Although the intent of most planned CRM campaigns is very strategic in nature and they are expected to induce stickiness and incremental behaviour with customers in a longer horizon - still, ROI has always been the immediate lens to judge these campaigns.
Marketers have so far focussed on following to keep the bottom line of campaigns low:
1.Reduced targeted base
2.Limiting the number of contacts
3.Choice of cost-effective targeting medium (e-mail in most of the cases)
4.Increasing the gaps between contacts
5.Etc.
In most of the campaigns, once the target audience and communication is defined contact strategy is generally “blanket applied”.
Blanket contact strategy although simple from an implementation standpoint, it fails to recognize the inherent response likelihood of a specific customer given a particular frequency, timing, gap in communication and choice of medium for communication.
Advanced uplift models recognize this and not only can they bring the cost of communication drastically down but also boost the overall response to campaigns by further tailoring the communication strategy.
Framework
An advanced statistical uplift model can be built to gather past learning of a customer / similar customer and identify sub segments that require a specific communication strategy and also the communication elements around it.
To illustrate, let’s take a case study of a flash deal agent where the as-is communication strategy is aggressive and 2 emails are sent followed by SMS over a week. Average response rate realized is 15 %.
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email
email
SMS
Crafting the sub segments
Statistical model learns the following from historical data before grouping customers (with healthy response rates) in similar focus buckets:
1.Month, day of the month, time of the day the message was sent
2.Month, day of the month, time of the day the message was opened
3.Month, day of the month, time of the day the message where response was returned
4.Number of contacts that were sent till the response was returned
5.First, intermediate and final media types that were used
6.Gap between various media types
With this exercise, customers segment that require just 1 email communication and with a higher likelihood of response if it is sent on Wednesday is identified.
Profiling the sub segments
Etched-out sub segments that show alignment to a specific communication strategy are profiled, pen pictured and their likely response rates determined.
Learning from these sub segments can then be applied to customers with similar profiles but not sufficient experimental historic data.
This exercise gives a face to the sub segment which is trackable.
For example, customers segments that require just 1 email communication have an annual income of INR 25, 00,000 -35, 00,000; they are in age range of 30-40 years, and have 1 kid. They have on an average 3 credit cards registered and internet is their preferred mode of transactions. Average response rate from these customers was 35%.
Reducing the target audience base
It also determines the base which can be removed from the campaign communication
1.Customers that are least likely to respond to the campaign
2.Customers where communication budget required to generate the response is too heavy
3.Customers that will anyway show the behaviour without any campaign / communication
This exercise eliminates (a) sub segments where either likely response rate is less than 1% (b) sub segments that require over 10 communications over 6 months and still have likely response rate lesser than 3% (c) sub segments that have purchase propensity of 90% without any campaign
A Case Study
Exhibit A depicts the model result summary for one of the flash deal agents. Key directional impact summary of the model is highlighted below:
1.It lowered the communication budget by over 35%
2.It increased the overall response rate by 70%
3.Identified 15% of the base where any communication was not required
Exhibit A
Challenges
Insufficient historic experimental data
Statistical models are dependent on past learning that not only covers exhaustive communication scenarios but also have their depth.
Robust design-of-experiment are recommended to marketers to test possible communication strategies and to build a rich historic pool from which
1.Insights can be mined out via advanced statistical models
2.A tailored communication be effected
Key Outcomes
1.Differentiated communication strategy for a given target audience
2.Significantly reduced campaign costs
3.Higher response rates to campaign
4.Key Insights such as profile of sure responders and sure non responders which can be the subject of various deep dive studies
Cartesian Loyalty Meter 2011 is a comprehensive dossier on Loyalty Programs in India. The report comprises 4 modules:
1. Module 1 – Colloquy’s Cross-Culture Loyalty Study covering 500 SEC A/B/C field interviews in India on loyalty and loyalty programs 2. Module 2 – Cartesian-Lumiere qualitative study- in-depth single and paired interviews with members of top loyalty programs across retail, fuel, airlines, hospitality and credit cards. 3. Module 3 – The internal organisational viewpoint on the challenges, opportunities and strategic role of loyalty programs through interviews with middle/senior loyalty practitioners managing programs 4. Module 4 – A Ready Reckoner of program structure, features and benefits of top 15 programs across these sectors.
