Peel away the
layers, and the typical email marketing campaign works something like
this: You send out a message to a group of individuals, track and
analyze the results, and then move on to the next campaign.
But Sequentual
Marketing Campaigns are not typical. They makes use of a multiple-rules-based
engine in a strategy sometimes known as "adaptive sequential
messaging" or "remailing" and utilize our unique Sequentual
Event Processor™ (Patent Pending) to support your marketing efforts.
Different
Action, Different Response
The premise behind
this approach is simple. When you send out a mailing, you know that
not all recipients will take the same action. Some won't open your
mailing, some will read it and stop there, others will click through
to your site, and, if there's a further call to action -- such as
having the recipient perform some task while at your site -- a few
will follow through on that call. Depending on the action taken by
each recipient, you'll want to follow up in different ways (if you
decide to follow up at all).
What the Sequentaul
Event Processor™ does is help automate this process. Instead of your
having to take several steps, the Event Processor looks at each recipient's
action and takes some of those steps for you.
More importantly,
it can contributes a significant lift in response.
I'm going to back
up a second and explain in a more general sense how metrics like Latency
are used, and in particular, address some of the misconceptions people
have regarding customer value-based and relationship marketing techniques.
Much of CRM is based on these fundamental ideas. Remember, CRM is
an approach to managing a business, not a technology. You do not need
to live on the bleeding edge of technology to take advantage of a
customer-based management approach.
Generally, CRM
or Relationship Marketing attempts to define customer behavior and
then looks for variances in behavior. When you hear people talk about
"predictive modeling" or looking for "patterns"
using data mining, they are essentially taking a behavioral approach
using the latest tools. Once you know how "normal" customers
behave, you can do two things with respect to your business:
* Formally document
normal customer behavior and internalize it systemically, leveraging
what you know to improve business functionality and the profitability
of customers
* Set up early
warning systems, triggering events, or "trip wires" to alert
you to customer behavior outside the norm. This variance in behavior
generally signals an opportunity to take action with the customer
and increase their value - online or off-line.
What is most important
to measure in CRM is change. People spend way too much time worrying
about "absolute" numbers, like Lifetime Value. What they
should really be looking at is "relative" numbers - change
over time. It's not nearly as important to know the absolute value
of a customer as it is to know whether this value is rising or falling
- called the customer LifeCycle. Knowing and understanding the customer
LifeCycle is the most powerful marketing tool you can have.
Customers in the
aggregate tend to follow similar behavioral patterns, and when any
single customer deviates from the norm, this can be a sign of trouble
(or opportunity) ahead. For example, if the average new cellular customer
calls customer service 60 days after they start, and an individual
customer calls customer service 5 days after they start, this customer
is exhibiting behavior far outside the norm. Is there a potential
problem, or opportunity? Is the customer having difficulty understanding
how to use advanced services on the phone, or is the customer happily
inquiring about adding on more services? In either case, there is
an opportunity to increase the value of the customer, if you have
the ability to recognize the opportunity and react to it in a timely
way.
Understand, there
is no "average customer", and a business will have many
different customer groups, each exhibiting their own kind of "normal"
behavior. The tools available to identify and differentiate customer
segments using behavioral metrics are discussed at length on almost
every page of this web site. For example, the type of media or offer
used to attract the customer can have a dramatic effect on long term
behavior, and customers who come into the business on the same media
and offer will tend to behave in similar ways over time.
In the cell phone
case above, the measurement of Latency (number of days until customer
service call) serves as the "trip wire", a raising of the
hand by the customer, to say to the marketer "I'm different.
Pay attention to me." It is then up to the marketing behaviorist
to determine the next course of action. Metrics like Latency provide
the framework for setting up the capability to recognize the opportunity
for increasing customer value.
This raising of
the hand by customers, and the reaction by marketers, is the feedback
loop at the center of Relationship or LifeCycle based marketing. It's
a repeating Action - Reaction - Feedback cycle. The customer raises
the hand, the marketer Reacts. The customer provides Feedback through
Action - perhaps they cancel service, or perhaps they add service.
