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Customer Retention

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Presentation given to the Century Media Workshop - London, September 2007

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Customer Retention

  1. 1. Customer Retention How to use digital media & eCRM to get up close and personal with YOUR customers Thom Poole Jonathan Richards September 2007
  2. 2. Agenda <ul><li>Understanding how to integrate digital media & direct marketing </li></ul><ul><li>Practical methods for identifying & targeting the right customer </li></ul><ul><li>Testing your offline and online methods </li></ul><ul><li>Measuring the return on investment </li></ul><ul><li>Objective setting </li></ul>
  3. 3. Why us? A quick biography of Thom Poole & Jonathan Richards
  4. 4. Thom Poole <ul><li>Web & digital marketing trailblazer since 1992 </li></ul><ul><li>Taught digital marketing for 9 years </li></ul><ul><ul><li>e-Commerce </li></ul></ul><ul><ul><li>Web design for marketers (and the terrified!) </li></ul></ul><ul><ul><li>CRM </li></ul></ul><ul><li>Written papers on ‘Data Privacy’, ‘The Marketing Art of the Opt-in’ and ‘Trust in Business and Marketing’ </li></ul><ul><li>Written a book on ‘ethical e-marketing’ called ‘Play It By Trust’ </li></ul><ul><li>Held senior marketing positions at O2, Black & Decker and Hilti </li></ul><ul><li>Fellow of the Chartered Institute of Marketing & holder of an Individual Charter Standard in Marketing </li></ul><ul><li>Consultant & business mentor for digital marketing strategy and implementation </li></ul>
  5. 5. Jonathan Richards <ul><li>Set up Centurion Management Systems in 1996 </li></ul><ul><ul><li>Specialising in business system implementations for mid-cap organisations </li></ul></ul><ul><ul><ul><li>CRM </li></ul></ul></ul><ul><ul><ul><li>Human resource </li></ul></ul></ul><ul><ul><ul><li>Business Intelligence </li></ul></ul></ul><ul><li>Co-founder of Centurion Marketing Systems in 2000 </li></ul><ul><ul><li>Specialising in Market research software </li></ul></ul><ul><li>Has managed systems implementations in UK, USA, South Africa and Australia. </li></ul>
  6. 6. Understanding integration Understanding how to integrate digital media & digital marketing
  7. 7. Definition of Marketing - CIM <ul><li>Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably </li></ul><ul><ul><li>Customers are at the heart of the process </li></ul></ul><ul><ul><li>It is the study of the market forces and factors, and the development of a company’s position to optimise its benefit from them </li></ul></ul>
  8. 8. Definition of Marketing - Alternative <ul><li>Marketing is all about EXPLOITATION ! </li></ul><ul><ul><li>You learn all about your customers </li></ul></ul><ul><ul><li>Your products and technologies </li></ul></ul><ul><ul><li>Your competitors </li></ul></ul><ul><ul><li>Your economic environment </li></ul></ul><ul><ul><li>Your customers aspirations, etc, etc </li></ul></ul><ul><li>And you exploit that KNOWLEDGE profitably </li></ul><ul><ul><li>You give your customers what they want </li></ul></ul><ul><ul><li>What they think they want </li></ul></ul><ul><ul><li>What you can convince them they want </li></ul></ul>Thom Poole - 2000
  9. 9. Message alignment Buy This buy this Look here Register here
  10. 10. Communications model A linear model of communication (based on Schramm (1995) and Shannon & Weaver (1962) – from Fill (1999))
  11. 11. Brand identity system <ul><li>A consistent brand identity system should be an early high priority investment because of the impact it can have on your sales and revenue. A brand identity system includes: </li></ul><ul><ul><ul><li>Conveys that you are trading viably </li></ul></ul></ul><ul><ul><ul><li>Attracts more clients </li></ul></ul></ul><ul><ul><ul><li>Increases your credibility </li></ul></ul></ul><ul><ul><ul><li>Increases “memorability” </li></ul></ul></ul><ul><ul><ul><li>Enables you to stand out </li></ul></ul></ul><ul><ul><ul><li>Makes your business look “bigger&quot; </li></ul></ul></ul><ul><ul><ul><li>Improves your chance of getting venture capital or selling your business </li></ul></ul></ul><ul><ul><ul><li>Brands your business </li></ul></ul></ul><ul><ul><ul><li>Explains your company name </li></ul></ul></ul><ul><ul><ul><li>Endears your company name to your clients </li></ul></ul></ul><ul><ul><ul><li>Describes an unusual type of business </li></ul></ul></ul><ul><ul><ul><li>Differentiates you from your competition </li></ul></ul></ul><ul><ul><ul><li>Meets expectations </li></ul></ul></ul><ul><ul><ul><li>Demonstrates your commitment and pride in what you do </li></ul></ul></ul>
  12. 12. Layers of your brand <ul><li>Brand foundation </li></ul><ul><ul><li>Brand vision </li></ul></ul><ul><ul><li>Brand mission </li></ul></ul><ul><ul><li>Brand values </li></ul></ul><ul><li>Brand basics </li></ul><ul><ul><li>Brand identity </li></ul></ul><ul><ul><li>Brand content </li></ul></ul><ul><ul><li>Brand marketing </li></ul></ul><ul><ul><li>Brand offerings </li></ul></ul><ul><ul><li>Brand experience </li></ul></ul><ul><li>Competitor comparison </li></ul><ul><ul><li>Brand positioning </li></ul></ul><ul><ul><li>Brand differentiation </li></ul></ul><ul><li>Internal measures </li></ul><ul><ul><li>Brand environment </li></ul></ul><ul><ul><li>Brand promise </li></ul></ul><ul><ul><li>Brand values </li></ul></ul><ul><li>External measures </li></ul><ul><ul><li>Brand awareness </li></ul></ul><ul><ul><li>Brand gap </li></ul></ul><ul><li>Brand maintenance </li></ul><ul><ul><li>Brand alignment </li></ul></ul><ul><ul><li>Brand management </li></ul></ul>
  13. 13. Characteristics of Successful Brand Identity <ul><li>Uniqueness </li></ul><ul><li>Repetition </li></ul><ul><li>Consistency </li></ul><ul><li>Memorable </li></ul><ul><li>Meaningful </li></ul><ul><li>Clarity </li></ul><ul><li>Honesty </li></ul><ul><li>Personality </li></ul><ul><li>Professional </li></ul><ul><li>Trust </li></ul>
  14. 14. Campaigns
  15. 15. Extreme branding
