The future of Data Management


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Presentation to a Marketing Week conference - September 2007

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  • Presented by: Thom Poole MSc, DipM, FCIM, MCMI, Chartered Marketer Quick Biog Web & digital marketing trailblazer since 1992 Taught digital marketing for 9 years e-Commerce Web design for marketers (and the terrified!) CRM Written papers on ‘Data Privacy’, ‘The Marketing Art of the Opt-in’ and ‘Trust in Business and Marketing’ Written a book on ‘ethical e-marketing’ called ‘Play It By Trust’ Held senior marketing positions at O2, Black & Decker and Hilti Fellow of the Chartered Institute of Marketing & holder of an Individual Charter Standard in Marketing Committee member in the West Surrey branch and the South East Region of the CIM (former Chairman of West Surrey branch) Member of the Marketing Society, Strategic Planning Society and Chartered Management Institute Consultant & business mentor for digital marketing strategy and implementation
  • When a sales manager said - ‘People buy from their friends - so be a friend’, I thought - no-one is going befriend a cut-throat sales representative! In essence, what they are saying is that if you’re a seen as friendly and approachable, you will build trust. But you also need to target your customers carefully, and let them know who you are. What is it that makes your customers tick? Can you exploit that knowledge of your customers? Are you developing products and services that are of use to the customer profile? The famous advert, I think, sums it all up - “So, what was it you wanted to sell me?”
  • A year later that business owner is wondering what happened to that customer and where they went. Why haven't they hear from them? Did they leave? If so, why? When you consider that the last two make up the majority of why a client or customer will no longer use your service or buy your products - it can be a hard pill to swallow. After all it means they are an inactive client because they felt you didn't care about them and your competitor did. This makes sense when you consider that customers often purchase your service or product because they have developed a relationship with you, they owned another product or yours, or they were referred to you by a friend or associate. When faced with the above facts why is it businesses spend 80% of their marketing dollars going after new customers and clients rather than nurturing, retaining, and maintaining the customer relationships they already have?
  • As you can see your marketing dollars will go further if you use it to build, nurture, and develop your customer relationships. This isn't as difficult as you think. Building these relationships just means treating your customers and clients as if they
truly are your strategic partners and showing them that you truly care about them. It's important to try to satisfy them with the right products and services, supported by the right promotion and making it available at the right time and location. Customers can easily detect indifference and insincerity and they simply will not tolerate it. Long-term client and customer loyalty is a long-term challenge that you must strive for every day and with every transaction no matter how big or small. While a growing business needs to constantly capture new customers, the focus and priority should be on pleasing your existing customer base. Companies that fail to nurture and retain their customer base ultimately fail. You will also spend twice as much to get new clients as you will in maintaining your existing customer base.You will also be limited in your ability to attract new clients if you can't hold onto and satisfy your existing customers and clients. The bottom line is that one of the key components in marketing and business growth is to spend the majority of your time and effort nurturing customer relationships, so that you get business from existing clients and customers. This is a strategy that will move you forward in increasing your sales by 50% without increasing your budget. It costs 7-10x as much to get a new customer as to keep an old one
  • When I was a salesman, my boss told me that people bought products or services from their ‘friends’. I have yet to meet a salesman that I could call a friend – not whilst they were trying to get my money, anyway! Trust is the basis for building loyalty which in turn will increase interaction – it is up to you to turn this interaction into profit. As a personal example – I am an Apple McIntosh user at home, but have to suffer PC’s at work. Think about the customer loyalty Apple has – most Apple users can be identified by two main attributes – they are fiercely loyal to the brand, and they are poor, because the loyalty costs so much! I have used Michael Porter’s value chain model to demonstrate the trust-focused value chain, culminating in ‘trust’ in a brand, product or service. It is no fluke that trust occupies the same space that ‘profit’ does in Porter’s model, indeed I could have extended it with another field to the right called profit. Being trustworthy is profitable.
  • The normal trust lifecycle curve shows that a customer will start in an untrusting state - they are unaware of the brand’s reputation. During the transaction, the customer will build a view of the company, trusting the relationship as they go. Over time, and [hopefully] with repeat transactions, this trust will be confirmed, and then maintained. Advocates, as we highlighted before, will reduce the time required to build trust, because if you trust the advocate who recommended the company to you, you will adopt some of that trust.
  • Or Propensity Scoring
  • But much of it is devoid of reality. The fantasy of the modern Harley is what drives the market.
  • So how do you segment? First step is to identify your customers This example comes from the British mobile phone company - O2 -where they developed five main segments - Ambitious Techies, Budgeters, Professional Functionals, Status Seekers and Young Socials. From that, mood boards were developed - this for the Ambitious Techies, and then a more complex evaluation and ROI estimator board.
