What's New in Marketing - Issue 47, April 2006

http://www.wnim.com

Do you know about MOA?


For this article MOA refers to Modelling, Optimisation and Automation, and if you don’t practice it on your online market, you too may be extinct. For online marketers, modelling, optimisation and optimisation are the key to success in many disciplines from search engine marketing, e-mail marketing, online advertising and website marketing. This article focuses on the last of these, improving website performance through MOA, and in particular website-based personalisation.

We will take a quick look at what M, O and A, mean in the context of personalising a website and then will look at specific methods to deliver tailored marketing messages to the individual. The key to success with web personalisation is delivering “anticipated, relevant and personal messages”.

“Anticipated, relevant and personal messages” is the mantra from Seth Godins 1999 book ‘Permission marketing’ (http://www.permission.com/). This still very much holds true today and is becoming more of an imperative as online competition increases. Given this, it is surprising that relatively few good examples of web-based personalisation practice exist. It’s doesn’t take long, when discussing this topic, like in my Improving Your Results from Digital Marketing (www.cim.co.uk/1138) workshop before someone starts raving about the classic Amazon ‘Customers who bought book X also bought about book Y’.

But Amazon have been doing this for nearly 10 years now, why haven’t many other companies caught on? Well perhaps they have, and this is a silent revolution which is not driven by agencies, but internal web design teams applying business rules or integrating automated personalisation servers into web-interfaces. But there is also the issue of cost, many personalisation systems which were developed in the 1990s were expensive and there are still sophisticated, high-end systems available. But I will also show in this article, that there are now many more cost-effective solutions available to smaller companies. In some cases, real benefits can be gained by handing coding simple business rules to display messages.

Modelling website personalisation

It is important to develop models to help achieve effectiveness in digital marketing – it is about ‘doing the right thing’. For example, are you maximising the number of visitors you are attracting to your site, given the market potential.

Modelling is about using the right data sources and models to make sure you are reaching the right audiences and converting them to the right outcomes – this is about efficiency – ‘doing the thing right’. Modelling is supported by research into online audiences.

Web personalisation is all about improving your numbers. Modelling can help you “Size the Prize” of your investment in web personalisation. You can apply simple conversion models like that below. Models can show the potential audience through using audience services like Hitwise, Netratings and Comscore or tools like the Google Traffic Estimator.



Model for evaluating effectiveness of different referrers for different site areas

The best models for the web do not simply look at overall site conversion rates, but look at different types of conversion rates:

  • For different visitor types – Prospects and customers, male and female, small-business and large business and other segmentation variables based on profiles.
  • For different lifecycle stages – New visitors and returning visitors, first time purchasers and regular purchasers, active visitors and dormant visitors.
  • For different visitor sources – Visitors arriving directly on the site through typing a URL or bookmark, those referred from a search engine or even those from Google who type a particular keyphrase.
  • For different site sections – Different areas or channels of the site for different markets and products.

Conversion models should also separate out bounce rates (identifying how many immediately leave the site), conversion to opportunity or quote and conversion from opportunity to sale. That way we can dissect our customer journeys and find out how, where and why we are failing to convert more visitors.

Understanding the effectiveness of web personalisation really requires us to grapple with these conversion rates.

Optimisation

In contrast to modelling, digital marketing optimisation is about improving the Efficiency of our digital marketing or ‘Doing the Thing Right’. It is about:

·                Reaching more of our target audience

o              At a lower cost

§                With the most appealing proposition

·                So converting more of them to our defined outcomes

Web-based marketing specifically, is about:

·                Reaching the right people

o              At the right time (in their customer lifecycle or journey)

§                With the right message

·                So converting more of them to our defined outcomes

Technically speaking, an optimisation process identifies values of independent variables which result in the maximum (or minimum) value of one or more dependent variable(s) of a value or measure of merit relationship.

For web-based personalisation, the dependent variables, or what we seek to achieve are usually:

  • Clickthrough rate on a message or banner
  • Conversion rate to quote, sales or other outcome

The independent variables are the different factors we combine in our marketing all the time to get the result. Automated tools enable us to test, for a single piece of creative such as a banner, independent variables including:

  • Creative or visuals
  • Formats (e.g. Animated GIF against Flash)
  • Messages and copy

Together these enable us to explain our proposition best in terms of its:

  • Pricing
  • Product
  • Promotions
  • Place (response mechanisms such as web or phone)

Potentially it enables us to vary key elements of our marketing mix, in real-time to find the combination which work best.

Across the whole website, the independent variables are:

  • Position of different ads units and other content elements on different pages or across different pages
  • The characteristics of the visitor, as explained above
  • Relationship strength (prospect and customer)
  • Segment type
  • Visitor lifecycle stages
  • Referral source
  • Other customer profile details
  • Technographics, such as screen resolution or browser

Automation

Like optimisation, automation is about improving the Efficiency of our digital marketing or ‘Doing the Thing Right’.