  16. 16. Integrated campaigns <ul><li>Communication in a cross media environment is becoming a force multiplier in driving the customer relationship </li></ul><ul><ul><li>Create brand consistency </li></ul></ul><ul><ul><li>Easier to establish an integrated approach </li></ul></ul><ul><ul><li>Deliver personalised communication </li></ul></ul><ul><ul><li>Leverage interactive technology </li></ul></ul><ul><ul><li>Demonstrate accountability </li></ul></ul><ul><ul><li>Create customer value </li></ul></ul>
  17. 17. Integrated campaigns – the way to go
  18. 18. O2 Advert © Thom Poole 2005
  19. 19. The relationship <ul><li>Re -la-ti on -sh ip (r ĭ -l ā ' sh ə n-sh ĭ p') </li></ul><ul><li>n. </li></ul><ul><li>The condition or fact of being related; connection or association </li></ul><ul><li>Connection by blood or marriage; kinship </li></ul><ul><li>A particular type of connection existing between people related to or having dealings with each other: has a close relationship with his siblings </li></ul><ul><li>A romantic or sexual involvement </li></ul>From: www.answers.com
  20. 20. Increase your profits! <ul><li>Customer acquisition </li></ul><ul><ul><li>Buy in lists, and communicate relevantly </li></ul></ul><ul><ul><li>Follow up professionally on enquiries </li></ul></ul><ul><li>Customer retention </li></ul><ul><ul><li>Provide a relevant relationship </li></ul></ul><ul><ul><li>Be and remain competitive </li></ul></ul><ul><ul><li>Understand customer drivers/motivators </li></ul></ul>
  21. 21. 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>
  22. 22. 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>It costs six times more to sell something to a prospect than to sell that same thing to a customer </li></ul></ul>
  23. 23. 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
  24. 24. 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)
  25. 25. Customer centricity <ul><li>Know your customer: You can ’t always know each individual customer, but you can segment customers based on common characteristics. The key theme is that each customer has a specific set of needs </li></ul><ul><li>Align your resources: What resources are we talking about? Becoming customer-centric includes the alignment of your people and your company ’s structure, processes, technology, products, and services to the customer </li></ul><ul><li>Listen and respond: Most company’s conduct some form of customer satisfaction survey. However, simply administering a survey alone is not listening </li></ul>
  26. 26. Resource alignment - 1 Back-office personnel clearly recognise how they impact the customer experience. Everyone is a customer to someone else Back-office personnel detached from the customer Adopting the philosophy: “ T he customer ’s problem is my problem, and therefore, I will facilitate resolution ” “ N ot my problem ” syndrome Clear accountability and ownership of the customer Lack of ownership of the customer Measured based on customer success (e.g. satisfaction, retention, revenue, profitability, share of wallet) Measured on individual and departmental productivity (e.g. new revenue, calls answered) Rewarded for customer-centric behaviour. When deviation occurs outside of tolerance or a negative result occurs, coaching takes place to improve employees ’ future decision making Reprimanded for deviating from process Perform against policies and procedures, under-standing that they were designed to enable the customer to do business with you - n ot meant to be a customer obstacle. When exceptions occur, the objective is to determine how to meet the customer ’s need and facilitate meeting that need without placing the burden on the customer to figure it out Driven by script with no latitude to deviate on behalf of the customer All personnel are skilled in managing interpersonal relationships Not adept at managing interpersonal relationships Your people have the greatest influence on the customer experience Empower them to delight the customer People & structure Customer-Centric Requirements Realities Plaguing Non-Customer- Centric Companies Principle Resource
  27. 27. Resource alignment - 2 Customer ’s entire experience is managed holistically Customers managed on a transactional level (e.g., individual orders, inquiries, issues) Transparency/full disclosure provided to the customer Lack of information. Customer is not allowed to “l ook behind the curtain. ” Being easy to do business with. The customer is buffered from the intricacies of the organisation Organisation is difficult to do business with. Seams of the organisation are exposed to the customer Processes designed from the outside in to enable customers to do business with you Processes designed from the inside out, focused on intra-departmental efficiencies Be easy to do business with Process Customer-Centric Requirements Realities Plaguing Non-Customer- Centric Companies Principle Resource
  28. 28. Resource alignment - 3 Design the customer experience “b efore market” Products and services When launching a product or service, the customer experience is “d esigned ” in advance The customer experience is considered “a ftermarket ” in a reactive manner Needs of existing customers and improving their experiences are the primary driving forces Designed and launched based on features/ functions anticipated to capture “n ew revenue ” from “n ew customers” Implemented to enable customers to do business with you more effectively and efficiently Implemented with a focus on efficiency gains, resulting in obstacles for the customer Implemented to automate improved operating models and processes Implemented in response to business problems, automating existing bad practices Automate effective customer-focused practices Technology Customer-Centric Requirements Realities Plaguing Non-Customer- Centric Companies Principle Resource
