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Marketing Society Star Awards 2009 Category 02: Communication Excellence Direct Marketing Excellence Climbing the ladder How VisitScotland’s new approach to direct marketing has generated a 68:1 return on investment by creating loyalty to Scotland as a tourist destination. Gus Chalmers, Managing Director, Union Direct Susannah Low, Account Director, Union Direct Gwen Raez, VisitScotland Heather McKinlay, Fraoch Marketing 11th February 2009 Word count – 1,926 Introduction Consumers face an ever-increasing choice in most markets these days. Visit the local supermarket and you are presented with an array of vegetables most of which twenty years ago you wouldn’t even have heard of let alone tasted. Visit the off-license and you’ll be spoilt by a choice of dozens of beers and wines. Innovation, technology and reduced transport costs have shrunk the world. This is particularly true for the holiday and short-break markets. The proliferation of budget airlines such as easyjet and Ryanair combined with the development of a network of regional airports has resulted in an everincreasing list of overseas destinations being available to most of us – at a low cost. But whilst choice may be considered a good thing for the consumer the flip side of the coin is increased competition for providers and in the context of holidays, for individual destinations. In this environment, Scotland has ambitious targets to grow its share of the market. It is a market which is of critical importance to the Scottish economy with UK consumers representing 83% of volume and 65% of value to Scottish tourism, delivering £2.7 billion to the economy (source UKTS 2006) a figure that VisitScotland have been tasked to grow by 50% over 10 years. 2 In the face of these challenges this paper will demonstrate how a new direct marketing strategy implemented at the start of 2008 has delivered incremental tourist revenue for Scotland of £18 million in its first six months representing a stunning 68:1 return on investment. 3 Background With an annual direct marketing budget of £500,000 yet more than three million records in total on its database VisitScotland had to be selective about who it chose to mail through the year. The question was how could it use the data it held on these individuals to maximise returns? Since 2002 contacts on VisitScotland’s own database had been asked a loyalty question at the point of data-capture allowing them to be placed on a ‘loyalty ladder’ reflecting their attitude to Scotland as a destination and their likelihood to travel there – from ‘Rejecters’, through ‘Prospects’, ‘Lapsed’ and ‘Occasionals’ to those at the top of the ladder, the most loyal ‘Regulars’. Compared with the wider market these database contacts were far more likely to be classified as ‘Regulars’ (45% v. 10%) or 'Occasionals’ (30% v 14%) and clearly had a much stronger affinity with Scotland The database was therefore a huge potential asset. Given the relatively limited budgets and the need to increase the efficiency of all marketing spend, was that asset being utilised in the most effective way? Historically VisitScotland’s direct marketing had tended to be product focused, promoting individual activities such as golf, fishing, walking or city breaks to individuals based on a previous expression of interest. The issue with this approach was essentially twofold; 4 1. It was product rather than consumer focused. This meant that one individual could potentially receive multiple mailings throughout the year from different product teams. From the consumer’s perspective this could potentially appear haphazard. VisitScotland’s research also indicated that most visitors had multiple interests and reasons for visiting so it made sense that its marketing materials reflected this. 2. It was wasteful; spend per individual consumer was not allocated by potential value but principally by whatever activity that individual had previously expressed interest in. One low potential consumer might in theory be mailed five times through the year whilst another, high potential value individual may not have been mailed at all. An ambitious change in direction was therefore proposed; a move from direct marketing to relationship marketing – a programme believed to be the first of its kind for a tourist authority. Marketing spend would be targeted where the most potential lay. Mailings would become more personalised, driven by individual consumer data. Individual consumers would be encouraged to interact with VisitScotland, to take more breaks in Scotland and to climb the loyalty ladder. The Keep Discovering programme was launched. QuickTime™ and a TIFF (U ncompressed) decompressor are needed to see this picture. 5 The new approach The strategy The underlying insight behind the new approach was that if high potential value consumers are provided with inspirational ideas of what to do on holiday in Scotland that were relevant to their own interests and if this information was combined with targeted, personalised offers from travel, accommodation and activity providers then they would be more likely to visit Scotland - and to keep coming back. Research indicated that a ‘Regular’ was worth £900 to Scotland annually compared to £320 for an ‘Occasional’ so the potential benefit to Scotland of encouraging movement up the loyalty ladder was enormous. Marketing spend would therefore focus on contacts on the database categorised as ‘Occasionals’; these individuals would receive four mailings through the year in a concerted effort to drive them up the loyalty ladder and to become ‘Regulars’. Regulars would be mailed one higher value, high impact communication a year – on the basis that they had already shown a higher degree of loyalty to Scotland as a destination and were therefore more likely to return, and would contact VisitScotland proactively themselves to gather relevant information. Content would be driven by what was known from the database about an individual. If, for example, they had previously registered interest in, or requested information about, walking, touring and city breaks then would receive information and offers personalised to those interests. 6 Relevance and personalisation would drive engagement and response encouraging loyalty amongst consumers and ultimately generating incremental visits and tourist spend for the Scottish economy. Objectives A challenging objective was set to deliver a minimum return on investment of 25:1 from the programme over time, representing a significant uplift on previous direct marketing campaign performance. Additionally, a movement of 10% from ‘Occasional’ to ‘Regular’ was targeted from the database. Both of these core objectives would be measured though a robust telephone tracking panel comparing the mailed group to a non-mailed control sample. 