Marketing Case Study: Customer Lifetime Value Important to Automotive Industry

Today's direct marketing case study comes to us from Sigma Marketing, a Rochester, NY-based database marketing company. While I wish that they would have shared more about what went into their "Loyalty Metric" (probably it's their confidential 'secret sauce'), the message remains clear. It's important to get a handle on the true value of your customers, in order to best drive loyalty, retention and upsell campaigns.

Maximizing Lifetime Customer Value:

The Client
Major automotive manufacturer

The Challenge
Our client was overlooking future revenue opportunities by not recognizing the true lifetime value of its current customers. The client recognized that there were differences among customers’ loyalty over a lifetime, but could not quantify or act on those differences.

The Breakthrough
SIGMA created the Loyalty Metric, a measurement that allowed the client to make business decisions based on a real and accurate lifetime view of the customer, not a 12-month or even 60-month snapshot.

The Loyalty Metric yielded important and valuable learnings for the client:

• current customers are worth billions of dollars to the client over a lifetime;
• the top 10% of customers contribute 89% of total value;
• the highest-value customers and lowest-value customers shared many similar characteristics, but one critical characteristic differentiates the two – purchase velocity.

The Win
SIGMA discovered that the client could best utilize The Loyalty Metric in:

• the development of retention programs for high-value customers;
• taking cost-effective, pre-emptive action against potential defectors;
• creating intelligent marketing programs to effectively manage both high-value and low-value customers;
• generating additional vehicle sales at higher velocity among medium-value customers, turning them into high-value customers.

Corporate Reputation is Important

It could be that this headline says it all:

"Seventy-One Percent of Consumers Say the Reputation Of Corporate America Is "Poor", But Consumers Will Buy, Recommend and Invest in Companies that Concentrate on Building Their Corporate Reputation"

This headlined an article from Harris Interactive discussing their Reputation Quotient^TM (RQ) survey. I don't think it's any big surprise that consumers don't trust big business. In this economy when we see large firms, (like the big bad oil companies) realize huge profits while the rest of us struggle to pay our bills, the majority of people have had it up to here with big business.

So, if you happen to be a big business, or if you help big firms market to consumers (like we do), what do you do with this news? Luckily, there is an action-plan (and some advice) to be found.

"But despite a slide in Corporate America’s image among consumers, the RQ found that a strong statistical correlation exists between a company’s overall reputation and the likelihood that consumers will purchase, recommend or invest in a company or its products and services."

In a nutshell, be good to your employees. Make honest and fair business decisions. Make sure that your 'goodness' is shared/communicated with the public. Listen to your customers and make them happy. Build your reputation. Do all of that and your customers will like you; they'll buy from you. You'll get more just like them.

Sounds pretty easy, eh?

Here's more from the article, talking about how Google clinched the number 1 spot on the RQ rankings.

What does it take to get to the top? Google provides a case in point. Four years ago, the company was not included among the top 60 most visible companies on the list. But this year, Google rose to No. 1, beating last year’s RQ reputation leader, Microsoft. Google also beat this year’s second-runner-up, Johnson & Johnson, which was the top ranked company, until last year, since the inception of the survey in 1999.

"How did Google achieve this stratospheric climb? The company scores either in first or second place on reputation drivers of financial performance, vision/leadership, social responsibility and workplace environment," says Fronk of Harris Interactive. "For Americans to hold a company in high regards today, clearly more than just profits are needed – companies need to focus on overall corporate social responsibility and how their employees are treated in order to build trust with today’s consumers." It’s interesting to note that Google ranked No. 2 on the social responsibility dimension, but does not even make the top five of companies based on its support of good causes, the environment or communities. "Google received a top-ranking for social responsibility primarily due to their workplace environment," Fronk notes, "demonstrating that corporate responsibility, in the minds of consumers, starts with your own employees first."

If you're interested in how other companies fared in terms of their reputation, you can download the list of the top 60 companies here.

Case Study: Database Builds Loyalty for Casino

Today's direct marketing case study comes to us from Equifax. Since we enjoy reading about how technology (in this case a marketing database) impacts overall performance, we thought we'd share. For those who are grappling with the decision as to whether to build your marketing database in-house, or use a service bureau, you should continue reading.

Client Profile
A leading gaming and entertainment company, operating riverboat and hotel casino complexes across the U.S.

Challenge
To increase customer loyalty and drive repeat visits to their casinos, the client targeted direct marketing programs to their existing customers. They were using their operational database and very basic tools to generate direct marketing programs. To enhance campaign effectiveness, they wanted to conduct more testing and better target their direct mail and e-mail campaigns, but did not have the infrastructure to address the challenge.

