Segmentation and Testing are the Keys to Multichannel Marketing
Current strategies for multichannel marketing tend to take one of two possible paths. The first is cost-focused, where the idea is to drive low-profit/low-potential customers to the least expensive channel. This makes sense from a servicing standpoint, but may not be effective from a marketing and sales standpoint because it doesn't consider high-value customers who prefer the convenience of high-tech, low-touch channels.
The alternate approach offers consumers their choice of channel and even the time frame between contacts. This is the most consumer-friendly tactic and requires that preferences be asked or recognized, purchase habits are analyzed, and follow-through efforts get carried out with the right offers at the right time. While this approach may be the ideal, it involves a hefty investment in technology to gather and follow preferences and to extend capabilities across all channels.
Perhaps the most ideal solution incorporates both approaches, and is grounded in a strong research/analytical foundation. Profits and preference information can be combined to create an optimized marketing plan.
Close the Loop
Most successful multichannel research begins with segmentation. In segmenting consumers, marketers likely will discover that each segment is predisposed to communicating via specific channels. Similarly, each segment will have a relative level of profit. Combining the two characteristics allows marketers to optimize their multichannel marketing strategies. Easy, right?
Not quite. There are several prerequisites. First and foremost, marketers should establish a closed-loop marketing environment where promotions across all channels and brands and/or products lines are planned and cohesively executed, and response is monitored.
As individuals are selected for inclusion in a campaign, promotional information should be recorded in the marketing database. The actual promotion—regardless of the channel—should be encoded with a key that allows you to link back to the promotion record. In the absence of a keycode, marketers also may employ a more indirect method. Referred to as "attributed response," indirect tracking takes into consideration that a promotion may have prompted an individual to take action—even though "proof" that the action is tied to the promotion may be absent. Generally, attributed response should be matched to promotion records no older than three months.
Regardless of whether the type of response being tracked is actual or attributed, it is critical to note the channel used for the promotion and the channel used for response.
For instance, a bank's credit card department notes that a customer prefers to receive phone calls from someone from the local branch. This information is applied across the enterprise and leveraged to improve the effectiveness of its marketing campaigns, ultimately driving new sales. As a result, this channel preference is used in the mortgage lending department's next offer to that same consumer.
The enterprise-wide marketing database serves as the foundation for the segment-based multichannel marketing plan. Knowing how consumers interact across lines of business—the channels through which they have responded, the products and services they use, and the profitability associated with them—allows a company to develop a vision for the ideal portfolio of products or services for each segment, as well as the channels that should be used to reach those segments.
Marketers should begin by segmenting their customer base according to various lifestyle characteristics. Segmentation provides marketers with valuable information about consumers, including measurements of age, income, lifestage and presence of children.
Having developed your segmentation strategy and then aligned it with various tests across multiple channels (i.e., launching campaigns through several different channels within each segment), you should be able to uncover somewhat distinct channel preferences for each segment. You may find that older customers prefer a phone call, but younger ones prefer e-mail. Or, you may find that the established affluent segment prefers online conveniences, whereas the emerging affluent segment prefers face-to-face communication.
Of course, preferences and customer expectation must be managed vis-a-vis profitability. Using expensive channels to service unprofitable customers—particularly those for whom there is little likelihood of future profitability—simply doesn't make good business sense.
Further analysis can be done to discover anomalies in each segment. An example is unprofitable individuals in what generally is one of your most profitable segments. These individuals alert you to the fact that while they look like your most profitable customers, you are not pulling in as deep a share of their spending as you potentially could. Focusing your efforts on effectively communicating with them through preferred channels likely will yield high returns in terms of incremental sales.
Focus on a few segments in the beginning. You may have an idea which segment will respond best to each channel, but in the beginning it most likely will involve more guesswork or art than science. As the amount of information gained through tests grows, so too will the precision of your multichannel marketing efforts.
Market to some of the individuals in a given segment through traditional channels such as direct mail, and to some of them through alternate channels, such as e-mail or in-store offers. Track the results and you likely will notice some emerging trends. Can the unprofitable customers be made profitable by gaining their attention and new business through alternate channels? For each segment, your goal is to uncover the ideal mix of products, pricing and channel strategy.
Create a Personal Touch
Because multichannel marketing is a relatively new concept, there isn't a huge body of information or experience to rely on. As a marketer, you must test channels across various segments of your customer and prospect bases to uncover channel preferences. Once that is done, you must use the information across the enterprise, and not hoard it in one department or sector. Then, approach multichannel marketing at the consumer level, not the account level. This creates the personal touch that only enterprise-wide multichannel marketing can provide to consumers.
Katie Scholl is a database marketing consultant for Acxiom Corp. She can be reached at firstname.lastname@example.org.