  29. 29. The quest for customer-centricity <ul><li>Locate your starting point </li></ul><ul><ul><li>Customer awareness </li></ul></ul><ul><ul><li>Customer focus </li></ul></ul><ul><ul><li>Customer satisfaction </li></ul></ul><ul><ul><li>Customer value </li></ul></ul><ul><ul><li>Customer loyalty </li></ul></ul><ul><li>Determine if your focus is where it should be </li></ul><ul><li>Establish a baseline </li></ul><ul><li>Re-assess how you segment and value clients </li></ul><ul><li>Identify profitable behaviours and the 
factors that promote them </li></ul><ul><li>Put your face in front of the client </li></ul><ul><li>Review your roster </li></ul><ul><li>Flip the hierarchy </li></ul><ul><li>Strategise and execute </li></ul>Source: www.destinationcrm.com
  30. 30. Customer-centric marketers see a higher ROI <ul><li>The top performers: </li></ul><ul><li>Track customer behaviour </li></ul><ul><li>Use customer profitability modelling </li></ul><ul><li>Maintain centralised knowledge and data management systems </li></ul><ul><li>Possess real-time decision support, including business intelligence tools integrated with marketing and customer data, with higher frequency than benchmarked groups </li></ul>Source: Aberdeen Group
  31. 31. Exercise <ul><li>List the top 5 customer touch- points with your organisation </li></ul><ul><li>How effective are they? </li></ul><ul><li>You have 5 minutes </li></ul>
  32. 32. Exercise 5
  33. 33. Exercise 4
  34. 34. Exercise 3
  35. 35. Exercise 2
  36. 36. Exercise 1
  37. 37. Presentations <ul><li>Please present your findings </li></ul>
  38. 38. Take a break Back in 15 minutes
  39. 39. Practical methods For identifying and targeting the right customer
  40. 40. Customer Relationship Marketing <ul><li>Be relevant to your customers </li></ul><ul><li>Give your customers a reason to trust you </li></ul><ul><li>Build a community of customers who you can test ideas on </li></ul><ul><li>Use/exploit the knowledge you have about your customers </li></ul><ul><li>Align your organisation behind your relationship </li></ul>
  41. 41. Customer Relationship Management Why? <ul><li>Build and strengthen customer relationships to keep them coming back </li></ul><ul><li>Provide value-added services that are difficult for competitors to duplicate </li></ul><ul><li>Improve product and service delivery processed </li></ul><ul><li>Increase staff awareness of customer needs </li></ul><ul><li>Reduce customer frustration by not asking the same questions over and over </li></ul>
  42. 42. Customer Relationships <ul><li>This is a form of marketing that aims to create relationships with a company’s customers </li></ul><ul><li>It involves a process that records all the customer interactions and their outcome </li></ul><ul><li>Some complex systems can generate millions of lines of information each day </li></ul><ul><li>It is one thing to collect it, it is another to know what to do with it: </li></ul><ul><ul><li>HEADLINE: CRM is dead! </li></ul></ul>
  43. 43. Types of CRM E-CRM Propensity Modelling System Complex ERM System CRM System Contact database Simple rotodex
  44. 44. The three aspects of joined up CRM <ul><li>Operational CRM - automation of support and customer interactions that include a company’s sales or service processes </li></ul><ul><li>Collaborative CRM - direct communication with customers that does not include a company’s sales or service representative (“self service”) </li></ul><ul><li>Analytical CRM - analysis of customer data for a broad range of purposes </li></ul>Operational Collaborative Analytical
  45. 45. A word of caution! <ul><li>Too many projects have gone astray by trying to do </li></ul><ul><li>too much too soon. </li></ul>
  46. 46. CRM selection <ul><li>Have a CRM strategy because CRM initiatives launched without a strategy invariably cause pain </li></ul><ul><li>Choose the right CRM partner </li></ul><ul><li>Understand the technology </li></ul><ul><li>Focus more on business processes than technology </li></ul><ul><li>Don ’t try and design the perfect CRM system that will meet 100% of each and every person ’s wish list </li></ul><ul><li>Do not try to change the whole organisation overnight </li></ul><ul><li>Think about the user interface and plan it carefully </li></ul><ul><li>Get help and expect to pay for CRM system implementation </li></ul><ul><li>Make it somebody ’s responsibility to own the data, and to make sure that it is correct and complete </li></ul><ul><li>User acceptance is the single most important success factor for a CRM system so invest in training </li></ul>Source: E-CRM Solutions Ltd (www.e-crm.co.uk )
  47. 47. Data collection Know what you know
  48. 48. What do you want to know? <ul><li>Are you attracting new customers </li></ul><ul><li>What is the health of your lead qualification process </li></ul><ul><li>How proficient is your conversion to buyers </li></ul><ul><li>Does your marketing encourage purchase </li></ul><ul><li>What behaviour indicates that a prospect is ready to buy </li></ul><ul><li>How do customer segments differ </li></ul><ul><li>What attributes describe your best customers </li></ul><ul><li>How can they help you target other prospects </li></ul><ul><li>How can profiling help you cross-sell and up-sell </li></ul><ul><li>What is your churn rate </li></ul><ul><li>How do you measure loyalty </li></ul>Sterne, J. WebMetrics. 2002 pp29
  49. 49. Know what you know! <ul><li>Most organisations already know their customers well </li></ul><ul><ul><li>They just don’t make the most of it! </li></ul></ul><ul><li>They are already doing business with them, so they have started to understand the customer </li></ul><ul><li>Need to consolidate what is already known </li></ul><ul><li>Fill in the gaps </li></ul>
  50. 50. Know what you know! <ul><li>Start with the basics </li></ul><ul><ul><li>Data provided by customer </li></ul></ul><ul><ul><li>Transactional data </li></ul></ul><ul><ul><li>Third party data </li></ul></ul>
  51. 51. Know what you know! <ul><li>Data provided by the Customer </li></ul><ul><ul><li>Name & Address </li></ul></ul><ul><ul><li>Telephone Numbers </li></ul></ul><ul><ul><li>What ever you have asked them! </li></ul></ul>
