Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Justin Petty, vice president of global media and partnerships at dunnhumby.
When I worked as an analytics consultant in the telecom industry 10 years ago, the incumbent approach was to find the best people to sell DSL to and send them direct mail offers. Then we found the best people to sell long distance to and sent them direct mail offers. As the product set grew to include TV service and mobile service, it became apparent that starting with the customer and determining the best products for individuals was more efficient – and more effective.
I then worked in the DIY home-improvement and DIY auto-repair industries. I found that companies still took a product-centric approach to marketing.
The DIY home-improvement retailer, for example, would say it needed to run a wood flooring direct marketing (DM) campaign in March. Why? “That’s flooring month and we told the category manager we would run a DM campaign for them.” No data was used to determine consumers’ needs or the best time to promote certain products. Flipping the model upside down to start with the customer and identify, through the data, what they bought and when helped create a data-driven, customer-centric marketing calendar.
In these cases it was fairly easy to implement this strategy and make it effective. The telecom company owned the products and services, with complete control over the marketing. The home-improvement company worked with vendors, but it controlled the marketing plan and execution. The vendors weren’t really doing their own marketing of their products, except for some traditional mass media.
How can we ensure a correlated and complementary customer-driven marketing plan across both retail and brand marketers?
Most retailers now understand that customer-centric targeting, personalization and customization are much more effective than the carpet-bombing approach from the past. But in many industries, retailers don’t have complete control over the marketing of products they sell.
In apparel, for example, the retailer may have a very customer-centric approach while its vendors reach out to the same consumers with a very product-centric message. This is not in the best interest of the consumer. In the worst-case scenario, the message is product-driven by the vendor and co-branded with the retailer. Meanwhile, the retailer delivers a different message or offer through its own marketing vehicles.
Do What’s Best For The Customer
Focusing on the customer first and doing what is best for them has become the new norm for retail marketing strategies. Promotions are no longer driven by surplus inventory or vendor requests. Retailers are beginning to take control of their own strategies and compelling vendors to play along. Those who understand that a customer-first approach helps everyone in the long run have already started making these changes. However, the retailers that still let vendors, merchandising or gut instinct drive their marketing strategies will lose.
Brands and their agencies struggle to be customer-focused because their goal is to sell their product and they have a harder time knowing who their customer is. But they also have a desire to be more efficient with their media spending, and are being measured in ways that require more accountability. The brands that will succeed are those that work with retailers to be more targeted, reduce wasted media spending and, consequently, become more customer-oriented. They’re still marketing their product, but they can aim those advertisements to the most relevant audience.
How are retailers and brands able to take a customer-first approach? They use the power of data – big data or otherwise – to enlighten themselves on what their customers’ needs are. What is the best month to promote wood flooring? What are the trends in the historical sales data, and can that lead to a better decision on timing?
Granular data allows you to target individuals or households. Not everyone is in the market for wood flooring. The data will allow greater precision and efficiency with media spending.
Of course, this requires the ability to execute the marketing plan on a one-to-one level.
Understand The Role Of Media Channels
Mass-media channels are great for reaching large numbers. Until addressable TV becomes more predominant, TV advertising will continue to use more of a carpet bomb approach. There are ways to use data to be more targeted with TV buys, but most advertisers aren’t using anything more than demographics to make decisions. Therefore, TV is most effective for reaching new customers who may not already be aware of your product, or when used in conjunction with other media channels to reinforce your message.
Retailers use mass media to drive people to their stores instead of competitors’, or to convey broad promotions. Brands also use TV to combat the competition and share news about their products. But both retailers and brands have a much harder time using mass media to be targeted and relevant to a select group of customers.
Media channels that enable individual- or household-level communication are the most effective at being data-driven and customer-focused. In the last five years, there has been an explosion of digital channels that can be directly connected to customers. This is a win for the customer because they can now get more personalized and relevant communications. But that only happens if advertisers take a customer-first approach. We’ve all seen countless online display ads for things like dating sites or insurance that try to sell us on something we aren’t interested in. This causes consumers to tune out and makes it more difficult for relevant ads to cut through the cacophony. Retailers and brands run the risk of creating their own form of this intrusive noise in digital media.
Retailers might use retargeting or some other form of targeted digital ads directed to specific consumers and relevant based on historical data. But what about the brands that don’t have access to customer data or can’t identify individual users?
Work Together For The Customer
When retailers work with brands, sharing insights from the data and enabling targeted brand communications, both parties win. Brands can execute relevant one-to-one communications, while retailers use their data to drive more content to customers. When it works, the customer sees more relevant ads and response rates significantly increase.
This also applies when brands have their own CRM programs. In these cases, they often have their own data and customer lists. This allows for targeted communications across a variety of channels and is relevant to customers since they are already a part of the CRM program. Where problems can arise is in a lack of coordination with retailers. Without some form of “air traffic control,” promotional offers from the brand and retailer may conflict or cause confusion for the customer.
In a perfect world, the retailer would have a pool of promotions from vendors and the liberty to decide who gets what offer. That way they can start with the customer, identify the best offer for that individual, and ensure everyone receives relevant and consistent messaging. Brands can still run their own mass and CRM communications but should do so in coordination with the retailer. When multiple media channels are used in conjunction with a consistent targeted message, the result is greater than the sum of its parts.
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