Everyone thinks of email as being more or less a broadcast medium. Email agencies and bureaux send millions of emails as newsletters every month to addresses lodged in databases. Some send them daily. No-one expects a reply.

But email has a richer use. With apologies for the reminder, but email was the way you had a conversation without picking up the phone. You send a message to your mate, and when they’re ready to answer they do. You can have conversations in real time, or with a delay for timezones, research or holidays. Email involves your counterpart in the decisions about how the conversation is paced, where it leads to, when it changes venue, when you meet up.

We appear to have lost sight of the dialogue. It’s easy to do so: if you’ve got 20,000 addresses on your database or 800,000, managing dialogue can be a daunting prospect. And notice I said addresses, not customers. More often than not the email broadcasts marketers manage go blind to everyone they can reach. So email gets a bad reputation, and newsletters have dwindling response rates. Where once it thrashed Direct Mail, now response rates are in the lowest single figures.

We all know what the solution is though. Segmentation makes response rates leap.

Imagine you’re sending an email to ten thousand people with three unbeatable holiday offers in it, one for families at the top, one for retired people in the middle, and one for singles at the bottom. And let’s assume that everyone reads the first offer, two thirds read down to the second and a third scroll down to the third. If the audience is equally split between the three target groups, the maximum possible response rate is 6,666.

If we could divide the audience into three segments, and send one email with one offer to each, the maximum possible response rate is ten thousand. That’s a huge difference in effectiveness. If you started with this three-part email, and it really is an unbeatable offer, just by segmenting it you increase your sales by 50%.

So that’s segmentation. Segmentation is a science – one which we practice and improve all the time. It can be really simple like the example above, or it can get very complex. We can segment by, for example, behaviour (what media they consume, do they request a brochure before making a decision, which wines do they prefer), or by demographics (where they live, how many there are in the family, what they earn), or by motivation (whether they are interested in their kids’ health, or the environment, or what their neighbours think). When we start working with a client this is what we address first, by looking at what data is available either in the client’s hands or commercially, because this will give us insights into what messaging might work to drive increased response.

Segmented email marketing is incredibly powerful, but it’s nothing to do with technology, and the technology vendors will always work with specialist eCRM partners with long experience in segmentation strategy to devise the campaigns they deliver for you.

eCRM adds something really special to all this. eCRM is channel-agnostic, in other words it’s concerned with reaching the customer wherever they are - email, SMS, social media or websites. A great eCRM strategy uses every touchpoint available to deliver the right messages for the right moment in the decision-making cycle to the right person. eCRM leverages segmentation through email, but creates a relationship through observing how customers behave and what they find most motivating by tracking across every digital venue, mobile to landing pages to social media, and that’s when email marketing becomes something different, something which transforms businesses through radical changes in revenue.

Time was that marketers simply marketed. They told a story that engaged potential customers in their brands. They talked at people, hoping to attract, seduce and exploit. Retention was simply about delivering what was expected – not disappointing – and being consistent. When I became aware of interactive marketing in the early 1990s it was because of a CD-Rom called Xpand Expo, a virtual exhibition hall that you could click around, read text files placed on virtual stands, and that was about it. They’d spent a lot of time rendering an exhibition hall-like suspended ceiling, and done a good job of selling virtual stands to the likes of HP. What occurred to me at the time was that here was a golden opportunity to give some power to the consumer, by removing the sales person – but it needed structure and marketing thinking to make it engaging and work. I started my first digital agency to do just that.

Interactive multimedia truly gave the power of self-selection to the consumer. It meant if we gave a consumer five choices, they’d (almost certainly) choose the option that appealed to their needs most. Slightly problematic in that getting CDs to enough potential customers was expensive and the media was fixed. No-one in marketing took it very seriously. Then the following year along came the world wide web, and the world changed in twelve months.

Marketers cottoned onto the opportunity – eventually – to engage customers in a dialogue driven by the customer herself. Websites became big business for forward-thinking clients and agencies like ours; getting people to the websites became the next challenge but again, tapping into elective channels made sense and worked in practice. In fact, the agency I run now started as a search engine optimisation (SEO) agency in 1996 as an offshoot to our web agency. And actually that leads me towards the problem marketers face at the moment, which in my view is crippling the advance of interactive, elective experiences that customers can enjoy and companies can make millions from. And they can, because some have seen how to solve the problem.