  52. 52. Examples of customer data Company Individual
  53. 53. Examples of customer data
  54. 54. Know what you know! <ul><li>Transaction and interaction </li></ul><ul><ul><li>Inquiries, Purchases, Service requests </li></ul></ul><ul><ul><li>Web visits </li></ul></ul>
  55. 55. Examples of transactional data Problem resolution Sales opportunities
  56. 56. Examples of transactional data Accounting data
  57. 57. Know what you know! <ul><li>Third party data e.g. </li></ul><ul><ul><ul><li>Profile </li></ul></ul></ul><ul><ul><ul><ul><li>E.g. Turnover, number of employees </li></ul></ul></ul></ul><ul><ul><ul><li>Credit rating </li></ul></ul></ul><ul><ul><ul><li>Demographics </li></ul></ul></ul>
  58. 58. Examples of 3 rd party data
  59. 59. How to collect data <ul><li>On the fly </li></ul><ul><ul><li>Customer facing staff </li></ul></ul><ul><ul><li>Transaction systems </li></ul></ul><ul><ul><li>Web visits </li></ul></ul><ul><li>Periodic updates </li></ul><ul><ul><li>Customer surveys </li></ul></ul><ul><ul><li>Credit checking </li></ul></ul><ul><ul><li>Segmentation of customers </li></ul></ul>
  60. 60. Examples of collecting data Web forms Workflow key tasks
  61. 61. Know what you know! <ul><li>When to collect and analyse data? </li></ul><ul><ul><li>Often never done </li></ul></ul><ul><ul><li>Do it once for a bit of an insight </li></ul></ul><ul><ul><li>Do it occasionally to continue learning </li></ul></ul><ul><ul><li>Ideal is to do this continuously </li></ul></ul>
  62. 62. What next? <ul><li>Data mining </li></ul><ul><li>“ the nontrivial extraction of implicit, previously unknown, and potentially useful information from data” </li></ul><ul><li>“ the science of extracting useful information from large data sets or databases” </li></ul><ul><li>Source: Wikipedia </li></ul>
  63. 63. Data mining <ul><li>In layman’s terms: </li></ul><ul><li>Data mining involves sorting through large amounts of data and picking out relevant information. </li></ul><ul><li>Data mining identifies trends within data that go beyond simple analysis. Users have the ability to identify key attributes of business processes and target opportunities. </li></ul>
  64. 64. Data mining <ul><li>Data </li></ul><ul><ul><li>facts, numbers, or text </li></ul></ul><ul><li>Information </li></ul><ul><ul><li>The patterns, associations, or relationships among all this data can provide information </li></ul></ul><ul><li>Knowledge </li></ul><ul><ul><li>Information can be converted into knowledge about historical patterns and future trends </li></ul></ul>
  65. 65. Data mining - example <ul><li>US grocery chain used buying patterns to discover: </li></ul><ul><ul><li>When men bought “diapers” on Thursday’s and Saturdays they tended to buy beer </li></ul></ul><ul><ul><li>These shoppers tended to do the weekly grocery shop on Saturdays </li></ul></ul><ul><ul><li>On Thursday’s they bought fewer items </li></ul></ul><ul><ul><li>Conclusion - beer was bought for weekends </li></ul></ul>
  66. 66. Data mining - example <ul><li>Possible uses </li></ul><ul><ul><li>Increase revenue by moving beer display closer to diapers </li></ul></ul><ul><ul><li>Make sure beer and diapers are sold at full price on Thursdays </li></ul></ul>
  67. 67. Data mining - tools Advanced reporting tools – many software products have these built in. Business intelligence tools – have been expensive and hard to use but getting better. Data Mining specific – often little more that BI. Choice depends on how much you want the tool to do for you? Microsoft Excel – now has conditional formatting
  68. 68. Data mining - example
  69. 69. Data modelling <ul><li>Demographic profiling </li></ul><ul><li>Behavioural segmentation </li></ul><ul><li>Lifetime value modelling </li></ul><ul><li>Churn modelling </li></ul><ul><li>Propensity modelling </li></ul><ul><li>Basket analysis </li></ul><ul><li>Brand profiling </li></ul>
  70. 70. Behavioural segmentation <ul><li>Behavioural segmentation divides customers into groups based on the way they respond to, use or know of a product </li></ul><ul><li>Behavioural segments can group consumers in terms of: </li></ul><ul><ul><li>Occasions </li></ul></ul><ul><ul><li>Usage </li></ul></ul><ul><ul><li>Loyalty </li></ul></ul><ul><ul><li>Benefits sought </li></ul></ul>
  71. 71. Behavioural segmentation <ul><li>Behavioural segmentation identifies consumption rates of a product or service as a means of segmenting markets. </li></ul><ul><li>For instance customers of a local leisure centre may be classified as: </li></ul><ul><ul><li>Frequent users (Daily visits) </li></ul></ul><ul><ul><li>Less frequent users (At least once a week) </li></ul></ul><ul><ul><li>Users ( Occasional visits) </li></ul></ul><ul><ul><li>Non users. I f a company can identify the characteristics of frequent users (they may live in a certain area and have other common features such as income) they can target those segments in order to increase the number of frequent users </li></ul></ul>
  72. 72. Propensity modelling <ul><li>Propensity models help you to maximise Return on Investment by targeting the most suitable audience </li></ul><ul><li>Fundamentally, propensity models allow you to score customers or prospects according to their likelihood to undertake a given action, f or example; </li></ul><ul><ul><li>l ikelihood to become a customer </li></ul></ul><ul><ul><li>likelihood to buy again </li></ul></ul><ul><ul><li>likelihood to lapse </li></ul></ul><ul><ul><li>l ikelihood to take up a new service </li></ul></ul>
  73. 73. Propensity modelling <ul><li>Who will buy a product? Who will repay a loan? Who will display any particular behaviour with a commercial value? </li></ul><ul><li>This type of modelling looks at choosing and modifing predictors, how to score (and re-score) individuals in a large database, how to validate and maintain your models, how to deal with the biases that can arise through repeated use of the models, how to exploit fully the opportunities (and challenges) that arise when data is available on very large numbers of customers </li></ul>