OVERALL FINDINGS: COLLOQUY STUDY India as an economy shows a strong sense of economic optimism and openness to foreign brands. There is an eagerness to participate in loyalty programs although current levels of participation are low when compared to the West. There is a high level of involvement with brand communications – and especially so with loyalty program communication – with a preference shown for electronic means of communication over physical. Referral and word-of-mouth plays a key role in influencing membership to a program as well as usage of brands. This is most pronounced for financial services followed by Dining and Clothing. Highest loyalty is generated by financial services followed by grocery and then travel. Primary reasons for joining a loyalty program include rewards and benefits as well as the fact that they frequent the outlet anyway. Reasons for not joining a loyalty program differ by SEC. SEC A customers feel that some programs do not offer enough of an incentive to join while SEC B customers have cited privacy concerns as well as the fact that they do not spend enough to earn sufficient incentives in a program. There is high willingness to join a program amongst non-members – especially in retail and financial services. As program members, customers expect to be treated as valuable and special. Recognition and exclusive services are as much in demand as are rewards and gifts for program membership. Membership to a program does impact purchase decisions and there are a select set of customers who believe in accrual for a large ‘dream’ reward. A high growth phase for loyalty initiatives is imminent and privacy concerns are not crippling just yet.
OVERALL FINDINGS: CARTESIAN-LUMIERE QUALITATIVE STUDY Customers perceive ‘loyalty’ to be a feeling of ‘stickiness’ and ‘comfort’ with the brand. There is a tendency to go back to a brand/outlet/service that one is ‘comfortable’ with and repeated positive engagement with the brand strengthens loyalty. This then has a positive rub-off on intentions to join a loyalty program from the brand. Loyalty programs are associated with points/rewards/discounts as well as with special service and treatment. Customers across the board feel that they need to know upfront what they need to do in terms of ‘desired behaviour’ and what is the return they will get for it. Any impressions of trying to outsmart them or hiding details in fine-print is not appreciated. They want all cards on the table. Transparency and honesty with the customer is the name of the game. Proximity, familiarity with the brand, trust, the ego boost involved and a view of tangible returns are key triggers to join a program. Barriers to membership include membership fees and low usage of the product/ service as well the obvious barrier of ‘one more card’ in the wallet. Influence of loyalty programs on purchase decisions vary by vertical. It is much more upfront and critical in the case of personal travel (airlines) than it is in retail where quality, availability, range, location etc take precedence. There is also the aspect of choice. Where there are many options to choose from, other purchase criteria take precedence over the program. With limited options to compare the tendency is to swing the purchase more towards the brand where there is a program membership. The customer view is that loyalty programs are necessary – but not sufficient. As members of the program, they expect to be treated as such across all touchpoints and interactions with the brand. Customers tend to have multiple program memberships within a sector - especially in airlines, credit cards and retail. This gives them a feeling of choice despite being tied down to the accrual aspect of a program. Hospitality however seems to command single program memberships in most cases. Perhaps because, in the case of frequent dining programs, there is a hefty membership fee involved. Programs in the airline sector are highly evolved and the retail sector is fast getting there. Hospitality sector programs are niche and high on experience delivery. Fuel seems to be underleveraged due to operational hassles at the petrol pumps in terms of card swiping. Credit card program memberships come as default with the card and operate pretty much in the background. Members however are smart enough to rotate card usage to maximise credit limits. Therefore consolidation of earn - which every program wishes to drive – (with one card) is not something that is natural. Airline, credit card and hospitality programs have an innate self-esteem and status value associated with them – hence the necessity for elements of superior service, ‘flash’ value and exclusive privileges. Retail programs are less about the status and more about the value from shopping. Positive experiences with programs are talked about and lead to referrals. Negative experiences are also talked about – and often lead to an adverse impact on the parent brand especially if they are repeated too often. In terms of rewards, there is equal preference for instant gratification as well as accrual devices. The elements of novelty and surprise – from bonus points to scratch cards – are welcomed with delight. Goodwill and ‘soft’ gestures like birthday and anniversary wishes are also appreciated. Over-delivery at key moments-of-truth is noticed and applauded – even ensuring that minor lapses are forgiven. In fact, while most programs have a holistic value proposition, it is a few key distinctive features – free parking, birthday discounts, easy enrolment etc – that are instinctively and spontaneously recalled and associated with the respective programs. Men and women tend to differ in their attitude to and expectations from membership – as do experienced and savvy loyalty program members from the newbies.
