By Matthew Boot, chief analyst KDB
The dust has yet to settle around those caught in the financial downturn. In fact, the building blocks are still crumbling. For those businesses wishing to navigate their way through the debris, customer focus is paramount. It is becoming more apparent that having knowledge of the customer is vital to help distinguish a company – especially in a shrinking marketplace.
Marketers can be far more flexible in their strategies when the going is good - you may not be thinking of buying a new mobile phone and the analysis may not suggest that you are a particularly good candidate, but if you have plenty of disposable income and few worries about the future you may be willing to splash out.
But, as the going gets tougher, incomes are being squeezed and the majority of consumers will be much more vigilant about their spending so speculative campaigns are likely to have a much lower yield.
The difference between a good and a bad campaign can be determined by the people it targets. With a lesser margin for error, it will be increasingly important to ensure that marketing campaigns are targeted at the right people. Data that is either incorrect or obsolete will generate material to be sent to the wrong recipients and campaigns that run along these principles are doomed to fail.
Customers change on a regular basis. We know from our own experience that what we want now is often radically different to what we wanted twelve months ago. Yet when companies approach customer data, they can all too quickly forget the fact, imagining that their customers will want the same thing forever.
The reality, of course, is that consumer research gives a snapshot of a consumer base at a particular moment. Customer bases change for a variety of reasons. Changes in the national or local economy (such as the current downturn or job cuts at a local company) may impact upon consumers’ disposable incomes.
There may also be a wholesale shift in the business’ potential customer base. Twenty years ago, mobile phones were only for highly paid professionals, but there are now more mobiles than consumers in the UK. Marketers who failed to realise the increasing potential for mass ownership will have failed to ensure that they made the most of the opportunity.
Failure to understand at what point of the year segments spend money on particular items will lead to inefficient campaigns. The onset of the summer holidays or Christmas will change families’ spending patterns, but have a different impact on childless professionals. Seasonal variations have an effect on customers and also have a different effect on the behaviour of different segments.
Companies need to understand the importance of time-specific material if their marketing is to have its full effect. Customer insight needs to be an on-going process rather than an isolated incident so businesses can change with their customers. Otherwise, they will find themselves approaching today’s customers with last year’s data and parameters.
The benefits of detailed customer insight are clear: the more insight into your customers, the more likely you are to be able to know what they will buy.
The ability to provide more targeted campaigns is important for several reasons. In the first instance, the expense of conducting large-scale campaigns will become increasingly prohibitive as their yield decreases due to the slowdown. Marketers will thus be under increasing pressure to make their campaigns more targeted in order to increase yield. During a boom, it is possible to conduct vast mail outs with little segmentation and still experience a reasonable return on investment. As finances tighten, this will no longer be the case.
Furthermore, public annoyance and disdain at the nuisance level of irrelevant communication means that companies have to be far more discrete with their campaigns. Companies who want to promote a responsible image and foster customer loyalty will be loath to cause tension with customers by contacting them in a way that does not suit their lifestyle. Irrelevant marketing material is not only a waste of money; it also leads the consumer to consider the company as being out of touch.
There is increasing pressure on marketers to consider the environmental impact of their activities, in particular their direct mail. The more targeted a campaign is, the more companies can burnish their green credentials by reducing the amount of mail they send out, without sacrificing profit.
Marketplaces are becoming increasingly inhospitable to poorly planned campaigns that rely on woolly data. What is needed for fruitful campaigns is a customer-targeted approach based on smart knowledge of the consumer if businesses are to see the same returns they have over the last 10 years.
Arising from the ashes of the tumbling markets should be best practice techniques, which can be overlooked during a financial boom. Developing good habits now will allow marketers to reap the rewards again when the economy recovers and the financial towers are re-built.
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