the future of direct the future of direct marketing in canada

The future of Direct The future of Direct Marketing in CanadaMarketing in Canada

Richard McLaughlinRichard McLaughlinCanada Post Canada Post BorderBorderfreefree Direct SummitDirect Summit

April 18, 2006 Toronto, ONApril 18, 2006 Toronto, ON

AgendaAgenda

The risk and reality of government The risk and reality of government interventioninterventionThe Marketing Mix The Marketing Mix -- trends and implicationstrends and implicationsSegmentation and client centricitySegmentation and client centricityMaximizing ROI Maximizing ROI –– product versus clientproduct versus clientThe overall implications for marketersThe overall implications for marketers

The Risk & Reality of Government The Risk & Reality of Government Intervention in CanadaIntervention in Canada

CRTC ruling on Telemarketing and the CRTC ruling on Telemarketing and the creation of a national docreation of a national do--notnot--call list expected call list expected fall of 2007 or laterfall of 2007 or laterCRTC review of the Canadian television sectorCRTC review of the Canadian television sector

Concern over Canadian contentConcern over Canadian contentEmerging technology (Emerging technology (PVRsPVRs and TV over the and TV over the web)web)Revenue splitting amongst the interested partiesRevenue splitting amongst the interested parties


•• Mandatory fiveMandatory five--year review of federal privacy year review of federal privacy lawlaw

2006 2006 ---- formal review of legislationformal review of legislationExpectations:Expectations:

Increased scrutiny around consent Increased scrutiny around consent and secondary marketing practicesand secondary marketing practicesCall for more transparencyCall for more transparency


Mandatory fiveMandatory five--year review of federal privacy year review of federal privacy lawlaw (continued)(continued)

Biggest threat: loss of implied/optBiggest threat: loss of implied/opt--out consentout consent

Potential for stronger enforcement regime:Potential for stronger enforcement regime:Giving Privacy Commissioner orderGiving Privacy Commissioner order--making powermaking power

Fines and penalties Fines and penalties ““Naming of namesNaming of names””


Privacy in CanadaPrivacy in CanadaCanadian Privacy CommissionerCanadian Privacy Commissioner’’s personal cell s personal cell phone bill was purchased from a US information phone bill was purchased from a US information broker and published on the front page of national broker and published on the front page of national news magazine (MacLeannews magazine (MacLean’’s Magazine s Magazine –– Nov/05)Nov/05)Recent article in the Montreal Gazette quotes Ms. Recent article in the Montreal Gazette quotes Ms. Stoddard as suggesting that marketers are being Stoddard as suggesting that marketers are being less than ethical with their collection of personal less than ethical with their collection of personal information through loyalty programsinformation through loyalty programs

WhatWhat’’s Ahead s Ahead –– longer termlonger term

Growing concern by the Privacy Commissioner Growing concern by the Privacy Commissioner over the use of RFID over the use of RFID –– Radio Frequency Radio Frequency IdentificationIdentification

the small size of the tags and the ability to uniquely the small size of the tags and the ability to uniquely identify an object identify an object –– pose potential threats to individual pose potential threats to individual privacyprivacy


The implications for marketers?The implications for marketers?The rules are likely to get more restrictiveThe rules are likely to get more restrictiveThe penalties are likely to be more severeThe penalties are likely to be more severeTougher privacy legislation will Tougher privacy legislation will favourfavour companies companies with large existing customer bases and established with large existing customer bases and established brandsbrandsA national DNC list will forever alter the A national DNC list will forever alter the telemarketing industry if it is enforced and will telemarketing industry if it is enforced and will also also favourfavour large established companieslarge established companies

The Marketing Mix The Marketing Mix -- trends and trends and implicationsimplications

Increasing pressure from the CFO/CEO on Increasing pressure from the CFO/CEO on revenue/profit generation and proof of ROIrevenue/profit generation and proof of ROI

Marketers never seem to have enoughMarketers never seem to have enough

Particular pressure on nonParticular pressure on non--direct budgetsdirect budgets

ROI ROI –– the best that most can dothe best that most can do

$0.5mm$0.5mmOtherOther

$2.0mm$2.0mmTelemarketingTelemarketing

$0.2mm$0.2mmEE--marketingmarketing

$2.5mm$2.5mmDirect MailDirect Mail

$0.5mm$0.5mmCatalogueCatalogue

$0.5mm$0.5mmRadioRadio

$0.8mm$0.8mmPrintPrint

$3.0mm$3.0mmTelevisionTelevision

ROIROIProfitProfitRevenueRevenue# new # new customerscustomers

BudgetBudget

ROI ROI –– what the CFO expectswhat the CFO expects

$0.5mm$0.5mmOtherOther

$2.0mm$2.0mmTelemarketingTelemarketing

$0.2mm$0.2mmEE--marketingmarketing

$2.5mm$2.5mmDirect MailDirect Mail

$0.5mm$0.5mmCatalogueCatalogue

$0.5mm$0.5mmRadioRadio

$0.8mm$0.8mmPrintPrint

$3.0mm$3.0mmTelevisionTelevision

ROIROIProfitProfitRevenueRevenue# new # new customerscustomers

BudgetBudget

The changing Marketing MixThe changing Marketing Mix

0%10%20%30%40%50%60%70%80%90%

100%

2000 200?

