The Marketing Executives Group International

By: Andy Cutler http://www.linkedin.com/myprofile?trk=hb_tab_pro

The biggest driver of marketing success is the relevance of the message to your customer. You can have a great offer but if the product is of no interest to the consumer, the message will most likely be ignored.
The more you know about your customers at the individual level, the more relevant your marketing can be. This is why it is critical to track customer behavior at the individual level—and make your messages relevant to each individual customer.

Using customer insight to create more relevant interactions (in all channels—not just outbound messaging) fuels growth because customers will respond more favorably to the marketing messages and will purchase more from you. It will also improve profits because, as your messages and offers become more targeted, your marketing will become more profitable (you will send fewer unwanted, ignored messages).

But it’s not just improved marketing to existing customers that drives higher growth and profits—improved customer insight can make your prospect marketing more effective as well. By understanding what your best customers look like and which respond best, you can refine your targeting of non-customers. Ultimately, you can use highly sophisticated modeling to drive dramatic improvements in cost-per-conversion and return on investment. For one retailer’s Direct Mail acquisition program, we used predictive modeling to reduce the break-even time frame from 6 months to 1 month. For another we used a modeling technique called machine learning to optimize paid search bids and lowered their cost-per-conversion by 44%.

Three Common Barriers

There are many reasons why companies find it difficult to improve their insight into customer behavior, but we will focus on the three most common issues.

First, many companies are simply not aware of the improvement that can be achieved by improving customer insight and message relevance. This is the most difficult barrier to overcome as there is a natural resistance to change inherent in most organizations. Without a compelling ROI story, change is unlikely to occur.

Second, it is often the case that the retailer simply does not have their data organized to generate better customer insights—and they are hesitant to make the investment to do it because they are not clear on the payout.

Finally, assuming the company has been able to overcome the first two issues and has their customer data in good shape, there is often another issue to deal with: having the knowledge and experience to execute the appropriate analyses to yield superior customer insight. The talent to do this is actually quite scarce in the marketplace and companies find it difficult to recruit and retain such talent. The most talented customer insight people tend to go to service companies where they can work on a variety of clients and projects.

Overcoming the Barriers

Overcoming these hurdles requires some work but it is not as daunting as you night think.

If you are at stage 1—trying to understand how much improved customer insight can increase growth and profits—there are two things to do: gather information on other retailers’ success stories and then project the potential impact on your business.

Information can be gathered from industry publications, trade shows, blogs—really any place where 1-to-1 retail marketing is discussed. Another place is some of the companies that provide retail 1-to-1 marketing services—they will often share some results achieved with their clients.

Regardless of how much third-party information you gather, you will need to estimate the effect that improved customer insight will have on your business. It may be useful to speak with 1-to-1 marketing services companies or consultants. Many can provide a stand-alone project designed to project the ROI of improved customer insight for your company.

If management is already convinced that investing in better customer insight is a good idea but getting the right IT infrastructure in place has proven elusive, you should consider outsourcing. There are multiple options, from hiring an IT consulting firm to design and build a solution that can be managed internally to a fully-outsourced solution hosted at a marketing service provider. Should you decide to go either of these routes, make sure you look at a variety of options as there are many business models and technologies available. Technology is constantly evolving and you will want to make sure that you find the most appropriate customer insight applications for your retail business.

Finally, if you feel that you have your customer data in reasonable shape but are unsure of exactly how to proceed or simply do not have the resources to execute customer insight analysis, here are a couple of options for you. The first option is to hire an analytic services company to provide the support you need. The other is to develop or “lease” a customer insight application that makes it much easier to develop customer insight internally using less experienced resources. Given the high cost of outsourced analytics and the desire to retain customer insights within the organization, this is often the best solution.

Andy Cutler http://www.linkedin.com/myprofile?trk=hb_tab_pro