Automation is achieved through taking modelling and optimisation to the next level, such that relatively little human intervention is required. A software tool can be provided with some objectives and parameters and it then automatically adjusts to achieve a goal known as the objective function.

With web-based personalisation, we have two main choices to achieve optimisation, these are:
1. Heuristics, or basic business rules which determine the creative shown. This basic automation often uses a well known relationship-based approach to base this on according to whether a cookie has been placed on the visitor’s PC. While some visitors delete cookies, this approach still works well, because sufficient numbers don’t.

A classic approach, for example used by easyJet is:

A. No cookie – show country selection page, then show page showing main offerings (i.e. not just flights, but also car rental and hotels).

B. Cookie, not purchased – take straight to country home page.

C. Cookie, purchased – take straight to relevant products, e.g. flight from last-booked airport.

Alternatively, B and C can be based on a log-in rather than a cookie, but a cookie is likely to be most effective. You need to be careful about how you explain the use of cookies. BA (http://www.ba.com/) is very straight about this, but it does seem to get in the way of the user experience.

This approach can be taken further by simply allocating an area of the screen for a personalised message and populating it with basic message about the benefits of the site, current promotions or offers relevant to the individual. A good example is CIPD (http://www.cipd.co.uk/) which shows different messages to different types of visitors and members to educate them about available services.

Another example, is where fashion e-retailer Net-a-porter.com (http://www.net-a-porter.com/) can potentially deliver different messages according to the search phrase the visitor arrives using from a click on the natural listings of a search engine. This can be achieved by scraping the Google search term from the http:// referrer string. Alternatively, they can use Google Adwords to drive visitors to a tailored landing page.

I won’t describe rules-based personalisation further in this article, but you can see that there is a lot of potential as a means of delivering relevant messages to different audience without the need for installation of expensive web-based personalisation tools.

2. Dynamic or real-time personalisation. With this approach, the message is tested and reviewed continuously and the version that performs the best based on the objective function (clickthrough or lead or sale) for a particular user is displayed. Technically optimisation occurs through randomly serving a control message and then varying the test message, until it is creative treatment and message performs best for different audience characteristics. Of course, choosing the right control is important. It is possible to use a ‘champion-challenger’ approach to assess rival creatives to see which performs best.

This is the most complex type of personalisation and the remainder of this article will focus on this.

Dynamic or real-time personalisation technology is typically applied on media sites or on destination sites. For example, the FT uses Revenue Sciences (http://www.ft.com/) to target its audience through behavioural targeting of its display ads for its advertisers.

On destination sites, software such as that from Touch Clarity (http://www.touchclarity.com/) has been used by banks such as Lloyds TSB (http://www.lloydstsb.com/) to deliver targeted messages to its customers and prospects. If you visit Lloyds TSB (http://www.lloydstsb.com/) and refresh the screen, you will see how some of banners, buttons and text-based offers vary.

Note though that such an effect can be produced simply by rotating different offers using conventional ad-serving software. The difference being that the clickthroughs are not monitored in real-time and then the banner updated. This approach, although not strictly personalisation, has great merit in that more messages can be displayed to the audience than for a site where each page has static content, so there is more probability that more a relevant message will be displayed at some point on the site.

The halfway house between these two types in terms of cost and complexity is A/B or split testing, where alternate visitors are shown different creative in order to determine which combination of creative and message works best. Different creative options are automatically served and tracked, but there is no immediate feedback loop to permanently update the creative as for real-time personalisation. Instead, the results are manually reviewed and it is decided which creative to serve in future, either statically or a rules-based approach.

Different approaches to dynamic real-time personalisation

So that’s the theory, how do we make real-time dynamic personalisation happen? Well, most companies, even early adopters of such marketing technologies are only in their infancy of using this technology. There are varying degrees of sophistication in which they can be used.

In the final part of this article, we will describe some of the different approaches and challenges of deploying these tools. Many of the challenges are related to the extent of the incremental returns through deploying personalisation, i.e. is it worth it compared to simply applying heuristic rules or rotating banners.

Where on the site are personalisation tools deployed?

Often, the use of personalisation tools is limited to the home page, or some of the other most popular areas on the site. This is often resource-constrained since each additional personalisation slot on a site will attract an additional fee. Furthermore, substantial human effort is required to initially configure and calibrate the tools and then to review performance relative to other creatives. On pages deeper in a site, there may not be sufficient visitors or responses to constrain the personalisation model since they may use many variables and require a reasonable sample size for each. If this is the case, there will not be sufficient incremental benefits from deploying the tool.

Overlaying heuristics

There may be some independent variables that cannot be readily included within the personalisation model. For instance, the prospect vs customer is a key division on many sites. In this case, it will be beneficial to have a separate personalisation algorithm running for both prospects and customers. There are practical difficulties in making this happen.

What are you optimising on?

While it is straightforward to use clickthrough rate on the personalised area as the dependent variable, what is really relevant is whether visitors convert to the outcome such as quote or sale. This requires the personalisation system to interface with the quote or sales system to assess this. Optimising on outcomes or user-actions is the way forward if the technology infrastructure permits it.

