How to Improve Your Offer Strategy, Easy First Steps

All marketers know their customers have different needs, interests, and motivations.  Yet very often, whether a marketer pursues a one-size-fits-all or 1:1 targeting and content strategy, we see that one-offer-fits-all, and everyone gets it, every time.  This creates three fundamental problems for marketers:
– It opens the door to undesirable outcomes by not driving customers to strategic ones
– Over discounting leaves significant dollars on the table
– Over communicating irrelevant offers damages the customer experience

Align the Offer to the Behavior You Want to See

Customers respond differently to different offer types.  Prior to free shipping being tables stakes, it was often, but not always, the offer that generated the most response.  Now that free shipping is expected, savvy marketers are looking at which offers are most effective at driving customers and prospects to specific actions.  Most often this is to buy more frequently, increase their average order value, buy in a category they have previously not bought in, trial a new product offering, buy for the first time, engage in a second channel, engage with relationship building communications, download the new app, complete their first game, etc.

Focus your offers by behavioral segment and the tactical outcomes you want.  Consider the single mom with 2 kids who spends $400 a week at Albertsons and has been doing so for years.  She may be shopping elsewhere, but Albertsons is getting the lion’s share of her grocery spend.  Albertsons needs to keep her happy, which very well may not just be through financial incentives.  Telling her about a specific new product that her kids might love and will make her life easier has real value for this customer.  If this same customer visited every week but only spent $20, we would know she is doing most of her shopping elsewhere.  Given the regular frequency of her visits, an offer that encouraged higher spend amounts per visit or new category buying would be more effective at driving the desired behavior than giving her a discount on the small purchase she was already going to make.

Listen Differently

Listen to what customers are doing, not just saying.  For marketers who have access to systems with integrated data, this can be done by looking at their buying behaviors.  As an example, if a Papa John’s customer bought a pizza yesterday, the likelihood they will convert on Papa John’s SMS pizza promotion today is near zero.  Sure there are some households that might, but Papa John’s should know who these super buyers are and giving them a discount when they were already going to buy just hurts the bottom line.  Looking at individual, segment, or overall brand purchase cycle will allow you to create recent buyer exclusion time frames that will improve campaign performance metrics and reduce your customers’ inbox clutter (i.e. improves the customer experience).  It also gives customers one less opportunity to opt-out.

Don’t Just Try to Buy Them Back

After reviewing hundreds of marketers’ customer databases, a very consistent pattern of 66% to 75% of their customer base had not engaged with marketing communications in over a year.  Even worse, annual customer churn in many cases exceeded 85%.  Many had promotion-only reactivation programs in place to drive re-engagement, but a series of uninspiring coupons rarely had the desired impact.  Instead of just trying to buy back lost customers, mix your program up with touch points that give them a reason to engage even if they are not ready to convert.  Bring them back with How-To’s on products they bought that may still be in use, which can be especially effective with more durable goods (Weber Grill’s How-To for Grilled Game Day Nachos for example will make you want to break out the grill).  Test integrated gamification tools like those from 3Radical that are engaging and can be used to drive a multitude of strategic actions.  Give them a chance to vent through a quick survey.  Even if they do not come back, learning why they stopped being a customer may give you the insight to improve overall retention.

For marketers trapped in a vicious promotion cycle, they may need to buy customers back, but should do so in a more effective manner.  Consider an escalating offer value that provides increasingly lucrative offers to those who have ignored previous efforts.  It won’t cost you anything unless they actually convert.  Which is, after all, the goal.  This may be capped at a break-even discount value, and should leverage single use coupon technology to minimize risk, but considering how much it costs to acquire a new customer taking a small loss to get them to reengage and convert may be far more cost effective than finding a new customer.

Offer strategy and associated tactics are an often overlooked opportunity for marketers to improve their existing programs.  By encouraging specific customer behaviors that support a marketer’s overarching strategies and goals, marketers will find success financially and in improving the customer experience.

For more on our Data Strategy Services click here.


Three Cases That Will Help Shape Your Understanding of GDPR and CCPA

The authors of the European Union’s General Data Protection Regulation (GDPR) left a lot to be interpreted by the courts.  After 21 months we have seen initial complaints and fines against the big companies like Facebook and Google as expected.  However, there are several smaller profile cases that have already been decided that provide insight into how GDPR will be applied, and perhaps just as importantly how smaller organizations are just as likely to be caught as the ones with deep pockets. For those racing to be CCPA compliant, these initial decisions provide insight into how CCPA may be interpreted.

Case 1:  Invasiveness A Key Factor

The Swedish Data Protection Authority fined a municipality 20,000 euros for testing facial recognition technology to monitor student attendance.  This case is interesting for three reasons.  First, although the data subjects had provided consent, this ruling indicates that is not always enough.  Second, as it called out testers for not having consulted the Swedish DPA or having conducted an impact assessment prior to executing a test using sensitive biometric data.  Finally, despite being for a single class of 22 students, a relatively small group, it did not fly under the GDPR radar. 

