E-Mail More Prominent in Marketing Campaigns

Results of a survey conducted by Direct magazine show that e-mail is becoming a more important marketing communications tool. Use of e-mail to communicate with both existing customers and prospects is on the rise according to the survey. 72% of the firms surveyed send e-mail to customers (up 10%), and 50% send e-mail to prospects, up 9%). Direct mail, while still a vibrant channel, declined in terms of the percentage of respondents saying they send to customers (66%, down 4%) and to prospects (59%, down 1%). Direct mail will likely face further scrutiny by direct marketers as costs to produce and mail pieces climb as well as calls from advocacy groups and some consumers to curtail the amount of natural resources expended to produce mail pieces.

The results of the survey send a clear message about the importance of multichannel marketing efforts. E-mail marketing is more prominent, direct mail will continue to have a significant role, and search engine marketing (used by 39% of those surveyed, up 10%) and internet advertising will be used more extensively. The days of advertising campaigns consisting of traditional media only are over. What is needed today is an integrated effort that can include traditional media elements such as print or broadcast mediums. Direct marketing’s inherent capabilities to measure effectiveness make tools such as e-mail, direct mail, and search engine advertising indispensible elements in today’s integrated marketing campaigns.

Link: Directmag.com : “E-mail Gains in Usage but Traditional DM Media Decline: Survey”

Thinking Outside the (Big) Box

I came very close to using a phrase I vowed never to use on this blog, but I couldn’t help myself!

I contend that marketing is rather simple. It’s marketers that make it complex, over analyze situations, or otherwise screw it up. A great of example of observing, learning, and responding in a straightforward way was featured in a recent issue of Business Week. Big box electronics retailer Best Buy is breaking from traditional top-down marketing planning by getting more input from stores about the product mix in each location. Among examples mentioned in the article were moving the location of iPods to the front of the store in a Houston area Best Buy to accomodate Eastern European ship workers on leave and a Savannah, Georgia store expanding its offerings of products targeting soldiers that will be returning in the coming months.

These adjustments to marketing strategy could be made because Best Buy managers had a good understanding of shoppers’ buying behaviors in their markets. Such observations are impossible to make from corporate offices. This shift to market level action falls in line with Best Buy’s “Customer Centricity” strategy. Yes, control is ceded to the field to a certain extent. But, if managers hired to make decisions cannot be trusted to do so, a company has bigger problems than where strategy decisions are being made.

I saved the best for last. A Best Buy store in Mooresville, NC, invited a seniors group to the store one morning before opening for a demonstration of products. A group of 85 showed up and bought $350,000 worth of products. The store manager indicated his costs totaled $99 for labor, doughnuts, and coffee. That is ROI that one can only dream of achieving! What small investments could you make that could potentially deliver an unexpected return?

Link: Business Week – “At Best Buy, Marketing Goes Micro”

Retail Sales Continue to Grow Online

In a slowing economy, retail sales are an important indicator of the direction of the nation’s economic trends. Consumer buying patterns at retail provide a glimpse into our confidence and the strength of the consumer economy. While retail sales have been sluggish overall in recent months, online retail sales have fared better. According to figures released by the U.S. Department of Commerce, e-commerce sales rose 13% during the first quarter of this year compared to the same period in 2007. Also, the share of all retail sales occurring online rose from 3.1% to 3.4%.

This trend is not suprising. The web has always offered the advantage of convenience, giving shoppers 24/7 access to the products they want. Now, the soaring cost of gas gives us another reason to shop from our computers. A limitation of e-commerce in its earlier days was consumers’ lack of confidence shopping online. This limitation has waned as more people have made purchases over the Internet.

It is likely that the percentage of all retail sales will continue to rise. Now is the time for the late majority and laggards to swing into action and have a presence online. No, I’m not talking about shoppers. I’m talking about retailers! The role of a retailer’s web site has moved beyond an information source that can drive store traffic. The web should be part of a multichannel effort that not only supports the in-store experience, but it must be a viable outlet for shoppers who increasingly wants to do business online. If you are a retailer that is not offering your customers the option of shopping online- why not?

Link: eMarketer “Retail E-Commerce and the Economy”

The Good and Bad of Industry Consolidation

The past several years has seen consolidation occur in many industries: airlines, banking, and department stores just to name three. Many forces lead to the consolidation of firms in an industry: high costs, plateauing demand, and overcapacity are frequent drivers of consolidation. In many cases, mergers among firms in an industry is seen as the best option for long-term profitability and ultimately, survival.