Screen layout

How do you optimise, this since the personalised ads need to be in the best position to perform. Different tools such as Optimost (http://www.optimost.com/) can be used to evaluate alternative page template layouts.

Banner blindness

Most web users suffer from banner blindness. We naturally screen out anything that looks like an ad. Witness the average clickthrough rate from a banner or skyscraper (typically less than 0.25% clickthrough on a portal according to DoubleClick (http://www.doubleclick.com)/). This is a real problem for real-time personalisation approaches which often rely on image-based banners. So, it is important that the creative does not look too banner-like. This often means adding in text, which then requires additional space. Additionally, it is important to make the ads fit in with the branding style of the site. If the images, colours and typography of the personalised content are consistent with the main site, then this will improve response.

It may also mean using text-based ads similar to Google Adsense (www.google.com/adsense) such as those on my site (http://www.davechaffey.com/). These often get higher clickthrough rates (in the range 0.5 to 5%) in my experience. Lloyds TSB uses this approach for the offers on their home page, so as not to not make them too ‘ad like’.

Size matters!

Given what we have said about banner blindness, this often requires large panels to deliver the message. This takes screen real-estate away from other applications which might collectively give a better response.

Cross-selling related products

Real-time personalisation tools seem to be often deployed on the most popular site pages, but there must be great opportunities to deploy them deeper in the site to show the ‘next-best product’. Tools such include e.Piphany and Eloqua. A similar approach to Google Adsense could be used here since it automatically detects the content of a page and then displays relevant messages based on trialling different messages and then assessing their clickthrough. For example if you visit the channel on my site about E-mail Marketing (www.davechaffey.com/Total-E-mail-Marketing), you will see ads specific to this topic.

Integrating with campaigns

In addition to the alternative creatives that are rotated, there will be other key messages you wish to deliver to your audience, particularly those related to campaigns featured prominently in offline media. The web manager also has to decide what precedence is given to these since the synergistic effect or receiving the same message in different media is an established approach of integrated marketing communications. Personalisation tools usually have the facility to weight certain creatives, and some can be set to 100% such that they are delivered all the time. Higher frequency can give a better result.

Which products? Which promotions?

One approach that can work well is to rotate the less commonly featured products in the smaller personalised ads.

What about frequency dilution?

In most media, testing shows that the more time a person is exposed to a message, the more likely they are to recall it and also act on it. With the rotation involved in this personalisation, there is a risk that an optimal frequency of 3 or 4 is not reached.

Following the customers on their journey

When behavioural targeting is applied for online advertising, one of the key benefits is that ads can be displayed specific to an individual across the site, rather than them seeing different ads on different pages which reduces the frequency. It would seem that such an approach would work well on destination sites for travel or e-retail, but because the personalisation is not used across the run-of-site, it seems as if often this is a missed opportunity.

Integration with CRM systems

Surprisingly, many personalisation systems such as Offermatica (http://www.offermatica.com/) or TouchClarity have not been integrated with the CRM systems for technology, resource or cost reasons and often all three. When messages are delivered according to the purchase history, product holding and characteristics of the customer, they are likely to perform much better. With CRM vendors such as ePiphany (http://www.epiphany.com/) entering this market, such integration should become more common in future.

How much does all this cost?

We have seen that this technology does not come cheap, particularly when deployed across a site. Given this, we are likely to see lower-cost entrants since it is a technology that could be relatively easy to implement. Large in-house teams may find that this is so important in the long-term that they develop their own modules for this purpose which are developed specifically for their needs and which avoid the long-term on-costs.

It also seems likely, that facility will be built into content management systems or e-commerce catalogue solutions rather than requiring integration of separate tools. For example, Debenhams uses Blue Martini (http://www.bluemartini.com/) for its online CRM system. This software gave Debenhams the capability to monitor and personalise the way customers navigate around the site. By tracking browsers Debenhams can build user profiles and push relevant promotions or change the feel of the site according to individual shopping habits.

Conclusion

So, the application of technology to some aspects of digital marketing can increasingly make a difference to who is successful and who isn’t. While human knowledge, experience and skills are fortunately required for many creative aspects of marketing, there are some areas where selecting the right technology can make a large difference.

Next month

We will look at another type of optimisation in the next months article, this time search engine optimisation. An online marketing approach that is critical to all companies across all sectors and all sizes.

About the author

Dr Dave Chaffey is workshop leader for a range of one-day e-marketing training workshops from the CIM:

Go to http://www.cimtraining.com/ for course details and online booking.

Dave Chaffey is trainer and consultant for Marketing Insights Limited (http://www.marketing-online.co.uk/). He is a prolific e-business author whose books include ‘Total E-mail Marketing’, ‘Internet marketing: Strategy, Implementation and Practice’ and E-business and E-commerce Management.