OtherDirect MailPrintTV/Radio

Extrapolation of compiled data


The 30 second ad will continue a slow painful The 30 second ad will continue a slow painful death over the next 5 years due to:death over the next 5 years due to:

The continued erosion of the broadcast TV The continued erosion of the broadcast TV audience to other forms of electronic entertainment audience to other forms of electronic entertainment like cable television, DVDs, the Internet and like cable television, DVDs, the Internet and electronic gamingelectronic gamingAn increasingly empowered consumer through An increasingly empowered consumer through new technologies like the Personal Video Recorder new technologies like the Personal Video Recorder (PVR) that allows users to skip ads(PVR) that allows users to skip ads

Source: In-Stat/MDR


Replace the 30 second ad exposure with:Replace the 30 second ad exposure with:Movement to Movement to ““randomrandom”” length adslength ads

Product placement in television/moviesProduct placement in television/movies

Corporate Sponsorship of television and movie Corporate Sponsorship of television and movie productionproduction


Proliferation of media fragmentationProliferation of media fragmentationIncreasing ability to target more in line with directIncreasing ability to target more in line with direct

Complexity of measuring what worked and what Complexity of measuring what worked and what didndidn’’t increasest increases

Lack of a track recordLack of a track record

Specialty MagazinesSpecialty Magazines


Continuous emergence of new technologiesContinuous emergence of new technologiesWeb, cell phone and PDA TVWeb, cell phone and PDA TV

Wireless broadbandWireless broadband

Increasingly sophisticated Increasingly sophisticated PDAsPDAs and integrated and integrated devices (phone, camera, MP3, etc.)devices (phone, camera, MP3, etc.)


High volume mail and telemarketing focuses on High volume mail and telemarketing focuses on ““II’’ve ve got a product to sell, letgot a product to sell, let’’s find some buyerss find some buyers””Response rates are stable or declining particularly in Response rates are stable or declining particularly in high volume categories (credit cards) where everyone high volume categories (credit cards) where everyone is buying the same external listsis buying the same external listsEE--mail showing mixed results with a misconception mail showing mixed results with a misconception that its that its ““freefree”” and is hampered by increasingly and is hampered by increasingly sophisticated sophisticated ““spamspam”” filters offered by ISPsfilters offered by ISPs


Leads to sales people using propensity models Leads to sales people using propensity models and/or event trigger decision engines and/or event trigger decision engines increasing in popularityincreasing in popularity

Other technology dependent alternatives Other technology dependent alternatives (search engine optimization, (search engine optimization, podcastspodcasts, , blogsblogs, , etc.) starting to become more mainstream but etc.) starting to become more mainstream but are still in the early stagesare still in the early stages

Segmentation & Client CentricitySegmentation & Client Centricity

Smarter Segmentation of customers and Smarter Segmentation of customers and prospectsprospects

Reversing the marketing paradigmReversing the marketing paradigm

Why Segment?Why Segment?

-$1,000$0

$1,000$2,000$3,000$4,000$5,000

Decile1

Decile3

Decile5

Decile7

Decile9

Client Profitability


Product centric marketing to an external Product centric marketing to an external prospect list will result in a distribution of prospect list will result in a distribution of clients across most/all deciles even when using clients across most/all deciles even when using a propensity modela propensity model

Overall ROI is a poor measure of successOverall ROI is a poor measure of success


It is difficult to establish and maintain a long It is difficult to establish and maintain a long term sustainable advantage based on product term sustainable advantage based on product alonealone

Product innovation is now copied within Product innovation is now copied within months if not weeksmonths if not weeks

SegmentationSegmentation

Most common forms of segmentation are:Most common forms of segmentation are:Revenue, Profit or LTVRevenue, Profit or LTVLifestyle or Lifestyle or LifestageLifestageDemographicsDemographicsPsychographics/Attitudes/Psychographics/Attitudes/BehavioursBehavioursProduct or ServiceProduct or ServiceEthnicityEthnicitySize of company and industry vertical (B2B)Size of company and industry vertical (B2B)

Smarter SegmentationSmarter Segmentation

Push beyond the Push beyond the lifestagelifestage or customer value or customer value based segmentationbased segmentation

Segments should be small enough to have Segments should be small enough to have unique characteristics in common, while large unique characteristics in common, while large enough to have a financial impactenough to have a financial impact

Smarter SegmentationSmarter Segmentation

Allow your data to tell you what those groups Allow your data to tell you what those groups are in your company/industryare in your company/industry

For many companies a high potential group For many companies a high potential group will be business owners with a need for will be business owners with a need for integrated business and personal products integrated business and personal products and/or servicesand/or services

Reverse the marketing paradigmReverse the marketing paradigm

Instead of Instead of ““II’’ve got a product, how many ve got a product, how many people can I find to sell it topeople can I find to sell it to”” how about, how about, ““II’’ve ve discovered a deep customer need that I am in a discovered a deep customer need that I am in a unique position to help solveunique position to help solve””

It doesnIt doesn’’t apply to you because yout apply to you because you’’re too re too broadbroad--based in your appeal? Think harder.based in your appeal? Think harder.