The issue is that in the years following the early pioneering experimentation, digital marketing has become siloed. When I last looked there were 3,500 companies claiming to build websites. SEO has become an industry in its own right – in fact, two industries: organic (natural) search optimisation and paid-for search, (PPC – pay-per-click). Web has become websites plus tactical microsites, often by different agencies. The DM agency probably has a microsite supporting a print campaign. The PR agency is looking after “reputation management”, though it might be subcontracting the Facebook page to a social media agency. Oh, and the online ad campaigns are being specified by the media buying company.

I’m sure it all made perfect sense at the time.

So here’s the situation most clients (except the really canny ones staffed by strategic thinkers) find themselves in today. A dozen agencies, some nested or subcontracted. Each of them doing what they’ve been told. And if they’re good, each one is trying extremely hard to improve on what they did last quarter, incrementally increasing click-throughs or eyeballs or impressions or recall by 3%.

Many of the really good ones will be coming to you with really great ideas for attracting new customers. Fantastic viral ideas coming from the ad agency. A really good creative hook with legs from the online agency that will reach new audiences and probably drive some extra traffic to the website too. And what with the e-commerce company annually improving the sales funnel, well, it’s an ever-improving world out there. But while all these bits and pieces are individually doing better than whatever they were doing before, they are also gradually losing touch with each other. It used to be that marketing marched to a single coherent beat, where the TV ad established the awareness and each other medium elaborated on the brand message. Yet that’s fragmented badly, and what we’re left with is a mess of tactical, competing, agency-income-motivated digital campaigns that have no backbone or strategy, and which often do more to confuse the customer than empower them.

It’s a situation we see all the time. And there is a simple way of getting out of it, though it takes will, vision and patience.

We need to go right back to the customer. The data is the key here. All of the various marketing activities I’ve described deliver data in fairly large quantities – data about who your customers are, how they behave, what they like, how many times they buy, how much they spend, how long they last, how quickly they churn and so on. Again, it’s probably in a variety of different places, but that doesn’t really matter. The first step is to find it all.

So, step one, find the data. Any eCRM agency worth its salt will be able to manage the aggregation of this data, manage its analysis, and come up with insights about your customers. These insights inform segmentation – behavioural, demographic, technographic; value (by whatever measures)-led, loyalty-led, influence. And segmentation tells you what you need to say to each of them at what time to increase their engagement and to increase sales... when McCain Foods did this, engagement rates with brand resistors went from 14% to 63% in just ten months.

So now we have a map of what needs to be said to whom and when. In its most basic form eCRM can easily be delivered by email. This might be augmented by microsites speaking and exchanging information with each segment. Supporting this you might want to extend forums or social media that allow customers to interact further with you, or each other. If you observe these closely enough you’ll find out what’s bothering customers – in fact they might show you how to segment them even further or what’s going to interest them in the future.

And suddenly (well, to be fair it might be three to twelve months) you have the kernel of a digital strategy. Followed through, the segmentation which came from all that disparate data can start delivering genuinely useful information that essentially becomes the foundation of a marketing strategy. Simply observing the success or failure of each strand of communication with a segment by watching the behaviour of the recipient, gives you the power to change the options you make available to her over time. It’s enormously powerful, and because all that is being done is observing response and making changes based on what is seen, the power really is back in the hands of the marketer, even if it appears that the whole machine is being driven by the customer.

And from this observation of what works and what doesn’t, what motivates or engages and what demotivates or disengages, comes the magic: very quickly we start to see which segments we want more of. And that means we know what to tell our agencies to do. They are suddenly working to your plan, not theirs, and your plan is driven by an eCRM strategy not an agency account handler’s desire to make themselves famous with an award-winning viral or a 0.002% increase in banner clicks. Time was that clients drove strategy, rather than herding agencies, and eCRM brings that time back, at long last.

Recession indicates retention. The solution (as everyone knows but few seem to practice) to the problems brought about by a severe downturn is first concentrate on what you have, not what you might have. Marketers must – must – get retention right, for a variety of reasons.

• It’s where your current revenue is
• It’s where the lowest hanging fruit for additional revenue is (all you have to do is not screw up, then ask for more business)
• It’s where your biggest advocates lie
• It’s where your data sits
• It’s the biggest source of prospective customers for your competitors

...And so on. Reducing churn protects your customer base against better offers or a better story from your competitors, and yes, they’ll try anything. But customers have a certain amount of inertia. Once they’ve started a relationship with a brand they’ll only move through lack of appropriate attention or if you don’t deliver on what’s been promised, so retention starts with not offending customers. eCRM creates stories that will keep customers engaged, and great eCRM creates stories that massively increase engagement and not only reduce churn to near-zero but increase purchase frequency, average transaction value, and active advocacy.

