Exploiting Interactive Marketing: Part 1

Overview

This three-part series explores various attempts to exploit interactive marketing techniques, defines interactive marketing, and investigates how this new marketing technique recognizes the customer’s role in the customer-company relationship. The article explores the risks and challenges in shifting the organization, process, and technologies to support interactive marketing, yet outlines several strategies for achieving this transformation and the resulting benefits.

Introduction

Interactive marketing is quickly arriving and certainly here to stay. Although some leading organizations have effectively deployed superior interactive marketing techniques in the past, the proliferation of the web and new technologies are critical enablers of this new approach to one-to-one or direct marketing.

Despite the successes of interactive marketing early adopters, many firms are struggling with the deployment of interactive capabilities or finding that their roll-out strategy prevents them from taking advantage of new technologies or capabilities. To understand this dynamic, this paper reviews the industry changes driving firms towards interactive marketing and the challenges in deploying today’s technologies to exploit interactive-capable media fully. Finally, it provides a framework for shifting towards an interactive capability.

The customer is king

Although many marketers will readily admit the customer’s role in today’s economy and, further, the increasing reliance on customer information to help us make up for the type of brand loyalty that dominated in the past, many organizations simply don’t have the technical capabilities to support a true customer-driven business model. Instead, marketing organizations spend countless hours and significant money in jury-rigging their business processes and technologies to support a customer-centric model.

Customer knowledge replaces brand loyalty.

One simple example is the frequent mailing of credit card upgrade offers. During work with a leading credit card issuer, the author learned that these offers often go out on a schedule of six to 12 times a year. When asked how the dates were chosen, the issuer said that an attempt was made to ensure even coverage was planned for the entire year. On the other hand, the issuer readily admitted that the offer criteria (the customer has reached his/her credit limit three times in the last year, has consistently paid on time for over two years, and has a high credit score) are based solely on customer-driven actions or behaviors.

Effectively, the firm is “batching-up” these people to make a one-time mailing possible instead of allowing the offer to go out on the exact day a person hits the prescribed criteria. Basically, the firm is taking a class of offer that is really a customer-driven event and forcing it into a company-driven business model.

Why? The organizational model and systems in many organizations were designed to support “one-shot” marketing. In this model, the premise is that the organization makes the decision on what offers to make to which people and, most importantly, when to make these offers. Notions like a campaign schedule, marketing calendar, and the idea that an organization can play all its marketing “events” at the start of each year fundamentally contradict the notion that the customer’s actions drive the relationship. Ownership of the customer, customer valuation methods, and the basic product-dominated organizational structure and incentive programs all present challenges to a true customer-drive business model. Furthermore, business processes and measurement techniques were designed around this “one-shot” premise and would require significant rethinking if a firm were to move to an interactive paradigm.

Customer drive interactions, not companies.

It is clear that both customer and company drive events have a place in the marketing mix of the future. As branding and customer marketing come closer together, and the deployment of direct marketing techniques is utilized for other “non-sell” related message and behavioral purposes, marketing efforts will have a more varied application. Nonetheless, firms need to recognize the difference between a customer-drive event and a company-driven event and have the right technology infrastructure to handle both.

What is abundantly clear is that the proliferation of the web and the onslaught of advertising “broadcasting” is putting the power and control into the hands of the customer. Customers expect offers and service from their vendors to be timely and appropriate. One excellent example of this is a mail-order firm that provides a listing of gift purchases made during the past holiday season. For each person the customer has sent gifts to in the past year, the firm provides the name of the gift received, details of last year’s gift, and five suggestions for this year’s gift. Two minutes and eight checkboxes later, the customer has spent several hundred dollars and delighted several family members and friends in the process. 

These examples of best practices are quickly becoming the basic expectation of many customers today. Deluged by marketing and advertising messages, they want suppliers to provide an appropriate message with the appropriate offer at the right time.

Interactive efforts of the past

Although most marketing people will suggest that the web has been the first real driver for interactive marketing, leading companies were practicing many of the core principles of interactive marketing as early as 1980. One example of this is the catalog and telecommunications firms which were building and leveraging call-center technologies that included decision-tree capabilities. This provided the customer service or telemarketing agent with the capability to carry on a dialogue with the customer about their satisfaction and experience and to follow a path on the decision tree that might (or might not) lead to an offer for products or services. Although the verbal interaction was limited by the training and experience of the operator, plans included in the assessment of a customer experience and the “real-time” suggestion of products and services based on a combination of the dialogue with the customer and the marketing team’s customer knowledge.

Some firms have gone further, to outline the customer life cycle over a period of time ranging from one to five years, and to have the marketing systems to monitor and react to certain customer conditions. These efforts, when integrated with all the customer touchpoints (e.g. customer service, mail, telemarketing, retail) often yielded significant results, since offers could be held until an interaction was prompted by the customer. Once this occurred, the appropriate offer could be made in the context of the dialogue started by the customer. Customer responses are significantly higher in this type of scenario. One recent media company noticed a 60 percent improvement in response rates when a “next product to buy” decision was made utilizing advanced modeling software and real-time customer information during an inbound call to the call center. 

Leading firms experimented with interactive marketing trials in the 80s.

Despite the valiant efforts of these firms, several factors added significant cost and effort to working an interactive model in the past. First and foremost was the marketing technology framework. Many of these firms build marketing databases and systems five to ten years ago, and as a result focused their technology investments in “getting the mail out.” This meant that databases were designed for large list pulls, and the technology to monitor for new customer actions was driven by the notion that a query run every day would be able to spot trends in customer behavior. Although this provided the marketing department with the basic capabilities needed to support an early-stage interactive marketing capability, the system processing costs and labor necessary to support the model were costly and only justified in limited business situations.

Secondly, firms attempted to adopt the interactive paradigm without consideration for the business process impacts such a model requires. For example, a life-cycle management program does not fit neatly into the campaign calendar notion that many marketing organizations use even today. With a life-cycle program, events and offers are being made every day, and as such only an estimate can be made regarding the targeted population on any one day. Furthermore, creative and other activities need to be adapted for a more continuous business model. The idea that an offer is planned, designs are developed and produced, the piece is mailed, and then response is measured is simply not applicable in a life-cycle model.

Today’s applications lack integration.

Finally, the vast experience of most direct marketers with the bath-oriented model means rethinking the entire customer management process and key implications on how to run the business. For example, despite current printing technology advances, print orders are still significantly less expensive as the number of pieces per batch increases, thereby providing a monetary incentive to maintaining the batch paradigm. Measuring and forecasting response of an interactive paradigm is significantly more difficult since the audience and offer are effectively not known until the actual event occurs. Fundamentally, these impacts and other frighten the marketer away from moving to this new model.

Category: Marketing

Michael Caccavale

Michael Caccavale

As the leader of Pluris, CEO Michael Caccavale is the innovator and forward-thinker behind the company’s marketing enablement, analytic and optimization solutions.

About this blog

At Pluris, we believe that we all can do a better, more efficient job at marketing to our most important customers. On this blog, we'll discuss how strategy, database management, offer optimization and analytics can help us all be better marketers. Sometimes, we may just talk about sports.

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