OVERALL FINDINGS – PROGRAM MANAGERS Across the board, there is a universal belief in the strategic importance of loyalty programs and other loyalty initiatives as part of the overall marketing and business vision of the organisation. The continued focus towards customer-centricity in these organisations ensures that loyalty programs are taken very seriously and are an integral part of core business decisions. It is a common view that customer-centricity must percolate across the organisation such that ‘loyalty’ is part of the organisation DNA and all initiatives are democratically owned. Data and insights are seen as a critical pay-off of loyalty programs and the expertise to use the insights to make relevant and customised offers to customers is seen as the differentiating factor. The importance of planning and preparing well in advance for loyalty could not be more emphasised. Getting the objectives and deliverables right, setting the correct expectations within the organisation, structuring the program in a simple and attractive form and getting the right technology in place to enable execution are all part of the success mantras shared by senior loyalty practitioners.
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A 30,000 View on Data- related problems that businesses face 1. Abundant data (Every big business has petabytes of information) 2. Multiple Sources (There are 7-10 different sources on an average) 3. Poor Data Quality (According to Data Warehousing Institute poor data quality costs $600 billion annually for US firms) 4. No Standard format (Every transactional system follows their own standards) 5. Missing Data (Most systems, especially the online systems don’t capture required information useful for Analysis) 6. No Single version of the truth (Every transaction system stores data in their own versions).
Let’s look at each of these issues in greater detail:
Abundant Data:
A decade earlier, data in GB (Gigabytes) seemed like a mountain, but today we get USB drives which possess the capacity to store this data. Data evolution has progressed from Gigabytes to Terabytes (1000 GB) and to Petabytes (1000 TB) today. The amount of data is doubling every 18 months (Moore’s Law). Hence the importance of having a Data Management Strategy in place is increasing by the day. Lots of rich information required for business decision making is hidden in this vast amount of data. The key requirement is to organize this in a particular place and then to appropriately mine it using Data Mining techniques to unearth hidden insights.
Multiple Sources:
Data sources can be as varied as transaction data, online apps, Call Centre data, Survey data, Campaign data, Complaints, Software Downloads, Reply Cards, Online Store purchases, Registration data and Response data. Each of the sources captures key information which forms a particular piece of the puzzle. When the multiple pieces from each of the sources is integrated, it provides the answer to the bigger puzzle. The problem is that each of the sources have their own database and store data in their own formats
Poor Data Quality:
“Garbage in, Garbage out” goes the saying and this is true for the data driven world too. If poor data is fed into the system, the resulting analysis based on this data will also be poor, no matter what kind of advanced analytics tools and techniques we use. When the data is captured in the source system, we need to put in place the appropriate checks and procedures to reject or correct the wrong data.
No Standard Format:
Multiple transaction systems such as CRM, ERP etc., capture data in different formats and there is no set standard across this. The one that stands out particularly is contact/address data where there is a total mismatch in address elements. In the West, many address correction softwares certified by the USPS and eligible for postal discounts, are used to standardise addresses before mailing. The result is more hygienic data in the West.