The customer relationship management bit of eCRM isn’t the whole story.

Buried in the above list though is a gem. “It’s where your data sits”. Your best source of information – not just for segmentation strategy – about who’s likely to spend more is your existing customer base. The data you already own can tell you how to run extraordinarily efficient acquisition campaigns.

(By the way, many people in digital have long thought that acquisition campaigns are a load of rubbish because generally they’re about feeding huge numbers of people into a funnel in the hope of converting the few people who, more or less by accident, have been hit at the right time to buy.)

By combining the segmentation that’s been created for eCRM programmes that focus on retention with the data that gets collected on how those segments behave over time in reaction, we suddenly have a potential gold mine. Great eCRM doesn’t just retain, enhance, increase – it tells you how to acquire. The new, richer data tells you which types of people are most likely to be movable from low-value to high-value. And this in turn tells you what kinds of people you want more of. And that, put simply, tells you where to spend your money to increase your feed into the improvable segments. eCRM suddenly becomes not just about retention marketing, but about all marketing.

The age of eCRM is upon us. Well, to be fair, the age of eCRM – Electronic Customer Relationship Management – is upon the commercial world. Companies like The Sun’s fantasy football league, the world’s biggest, are doubling their revenue from digital by engaging with their existing customers in a structured, highly commercial way. They love it (who wouldn’t love a 93% increase in digital sales in three months?). eCRM’s a hot subject in News International towers – in fact it’s a hot topic for all sorts of brands from Nickelodeon to McCain Foods to Virgin. You would imagine that, given the commercial successes and incremental profits it drives, it would be a straight port to charity. But it isn’t. In my view, eCRM isn’t a universal fit, and it needs a slightly different approach when it comes to applying its highly tested principles to fundraising and donor engagement.

Let me take a step back and explain the general principles behind eCRM and then how I believe it can and should work for the third sector.

eCRM starts with data. This data comes from, in essence, existing customers. The data consists of things like when a product was bought, what its value was, whether it was bought following a sequence of events, or driven by a promotion, or facilitated by a third party. That kind of observed behavioural and motivational data can be layered with information about the customer herself – family size, age, location, whether others they know are also customers, whether they belong to this, that or the other social group. Integrating and analysing this data often shows up connections and trends. We may find for example that a customer is likely to spend more if they’ve seen a TV ad within hours of being emailed a voucher on a Tuesday, or that if they’ve got young children they’ll respond better to new offers on mornings when they have childcare. We derive series of insights, and we create a plan that segments audiences by value, frequency, recency, and motivation. We come up with a creative hook, attach email, SMS, web touchpoints, and off we go testing and optimising campaigns to see which work most effectively. It’s pretty logical, and it’s entirely oriented towards increasing a customer’s value.

In theory, you could apply the same highly commercial approach to charity eCRM. In fact, Direct Marketing and Direct Response Television (DRTV) do exactly that, and in general it works extremely effectively, at least for a short while. It relies on continuous volume being fed into a funnel, because using these kinds of methods you can burn through huge numbers quite quickly. And it is of course very single-minded. It allows little for the emotional attachments people have with causes that actually very often span lifetimes and generations. It’s mechanical, in essence. Commercial eCRM creates an equation that takes customers and uses data and psychological techniques to maximise the revenue that can be gained during their lifetime as a customer. That’s business, and it’s not personal. I think that charitable giving, on the other hand, is personal. Charity is not, or should not, be a machine (stick charity on top of problem here, turn handle, problem solved) because I think charity is about solving problems unaddressed by the machine of society.

