* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download Marketing Mythbusting: Six Maxims Get Put to the Test
Market penetration wikipedia , lookup
Revenue management wikipedia , lookup
Neuromarketing wikipedia , lookup
Subscription box wikipedia , lookup
Mobile commerce wikipedia , lookup
Ambush marketing wikipedia , lookup
Web analytics wikipedia , lookup
Multi-level marketing wikipedia , lookup
Social media marketing wikipedia , lookup
Target audience wikipedia , lookup
Brand loyalty wikipedia , lookup
Marketing research wikipedia , lookup
Mobile banking wikipedia , lookup
Online shopping wikipedia , lookup
Viral marketing wikipedia , lookup
Marketing communications wikipedia , lookup
Youth marketing wikipedia , lookup
Guerrilla marketing wikipedia , lookup
Supermarket wikipedia , lookup
Marketing plan wikipedia , lookup
Product planning wikipedia , lookup
Multicultural marketing wikipedia , lookup
Integrated marketing communications wikipedia , lookup
Target market wikipedia , lookup
Marketing mix modeling wikipedia , lookup
Visual merchandising wikipedia , lookup
Digital marketing wikipedia , lookup
Green marketing wikipedia , lookup
Advertising campaign wikipedia , lookup
Customer experience wikipedia , lookup
Customer relationship management wikipedia , lookup
Marketing strategy wikipedia , lookup
Marketing channel wikipedia , lookup
Street marketing wikipedia , lookup
Global marketing wikipedia , lookup
Direct marketing wikipedia , lookup
Customer satisfaction wikipedia , lookup
Customer engagement wikipedia , lookup
Services marketing wikipedia , lookup
»» insights False Marketing Mythbusting: Six Maxims Get Put to the Test True False False False True Make sure you’re allocating finite resources based on sound assumptions True Number 73—December 2013 Today, marketers have more choices than ever before. With the proliferation of channels and innovative new ways to offer and deliver products and services, the range of possible actions has grown enormously. Making the right choices is critical since customers have many more choices too. And often it seems that while resources are finite, legions of competitors aren’t. Their ranks are swelling with upstart challengers, as well as successful companies moving in like juggernauts from other markets. Because our assumptions affect our choices, it’s wise to examine them closely. This paper scrutinizes six of today’s widely repeated marketing “truisms” to determine if they hold true: 1.Marketing matters to the C-suite. 2.Our customers are satisfied, so they’re loyal. Are nearly 60% of CMOs focused on the wrong top priority? 3.Email is dead. 4.Discounting is a race to the bottom. 5.Showrooming is a killer. 6.We need more customer data. You’ll also discover how marketing innovators in both retail and banking are applying analytics in high-payoff areas to rise above crowds of competitors. www.fico.com Make every decision countTM Marketing Mythbusting: Six Maxims Get Put to the Test »» insights »» Marketing Maxims: Let’s look at some current marketing assumptions to see if they stand up to close scrutiny. True or False? Maxim #1: Marketing matters to the C-suite Verdict: True But not necessarily how you might think. There’s a disconnect between what most CMOs are focused on and what the rest of the C-suite thinks is most valuable. Figure 1: Most CMOs are not focused on existing customers “What are your current top marketing objectives?” Acquire new customers Launch new products/brands Increase brand awareness Improve marketing ROI Increase customer retention Innovate Improve digital/interactive/social marketing tactics Increase customer lifetime value Increase customer satisfaction/advocacy Acquire, develop and retain talent Improve marketing’s value in the organization Expand globally/to new geographies Integrate communications 59% 42% 41% 41% 30% 29% 29% 26% 26% 23% 21% 17% PwC’s 2013 Global CEO Survey1 found that 82% of CEOs are looking for “new ways to stimulate customer demand and loyalty this year.” A 2012 study by The Economist Intelligence Unit reported similar findings: Driving revenue was most frequently cited as the top marketing priority by CEOs and other non-marketing C-suite executives. It ranked above finding new customers and well above creating new products and services.2 By contrast, a 2011 global survey of CMOs by Forrester Research and executive search firm Heidrick & Struggles found that 59% of respondents said acquiring new customers was their top priority. Less than half that number, 26%, pointed to increasing customer satisfaction/advocacy and lifetime value as number one goals.3 A subsequent survey by Heidrick & Struggles on recently replaced CMOs found that while only 24% of the fired executives had experience in customer relationship management, loyalty and retention, 56% of their successors did.4 (See Figure 2.) 