  74. 74. Propensity modelling <ul><li>What is prospect scoring? </li></ul><ul><ul><li>Prospect scoring is simply the scoring of prospects (customers you ’d like to do business with) according to their potential value to your business. It is used for prioritising sales leads and other marketing activities e.g. media spend allocation </li></ul></ul><ul><li>Does it matter? </li></ul><ul><ul><li>Imagine an upmarket department store, aiming to boost sales of bathroom accessories, offering a free bathroom planning service. The demand for this service might quickly exceed available service capacity </li></ul></ul>
  75. 75. Propensity modelling - example <ul><li>Does it matter? </li></ul><ul><ul><li>The store has several ways to address the problem: </li></ul></ul><ul><ul><li>Stop the service - this could alienate those prospects that would have taken advantage of it, leading to lower sales </li></ul></ul><ul><ul><li>Charge for the service - this might work but might not be competitively viable </li></ul></ul><ul><ul><li>Prioritise the service - by offering the service to customers most likely to spend a high amount on the bathroom accessories following the free service, as opposed to those who might use the service and then buy somewhere cheaper </li></ul></ul>
  76. 76. Propensity modelling - levels <ul><li>Prospect scoring can be achieved on three different levels: </li></ul><ul><ul><li>Intuitive : Niche organisations often know and understand their customers and prospects without formal profiling </li></ul></ul><ul><ul><li>Simple segmentation : A single-use model is used for a specific campaign or task and is based on either a simple geo-demographic system or on basic modelling such as campaign response modelling (comparing responders to non-responders) </li></ul></ul><ul><ul><li>Complete analytical framework : This involves an integrated approach where initial analysis of customers is the basis for an analytical framework, created by overlaying customer knowledge onto the prospecting process. The model is constantly updated as new factors influence the behaviour and nature of customers </li></ul></ul>
  77. 77. Customer value <ul><li>What is Value? </li></ul><ul><li>Value is not only a combination of revenue, sales and/or profit. It includes a very important aspect of any marketing relationship, that of potential. What is the real customer potential? </li></ul>
  78. 78. Case study - Issue <ul><li>In January 1999, after extensive TV and press advertising campaigns and a number of similar products have appeared from rival providers and so it is essential that Standard Life Bank can both consolidate and then continue to expand its share of the mortgage market. </li></ul><ul><li>To achieve these aims the company's goals are: </li></ul><ul><ul><li>to identify the key attributes of clients attracted to the mortgage offer </li></ul></ul><ul><ul><li>to cross sell products to the clients of other companies in the Standard Life group </li></ul></ul><ul><ul><li>to develop a remortgage model which could be deployed on the group website </li></ul></ul><ul><ul><li>to examine the profitability of the mortgage business being accepted by Standard Life Bank </li></ul></ul><ul><li>A major part of the project was to develop models that might be successful in identifying customer characteristics relevant to any mortgage product </li></ul>
  79. 79. Case study - solution <ul><li>Using SPSS data mining capabilities, Standard Life can address a growing number of projects enabling them to deliver better value to their customers </li></ul><ul><li>They were able to build a propensity model for the remortgage offer showing the types of client attracted to this product </li></ul><ul><li>This model would be easily portable and applicable to other client databases within the Standard Life group </li></ul><ul><li>Using the propensity models, a remortgage mailing campaign was planned and executed by the Customer Data Analysis team in conjunction with Standard Life Bank </li></ul><ul><li>The mailing included a randomly selected control cell. The model allowed the bank to focus their efforts on the best prospects for the remortgage product and create scores for each customer </li></ul><ul><li>These scores allowed them to achieve more targeted direct mail and to score prospects with similar characteristics accessing the website </li></ul>
  80. 80. Case study - results <ul><li>Overall the data mining exercises undertaken enabled Standard Life to better understand the characteristics of their mortgage clients so they can more easily search for potential new clients with these characteristics </li></ul><ul><li>They also have the capability to profile incoming prospects quickly and personalise their web experience accordingly </li></ul><ul><li>Amongst the results that made a real difference to the business were that they: </li></ul><ul><ul><li>Built a propensity model for the Standard Life Bank mortgage offer identifying key customer types that can be applied across the whole group prospect pool </li></ul></ul><ul><ul><li>Discovered the key drivers for purchasing a remortgage product </li></ul></ul><ul><ul><li>Achieved with the model, a nine times greater response than that achieved by the control group </li></ul></ul><ul><ul><li>Secured £3 3million worth of mortgage application revenue </li></ul></ul>
  81. 81. Break for Lunch Back promptly in an hour, please
  82. 82. Segmentation Dividing your market up
  83. 83. How to approach segmentation <ul><li>Step 1 : Ensure that the segmentation is directly linked to what drives value to the business </li></ul><ul><li>Step 2 : Producing a clear and reliable segmentation </li></ul><ul><li>Step 3 : Tailor the outputs to make the segmentation clear and useful </li></ul><ul><li>Step 4 : Make strategic recommendations to make the segmentation practical and immediately actionable </li></ul>
  84. 84. 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?
