Face Book)

• Despite media focus on neural communication negativity, much of

WOM is positive

• Should be blended with online, digital, traditional electronic and print

communication media

• „Stars‟ of peer-driven WOM: Apple/iPod, Toyota, WalMart, Hewlett-

Packard, Budweiser, Zappos, Amazon, Google

New Direct Marketing Reality #2:

Effect of Perceived Brand Trust, and

Emotional and Relationship

Behavioral Drivers

In Praise of Content Marketing

• Puts a „personality‟ on both the organization and its value proposition

• Helps to develop new business and identify market position

• Multiple communication and expertise showcasing opportunities: ebooks,

blogs, articles, podcasts, videos,

• Ability to create and sustain thought leadership

• Enables employees, as authors and contributors, to be ambassadors for the

enterprise, increasing the emotional/relationship connection with customers

and prospects

• Ideal balance may be 80% thought leadership and 20% marketing

• WARNING: Avoid temptation for content to be too closely tied to sales and

customer life cycle

Leveraging Rich Video

• Attractive, differentiating, and engaging alternative to text: Proven

higher conversion and customer retention rates (compared to text)

• Anticipated (by Cisco) to be 70% of consumer Internet traffic by 2017,

up from 57% now

• Formats such as video web meetings, screen shots, interactive web

events, available in multiple formats: Mobile, Internet (Instagram,

Vine, You Tube, etc.), TV

• On-demand ability for marketers to reinforce brand position, image

and relevance through consumer engagement

• Can connect/integrate with personalization CEM and CRM tools

• Examples: Home Depot demo podcasts; Luna Ukulele and Guitar

demo podcasts

Impact of Trust and Reputation

Bank A:

Proaction Provides Positive Behavior-Driving Value/

Service Consistency and Reliability Seen As Key Negative

Bank B:

Sense of Belonging and Proactive Service Positive Drivers/

Significant Erosion and Behavioral Impact of Trust and Confidence

11%

24%

2%

1%

23%

2%

10%

4%

6%

3%

11%

2%

2%

1%

3%

26%

2%

3%

3%

9%

3%

2%

2%

35%

3%

4%

3%

2%

Q8A. Is a stable company

Q8B. Has a positive reputation

Q8C. Is a vendor that positively stands out from its competitors

Q8D. Is a reliable company

Q8E. Is a company I trust

Q8F. Is easy to do business with

Q8G. Understands my overall business objectives

Q8H. Is a preferred vendor for organizations like mine

Q8I. Exhibits market leadership

Q8J. Reduces commercial risk

Q8K. Manages our relationship at a strategic level

Q8L. Has vertical industry expertise

Q8M. Invests in the future to be a leader

Q8N. Is a company that ensures my personal success

Alienated/Amb Advocate

B2B Company:

Reducing Commercial Risk Is Key Positive, As Is Trust (Also Negative)

New Direct Marketing Reality #3:

Satisfaction Measurement is So

„80‟s, and the Need/Availability of

Accurate, Actionable, and Real

World Performance Metrics

Source: CompuStat and ACSI

-100

0

100

200

300

400%

-30 -20 -10 -0 10 20 30%

Sales annual growth

ACSI annual growth

R² = 0.00

Reality: CSI Scores Do Not Predict Revenue Growth

• Grow Revenue • Position Brand • Increase Share • Decrease Risk

The Impact of New Communication and Real-Time Influence has Pushed the Strategic Relevance of

Advocacy and Brand-Bonding Behavior

Assessing customer relationship has its genesis in quality assessment. Realization that quality alone does not generate a satisfied customer.

Satisfaction gets to some of the intangible dimensions of the relationship, but is a passive measure and does not explain nor predict retention.

Embrace customer retention to the framework, but it does not capture the influence customers have on “other” customers and partners.

Advocacy captures the influence the customer and partner base have, in addition to measures below.

