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. Part 1 can be found here.
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.
The new interactive marketing paradigm
Interactive marketing is the idea that total real-time customer knowledge is leveraged across the enterprise to advance the business of the firm. It is important to note that the business of the firm must include total consideration for the firm’s operating strategy. Vendors in the marketing technology space suggest that maximizing or optimizing customer value is the ultimate end-game for all corporations, but new dot-com business models and Wall Street’s valuation methodologies would suggest otherwise. In some firms, the short-term (two to three years) strategy is simply to attract customers or “eyeballs” to a website. Other firms, for example in telecommunications, seek to gain significant customer share in an effort to drive capital spending and infrastructure development that can be leveraged to stay competitive in the long term.
Real-time interaction management will dominate the marketing mix in the future.
The major differences between interactive marketing and the direct marketing paradigm of the past are the notions of real-time information and “guided interactions.” Real-time information is quickly becoming a necessity to stay competitive. Financial services firms want to know if a person is straying from a website when they get to a certain point in the mortgage calculation applet. They want the customer service representative to have full knowledge of this click stream within minutes, so if the customer calls, frustrated with the applet, the customer service representative can make the right suggestion and offer. Cellular network providers want the call center to know if a person’s call volume is down 5 percent this week. This would then let the representative probe the customer for reasons and potentially make a “save” during an inbound customer call to request a dropped-call credit.
Traditionally, direct marketing has always included the notion of total customer knowledge and complete integration of all the customer touchpoints, but the proliferation of the web and the dynamics of the marketplace are demanding real-time customer information. As such, a complete infrastructure must be built within the firm to support a customer information broker capability. Gone are the days where weekly and monthly updates to the data warehouse suffice; customers are asking, even demanding, that everyone and everything they interact with be completely knowledgeable about the total customer relationship.
The second most notable difference in interactive marketing is the idea of “guided interactions.” Unlike traditional direct marketing, where the interaction is planned outside of any customer interaction, interactive marketing supports the notion of dynamic offer creation. In this scenario, the person interacting with the customer can shape or guide the interaction and come up with an offer on the basis of both the marketers’ knowledge and the real-time discussion with the customer. A classic example includes a discussion with a catalog buyer checking the status of an order. The service representative may offer the customer different products based on what the customer tells him/her during the call about his/her last purchase. Questions by the customer service representative about the fabric quality of a recent shirt purchase may help pinpoint the style of bedding material to be suggested as part of an upsell strategy.
There are still challenges – and solutions. Stay tuned for Part 3 of this series, coming next Thursday.