Wednesday
This Ain't Your Daddy's Advertising: CRM and integrated marketing communications - By James D. Mangan
Industry experts contend that marketing, traditional mass media brand advertising in particular, is not working any more. This contention is nothing new. People have been buying and selling traditional advertising "on faith" for quite some time.
There is another school of thought which holds that integrated marketing communications [IMC] deployed in combination with CRM technologies has never worked better. Let's test the truth of both of these contentions.
Daddy's advertising is in big trouble with consumers
Traditional mass media advertising (a.k.a. your daddy's advertising) is suffering from a gradual, yet inevitable, process of eroding effectiveness.
It is abundantly clear that consumers are becoming resistant to one-sided, projected, mass media advertising. In terms of receptiveness, consumers are well beyond the saturation point—they are simply exposed to more advertisements in a myriad of forms in any given day than they can possibly process. The typical consumer is exposed to as many as 3000 ads every day.
Advertising filtering used to be an act of will—ignore it and it will go away. It is not necessary to conduct a statistically valid psychological study to know that 'ad fatigue' is growing. Observe, more and more sophisticated consumers are taking pro-active steps to block traditional advertising. The Federal Trade Commission reports that more than 10 million phone numbers have been registered with the federal "do-not-call" lists in the first four days of the program which kicked off in June of this year. Other psyche defense strategies are growing in popularity, including:
- pop-up ad blockers,
- sorting snail-mail next to the waste basket,
- zipping and zapping TV commercials,
- billboard bans, etc.
Consumers will pay for technology, services, alternative media and government regulations that provide relief from the onslaught.
In fairness, traditional advertising media is not dead yet. There are some very familiar media venues that involve a compelling and complimentary relationship between content and advertising. Some notable examples include professional trade and consumer fashion magazines. For millions of spectators, Super Bowl advertising is an important part of the pre-game hype and halftime entertainment. And then, there is my personal favorite, places like Times Square where outdoor advertising and urban architecture have come together to foster a unique sense of place. When it works, it works great. Nevertheless, trouble is brewing.
Second thoughts and the search for alternatives
The other irresistible force causing concern for traditional, mass-market brand advertising is simple microeconomics. What strategic choices can businesses make to compete more effectively and generate profits?
IF, let's say, there is an inherently superior marketing communications method (i.e. integrated communications) and consumers are more receptive to an interactive brand dialog using this method. Just for the sake of argument, let's say integrated communications delivers better return on investment of marketing resources. And, finally, let's say that this method can transform marketing activities into a valued service that contributes to overall product quality and differentiates the brand . . .
THEN firms deploying integrated communications would gain competitive advantage in the marketplace.
As businesses adapt to emerging customer preferences and adopt alternative marketing communications methods, it is logical to expect that allocations to marketing operations and brand intelligence grounded on CRM platforms will increase as a percentage of total marketing expenses. Alternatively, investment in traditional customer acquisition methods and mass media will be rationalized.
Certain industries were early adopters of CRM, most notably market leaders in the financial services industry (banking in particular), telecommunications and "r-e-tailers" which started with simple personalization and then began revenue generating marketing initiatives based on explicit customer preferences and/or projected interests.
Going forward, technology industry analysts foresee continued spending for CRM technologies, despite the slowdown in sales of new licenses in 2001 and 2002. It appears that the market for CRM technologies is pausing for a temporary "breather." Certainly, the recent economic downturn has a lot to do with this situation. However, the "industry chatter" suggests that other factors are equally relevant to the loss of momentum. In striving to achieve strategic advantage, the Holy Grail, some businesses ran headlong into the big, bad boogie man of every enterprise initiative. Implementation. In order to be successful, the means (i.e. the right technology) and methods (i.e. effective tactical strategies supported by operational resources) must be in place. Neither the means nor the methods will matter in the least without a strategic brand vision grounded on a customer-centric view of customer relationships.
In many instances, the technology challenges associated with CRM are not nearly as daunting as the challenge of adapting the organization. And so, while the adoption of CRM (including essential modules such as Enterprise Marketing Management, Partner Relationship Management and Sales Force Automation) may be slower than once projected, the value of these technologies is such that the outcome is inevitable.
So, what's the "big idea" behind integrated marketing communications?