Solution
The client engaged Equifax to conduct a requirements and feasibility study. Their goal was to build an in-house database solution, versus a service provider solution. The feasibility study was a collaborative effort with the client's IT. Equifax built a comprehensive test database parallel to the client's current system--with the added challenge of a changing operations system.

Equifax delivered a database solution that exceeded the client's expectations. The project that began with a feasibility study evolved into a comprehensive service that provides a "single view" of the customer across several properties. The service includes daily updates of customer, transactional, demographic, hotel and promotion history data into an open relational database utilizing best-of-breed business intelligence and campaign management tools. The solution supports daily, trigger-based, multi-channel campaign executions, enabling more convenient, relevant offers to patrons. The client's solution has expanded to include data mining and analysis, using predictive analytics and modeling tools and techniques to enrich their direct and e-mail marketing strategies.

Results
Equifax delivered a powerful marketing database solution, on-time and on-budget. The solution provides direct marketing expertise and support comparable to a more costly, yet less effective in-house solution. In addition, the database features a Quality Control element that ensures the clients meets industry regulatory requirements. The flexible, robust infrastructure facilitates a more "enabling environment." As a result, the client is experiencing greater success in marketing across all segments of the business.

• Average spend per customer increased 20%. More timely and better matched offers to patrons--with emphasis on event-triggered opportunities--has increased patron's visits and play, resulting in a more satisfied customer base and better ROI for the client.
• Dramatically shortened timelines enable the client to deliver more frequent mailings to patrons. Direct mail campaigns that used to take two days per property to execute now take two to three days for all six properties.
• Through increased efficiency, the client can quickly, aggressively pursue multiple marketing tactics simultaneously. In addition, the marketing team can "put good direct marketing strategies to work."
• Improved, timely business reporting allows the client to apply key learning for the implementation of more effective marketing strategies.

Equifax has proven to be a valuable resource in this client's quest to optimize customer relationships. As a database provider, Equifax has helped the client learn more about their customers in order to increase their visits, build loyalty and, ultimately, boost revenue.

More on Telecommunications -- AT&T's Success Story

As you know, Suzanne posted yesterday about how some forward-thinking telecommunications companies are marketing themselves more aggressively to keep their customers for the long-term. While it doesn't sound like rocket science, it wasn't so long ago that this just never happened. In the past, it was simply a mind-set of try to bring on as many customers as you lose, and you'll stay even. And, as direct marketers . . . as business-people . . . we know that this is an insane approach!

At the end of her post, Suzanne posed a couple of questions about why the traditional telecommunications giants weren't mentioned in this research and asked for reader comments/opinions.

Well, today, the Washington Post reports that AT&T has just announced a 21.5% gain in the first quarter of 2008. And, this in a time of economic slowdown! The article goes on to report that "The country's largest telecommunications company earned $3.46 billion in the quarter, compared with $2.85 billion in the first quarter of 2007. Revenue rose 6 percent, to $30.74 billion." Um . . . that's "B" for Billion.

Regarding the economic slowdown, CFO Richard G. Lindner said that "apart from some 'softness' in local phone lines, there was little sign of the weakness in the U.S. economy affecting the company.

Hmmm . . . so, the biggest of the traditional telecommunications firms continues to grow in a softening economy to the tune of over 21%. The article doesn't mention AT&T's marketing efforts specifically but it does mention that the growth is definitely spurred on by AT&T Mobility.

Now, Dave from the Motley Fool has his opinion as to why AT&T is so successful. Can you say iPhone? Here are Dave's thoughts, "I see two major trends pushing the wireless-data wave along: broadband-equipped laptops and the Apple iPhone. With corporate types and "prosumers" willing to pay a premium for mobile broadband connectivity, AT&T is capturing high-margin revenue as it rolls out this service across the U.S. And the game-changing iPhone is encouraging more people to browse the Web on a mobile device and buy audio and video media -- again, at a high margin."

It'll be interesting to see if AT&T's strategy of partnering with cool technology players pays off -- as it obviously thus far with Apple. It'll also be interesting to see if due to their intelligent partnering approach if they'll need to do what the other players are doing in terms of their marketing efforts.

From what we can tell, AT&T definitely hit the number 5 key trend in marketing from yesterday's post: "Telecoms use new emerging media channels to reach early adopters." AT&T's partnership with Apple definitely is reaching the early adopters or prosumers (as our friend Dave calls them). And those folks that I've seen who have purchased the iPhone definitely use all of it's functionality -- which equates to more revenue for AT&T.

Customer Trust is So Important...

We work so very hard to get our customers to like us, to buy from us and, ultimately, to trust us. Isn't trust really the epitome of customer loyalty?