Read Dave Chaffey’s blog (http://www.davechaffey.com/) for E-marketing Essentials – the 5 “must-read” articles about online marketing from the hundreds Dave reads each month.

Tough at the top? It’s even tougher getting there for a small company …

Although we often read in the press about a small company winning a massive contract with a large multi-national or government department, the reality is that this is the exception rather than the norm. The fact that it has hit the press as a newsworthy item says it all.

It is not easy for small companies to win contracts against larger competition but it is possible and the good news is once you have got the hang of it, it does becomes easier… just.

Our experience at Maxsi, where we regularly win orders with big name clients against tough competition from across the world shows that it can be done.

The one essential ingredient that a small company requires to be successful against larger competition is confidence. If you as an organisation are not confident in your own abilities to take on a larger competitor then you might as well not bother. Your lack of enthusiasm will permeate throughout your presentations and meetings with prospective clients and will eventually lead to a predictable outcome. Confidence on its own will not guarantee that order but without it you are going nowhere. Unless you are extremely lucky, you will from time to time fail to win orders from large customers, even if you offer the better proposition, for no other reason that they prefer the competition because it is larger than you. You need the confidence to pick yourself up and go for the next one. It’s not fair but nobody’s going to listen, least of all your next potential client.

To be successful we have to be the same as our competitors and yet at the same time be different. So how do we manage to achieve the impossible? First, we aim to have as many unique design features and functions over our competitors’ offerings which will give our customers tangible benefits from using our service. Secondly, even with these advantages we need to ensure that in a head to head we match all our competitors’ features and functions.

But if your product or service is similar to a competitor’s then how can you differentiate yourself? The answer is the small company’s secret weapon, the one area where being small works to your advantage, the soft underbelly of your large global, multinational competitor: flexibility. Although a lot of large companies can be satisfied with off the shelf products and services they often have special unique requirements that require a custom approach. A lot of your larger competitors will either not be able to provide that flexibility or use it as an excuse to exploit the customer with extortionate pricing. If you can convince your potential clients that your flexible, personal, adaptive, caring, responsive approach will give them the results now and in the future you are onto a winner.

So far we haven’t discussed pricing and to be honest it isn’t important. It does help if you are just underneath your competitor’s price but being miles under or over does tend to work against you … just think about it.

The main reason a large company will be fulsome in its praise about your excellent proposal, why it will wax lyrically about your beautiful presentation and then give its order to your larger competitor is risk. A large company will consider placing an order with a small company as risky and will often play safe by placing it elsewhere.

To counteract this tricky problem develop a number of strategies to help reduce your potential customer’s perception of risk with your proposal. Some ideas include short term contracts, trial periods, pay as you go, inclusive support and maintenance, extended warranties, financial guarantees and certification.

Depending on your product or service you may find it easier to have successes with larger companies by working with resellers. For reasons I don’t profess to understand some large organisations will not buy products and services direct from a small company but will buy the same products and services through a reseller.

One factor that does improve your chance of selling to a large company is your track record of working with large companies. But before you start shouting at the page there is a way you can kick-start this process. It does work. It is how we got started. When we first developed eVisit Analyst we offered it to three well known large organisations to use it free of charge for a year. They accepted. The rest as they say is history.

So although it is difficult, it is possible and it is worth it. Working for a small company there is nothing to quite match the feeling when you land that big order from a large company from under the noses of your large multi-national competitor – marvellous.

About the author

John Harrison is CEO of Maxsi Ltd. Maxsi Ltd has developed the eVisit Analyst (evisitanalyst.com) range of advanced website analysis systems used to great effect by a number of blue chip companies. eVisit Analyst is used by clients in an array of sectors, ranging from business, local government, charities, financial services and academia. 


The meaning of marketing life

Last week I caught a glimpse of the popular American TV show ‘American Idol’.  The short-listed contestants vying for centre-stage of the spotlight that is ‘celebrity’, were being coached by one of the great All-American entertainers of all time – Barry Manilow.

Each contestant was a gifted singer.  Yet, when Manilow listened to their creative interpretations of various classic hits from the 1950s, he explained that ‘belting-out’ a tune – even sweetly – was not enough.  A great creative singer had to appreciate the meaning of both music and lyrics. 

He went through the songs, line by line, discussing the relevance of each tune’s story.  Once done, the performers tried again. This time, the performances touched more than a heartstring; they resonated with conviction.

The programme reminded me of the old days of purely process-driven direct marketing.  I remember people like Bird and Brann advocating that as long as you included words such “Yours Free” in a direct mailing, you were on the path to planned enlightenment.  Yet today in order to produce meaningful marketing communications, words alone are not the route to Nirvana.

Whether you want to be a copywriter or brand director, landing a ‘dream’ marketing job with the aim to bask in the career spotlight is the goal of many.  Yet, in everyday practical terms of sitting at your desk separated by a flimsy office screen behind which you hear the occasional ‘ Have a nice weekend?” question from someone who has an eye on your mousemat, there are days when the whole thing appears process-driven rather than driven by the heart.

