How next-generation capabilities are delivering winning results in the world of personalizationTHE CUSTOMER CENTRIC MARKETING REVOLUTIONprecimapage 1Retail marketers have been excited by the prospect of establishing a direct dialogue with customers for some time. The concept of one-to-one marketing makes sense: The more you know about customer preferences and needs, the more relevant and enticing offers you can make. In fact, one of the primary reasons for establishing a loyalty program is so that retailers gain the requisite customer information to enable dialogue with customers. The implicit agreement inherent in a loyalty program is that it creates a fair and equitable exchange of value between retailers and their customers: customers share their information and expect relevant communications and rewards in return. In turn retailers expect to see significant improvements in marketing performance and overall sales and profits.But the reality is often quite different; customers report little improvement in the relevance of communications and retailers have been struggling to show demonstrably improved campaign performance. In addition, retailers are now drowning in Big Data, which potentially could improve marketing ROI but also presents the rather significant challenge of how to build the capabilities to make sense of all that data.To compound the situation, customer expectations have increased. The more data customers share, the higher their expectations are for marketing personalization delivered through their channel of preference.In looking at the ROI perspective, the DMA indicates that response rates for most direct communication vehicles are in the low single digits and the costs per response are high.Marketplace dynamics are forcing retail marketers to either adapt or become irrelevantBetter analytics tools and technologies are easing the strategic journey toward true one-to-one personalization.precimapage 2So neither customers nor marketers are happy with the status quo on most of todays direct marketing efforts. Fortunately, with the capabilities of emerging technologies, neither side has to feel helplessly resigned to the current situation. Change is not only possible, its already here. Today, better analytical approaches and improved technologies are easing the strategic journey toward true one-to-one personalization, helping marketers move past obstacles and seize opportunities for generating sustainable growth and earning customer loyalty.Traditional Campaign-Based Approaches Have Not Been Delivering The traditional practice with customer marketing is to take one of two approaches: Either force-rank customers based on past spend levels in order to focus on the top several thousand; or use generic segmentation approaches and treat all customers in the segment as essentially the same individual. The top-spending customers (or other selected segments) then serve as the target for campaigns in which marketers identify offers to send, either to achieve an internal objective or in response to requests from vendors. We understand why many retailers are pushed toward taking these campaign-based approaches. But the force-rank method bypasses customers who may not currently spend a lot but have significant potential for increased spend, and the every-customer-in-a-segment-is-the-same method is an inefficient scatter gun approach. Money is being left on the table and possibilities for significant revenue gains are being ignored. Also, this campaign-based approach demands 0.2%$53Paid Search0.1%$55Email1.1%$54Postcard4%$112Catalog1.3%$51Direct Mail% $Response Rate Cost/ResponseResponse Rates Traditional marketing generates dismal response rates, with new-media email and paid search showing the lowest return of all.Source: DMA 2012 Response Rate ReportMoney is being left on the table and possibilities for significant revenue gains are being ignored.precimapage 3significant time and resources, but lacks the customer-centricity needed to build real, sustainable loyalty. As a result, retailers can only execute a handful of these proactive campaigns each year, or can only be timely in the campaigns if using a trigger-based or simplistic list-pull approach.SetCampaign GoalsDesignCampaignGenerateCustomer ListProduceMaterialsExecuteCampaignAnalyzeCampaignDo ItAgainOne to Two MonthsTraditional Campaign TimeframeOld-school pro-active campaigns are time and resource intensive, limiting retailers to executing only a handful each year.Steps in the Right DirectionIn an effort to push the envelope, some marketers have begun building a richer understanding of “best” and “next best” customer needs, and placing those customers into one of several hundred micro-segments along with a few thousand other “like” customers. Each segment then receives offers tailored to their segments needs, but each of those micro-segment customers receives the same (or a very