The Swedish DPA determined that data subjects’ consent was not legally valid because of a meaningful imbalance between the controller and the data subject.  Given that many marketers use consent, or a liberal interpretation of a legitimate interest of the data controller, as the basis for their activities, this judgement should be a warning against interpreting consent as a blank check.

Case 2:  Right to Access May Include Everything

While there have been several conflicting court decisions out of Germany regarding the Right of Access, the most concerning one from the Appeal Court of Cologne held that a data subject’s access rights includes all personal data pertaining to them and processed by the insurance company in question, including any internal notes regarding conversations between company employees and the customer.  The court dismissed the argument that this was impractical and stated that the IT systems should be updated to address this level of access.

For marketers attempting to determine what information to pass along, the safest path appears to be to overshare.  For some companies this may expose their use of 3rd party data used in their marketing efforts and the sources. 

Case 3:  Unexpected Kind of Hammer Dropped on Foreign Processor

Sometimes there are worse penalties than fines.  The Canadian firm AggregateIQ Data Services was been instructed to “Cease processing any personal data of UK or EU Citizens obtained from UK political organizations or otherwise for the purpose of analytics, political campaigning or any other advertising purposes”, effectively removing them from the UK data market.  If you are unfamiliar with this firm, they are the Brexiteers’ version of the now-bankrupt Cambridge Analytica.  As a processor, AggregateIQ received personal data from various political Leave parties and campaigns to support targeted social media campaigns.  However, the ICO decision clearly views them as a controller with all associated obligations and found them to be in violation of:

– Not processing personal data in a way that the data subjects were aware of
– Not processing personal data for purposes for which data subjects expected
– Not having a lawful basis for processing
– Not processing the personal data in a way which was compatible with the reasons for which it was originally collected
– Not communicating appropriate fair processing information to those individuals

Political beliefs aside, this case calls out two key points.  First, processors need to have reasonable confirmation that their use of data given to them by controllers falls within the privacy and data usage notice of the collectors.  Second, some controller obligations may be held against processors even if GDPR explicitly calls out that controller obligations may not be assigned to processors by controllers.  How the DPAs and courts view organizations that straddle the controller-processor fence may not be as clear cut as initially thought.

As more time goes by, more fines are levied, and court cases are decided, organizations will have a better understanding of how GDPR will be applied. For those subject to CCPA, these decisions provide direction in how to proceed with implementing right of access, dealing with 3rd party data, and understanding limits to consent. Until then, the best many organizations can do is be overzealous in following the law as they understand it, and learn lessons from those who found out the hard way their interpretation was not aligned with the intent of the law.

For more on our CCPA Assessment Services, click here

Moving Beyond Vanity Email Metrics

Kick off the new year by finally putting those new year’s marketing resolutions into action.  To help improve your insights and marketing performance we have put together a set of metrics that will help move you past the traditional vanity metrics (a.k.a. onametrics) and improve your bottom line.  Many marketers rely on these top of the funnel metrics because “this is what we have always used” or because their organizations struggle to access their point of sale data to turn it into something actionable across their outbound communication channels.  Of the hundreds of custom metrics that have been developed to solve marketers’ challenges, a handful stand out as ones that have broad applicability across programs and will have value for most marketers.  If your email program is mostly “mass blast” or your access to data is limited, then these metrics are for you.

One of the most frustrating things to see is a marketer who knows they should be creating more relevant, personalized communications, but continues to serve up one-size fits all communications.  There are often good reasons for this, but it perpetuates the challenges that keep them from getting to segmented or 1-to-1 communications, which in today’s era of Big Data and real time technology are realistic options for all marketers.  This article highlights common marketer challenges and provides metrics that help measure the problem and can help build your case for investing in data and technology integrations to support more effective marketing as part of the long-term vision all marketers should be pursuing.

Are you unwittingly damaging your mailable customer base? 

A mass-blast email message may be considered profitable at first glance, but standard metrics can mask major damage to a marketer’s mailable audience.  This is an all to common problem.  According to Michael Fisher, former President of Yes Lifecycle Marketing (formerly known as Yesmail) “Should marketers take their proverbial blinders off, many will see growing problems in their customer base.  Far too often we see excessive promotional activities that lead to reduction in audience size.  Simple reporting based on metrics you can derive from standard data points and a view of inactive members vs. active members measured month over month, and year over year, provides an immediate view into the health of a business, and quite often points to challenged acquisition strategies.  Far too few businesses have this kind of insight.”