Cynicism sets in.  The original purpose why you pursued a glam skinny latte-stirred career gets stuck in a guano-like mound, serving only to nourish parasitic political adversaries.

Forget the rules. Search for the meaning

Speaking to pre-cynical ‘newbie’s’ in marketing about fundamental processes such as AIDRA  (Attention. Interest. Desire. Reasoning.  Action.) and DAGMAR (Defining Advertising Goals for Measured Advertising Results), I am urged to explain ‘bare-bones’ processes required to get specific aspects of a job done.  Whilst the understanding of such methodologies is vital to any serious career-minded marketer, ‘rules and regulations’ are not ends in themselves.

Too often graduates in marketing become such specialists in specific nuances marketing that they end up working in isolation of other aspects such as research and data mining. (Both taking equally vital roles in the theatre of business).

Rather than compartmentalise talent, organisations need to encourage individual as well as team enterprise and initiative. 

They can kick off by re-visiting the lyrics of old timers like Porter’s Forces, Ansoff Matrix, Maslow and Balanced Score Cards et al.  They could muster the confidence to look ahead by investing, mentoring and challenging talent, rather than look back in anger.

Old rules. New game

A few years ago, thanks to original thinkers like Seth Godin, one of the oldest principles in human communication, ‘tell a friend about something which makes him feel good and makes you look good’, was given new meaning, reinterpreted into ‘Viral Marketing’.

Many reexamined the premise that “the medium isn’t the message – the message is the message”.  The result was that whilst a good, simple, single-minded message remained ‘king’, the medium, such as a downloadable mpeg or Podcast, made an alluring ‘queen’. 

Today the big idea no longer fashions the delivery of a marketing campaign. Instead, the delivery (medium) refines the original creative concept.

Looking for real meaning plays a particularly significant role in marketing metrics.  Classic measures such as econometric modeling, alone no longer explains why marketing ‘Atlases’ like Coca-Cola have a market capitalisation of $100 billion, yet a ‘book’ value of just $16 billion (2005). Or Procter & Gamble shows a similar book value of approx. $16 billion, yet a market capitalisation of $142 billion.

Researchers are being forced to take their noses out of Excel spreadsheets and put their ears to the ground, uncovering the meaning of data from the point of view of real-life consumers.  In other words, understanding not just the relevance of Brand Equity, but meaningful ways to measure its significance.

Reach out and touch

One popular method is to consider ‘touch-points’.  These represent every conceivable occasion a consumer has to interact with the brand.

For example:

·                TV.

·                Web.

·                Phone.

·                Radio.

·                Newspapers.

·                Billboards.

·                Transit.

·                Internet.

·                Promotions.

·                Shopping experience.

Once research uncovers such data, the imaginative marketer incorporates it into a practical, meaningful creative interpretation communicated throughout the marketing communications mix.

Don’t misunderstand me. I am not one for ‘throwing away the rulebook and starting from scratch”.  I simply believe it’s time to realise that whilst it would be wonderful that everything in life worked according to textbooks, the moment has arrived to become a marketing alchemist; mixing theory with meaningful practice.  Once done, each and everyone of us will be in the position to add our own beat to the rhythm that is life, rather than remain stuck in a bygone era when everyone asks the same routine –wearied guy in the bar to “play it (yet) again”.

About the author

Jonathan Gabay is on CIM’s core Faculty.  Be sure to visit his website: www.gabaynet.com


How New Economy Thinking can revitalise the motivational marketplace

Back in the days of the dotcom phenomenon, new economy companies burst upon the scene and upset the status quo within many traditional industries.  The likes of e-tailers Amazon and Play.com took consumers out of the High Street and onto the Internet, while companies such as Salesforce.com have empowered companies with web-based on-demand services previously the domain of large, monolithic software applications.  Critically, new thinking and approaches made these companies 'disruptors' within their market, forcing the established companies to change their approach or falter.

Nowadays, in a time when the 'New Economy' has matured into the 'Knowledge-Based Economy' and 'Web 2.0', those companies previously known as 'dotcoms' have become as ubiquitous to business life as any established player - posing the question of which markets might still be affected by the relentless rise of the Internet.

The motivation and incentive marketplace is one such sector where change has been slow to come.  Traditional employee reward motivation activity has long been viewed as an area very much in the 'if it ain't broke, don't fix it?' mould.  So how can the Internet make a difference in such a sector?  The same question might well have been asked when the founders of the now-successful dotcom companies first put their business plans before Venture Capitalists. 

Where a traditional market exists which is set in its ways, such as the motivation and incentives space, a Disruptor company can have a significant impact.  The established companies in the marketplace inevitably view the entering Disruptor with large levels of fear, uncertainty and doubt, and since they are used to operating in a habitual, largely conservative manner, they are consequently resistant to change.  Traditional motivation companies are not used to operating in the same environment as companies with radically different business models as the online players - and it upsets them.  They now have to contend with a lean, mean challenger: competitors with new business strategies based around continuous change and innovation, lower overheads, alternate pricing structures, thin supply chains and dynamic fulfilment operations.  It's a daunting scenario for companies that have been used to having things all their own way.

