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Customers have to be at the heart of campaign planning

Direct-marketing campaigns should be customer-centric. Plan a campaign around customers and not look for customers to fit the campaign

July 30, 2022 / 09:54 AM IST

Most small and medium enterprises (SMEs) that use databases for direct-marketing campaigns plan the push according to a pre-set calendar. While many set these dates in advance, based on holidays and festival season, they miss taking into account customers’ needs or interests.

The campaigns often follow a calendar based on the previous year, with ad hoc campaigns added based on product overstock conditions. The owner or the marketing manager decides which products should be part of the promotion, a choice often made based on the type of the campaign.

Say if it is a "household” campaign, houseware, home linens and other such products are promoted. The specifics of the offer, such as discounts, are also decided at this point. Once the specifics of the campaign are decided, the database marketer chooses the target customers.

Exceptions may be made when there is a strategic reason to target a specific group of customers. A direct marketer may decide that the strategy should be to grow a more loyal base among upmarket youth. Customers will be chosen based on these attributes. Either way, the campaign is planned first, without evaluating if it is the right promotion at the right time for the right segment.

This promotion-planning approach is rife with problems.

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First, it ignores customer-purchase cycles. The optimal time between a customer's promoted purchases may not coincide with the promotion calendar.

Second, there are not enough controls over the number of times customers are part of campaigns. Controls can be set using suppression rules—do not select customers who have been mailed to in the last 45 days—but these are often arbitrary and are applied across all segments.

Third, by looking for customers to fit the campaign rather than planning campaigns around customers, many valuable customers will be missed and you will not get an adequate return on your investment.

Mailing costs soar if it is hardcopy. Telephone follow-ups also will be wasted. There is a high level of customer attrition and the company spends a huge amount of money to maintain a customer database that is not providing the value it should.

The way you segment the customers is also important. Most SMEs stick to the traditional route such as corporate, heavy users, etc.

I advocate the use of customer motivation as the basis for segmentation. Organisations should map customer scenarios to manage the moments of truth better.

muneer column smart growth An alternative to planning and implementing a campaign-centric orientation is to move toward a customer-centric approach. It maximises the marketer's return on the sizable investment made in the customer database. This consists of several stages:

 1. Start with customer segments 

Segments can be defined in any manner. Marketers usually segment the customer base using the RFM model (recency, frequency, monetary value), demographics, or types of products purchased. A valuable approach is to incorporate promotion sensitivity into the segmentation scheme.

2. Review campaign calendar according to your customer segments 

How many times the customer segments are contacted? How much is the expected customer spending? What’s the level of marketing expenses planned to be allocated to customer segments over the campaign period? From this analysis, one can estimate the expected return on investment for each customer segment.

3. Use a different approach to planning 

The intention is to create a promotion calendar for each customer segment that will closely optimise customer segment profitability. This is not based on pure science. Business requirements may limit the desirability of planning campaigns in a purely customer-centric way, so the SME direct marketing heads must incorporate business and production constraints into planning.

4. Establish a system to build campaigns 

This must include timing, number, and other details of the offers to optimise profitability across campaigns, based on business and production constraints. Use the customer segment model developed earlier as the basis for the optimisation procedure, leading to a direct marketing schedule for each customer segment. Do modeling for this.

The biggest challenge for SME marketers using database marketing in shifting to customer-centricity in campaigns is amalgamating the calendars from the two approaches. Veteran marketers always will have to make choices on how to do this.
M Muneer is the managing director of CustomerLab Solutions, a consulting firm.
first published: Jul 30, 2022 09:54 am
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