  85. 85. Example of segmentation <ul><li>bpriskmanager (BPRM) is a very successful financial services division of BP </li></ul><ul><li>BPRM wanted to apply certain customer-centric strategic decisions but did not have the right tools in place to do so </li></ul><ul><ul><li>Focus sales efforts and initiatives against the most valuable existing and potential customers </li></ul></ul><ul><ul><li>Allocate resources accordingly </li></ul></ul><ul><ul><li>Design financial products to appeal to the most valuable customers instead of by intuition </li></ul></ul><ul><ul><li>Reduce the customer base by 10% </li></ul></ul>
  86. 86. Assessing current tools for tackling objectives <ul><li>The customer groupings that BP was using did not accurately reflect the market – the high revenue/volume customers were diluted in the sector groupings </li></ul>? Axes represent total Average Bubble sizes represent sector size Sector 7 Sector 9 Sector 8 Sector 5 Sector 6 Sector 4 Sector 3 Sector 1 Sector 2 %Volume %Revenue
  87. 87. Determining customer behaviours <ul><li>By interviewing key stakeholders within BP we identified all these customer attributes that make them valuable to BP </li></ul><ul><li>We used BP’s CRM system to find and derive the variables that best reflected all the value drivers identified </li></ul>VALUE DRIVERS SEGMENTATION VARIABLES REVENUE & VOLUME BUSINESS TO OTHER DIVISIONS CUSTOMER MAINTENANCE CUSTOMER SOPHISTICATION CUSTOMER CREDITWORTHINESS Deal commission per customer Contacts per customer Deals per customer Credit rating CUSTOMER LOYALTY Volume traded per customer Sophistication index
  88. 88. Plotting segments Margin Lucratives (1%) Risky Volume Drivers (2%) Demanding Savvies (9%) Moderates (5%) Occasional Savvies (13%) Risky Occasionals (33%) Safe Occasionals (29%) Safe Low Traders (6%) И Axes represent all customer average Bubble sizes represent segment size 3 6 9 12 150 400 Spend per Customer 4,000 Volume per Customer
  89. 89. Segmentational analysis <ul><li>The segmentation that was based on all value drivers produced eight robust and distinct segments of BP customers with customers across sectors, regions and using a variety of products </li></ul>Margin Lucratives Risky Volume Drivers Demanding Savvies Moderates Occasional Savvies Risky Occasionals Safe Occasionals Safe Low Traders % of customers
  90. 90. The net worth of each segment 9% 19% 28% 5% 6% 11% 13% 4% 10% 33% 12% 16% 29% 8% 11% 6% 5% 40% 1% 9% 18% 2% 2% 2% Segment Size Spend Volume Safe Low Traders Safe Occasionals Risky Occasionals Occasional Savvies Moderates Demanding Savvies Risky Volume Drivers Margin Lucratives
  91. 91. Segmentation – an ongoing process <ul><li>With any segmentation project you come up with a snapshot analysis </li></ul><ul><li>Use CRM system to capture variables and assign customers to segments </li></ul><ul><li>User CRM sysrem to target based on segments </li></ul><ul><li>Need to revisit segment definitions periodically to ensure still valid. </li></ul>
  92. 92. One to one customer needs <ul><li>At the heart of all e-CRM systems lives a knowledge base with a knowledge-management application. A knowledge base is an electronic collection of information that can be queried for answers to various questions. </li></ul><ul><li>To understand personalisation technologies, one need only look at Amazon.com. They are well known for tailoring its product promotions to customers based on their stated individual preferences or previous buying habits </li></ul><ul><li>Personalisation enables Amazon.com to “individualise” its offerings, meaning customers who specify an interest in books about Italian cuisine aren't bombarded with indiscriminate promotional e-mails about skydiving, mineralogy or other topics that aren't relevant to them </li></ul>
  93. 93. Amazon
  94. 94. Example of e-CRM
  95. 95. How to get started with e-CRM <ul><li>You have a CRM system and have been gathering information about your customers. </li></ul><ul><li>What next – how do I start down the e-CRM route? </li></ul><ul><li>Linking your CRM and website is not as hard as it used to be! </li></ul>
  96. 96. e-CRM example 1 <ul><li>Prospect fills out a form on your website and receives a ‘thank-you – we will be in touch shortly’ e-mail. </li></ul>
  97. 97. <ul><li>The form contents are automatically added to your CRM system </li></ul>e-CRM example 1
  98. 98. e-CRM example 1 A workflow process kicks in to allocate the lead to the most appropriate sales resource
  99. 99. e-CRM example 1 <ul><li>The salesman sees the lead on his opportunity pipeline </li></ul>
  100. 100. e-CRM example 2 <ul><li>Simon buys your product and can see all issues being dealt with by the support team on your website. </li></ul>
  101. 101. e-CRM example 2 The support team can view Simon’s cases against his record or their own ‘My CRM’
  102. 102. Exercise <ul><li>List the key information your business needs to sell/support customers effectively </li></ul><ul><li>Approx. 10 points </li></ul><ul><li>You have 15 minutes </li></ul>
  103. 103. Exercise 15 Going Home Mark Knopfler
  104. 104. Exercise 14 Going Home Mark Knopfler
  105. 105. Exercise 13 Going Home Mark Knopfler
  106. 106. Exercise 12 Going Home Mark Knopfler
  107. 107. Exercise 11 Going Home Mark Knopfler