All of which is a little grandiose. eCRM for charity does automate inasmuch as it allows organisations to use techniques and principles to increase engagement between a cause and its supporters. If by using eCRM we can provide genuine value and fulfilling engagement then as a consequence support will deepen and charities will be able to operate more effectively. The essential truths of eCRM do apply: eCRM is about delivering information to a supporter that is timely and relevant, that doesn’t confuse, that increases the bond rather than distracts from it or irritates. Data is still at its heart. Understanding what your audiences are motivated by, where they live, what their attitudes are, what they are prepared to do on your behalf, all of these are critical. But while commercial eCRM is about facilitating a value transaction (I give you entertainment, you increase your purchase frequency), not-for-profit eCRM is about building and delivering trust, and allowing an opportunity for this to be returned.

eCRM for causes works most effectively when it provides a call to understand rather than a call to action. The same methodology applies – we still analyse all the data we can lay our hands on, we understand what motivates people, we work out what people are likely to want to do, and we segment them accordingly. But the strategy is much longer in view. Building relationships over long periods of time builds trust and cut-through. It gives something back to the supporter, and in turn this means when we do have something we need to say, if it’s delivered in an appropriate manner to the right person at an appropriate time, it is listened to. VSO learned this early on in its forays into eCRM, when at a certain point it found it needed to recruit a large number of primary school teachers – using email and a microsite to engage it found over 6,000 new, qualified contacts all through referral, because of the relationships it had created.

eCRM, that is to say properly researched and segmented long-term contact strategies delivered digitally, is a means not to an end, as it is in the commercial world, but to a beginning. Worked well it delivers relationships that last not just lifecycles but lifetimes.

Developing an effective segmentation may require a blend of behavioural and attitudinal data, argues Pete Anderson, planning director, Underwired

The nature of mass consumerism has changed dramatically in recent years and, in sync, the landscape of mass marketing and broadcast media has changed too – the identity and the ‘voice’ of the individual have become ever more prevalent, with the feeling that individuals can make big differences. Consumers have the power either to make or break a brand, through advocacy or criticism.

The problem is that, although the world has moved on, generalisations are still perpetuated, even in our industry, where recognition of the individual and the importance of ‘one-to-one’ dialogue are considered almost sacred.

Digital space provides expanded flexibility in achieving targeted and ‘one-to-one’ marketing, with email and SMS providing cost-effective communications. Consequently, some companies are making progress in terms of segmentation and ‘relevance’. However, a startling number of advertisers and agencies alike are still not practising segmentation or targeted communications.

So why, in an enlightened, insight driven industry, are we ignoring the mountains of research, consumer feedback, trends, market forces? Is it the ‘elephant in the room’ syndrome – it’s staring us in the face but we choose to ignore it? Or are we just guilty of defaulting to the path of least resistance, or not really understanding the subject, so that the ‘hype’ is just a sales pitch with no substance?

If it ain’t broke...

A common justification for not doing something is the old adage, ‘if it ain’t broke, don’t fix it’, driven either by a real (although sometimes flawed) belief that this is the best way and it can’t be improved, or by sheer laziness or plain reluctance to deal with something that feels ‘too complicated’ and outside the comfort zone.

I once read an article by a respected practitioner in direct marketing who stated that keeping things simple was what it was all about. This is fine to a degree; over-complication is not a good thing, but they claimed that we seemed to be moving into an era of ever more complex ‘scientific marketing’ – analytics, modelling and segmentation – which is ‘over-complicating’ things. That’s like burying your head in the sand: ‘I don’t want to deal with it because it’s difficult.’ Well, whether we care to recognise it or not, the devil is (definitely) in the detail.

Thankfully, their views do not reflect the trend across the whole industry, but the subject of segmentation is still quite a broad church and open to a variety of interpretations and methodologies.

The challenges of segmentation

The problem is, there is very little discussion about how and what segmentation should be used, just that segmentation is important and that advertisers should segment their customers. Add to this that most brands aren’t fortunate enough to have a robust, comprehensive customer database that has a significant volume and depth of consistent data to apply a workable segmentation model without breaking into a sweat.

The challenges are many and varied, and there has to be a real belief that the work required will deliver something that is not only effective, but executable. There really is no point in demonstrating something that looks amazing but cannot actually be applied to a communications or customer relationship management (CRM) programme. Having a model that helps all concerned identify and describe the consumer is fine, but not being able to do anything meaningful with it makes the process pointless.

Direct marketers were early adopters of segmentation, simply because the whole principle of direct marketing is about targeting and relevance. Direct marketers are also in the best position to be able to practise and execute segmentation, since DM relies on data – customer-related data, that can identify anything from demographics (what customers look like) to behaviour (what they buy, how frequently, how much they spend, and so on).

Looking to the DM sector helps us to understand the value and the effectiveness of segmentation. The problem is that most companies find it a challenge to gather consumer data at the level of granularity required both to create and execute a realistic, workable segmentation.