One of the most egregious examples I have ever seen was a well-respected retailer whose post-holiday campaigns were profitable, but they didn’t realize the impact it was having on their unsubscribe rate.  These campaigns resulted in 9 subscribers removing themselves from all future touch points (negative engagement), per single click (positive engagement).  Not even for a conversion, just a click.  Considering this was more than 31x their normal unsubscribe rate and nearly an inversion of the email channel benchmark ratio (10 clicks per unsubscribe), the damage to the customer lifetime value was significant.  Sure, the short-term revenue looked good, but when tens of thousands of repeat customers negatively engaged with those messages to stop all future communications the impact on the brand’s marketable audience and lifetime value far outweighed the short-term benefit.  Unfortunately, standard and vanity metrics made it easy to overlook this.

Are you over communicating and turning customers off to your brand?

If you are sending more than one promotional message per day, odds are you are.  A great metric that all email teams can start to monitor to guard against email burnout, without any cross-system data integration work, is the Click to Unsubscribe Ratio.  This metric compares two types of engagement and should be calculated at all levels of measurement (campaign, program, message type, offer type, audience segment, etc.).  Based on a positive interaction (a click) and a negative interaction (an unsubscribe), it is calculated simply by dividing number of unique clicks by the number of unsubscribes.  If this is less than one it means you have more unsubscribes than individuals clicking which is a pretty obvious red flag, even if it is profitable in the short term.  For reference, based on Mail Chimp’s current benchmarks their 46 tracked industries range from 4 to 39 clicks per unsubscribe with an average of 10 clicks per unsubscribe.

Can’t get to the data to calculate an individual ROI?

Getting the penny pinchers to invest in marketing technology that actually helps you hit your goals is rarely an easy task, and in fairness it is their job to ask the hard questions.  Often real-world results are more compelling than logical reasoning.  Let the results do the talking.  True campaign ROI and customer level LTV is channel agnostic, but in the absence of that, the ability to show a limited version in the form of Revenue per Active Record can be very powerful, as can the lift generated by more data driven tactics.  This metric can be applied to broad-spectrum use cases including measuring prospect source performance, determining the incremental impact of new relationship building programs (i.e. non-revenue programs), and projecting the revenue impact if customer retention or engagement improved.

Concerned your acquisition program is under performing?

Take a page from the catalog world where each touch often costs 1,000x more than a single email touch by tracking the percent of new customers who return for subsequent conversions.  This view of customer behavior was necessary as often very few catalog acquisition audiences were profitable with the initial touch so a longer-term perspective was necessary to determine which leads ultimately turned out to be profitable.  Tracking prospects by source, ideally by time cohorts to measure the % of Prospects with 2 Conversions and % of Prospects with 3+ Conversions provides marketers with additional insight into which source drives the best long-term engagements and the highest lifetime value.

Does your organization’s fear of losing revenue make it hard to change the status quo?

If you think you aren’t getting as much as you could out of your subscriber base, you are right but the fear is unjustified.  Analysis of over a hundred brands at the individual subscriber level showed that, on average, an appalling 19% of email subscribers EVER clicked on ANY email from an individual brand.  Nearly half had opened one or more emails but most never clicked.  Never.  Not even once.  Tapping into this 81% represents a key opportunity to grow email-based revenue for all marketers, and should be the subject of creative and aggressive testing efforts.  If they have never clicked and they have never converted, the risk is non-existent.  Start to monitor this by looking at the % Who Have Ever Clicked on 1 or more email messages in the last 12 months.  You can also use the metric’s associated data attribute as a flag for testing escalating offer values, non-financial incentives, and within existing forms of targeted outreach such as Reactivation programs.

It’s a new year and with another year of blue sky goals on the horizon, it is time to figure out how you will reach them.  These metrics are a good starting point to help you not only identify immediate opportunities and threats but also help build your case for greater access to siloed data.  Move beyond vanity metrics in 2020 to build a stronger foundation for continued growth and an improved customer experience!

For more on our Data Strategy Services click here.


Top Customer Acquisition Challenges and What to Do About Them

I have never met a marketer who felt their acquisition sources were performing as well as they could.  After hearing from hundreds of marketers about their acquisition programs, they almost always have the same three key roadblocks to improving their acquisition performance.  With modern technology’s ability to manage and action Big Data, and consumer experience expectations constantly rising, there really is no excuse not to address these challenges and reap the performance rewards of more effective acquisition sourcing.

The common challenges most marketers have with acquisition are:

1. Ineffective Targeting:  There is either a limited understanding of who the best prospect is to focus targeting efforts on, or that knowledge is not shared with those in charge of the targeting efforts.

2. Conversion Funnel Disconnect:  Lead sources often have no visibility into who actually converts, how much they spend, and if they ever come back leaving them to focus on the top of the funnel where they have greater visibility.

