Run on Toast

Big Brother or Marketing People Want?

The news that the BBC is to use behavioural targeting on its global websites outside the UK (Marketing Week 27.04.09) is an important milestone for this (relatively) new and highly controversial technology for 2-reasons...

1. It is seen as a key enabler to commercialising their websites
2. If the ultra-cautious BBC are happy to adopt it should your company be doing the same?  

  
Behavioural targeting uses knowledge of the websites you visit to serve you more relevant online advertising. It is seen as a crucial technology for both ISPs and web owners to monetise their sites, and to revitalise online display advertising.

It's controversial because of privacy - do you want your web-surfing habits to be tracked and used in this way? The answer is of course - it depends! If it is genuinely useful then yes. There is a distinct generation gap in the attitude of those consumers (often younger and social-networking literate) who understand the value of sharing their personal information.

BT got is spectacularly wrong last year in its test on the Phorm behavioural targeting platform. Rather than invite customers to participate in a beta-test (Google style) it picked customers randomly. Whilst their anonymity was assured the customers in the trial did not appreciate being selected without permission.

Online display advertising is at a bit of a crossroads - despite comprising 19% of online advertising expenditure in 2008 (IAB) the effectiveness of this media is coming under intense scrutiny. Network buys have become the norm where you pay for impressions but are blind to the web sites you might end up on with the organisational risk and wastage that entails.

On a more positive note the combination of behavioural targeting and the interactive display formats that are increasingly available promise greater customer relevancy and a better branded experience - potentially moving from the interruptive to the genuinely engaging.

If this sounds to you a bit like the cookie debate of 5-years or so ago - you'd be right - using much the same technology. Whilst consumers are beginning to accept that cookies are useful for improving their internet experience there is a way to go to win the debate on highly targeted advertising. 

Brand and digital media owners need to demonstrate to consumers that they can use behavioural targeting responsibly to genuinely deliver marketing people want. The IAB's good practice guide is an excellent place to start.

DM is dead, long live CRM

Anjali @ Made By Many tweeted this the other day, and I doubt anyone working in DM would disagree. The more consumers automatically disregard DM as junk mail, the less efficient the medium becomes. Even the most notorious of direct mailers, such as Capital One, are reducing what they put through the letterbox. Partly because of the cost-effectiveness of digital and partly because consumers just don't look anymore, DM as we know it will cease to exist in the year 2017*.

However, stop and take a minute to consider two things. One, that in landscapes where doormats aren't littered with mountains of pizza menus, people do stop and pick up DM - but only if it looks really interesting - white envelopes to The Homeowner = FAIL.

Two, that no matter how many spam filters you employ, you are you probably look at everything that you have opted into through a CRM programme. Just as catalogue retailers were uniquely placed to take advantage of the e-commerce revolution back in the day, DM agencies are well placed to make the most of CRM programmes because to a large extent we're doing it anyway.

So while direct mail might be dead, there is a land of opportunity for the direct agency, especially as we become more involved in the digital aspects of CRM - all those clever algorithms - but that's another post for another day.

*Not quite scientifically calculated

How to cheat at direct marketing ROI

Calculating how to measure direct marketing ROI (return on investment) is fairly simple: (SALES X VALUE) / COST = ROI Below is a guide as to how you can increase your ROI in 5 simple steps...

1. Measure response at the GROSS level

Rather than count only incremental sales (target cell sales minus control cell sales) from your campaign simply count all the sales. Control cells can be tricky to set-up so why bother? Further measuring incremental response can be hazardous to your business case as for most campaigns it is only 20-40% of gross response. This is particularly true for brands which have other sales channels such as a retail network. 2. Massage your value If the sums are getting tricky simply inflate the value of the product or service. Don't think seriously about whether you should use a 1,3 or 5-year NPV (net present value) just use the highest one! Never mind that to achieve the higher 5-year value might involve further customer investment. Whatever you do don't look back 6-months later at the actual NPV of the customers your campaign acquired and re-adjust your ROI expectations for the next campaign. This so called Total Value Management approach can make any business case dead in the water. 3. Drive down your pack cost Yet another way to make that business case is to drive down the cost of the communication. For a letter and A5-leaflet it is perfectly possible to get something produced for less than 20p including postage. This is about economies of scale. Just mail a huge volume well past the point of customer relevancy (see step 5) and get the stuff printed in Eastern Europe. Don't let the allure of the agency fool you into any of that expensive brand strategy & data planning stuff. Just ignore those brand communication or CRM guys who insist that direct marketing has a role to play not only as a highly optimised sales channel but one that can build relationships too. 4. Don't do test and learn It just drags down your overall ROI through the need for additional investment. It's tricky to set-up. If you want to learn anything worthwhile you have to really think hard about it. Plus it takes ages to get results back 5. Evaluate the campaign at an overall level I have left the most important tip till last. Make sure you present your results at the highest aggregate level. This is really, really important don't look at the results disaggregated by targeting decile for example. When you can eek out a positive ROI from communicating with the top-6 deciles (60% of the base) it is very inconvenient that the top-2 deciles only create all the profit whilst the next 2 only break even and the next 2 have negative ROI. Don't let anyone see (especially those finance guys) that by mailing half the volume you could achieve c85% of the sales, 95% of the profit and double your ROI. Of course if you want to measure your direct marketing properly you'd do the opposite of this guide but then that involves doing communications that genuinely engage your customers creating additional demand, rather than simply hoovering-up sales you would have got anyway.