World Class Direct Marketing Analytics

Transcription

1 World Class Direct Marketing Analytics 1

2 BUILDING A WORLD CLASS DIRECT MARKETING ANALYTICS CAPABILITY INTRODUCTION Direct marketing remains a cornerstone strategy for many companies and CMOs, and for good reason. Direct marketers endeavor to create specific engagement with identified customers and leverage a highly measurable and impactful activity. It is also a highly diverse marketing area with some tactics such as direct mail stretching back decades, others like in their second decade of life, and many digital and social tactics emerging from their first. Despite the known benefits and long history associated with various direct marketing tactics, many companies still struggle with designing, building, and implementing rigorous and scalable direct marketing analytics functions. Most have pockets of measurement occurring, but it is sporadic and inconsistent, and can leave marketers and executives frustrated with results and the conclusions they are able to draw. One of the big issues that marketers face is a rapidly expanding suite of direct marketing vehicles, creating great opportunity as well as challenges. These new direct marketing vehicles take the form of social media sites, blogs and mobile applications. Measurement of these vehicles can be difficult because they tend to be unstructured by nature, uncontrollable, have large amounts of data and do not typically lend themselves to the same measurement techniques and methodologies of more traditional tactics. These emerging trends, coupled with today s economic climate mean sales and marketing teams are struggling more than ever to justify every dollar of marketing spend going out the door. Unfortunately, many companies today fall into the trap of viewing all marketing spend as an expense, instead of the revenue generation engine that it can and should be. In this white paper, we ll outline the 5 building blocks necessary to create a successful direct marketing analytics function, and the enabling technologies required to implement these best practices. By following this roadmap, you can begin to think of marketing spend as an investment, and in turn begin to convince C-level executives and finance directors to think of marketing investments in the same way. BUILDING BLOCKS OF DIRECT MARKETING ANALYTICS Developing a world-class marketing analytics function is predicated on 5 basic building blocks (See Figure A). 1. Defining the Vision - assessing where you are today, and where you need to be before making investments in people, processes, tools and technologies. 2. Collect and Aggregate Data - aggregating marketing campaign information, customer contact information and customer response information to enable both basic and advanced direct marketing analytics. 3. Developing Measurement Methodologies enabling ROI measurement on all marketing activities by tracking, at an individual customer level, contact and response history. 4. Testing and Refining Methodologies - testing, refining and customizing for different vehicles once a standard process for calculating incrementally has been defined. 5. Integrating Insights into Business Processes - driving improved business decisions with improved analytics insights. MarketBridge World Class Direct Marketing Analytics Page 2

3 Companies frequently rush to steps 3 or 4 without completing steps 1 or 2. Alternatively, companies arrive at step 4 and spend too much time refining their analytics approaches and models without stepping back and sufficiently integrating the insights they are generating into business processes. So, before you begin implementation, ask yourself where does my company sit in this roadmap? FIGURE A. - BUILDING BLOCKS OF DIRECT MARKETING ANALYTICS 1. Defining the Vision This is possibly the most important step in the entire roadmap, and where many companies fall down. The focus of this step should be to assess where you are today, and where you need to be before making investments in people, processes, tools and technologies (See Figure B.). Here are some key considerations during this stage: How advanced do you need your measurement capabilities to be? How much are you willing to invest? What data will be required? What do you have today? What don t you have? What skills/capabilities will be required for your team to be successful? To be clear, basic does not mean bad, nor does advanced mean good. What is important is that your organization is collectively identifying the level of capability required and developing a plan to get there. 2. Collect and Aggregate Data Within this step, there are 3 basic categories of data that need to be aggregated to enable both basic and advanced direct marketing analytics. 1. Marketing Campaign Information is necessary for basic marketing reporting such as tying sales and response rates back to marketing activities via coupon or offer codes. Many companies actually struggle to collect and store this information, however technology solutions such as Aprimo and Marketo Lead Management can help aggregate and store this data. 2. Customer Contact Information can be difficult to aggregate across vehicles and activities and many companies struggle with this step. This may require stepping back to ask fundamental questions; MarketBridge World Class Direct Marketing Analytics Page 3

4 What do you mean by a customer? How do you assign addresses, mailing addresses, account contacts, etc. and at what level of the customer hierarchy should analysis be conducted? 3. Customer Response Information is assembled in the last step once contact history has been created. This requires linking your customer/marketing database with your sales data and is necessary for more advanced analytics such as calculating incremental ROI. 3. Develop Measurement Methodologies Many companies reach the level of tying marketing activity to gross revenue based on tracking contacts and connecting them to leads and sales. While this is a valuable first step and a critical one for companies to establish, it does not go far enough in establishing the true marginal impact of marketing, which can only be done by focusing on incremental revenue, not simply gross revenue. The key requirement is the ability to track, at an individual customer level, contact and response history. Control groups, or customers with similar characteristics to the campaign targets who do not receive a specific marketing touch, must also be withheld. As a general rule of thumb, setting aside 8% of the target group as a control is sufficient (though this varies with the size and makeup of the target group). How your company defines ROI, whether based on revenue or margin, may vary based on your business or industry. Companies with relatively stable margins who are competing on market share can focus on incremental revenue and ROI. FIGURE B. - CAPABILITIES SPECTRUM MarketBridge World Class Direct Marketing Analytics Page 4