7% Base: 191 CMOs (top three responses accepted) Source: Q3 2011 Forrester/Heidrick & Struggles Global Evolved CMO Online Survey Figure 2: CMO requirements are changing CRM/loyalty/retention experience: 56% 24% Customer acquisition skills: 36% New CMOs Replaced CMOs 31% 0 10 20 Source: Heidrick & Struggles 30 40 50 60 70 6th Annual Global CEO Survey, PricewaterhouseCoopers 1 (PwC), January 2013 2 “Outside looking in: The CMO struggles to get in sync with the C-suite,” The Economist Intelligence Unit, November 2012 3 “The Evolved CMO in 2012,” Forrester Research, February 2012 4 “The Age of the Agile CMO has Arrived,” Heidrick & Struggles, March 2013 1 www.fico.com page 2 Marketing Mythbusting: Six Maxims Get Put to the Test »» insights This suggests that a shift in CMO focus is taking place—and it’s one that’s long overdue. More than two decades have passed since Harvard Business Review published the seminal, “Zero Defections: Quality Comes to Services.” That article dropped a bombshell: Data that proved a modest 5% increase in customer retention rates could send profits soaring by 25% to 95%.5 Since then, evidence has piled up showing that not only do existing customers cost less to service, they also buy more. This holds true, whether business is taking place in a store, at a bank branch or online. And with the rise of social media, existing customers can also create a strong forward draft for your marketing efforts through referral and recommendation influence on others. Maxim #2: Our customers are satisfied, so they’re loyal Verdict: False Satisfaction doesn’t always correlate with loyalty. Nor does loyalty always lead to higher spending and increased wallet share. In a global survey of retail banking customers, Capgemini and the European Financial Management Association (Efma) found that less than half of respondents said they were likely to stay with their banks. In regions where customers reported higher levels of positive experiences, that percentage improved. Positive customer experience, the survey found, was a stronger predictor of retention than satisfaction.6 Similarly, for retailers, the Harvard Business Review article “Customer Loyalty Isn’t Enough. Grow Your Share of Wallet” reported that common gauges of loyalty such as satisfaction metrics correlate poorly with share of wallet.7 The authors warned: “Customers may be very satisfied with your brand and happily recommend it to others—but if they like your competitors just as much (or more), you’re losing sales.” How customers rank your brand in relation to other brands they use in the same product or service category is a more accurate metric, according to this article. In fact, based on a two-year longitudinal study of 17,000 consumers across a dozen industries and nine countries, the authors devised a “Wallet Allocation Rule” (combining ranking order and the number of companies in the ranking) that did correlate with wallet share consistently “from company to company and industry to industry.” Essentially, banks, retailers and other businesses need to consistently give customers reasons to buy more, along with delivering a customer experience that stands out from the crowd. Leaders also make heavy use of email, mobile and web channels, to reach customers through their communication channel of choice. “ Zero Defections: Quality Comes to Services,” Frederick F. Reichheld and W. Earl Sasser Jr., Harvard Business Review, September 1990 6 World Retail Banking Report 2013, Capgemini and Efma, April 2013 7 “Customer Loyalty Isn’t Enough. Grow Your Share of Wallet” by Timothy L. Keiningham, Lerzan Aksoy, Alexander Buoye, Bruce Cooil, Harvard Business Review, October 2011 5 www.fico.com page 3 Marketing Mythbusting: Six Maxims Get Put to the Test »» insights That’s exactly what a leading North American supermarket chain is doing to create a “breakthrough” loyalty program in a market full of them. The program relies on FICO analytics, including thousands of propensity models, which predict products individual customers are most likely to purchase, and time-to-event models, which predict the week they’re most likely to do it. With these insights, the retailer delivers fully personalized packs of discounts to its best customers. Customers also receive recipes featuring the discounted items and an updated shopping list with all the ingredients needed to prepare each dish. While a customer’s package may include some “try this” offers in new categories, the focus is on the products this individual already purchases frequently—making sure these sales don’t go to a competitor. And because the analytics learn from every purchase, the offers become more and more tailored to the individual over time. While the program is still being rolled out, preliminary results include a 150% lift in average visits per member for redeemers over non-redeemers. A European banking group is taking much the same approach to creating exceptional personalized experiences for its customers—but on an even larger scale. FICO is helping the company replace traditionally fragmented customer views and marketing objectives with a coherent enterprise approach. With this broader view and real-time streaming analytics, a customer who has just purchased travel insurance from one division of the bank may instantly receive from another division a complimentary offer of a credit card with an attractive introductory rate for vacation spending. Other offers are preselected. From a wide range of products (travel insurance, loans, savings, credit cards, mortgages, etc.), across all channels and brands, analytics determine the best two to three offers to make to each customer during a period of time. While these offer decisions are made at the individual customer level, they’re also optimized at the segment level. For