80s: Quality

90s: Satisfaction

Late 90s: Loyalty

Current: Advocacy

The Role of Customer Advocacy and Brand Bonding

In marketing and services decision-making guidance and ‘how-to’ action, including…

Marketing and Communications Planning and Engagement Media Effectiveness

Customer Service/Touchpoint/Process Experience Effect

Company Image and Reputation Impact

Product and Service Development

Customer Relationship Building

Brand Messaging and Positioning Assessment

Loyalty Program Development/Refinement

Customer Life Cycle Optimization

10%

14%

17%

15%

22%

5%

1%

6%

12%

Staff always takesthe time to talk with me

I have an open andhonest relationship with the

people at my bank

Staff proactively suggests productsand strategies that will help me

Staff suggests only thoseproducts that are best for me

Staff follows up withinformation as needed

Staff delivers servicein a timely manner

Staff are trained to offerreliable services

Staff appears competentand knowledgeable

Staff makes me feel likea valued customer

24%

21%

14%

1%

Alienated Advocate

Critical to Reducing Alienated Critical to Building Advocates

13%

13%

9%

6%

1%

Advocacy Driver Analysis Swing up and swing down (‘swing voter’) analysis identifies the performance attributes that will drive customers from Alienated to Ambivalent, Ambivalent to Allegiant, Allegiant to Advocate.

Analysis repeated for brand, product and key touch point attributes for input into an overall improvement action plan.

Quality of Staff Services

Relationship Attributes for B2B Services Company Swing Up (to Advocate)/ Swing Down (to Alienated)

Advocacy Segmentation: Profile of Attitudes (Top Two Box Ratings)

Critical Attribute

(Scale: 1 – 10; 9 and 10 Are Top Boxes)

Advocate Allegiant Ambivalent Alienated

Brand

Has earned my trust and confidence 81 28 6 2

It is a pleasure to do business with them 78 22 5 1

The bank is definitely for people like me 79 26 7 2

Staff

Staff makes me feel like a valued customer 75 22 8 2

Staff are trained to offer reliable services 71 20 7 3

Staff follows up with information as needed 71 18 5 2

Value Proposition

Breadth of checking and savings accounts offered 62 13 4 1

Variety of cards with different features suitable to you 53 11 4 1

Communication of different products and their features 60 13 3 1

Advocacy Applied to

Customer Life Cycle

Evaluation:

Defected B2B Customer

Advocacy-Based Research

Example

Price is the most frequently stated reason for defection.

Changes in business focus also fuel discontinuation.

Though content is also mentioned, a closer look at the verbatim comments indicate that most often a business focus change rendered the content less meaningful, rather than a dissatisfaction with the content itself.

Reasons for Defection

3%

10%

5%

6%

3%

36%

2%

1%

4%

6%

2%

1%

6%

15%

3%

1%

18%

2%

2%

2%

19%

2%

1%

4%

23%

2%

18%

2%

Customer service

Timeliness of information

Usefulness of product delivery method

Product quality

Information content‟s relevance to your needs

Competitiveness of pricing

Billing accuracy

Timeliness of problem resolution

Licensing requirements

Ease of doing business

Reputation

Market Leadership

Understanding of your data/information needs

Customer focus

Building Customer Advocacy and Reducing Alienation

Reality: Key Advocacy and Brand-Bonding Business Value Message

“The benefits of building advocacy can’t be ignored. Satisfaction and loyalty are important, but they’re old news. It’s a new dawn in customer experience strategy, where the customer controls over 50 percent of the brand message. Forward thinking companies will be the ones that identify and work with their customer advocates to genuinely build trust in the brand, the customer base, and the bottom line.”

Cultivating Customer Advocates: More Than Satisfaction and Loyalty 2011 Peppers & Rogers Group White Paper

New Direct Marketing Reality #4: The Name of the Game is Customer

Dialogue, Inclusion and Collaboration/Involvement

What happens when Advocacy and Brand Passion (Excitement) can be

brought together in the same person?

Actively Encourage and Facilitate Two-Way

and Multi-Party Dialogue

• Push and mass messaging has given way to partnership and inclusion

• „Conversation Catalysts‟ (Keller Fay): Create more opportunities for customers to talk to each other, learn from marketers, and share positive and negative experiences

• Content should be timely and engaging to stimulate involvement; brands should actively encourage response (text analytics/learning applications)

• Leverage consumers to help with positioning, cross/omni channel messaging, product and service development

• Example: Harley Owners Group (H.O.G.) clubs, especially in Europe

• Example: Denny‟s Canada mobile loyalty program, providing points for friends and social invitations for them to meet members at Denny‟s restaurants