similar) offer.Although one step closer to full personalization, this type of segmentation rarely justifies the cost. Campaign effectiveness is often measured using reach, response rates or sales resulting from redemptions. Rewarding customers for their loyalty by giving them offers for products they already consistently buy does drive high response rates. But using response rates or sales from redemptions in this context as evidence of a successful marketing campaign could be a little misleading. True ROI should be calculated by quantifying net incremental gross profits. But marketers often find this difficult, and results are frequently minimal when they can be identified. There are even instances of marketers using their creativity to define new success metrics such as Sales ROI, which involves dividing the incremental sales from the campaign by the cost of the campaign in order to quantify an ROI metric, but this metric excludes the actual cost of the product from the “ROI” calculation. Even when marketers use data to discern their customers preferred mode of communication, the response rates are low when the message itself doesnt resonate. In our 2013 Consumer Relevance Study, fewer than half (46%) of Americans said they are satisfied with communications based on their preferences. precimapage 4Customers are not alone in their dissatisfaction. In our 2012 Enterprise Loyalty Survey, nearly half (46%) of the marketers who responded said a top challenge for their organization is better utilization of customer data to get real insight into customer needs for marketing. The Next-Generation Solution A better analytics-based approach now exists for solving the “too much data, too little time, too few resources” problem. The solution relies on a process of advanced customer analysis, creating a win-win situation for marketers and customers. OptimizeEngageAnalytics1-to-1Execution1-to-1DesignCommunicationChannelsReportingTrack,Measure, LearnData & Analytical PlatformLeading retailers engage customers by understanding the needs of individuals and by consistently executing to “best” satisfy those needs. These retailers drive sales through better analysis enabling personalized marketing communication. A system based on a robust data and analytics platform allows marketers to:Analyze all customers individually rather than simply segmenting the top tiersDevelop a holistic understanding of customers needs, their current and potential value and what they respond toEnsure timely, relevant and profitable communications through channel of preferenceThis approach not only ensures that each customer is understood to the greatest degree possible but it also allows for continual updating of customer needs. Each customer is continually rated with a value score based on each product they purchase, combined with their channel of engagement. With this much more refined and targeted awareness, retailers now can use strategic communication that is 100% personalized in every component, from the creative to the products, from the types and magnitude of the offers to the timing and communication channels. Next-Generation Marketing Vision“Best” practices lead to an always-on, dynamic, insight-driven and fully personalized communication process.precimapage 5Needs Life-stage Lifestyle Geo-demographicsValue Current value and behavior Potential value by customer/category Growth opportunities by customer, by category, by storeResponse Offers Content ChannelsEssentials of a Customer-Centric Marketing ApproachCreating an effective framework for customer-centric marketing begins with establishing a customer engagement intelligence platform that can be continuously updated. This platform approach allows marketers to reconcile two sometimes conflicting objectives in a cost-effective manner: how to be highly relevant while also being very timely. The customer engagement intelligence platform incorporates a holistic view of each individual customer: A number of targeted marketing efforts today focus on rewarding loyal customers with discounts on items they already purchase. While this approach can deliver fantastic response rates, it doesnt always drive net incremental sales; as a result, “Thank You” offers like this should only constitute part of an overall communication plan. By understanding where individual customers fall in the current and potential value landscape, a marketer can understand where opportunities exist to both reward loyal customers for existing purchases and encourage incremental upsell, cross-sell and basket/trip building. This level of offer optimization delivers true ROI in a relevant context for each customer.precimapage 6Opportunities for Multi-Objective Personalized CommunicationsOnce a company is up and running with personalized marketing, this leads to many holistic marketing opportunities. Always-on, dynamic, insight-driven and personalized communication