Then you read about customer trust gone awry, as in the case of Target misusing social media. It kills me that one of the few huge corporations that actually buys into the value of communicating with customers and prospects through social networks didn't put into practice what I believe is the very essence of social networking. A little thing called Honesty.

From the Star Tribune article: Target, "the Minneapolis-based discount retailer is being outed in online blogs and discussed in college ethics classes after students allied with the company (Rounders) were told to "keep it like a secret" while singing the company's praises on the social network site Facebook.com."

Target gave their 'Rounders' discounts, CDs and other prizes for marketing Target products to their Facebook friends and providing the company with feedback.

Rounders were okay with this concept (heck, they loved the free SWAG!), until in one campaign, they were instructed by a Target-sponsored newsletter to "try not to let on in the Facebook group that you are a Rounder."

As you can imagine, this rubbed some kids the wrong way and (take note here) one Rounder used the Facebook forum to 'out' Target. I love the irony of using the very medium that Target was attempting to control to put out the honest story.

Lesson learned: if you are trying to generate a buzz for your product on places like Facebook, MySpace or even in the blogosphere, do it with integrity. Let your product virtues sell themselves. Manipulation will most likely backfire on you, creating the exact opposite effect of what you were trying to achieve.

Yes, Target did get some word-of-mouth. Sadly, I don't think that this is the exact kind of 'buzz' they were hoping to generate...

Marketing Database Facilitates Customer Loyalty

There's been quite a bit of controversy lately about how to measure customer loyalty. Many large companies seem to be buying in on the premise of the Net Promoter Score (NPS), although the analytical types I listen to don't seem to have a lot of confidence in NPS. Specifically these blog posts from Marketing ROI and Profitable Marketing have some great points to make about the NPS and some alternative ideas on ways to evaluate the worth, or loyalty of a customer.

I guess, overall, I'm pretty old-fashioned and believe in letting hard numbers paint the picture of success, or failure. In short, we've got to be able to quantify (whether it's increased profits from up-sell/cross-sell programs, or a longer customer relationship or referrals) the value we get from each customer. And, then we need to weigh that against the cost it took to acquire and nurture that relationship. Sounds simple, eh? Unfortunately, it's not simple at all...

That's why I love reading about companies who seem to have gotten the equation RIGHT! Take a look at this "AdWeek" article about how the Harrah's database and loyalty program investment is paying off, in a big way.

'Total Rewards' Pays Off for Harrah's

The article cites some reasons why it's working for Harrahs:

1. The program is easy to use and offers a variety of ways to redeem rewards. The article talks about how too many rules and too many restrictions on redemption equate to a program that people won't participate in.
2. It offers "upward mobility". Tiers of membership are built-in, with better and better perks as people move up the chain. This lets members aspire to the next level, hence they spend more with you.
3. Harrah's program maximizes customer communications. "Rewards members look forward to highly targeted promotions. The casino uses information from the card usage to create frequent direct-response promotions that customers would be likely to use. The response rate for such offers averages about 10 percent." As a direct marketer, this touches my heart! I'm thrilled not only with a 10% response rate, but even more so by the fact that these programs are so targeted that customers actually look forward to receiving an offer.

The article concludes with helpful tips on how to design a loyalty program that works.

Bottom-line, Harrah's has proven through hard numbers that their marketing investment (database infrastructure and loyalty program) has paid off. And, that's the kind of measurement I can believe in.

House of Blues -- Using Mobile Marketing to Effectively Target the Youth Market

The House of Blues really hit it this time! Not only are they an excellent nightlife and music venue, but they are forward-thinking, leading-edge direct marketers. Recently, a case study was published by Mobile Marketing in the News outlining what the House of Blues (in partnership with Motorola) accomplished with the help of Soapbox Anywhere.

Here's what they did: "House of Blues, presently using the Web for consumer interactivity in addition to other more traditional means of marketing, decided to leverage the mobile channel to deepen its relationship with its existing and new customers. Recognizing mobile as a personal, one-to-one mass market medium that is 'always on', House of Blues tapped Soapbox Mobile to create its mobile campaigns. The Soapbox Anywhere platform provided personalized mobile interaction in addition to a valuable database of mobile users. The House of Blues mobile trivia campaign placed a 'call-to-action' across in-house TV screens and person-to-person street team interaction by means of unique short codes assigned to House of Blues venues across the U.S. The Soapbox Mobile solution empowered House of Blues to track and report, in real-time, the effectiveness of its mobile campaigns for each of its nationwide locations."

So, here's a case where a company, i.e., House of Blues, used emerging technology to accomplish a lot of things. First, they have built a unique way to acquire new customers and build loyalty (and stronger relationships) with their existing customers. Second, they have definitely figured out a nifty way to build brand awareness. Third, they were able to use their creativity to bring value to their partner, Motorola, in a way that most certainly makes their hearts sing: new revenue streams. Finally, and near and dear to us, they were able to create a program that was easily trackable so that they could see the effectiveness of the campaign in real-time. That's smart direct marketing for sure!