  108. 108. Exercise 10 Hymn by Barclay James Harvest
  109. 109. Exercise 9 Hymn by Barclay James Harvest
  110. 110. Exercise 8 Hymn by Barclay James Harvest
  111. 111. Exercise 7 Hymn by Barclay James Harvest
  112. 112. Exercise 6 Hymn by Barclay James Harvest
  113. 113. Exercise 5 Hymn by Barclay James Harvest
  114. 114. Exercise 4 Heartbeats by Jose Gonzalez
  115. 115. Exercise 3 Heartbeats by Jose Gonzalez
  116. 116. Exercise 2 Heartbeats by Jose Gonzalez
  117. 117. Exercise 1 Heartbeats by Jose Gonzalez
  118. 118. Presentations <ul><li>Please present your findings </li></ul>
  119. 119. Testing Testing your methods, on- and offline
  120. 120. Difference between on- and offline <ul><li>Speed to market and of reaction </li></ul><ul><li>Low cost </li></ul><ul><li>A/B testing opportunities </li></ul><ul><li>Increased reach </li></ul><ul><li>Competitor analysis & research </li></ul><ul><li>Partner/affiliate interface </li></ul>
  121. 121. Taking offline customers online <ul><li>Cheaper to service </li></ul><ul><li>More personalisation </li></ul><ul><li>Faster transactions (less chance of churn) </li></ul><ul><li>Integrated approach </li></ul>www.domain.x/tube www.domain.x/tv
  122. 122. Measurement/tracking <ul><li>Using web metrics, you can track what is happening online </li></ul><ul><li>Web metrics are often anonymous, but… </li></ul><ul><li>Link outbound campaigns to your CRM & track your actual customers </li></ul><ul><ul><li>How often do they respond? </li></ul></ul><ul><ul><li>What is their personal ROI? </li></ul></ul><ul><ul><li>Do you want to keep them? </li></ul></ul>
  123. 123. Online testing <ul><li>Use your e-CRM system to personalise every digital touchpoint </li></ul><ul><li>Use A/B testing to find out which methods/media work best for each customer/segment </li></ul><ul><li>Use control groups, effectively </li></ul><ul><li>Monitor each method/technique for replication/ replacement </li></ul>
  124. 124. Google AdWords <ul><li>Very useful for A/B testing </li></ul><ul><li>Very direct advertising method </li></ul><ul><li>You only pay for results, so less waste </li></ul><ul><li>Anonymous, but tracking/personalisation is possible </li></ul><ul><li>This is an artform in its own right </li></ul>
  125. 125. The anatomy of an AdWord Title 25 characters Description line 1 Description line 2 35 characters 35 characters
  126. 126. Exercise <ul><li>Develop an AdWords campaign for one of your target audiences </li></ul><ul><li>Use the template in your slide pack </li></ul><ul><li>You have 10 minutes </li></ul>
  127. 127. Exercise 10 Pra Manha Da Lata
  128. 128. Exercise 9 Pra Manha Da Lata
  129. 129. Exercise 8 Pra Manha Da Lata
  130. 130. Exercise 7 Pra Manha Da Lata
  131. 131. Exercise 6 Pra Manha Da Lata
  132. 132. Exercise 5 Pra Manha Da Lata
  133. 133. Exercise 4 Pra Manha Da Lata
  134. 134. Exercise 3
  135. 135. Exercise 2
  136. 136. Exercise 1
  137. 137. Campaign segmentation <ul><li>Segment by: </li></ul><ul><ul><li>Keywords </li></ul></ul><ul><ul><li>Territory </li></ul></ul><ul><ul><li>Time </li></ul></ul><ul><ul><li>Message </li></ul></ul><ul><ul><li>Landing page </li></ul></ul>
  138. 138. Let’s take a break Back in 15 minutes
  139. 139. Measuring your Return on Investment You are in business to make money
  140. 140. Basic marketing metrics <ul><li>Increase marketing ROI </li></ul><ul><li>Decrease campaign overheads </li></ul><ul><li>Maximise the lifetime value of the customer </li></ul><ul><li>Improve customer interactions with the campaign </li></ul>
  141. 141. Website metrics <ul><li>Unique visitors </li></ul><ul><li>Pages viewed </li></ul><ul><li>Duration of visit </li></ul><ul><li>Key customer journeys </li></ul><ul><li>Conversion funnel </li></ul>
  142. 142. Web analytics applications <ul><li>With functional reporting for each department, from marketing to merchandising to business analysis, you can answer the questions that are most important to the overall e-business as well as each department: </li></ul><ul><ul><li>Get the most out of your Web 2.0 </li></ul></ul><ul><ul><li>Optimise the online experience </li></ul></ul><ul><ul><li>Identify which content, channels, partners and campaigns drive conversion </li></ul></ul><ul><ul><li>Customise reports for the way you do business </li></ul></ul><ul><ul><li>Drive adoption across the enterprise </li></ul></ul><ul><ul><li>Easily schedule emailed reports </li></ul></ul><ul><ul><li>Optimise conversion for each page, path, and scenario on your site </li></ul></ul><ul><ul><li>Run your business by the numbers </li></ul></ul>
  143. 146. Forrester Research Web Analytics Providers
  144. 147. Identifying the most valuable clients <ul><li>How do you identify your most valuable customers </li></ul><ul><li>Part of the segmentation process </li></ul><ul><li>Typical metrics: </li></ul><ul><ul><li>Past Customer Revenue </li></ul></ul><ul><ul><li>Past Customer Value </li></ul></ul>
  145. 148. Identifying the most valuable clients <ul><li>A better measure is Customer Lifetime Value (CLV) </li></ul><ul><ul><li>Forward looking picture </li></ul></ul><ul><li>However: </li></ul><ul><li>This is a complex subject </li></ul><ul><li>Many different ways to calculate </li></ul>