3. Reliance on Vanity Metrics: There continues to be a bewildering focus on vanity metrics that no one really likes.

In many cases brands share basic demographic profiles with their lead sources to help guide their acquisition efforts but they are often overly broad and not connected to actual conversion data.  When this happens, marketers end up paying as much for one-and-done customers as they are for those destined to become part of their best customer group.  Audiences such as “Women age 18+” are not going to yield the best results, yet they are fairly common.  One of the problems with sharing more is that brands are unwilling to provide more refined audience definitions since they know their lead sources also sell to their competitors.  This creates a self-fulfilling prophecy of mediocre leads.

Marketers who are confident in their brand and prospects journeys should invest the time to build true partnerships with ethical lead sources and not treat them like a vendor.  Even something as simple as providing LTV decile scores associated with previously purchased leads can provide critical information while maintaining a level of separation.  Insights into who converted, and in a meaningful way, is critical to identifying leads that drive the highest value for a brand.  It will also enable lead sources to focus on the best leads, reducing the volume of leads that will never convert and the number of bad leads asking “why am I getting this?”.  A confident brand will have the analytics skills to identify a best prospect definition, technical know-how to get their message delivered, a gateway product / service and offer that cuts through the competitive clutter, and the marketing chops to provide a superior prospect experience.  Regardless of the efforts of their competitors.

Enough with the vanity metrics!  Of course, they can be useful for some top of the funnel perspective, and each marketers’ business needs are different, but most goals are conversion related.  Here are 3 metrics that every business should be able to calculate and will add meaningful insight into where to spend your acquisition dollars more effectively.

Return on Investment (ROI):  I can’t pay my mortgage in Impressions and I doubt you can either.  If you are not looking at the return you get for your investment it is time you started doing so.  I’m still surprised how few marketers can tie a ROI to their acquisition sources.  The data is there, it just needs to be tied together.  Keep in mind your lead to conversion time horizon may require you to look at ROI with multiple time horizons to really see where your high LTV customers are coming from.  It is also important to keep in mind that the first conversion often does not lead to a profitable new customer.  This has long been the case in traditional channels like direct mail, where the return rate for the second or subsequent purchases led to positive ROIs.  With the immediate gratification aspect of the digital world this kind of longer-term thinking may lead some high potential audiences to be ignored or dropped.  ROAS is not a good substitute.  Higher level conversion funnel metrics are helpful in determining why conversions aren’t happening, but ROI will always be the king of metrics.

Average Order Value (AOV):  When new customers make their first purchase they almost always spend less than an existing customer.  They are testing the waters, not sure about the brand, product quality, or customer experience.  In a digital world where the shopping experience is not in a controlled store environment, this axiom appears to even more true than it is in the B&M world.  A lower AOV for one lead source may not be indicative of their long-term revenue potential.  To understand if their purchase behavior starts to conform over time to the existing customer base, look for convergence of AOV with the existing customer base.

Return Visit Rate:  Let’s face it, not everyone likes or needs what you offer.  For those that do, it is important to cultivate relationships to drive repeat behaviors.  Compare the % of 1st time buyers by prospect source that come back for a 2nd and 3rd purchases.  If they had a bad 1st purchase, they surely won’t be coming back for a 3rd, but the ability to see how prospects develop over time cannot be captured without a longer view of their behavior.  For high frequency businesses a month may suffice.  For brands with longer purchase cycles or highly seasonal business, a 12-month period may be best.

While there has been some progress over the last few years in the acquisition space, the majority of marketers continue to do things the way they always have.  Given where Big Data and technology stand, and increasing legislation regarding data collection and usage consent, marketers and brands that fail to revise their approach to acquisition will be left behind.  The brands that continue to grow will be the ones that best leverage their data, and associated insights, to refine their acquisition programs into high performing ones.

For more on our Data Strategy Services click here.


Get Ready for CCPA – Top 5 Challenges for Businesses

Less than two years after GDPR went into effect, a similar sense of unease is building in the United States as businesses struggle to become compliant with California’s new CCPA legislation (California Consumer Privacy Act) and to understand what it will mean not just in that state, but across the nation.  With California representing 14.5% of U.S. GDP[1] and 12.0% of the overall population, there is too much at stake to stop doing business in that state, a tactic a few used instead of continuing to do business in the E.U.  With the January 1st, 2020 effective data looming efforts are complicated by the peak season for many businesses that are primarily focused on making their numbers.  Come January first, many executives will be asking “Can we become compliant before we get fined?”

At a practical level, CCPA is just another major step in the natural progression and solidification of the overall shift in the marketer-customer dynamic that we have seen over the last decade.  The fact that this comes to us at the state level is not surprising considering the country’s foundation of states’ rights, but we expect this is most likely the forerunner to national legislation that should be easily justified.  The Commerce Clause of the U.S. Constitution alone should suffice, but the growing need to harmonize overall data privacy legislation with other existing national laws that are currently only niche in focus, such as HIPAA, may be the stick that pushes Congress to finally act.  Harmonization of data privacy legislation will not only benefit consumers by making their rights easier to understand and defend, it will also be business friendly.  Instead of businesses trying to figure out what the ever-changing set of laws are in all 50 states (not to mention foreign nations), a singular set of domestic laws will greatly simplify life for technology, product, marketing, and legal teams in every organization.