Innovators do exist in the motivation and incentive sector, and these innovators are embracing technological solutions in order to bring the industry into the 21st century, with services tailored to the requirements of modern business.  Lessons have been learned from the dotcom era, and companies that operate online are more than aware that a business model must be solid and sustainable. 

It is safe to say that the motivation and incentives sector was initially slow to embrace change and to recognize that online incentive applications were of great value to customers.  The market is now developing rapidly, with organisations of all shapes and sizes looking to move away from the established, traditional devices such as paper-based voucher schemes or catalogues.  As the recipient of the award becomes increasingly tech-savvy and Internet-reliant in their daily life, so must be the mechanism for motivating them.  Web-based incentive applications offer a gateway to a range of possibilities which conventional incentive activity simply cannot provide; they allow the customer to not only reward their employees, suppliers or dealers, but also to engage with them: an online communication channel which gives them constant contact with their network of staff or partners, allowing them to gather feedback, conduct product surveys, carry out staff or customer satisfaction surveys or communicate company news - the limits on communication are set only by the imagination.

In welcoming technological advances to the industry we not only embrace and celebrate change, but offer the customer that most important of elements - choice.  There will always be a place for traditional incentive activity, but web-based incentive and reward solutions can deliver greater value; paper schemes for example will never be able to offer the benefits of market intelligence gathering or product knowledge surveying that online systems can. New ideas and processes can revitalise the sector, and grow the market by attracting companies who have never considered staff and partner motivation before. The evolution of an industry keeps the customer interested and keeps the market growing.  Online incentive schemes which engage the user in an ongoing communicative process and which do more than just reward are the future of the motivation industry.

About the author

For further information on IncentiveDirect and iD-points, please contact :
Steve Harris
Mulberry Marketing Communications
Tel : +44 (0) 20 7928 7676
Email : sharris@mulberrymc.com

 

Public sector – politics or marketing?

Last month I wrote about public sector marketing, and this month I’m continuing the theme. I’ve just started to prepare my teaching for next term, for Brunel University, one of the universities where I am a Visiting Professor. I’m teaching a course in marketing for the public sector and for politics. It fits very nicely with my professional development (yes, I’m still developing even though I’m 58 in July). I joined WCL in January with a brief to broaden the type of work it does – primarily change management projects in central government – to include more private sector work. It’s gone very well, but paradoxically some of the most fascinating work I’ve been doing has been on two projects in the public sector. One project was on familiar territory. It involved seeing what could be done to improve customer management in an agency whose job it is to provide information – mainly to other government departments but also to a few commercial customers. For that work, I used WCL’s Public Sector Customer Management Assessment Tool, which I helped develop. The other was on less familiar territory – examining the central government fund allocation process for one of the most important areas of public activity and producing a paper to explain it to the world. And that’s where I got a shock.

In the private sector, much has been done to improve governance – in particular to clarify where funds are going, why they are going where they are going, the results produced and who was responsible for them, the opposite has been happening in central government. However, this trend is concealed by clever marketing communications. Repeated announcement of new funding, of the targets associated with new funding, of projects designed to improve efficiency and effectiveness, are all designed to encourage the belief that central government is doing really excellent work on improving the efficiency of the public sector. But two essential conditions of efficiency are missing. The first is clarity of actual funding allocations against areas of endeavour, the second is the link between planning processes and budgeting. In the private sector, quite a lot of progress has been made here. Financial and business planning systems – at least in the best run companies – are designed to show how funding is allocated to achieve particular objectives via particular departments. Of course, in many companies there is confusion and uncertainty, but at least it is clear that those responsible for any weakness – the directors – are accountable for it.

When it comes to central government funding, the situation is very different. I’ve discovered that in central government ministries, individual senior civil servants get their junior ministers to announce expenditure on particular items within overall budgets, not making it clear whether these are additional allocations or just allocations within existing budgets. Often money is given with one hand and taken away with another, with the announcement about the taking away often delayed or buried in a much broader announcement. Nor is it clear how much of the funding actually reaches the front line destination for which it is intended. In many cases, it is top-sliced to provide budgets for the central management posts for the programmes which are being funded, and then top-sliced again at local management level.

All this might be tolerable if funding allocations were tied clearly to achieving improved output in some way. But there is usually a process break. In best-practice private sector companies, securing additional budgets depends on demonstrating what outcomes will be and what money is needed to fund the activities required to produce the outcomes, in central government, the process is often the other way round. A central target is set and funding allocated, and then public sector employees – from central civil servants to local government or agency employees, have to find ways to deliver the objectives with the funding, irrespective of whether the funding is enough. If the activity proposed is substitutional i.e. if it takes the place of an existing public sector activity, it is not surprising that the backwards reconciliation to match activities to budgets usually leads to the conclusion that all the staff required for the old activity are needed for the new one – possibly more.

