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Understanding the value of your customers to deliver business growth - DMA

An ongoing challenge for the B2B marketer is to align their marketing efforts with complex customer needs and segment their messaging to key influencers. Many B2B marketers fail to properly identify the customer journey to generate the most compelling experience to capture customers through their marketing mix.

And yet for most companies, the Pareto Principle applies: 20% of customers account for 80% of profits. The best investment to make in adverse economic conditions is to find and attract more customers that look and behave like your best customers. The right marketing channel to reach quality new customers may not be the cheapest option available, but the investment will pay off.

The presentation will offer best practice guidance and use the DMA’s own B2B marketing and sales strategies to demonstrate how to achieve 400% increase in new business during a recession.

The session will look at:

Understanding the true value of your customers and what you can afford to acquire them
An explanation of a classic approach to lifetime value
3 key improvements that helped the DMA increase membership acquisition by 400%: an overarching value proposition, a clearly defined segmentation strategy and a customer focused tone of voice

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Understanding the value of your customers to deliver business growth - DMA

  1. 1. How the DMA achieved 400%growth in new members byfocussing on Lifetime ValueB2B Marketing Conference14 June, 2012
  2. 2. Agenda• Core Principles: lifetime value• Developing a Value Proposition• The importance of brand in B2B• Segmentation and Relevance• Success metrics
  3. 3. Who are the DMA?• Membership organisation• Represent all channels using personal data• Tri-Partite Membership – Clients – Agencies – Supplier
  4. 4. The value of a customerWhere do you start?
  5. 5. Not all members are equalRank these profiles forValue of a member • Ecommerce company who thinks DMA is mail only • Small mailing house: displays logo/ uses no services • Lapsed member after 1 year, never came back • Large agency who enters and wins DMA awards • FTSE 250 client maximum fee payer, 48 contacts • Mid-fee data supplier who spends £70,000 on sponsorship, attends every event, chairs a council, refers clients and uses the free legal help desk 3 times per month
  6. 6. Transactional Data ValueFrequency Recency
  7. 7. “Lifetime” alters value• How long to customers stay active for?• What revenue will they generate per year?• Work this out for the whole database• Then for customer segments• That gives a lifetime value (LTV)• What about different acquisition source?
  8. 8. Different Metrics, DifferentConclusions• Click-through rate• New or repeat visitors• Bounce Rate• Engagement• Micro-conversion• Conversion to Sale
  9. 9. “All of the above is focusing on short term success.Even measuring “Visitor ConversionRates” is akin to declaring success after a one night stand.Visit based conversion rates promote bad marketing behaviour.”
  10. 10. How about adding these?• First month sales• 6 months sales• 3 years sales
  11. 11. A Hypothetical Example Best Average Customers CustomersPurchases per year 4 2Average Order Value £70 £50Annual Revenue £280 £100Gross Profit Margin 10% 10%Gross Profit £28 £10Acquisition Cost £8 £4Net Profit £20 £6
  12. 12. A Hypothetical Example Part 2 Best Average Customers CustomersLife Expectancy 3 years 2 yearsRevenue Year 1 £280 £100Revenue Year 2 £220 £ 60Revenue Year 3 £180 £ 0Lifetime Revenue £680 £160Gross Profit Margin 10% 10%Lifetime Gross Profit £68 £16Acquisition Costs £8 £4Lifetime Net Profit £60 £12 »
  13. 13. DMA Lifetime valueLooking at the lapsed members:• Average order value: £1,597• Average membership: 4.3 years• Average life time value: £6,867Looking at the existing members:• Average order value: £2,105• Average membership: 6.1 years• Average life time value: £12,838
  14. 14. Creating a single view –building a new databaseWhat did they spend on sponsorship?Did they enter the awards?Did they buy a table at summer lunch?Attend data conference? Play golf?Use the legal helpdesk?Volunteer on a council?
