The old rules of the game – Advertising, shelf space, retail presence.
The new rules of the game – Predictive models, one-to-one offers, outbound campaigns.
You can download PDF version of this whitepaper here.
65% of product launches fail. That’s means that the millions of hours and millions of dollars in resources invested into developing two out of every three products is a complete waste. Visit an electronics store, a bank, or a telecom dealer, and odds are that two-thirds of the products and services you see there won’t be around the next time you visit. Rather sad, but rather avoidable as well.
Poor planning and lack of truly understanding what the marketplace desires are some of the root causes of such failures. But an overall inability to move such products and services falls on marketing and sales. The passive culture that permeates within these two groups – particularly in marketing – is inexcusable. For too long, marketing teams have been allowed to pass the buck, by blaming sales teams, by blaming executive management, by blaming anyone but themselves for the failure of a given product or service to sell.
In actuality, no one but marketing is to blame. A passive attitude whereby sales are somehow mythically driven by just increasing advertising or retail presence doesn’t cut it anymore. It’s time that marketing teams make a radical shift to the world of proactive marketing.
Proactive marketing, in all aspects, is the opposite of what’s done today by most companies in B2C sectors. Anything and everything around selling more to customers, making them more loyal, or even acquiring them is done on a one-to-one level, never on a mass-scale – be it in the form of individual offers, customized products and services, or outbound contacts , it’s about winning customers over one-by-one. It’s done below-the-line, it’s personalized, and it’s relevant – again, all characteristics that are radically different than business as usual.
Proactive marketing is not, however, an end-all solution. It does not mean an end to traditional marketing; rather, it’s a complementary effort. It’s the extra push that gives companies the edge against their competitors, it’s the little bit more that makes or breaks a product or service, a relationship, a company.
Companies ready to take the leap and begin their own proactive marketing efforts need to follow a set of steps to build the base for conducting such activities, steps that can be summarized as follows:
1. Get to Know Each Customer: The first step is to truly understand the differences among the customer base, with each customer having his or her own set of behaviors and needs, not to mention potential value. The goal here is to take the mass base of customers and at least segment them into several dozen actionable groups.
Some of the key factors that help define and differentiate these groups are around demographics (age, nationality, gender), product usage (recency, frequency), spend (existing, potential), and needs (in terms of products and services). Companies in certain sectors traditionally have such data on hand (i.e. telecoms and banks), others need to build mechanisms for getting it (i.e. retailers through loyalty programs).
2. Build the Offers: Proactive marketing in its essence is sales, by making a relevant offer to the right person at the right time. Based on the defined target groups, products and services that are relevant to them must be identified, and offers developed around driving uptake. It is critical that the offers be relevant, otherwise, it’s no different than business as usual – trying to sell ice to an Eskimo as the saying goes.
Not only should the offer be relevant, but there should be an additional enticement for the customer to pull the trigger. A couple examples of smart and relevant offers with enticing additional benefits should make this clear:
Scenario: Mary Smith is one of our credit card subscribers, but does not have her salary deposited into our bank. Rather, she pays her credit card statement through another bank.
Objective: To get her to open a checking account and have her salary deposited with us each month rather than have her keep her savings elsewhere.
Behavior: An analysis of Mary’s credit card usage behavior shows that she makes numerous airline ticket purchases every quarter, and spends a great bit overseas. Mary also spends the rewards points she earns from using the card, which she earns on a “one point to one dollar” ratio.
Customized Offer, via Phone: Mrs. Smith, if you set up a checking account with our bank and make automatic salary payments into it each month, instead of one point for every dollar, you will instead earn two points for every dollar you spend on your credit card for all airline ticket purchases and overseas spend – a benefit you will enjoy as long as automatic salary payments are made each month.
Scenario: Bill Reynolds bought an HP laptop three years ago from us, a transaction recorded via the fact he used his loyalty card when he made the purchase.
Objective: To get him to buy his next laptop with us, as analysis of similar customers has shown that it’s now time for him to replace his old one.
Behavior: Bill is an iPhone junkie. He bought two iPhone 3Gs from us the week it came out, and one iPhone 4 from us the week it came out as well.
Customized Offer, via SMS: Exclusive for you, buy an HP laptop from any of our stores this week, get $50 off your next iPhone purchase (iPhone 4 or next year’s iPhone 5).
Scenario: John Doe used to top up on average $50 a month each of the prior 18 months – the last 6 months he has been averaging $20.
Objective: To get John back up to $40 or $50 spend per month.
Behavior: The decline in spend has come from a complete cut-off of international calls – John used to call the UK and would generate us $20 – $30 in revenues each month from this behavior. His current revenues are comprised of data and local minutes usage.
Customized Offer, via SMS: A special offer just for you – top up $50 within the next week, enjoy half price calls to the UK for one month afterwards.
It cannot be stressed enough that for every offer that is designed, a solid business case must be built, in order to ensure the effort makes sense financially. In the above scenarios, it is assumed as such. Ultimately, any effort that generates revenue that normally would not have been realized (regardless of dip in gross margin) is an effort worth undertaking (assuming all else is equal, such that the actions are not offered to the masses and are targeted, are not made to the wrong customers, etc.).
3. Pick the Channel: There are many channels that can be used for reaching out to customers. Each has a different effectiveness rate based on the offer to be made, and obviously each has a different cost associated with it. In certain cases, making calls will make sense, in others, sending an SMS. Other alternatives such as email, mailer, and auto-dialer also can be used.
We recommend companies play around with this aspect of proactive marketing, mixing and matching offers to various channels, to determine the best blend of channel usage. Small-scale pilots with different customer segments, offers, and channels will get the job done here.
4. Gain Momentum: As daunting as it may seem to get the whole effort up and running, it has to start somewhere, and we recommend it start small. Pick a couple of hundred customers to be contacted with one or two offers to begin building momentum, to gain some visibility across the business. Successes should be shared, failures learned from, modifications made as needed. The truly hard part around shifting to a proactive marketing mode is getting the first three steps listed above completed, yet it’s often this step where things fail. Building up success by success should help ensure a full-scale rollout is ensured.
In this day and age when competition is fiercer than ever, margins are down, and customer expectations are sky-high, companies need to find an edge, that extra advantage against their competitors. We are confident they can find it in proactive marketing, a practice that will proliferate across companies and sectors over the coming years.
To learn more about shifting to a proactive marketing environment, please contact firstname.lastname@example.org.