So it’s not surprising that whatever reductions are proposed in the number of public sector employees, the number is hard to cut. This, combined with the number of people dependent on public benefit, means that the UK is moving towards an electorate where most depend on public funding and where private sector employers and employees have to work ever harder to fund public expenditure. So if you are a public sector employee or public benefit recipient, who would you vote for – the party that stands for a large public sector or the one that stands for an efficient one? Sadly, government marketing communication has been so successful that the challenge has not been taken up by the opposition – they have just folded. What hope for the relationship between marketing and truth?

About the author

Professor Merlin Stone is director of WCL Consultancy. WCL helps large companies and public sector organisations plan and implement change. To learn more about WCL please email info@w-c-l.com or call +44 (0)207 7593 5760

Battle of the brands - The new look competition in the energy space

Deregulation had an unusual effect on the energy market. Initially it opened the doors for competition, a flood of new entrants burst on to the scene and the scramble for market share began. However, many of these smaller companies had little brand clout and minimal marketing budget to fend off the well-established players. Many fell by the wayside or were bought out by their larger, established counterparts.

All in all, the incumbents retained their dominant positions at the top of the utilities food chain. In the circumstances, it’s understandable if some began to feel secure in their position and even complacent about their dominance. But complacency in any market is a dangerous state of being. The incumbents may have won the battle to stay at the top of the energy and telecommunications ladders, but the war is far from over. There is a new threat on the horizon and utilities companies would do well to keep looking over their shoulders.

New competition has arrived in the form of big brands, diversifying their offerings to branch into the utilities space. Using an instantly recognisable and trusted brand name and an established relationship with millions of customers, many household brands are making the move into new territory, offering " home services" in the form of gas, electricity and telecommunications. Many incumbents might view this foray as a financial services organisation or retail company’s latest flirtation with non-core services – a bid to further popularise brand name and maximise brand reach, but with little weight behind the proposition. They may assume that this is as lightweight a competitive threat as the initial flood of utilities new entrants. But incumbents must be aware that this is competition in a different form.

Firstly, incumbents shouldn’t underestimate the power of brand. The new entrants are companies like Lloyds TSB with a gas, electricity and telecommunications offering, Tesco with a fixed and mobile telephony offering and the Post Office with a telecommunications offering. These are heavyweight organisations with the type of brand recognition and established trust that many companies yearn for. Leveraging the brand and the trust that the brand inspires, these companies, with the appropriate marketing campaigns, can evolve in the consumer psyche into legitimate energy and telecommunications providers.

Telco incumbents are already under threat. BT has already lost a third of its market share and is now coming under further and sustained pressure from Tesco, the Post Office and Carphone Warehouse.  Having been liberalised first, the telecoms industry is in a more advanced state than utilities, but we can expect to see a similar shift in the energy market as the brands look to expand their home services offerings beyond telephony.

From the consumer point of view, to purchase your energy supply from the same company that is providing you with financial services or household goods is not a quantum leap. Today’s consumers are interested in quality, price and convenience of service. For the ‘cash rich, time poor’, the supplier that provides joined up retail, telecommunications and energy services could be the cure-all. There are other benefits - retail organisations, like Tesco, can link their telecommunications offering into loyalty card schemes, giving consumers loyalty points with their electricity bill, or enabling them to redeem points against bill payments.

Companies in the retail and financial services markets may also be more customer-centric than their utilities counterparts. Energywatch’s recent “super-complaint” criticised the energy industry for over-complex bill formats and for over-charging consumers. The very fact that competition is well established in the retail and finance markets suggests that CRM has been a feature of those environments for a long time. These big brand new entrants could use their customer management skills as a weapon to help wrestle market share from the incumbents.

Another string to the bow of new entrants is the continuity and type of customer communication, which gives them an excellent opportunity to cross sell home services. From Lloyds TSB’s branches where they can chat to their customers about utilities services when finalising a mortgage application, to in-store advertising and loyalty card mailshots at Tesco, these big-brand new entrants have face-to-face communication with customers that few utilities companies can compete with.

So what can utilities do to start consolidating their market positions in the face of this threat? Pour resources into customer retention rather than acquisition. Companies that offer an outstanding combination of price and service have few worries about losing their customers. But this requires continual creativity and a close dialogue with customers. Don’t think, “how can I adapt my current technology?” but rather “what new initiatives will please my customers?” Billing is an area that requires attention: 40,000 complaints to Energywatch can’t be wrong. Companies must get it right – disgruntlement over bad billing pushes customers to the competition. Outsourcing these functions to an expert provider can help – it enables companies to concentrate on designing, rather than fulfilling, an outstanding customer proposition.

Times are good for many incumbents, so they must be aware of complacency. The behemoth brands may well be new entrants to the utilities market, but they are world leaders in serving customers.

About the author

Scott Sunderman is Chief Commercial Officer of Servista, the leading provider of customer care and billing services. http://www.servista.com/.