While we wait for the government to get their act together, we’ve created a quick list of the top CCPA challenges we think everyone should keep in mind as they help their businesses become compliant:

Top 5 CCPA Challenges for Businesses

They Let Lawyers Write It.  Unlike GDPR, CCPA was not written in plain language despite requiring information provided by businesses to consumers be “provided in a manner that may be easily understood by the average consumer”.  As non-lawyer stakeholders across Marketing, Technology, Data Management, and other teams try to figure out what it means to their staffing, technology, and planning requirements, this adds an unnecessary layer of confusion and will hinder compliance.  If you do not have an internal compliance team, look for experienced external consultants to help you through this process.

It’s Going into Effect Unfinished.  The State of California readily admits the legislation is incomplete and will likely see additional changes after the date it goes into effect (1798.185).  This effectively makes it impossible for an organization to be fully compliant, or even fully confident in the elements that they believe are clearly laid out in the current version.  This will add additional burdens of cost, time, frustration, and the risk of damaging litigation to the average business.  Plan for second phase (after July 1st, 2020) to address expected changes in the first half of 2020.

It Is Not a Single Source of Truth.  Other pieces of California state legislation, such as breach notification, are separate from CCPA.  Additionally, requirements for data collection on minors is different from COPPA, creating the risk of potential conflicts that will create a burden on businesses having to balance federal and state level laws.  There are two common approaches here.  The more complicated is to have a California only policy and one for everyone else.  As more states adopt this type of legislation, data management will become more difficult.  The simpler approach is to treat everyone as if they have the rights granted to those under the most restrictive set of legislation and apply it to all consumers.  While not always ideal for all businesses, managing one set of rules will always be less risky and easier to execute.

How to Deal with Existing Records Is Not Explicitly Defined.  Much like GDPR, there is no clear vision on what must be done with existing consumer records.  CCPA explicitly does not authorize a business to make material, retroactive privacy policy changes or make other changes in their privacy policy in a manner that would violate the Unfair and Deceptive Practices Act as part of an acquisition or similar event but this is not clear for ongoing business operations.  The safe play here is to bundle the new rights communications as part of an overall terms & conditions update that is now commonplace.

More Active Data Strategies Will Be Required.  CCPA requires more granular event recording than exists in most companies.  Going beyond the data that was collected, businesses must also retain records of what data was disclosed, sold, and interestingly not sold, and to what 3rd parties.  For most businesses automation will be required to make this happen in a cost-effective manner going forward, to comply with the clearly defined response time frames outlined in the legislation, and to have the foundations in place to deal with an audit.  Addressing this should be part of your overall data asset development strategy and overall business health reporting.

As we have seen with other data privacy legislation around the world, data privacy compliance will continue to evolve.  Businesses that meet, or exceed, these requirements will find themselves at a reduced level of risk from fines, have stronger relationships with their customers, and should see competitive advantages compared to those who lag behind with their compliance.

For more on our CCPA Assessment Services, click here


For more reading check out:

California Consumer Privacy Act of 2018 (Full Text)

California Data Breach Notification (Click here)


Sources: [1] https://www.bea.gov/system/files/2019-07/qgdpstate0719.pdf

Media Evolution The Changing Role of Print

The media industry has always adapted to meet the changing needs of advertisers and to incorporate new technologies into their service and product offerings.  Over the last two decades this industry has changed at a breakneck pace that is no longer a series of adjustments but a wholesale evolution of the industry.  New media have entered the arena while others have been forced to evolve to avoid becoming obsolete.  These changes have been driven by advancements in technology, consumer media usage and the almighty dollar.  Perhaps no media has been more challenged by these changes than print.  While print media has been the hardest hit, talk of its extinction is premature and ignores the fact that it has and continues to play a significant role in consumer marketing.  Print media is here to stay but its form and role will never be the same again.

Like all media forms, print has evolved over time and has been undergoing a period of considerable change that began prior to the recent recession.  Newspaper ad revenues have been experiencing significant decline since 2001 while penetration has been declining in many key segments since the early 1970’s (see chart).  This decline has been less pronounced with readers age 55+.  As more tech-savvy baby boomers reach retirement the decline seen in younger segments will likely be matched by the older segments. 

