Martin Wright unpicks how coordinated contact strategies improve marketing performance and shows how simple response analysis can mislead, over-estimating the incremental impact a tactical campaign can have.
Despite compelling evidence about the ability of integrated contact strategies to improve performance they remain woefully under used, particularly in financial services marketing.
Look beyond most companies’ high profile advertising and lead generation activity and think about how they talk to their most valuable audiences; existing customers and past enquirers. You will find a wide range of tactical campaigns most consisting of single media and one, perhaps two stages. These same tactical messages will be sent to the same customers repeatedly.
Consider the monotonous repetition used by banks to get current account holders to take out a credit card or savers to invest in Bonds or ISAs. Or the one or two attempts that most insurance companies make to retain your business just before your policy is about to expire.
Of course, one-off tactical campaigns have their place, as does sending the same people the same communication several weeks later. But the evidence points strongly to the positive impact that integrated contact strategies can have. For most companies an optimal direct marketing plan will need to include a healthy mix of tactical and strategic activity.
For example the Morill Study showed how advertising combined with face-to-face selling improved sales by 23% at 20% less cost per sale over face-to-face selling alone. (How advertising works in today’s marketplace: The Morrill Study, 1971)
Three approaches to direct marketing
Companies can send a single communication, they can send the same or similar communications at intervals or they can create a planned contact strategy using a carefully coordinated range of messages delivered over time and through a variety of media.
How does response differ between these approaches?
Most companies measure the response generated by a campaign or look at the number of purchases by the target group in the following months. Sadly these approaches over-estimate the incremental value of activity; the better the targeting the greater the over-estimate.
Best practice is to compare sales by the contact group to a control group. This shows that for most companies there is a base level of sales among the control group. A direct communication temporarily increases the level of sales among the target group but sales then fall, often to below that of the control group.
Figure 1: A single, well targeted campaign can cause a high sales spike but generate modest incremental sales.
Many promotions simply pull sales forward that would have happened in any case.
Tight targeting and the use of tried and tested creative messages mean that companies are often talking to the converted in a way that they are known respond to (often it was a very similar approach that recruited them to the database in the first place).
Recently I worked with a large financial services organisation. When they compared purchases by consumers who were sent tactical campaigns, to purchases by corresponding control groups, they could see no statistically significant differences in sales whatsoever.
Results were far worse than a superficial analysis of results had suggested. As a result I helped them develop a contact strategy covering all products and all direct media. It combined tactical, event driven and coordinated contact strategies. Its objective was to maintain short-term sales whilst fundamentally shifting customer behaviour and increasing lifetime value in the longer term.
Of course most companies need to generate sales regularly and so they repeat the same campaign month after month using contact rules so individuals only see the same message once every two or three months.
From time to time companies will test a new campaign or make changes to the product. However the look and feel, and most importantly the objective, remains the same; to get the prospect to buy now.
Many companies have found that warm-up and follow-up campaigns particularly using a mix of media can help, and indeed they do. A follow-up direct mail pack can increase response by between 8 and 48%,an email follow-up by 25%. Indeed, I have tested a follow-up telephone call 20 minutes after a form was completed online and seen conversion to sale double.
These follow-ups make a bigger impact than a single contact and so they successfully pull more sales forward as well as generating sales from more sceptical prospects who would not have bought otherwise.
Figure 2: Repeated campaigns ramp up sales but usually decline over time
However, as good as this approach can be, there is a limit to it. Most companies find that as their campaigns become more urgent and more repetitive, response rates eventually decline and opt-out rates increase.
Coordinated contact programme
At its best a coordinated programme is much more than a series of warm-up and follow-up campaigns. It can achieve much more important goals than maximising the sale of familiar products to people with a high propensity to buy. It can begin to address long term challenges like improving retention or selling products with a high barrier to purchase.
It can have multiple objectives such as raising awareness and challenging attitudes as well as generating response and sales. In other words it can develop a relationship before asking the prospect to buy.
The key advantage of building awareness and dialogue is that it can over time raise the base level of sales between contacts.
Figure 3: Co-ordinated contact programmes can create substantial changes in consumer behaviour and build the level of base sales
How people process information
To make communications effective marketers need to understand how people process the vast amount of information that comes their way every day. Consumers apply a ‘judgement system’ (Ross A. Wirth - http://rosswirth42.blogspot.com/2010). If information matches or enhances what is already there it is likely be added to the existing concepts and categories. If it doesn't match, the consumer must reject this new information or replace what is already there.
When consumers reject information there is a failure to communicate. The marketer who presents non-integrated messages, or who tries to change perceptions to quickly or seeks action before having first created desire, risks consumers simply ignoring those messages.
Integrated customer contact strategy in action
There are many examples of this in action; here are just a few that people have allowed me to share.
- Whilst head of customer strategy at AA, Mark Humphries introduced a contact strategy which recognised the relationship a consumer had with the organisation and used survey data to find out what they were interested in. He developed a contact strategy which pre-determined what messages were sent to which consumers, when.
This replaced a targeting approach driven purely by response and ROI which had seen some customers get little or no contact whilst others were inundated. Response rates declined and complaints and opt-outs had risen alarmingly. By introducing welcome communications, taking the time to find out more about customers and making communications more relevant, the business was able to reverse the decline in response and improve customer satisfaction.
- Similarly when Michael Fassnacht and Tod Frincke of Loyalty Matrix worked with a well known consumer goods manufacturer which had a high price specialty product, they found it was suffering with low awareness and very low conversion among potential buyers. They created a coordinated programme that included awareness and data capture followed by a series of low cost contacts at key buying moments.
The awareness campaign created an initial spike in interest and sales, then sales settled back to near pre-campaign levels. The ongoing contacts helped build baseline sales gradually over 12 months, ultimately to end at a level three times higher than at the campaign's outset.
Many studies have found that coordinated contact strategies, particularly those that use multiple channels, can have a greater long-term impact on customer behaviour and drive increased return on investment than simpler tactical or repeated messages. Simple response analysis can mislead, overestimating the incremental impact tactical campaigns can have.
These programmes clearly take longer to create, require greater initial investment and need to be supported by robust targeting and analysis. However in the many circumstances this effort may be the only way to create success.
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What I have learned from this article is that whether one is doing direct mail, face to face, phone, or email marketing, that follow up has been important in Mr. Wright's ability to close sales. However, a coordinated programme can be even more beneficial in its ability to better understand customer behavior and using that information to push their product to new heights. These integrated contact plans are often multi-pronged in how they "attack" a potential sale. This takes time, but the incremental gains over time provide very fruitful returns.