Finance doubled your marketing budget? (Yeah right!)

We’ve all heard and seen it smattered across the news, the economy is a picture of ‘doom and gloom’ and there is talk of a recession amongst the litany of woe. Last month, a New Zealand Herald article claimed that “business confidence has plunged to depths last seen during the first oil shock of 1974”.

Whether we believe these claims at a local level or not, the latest figures from the New Zealand Institute of Economic Research’s quarterly survey is that the outlook for businesses is grim. Marketing budgets are often the first to come under the company finance spotlight and there is a tendency to pull these in when times are tough. However, ‘down-time’ in the economy, when consumer spending is at a low, is the time when businesses need to be doing more marketing activity and doing it more wisely and efficiently than ever before.

So where exactly should marketing spend be allocated, and how do you get more bang for your buck when times are tight?

There are many ways to market smarter and more cost effectively and existing data is a valuable resource that is well worth harnessing. People who have databases or access to their customer information have a head-start and are able to engage in a range of initiatives to put a face to their customers, retain the ones they have and acquire new customers who are more likely to be profitable.

INCREASING CUSTOMER KNOWLEDGE THROUGH PROFILING

It is well known that it can cost five times more to gain a new customer than to service your existing ones, so making the most of the customers you already have makes sound economic sense. Customer data can be profiled to find out as much as possible about existing customers, identify their key characteristics and behaviours and hence, communicate with them appropriately. Profiling can be used to identify pockets of customers that share similar characteristics but exhibit different purchasing behaviour, highlighting cross-sell opportunities.  

Profiling is a cost-effective and sensible start to knowledge discovery, which is vital in creating informed marketing strategies and initiatives that appeal to target markets.

A government department used profiling to paint a picture of its target audience for the ad agency – the resulting television campaign paid for itself within four days of showing.

RETENTION STRATEGIES BASED ON BEHAVIOURAL ANALYSIS

The more you know about your customers, the easier it is to look after and retain them. Profiling is a valuable part of this process and can provide clues as to the characteristics of likely churners. Further to that though, behavioural data can be analysed for behaviours that lead up to a customer churning, in order to highlight ‘warning signals’ and derive suitable timings for intervention. The ability to pinpoint warning signals provides cost savings, making it possible to target initiatives at those customers who really are in danger of churning. This creates maximum effect for minimum cost and allows a highly pro-active approach to customer retention.

A nation-wide media distributor who recently undertook a retention analysis programme is now enjoying a 9.5% drop in subscription cancellations.

NEW CUSTOMER ACQUISITION THROUGH MODELLING

If acquisition is on the marketing menu, the information gained from propensity models can be used to target campaign efforts and increase return on investment. Propensity modelling uses the characteristics of existing customers to assess the likelihood of prospects to present a certain behaviour, ranking them according to their probability to respond to a promotion, spend more or purchase certain products.

Smart acquisition modelling empowers businesses to maximise campaign efficiency and effectiveness by selectively targeting key areas or pockets of people. Compared with a blanket mailing to everyone in your catchment area, applying a model will increase campaign response rates and allow optimum use of marketing resources, especially important in the current economic conditions.

A nation-wide charity recently undertook an unaddressed acquisition campaign, using a predictive model to identify areas where residents were more likely to become donors. This initiative saw a huge lift in responses, with a 73% improvement in response rates for the top 20% of prospects. This provided the charity with a far superior return on investment than previous campaigns.

BUT WHAT IF YOU HAVE NO DATA?

While people with some form of customer database have an advantage, there are still options available for businesses with no customer database.

• Think about what other data is available? eg: transaction data from point of sale, web-site traffic, telephone numbers
• Use external data sources (eg Census data, LINZ data) to find out as much as you can about your catchment area
• Talk to data specialists to assess options for customer data collection

When times are tight, there is even more strain on marketing budgets and often more pressure to deliver measurable results. Don’t let that deter you as it is now that marketing really needs to be working its magic. With the use of smart data-driven strategies, you will be able to maximise the results of your campaigns and use your marketing spend to work smarter, not harder.

THINGS TO TAKE AWAY FROM THIS ARTICLE

• Meagre marketing budgets can be overcome using smart data-driven strategies to deliver measurable results
• Data can drive initiatives to discover more about your customers, make sure you keep the customers who are valuable and acquire new, profitable customers
• Profiling provides valuable insights about your customer base and can highlight cross-sell opportunities
• Behavioural analysis and profiling can inform retention strategies to reduce customer churn
• Acquisition, with the helping hand of a targeted model, increases response rates and delivers a higher return on investment