Missing Data:
How does data get missing? Let’s take an example. A new user enters the store/online store and signs up for the registration process. He starts filling the fields which are marked mandatory and leaves out rest of the fields. In this case if only fields like email id and mobile number are mandatory and not the address, date of birth, sex then these fields will be blank. During analysis, we require these fields to come out with customer insight but those are missing now. It is therefore important to plan data capture devices with an eye on future requirements. There are ways to overcome this problem by using some imputation techniques and so on, but it won’t be as effective as the original data fed directly by the customer himself.
Single version of truth:
This is a reality – a top business problem. If a business wants to know details about a customer (say his name, address details etc.,) there will be different answers flowing from multiple systems each giving their own version of the truth. This is because the information resides in Silos and is not integrated across an enterprise. How will you segment and target your customers if you don’t even know who they are? This problem impedes any analytical work and needs to be addressed before any target marketing (campaign) is carried out.
We know the issues. What next? The solution lies in going for the Enterprise Data Warehouse (EDW) using Data Integration, Data Quality tools available in the market. The option is to write customized scripts and codes to implement the Data Integration solution if the required expertise is present with the company. This “Make or buy” decision needs to be made by the management after discussing with the technical personnel as the licensing costs for some of these tools available in market is huge. Going for freeware is not a good option as there will not be any support available in case of problems. What’s more, there is no guarantee for getting the right results. Once the Integrated DW is built, the source systems also need to be updated accordingly with the standardized data. The EDW will now act as the hub for any querying and reporting kind of activities
Sounds good!
But who owns the entire process and data? This is an industry wide problem - the client feels that the vendor should own the solution and vice versa. Here comes the need for Data Governance mechanisms and an evaluation of the Master Data Management (MDM) framework. This framework will carefully outline the entire strategy, processes, tools and techniques for managing the Master data. Here Master data means the data which has the single view of the truth and represents the final, integrated and cleaned-up data. While defining the Master data, several aspects like complexity, volatility, source of the data, how it will be used across the enterprise and its value to the business, is considered. Hence the Management of this Master data which is critical for the success of the business objective cannot be taken for granted. The MDM has become more of a business driven outcome than a technical one. Added to this, the Complexity in managing today’s business with situations like Mergers and Acquisitions, Regulatory Compliances, Technological advances like Service Oriented Architectures (SOA), different business model like Software As a Service (SAAS) etc., puts greater emphasis on managing the Master data as that forms the Bedrock for success in any of the above business scenarios. Two of the most common techniques considered for this - Customer Data Integration (CDI) responsible for the creation of Customer data with a single, unified and consistent view and Product Information Management (PIM) for handling product information. The Data owners will monitor the updates to this data on a frequent basis and also follow the checks to ensure that none of the data from the source system is missed and unutilized. Also the system needs to be updated based on specific Change Data Capture (CDC) mechanisms.
Figure 1: Enterprise Data Warehouse – Master Data Management Architecture
POS – Point of Sale CDI – Customer Data Integration PIM – Product Information Management EDW – Enterprise Data Warehouse MDM – Master Data Management Note: The Data sources used in this diagram is for illustrative purposes and doesn’t cover the entire gamut of the available sources.
How does this impact business? 1. We can expect better campaign response rates as Segmentation and Targeting of the customers will be unbiased based on a perfect 360 degree view of the customer. 2. We can reduce mailing costs in case of Direct Mailers (DM) by ensuring the delivery to the right addresses. We avoid legal hurdles by not sending unwanted information to customers who have already unsubscribed or are in the DND category 3. Organisation business decisions will be based on reliable data and scientific analysis of the same. 4. Analysis will be more complete as we have all the required data and the confidence level on the outcome will be the highest be it classification or regression or multivariate analysis. 5. And Yes, Implementing Loyalty programs will be a smooth ride without worrying too much about the data.
Final Thoughts: The data problem in today’s world is prevalent in every business and industry. This needs to be addressed immediately, if firms want to compete in today’s market where cut-throat competition exists with multiple offers chasing very few prospects. The competitive advantage which a company has lies in its own data and they should be able to treat it like a Goldmine of information. This definitely requires the infrastructure like EDW and framework such as MDM as the complexity grows exponentially across different dimensions.