7 Executional excellence Inspire, individualise, incentivise, interact, integrate – the five ‘i’s at the heart of the programme: 1. Inspiration Stunning photography that creates the desire to visit is used throughout beginning on the outer envelope in recognition of the fact that for many it’s Scotland scenery and sights that hold its strongest attraction. 8 2. Individualisation Individualised content; designed to inform and inspire, relevant to an individual’s known interests and tailored to their level of engagement with Scotland; ‘Regulars’ for example receive personalised ‘off the beaten track’ ideas presented in a book of glossy inserts; for example, a ‘foodie’ who is also into walking might receive information about a wander through a leafy glen with a wonderful pub or restaurant at its end. As ‘Regulars’ were to receive only one annual communication the first one incorporated a handy, glovebox size, filofax style folder for recipients to store these inserts for future reference and use. ‘Occasionals’ get similarly personalised information but with more mainstream suggestions less far from the beaten track, recognising that they are yet to become Scotland ‘regulars’ and may not yet have experienced some of the more ‘headline’ attractions. ‘Occasionals’ are invited to request the ‘filofax’ style folder in order to manage costs and encourage interaction. 9 3. Incentivisation Offers are tailored to individual circumstances and interests by using cuttingedge digital-printing techniques. If you’re based in Ireland then the travel offer will be a relevant one such as Stena Line ferries. If you’re into walking it will be a deal from an outdoor equipment shop for discounts on kit. If you generally prefer to stay in bed and breakfasts then the accommodation offer will reflect that preference. 4. Interaction Any relationship marketing programme must encourage response and provide channels that allow consumers to provide updated personal details. Every mailing incorporates an incentivised survey which has been personalised according to what data is already held on that individual recipient – if we’ve already had the answer we won’t ask the question a second time. Relationships depend on dialogue and reacting to what the other party says – 10 so we pay close attention to ensure updates are logged in time for the next phase of activity. 5. Integration Integration with other channels and promotions is critical to ensure that an individual’s experience of and interaction with VisitScotland is as seamless as possible. Online; VisitScotland’s digital agency, Equator, have created a sister web site www.visitscotland.com/keepdiscovering which allows users to personalise content and create their own online ‘filofax’ of relevant content. A monthly ezine keeps those registered online up-to-date with the latest content additions and offers. 11 National promotions; VisitScotland’s marketing calendar incorporates some high-profile promotions to encourage tourism during the slower parts of the year most notably Autumn Gold and Winter White. The Keep Discovering programme seeks to maximise synergies with these promotions by including relevant offers within the mailings and in reflecting the promotional theme in the creative content and imagery. 12 Results and measurement The Keep Discovering programme is measured in a number of ways, all of which show the positive effects of the new strategy for direct marketing; Response rates Response rates are an important measure for assessing the level of engagement consumers have with the programme over time. With five waves of the programme now complete robust response results are available for the first four phases of activity as outlined below. Given the high frequency of the activity to ‘Occasionals’, the consistently high response rates both on and offline have exceeded expectations and indicate a high level of engagement with the programme amongst the targeted group. Phase one Phase two Phase three Phase four Mailed ‘Regular’ 17% Not mailed Not mailed Not mailed Mailed ‘Occasional’ 14% 11.8% 10.4% 14.8% Ezine 6.5% 4.9% 5.0% 5.6% 13 Soft measures Quantitative research confirms this high level of engagement; 74% of ‘Occasionals’ surveyed agreed that the materials made them ‘feel that VisitScotland knows what interests me personally’, rising to 80% for ‘Regulars’. 82% of ‘Occasionals’ said they ‘looked forward to receiving the literature’, 84% for ‘Regulars’. 75% of ‘Occasionals’ agreed that the mailings ‘made me want to take a break in Scotland’ with 86% of ‘Regulars’ agreeing. Movement on the loyalty ladder One of the core objectives for the programme at the outset was to move 10% of ‘Occasionals’ over time to become ‘Regulars’. This movement was to be measured through a telephone tracking study conducted to a sample of mailed and non-mailed, control consumers. The last such research exercise was conducted after phase three of the programme and at that point 5% more of the mailed group had become Regulars whilst 10% fewer had lapsed establishing a 15% improvement in loyalty over the non-mailed group. We will continue to measure this impact as the programme develops. Additionally, analysis of the database at the end of ’08 has demonstrated that the number of consumers classifying themselves as ‘Regular’ has increased by 19.75%. 14 Return on investment The same research exercise conducted after phase three established that of the 160,000 consumers included in the Keep Discovering programme 127,529 breaks in Scotland had been taken at a total spend of £58 million. £18 million of this total has been calculated to be incremental with a programme spend of just under £265,000 up to that point giving an exceptionally high return on investment of 68:1, significantly ahead of the targeted 25:1. 15 In conclusion This new approach to direct marketing is now in its second year and has shown significant success in its first twelve months. Critically, it is creating increased loyalty to Scotland as a tourist destination by encouraging consumers to move up the ‘loyalty ladder’ and in so doing is delivering an increased number of visitors and incremental spend for the Scottish economy. Through the application of the five ‘i’s (inspiration, individualisation, incentivisation, interaction and integration) the programme has laid very firm foundations to encourage consumers to Keep Discovering Scotland. . 16