  • The future of Data Management

    1. 1. The future of data management Looking at the future of data management - What is on the digital horizon? Thom Poole September 2007
    2. 2. Why retain customers? <ul><li>The trend within marketing is that we becoming more personalised </li></ul><ul><li>Digital technology for communications and production allow cheap customisation </li></ul><ul><li>Customers have an increasing amount of choice </li></ul><ul><li>International travel & the Internet mean we can buy anything from anywhere </li></ul><ul><li>Why should customers go to you? </li></ul>
    3. 3. Segmentation trends <ul><li>1950’s Mass markets </li></ul><ul><li>1960’s Market segments </li></ul><ul><li>1970’s Niche markets </li></ul><ul><li>1980’s Mass customisation </li></ul><ul><li>1990’s Micro-markets </li></ul><ul><li>2000’s e-Markets </li></ul>
    4. 4. <ul><li>What makes them tick? </li></ul><ul><li>Marketing = exploitation! </li></ul><ul><li>It is no good developing applications for the elderly if they are unlikely to use them </li></ul>Target your customers “ I don’t know who you are, I don’t know your company, I don’t know your company’s products, I don’t know what your company stands for, I don’t know your company’s customers, I don’t know your company’s record, I don’t know your company’s reputation, Now – what was it you wanted to sell me?” MORAL: Sales start before your salesman calls – with business publication advertising
    5. 5. Customer churn/defection <ul><li>There are many reasons a customer or client may leave you, but the ones you will hear most often are: </li></ul><ul><ul><li>Customers felt your pricing was too high or unfair </li></ul></ul><ul><ul><li>Customers had an unresolved complaint </li></ul></ul><ul><ul><li>Customers took a competitors offer </li></ul></ul><ul><ul><li>Customers left because they felt you didn't care </li></ul></ul>
    6. 6. Value for your money <ul><li>Before you spend your time and money going after new customers and clients you do not currently
 have a relationship with consider the following statistics: </li></ul><ul><ul><li>Repeat customers spend 33% more than new customers </li></ul></ul><ul><ul><li>Referrals among repeat customers are 107% greater than non-customers </li></ul></ul><ul><ul><li>Companies lose half their customers in 5 years (Harvard Business Review) </li></ul></ul><ul><ul><li>It costs six times more to sell something to a prospect than to sell that same thing to a customer </li></ul></ul>
    7. 7. Friendship = Trust <ul><li>‘ People buy from their friends’ </li></ul><ul><li>Trust builds loyalty </li></ul><ul><li>Trust will drive profit </li></ul>Trust-focused value chain (adapted from Porter, 1998), Poole - 2002
    8. 8. Trust lifecycle Time Level of Trust Unaware Build Trust Confirm Trust Maintain Trust Register/Transact/Confirm Consider/Validation/Assess Browse/Search/Compare Trial Threshold Purchase Threshold Habit Threshold Untrust phase Extrinsic Intrinstic Recommendation © Poole (2005), adapted from Reynolds (2000)
    9. 9. Propensity modelling <ul><li>If you behave in the same/similar way to someone else, you are likely to complete the same transactions </li></ul><ul><li>If you behave as your segment always does - this will be your next move </li></ul><ul><li>Why is this important? </li></ul><ul><ul><li>We can predict whether to invest time in this relationship </li></ul></ul><ul><ul><li>We can possibly force the customer to make a larger purchase </li></ul></ul><ul><ul><li>We can reinforce our models with the outcome of this transaction </li></ul></ul>
    10. 10. Amazon
    11. 11. Refined marketing campaigns Customer interaction Refined understanding Refined communications New campaigns Customer response Behaviour analysis Dych é, J. 2002
    12. 12. Technology getting too clever Technology can contribute to churn
    13. 13. Types of CRM <ul><li>Simple rotodex </li></ul><ul><li>Contact database </li></ul><ul><li>CRM System </li></ul><ul><li>Complex ERM System </li></ul><ul><li>Propensity Modelling System </li></ul><ul><li>E-CRM </li></ul>
    14. 14. Getting too familiar <ul><li>If you use a database, you could start talking to your customer about things that are relevant to them </li></ul><ul><li>You could also get too personal! </li></ul><ul><li>The law does not allow you to talk to anyone else about an account - example: </li></ul><ul><ul><li>Man, having an affair, booked into a large hotel. It is the 3rd time he had been there, each time with a female companion </li></ul></ul><ul><ul><li>After the visit, the hotel telephoned his home number and spoke to his wife. </li></ul></ul><ul><ul><li>They asked her if she enjoyed the stays, and offered her, and her husband a free night </li></ul></ul><ul><ul><li>She had never been to the hotel </li></ul></ul><ul><ul><li>Divorce proceedings followed and the husband successfully sued the hotel for breach of the Data Protection Act </li></ul></ul>