Take the FMCGs (packaged goods) sector. Gathering customer data is a real challenge here since consumer purchasing is made through a retailer, usually a supermarket and, until recently, most retailers gathered only till information and transactional data that weren’t attached to any customer information. Retailers like Tesco created initiatives to address this challenge through loyalty cards, for example, Tesco’s Clubcard, while other retailers quickly followed suit with their own loyalty cards; but the challenge still exists for FMCGs to create their own customer segmentation models in order to influence category and brand purchasing behaviour.

Even where segmentation exists, the design and construction of these models can be questionable. Add to this a lack of understanding of what segmentation represents and it is clear the whole area is fraught with challenges.

Breaking into segments

The point of segmentation is to group consumers into identifiable and manageable groups – groups that display characteristics in common, whether that be demographics, channel preferences, behaviour, values, attitudes or motivations.

Far too often, though, client and agency marketers fail to remember that segments are just broad groups – groups about which we still make generalisations, albeit more targeted generalisations. Segments are not absolutes, they are not groups of consumers who are exactly alike – they are just more similar in certain attributes than if they weren’t grouped together. An example might be a demographic value, where a segment could be typified as families, with four kids, living in London and the south-east. These values are not going to occur consistently for every consumer in the segment: it just means that the segment has a greater likelihood of comprising households with those values. So, for instance, the segment might also contain some households with two kids instead of four. It just means that the segment will be ‘more likely’ than the average (whether the population, the customer base, and so on) to contain households with those traits and values. This depends how precisely the segment has been defined: if ‘4+ kids’, for example, is specified as a key variable, it ought to mean exactly that.

Originally, segmentation was designed around demographics, because what consumers looked like was the main criterion for grouping them together. It was also a fair bet that if you belonged to a group of consumers that were, for example, a middle-income household with two children, both adults earning, living in the South East, you’d behave much the same as the next household with the same profile. The use of ACORN classifications (still in use, but now largely superseded by MOSAIC, both being geo-demographic classifications of residential neighbourhoods, placing groups of households together based on their similarities at postcode level) to broadly describe an audience based on their similar life-stage profiles was, and still is, widely used for broadcast and ‘above the line’ media planning, where awareness activity has traditionally relied on mass-marketing techniques to reach broad groups of consumers.

But broad segmentation descriptions of an audience, like ‘ABC1’ consumers, while appropriate in certain circumstances for media planning and the like, tend to be overused and are increasingly inappropriate these days for describing groups of consumers who need to be targeted using integrated activity. After all, ‘ABC1’ broadly describes the majority of UK households earning a decent income. Not very targeted or specific, yet it’s an audience description that still appears, albeit less frequently, in client briefs to agencies where integrated or relationship marketing techniques are required.

The challenge for the agency planner is then to drill down, to gain greater understanding of the audience groups in order to provide those ‘real’ motivational insights that inspire great ideas and creative. At Underwired our challenge is to find a way for our clients, strategically and creatively in a digital space, to break down barriers and find a way into consumers’ hearts and minds. How to achieve this is the most powerful insight that we can find, the insight that helps us understand what makes a consumer tick. The ‘thing’ that makes a person engage with a brand, consume a brand message, and then take action; it enables us to connect the strategy to the creative, helps us find that big idea that can break down the barriers to brand engagement, and gets consumers to open their wallets.

The output, the manifestation of the idea, is the single-minded proposition. Focusing on one single-minded proposition for a broad audience is all very well for a long-term brand or awareness campaign played in an offline, above-the-line space, but consumers are more savvy and selective than ever – and so single-minded propositions to an audience of one large group can frequently alienate more people than they engage.

The concept of single-minded propositions still works. But now, thanks to segmentation and ever-more-targeted communication channels, different ‘single-minded propositions’ can be targeted to different audiences. So now the single-minded proposition becomes relevant to consumers in each segment, which means that more people are engaged, yielding better response, less wastage, and greater cost effectiveness. The result? Improved ROI. Do this on a regular basis and it becomes a ‘relevant’ dialogue with the consumer – a relationship (so now we’re talking eCRM). The result? Improved CLTV (Customer Lifetime Value).

In an ideal world...

So what is the ideal? What is the most effective way to segment consumers into groups so that communications can appear as relevant and specific to each individual as possible?