Integrated marketing communications involves crafting advertising creative and media strategy to convey a compelling message to prospective customers at critical contact points as customers experience the brand and explore the value of products and brand relationships. IMC involves a customer-brand dialog. The goal: deliver the right message to the right customer at the right time. Media strategies associated with integrated communications include both paid and non-paid media, hence the compatibility of integrated marketing strategy and CRM technology.
Integrated communications overcomes the limitations of traditional brand advertising, which focuses almost exclusively on brand awareness, qualitative brand impressions, and share of mind. While instructive in measuring the effectiveness of advertising creative, these metrics can not be directly correlated to the bottom-line performance of the firm.
Lifetime value of customer relationships is the key to the profitability of many firms in many industries. In many instances, lifetime value serves to justify the initial investment in customer acquisition and identify customers with the greatest long-term potential. IMC seeks to capitalize brand relationships.
Integrated communications seeks to impact the customer experience, brand relevance if you will, shaping perceptions as customers experience the brand. With IMC, brand merges with product quality. Brand satisfaction is a function of the tangible product purchased as well as perceptions of the purchase process and on-going interactions.
Evolution of the integrated marketing practice and process
Throughout the 90s, integrated marketing initiatives were perceived as too complicated, having too many moving parts, and too labor intensive.
In order to implement an integrated communications program, marketing managers had to interact with advertising agencies and distribution channels as well as operations, including IT, and service centers. Implementation relied heavily on matrix management. Stakeholders generally owned products, not markets or customer segments. It was a tough bill to fill. They say pioneers take arrows. Well, in the 90s, most of the people practicing integrated communications looked more like porcupines than marketing professionals. Nevertheless, survivors learned important lessons and gained valuable experience.
In the era before CRM, integrated communications was an extremely blunt instrument. If you were successful at your craft, you ended up wasting fewer resources than your competitors in acquiring new customers. Politicians facing difficult decisions concerning imperfect legislation will "just hold old their nose and vote." So it was with integrated communications in the early 90s. The discipline was strategically valid, having clear benefits compared to your daddy's advertising methods, but it could have been more compelling from a business standpoint. Something was missing—closed loop marketing—the ability to transform brand intelligence into brand interaction.
The future of marketing unfolds
Over the past several years the integrated communications practice has evolved to capitalize on new CRM technologies which have enabled companies to compete more effectively and more aggressively for customer franchise. The following are four ways in which marketing methods are evolving:
One: Brand intelligence leads to brand relevance
CRM platforms based on an enterprise customer database have opened the door to brand intelligence. With CRM as an operational resource, the strategic focus shifts to understanding lifetime value of customer relationships along with the variables that can be actively managed to shape the dynamics of those relationships. Businesses craft highly targeted campaigns, down to an audience of one. Personalization is just the tip of the iceberg. Business rules drive "kinetic offers" based on expressed interests (inherent to permission marketing), purchase patterns and customer interactions, interpreted in real-time.
CRM provides the capacity to monitor and track customer interactions across a broad range of touch-points including sales, web, and service centers. As purchase deliberations intensify, firms can apply incremental sales resources to customers who have indicated an interest in the offer AND a readiness to buy.
Big-time "push" marketing campaigns become less important, though certainly not obsolete. Expect to see frequent mini campaigns where targets are carefully selected based on purchase patterns along with needs-based approach, fine-tuned through predictive analysis. In order to be successful, marketing professionals will need to maintain partnerships with agencies to craft brand strategies. They will also have to cultivate the means to dig down deep and interface with operations to formulate and coordinate tactical implementation of customer interactions.
Two: Unlocking profit potential of existing and acquired customers
In many instances, the cost of acquiring new customers exceeds the revenues generated by a single purchase transaction in year 1. Without an effective means to capitalize on customer relationships, the return on investment associated with customer acquisition employing traditional methods represents a dubious proposition.
When CRM is tied to enterprise marketing operations, advertising managers and market segment managers can come to terms with brand deficits because the firm can formulate reasonable strategies to increase the value of relationships over time.
It will become increasingly difficult to make the case for investment in customer acquisition without some means of capitalizing on relationships which involves cross,-sell, re-sell (a.k.a. retention rates) and up-sell. Even those companies that seek market share and scale through mergers & acquisition strategies will require an effective means to capitalize on goodwill by growing the value of relationships.