The candy industry recently experienced consolidation among its members. Iconic gum marketer Wrigley has agreed to be acquired by candy marketer Mars, which has the backing of Warren Buffett’s Berkshire Hathaway. The merger creates an industry giant that will give the combined companies more resources to compete than either one could on its own.

So, who should be worried when consolidation like the Wrigley-Mars deal occurs? All of the smaller players in an industry. Small firms do not have the economies of scope that a Mars-Wrigley would have. It is almost impossible to compete on price; the distribution and selling efficiences a large firm enjoys are almost impossible to replicate in smaller businesses. Value must be added in other ways: superior product features or benefits, unique user experience, or outstanding customer service. There is always a market for firms that can excel in these ways.

Link: Brandweek “Small Candy Makers not Sweet on Consolidation”

Hybrids Moving from Making Environmental Sense to Economic Sense

In case you don’t own a car or have been in hibernation the past several months, you may be surprised at the price of a gallon of gasoline these days. The average price in the U.S. was $3.67 as of last Friday according to AAA. Talk of a gas tax holiday by presidential candidates would do absolutely nothing about the fact that expensive gasoline seems to be here to stay. There is simply too much demand, both in the U.S. and abroad, as well as unfriendly oil producing countries such as Iran, Russia, and Venezuela that have little motivation to ease our pain at the pump.

Hybrid vehicles have been touted as one possible solution to both help the environment and spend less on gas. The combination gas and electric engine have miles per gallon capabilities that are more than 30% better than gas-only engines. That statistic would suggest that people should race down to the local car lot and buy a hybrid. Not so fast! Hybrid models come at a price premium anywhere from several hundred to a few thousand dollars over a gas engine version. This price differential has been a deterrent from hybrids gaining widespread adoption as the gas savings often would take too long too offset the higher price of a hybrid vehicle. Until car manufacturers aggressively work to narrow the price difference between gas and hybrid vehicles, adoption of hybrid vehicles will not realize its potential.

The long payback period is shortening thanks to soaring gas prices. Now, some hybrids have payback periods of 2-4 years. This shortening of the breakeven point means that hybrid owners are more likely to realize savings. Of course, this assumes gas prices remain high. While it would be nice to see prices retreat below $3.00 a gallon, there will be little reason to lower prices as long as demand does not decline substantially. This means that buying a hybrid vehicle might no longer be the wise environmental choice, but it could be the wise economical choice, too!

Link: USA Today “Hybrids Recoup Higher Cost in Less Time”

Build Communities, Build Relationships

If social networks were a fashion item, they would be the must have marketing accessory this season! The success of sites like MySpace, Facebook, and Digg have prompted brand caretakers to explore creating social networks around their brands or product categories. The idea is that if people are interested in meeting others with similar interests as shown by the millions of visitors to the top social networking sites, then there might be commercial applications for social networks for relationship building and maintenance. I would say there is commercial potential… for some brands.

Creating a social network just because others do it is no more logical than advertising because your competitors do it or lowering your price to match your competitors’ price. A brand has to matter to customers in the first place before they would consider investing time and emotions in a social network. An example of a brand that has the foundation for building a social network is GM’s Saturn. The brand recently launched its own social network, ImSaturn. Saturn has had a legion of devoted customers since its inception in the early 1990s. Saturn owners are somewhat like Apple Mac users: not the largest customer group in the industry but very loyal to the brand. In three weeks, more than 1,200 people joined ImSaturn (including yours truly, an owner of two Saturns). This initial response exceeded the goal of having 1,000 members during the first six months.

It’s all about relevance- creating a social network cannot make your brand relevant. The brand must already be perceived as credible and its promises delivered to the target market. A social network is a way to bring together people with similar feelings toward a brand and even draw in people from their personal networks. With those capabilities, social networks are not likely to go out of style anytime soon!

Link: Response Magazine “Saturn Creates Its Own Social Networks”

More on the Giving Customers a Voice with User Reviews

In a post April 28th, I discussed the increased importance of user-generated product reviews in consumers’ buying decisions. The theme of the message was companies can be well served to give their customers a platform for talking about what they like (and dislike) about products and services.