example, for customers within an affluent, high-value segment, decisions may be optimized to maximize the long-term profitability of the relationship. For a less valuable segment with a high likelihood of attrition, decisions may be optimized to maximize income over the next six months. Preliminary testing has already demonstrated that these precise decisions—selecting from thousands of potential actions for a customer base of 15 million individuals—can be made in under an hour every night. www.fico.com page 4 Marketing Mythbusting: Six Maxims Get Put to the Test »» insights Maxim #3: Email is dead Verdict: False Figure 3: Email remains overall the most potent channel How often do you use each of the following? At least daily At least weekly Less than weekly Never 3% Email 91% 5% Email is not only alive, but, according to the ExactTarget 2012 Channel Preference Survey, it’s the “number one direct channel in terms of daily use and consumer preference” for marketing communications. Figure 3 compares the survey’s results for email and other channels. And in Figure 4, research by Epsilon, reported on eMarketer.com, shows email open rates are actually on the rise.8 “Check in” using location-based social networking 9% 11% 28% 52% Moreover, according to a recent article in Advertising Age, email response rates have even held firm against Google’s redesigned Gmail inbox, which places marketing emails into a “Promotions” tab.9 The article says individual vendor experiences, as well as studies from Return Path and Epsilon, all show little or no change in recipient behavior. Instant messenger 24% 8% 52% Here are a few more data points on the vitality of email: 1% Facebook 57% 13% 11% 19% Text messages 57% 11% 10% 22% 16% Messaging using an app on a mobile device 19% 5% 6% 70% Twitter 14% 6% 71% 9% LinkedIn 10% 8% 14% 69% Figure 4: Email open rates are on the rise 30 Open rate Clickthrough 23.3% 22.2% 26.2% 25.6% 27.2% 27.4% 23.8% 24.8% 5.9% 5.2% 5.5% 5.2% 4.7% 4.4% Q1 Q2 Q3 Q4 Q1 Q2 31.1% 20 10 0 2011 • 6 0% of shoppers visited a physical store because of email, according to Wanderful Media, based on its survey of 1,000 US consumers. • 9 1% of consumers check email daily, up from 85% in 2008, according to data from ExactTarget. Source: ExactTarget 2012 Channel Preferences Survey 40 • E mail outperforms social-media advertising 3-to-1, looking at sales per dollar spent. According to the Direct Marketing Association, email generates $39.40 in sales for every $1 spent. 4.5% Q3 2012 4.5% 5.1% Q4 Q1 Source: Epsilon, “Q1 2013 Email Trends and Benchmarks,” July 2013 Clearly email shouldn’t be counted out. Still, demographics matter, and communication preferences are changing. Customers in the youngest demographics show a strong preference for mobile SMS and texting. And older consumers are adopting mobile and social technologies at a quickening pace. Even within demographic groups, preferred combinations of channels for different purposes may vary widely. In fact, a recent Gallup study of 3,000 random retail bank customers found more than 750 unique combinations of channel use.10 “Mobile and Targeting Drive Up Email Opens,” eMarketer.com, August 7, 2013 “Gmail’s Redesign Hasn’t Hurt Jiffy Lube’s Email Response Rates,” Advertising Age, August 14, 2013 10 “Banks: Get Your Customers to Go Digital,” GALLUP Business Journal, May 14, 2013 8 9 www.fico.com page 5 Marketing Mythbusting: Six Maxims Get Put to the Test »» insights The challenge for marketers today is to identify the best channel or combination of channels for interacting with an individual customer for a particular purpose. Today’s advanced analytics do just that: They can tell you that Jake is most likely to respond to a text at 8pm on a weekday, while Sarah responds best to emails on weekends. Moreover, intelligent customer dialog management systems can automatically orchestrate multiple campaigns (on-demand, recurring, event-triggered) across multiple channels to ensure consistent and coherent interactions with customers. A major US CPG company is using FICO predictive and decision analytic applications of this kind as the platform for its large-scale customer rewards program. With the ability to learn about customers not only from their stated preferences, but also from their ongoing actions, the company personalizes the look and messaging of offers on web pages, email and mobile content. The result has been an average response rate of 30%, with most campaigns achieving even higher activation rates (percent of consumers taking a next step to interact with the brand). Every interaction yields more insight for identifying the best next action and creating a more relevant consumer experience. Maxim #4: Discounting is a race to the bottom Verdict: False Discounting can be extremely effective and profitable with some customers. If you can figure out which ones they are, you can use discounting to increase both your competitiveness and profitability. % % % Unfortunately, many retailers are indiscriminately following the deep discounting trend in mobile marketing. Waves of daily deals and local deals are leading them to overuse discounting even to the point of endangering their brand. In retail banking, increasing pricing transparency from online comparison sites is pushing some financial institutions in this direction