based on a customer-centric approach offers the capacity for multiple objectives: 1 Support the business Provide relevant content and offers linked to specific merchandising priorities.2 Drive cross-sell Suggest items that similar customers are buying.3 Drive trial and innovation Support the launch of store-brand products.4 Reward customers and drive response Send “thank you” offers for previous purchases.Defining Marketing Strategy and Optimizing Communications and Offers Customer Potential ValueCustomer Current ValueHIGHHIGHLOWOffer: 1 Thank You 1 Basket Builder1 Continuity1 New Product4 Upsell4 Cross-SellOPPORTUNITYOn-Board & GrowLOW PRIORITYCost Effective ManagementOffer: 1 Basket Builder1 Continuity1 New Product1 Private Brands4 Upsell4 Cross-SellPRIORITYRetain & GrowOffer: 2 Thank You 1 Basket Builder1 New Product4 Upsell4 Cross-SellPRIORITYDefend & RetainOffer: 4 Thank You 2 New Product3 Upsell3 Cross-SellUnderstanding current and potential value by customer by category enables personalized offers to be tailored by engagement level and customer needs. Heres an example that illustrates a very simplified way to think of constructing offers (the numbers represent the quantity of offers) true offer optimization operates at the individual customer level.precimapage 75 Encourage upsell Send targeted offers for more premium products that similar customers are buying. 6 Drive vendor integration and attract incremental funds Deliver relevant brand offers aligned to strategy.7 Reward loyalty through continuity offers to drive visits, spend per visit and monthly spend Tailor thresholds and incentives to the individual customer.A Holistic View of Fully Personalized Communications Next-generation customer marketing offers clear benefits including upsell, driving trial, cross-sell and growing basket size. precimapage 8Managing for Operational SuccessAll of this personalization has the potential to leave marketers feeling a little overwhelmed. If the strategy is managed on an ad-hoc basis without the appropriate capabilities built upon a solid foundation, then the chances of success are diminished. But by building the necessary capabilities, marketers can define customer-centric marketing strategies and plans, consistently deliver proactive and reactive communications that are timely and relevant, and deliver the right reports to understand performance in a timely fashion.DeliversData & Analytical PlatformCustomer Responsewhich drives optimization of marketing investmentsCustomer Needswhich drive relevance of strategies and tacticsCustomer Valuewhich drives prioritizationof customers and opportunitiesData AssetsSales DataShopper DataMarketing DataFuelReal-Time Analytic AssetsPredictive ModelsProduct AssortmentOffer ResponseCross-SellUpsellCustomer ScoringFuelUser BI SoftwareDashboardsScenario / SimulationCampaign ReportingShopper ReportingMarketing Personalization EngineBusiness RulesBanner/Brand StrategiesEconomic PrioritiesExpected BenefitTactical CampaignsUser InterfaceTrigger EngineInputDeploymentChannelsPrintDigitalMobileSocialInputExecutionNext-Generation Marketing Execution An integrated customer-centric marketing solution moves smoothly from strategy to delivery to reporting, with dynamic updating.precimapage 9A Phased ApproachRetailers who are already gaining significant results using this personalized approach didnt get there overnight. Think of it along the lines of human maturation. First we crawl, then we walk, then we run. And before we can begin crawling, we must decide that were tired of sitting in the same place and want to move from a frustrating status quo toward an integrated solution that engages customers, nurtures their loyalty and provides significantly better ROI. There are four stages to this process: Prepare the business. This stage is about aligning the business, preparing the data, defining how technology infrastructures can make it all fit together and determining the roadmap to realize the vision. In a recent article for Chiefmarketer, Jamie Nordstrom, CEO at retailer Nordstrom, articulated this step very well: “We need to figure out how to deliver relevant recommendations customers are more aware of the data we have on them and how we are using it.”Build the intelligence asset. Here, companies analyze customers past purchase and engagement data to build their customer engagement intelligence platform. The insights from this platform are used to define integrated marketing strategies and plans that incorporate both proactive and tactical communications that can be consistently executed using the customer engagement intelligence platform. Explaining the new program at Walgreens for Direct Marketing News, Adam Holyk, the drugstore retailers Vice President of Loyalty and Consumer Insights, said, “Were hopeful that the program better enables our customers to interact with us on their terms in their preferred channels online, vi