The ideal will differ, depending on circumstances – the business and marketing objectives, the marketplace, the brand, the customers, communications channels, available data and research, available resource and budget. But, in my experience, segmentation works best if the main discriminator is the most significant factor that has an impact on response and purchase – and whether this factor can be used as a means to define and group customers into clusters of similar traits.

Rather than demographics, it’s preferable to group consumers into attitudinal and behavioural groups. These are more predictive factors, dynamic components that have a more direct correlation to a response or an action. For example, if a barrier to a product is a perceptual one, then the most significant way to segment the audience could be by attitudinal type – in other words, ‘I only buy products I trust...’

In addition to segmentation, brands should still strive to reach consumers with some real data-driven, one-to-one communication in order to optimise the consumer’s relationship with the brand: but segmentation does provide a cost-effective means to target a group of customers with a message that is common to them, and therefore relevant. Used as a filter, segmentation can be even more effective as a means to isolate a group of customers – in order to then target further within the group, pointing even more relevant messages to sub-sets of customers within the segment. By using attitudinal and behavioural data as the main criteria for identifying segments, the most dynamic components are being used, ensuring that the targeted message takes into account all customers in a group that have common motivations and behaviour.

Hearts and minds informing communications

By including attitudinal data in the mix, a strategy for communication and investment can be made, potentially a brand retention route for the high-spending segment, and possibly a couple of routes to test for the other. One may be to test communications with testimonials from similarly profiled consumers, or to further identify specific ‘barriers’ through a customer survey for this segment, and communicate appropriate messages accordingly.

Using traditional profiling and demographic segmentation techniques, the second segment could have appeared potentially as valuable as the first. The problem is that if the attitudinal barrier is an absolute factor in determining behaviour that can’t easily be broken down or changed over time, then the level of investment in this segment is not going to be very robust.

Finally, it is worth remembering that, just because customers fall into segments, it does not necessarily mean that they will always be in that segment – behaviour can change and alter over time, so segmentation should be dynamic; and just because a segment exists, it does not mean it should. Just like profiling, segmentation can sometimes identify customers that should not be there, that actually cost money to keep and may never move up through the value chain.

One thing’s for sure, good segmentation is always going to perform better than no segmentation at all – because ‘relevance’ is everything!

Pete Anderson, Admap

Reproduced with permission of Admap, the world’s primary source of strategies for effective advertising, marketing and research. To subscribe visit www.admapmagazine.com. © Copyright Admap

In 2001 my rather enjoyable, very creative digital agency had been the digital creative arm of the Lowe Group for several years. In August of that year, the mini-dip triggered by the dotcom boom-and-bust started affecting marketing budgets badly and anyone who was under-prepared or over-confident received a rather unexpected reality check.

It was an unwelcome experience, to put it lightly. But like all these things there is learning to be had. Certainly some (including myself) came to the realisation that we could recover from a hard knock without losing enthusiasm for the digital marketing industry. That generation of digital agency entrepreneurs, almost entirely made up of thirty-somethings with limited experience of running businesses through sequences of downturns, also learnt how to evaluate medium-term risks properly for the first time.

One of the things that caused so many agencies heartache and in some cases closure was that they believed that internet-based comms were immune from recession. This belief was based essentially on an absolute (and this view was shared by many) conviction that few clients were actually using the web well but that the opportunity to transform business efficiency through adoption of internet channels was self-evident. In the months when investors realised the money they had gambled on “the next big thing” was lost, the market’s reaction gave marketeers pause: websites, online campaigns and digital experimentation were put on hold. A significant proportion of my own agency’s income evaporated from our hands in just four months.

This over-confidence in web marketing was based on a belief that then, in the dying days of 2000, those clients who did not already have a website that produced returns would see it as a no-brainer that they had to invest in one. It wasn’t until a year later, when marketers loosened their belts and agencies regrouped, re-constituted and dusted themselves down, that this great web build recommenced.

In around 2003 my agency took a very long hard look at how it might stumble or fall in some future snap downturn. It seemed very evident that if the agency relied on website design and build as its key source of income alongside campaigns, it might once again be vulnerable. The problem, even by 2003, was that most brands worth their salt had a moderately good website, pulling in a moderately good return. Give them a few more years to get to understand the restrictions and opportunities inherent in the channel, to examine the results, to hire a better agency, to learn, grow and hone, and most companies might be using the web as a core sales and marketing channel. So what would happen if there was a downturn of any kind?