as well. Analytics can help you protect your brand and maximize the reach of your marketing budget by taking advantage of the fact that consumers vary significantly in their sensitivity to specific discounts and other aspects of offers. Today, we can predict these sensitivities with great precision: Will 20% off increase the likelihood this customer will purchase within the redemption period? Will 15% work just as well? With such insights, you can target discounts to where they will have the biggest impact on customer behavior. You can also free up budget to incent other customers to buy, producing more bang from your budget. These techniques work for banks as well as retailers. FICO analytics have helped an Asian lender increase usage of an installment loan product attached to a credit card by figuring out: “Which customers are likely to increase their loan utilization if offered a 30% temporary discount? And which customer would be sufficiently incented with just a 20% or even 10% offer?” www.fico.com page 6 Marketing Mythbusting: Six Maxims Get Put to the Test »» insights Maxim #5: Showrooming is a killer Verdict: False Showrooming is just the most recent trend in comparison shopping, which consumers have been doing for decades. The internet and now mobile have accelerated the trend and allow consumers to perform comparisons quickly, conveniently and anywhere. But what haven’t changed are your choices as a competitor: You can choose to compete on cost, but you can also win on service or your own unique winning mix. Why should banks care? Comparison shopping trends affect them too, as consumers increasingly turn to the internet, particularly social media, for information and advice about financial services. The Ernst & Young 2012 Global Banking Survey11 found that the majority of consumers are getting advice and information about banking products and services from sources other than banks: • Friends, family, colleagues (71%) • Comparison sites (65%) • Social media (44%) Like retailers, banks can try to compete on price or scale, but a more rewarding strategy may be to compete on the basis of relationship value. Banks can keep valuable customers by innovating services that give them reasons to stay and reasons to do more business. Here are some examples of what leaders in both markets are doing: Macy’s has used innovative mobile advertising campaigns to bring more shoppers into its stores. Recently the retailer created a mobile game of word association to draw traffic for a one-day sale while building brand awareness.12 Like other forms of mobile advertising, participatory ads are more likely to succeed if analytics are used to target customers with relevant content and offers. Click-and-collect strategies are also proving to be an effective way to outmaneuver online competitors while bringing buying customers into stores. Reuters reports that European retailers, including grocery stores, are experimenting with different business models that encourage customers to order online and pick up at the store.13 Many busy customers, it turns out, prefer to avoid delivery fees by dropping by a store to get their item— and they’re likely to make another purchase or two while there. “The Customer Takes Control: Global Consumer Banking Survey 2012,” Ernst & Young “Macy’s nails interactive ad campaign to strengthen mcommerce strategy,” Mobile Commerce Daily, September 10, 2013 13 “Analysis: Retailers look to click & collect online profits,” Reuters, September 6, 2013 11 12 www.fico.com page 7 Marketing Mythbusting: Six Maxims Get Put to the Test »» insights Omnichannel strategies like these are the key to combating showrooming, says eMarketer. Leading retailers are coordinating online, mobile and store interactions to create a seamless experience for customers. “Other remedies to showrooming include price-matching, a focus on inventory management and revamped distribution models to improve the customer experience during heavy shopping periods, and cheaper and faster fulfillment options.”14 Thinking “outside the box” of the traditional branch while adopting omnichannel strategies to better serve customers also works for banks. PNC Bank, for instance, has introduced a portable branch, compact enough to be moved by tow truck and placed on a sidewalk. Each of these mini branches will be staffed by a financial service consultant. This knowledgeable individual will help customers and small businesses with not only standard needs, like opening a new account or applying for a loan or credit card, but also with using new services, such as a mobile phone virtual wallet or a tablet-based cash flow analysis app. “PNC is introducing a spate of new concept branches signaling the bank’s shift from teller lines and transactions to technology and conversations.” PNC Rolls Out First Ever Portable Pop-Up Branch, thefinancialbrand.com, August 5, 2013 Banks can also use analytics to map individual customer journeys toward a relationship of increasing value to both parties. As depicted in Figure 5, when new customers are booked, analytics help banks predict when to offer additional services, selecting at each point in time the best next offer to make. If unexpected customer behavior occurs, analytics help banks interpret what these changes mean and adjust interactions accordingly. Picking