Efficiency begets effectiveness

Felix Velarde, Customer Strategy, March 2010

We've just gone past a fork in the road. You know the one, a year of very reduced budgets, and a dawning realisation that a year without brand awareness is a dangerous place to be. Marketers are approaching the idea of restarting major spending with some trepidation, because the board is peering closely at ROI.

So brands are starting to spend again, though with huge – and proper – circumspection. While it's tempting to go all out and get brand awreness back by focusing on telly or online with virals and sexy, award-winning branded acquisition campaigns, true effectiveness requires that marketers begin at home, with the customers they already have. ECRM (Electronic Customer Relationship Marketing), with its focus on retention, is auditable in ways an ephemeral viral campaign cannot be.

And there's a second fork ahead, though I don't think it has much impact on the decision about marketing strategy. We're either approaching the end of the recession, or we've chanced upon the middle of one that's W-shaped. If it's the former, then there are already a number of brands that have taken on the salutory lesson and switched focus to low-cost, high-impact programmes delivered by cheap, responsive and trackable channels like email, web, social media and SMS. We've already seen remarkable results that show traditional media-led brand consideration declining sharply while eCRM bases rise against the tide. Those brands will prosper with high margins, where marketing spend is described by what's left over after overheads and profit. More marketing effectiveness means higher market share. TV advertising brands not only haven't been able to afford it recently, but when they return to it they'll be shouting louder at diminishing audiences with waning response.

If we're appoaching the middle peak of a W, this problem will only get worse. Brand advertising works when there's continuous stimulation, something that traditional media strategies cannot provide at trickling budgets. ECRM and retention-oriented programmes, which seek to provide continuous engagement through cutting out anything that is not relevant to a specific user's customer journey, can provide not only stimulation for cross-sell and up-sell during times when high street spending is necessarily low, but also data. And this data actually can be used for acquisition, perhaps counter-intuitively.

The major learning is centred around which segments work and which do not. Essentially customers are segmented by propensity to buy, then value (frequency of purchase, lifetime value and so on), with some information about advocacy thrown in for good measure. Taking these very basic measures, and running campaigns based on what you think will most effectively motivate increased engagement (relevant content, added value) and returns (cross selling through relevant promotions, upselling via added functionality), quickly points out which segments are most easily promoted from low value/low loyalty to higher value. This is invaluable knowledge. It tells you in the most direct terms what types of customers are easiest to get more from. It tells you who to target through acquisition campaigns. It writes your media plan for you – and it's one with little or no wastage. Following this path is a marekter's dream: efficiency leads to greater efficiency.

Whichever way the V or the W goes once all the receipts from the government's response to the american mortgage crisis are tallied up, eCRM-oriented strategies for retaining customer loyalty and building engagement are critical, because the days of the brand delivered glibly in 30 seconds are over.

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