  15. 15. Solve tomorrow’sproblems today• You’re a B2B subscription publisher• Or an PI insurance company• You need sales today• And repeat sales next year• Better start working on LTV then...
  16. 16. Two lead sourcesWe pay £50 to lead source Aand £70 to lead source B
  17. 17. You need customers in year 2• 2,000 customers start Year 1• 1,000 from source A convert at 10%• 1,000 from source B convert at 30% You start Year 2 with 100 customers from Source A and 300 customers from B
  18. 18. Original Acquisition costs...• I spent £50 on Partner A customers• £70 on partner B customers• But I need to go and buy 200 more from A to make up the difference at the start of Year 2• So, here’s the exciting bit...
  19. 19. Tell this to yourFinance Director• I could have saved £6,000 if I’d spent £4,000 more this year• For year 2 we’ll have to “buy” 200 customers from Partner A at £50• That’s £10,000 extra cost in year 2• If I got them from Partner B in Year 1 it would only have cost me £4,000 extra (200 x £20)
  20. 20. DMA growth strategy 2011-12• Use future value to amortise investment• Big challenges: 4 years declining membership and relevance• New Brand identity• New Value proposition• New Audiences• Segmentation of proposition and content
  21. 21. A Strong Value Proposition• Clients• Agencies• Suppliers• All have different needs• All have different reasons for joining• How to create a strong value proposition?
  22. 22. DMA - Branding
  23. 23. A strong brand creates lifetimevalue –an enduring bondHow do we want people to feel whenthey see the DMA?“The DMA is an exciting, vibrant organisation that I must be a part of.”“The DMA can really help me and my business.” “The DMA has changed, I need to take another look.”
  24. 24. The visionTo be a vital and inspiring partner –always positive, always in touch.Together, we will create and championa vibrant future for all our members.
  25. 25. Our valuesGenuineWe are transparent and honest in all that we do.In-touchWe are open, intelligent and never lose sight ofthe needs of our industry and members.InspiringWe are vibrant, energetic and creative.HelpfulWe work as a team, sharing goals andsupporting all our stakeholders.
  26. 26. The conversationModern DM is about startingconversationsA simple, flexible mark – representing aconversation, a stamp and a single pixel.There’s a collective approach andinclusive feel around the use of the word‘we’.Genuine. Inspiring. In-Touch. Helpful
  27. 27. Delivery: 2011
  28. 28. Communications campaignCreate an overarching communicationscampaign championing the businessvalue of data: • High profile public relations to be driving force of campaign • Enlist ‘supporters’ to endorse the campaign • Supported by other marketing to business audiences (social, mail, email, open letter ads, posters etc) • Member communication campaign and toolkit
  29. 29. DataPositioning data at the heart ofbusiness success • Data Protection regulations • Privacy and security • Measurement and attribution • Cookies • Targeting and efficiency • Value of data • Making better business decisions
  30. 30. A segmentation strategyOverarching• PR• Brand• Bulletin, Legal, EventsSegmented by interest:• Doordrop• Email• Mailing Houses• Social Media
  31. 31. IS IT WORKING? Is it working?
  32. 32. Results so far• 400% increase in new members• 31% on multi-year contracts• 90% retention• Short term loss in 2011-12• BUT 1,000% ROI by lifetime
  33. 33. Membership trends No of members 950 900 850 800 750 700 31/ 03/ 2008 31/ 03/ 2009 31/ 03/ 2010 31/ 03/ 2011 31/ 03/ 12 FORECAST
  34. 34. New member acquisition No of new members 250 200 150 100 50 0 2007/ 2008 2008/ 2009 2009/ 2010 2010/ 2011 2011/ 2012 FORECAST
  35. 35. Lead generation 2011/2012 2010/11 2011/12 2011/12 Actual Target AchievedEnquiries 536 1440 887ConversionEnquiry toMeeting 37% 50% 52%Meetings 196 720 461ConversionMeeting toMember 58% 50% 45%New Members 114 360 209ConversionEnquiry toMember 21% 25% 24%
  36. 36. New Member Lifetime Forecast• 31% on multi year contracts• Average contract length 1.57 years• Average 6.4 contacts per member• Average 90% renewal
  37. 37. New member lifetime forecastAt 4.3 years: £1,225,500At 6.1 years: £1,738,500ROI over 1000% from investmentof £150,000