up the first signals of meaningful change in real time, banks can be there with the services customers need when they need them. Figure 5: Banks can use analytics to map a customer journey toward greater value Planned Unplanned challenges Unplanned opportunities STUDENT LOAN OPEN DDA ACH DEPOSIT WELCOME CONTRACT & SURVEY ONLINE BANKING DEBIT CARD MOBILE APP PERSONAL ALERTS ACH WITHDRAWAL SAVINGS ACCOUNT MORTGAGE AUTO LOAN PREDELINQUENCY PAYMENT TREATMENT PLAN 14 “Omnichannel Is the Key for the 2013 Holiday Shopping Season,” eMarketer.com, September 10, 2013 www.fico.com page 8 Marketing Mythbusting: Six Maxims Get Put to the Test »» insights Maxim #6: We need more customer data Verdict: True Figure 6: Time-to-event models pinpoint the best time to make an offer Purchase probabilities and offer susceptibilities change rapidly Simple probability model generates constant estimate over an extended time horizon. PROPENSITY Offers A B C Best offer timing is six weeks from now Today TIME D But voluminous data alone won’t lead to success. What will is the ability to pull more meaningful insights both from the data you have, as well as from new data sources. In the era of Big Data, you need to be able to add new data sources and analytics to your decision processes with ease and without having to queue up for IT time. Business rules management systems (BRMS) and applications that incorporate them enable nontechnical users to inject these powerful new elements into existing processes. Very quickly, decisions get smarter. Many companies have piles of data they’ve collected but are not yet leveraging for better decisions. Unstructured data, for instance, from customer service chats and phone conversations, as well as online customer product reviews, are full of potentially valuable insights. Analytic techniques, such as FICO’s Semantic Scorecard technology, can extract the most predictive features from this data, and combine it with traditional structured data analytics to improve the accuracy of customer behavioral predictions. In other cases, where data is already being analyzed, there may still be potential to draw out more value by looking at it in a new way. Many companies have collected transaction log (TLOG) data, for example. But few are currently analyzing it with time-to-event models in order to predict with precision when a customer behavior is most likely to occur (this week? next week?). There are also analytic techniques today that can go beyond finding the usual correlative data relationships (when A occurs B also occurs). They can scour existing data to find more powerful, previously undiscovered causal relationships (A affects B in this specific way). With these and other advanced techniques, companies can answer complex questions such as: “Which customers will buy only with this particular coupon, which will buy with any one of three possible coupons, and which will buy whether or not they receive a discount?” www.fico.com page 9 Marketing Mythbusting: Six Maxims Get Put to the Test »» insights Using mathematical optimization, we can find the best decision strategy, given all business objectives and constraints, for maximizing a particular goal, such as profit. We can also simulate the impact on key performance indicators of making adjustments to one or more constraints. Figure 7: Using optimization to drive incremental profit gains INCREMENTAL PROFIT PER ACCOUNT $10 Credit Limit Strategy V3 vs V2 Credit Limit Strategy V2 vs V1 Credit Limit Strategy V1 vs V0 $8 $6 $4 $2 $0 1 2 3 4 5 6 7 8 MONTHS SINCE INCREASE »» Conclusion: The Truth Will Set You Free (To Win) 9 10 11 12 FICO has helped a large US retailer use techniques like these to achieve response rates of as high as 30% from its loyalty club members. We’ve also helped a leading Canadian bank adopt the analytic techniques to develop an “optimization culture” for driving performance improvements ever higher. In credit line management, as shown in Figure 7, this bank’s latest optimized strategy (purple V3 line) has already lifted incremental profit by $5 per account at the 4-month mark, set to outpace its previous 2 successful optimized strategies (blue V2 and green V1 lines). It’s helpful to learn from what others are saying in the marketplace—but some tenets of common wisdom shouldn’t be relied upon when setting a forward course. When resources are scarce, deciding where to allocate them is critical to creating successful momentum. To make better marketing investments, make sure you’re basing them on sound assumptions. Learn more: • Read the Insights paper: From Big Data to Big Marketing: Seven Essentials. • S ubscribe to the FICO Labs Blog for the latest on marketing best practices and technology innovation. The Insights white paper series provides briefings on research findings and product development directions from FICO. To subscribe, go to www.fico.com/insights. For more information North America toll-free +1 888 342 6336 International +44 (0) 207 940 8718 email [email protected] web www.fico.com FICO and “Make every decision count” are trademarks or registered trademarks of Fair Isaac Corporation in the United States and in other countries. Other product and company names herein may be trademarks of their respective owners. © 2013 Fair Isaac Corporation. All rights reserved. 3032WP 12/13 PDF