Well, one conclusion was that it would be easy to say that any client already online would likely already have a perfectly good web presence. It would already be generating income. The web would already be a functioning platform for revenue – direct or diffuse – and growth. In a downturn, at the first hint of a recession, the imperative would not be to jump on the next bandwagon (the hugely naïve assumption of the turn of the century) but to simply halt any new improvements. A perfectly good website, the like of which which everyone now has (more or less), will last for another year or three while the economic picture becomes clear or more bullish. So the potential for a cascade of website-oriented agencies waiting on the annual redevelopment until they starve is clear, and in 2003 we did not want to feel this one ourselves.

Clear from the analysis of anticipated disaster, however, the argument that marketers would cleave to their customer relationships seemed a distinctly plausible route to salvation, or at least survival. When consumers haul in their own reins, and new custom is therefore scarce, then the greatest opportunity for survival and growth is the capture of custom from competitors. So loyalty, retention, upsell and cross-selling channels become the core basis for any marketing activity, because if customers see a company cares for its consumers more than their own does, there is a greater chance they will be persuaded to switch allegiance.

Today we can already see local house price falls and global food price increases leading inexorably to lessened consumer spending. The nicely alliterative credit crunch’s work done, or at least having in its first year’s effects, is having an impact on what marketers are willing to spend their money on. Norwich Union halved its budgets in preparation, re-negotiated its marketing contracts with smaller, leaner suppliers, and set itself up for a pretty frugal three year plan. Advertising expenditure growth for ‘08/09 is the subject of wildly differing estimates by the giants, ranging from bullish to distinctly bearish outlooks. Stock markets are jittery, as are bankers and their customers. Small businesses, including those in the agency land, will be finding it harder to secure loans to cover new development and expansion. Venture capitalists are drawing beads on companies that can survive, or on strategic consolidations that will strip fat from investment vehicles. Indeed, the recent rash of agency deals based on earn-outs shows what the big boys know, that acquisition at a notional multiple of ten now will be realised at 6 when the acquired miss their targets, and that earn-out deals on the cusp of even a mild recession are a bargain when set against the reality of shareholder commitment that lasts through cycles and not just for Christmas.

So, where does that leave the marketer? Well, and this is where the recession-proofing activity has borne fruit, it may be that there’s a convenient merging of phenomena that point the way.

Four years on from the early days of examination and decision I’ve described, consumers occupy a new communication space, with entirely new and unforeseen norms. Email is prevalent. In fact, email is prevalent and regulated. Social environments have been made easily accessible, so that the old paradigm of separate News reader, forum websites and self-published pages is usable by the all in the guide of personalised network spaces like Facebook and Bebo. In this latter, business is booming. Three quarters of all Ireland is on Bebo, and companies are capitalising on this fast by leaping aboard.

Consumers like having control. All consumers, when given the option, and when it’s made easy to manage, want at least some control over their environment. It is natural to want to see only those things that are of interest, that are relevant. Facebook, valued now at only slightly less than Ford (perhaps, as Matt Hempey suggests, the $15bn stock price suggests a less fortuitously coincident bubble forming), provides that total control over what is seen, what is delivered, and ultimately what is digested. This consumer-driven, elective consumption of social content shows that the way people relate to information and influence has changed from a broadcast/receipt, sit back to sit forward engagement, at last bringing reality to the interactive form that the early pioneers of the web as a medium for marketing envisaged before their bubble burst.

Broadcast itself though has played a very significant part in this. In fact, broadcast beyond the point of sense or acceptability has been fundamental. While no-one likes it, spam has at least driven regulation. In the UK the Data Protection Act’s revision to include a requirement for opt-in to commercial emails, or at least requiring traceable provenance of acceptance of commercial emails, has made the legitimate marketing industry, driven by agencies who want to be able to attract legitimate and larger clients, create strategies for persuading consumers to Say Yes to email communications.

It is the regulation of email that has provided the most relevance, at least for consumers here, and increasingly around the world, albeit indirectly. By starting the process of asking customers to sign up, marketers have had to examine the drivers, starting with the gross (enter a competition) and evolving to the refined (join a community of like-minded people). A logical step beyond this first questioning was to ask more. To enter the competition, further information could be required. The answers provided the steer towards the subsequent marketing pitch, and metrics from digital channels started to get aggregated.