• Example: Umpqua Bank and Zane‟s Cycles in-store cafes in U.S.; Metro Bank in U.K. (employee dialogue, involvement of kids and pets)

• Example : Rackspace interactive podcasts between employees and users

33

Brand Experience Segments

Customer Experience Segments

79%

31%

5%

86%

68%

34%

59%

24%

7%

45%

12%

3%

77%

24%

5%

Financial Services 2012 Monitor – Retention Likelihood By Customer Advocacy and Brand Passion

Market Probe 2012 Bank Monitor

Financial Services 2012 Monitor

Stock Investment

New Direct Marketing Reality #5:

The Reconsidered Importance of,

and New Techniques for, Direct

Marketing Analysis, Modeling, and

Testing

Review: What are we testing?

• Graphics, including embedded streaming video, photos, and illustrations

• Headlines and key lead-in statements

• Messaging/copy and theme concept alternatives

• Alternative and multi-channel media and formats – electronic/email, print, online/web sites, mobile, social, promo devices/advertising

• Color or black & white

• Invitation/order/reply forms

• Pricing variations

• Incentives/premiums/special promotions

• Availability dates/timing

• Personalization/digital printing

• Drop/campaign flighting dates

• In-house engagement, such as website support and customer service

Much to Consider

The Value(s) of Multivariate Testing

• Traditional A/B split-run testing too slow and expensive

• Because only one factor can be tested at a time with A/B, it is often

difficult to identify what optimum performance could be in different

marketing situations

• Control, or original, version may perform better than test version in

A/B – taking design back to square #1

• Through multivariate testing, many elements can be evaluated at the

same time: salutations, typefaces, copy lengths,

illustrations/graphics, offers, bonuses, media alternatives, response

devices, etc.

• Simultaneously testing conversion/success rate of each factor or

element; significantly less expensive, with smaller sample sizes, and

greater accuracy

• Plentiful availability of „bookshelf‟ testing software for extrapolation

and estimation of results

New Direct Marketing Reality #6:

Addressing Downstream Behavioral

Power of Customer Experience

How does your company create, and

benefit from, involved customers?

They are, or can become, your best customers

They are loyal, buy more products from you or exclusively use your brand (narrowed consideration set)

They are your unpaid, voluntary (even enthusiastic) outside sales force

They contribute to new product and message development

They are the strongest promoters and endorsers of your brand, online and offline

They respond to your array of marketing efforts, and are responsive to both multiple channel communication and real-time engagement

Brands Which Actively Involve Customers

Bringing It Together: How Do These

Companies Drive Optimum Loyalty Behavior?

• Zappos – corporate service/values orientation; customer service

• Wegmans – distinctive store design and upscale customer experience

• Southwest Airlines – employee ambassadorship; customer-focused processes; passenger experience

• Umpqua/Metro Bank – café-like bank design; ultra-proactive service

• Tesco – „Price Promise‟ comparison on all programs (retail, banking, insurance, etc.); Downton Abbey sponsorship

• Lego – innovative brand-building and product development, microsites, product mini-series, social networks, clubs and club magazines

• Amazon – micro-targeted and personalized online communications and site landing pages

• Baptist Health Care – employee teams, extraordinary service and community outreach, legendary word-of-mouth

• Ritz Carlton – unparalleled service, personalized guest experience

• IKEA – low prices, unique in-store experience, proactive service

• Rackspace – online dialogue/podcasts between employees and users

• The Container Store – mobile digital catalogs; in-store experience

• IBM – consultative content–rich strategy for each business segment

Video Links 1. Lowenstein on 10 Years of Direct Marketing Change http://bit.ly/13iiEmj 2. Getting the Message Out Now vs. 10 Years Ago http://bit.ly/172N9yK 3. Doing It Right - Which Marketers Understand the New Ecosystem vs. 10 Years Ago http://bit.ly/1cyLXKD 4. Content Marketing and Trusting Customers – Loyalty Now vs. 10 Years Ago http://bit.ly/1662vjq

Thank You!

Link to my CustomerThink customer experience portal blogs:

http://www.customerthink.com/user/michael_lowenstein

Link to “Back to the Future” blog in CustomerThink: http://www.customerthink.com/blog/the_new_realities_of_successful_direct_marketing

For further information, or if there are post-session questions,

please contact me at: mwlowenstein@gmail.com or

856-283-1182

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