Three: It's not just who you know, but what you do with it
All too often, the practice of marketing is associated exclusively with strategy and creativity. These things are important, but the nuts and bolts of marketing involves the process of transforming opportunities to sales. Operational risks represent a significant waste of resources and can dramatically erode ROI. What is operational risk? Any opportunity that is un-recognized, overlooked or recognized and then dropped completely or delayed to the point where it is no longer relevant to the customer or prospect. How often does that happen? Lots!
Workflow is a critically important feature of fully functional CRM because it ties brand intelligence to tangible value at every step along a value chain. For companies operating in cooperation with partners and intermediaries, information exchange pertaining to customer interaction dramatically enhances marketing performance. Firms gain the ability to recognize more opportunities as well as convert more opportunities into sales. Multi-channel, operational interaction to support consistent face of brand and close the loop—immediate response to real time inquiries. An equally important (and often overlooked) benefit is the ability to "extend" the dialog—providing institutional memory that allows the customer to make decisions in time frame that satisfies their needs.
Four: Interactive media and technologies gain wider acceptance
Expect to see a strategic shift in the media mix with an increase to allocations for interactive media. Case in point--a recent article in the Wall Street Journal reported that spending on search engine related marketing more than doubled in the U.S. from 2001 to 2002 and is expected by grow 48 percent in 2003. While this factoid represents a single pixel of a very large picture, these numbers are extremely revealing because this increase in spending for interactive media has taken place in a down economy. This speaks to the value businesses are placing on an interactive brand dialog, particularly one that is initiated by the customer.
Every ending is a new beginning
"Your daddy's advertising" was always risky business—the connection between investment in brand awareness, customer acquisition and the bottom-line profitability of a firm were tenuous at best. To quote John Wanamaker, "Half of my advertising is wasted. I just don't know which half." In the days of mass media, mass markets, and mass production it was OK to accept the ambiguity inherent in this statement. Not anymore.
In the coming years, outdated marketing methods will be replaced by integrated marketing communications methods with a heavy emphasis on customer database strategies supported by CRM technologies. The change will be driven by consumer preferences and the bottom line. Success will be contingent on the quality of a firm's marketing operations rather than the size of the paid media budget. And so, expect to see continued spending on CRM and expect to see IMC deployed by firms as the best means of achieving profits and getting and growing customer relationships.
Industry experts contend that marketing, traditional mass media brand advertising in particular, is not working any more. This contention is nothing new. People have been buying and selling traditional advertising "on faith" for quite some time.
There is another school of thought which holds that integrated marketing communications [IMC] deployed in combination with CRM technologies has never worked better. Let's test the truth of both of these contentions.
Daddy's advertising is in big trouble with consumers
Traditional mass media advertising (a.k.a. your daddy's advertising) is suffering from a gradual, yet inevitable, process of eroding effectiveness.
It is abundantly clear that consumers are becoming resistant to one-sided, projected, mass media advertising. In terms of receptiveness, consumers are well beyond the saturation point—they are simply exposed to more advertisements in a myriad of forms in any given day than they can possibly process. The typical consumer is exposed to as many as 3000 ads every day.
Advertising filtering used to be an act of will—ignore it and it will go away. It is not necessary to conduct a statistically valid psychological study to know that 'ad fatigue' is growing. Observe, more and more sophisticated consumers are taking pro-active steps to block traditional advertising. The Federal Trade Commission reports that more than 10 million phone numbers have been registered with the federal "do-not-call" lists in the first four days of the program which kicked off in June of this year. Other psyche defense strategies are growing in popularity, including:
- pop-up ad blockers,
- sorting snail-mail next to the waste basket,
- zipping and zapping TV commercials,
- billboard bans, etc.
Consumers will pay for technology, services, alternative media and government regulations that provide relief from the onslaught.
In fairness, traditional advertising media is not dead yet. There are some very familiar media venues that involve a compelling and complimentary relationship between content and advertising. Some notable examples include professional trade and consumer fashion magazines. For millions of spectators, Super Bowl advertising is an important part of the pre-game hype and halftime entertainment. And then, there is my personal favorite, places like Times Square where outdoor advertising and urban architecture have come together to foster a unique sense of place. When it works, it works great. Nevertheless, trouble is brewing.
Second thoughts and the search for alternatives
The other irresistible force causing concern for traditional, mass-market brand advertising is simple microeconomics. What strategic choices can businesses make to compete more effectively and generate profits?