Following further exploration in 2004 my colleagues started to do exactly that. Previous campaigns had been fairly linear – strategy, creative engagement, feedback, refined strategy – though multiple. The insights and data gleaned from each digital (and sometimes non-digital) channel were added together to form grander strategies that were again split across media. But it wasn’t until the widespread acceptance of email as a channel, made acceptable through increasing regulation and the prospect of increasing relevance simply through opt-in to lists managed by familiar brands, that the notion of convenient synergies were brought in to play.

eCRM was borne of the observation that behaviours, not just stated preferences, could be fed into the strategic process in the world of digital marketing. While customer journey planning had been borrowed a decade before from the supermarket trade, information architecture from exhibition design and so on, the revolution came with the marriage of data mining, web analytics, segmentation marketing and the social acceptance, no longer freaky, invasive or disturbing, of personalisation.

eCRM is special. It is the one thing that posits a relationship between a brand and a consumer akin to a personal relationship based on mutual curiosity and observation. And when industry faces the prospect of a tightening of consumer spending and the business imperative of holding on to one’s own customers to the exclusion of the competition, this kind of relationship suddenly becomes very important indeed. The recession-proofing my company sought became quite clear – deliver the means of developing robust, unshakeable customer relationships based on mutual understanding.

eCRM has become a fairly refined discipline in its own right, a demonstrable deliverer of extraordinary returns on investment, for brands as diverse as Nickelodeon, Citrix, Virgin and Peugeot. It sits alongside, wrapped up in and around, and symbiotically with, all the other digital disciplines the reliance on which saw the major part of the digital agency industry suffer. So how does it really work, what is the symbiosis that delivers consumer response, and why does it offer both protection for my own industry and a baseline marketing strategy for clients?

Firstly, it takes (as a simplistic example) the sales cycle: a product is investigated six weeks before purchase, using information on a website and a requested paper brochure, then price comparison happens, again online perhaps matching with a high street retailer, then the product is ordered online. Acquisition activity provides the first part of the sales funnel. A widely-distributed online promotion attracts people who are at the ‘six weeks out’ marker. The promotional mechanic (a discount voucher, say) captures data, including an email address and preference for product colour. An email automatically populated with content relevant to the individual – name, colour preference, predicted purchase date – is sent to prompt a visit to the site to get more information, to a particular review to cement the product choice, and offering a discount. The response rate at every step is examined and activity honed. (When Tesco started its email marketing programme everything that could possibly be tested was tested – every permutation of subject line, every combination of content, every type of call to action.) And the next six week cycle starts afresh ever more refined, ever more sophisticated, ever more effective.

Another key aspect of this way of doing things is the speed that we are able to make changes, and the cost basis for doing so. Direct marketing, the first truly sophisticated data-based, interactive discipline, takes time. It can take six weeks just to print a pack, let alone the planning time, creative development time, testing against groups, and implementation of the means to track, often through call centres or retail outlets, response rates. And the cost of personalisation of mail, although it has come down, is still astronomical. Email and, as the channel develops and eCRM becomes more widespread mobile, is conversely near-instant by comparison. It takes a week to take creative and lay it up into an email delivery system for broadcast. The response channels are largely digital – at least many of the most indicative metrics are instantly available online – open rates, click-through rates, interaction paths, response rates.

An individual’s actual behaviour from receipt to decision can be tracked in granular detail, matched against the circumstances of opt-in, demographic data gathered then and from subsequent communications, purchase activity and external data such as postcode-related information so we can drive people to their local shop, gym, airport, florist. Customer segments are re-cast live.

It means that every piece of communication is truly pertinent, utterly relevant, and always timely. The closeness of the relationship means marketers can spot where opportunities to deepen understanding and broaden sales occur. While it cannot and must not be used to the exclusion of other channels – TV, radio, websites, DM, sales promotion, PoS – it is by far the most cost effective means of engaging with customers over long periods, creating loyalty and giving he opportunity for advocacy. The investment required is low, and the sophistication of agencies gathering maturity. What is the worst that can happen by creating deeper relationships in the run-up to a possible recession? If recession fails to materialise, you have created a stronger bind between you and your consumers. And if you have to haul in your budgets, postpone your website refresh until next year, no-one will go bust, and your competitors will have no room to pinch your custom from under your nose.

Felix Velarde, Admap

Reproduced with permission of Admap, the world’s primary source of strategies for effective advertising, marketing and research. To subscribe visit www.admapmagazine.com. © Copyright Admap