Cartesian’s pioneering research on the impact of loyalty programs on the Indian Consumer - Cartesian Loyalty Meter 2011 – will be out in December in the form of a detailed report. Arguably for the first time in India, this will be a comprehensive dossier on top running customer loyalty programs in India and their impact on customer attitudes, perceptions, decision making and behaviour.
The report will have 4 modules:
1. A detailed qualitative study of Indian loyalty programs across retail (grocery, department, others), fuel, airlines, hospitality and credit cards – in terms of their impact and effectiveness. In partnership with research experts, Lumiere Business Solutions (www.lumieresolutions.com ) this qualitative study is the outcome of several in-depth individual and paired (couple) interviews of program members across all top running programs in the 5 verticals in Mumbai, Delhi and Hyderabad. Get deep insights and understanding by audience, by vertical, by program as well as across verticals in terms of what works, what doesn’t and what are member expectations and pain points!
2. An excerpt from Colloquy’s Cross-Culture Study on Loyalty covering 6 countries; the India findings are the outcome of a large sample of about 500 interviews across SEC A,B,C and across the country, to ratify key hypotheses and findings on drivers and barriers to loyalty and loyalty program membership and how if differs by vertical
3. The Internal ‘Organisational’ viewpoint - what is the strategic importance of loyalty programs in terms of the overall business and marketing strategy of the organisation, what are the key challenges and opportunities, what pitfalls and roadblocks should one expect, what are the operational issues to keep in mind – these and other key questions answered by seasoned professionals who manage these top running programs and live and breathe loyalty!
4. A single source ready-reckoner for you – a compilation of structure features and benefits, tiers and rewards, membership fees, other details – of the top running loyalty programs in the country.
As we speak, the findings are in and the report is being compiled. Here are some toplines :
1. Men and women, expectedly, differ in their attitude to loyalty program membership; Women tend to keep multiple cards (even within the same category – e.g. department store retail) and pick and choose what to use when. Women are more geared towards tracking points and encashing rewards. Men – equally involved, but in different ways. They tend to store membership numbers on their cellphones rather than keep too many cards in their wallets. 2. At what level the loyalty program swings decision making differs by vertical. In airlines, for e.g, especially for personal travel, the loyalty program membership is the primary factor that influences choice of brand. Not so in retail – where factors like need, quality, range, availability and price take precedence over program membership 3. Across verticals, delivery on ‘experience’ is as important if not more important that rewards! Membership to a loyalty program stems from a very basic ego-boost and self-esteem need – and this MUST be catered to as part of any program proposition All this and much, much more will be covered in Cartesian Loyalty Meter 2011.
Cartesian brings to you Cartesian Loyalty Meter 2011 – an in-depth, focused study on the impact of loyalty programs on perceptions and behaviour of the Indian customer.
The study will, in all likelihood, be the first and most comprehensive ready-reckoner on Indian loyalty programs and their effectiveness.
Top running loyalty programs across key sectors like retail (Grocery, Department, Others), Airlines, Fuel, Hospitality and Credit Cards are being covered.
WHAT WE’RE TRYING TO ANSWER This study will help answer questions such as: 1. Has loyalty program membership affected members’ overall perceptions of the company? 2. Has it impacted their purchase behaviour the way it was meant to? 3. Do they tend to consolidate their purchases with the brand/s whose loyalty programs they are members of? 4. How satisfied or dissatisfied are they with the programs and what are their expectations from the same? 5. What role does the loyalty program play in their lives?
THE REPORT The report will be a compilation of: 1. Actual member feedback and reactions through several in-depth member interactions 2. A snapshot of the current loyalty program landscape in the country – an overview of the structure, features and benefits of top programs currently running 3. An internal organisational viewpoint of the challenges of loyalty program management and operations.
Cartesian Loyalty Meter 2011 is being conducted in partnership with research experts Lumiere Business Solutions Pvt Ltd (www.lumieresolutions.com) .
MORE INFORMATION For more detailed information on the report and details on how to subscribe to the same, email us at
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