IF, let's say, there is an inherently superior marketing communications method (i.e. integrated communications) and consumers are more receptive to an interactive brand dialog using this method. Just for the sake of argument, let's say integrated communications delivers better return on investment of marketing resources. And, finally, let's say that this method can transform marketing activities into a valued service that contributes to overall product quality and differentiates the brand . . .
THEN firms deploying integrated communications would gain competitive advantage in the marketplace.
As businesses adapt to emerging customer preferences and adopt alternative marketing communications methods, it is logical to expect that allocations to marketing operations and brand intelligence grounded on CRM platforms will increase as a percentage of total marketing expenses. Alternatively, investment in traditional customer acquisition methods and mass media will be rationalized.
Certain industries were early adopters of CRM, most notably market leaders in the financial services industry (banking in particular), telecommunications and "r-e-tailers" which started with simple personalization and then began revenue generating marketing initiatives based on explicit customer preferences and/or projected interests.
Going forward, technology industry analysts foresee continued spending for CRM technologies, despite the slowdown in sales of new licenses in 2001 and 2002. It appears that the market for CRM technologies is pausing for a temporary "breather." Certainly, the recent economic downturn has a lot to do with this situation. However, the "industry chatter" suggests that other factors are equally relevant to the loss of momentum. In striving to achieve strategic advantage, the Holy Grail, some businesses ran headlong into the big, bad boogie man of every enterprise initiative. Implementation. In order to be successful, the means (i.e. the right technology) and methods (i.e. effective tactical strategies supported by operational resources) must be in place. Neither the means nor the methods will matter in the least without a strategic brand vision grounded on a customer-centric view of customer relationships.
In many instances, the technology challenges associated with CRM are not nearly as daunting as the challenge of adapting the organization. And so, while the adoption of CRM (including essential modules such as Enterprise Marketing Management, Partner Relationship Management and Sales Force Automation) may be slower than once projected, the value of these technologies is such that the outcome is inevitable.
So, what's the "big idea" behind integrated marketing communications?
Integrated marketing communications involves crafting advertising creative and media strategy to convey a compelling message to prospective customers at critical contact points as customers experience the brand and explore the value of products and brand relationships. IMC involves a customer-brand dialog. The goal: deliver the right message to the right customer at the right time. Media strategies associated with integrated communications include both paid and non-paid media, hence the compatibility of integrated marketing strategy and CRM technology.
Integrated communications overcomes the limitations of traditional brand advertising, which focuses almost exclusively on brand awareness, qualitative brand impressions, and share of mind. While instructive in measuring the effectiveness of advertising creative, these metrics can not be directly correlated to the bottom-line performance of the firm.
Lifetime value of customer relationships is the key to the profitability of many firms in many industries. In many instances, lifetime value serves to justify the initial investment in customer acquisition and identify customers with the greatest long-term potential. IMC seeks to capitalize brand relationships.
Integrated communications seeks to impact the customer experience, brand relevance if you will, shaping perceptions as customers experience the brand. With IMC, brand merges with product quality. Brand satisfaction is a function of the tangible product purchased as well as perceptions of the purchase process and on-going interactions.
Evolution of the integrated marketing practice and process
Throughout the 90s, integrated marketing initiatives were perceived as too complicated, having too many moving parts, and too labor intensive.
In order to implement an integrated communications program, marketing managers had to interact with advertising agencies and distribution channels as well as operations, including IT, and service centers. Implementation relied heavily on matrix management. Stakeholders generally owned products, not markets or customer segments. It was a tough bill to fill. They say pioneers take arrows. Well, in the 90s, most of the people practicing integrated communications looked more like porcupines than marketing professionals. Nevertheless, survivors learned important lessons and gained valuable experience.
In the era before CRM, integrated communications was an extremely blunt instrument. If you were successful at your craft, you ended up wasting fewer resources than your competitors in acquiring new customers. Politicians facing difficult decisions concerning imperfect legislation will "just hold old their nose and vote." So it was with integrated communications in the early 90s. The discipline was strategically valid, having clear benefits compared to your daddy's advertising methods, but it could have been more compelling from a business standpoint. Something was missing—closed loop marketing—the ability to transform brand intelligence into brand interaction.