5 Companies whose margins vary considerably across lines of business may want to develop incremental margin-based ROI calculations. Different groups should be held to different thresholds when evaluating direct marketing results based on the nature of their business and their business objectives. To achieve the goal of getting a Return on Investment based on incremental revenue for all activities, one should follow the structure outlined in Figure C. 4. Test and Refine Methodologies Once a standard process for calculating incrementally has been defined, testing, refining and customizing for different vehicles is essential. Common issues include: Issue: High variability in ROI leads to low confidence in results. A: Conduct validity testing comparing test and control groups before your campaigns go in-market (after segmentation is complete). Validity testing can diagnose: Outliers that may have a large impact on ROI results (either positively or negatively). Standard thresholds should be set for removal of outliers from ROI calculations. Other variables (besides marketing activity) that may be driving systematic differences between test and control groups. Instances when ROI should not be calculated because test and control groups have fundamental differences that prohibit reliable measurement. Validity testing essentially means putting your control group through tests, before the campaign launches to make sure it is an accurate representation of the target group. Look for average sales per customer, frequency of order, average order size and number of marketing touches. Building histograms of these metrics comparing target groups vs. control groups makes it easy to compare. Small variations in these metrics are acceptable, but variations should remain stable over time to inform campaign predictions. Understanding incrementally for a campaign is an excellent start, but it will only tell you part of the story. Campaign ROI is naturally limited by a measurement timeframe of when the campaign or program was in-market and the corresponding comparison time periods. But key questions that remain are: What happens to customer s longer term after they are acquired? How do repeated marketing touches impact customer value and loyalty? Which series/cadence of campaigns and messages, over time, has the biggest impact on our customers? To answer these questions, you need to run longer-term ROI analysis. The best way to do this is through an experimental cohort-design. Issue: Calculating ROI on per-campaign basis focuses only on short-term results. A: Design longer-term experiments where cohorts of customers are sent different contact streams and measure lift in customer lifetime value. MarketBridge World Class Direct Marketing Analytics Page 5

6 FIGURE C. - CALCULATING INCREMENTAL REVENUE Time-series cohort analysis: The number of cohorts depends on how many contact streams you test (increasing the number of contact streams increases the complexity by an exponential factor) Cohorts should consist of similar make-ups of customers A control group should be withheld from each cohort A master control group should be withheld that receives no marketing touches This allows you to measure the impact cumulative marketing activity has on customer lifetime value and this is the true measure of marketing ROI. 5. Integrate Insights into Business Processes The final building block centers on being able to successfully integrate insights into the business processes. Regardless of how sophisticated ROI methodologies are, they are useless if the results are not used to drive improved investment decisions. Implementing a world class direct marketing analytics function is more about following a clearly developed and well thought out process and plan than it is about fancy analytical techniques or models. Best practices include developing standardized marketing ROI reports customized for different consumers across the business: Weekly ROI reports for all in-market marketing campaigns Thorough campaign-level post-mortems for marketing managers MarketBridge World Class Direct Marketing Analytics Page 6

7 Quarterly, cross-campaign impact assessments for marketing executives Establish regularly scheduled review sessions with each business group to thoroughly review results and discuss business impact. KEY CHALLENGES AND NEXT STEPS As you move towards developing these building blocks for a world class direct marketing analytics function, there are a number of key challenges you will face. These obstacles are highlighted below along with suggested next steps for overcoming the barriers: Lack of clarity around the role marketing analytics can /should play Develop a capabilities roadmap, asses where you are today vs. where you want to be, what it will take to get there. Data/systems are prohibiting, not enabling, marketing measurement Identify the data type issue (marketing, customer, response) and evaluate technology solutions. Trouble tying marketing activities to leads and sales Ensure marketing and customer contact history data are complete and accurate; begin with basic response and net sales metrics. Incremental ROI fluctuates/low confidence in results Run validity testing on test/control groups; compare top-down to bottom-up results. Lack of action on analytics insights Establish regular post-mortem reviews; demonstrate value of analytics insights. Implementing a world class direct marketing analytics function is more about following a clearly developed and well thought out process and plan than it is about fancy analytical techniques or models. The most important part of the process is determining where your company is in terms of capabilities and establishing a clear roadmap for developing the new components for your measurement environment. Companies that do that are able to ensure that their direct marketing functions reach their full potential as revenue generating engines adding to the bottom line value of the organization. ABOUT DEMANDANALYTICS TM Our DemandAnalyticsTM methodology integrates customer, marketing and channel data to drive customer performance and profitability and optimize sales and marketing investment. By integrating our suite of solutions with best in class technologies, we capture and leverage data from a wide range of customer interaction touch points including online digital footprints, campaign responses, and point-of-sale purchases. To learn more about how DemandAnalytics can help you acquire, penetrate and retain new customers, and for more examples of our analytics work with clients, visit our website, www. market-bridge.com, or contact us at marketing@market-bridge.com. ABOUT MARKETBRIDGE MarketBridge is a leading global provider of technology-enabled sales and marketing methodologies and solutions for Fortune 1000 and emerging growth companies. The firm offers the following methodologies: MarketBluePrint, RevenueEngines, and DemandAnalytics. We work closely with CEOs and their senior Marketing and Sales leaders to solve their toughest business challenges and create scalable, sustainable competitive advantage. Visit our website, Market-Bridge.com. Headquartered in Bethesda, MD with offices in San Francisco, MarketBridge works with partners and associates across the globe to build and execute our clients initiatives GO-TO-MKT MarketBridge World Class Direct Marketing Analytics Page 7