    15. 15. Data collection <ul><li>Only collect the data you need for your business </li></ul><ul><li>Use that data in a way that is relevant to your business </li></ul><ul><li>Keep the data only as long as is necessary - communications should be recent, frequent and have a monetary value </li></ul><ul><li>Use the relevant media for collection and communication </li></ul><ul><li>Be open about the unsubscribe methods </li></ul>
    16. 16. Simple segmentation Behavioural Rate of usage Benefits sought Loyalty status Readiness to purchase Psychographic Lifestyle Personality Demographic Age Gender Occupation Socio-economic group Geographic Region/Country Urban/rural/suburban ACORN classification
    17. 17. Criteria for successful segmentation <ul><li>Relatively homogenous </li></ul><ul><li>Distinctive </li></ul><ul><li>Identifiable </li></ul><ul><li>Accessible </li></ul><ul><li>Actionable </li></ul><ul><li>Measurable/definable </li></ul><ul><li>Substantial (profitable) </li></ul><ul><li>Stable (long-term viability) </li></ul>
    18. 18. Why segment? <ul><li>In a ‘global’ village of 100 people… </li></ul><ul><li>57 would be Asian </li></ul><ul><li>21 European </li></ul><ul><li>14 American (North & South) </li></ul><ul><li>8 African. </li></ul><ul><li>52 would be women </li></ul><ul><li>70 would not be ‘white’ </li></ul><ul><li>70 would not be Christian </li></ul><ul><li>89 heterosexuals </li></ul>• 6 people would own 59% of the wealth, and all 6 from the US • 80 would be below the poverty line • 70 would be illiterate • 50 under nourished • 1 would die • 2 would be born • 1 have a PC • 1 have an academic qualification Would you want to talk to everyone?
    19. 19. Top two Harley Davidson customer segments professional men professional women Fantasy Reality Middle-aged Young
    20. 20. How do you segment? <ul><li>They are your customers … </li></ul><ul><li>Identify them </li></ul><ul><li>Online demographics are different to offline </li></ul><ul><ul><li>Ambitious Techies </li></ul></ul><ul><ul><li>Budgeters </li></ul></ul><ul><ul><li>Professional Functionals </li></ul></ul><ul><ul><li>Status Seekers </li></ul></ul><ul><ul><li>Young Socials </li></ul></ul><<<
    21. 21. The death of offline ‘retention’? Will digital media supersede traditional methods of retention?
    22. 22. Future trends <ul><li>The web will increase in importance </li></ul><ul><li>Integrated marketing will increase in importance </li></ul><ul><li>Web 2.0 will put the ‘power’ into the hands of the customer </li></ul><ul><li>The future of the internet is mobile </li></ul><ul><li>The data that companies can collect will become more sophisticated </li></ul><ul><li>Companies will have to understand the data better </li></ul><ul><li>TRUST will be a vital component in modern marketing </li></ul>
    23. 23. New in-car ‘Ents’ i-Tunes Engine monitor GPS TV/DVD DAB Radio WiFi Computing Bluetooth phone
    24. 24. In-car Advertising Example <ul><li>Driving along a road, and your ‘Ent’s system’ says … </li></ul><ul><li>“ Are you feeling hungry? There is a McDonald’s 300 yards ahead.” </li></ul><ul><li>When you drive into the McDonald’s, your Bluetooth mobile phone receives a voucher for ‘free fries’ </li></ul>
    25. 25. The future is about … Relevant Choice Me, Me, Me Me, Me, Me Me, Me, Me Me, Me, Me I want to be unique I want to be unique I want to be unique I want to be unique Give me a choice Give me a choice Give me a choice Give me a choice I want to be in control I want to be in control I want to be in control I want to be in control Be relevant at the right time Be relevant at the right time Be relevant at the right time
    26. 26. Next steps <ul><li>Understand who your most profitable customers are </li></ul><ul><li>Learn everything you can about them (profile them, segment them, etc) </li></ul><ul><li>Learn what motivates them (and what turns them off) </li></ul><ul><li>EXPLOIT your knowledge and build a relationship </li></ul><ul><li>Be trustworthy and trusting in that relationship </li></ul><ul><li>Be proactive in the relationship </li></ul><ul><li>… go to the bank </li></ul>
    27. 27. Any questions?
    28. 28. Thank you Thank you for your interest and attention Thom Poole [email_address]