Kraft CRM programKraft CRM program

Kraft has historically faced:Kraft has historically faced:No direct relationship or contact with their end No direct relationship or contact with their end consumersconsumersContinually held hostage by retailers to increase Continually held hostage by retailers to increase trade funds at the expense of brand buildingtrade funds at the expense of brand buildingStructured in tradition, powerful product silosStructured in tradition, powerful product silos

Therefore marketing programs historically Therefore marketing programs historically followed the followed the ““LetLet’’s find as many people to buy s find as many people to buy my productmy product”” pathpath

Kraft CRM ProgramKraft CRM Program

Began to build a database Began to build a database full of customers through full of customers through contests, special offers, contests, special offers, etc.etc.They established a They established a magazine with recipesmagazine with recipesThat transformed into a That transformed into a recipe magazine that was recipe magazine that was both personalized and both personalized and customizedcustomized

Kraft CRM programKraft CRM program

Then they added Then they added the capability to the capability to send personalized send personalized and customized eand customized e--mails to provide mails to provide busy families with busy families with easy to prepare, easy to prepare, nutritious meals nutritious meals for the weekfor the week

Maximizing ROIMaximizing ROI

The typical product centric approach would be The typical product centric approach would be to rent a list, use a propensity model and to rent a list, use a propensity model and market with volumemarket with volumeBut your competitors are doing the same thing But your competitors are doing the same thing with the same list and similar modelswith the same list and similar modelsAssuming there is a finite level of demand for Assuming there is a finite level of demand for your your product(sproduct(s) then a declining response rate ) then a declining response rate and ROI is inevitableand ROI is inevitable

Average profitability of a clientAverage profitability of a client

-$1,000$0

$1,000$2,000$3,000$4,000$5,000

Decile1

Decile3

Decile5

Decile7

Decile9


Product Centric Campaign ROIProduct Centric Campaign ROI

Assume $1 million budget per year with a response Assume $1 million budget per year with a response rate that declines over time rate that declines over time –– 1.5%, 1%, 0.5%, 0.25%1.5%, 1%, 0.5%, 0.25%

At 1.5% response rate, that translates to a requirement At 1.5% response rate, that translates to a requirement of 20,000 new customers for the campaignof 20,000 new customers for the campaign

With an average profitability of $250 per new With an average profitability of $250 per new customer, your ROI will decline (400%, 230%, 70%, customer, your ROI will decline (400%, 230%, 70%, --17% respectively) until it is negative17% respectively) until it is negative

Client Centric Campaign ROIClient Centric Campaign ROI

-$1,000$0

$1,000$2,000$3,000$4,000$5,000

Decile1

Decile3

Decile5

Decile7

Decile9



A blended product and service offeringA blended product and service offeringUniquely designed to appeal to a high value Uniquely designed to appeal to a high value segmentsegmentSame $1 million budgetSame $1 million budgetSpend it equally betweenSpend it equally between

Existing customers whom the model has identified Existing customers whom the model has identified are similar to our target segmentare similar to our target segmentProspects from the outside that we have identified Prospects from the outside that we have identified have similar characteristics to our target segmenthave similar characteristics to our target segment


Existing CustomersExisting Customers$500,000 spent moving 800 customers from the average $500,000 spent moving 800 customers from the average profitability ($250) to profitability ($250) to DecileDecile 1 would generate a 520% ROI1 would generate a 520% ROI

New CustomersNew Customers$500,000 spent converting 600 prospects to customers $500,000 spent converting 600 prospects to customers would generate a 400% ROIwould generate a 400% ROI

You have also established a long term sustainable You have also established a long term sustainable position in the market place with a highly profitable position in the market place with a highly profitable segmentsegment

Implications for marketersImplications for marketers

Impact on skill requirements for future Impact on skill requirements for future marketersmarketers

Far greater focus on general business skills and Far greater focus on general business skills and financial acumenfinancial acumenFar greater analytical skills given the increased Far greater analytical skills given the increased complexity of choices and challengecomplexity of choices and challengeAbility to impact and influence across the Ability to impact and influence across the organization to engineer the right customer organization to engineer the right customer experienceexperience


Requirement to work in several different Requirement to work in several different cultures and languages cost effectively and cultures and languages cost effectively and with cultural sensitivity while properly with cultural sensitivity while properly managing the overall impact on the brandmanaging the overall impact on the brand


Find profitable subFind profitable sub--segments of customers and segments of customers and use that information to find prospectsuse that information to find prospects

Understand the engineering of the customer Understand the engineering of the customer experience and reexperience and re--engineer it to best serve the engineer it to best serve the high potential subhigh potential sub--segments you identifysegments you identify

Richard McLaughlinRichard McLaughlinCanada Post Canada Post BorderBorderfreefree Direct SummitDirect Summit

April 18, 2006 Toronto, ONApril 18, 2006 Toronto, [email protected]@rogers.com

the future of direct the future of direct marketing in canada

Documents