In order to combat the decline in all age groups, print media has diversified their offerings and taken steps to acquire new readers while cutting costs.  Nearly all newspaper and magazine publishers have added complementary websites to their offering.  In an effort to attract younger readers major publishers such as the Tribune and Sun-Times Media Group launched free circulation newspapers geared towards their target audience.  Magazines such as Road & Track and Sports Illustrated have provided unsolicited free 6 month subscriptions followed by a renewal subscription contact strategy thereby providing a free trail.  In an effort to cut costs, some publications have abandoned long standing formats.  On February 8th 2010 the Chicago Tribune trimmed its traditional broadsheet format to reduce costs and changed their editorial ratio as part of their bankruptcy agreement.  As print revenues continue to decline profits are improving and should it be determined that these acquisition efforts and format changes played a key role, it is likely that other publications around the country will follow.

Online advertising has benefited from regular technological advances and has become a mainstream advertising medium now representing 12% of total ad spending compared to 34.6% for print.[1]  The explosive growth of online advertising has tapered off and for the first time experienced negative growth in the first quarter of 2009.  Internet advertising spend grew 37.5% between 2005 and 2008 while print declined 29.9% over the same period.[2]  However, the decline of print has not been made up by growth in online advertising. 

Changes in the media industry have impacted the two primary components of print media in different ways.  For a long time, newspapers enjoyed the highest penetration levels of any media.  This began to change with the introduction of television and its increased usage.  Over the past two decades this evolution has been most impacted by a culture that thrives in convenience and demands their information in “real-time”.  These have never been the strengths of print but proclamations that print is dead ignore prints strengths.  These strengths have begun to show their worth as online advertising has failed to carry the same perceived value that even the wounded print industry maintains to this day.  The very nature of the internet makes it impossible to completely replace print media.  Print retains characteristics not easily replicated through other vehicles: browsability, credibility, tangibility, size, inserts, ad impact, ad content, and usability.

Print will have to redefine its niche, purpose and approach, but it has been a proven vehicle for marketing communication and the differentiating strengths it retains will help it survive.  The internet has only partially succeeded at supplanting print as a news source.  Journalism has been supplanted, in part, by blogs, and independent sources that lack both the clout and professional reputation of long standing institution such as the Wall Street Journal.  Advertisers also have a vested interest in seeing print survive.  The ability to reach large numbers of baby boomers and older consumers, with their considerable spending power through a tangible vehicle will help support print through this transition period. There is no doubt media is undergoing a metamorphosis.  For print this future is unclear but the overall demise of print media is grossly exaggerated.  Print is undoubtedly undergoing a significant change, one that will redefine its niche and better position it for the future.  Media has always adapted to the needs and desires of its consumers and advertisers and this change is no different.  Only time will tell the fate of print, but that fate is far from decided.


 [1] Zenith Optimedia 2009 – Newspapers 23.8%, Magazines 10.8%

[2] Newspaper Association of America

The Changing Value of the Catalog in Today’s Retail Market Place

Catalogs have long been an American tradition, filling mailboxes to the brim every Christmas, with pictures of perfect living rooms, the latest gadgets and the most comfortable shoes.  However, due to the growth of ecommerce, increased postage rates and rising paper costs, many multi-channel retailers have been forced to decreased circulation and page counts while adapting their catalogs to be more than just a sales vehicle in the direct channel.  Retailers now use their catalog as a brand communication tool utilizing it to connect with the consumer.

Source: Direct Marketing Association -“The Power of Direct Marketing 2009”

The technological and economical advantages of ecommerce have contributed to the decline in catalog titles and circulation over the past few years.  Catalogs were initially born in response to geographical challenges retailers faced in offering their products to consumers across the country.  However, the internet’s strengths, in many cases, are more adapted to the present day consumer’s desire for convenience, speed, and ease of use.

A primary cause for the reduction in catalog titles, circulation and page count is increasing postage.  The postage increase in 2007, represented and increase on average of 20% to 40%.[i]  A provisional price increase for 2011 has been proposed and if implemented would increase postage an additional 5.6%.[ii]  In response to the combination of postage price increases and growth of ecommerce some retailers have decided to further reduce their investment in catalogs.  Neiman Marcus, in response to the cost of printing and mailing catalogs, now only sends catalogs to their best and most profitable customers.  Like many catalogers they also produce a digital version of their printed catalog which is available online and on the iPad to maintain contact with all customers, just at a lower cost per touch.[iii] 

Many retailers are also slimming down their catalog page counts.  The American Catalog Mailers Association reports that from 2007 to 2009 catalog mail volumes as a whole declined by 35 percent.[iv]  A prominent multi-channel retailer, Frederick’s of Hollywood, is phasing out their standard-sized catalogs to focus on niche “persona books”.  In fiscal 2010, Frederick’s mailed about 15.3 million catalogs but in 2011 only plans to mail about 13 million catalogs.  In total, Frederick’s is reducing its catalog operating expenses by $2.1 million.[v]