What’s Wrong with Innovation?

Confectionery manufacturers and retailers are striving harder than ever to achieve sales growth in largely flat markets. With a retail recession biting and dietary trends holding back consumption in many categories, it’s tough keeping the sales graph “heading north”. Confectionery is far from being the only consumer market under pressure, so it’s no surprise that striving for growth is the number one priority for management teams everywhere. According to a recent survey by Deloitte,

“Global manufacturers are …making Innovation their primary source of new revenue growth”. Indeed in every sector surveyed in this 650 firm study, “New Product Services and Launch” was the top growth driver, and “Mergers and Acquisition” was no higher than 5th.

The same survey goes on to predict that by 2010, products representing 70% of today’s sales will be obsolete, and to respond to a shortening of life cycles, companies are shortening their time to market for NPD from 18 months in 1998 to 13 months in 2007.  We think that should be nearer 13 weeks.

There is an over quoted statistic that says about 9 out of 10 new product introductions fail. As far as we can make out, it originally came from an AC Nielsen and Ernst and Young study in 1997. We hear figures of 70-80% more recently, but whatever the true figure for a category or market, anything over 50% surely is an appalling strike rate. The inefficiency and waste of resources, not to mention the damage to brands from disappointed consumers, must run to billions. Innovation depends on a degree of entrepreneurial risk taking, but this level of failure is genuinely unsustainable.

Accelerated, high return, Innovative New Product Development is the answer - the problem is that, put simply, most businesses aren’t very good at it - even the big names want to do better.

In any industry, efficient NPD or Innovation is a key business priority - how many mission and vision statements mention the word Innovation? So why is this crucial process of selecting and managing innovation so often slow, inefficient, and subjective?

At MIH - Make Innovation Happen, we have identified 10 reasons and validated them with over 50 senior marketing and R& D Managers; how many do you recognise in your organisation?

  1. There are often too many fuzzy, objectives running concurrently in a business. Fast moving responses to external factors can mean that strategy gives way to a series of ill defined tactics, and the holistic approach is lost. Soon the business itself loses clarity of direction.
  2. Reorganisation - a constant process, and driven by efficiency, almost always means downsizing. This typically results in a human capacity shortage - no slack left in the organisation to cope with the genuinely new ideas, or the unplanned, unexpected opportunities.
  1. Not only do reorganisations reduce capacity, they usually result in structures that encourage specialisation. Organisational “Silos” are created, with boundaries around divisions and limiting job descriptions around individuals. In short, business functions become specialised and communication between divisions, (often widely geographically separated) becomes an obstacle.
  2. In time these new “silo” organisations mean that the generalist skills disappear. Call it one of the better features of old fashioned brand management, but the “cradle to grave” personal project responsibility and the human enthusiasm that goes with it are fast disappearing as divisional functions and roles and responsibilities are broken down into thin slices.
  3. For some businesses, it’s a cultural issue - we hear “that’s the way we do things around here”. Slow and steady may be the approach, and if that’s the way it’s always been, now may be the time to re-examine, before the other guy gets there first.
  1. Inconsistency of judgement criteria - management code for the fact that people change or people change their minds. Either the individual decision maker moves on and the new incumbent has a different point of view, or the individual stays but moves the goalposts. It may sound simplistic, but often the human factors here can be a real cause of Innovation Inefficiency.
  2. In these uncertain times, the strategic response of many businesses is to stick to their core business. Managing within the comfort zone, or “circling the wagons” is a perfectly understandable response to new macro environmental and competitive threats - uncertainty that cannot be controlled. It does, however, result in a slowdown of Innovation, even though that may not be what is intended by senior management.
  3. When ideas are developed, how well are they developed and how well are they described? Confusion and misunderstanding result when the idea is not clearly expressed in a well thought out and consistent way. Concept based Marketing is a powerful approach as it relies on consumer insight and a genuine marketing drive, but it in turn depends on a well defined concept expression.
  4. It’s tempting, when you’ve been struggling to implement a project and keep hitting obstacles, to return to the beginning of the Innovation process and start again. Brainstorming and idea generation are much more attractive pastimes than project management. For this reason there is sometimes a tendency to think; “ideas are cheap-so why not have another one”?
  5. Consumers are not involved early enough. There can be practical and budgetary reasons why this might be the case, but it’s far from the ideal. High volumes of early stage concepts should be screened using Quantitative research, but at the same time developers and marketers need the insights and understanding that comes with Qualitative discussion. New research techniques, such as our own “Q3” methodology can solve this, using new technology allied to trusted research practices.

There is no “magic wand” to bring acceleration to innovation and to make innovation success odds better than a flip of a coin, but there is one guiding principle we can all bear in mind - do the right projects, and do the projects right.

How? We can help.

About the author

Tim Nicol is Managing Director of The Making Innovation Happen Centre Ltd. MIH is a London-based consumer products innovation company with an integrated research capability.

For more information please visit http://www.mihcentre.co.uk/

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