  146. 149. Customer Lifetime Value (CLV) <ul><li>Knowing the Lifetime Value of your customers is crucial to you and your business as it serves as a benchmark without which you'll be groping in the dark </li></ul><ul><li>When you realise that customers are actually an ongoing stream of revenue as opposed to a one-shot sale, you can re-focus your marketing efforts </li></ul>
  147. 150. Customer Lifetime Value <ul><li>Most models contain the following factors: </li></ul><ul><ul><li>Churn rate - The percentage of customers who end their relationship with a company in a given time period. </li></ul></ul><ul><ul><li>Discount rate - The cost of capital used to discount future revenue from a customer. </li></ul></ul><ul><ul><li>Retention cost - How much a company has to spend to retain an existing customer. </li></ul></ul><ul><ul><li>Time period </li></ul></ul><ul><ul><li>Periodic Revenue - Revenue collected from a customer in the time period. </li></ul></ul><ul><ul><li>Profit Margin - Profit as a percentage of revenue </li></ul></ul>
  148. 151. Customer Lifetime Value <ul><li>Consider the type of relationship with your customers </li></ul><ul><ul><li>Contractual relationships – once gone they are ‘lost for good’ </li></ul></ul><ul><ul><li>Migration relationships - where a customer not buying now might do so in the future </li></ul></ul>
  149. 152. The Power of Customer Lifetime Value <ul><li>Viewing a company as a portfolio of current and future customer relationships can provide many insightful perspectives. One is on how to nurture customer relationships – and which ones to nurture. </li></ul><ul><li>Such opportunities could be classified into three areas: </li></ul><ul><ul><ul><li>For current customers that are creating value: </li></ul></ul></ul><ul><ul><ul><ul><li>Increase profitability and/or </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Increase volume and/or </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Increase duration </li></ul></ul></ul></ul><ul><ul><ul><li>For current customers that are value-destroying: </li></ul></ul></ul><ul><ul><ul><ul><li>Quickly achieve a value-creating relationship or </li></ul></ul></ul></ul><ul><ul><ul><ul><li>End relationship if all else fails </li></ul></ul></ul></ul><ul><ul><ul><li>For potentially value-creating customers not currently served: </li></ul></ul></ul><ul><ul><ul><ul><li>Identify </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Acquire at a reasonable cost </li></ul></ul></ul></ul>
  150. 153. Quantifying the CLV
  151. 154. Integrating sales and financial
  152. 155. Integrating sales and financial
  153. 156. E-mail campaigns <ul><li>Targeting - 600% difference between best & worst lists </li></ul><ul><li>Incentives - 400% difference between best & worst </li></ul><ul><li>Creative - 35% difference between best & worst </li></ul><ul><li>Response device - 15% difference between best & worst </li></ul><ul><li>Timing - 10% difference between the best & worst </li></ul>
  154. 157. E-mail marketing lifecycle <ul><li>E-mails sent </li></ul><ul><li>E-mails opened </li></ul><ul><li>E-mails with Click-through responses </li></ul><ul><li>E-mails forwarded </li></ul><ul><li>E-mails bounced </li></ul><ul><li>E-mails unsubscribed </li></ul>
  155. 158. E-mail delivery metrics <ul><li>Open Rate </li></ul><ul><li>Click Through Rate </li></ul><ul><ul><li>Gross Click Rate (Total Clicks/Total Delivered) </li></ul></ul><ul><ul><li>Unique Click Rate (Unique Clicks/Total Delivered) </li></ul></ul><ul><ul><li>Click to Open Rate (Unique Clicks/ Total Opened) </li></ul></ul><ul><li>Click to Purchase/Conversion </li></ul><ul><li>Reach </li></ul>
  156. 159. Why people unsubscribe <ul><li>The e-mail address collector may have collected the address under false pretences </li></ul><ul><li>Your message may have been inartfully sent to the wrong list </li></ul><ul><li>Your content is no longer relevant to the recipient </li></ul><ul><li>Your content sucks! </li></ul>
  157. 160. Link to a web page <ul><li>Have a separate page for each content line in your e-mail </li></ul><ul><li>Track what works well </li></ul><ul><li>Use the tracking information to sell advertising/ sponsorship </li></ul><ul><li>Use the tracking to define new content </li></ul>
  158. 162. SMS tracking <ul><li>SMS sent </li></ul><ul><li>SMS received/opened </li></ul><ul><li>SMS replies </li></ul><ul><li>SMS bounces </li></ul><ul><li>SMS unsubscribes </li></ul><ul><li>SMS location of opens (if you can get the information from the network operators) </li></ul>
  159. 163. Uses of SMS <ul><li>Appointments </li></ul><ul><li>Warnings </li></ul><ul><li>Location based promotions </li></ul><ul><li>Immediate gratification promotions </li></ul><ul><li>… </li></ul>
  160. 164. A word of warning <ul><li>Combining CRM and identified web metrics can lead to a feeling of Big Brother </li></ul><ul><li>Getting over familiar can worry your customers </li></ul><ul><li>Use all the media & media tracking at your disposal, but remember that different departments send messages to the SAME customer - can lead to overkill </li></ul>
  161. 165. Q & A <ul><li>Any questions as we finish? </li></ul>
  162. 166. Thank you Thank you for your patience, interest and input. Thom Poole - [email_address] Jonathan Richards - [email_address]

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