Despite the many challenges, catalogs still represent a very influential and effective sales vehicle.  The mail order industry generated sales of $138.78 billion in 2010, a 2.3% increase in revenue over 2009 and the industry’s first positive revenue gains since 2006[vi].  A study by the Direct Marketing Association in 2010 shows that direct mail catalogs generate on average slightly over a 7% return on investment.  The same study reported that, on average, commercial email provides a 42% ROI and internet marketing excluding email creates a return of just under 20% ROI.[vii]

delias.jpg

While other forms of direct marketing may report a higher return on investment, catalogs not only drive sales but represent a vehicle that can engage customer in a way that ecommerce sites and other online communications cannot.  Catalogs remain an effective part of the marketing mix, especially with consumer segments that prefer printed communications or products that are enhanced through a more visually engaging format.   Changing consumer purchasing patterns have driven retailers to shift their catalog offering from direct response to a tool that drives sales to other channels and enhances the brand.  Catalogs no longer encourage customer to use mail in order forms, and many have taken the focus away from phone representatives.  Delia’s, a girl’s teen clothing company, and Chia’sso, a modern furniture supplier, have embraced the use of catalog as a driver to web and retail channels by adopting marketing tactics from other industries or modifying traditional methods.  This change in tactics is evident with both offering tear off coupons designed to drive traffic to retail locations (see image).

Beyond driving sales to other channels, catalogs are also effective at creating and building brand awareness and converting new customers into loyal customers.  Catalogs are more successful than email or online communications at driving customer loyalty and conjuring the intended lifestyle feel a company wants to convey with their marketing communications.  They also have a significantly longer shelf life and serve as a subtle purchase reminder.  Catalogs represent a focused brand communications vehicle enabling a retailer to control the brand experience, which is often a challenge for online retailers.

As the catalog marketplace continues to become more competitive retailers are testing and innovating their catalog, offers, formats, prospect lists and customer database to increase their share of wallet and create tangible points of brand differentiation.  Multi-Channel retailers are capitalizing on the tangibility catalogs offer and their ability to appeal to customer senses.  Bliss is capitalizing on this capability with their holiday 2010 catalog featuring a scratch and sniff which helps develop the brand identity, promotes a specific aromatic product and develops the catalog beyond a simple visual engagement tool.  Crutchfield, an electronic retailer, employed a 3-dimensional cover to engage recipients, develop brand identity and promote 3D televisions with their holiday 2010 catalog.  Many retailers are also shifting their catalogs to look and act more like a magazine.  With editorial features typical of consumer magazines intermixed with products, Dick’s Sporting Goods is a great example of this with their new hybrid mag-alog Game On.  Game On features products, intermixed with sports related editorial and photography more typical of a consumer magazine. Catalog’s role has evolved and now serves double duty as a direct sales vehicle and as a marketing tool that drives sales to a retail locations and ecommerce sites.  Consequently, retailers have adapted and maintained catalogs as a relevant tool in today’s market to fit their needs.  Catalogs remain a critical driver of revenue that cannot be replaced by the online channel.  Integrating marketing communications will create cross channel sales that will give multi-channel retailers a healthy and balanced revenue stream. Catalogers must continue to innovate to break through the marketing clutter, engage customers and motivate them to make a purchase.


[i] Kaplan, David. “Catalogs thinner but still carry weight.” Houston Chronicle 27 Nov. 2010 <http://www.chron.com/disp/story.mpl/business/7313135.html&gt;.

[ii] Rich, Tim. “USPS Rate Change For 2011 – Postage Price Increase On the Way.”  suite101.com.17 Aug. 2010. <http://www.suite101.com/content usps-rate-change-for-2011—postage-price-increase-on-the-way-a275080>.

[iii] Daniels, Chris. “Retailers testing out e-catalog versions.” Direct Marketing News. 1 Jan 2011. http://www.dmnews.com/retailers-testing-out-e-catalog-versions/ article/193140

[iv] IBID

[v] Brohan, Mark. “Frederick’s begins pulling the plug on full-size catalogs.” Internet Retailer. 3 Jan. 2011. <http://www.internetretailer.com/2011/01/03

[vi] “Mail Order In the US.” IBISWorld. N.p., 7 Oct. 2010. Web. 10 Jan. 2011. http://www.ibisworld.com/industry/default.aspx?indid=1931

[vii] “The High Costs of Catalog Retailing.” BrandWeek. 31 Mar. 2010. http://www.brandweek.com/bw/content_display/news-and-features/direct/e3id9db7bed8e9402cbea0b41c9c56a91a1

Loyalty Marketing Helped The Restaurant Industry Fight the Recession

The onset of the recession in the United States in December 2007 brought about a time of immense struggle for most in the restaurant industry, from QSR’s to fine dining establishments.  Between 1990 and 2006, prior to the United States’ economic nosedive, the restaurant industry became increasingly saturated.  During this period, the population grew by 22.6% while full service restaurants grew by 66.1%.[i]  This combination hit an industry that operates on notoriously tight margins especially hard.  Technomic, a restaurant consultancy, estimates that in 2009 alone the fine dining industry saw a 12-15% drop in sales.[ii]  Casual Dining chains closed about 1,200 of their 18,000 nationwide locations during the recession. [iii]

What did the restaurant industry do to fight back?

