When management consultants Peppers and Rogers published The One to One Future in 1993, marketers were abuzz with the notion that one-to-one marketing was going to revolutionize the industry. So why, in the 25 years since, have successes in this area been so few and far between? And how can you ensure that your company effectively capitalizes on one-to-one marketing?
Here are two common pitfalls to avoid:
More data doesn’t always mean more answers: While big data generates many trends and patterns, companies must ensure they don’t confuse correlation with true cause-and-effect when building their one-to-one marketing models.
Marketers build these models to predict the customer’s response to a particular program, allowing them to customize their outreach. When built with the right data, these elaborate models are, in fact, quite accurate. However, the desire to estimate every possible aspect of customer behavior often leads to using data that may be misleading. Some CRM planners and consultants strategically leverage customer insights and qualitative “voice of customer” data to refine marketing campaigns and offers. The latter can often be valuable in generating ideas for new initiatives; however, new ideas are not always impactful ideas. Tailoring offerings according to such qualitative data poses a challenge, as customers’ stated intentions may not translate into actual sales. In these cases, marketers can fall into the trap of misallocating funds to initiatives that look good on paper, but don’t always work in practice.
The key to effective marketing is taking a Test & Learn approach to identify what each customer segment really wants. This approach involves testing a campaign with a subset of customers, then measuring their responses as compared to a “control group” of customers. The results can help identify which promotions are most profitable, how often to reach out to customers, which channels are most impactful, and more—allowing marketers to truly optimize their personalized campaigns and reach customer with the most relevant offers.
The most popular offer is not always the best offer: Marketers often believe that their “best” promotions are the ones that the most customers redeem. However, evaluating the success of a promotion solely on redemption rate is risky business. In fact, the more times customers redeem a given offer, the greater the risk of subsidizing a purchase the customer would have made anyway. If customers are simply “cherry-picking” your offer for discounts, then redemptions are net-negative. However, if the offer spurs spending that customers would not otherwise have made, then it is net-positive (Figure 1).
The only way to identify which offers truly drive added profits is to test them with a subset of customers and compare their performance to that of a similar group receiving no discount. Companies that adopt this approach will be able to confidently assert whether the most popular offer really is the best one.
The truth is that successful, personalized marketing varies widely by company and context. To find what works at your company, you must commit to continually collecting many ideas, testing them in-market, and implementing the most effective ones. Throughout this process, you must remain laser-focused on evaluating each program’s incremental impact to accurately identify which programs actually resonate with customers and move the needle on profits.
Division Lead, Japan, Mastercard Advisors
Naohiko Oikawa is the Division Lead for Japan at Mastercard Advisors, focusing on introducing Mastercard's methodology and leading client engagements in the Japan market. Mr. Oikawa has over 25 year of experience in advising strategic and tactical decisions for blue-chip corporations in various industries such as Retail, Manufacturing, Tech, and Financial Services. Mr. Oikawa is also known as a leader in Japanese marketing community through his contributions in developing, speaking, and writing about Interactive Marketing, CRM, and Data-Driven Decision Making. He also teaches Marketing as a Visiting Professor at Nagoya University of Commerce & Business. Prior to joining APT, Mr. Oikawa led Dentsu Consulting as its founder and CEO. He has also worked at McKinsey & Company in its High Tech Group, Netyear Group as its Chief Marketing Officer, and Dentsu as a Marketing Communication Planner. Mr. Oikawa holds a BA in Literature from Keio University and an MBA from Waseda University.
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