The Thompson Group - Ten Trends Driving Marketing Transformation

	Ten Trends Driving Marketing Transformation
Marketing as we know it is undergoing fundamental change. A number of factors are driving this transformation, including changes in customer behavior, the proliferation of communication channels, ever-changing legal constraints, and the rapid evolution of technology. To differentiate their products and stay ahead of the competition, marketers must recognize and understand the implications of this new paradigm. With this in mind, we provide a perspective on the trends propelling marketing transformation.
1. Outbound marketing channels continue to decline in effectiveness. Response rates from traditional outbound marketing channels, such as direct mail, phone calls, and e-mail, are declining compared with historical averages. Most businesses today experience average response rates of less than one percent (conversion to customers) from their direct mail efforts. Although e-mail has higher response rates (open rates of around three percent), the number of respondents who actually buy is much lower than that. Driving this trend are "interruption-based marketing" tactics—such as telemarketing, spam, internet pop-ups, and mobile phone campaigns—that deliver messages that are irrelevant to the majority of recipients. As a result, much of outbound marketing has become a nuisance to customers and will continue to saturate their attention and sour their mood.
2. Changing regulations are increasing the cost and complexity of outbound marketing. New regulations—such as national "Do Not Call" legislation, data privacy acts, and anti-spam regulation—are forcing marketers to rethink their customer outreach efforts. Companies will need to understand the impact of new regulations, and then develop specific processes and capabilities to ensure compliance with changing local, state, federal, and international marketing regulations. The potential consequences of non-compliance are enormous and include fines that could destroy the value of marketing programs altogether.
3. The rise of inbound channels is changing the marketing mix. In the face of the declining effectiveness of outbound channels and evolving regulations, leading companies are adjusting their marketing mix to better take advantage of inbound customer interactions. Inbound communication channels, such as call centers, the Web, and branch locations, are effective marketing avenues that drive revenue growth from existing customers. Inbound marketing leverages customer-driven interactions such as service requests, product inquiries, and order placement by delivering a cross-sell, up-sell, or loyalty offer at the moment of customer contact. These real-time interactions create opportunities to present messages that reflect the most up-to-date needs, preferences, and priorities of each customer. According to the Gartner Group, inbound marketing efforts produce response rates ten times greater than those of batch outbound campaigns. The key reason: During an inbound interaction, the three most important commodities are already in play, namely the customer’s time, attention, and permission . Rather than being interrupted, the customer controls when the interaction occurs and, more importantly, provides the mindshare necessary to receive the message. The result is an uncluttered interaction with the customer, which leads to better response rates.
4. Real-time analytics are propelling operational marketing decisions. While decisions about batch outbound interactions may be made in a matter of days or weeks, inbound interactions require decisions to be made instantaneously. The move to inbound marketing requires real-time analytics. What product should be recommended while the customer is on the phone? How should a complaint from a high-value customer be handled? What opportunity is presented by a meaningful customer event? Scenarios like these require data on the customer’s most up-to-date interactions, preferences, and priorities. These scenarios also require real-time analysis and decisions that can anticipate the customer’s behaviors and needs. As a result, marketers will progressively move away from batch analytics and towards real-time analytics.
5. Marketers are relying on permission marketing to maximize outbound opportunities. In the face of declining effectiveness and evolving regulation, savvy marketers are not abandoning outbound channels completely. Rather, they are getting smarter about how to use channels such as direct mail, e-mail, and telemarketing. Marketing leaders are adapting to changing regulations by implementing permission-based marketing tactics and automating legal restrictions into their marketing practices. As a result, they are maximizing their ability to contact customers who are open to outbound messages. For example, the “Do Not Call” regulations have exemptions allowing marketers to contact customers when they have an existing business relationship. Also, even though the national “Do Not Call” list is expected to have 60 million numbers, there are over 166 million residential phone numbers and 147 million cell phone numbers in the US—meaning there are still many prospects for savvy marketers to identify and call. Since this is the subset of prospects who have not opted out from receiving calls, marketers may even experience a higher response rate than they did prior to the regulations. Marketers who are careful about compliance will be able to take advantage of these outbound opportunities — maximizing the number of customers to contact at any given time.
6. Customer events will trigger outbound marketing contacts. Another way that marketers will continue to make outbound channels relevant is by taking advantage of customer events that signify meaningful moments in the customer relationship. Birthdays, marriage, childbirth, promotions, anniversaries, and graduations are only a few of the important events in a customer’s life. These events represent opportunities for businesses to offer products or services in a timely and relevant fashion. Event-triggered marketing has proven to be a powerful way to maintain a customer dialogue and capitalize on these meaningful moments. According to the Gartner Group, event-triggered marketing efforts produce response rates five times greater than those of batch outbound campaigns. As software becomes more sophisticated, providing event analysis, event detection, and behavioral patterns, marketers will re-engineer the vast majority of outbound marketing activities from batch to event-based processes.
7. Marketing programs are shifting from acquisition to retention and cultivation. Many businesses are caught on the acquisition treadmill, where disproportionate investments in customer acquisition programs translate into reduced spending on customer loyalty initiatives. This unbalanced investment strategy leads to high churn rates, which in turn stimulates the need to acquire more customers. It is an ugly cycle that produces marginal long-term results. As outbound customer acquisition becomes increasingly regulated, costly, and less effective, marketers will finally get off the treadmill. These conditions will force them to realize the value of keeping and growing existing customers. In order to make this transition, marketers will need new tools to plan the customer’s experience, deliver timely communications, and react to changing behaviors.
8. Direct response advertising is driving customer acquisition. Although marketers will focus on cross-sell and retention, businesses will still need effective ways to acquire new customers. However, privacy laws now require gaining the permission of many of the most attractive prospects in order to market to them. As a result, marketers will increasingly use direct response marketing campaigns to drive customer acquisition. Leveraging traditional advertising media such as billboards, Web banner ads, magazines, and “infomercials,” direct response programs will guide customers to inbound channels such as call centers or the Web, where they receive further information, individual attention, and personalized offers.
9. Coordinated channels are driving marketing leadership. Customers don’t distinguish a business by its various communication channels. Whether interacting through the mail, via a Web site, or with a call center representative, the customer views the business as a single coordinated entity. Many businesses, however, use distinct and separate processes for communicating with customers through different channels. A customer may receive a marketing offer in an outbound mail piece, while the company’s inbound channels—the Web site or call center—may have no way of providing further information or fulfilling the offer. Next-generation marketing leaders will synchronize outbound and inbound channels to provide a single voice and improve overall response rates.
10. Marketing is powering the customer integrated enterprise. Perhaps the largest change affecting marketing is the breakdown of the traditional silos of sales, service, and marketing. In the past, CRM focused on automating the functions of various departments in the front office—first the sales force, then the call center. These efforts often reduced costs and delivered new efficiencies, but they lacked a marketing-driven focus to understand and build the value of each customer relationship. In many cases, these efforts increased the disjointed experience the customer received over every channel. As a result, more often than not these CRM projects resulted in an undifferentiated customer experience—one that failed to build loyalty, strengthen profitability, and deliver competitive advantage. Now, however, the customer relationship is at last being given the care and attention the term “CRM” has always implied. As opposed to focusing only on the automation of internal activities, the new generation of CRM is outward-looking and customer-facing. Indeed, the success of CRM now hinges on building a customer integrated enterprise that embeds marketing intelligence into every customer process to ensure the customer experience is optimized during each interaction.
Source: CIO Forums (CIOForums.com)
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