We are advocates of using technology in creative ways to effectively build profitable customer relationships. Kudos to House of Blues, Motorola and Soapbox Mobile for leading the way!

How About a Little Wine with Your Social Marketing?

Social Marketing (also being referred to as "Nomadic Marketing") is quickly becoming the leading edge of Direct Marketing today. Once considered an underground movement, Social Marketing is becoming an important tool for your Direct Marketing strategy. In fact, an up-and-coming wine-maker in South Africa has built his complete direct marketing strategy around Social Marketing.

Stormhoek winery is forecasting sales of an astounding 350,000 cases of wine this year internationally -- up from a measly 10,000 sold locally last year -- and this increase is solidly due to the success of owner Graham Knox's social marketing campaign. The article states that "Knox -- a former advertising whiz -- knew he wouldn't sell wine in an already saturated market by putting pictures of the product on billboards or in magazines. 'Wine is social, people like to talk about wine, so we needed to figure out how to get people talking,' he says. 'Since ancient times word of mouth has been the most powerful means of communication.' "

So what was Knox's strategy? He enlisted the help of Hugh McLeod, who is a cartoonist and also runs the most popular weblog in the UK. He's been called "the most influential blogger in Britain" by the Financial Times. Here's how he did it: "In between designing quirky cartoon-style labels for Sauvignon Blanc and Shiraz, McLeod began blogging about Stormhoek, realising how easy it could be to create a buzz in cyberspace, which would then translate into profit. He offered a free bottle of wine with a personalised label to the first 100 people in the UK, France and Ireland who would include Stormhoek in their blogs." Brilliant!

Simultaneously, the winery started sponsoring "geek dinners, providing free wine in the hope that people would go home and write about it. They did. The idea spread like a virus and soon Stormhoek was the drink of choice among the smartest, most tech-savvy crowd in the UK."

This initiative created so much success for Knox, that he also applied it to the US market where it has also been very successful.

Interesting, isn't it? Advertising Age included this marketing campaign in its "Top 50 global marketing campaigns last year, along with well known brands such as Toyota, Nike, Microsoft and Apple." So, this is not just the latest Direct Marketing fad. Social Marketing is here to stay.

So, as direct marketers, we need to figure out how to integrate this important tool into our overall marketing strategy. By creating a buzz around our products and services, we can enlist the power of our most loyal customers to more effectively sell them. It's an idea who's time has come and we predict that those who embrace it quickly have the opportunity to reap some great rewards. Consider Knox's answer to the question, " 'Is this the future of marketing? 'Absolutely,' he said. 'It's interactive, it's inexpensive and it has a more potential reach than anything else.' "

So, as you're hoisting your glass of wine to celebrate the 4th of July tomorrow, consider commenting on it! Go find the winemaker's blog or website or go to a wine commentary blog. You'll be on the leading edge of wine drinkers, and directly participating in the success of your favorite bottle of white, red or rose!

Have a Happy 4th of July Holiday! And for those of you outside of the US, have a glass along with us -- then let's blog!

PS Any guesses on what RRW stands for??? Hint: We love wine. If you guess correctly, we'll send you our white paper on Building Loyalty: How to Make Sure They're Drinking Your Brand. Think UB40. : )

Using Intelligence to Build Customer Loyalty

I love reading stories about how various industries are using database management and analytics to keep their customers satisfied, build loyalty and grow profits.

Today's "CRM News" published an article titled: Customer loyalty, profitability drive BI consolidation at Fairmont. It provides a case study on how the Fairmont Hotel chain maximized their marketing database investment by incorporating intelligent analytics and by a stringent data cleansing and maintentance routine.

Additionally, the article talks about how the Fairmont successfully implemented a customer segmentation strategy. "Marketing wanted to be able to enhance the customer experience by segmenting the customer base and ultimately driving behavior and additional revenue based on what it already knows about its guests."

In addition to the heavy reliance on analytics, what I found truly encouraging is how Fairmont solicited sponsorship from all aspects of their organization--from top-level execs, to marketing to IT. I'm sure that this team approach helped ensure a successful project.

From the article, quoting Jeffrey Berry, Director of Database Marketing for the Fairmont: "The biggest thing we've learned -- because there is a heavy technology spin and because the day to day is focused on the minutia of technology -- it's really important to make sure the business objectives are clearly established and outlined and you check against them," Berry said. "You don't want to get mired in the details so you miss the big picture. For me that's the key lesson."

Lesson learned!