In a report released in August 2010 by the National Restaurant Association, 77% of its responding members reported loyalty programs helped drive business to their restaurants during the recession.  Along with driving business, 90% of the respondents said loyalty programs created a competitive advantage for their brand.[iv]  While diners were paring down dining occasions during the recession, loyalty marketing programs provided incentives that drove repeat business and improved customer retention.  While there was no complete saving grace from the wrath of the recession, loyalty marketing programs have proven their value and helped many restaurants survive, quickly regain diners and increase market share as the economy rebounded.

Restaurants across the service level spectrum have the opportunity to profit from loyalty marketing programs. The days of restaurant loyalty programs solely consisting of a punch card are long gone.  Some have opted for paid enrollment programs.  With over seventy restaurants and a myriad of brands, Lettuce Entertain You Enterprises has embraced an element of exclusivity with its frequent diner program by requiring a one-time $25 fee upon signing up.  After a diner’s first visit to a Lettuce Entertain You restaurant their Rewards Card will be credited $10 and additional $10 on their second and third visits.  Lettuce Entertain You offers its members a wide variety of rewards in the form of free meals, spa days and even all expenses paid vacations to Las Vegas.  Other restaurant groups, like the Palm Restaurant, have adopted similar approaches. 

Instead of discounting, some restaurant loyalty programs are focusing on non-financial incentives for their members as a way to provide differentiated rewards while maintaining their margins.  Have you ever walked into a restaurant and the wait is just too long?  T.G.I. Friday’s now offers members of its Earn Your Stripes rewards program a “Jump the Line” perk upon enrollment.  While this approach has been adopted by some restaurants with loyalty programs, the majority still focus predominantly on financial based incentives.  As the restaurant industry continues to invest and improve their loyalty marketing programs, we expect a hybrid approach to become the norm, especially in the fine dining segment.

Loyalty marketing has long held a strong foothold in the airline, grocery and hotel industries because of its proven impact on customer behavior and the incremental profits it generates.  Industries that have seen the biggest impact from loyalty marketing are those that are defined by strong competition, high frequency patronage and high levels of competitive switching.  Faced with similar challenges, the restaurant industry is poised to benefit from loyalty marketing as other industries have.  However, the restaurant industry has been slower to adopt this form of marketing.

So why haven’t more restaurants adopted loyalty marketing programs?

Despite the potentially high returns loyalty marketing programs offer, there can be a substantial upfront investment associated with creating one.  At a time when every dollar spent is scrutinized, new investments are not always met with enthusiasm and therefore can be difficult to implement even if there are both short and long term gains.

One of the most overlooked benefits of a loyalty marketing program is wealth of information that it provides a business with about their customers.  The quantity and quality of data collected is superior to any other source as it represents actually customer behavior over time.  Every business can benefit from data based customer insights and restaurants are no exception.  Loyalty marketing programs collect data that provide insights on customer behavior, trends, marketing performance and demographic information, all of which enable restaurants to better target, reach and motivate current and prospective diners. With the restaurant industry slowly embracing loyalty marketing, it has created opportunities for adopters to create strong competitive positions and increase sales.  Despite an upfront investment, loyalty marketing programs have proven their value.  Restaurants with the foresight to incorporate a loyalty program into their marketing efforts before or during the recession weathered the storm better than their competitors and have found themselves in stronger financial positions.  With restaurants looking for competitive advantages, it is only a matter of time before more restaurant brands incorporate loyalty programs into their marketing initiatives.

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[i] Martin, Andrew. “Empty Tables Threaten Some Restaurant Chains .” New York Times.  3 Apr. 2009:  http://www.nytimes.com/2009/04/04/business/ 04restaurant.html?_r=2&pagewanted=1&em

[ii] Mclaughlin, Katy. “Recipe for Success.” Wall Street Journal.  23 Apr. 2009. http://online.wsj.com/article/SB124025031068735801.html

[iii] Martin, Andrew. “Empty Tables Threaten Some Restaurant Chains .” New York Times.  3 Apr. 2009:  http://www.nytimes.com/2009/04/04/business/04restaurant.html?ref=applebeesinternationalinc

[iv] Stensson, Annika, comp. “New Research Finds that Customer Loyalty Programs Help Restaurants Weather the Economy, Gain Competitive Edge .” National Restaurant Association. 10 Aug. 2010. http://restaurant.org/pressroom/pressrelease/?ID=1988