The marketer reacts to this Action, perhaps with a win-back campaign,
or with a thank you note. It's a constant (and mostly nonverbal) conversation,
an ongoing relationship with the customer which requires interaction
to sustain. It is not a relationship in the "buddy-buddy"
sense. Customers don't want to be friends with a company, they want
the company to be responsive to their needs - even if they never come
out and state them openly to the company.
This relationship
continues to cycle over and over as long as there is value in the
relationship for both the customer and the marketer. If the customer
takes an Action and there is no Reaction from the marketer, value
begins to disappear for the customer, and they may defect. When value
disappears for the marketer (the customer stops taking Action / providing
Feedback), marketers should stop spending incremental money on the
customer.
Notice I did not
say "fire the customer" or any of the related drivel thrown
around in some of the CRM venues. All customers deserve (and pay for)
a certain level of support. The real question is this: for each incremental,
or additional dollar spent on marketing to the customer, is there
a Return On the Investment? If I have the ability to choose between
spending $1 on a customer returning $1.10, and $1 on another customer
returning $3, I would be nuts not to choose the customer returning
$3. I have not "fired" the customer returning only $1.10;
I have just chosen not to spend incremental money doing any special
marketing to them.
Do you
see the difference?
In fact, much
of the profitability typical of high ROI Customer Marketing techniques
comes from knowing who not to spend on. Most of the decreased profitability
in any marketing program is a result of overspending on unsuitable
targets with lowered returns. But because marketers tend to look at
results in the aggregate, or they are looking at demographically-based
segments to measure a behaviorally-based outcome, they miss details
like certain segments returned $5 for each $1 spent, and others lost
$5 for every $1 spent. The campaign as a whole may return only $1.10
for each dollar spent because the marketer spent money on low Return
On Investment customers.
When you are trying
to encourage a customer to buy something, you are looking for a behavior
to occur. To measure the results of such a marketing campaign using
only demographic segmentation without any behavior-based metrics (like
Recency or Latency) is misleading at best, and lazy otherwise - it's
apples and oranges.
Why is
this all important?
Customers who
are in the process of changing their behavior - either accelerating
their relationship with you, or terminating their relationship with
you - are the highest potential return customers from a marketing
perspective. They represent the opportunity to use leverage, to make
the highest possible impact with your marketing dollar. You may make
money marketing to customers who are just cruising along the LifeCycle,
acting like an "average customer".
But when you can
predict the likelihood of an average customer to turn into a best
customer, and you successfully encourage this behavior, or you can
reverse a customer defection before it happens, there are tremendously
profitable longer-term implications for the bottom line. You discover
these opportunities by understanding behavior and setting up trip
wires (like Latency metrics) to alert you to deviations from normal
behavior.
What about all
the rest of the customers, those who are not either accelerating or
terminating the relationship? Leave 'em alone. Whatever background
marketing you do (advertising, branding, service campaigns, etc.)
is serving them just fine.
High ROI data-driven
marketing techniques are best used (and create the highest returns)
when they are used to surgically strike at a trend in behavior, not
when customers are comfortably plodding along. However, there's not
as many comfortable plodders as you think; in fact, from 40% to 60%
of your customer base is either in the process of accelerating or
terminating their relationship with you right now. The question is,
how do you take advantage of the situation?
Latency, and all
the other metrics described on the Drilling Down site, are simply
tools for recognizing the opportunity to take an Action in Reaction
to the customer raising their hand. If you don't have some kind of
system to recognize customers in the process of changing their behavior,
you will miss out on most of the highest ROI customer marketing opportunities
you have.
And don't count
on the customer to e-mail you when they're thinking of changing their
behavior - we both know that just is not going to happen. A more likely
scenario: they will just stop taking Action and providing Feedback.
By then, it's too late for you to do anything profitable about it.
Set up your trip
wires and predict the behavior, folks. It's the only way to sense
when an average customer is ready to become a best customer. And reacting
to a customer defection after the fact is a truly sub-optimal way
to "manage" a relationship.