The future of marketing unfolds
Over the past several years the integrated communications practice has evolved to capitalize on new CRM technologies which have enabled companies to compete more effectively and more aggressively for customer franchise. The following are four ways in which marketing methods are evolving:
One: Brand intelligence leads to brand relevance
CRM platforms based on an enterprise customer database have opened the door to brand intelligence. With CRM as an operational resource, the strategic focus shifts to understanding lifetime value of customer relationships along with the variables that can be actively managed to shape the dynamics of those relationships. Businesses craft highly targeted campaigns, down to an audience of one. Personalization is just the tip of the iceberg. Business rules drive "kinetic offers" based on expressed interests (inherent to permission marketing), purchase patterns and customer interactions, interpreted in real-time.
CRM provides the capacity to monitor and track customer interactions across a broad range of touch-points including sales, web, and service centers. As purchase deliberations intensify, firms can apply incremental sales resources to customers who have indicated an interest in the offer AND a readiness to buy.
Big-time "push" marketing campaigns become less important, though certainly not obsolete. Expect to see frequent mini campaigns where targets are carefully selected based on purchase patterns along with needs-based approach, fine-tuned through predictive analysis. In order to be successful, marketing professionals will need to maintain partnerships with agencies to craft brand strategies. They will also have to cultivate the means to dig down deep and interface with operations to formulate and coordinate tactical implementation of customer interactions.
Two: Unlocking profit potential of existing and acquired customers
In many instances, the cost of acquiring new customers exceeds the revenues generated by a single purchase transaction in year 1. Without an effective means to capitalize on customer relationships, the return on investment associated with customer acquisition employing traditional methods represents a dubious proposition.
When CRM is tied to enterprise marketing operations, advertising managers and market segment managers can come to terms with brand deficits because the firm can formulate reasonable strategies to increase the value of relationships over time.
It will become increasingly difficult to make the case for investment in customer acquisition without some means of capitalizing on relationships which involves cross,-sell, re-sell (a.k.a. retention rates) and up-sell. Even those companies that seek market share and scale through mergers & acquisition strategies will require an effective means to capitalize on goodwill by growing the value of relationships.
Three: It's not just who you know, but what you do with it
All too often, the practice of marketing is associated exclusively with strategy and creativity. These things are important, but the nuts and bolts of marketing involves the process of transforming opportunities to sales. Operational risks represent a significant waste of resources and can dramatically erode ROI. What is operational risk? Any opportunity that is un-recognized, overlooked or recognized and then dropped completely or delayed to the point where it is no longer relevant to the customer or prospect. How often does that happen? Lots!
Workflow is a critically important feature of fully functional CRM because it ties brand intelligence to tangible value at every step along a value chain. For companies operating in cooperation with partners and intermediaries, information exchange pertaining to customer interaction dramatically enhances marketing performance. Firms gain the ability to recognize more opportunities as well as convert more opportunities into sales. Multi-channel, operational interaction to support consistent face of brand and close the loop—immediate response to real time inquiries. An equally important (and often overlooked) benefit is the ability to "extend" the dialog—providing institutional memory that allows the customer to make decisions in time frame that satisfies their needs.
Four: Interactive media and technologies gain wider acceptance
Expect to see a strategic shift in the media mix with an increase to allocations for interactive media. Case in point--a recent article in the Wall Street Journal reported that spending on search engine related marketing more than doubled in the U.S. from 2001 to 2002 and is expected by grow 48 percent in 2003. While this factoid represents a single pixel of a very large picture, these numbers are extremely revealing because this increase in spending for interactive media has taken place in a down economy. This speaks to the value businesses are placing on an interactive brand dialog, particularly one that is initiated by the customer.
Every ending is a new beginning
"Your daddy's advertising" was always risky business—the connection between investment in brand awareness, customer acquisition and the bottom-line profitability of a firm were tenuous at best. To quote John Wanamaker, "Half of my advertising is wasted. I just don't know which half." In the days of mass media, mass markets, and mass production it was OK to accept the ambiguity inherent in this statement. Not anymore.
In the coming years, outdated marketing methods will be replaced by integrated marketing communications methods with a heavy emphasis on customer database strategies supported by CRM technologies. The change will be driven by consumer preferences and the bottom line. Success will be contingent on the quality of a firm's marketing operations rather than the size of the paid media budget. And so, expect to see continued spending on CRM and expect to see IMC deployed by firms as the best means of achieving profits and getting and growing customer relationships.
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