Direct marketers can no longer ignore the fact that the industry is in a crisis. All the evidence we need is the anger expressed by recipients of the flood of intrusive, untargeted and irrelevant marketing communications. The Direct Marketing Association reports that its database of people opting out of e-mail grew from about 200,000 in 2001 to more than 552,000 in 2002 — a 176% increase! Similarly, the DMA's telephone suppression file grew by 65% from 2001 to 2002, and the mail suppression file grew by 10% during the same period.
Yet DMers keep clutching on to old paradigms such as “2% is an acceptable response.” A 2% response rate is not acceptable! It represents a horrendously low threshold of relevance. The trending of people opting out of e-mail, phone and mail indicates that the current saturation bombing will only cause further increases in customers who “just say no” to our marketing. Remember, at the current “acceptable response rate” of 2% we have 98% of our audience throwing our messages in the trash.
It's possible to change the model from unsolicited junk to solicited communications that arrive with the halo of anticipated relevance. The antidote to opt-out is consensual marketing.
IBM has been testing consensual marketing for almost 10 years.
An early pilot measured against a control group achieved an 80% increase in sales and a 75% reduction in marketing waste (Database Marketing, DIRECT, July 2000). Many people, including busy executives, are willing to opt in to a truly customer-centric, value-added marketing relationship.
Long-term success should be defined by customers opting in to the marketing process and providing personal information regarding their true preferences and requirements…and by marketers recognizing and satisfying these requirements.
This giant step will transform marketing from “hunting for sales” to developing long-term relationships characterized by increasingly relevant communications. These communications will be based on companies targeting their messages according to the individual preferences expressed by customers and prospects.
Rules for this new type of consensual relationship will also require firms to suppress communications that do not fit an individual's expressed preferences. Hence, the shift from massive blasts to targeted, relevant communications.
Logically, this is a transforming strategy that applies to companies marketing value-added goods and services — not for commodities competing on price alone.
Let's also rethink the direct marketing database. Instead of populating it only with transaction information and inferred data that's been gleaned from third-party sources, why not enrich it with specific opt-in information from some of our most important customers?
The bottom-line job of a database is to drive the most efficient allocation of our precious resources. If the input is directly from customers, regarding what they need, when they need it, how they prefer to receive the message and how these needs change over time, our ability to effectively respond to their requirements takes a quantum leap forward. This is a consensual database.
Let's review some strategies for achieving a such a database:
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Involve customers in self-selecting their communication stream.
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Develop very detailed customer information.
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Determine how often customers want to be contacted.
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Identify media preference/media aversion.
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Develop a personalized calendar of communications.
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Allow customers to update their interest profiles at any time.
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Offer targeted information, according to their individual needs.
And how does one organize a consensual database? Start with a simple, manageable organization, such as:
- Type of product purchased.
- Industry.
- Geography.
- Field sales territories.
Then there's basic record information. This may include:
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Name, title, functional role.
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Contact information.
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Business drivers.
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Media preference/aversion.
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Contact frequency.
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Household names for each decision-making unit.
Database Linkages
It's critical that this database have unparalleled accuracy and currency. To achieve this, it must have linkage to key customer contact points like:
- Marketing.
- Field sales.
- Customer service.
- Telemarketing/telesales.
- Technical assistance.
- Fulfillment.
But let's look at our case study. The objectives of the IBM Software Premier Club are to strengthen and maintain IBM's relationship with its top software customers worldwide. The club's mission is:
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To maintain value-based relationships with IBM's best software customers and increase loyalty.
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To improve each executive's perception of IBM as a leader in software solutions.
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To step up customers' software spending with IBM.
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To competitively differentiate IBM.
Exclusive to loyal customers (and by invitation only), the program today services nearly 21,000 senior decision-makers and technology influencers at more than 7,000 companies in 49 countries. The club keeps members informed and educated regarding IBM Software Group's strategies, brands and offerings. In addition, members are able to communicate with each other and have access to:
- Industry research.
- A calendar of conferences, shows and seminars.
- IBM software experts to answer questions.
This program is based on IBM's early consensual marketing pilot. The club uses the principles of consensual marketing to enable individual members to identify their own preferences and software interests. Thus, the club establishes a consensual relationship and maintains an ongoing dialogue with each member to introduce new solutions and stay abreast of changing needs.
At the program's inception in 1994, and until about 1997, the IBM Software Premier Club used personalized and profile-driven direct mail as its primary communications medium. In 1997, the program migrated to the Internet. Customers now register themselves on a “members-only” Web site.
Since going online, membership has more than doubled, from 10,000 members in 1998 to 21,000 in 2002. Sixty-six percent have been members for more than two years and 49% have belonged for more than three years.
Globally, the 10% of customer establishments that belong to the club give IBM's Software Group nearly 90% of its revenue. Additionally, this audience spends 80% more than similar sized companies in the control group.
Here's some feedback from members:
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“Compared with other vendors, I'd give it a 10.” (U.S.)
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“Easily readable, presented in an understandable manner.” (Germany)
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“They seem to target the right audience well, and they supply the right kinds of information.” (U.K.)
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“It's an easy way to get specific information.” (Denmark)
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“It's good. Can't fault it!” (South Africa)
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“It's always improving.” (Brazil)
The IBM Software Premier Club is viewed by customers as a single point of contact into IBM for anything they need. Members are recognized for their value to IBM and receive special treatment. The program recognizes spending signals or buying triggers and alerts the appropriate IBM representatives so they can immediately address the opportunity.
Results
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In 2002, 80% of members said they were either satisfied or very satisfied with what their membership offered them.
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There was a 68% increase in Web traffic in 2002 over 2001.
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Thirty-five percent said their membership motivated them to purchase IBM software products that they otherwise might not have considered, up from 28% in 2001.
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More than 25% said membership encouraged purchase of additional licenses or upgrades for software already installed (up 8% from 2001).
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Some 80% of club members agreed that membership kept them informed of IBM software strategy and direction, a gain of 14% over 2001.
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Members bought more than non-members. Tracking against lifetime value benchmarks showed that the club's audience spent up to 80% more than the control group.
Companies must focus on customer relationships (as opposed to sales) to successfully implement these breakthrough strategies to increase customer lifetime value. They have to nurture the relationship with high-value customers through consensual marketing and use this interactive process to learn each customer's current and future needs. This will create a powerful, competitive differentiation and executive preference so that when customers are ready to buy, they will view you as the incumbent value-added partner rather than merely a commodity vendor.
Like IBM, you will find that the incremental revenue and profit from this consensual process far exceeds your previous return on investment.
Ernan Roman is president of Ernan Roman Direct Marketing (ERDM) and creator of the Integrated Direct Marketing and Consensual Marketing Opt-in Process. He also is the author of “Integrated Direct Marketing: The Cutting-Edge Strategy for Synchronizing Advertising, Direct Mail, Telemarketing, and Field Sales.”
Scott P. Hornstein is senior partner and principal of ERDM. In addition, he has been senior account supervisor for all the IBM programs utilizing the IDM process.
Yvonne Brandon is a global direct marketing manager responsible for the IBM Software Premier Club.