While empowering customers can be a way to allow them to help one another make product purchase decisions, there may be an even more important reason to consider making a user review section a part of your web site: it can generate revenue. A recent story in DMNews details how specialty retailer PetCo experienced very positive results from a contest that encouraged customers to write product reviews on the PetCo site. People who wrote reviews spent more time on the PetCo web site, shifted their purchases to higher margin products, and increased in dollars spent. Also, return rates for products reviewed on the web site were lower.

The key to PetCo’s success was that it gave customers an incentive to adapt their behavior and begin writing and reading reviews. In this case, the incentive was a chance to win a $500 shopping spree online at PetCo. It would seem safe to say that PetCo’s “expense” for this promotion was actually an investment that potentially will continue to provide ROI in the form of higher sales and more engaged customers.

Link: DMNews “DMNews Speaks with John Lazarchic, VP of E-Commerce at PetCo“

The Case for Self-Regulation: Word-of-Mouth Marketing

A general rule of business is that an industry is better off if it is able to self-regulate its practices rather than come under governmental regulation. This view is not meant to advocate a lawless society, but rather it is a view that businesses understand it is in their best interests to act ethically. Ultimately, customers will be the final arbiter, passing judgment on firms and deciding whether to business with them.

Advocating the position of self-regulation is brought up again because of what is about to happen in the U.K. Beginning later this month, a new law makes it an offense for companies to orchestrate the sending of messages online without identifying the origin of the messages. The law is designed to crack down on contrived word-of-mouth marketing campaigns in which the message sender appears to be a non-corporate entity but actually is a firm sending messages for commercial purposes. The U.K. joins other European countries that enacted the same law at the beginning of this year.

While it is laudible that a government be concerned enough about its citizens to pass laws intended to protect them, this area seems to be a low priority. Consumers are more saavy than ever, and a disingenuous marketing effort can create more problems for a firm than any benefits it could potentially create. An unforgiving marketplace would exact more punishment on a company that tries to deceive its audience using seeded marketing messages than any regulatory agency could.

AdAge: “U.K. Cracks Down on Word-of-Mouth with Tough Restrictions”

Let Your Customers Talk… And Then Listen!

The balance of power in marketing relationships has experienced two significant shifts in the past 20 years. First, it was retailers gaining the upper hand with manufacturers as massive retail chains wielded great buying power. More recently, the power has shifted from retailers and manufacturers to consumers. The empowerment made possible by the Internet gives us more information about sellers and their products than ever before.

A great example of how the power is squarely in the hands of consumers is the ability to post user reviews and descriptions of experiences with products or services online. A recent survey by the Society for New Communications Research found that nearly 75% of persons it surveyed choose brands or companies in part because of what they learn from user reviews online. More than 80% of those surveyed believe online communication mediums like user review web sites and blogs give them a greater voice.

The value consumers place on gathering and sharing information online must not be lost on marketers trying to attract and retain customers. Positive word-of-mouth simply cannot be bought; let your customers be your top salespeople! On the flip side, if you are failing customers in some way, is it not critical that you know that? Why would you want to suppress input from the people who you believe should be purchasing your offerings? Of course you would not deliberately set out to block needed feedback. But, many consumers believe that companies do not want to hear their opinions as only 33% of the persons surveyed by SNCR believe companies “…take customers’ opinions seriously.”

You can learn a great deal about what customers think about you without conducting complex marketing research. Just encourage them to talk… and then listen! Link

Put the "M" in CRM

In the past 10 years, many marketers have embraced Customer Relationship Management (CRM) as if it is the answer to all of their marketing challenges. Why not- the promise of a powerful collection of customer data that could be analyzed to identify selling opportunities and key customers that should be the focus of retention efforts, just to name two applications, is too great to resist. Reality has not always matched the promise, as many companies spent millions on CRM infrastructure but have been unable to harness the resources and make them work effectively.

How bad has the CRM experience been? A recent study done by the CMO Council found that only 16% of the firms surveyed rated themselves as effective or extremely good at executing CRM. Only 6% claimed to have excellent knowledge of their customers based on the demographic, behavioral, and transactional data they had captured. Not exactly a glowing report for a concept that many experts believed would fundamentally change the practice of marketing.

Clearly, there is work to be done to put the “Management” in Customer Relationship Management. It can be a daunting task to pull together customer data from sources scattered throughout a business. However, the high stakes associated with knowing as much about customers as possible means CRM efforts are too critical to abandon. Link