Developing Effective Multi-Channel Marketing Strategies

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B A N TA C O R P O RATI ON WH I TE PA P E R
F e b r u a r y 2 00 4
Developing Effective
Multi-Channel Marketing Strategies
Single Source.
Multiple Solutions.®

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Developing Effective
Multi-Channel Marketing Strategies
A Banta White Paper created for organizations wishing to gain greater rewards through the
development of synergistic marketing campaigns, incorporating both print and electronic media.
Single Source.
Multiple Solutions.®

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Developing Effective
Multi-Channel Marketing Strategies
Executive Summary: Although multi-channel marketing is the current trend, it is
not an entirely new concept. Multi-channel has roots in the age-old “media mix”
i d e a , which essentially said t h at b u yers we re reached at d i ffe re nt times in diffe re nt
ways, and t h at the most s u ccessful marketing pro g rams co ntained an appro p r i at e
mix of media for the targeted audience. The theory was that effective use of
multiple media helped a selling organization become top-of-mind when the
buyer was ready to make a purchasing decision.
There are two important developments that helped evolve the media mix concept into what we now think of
as multi-channel marketing:
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A t ransition by marketing and adve rtising pro fessionals in the 1990s t o wa rd int e g rated co m m u n i c at i o n s .
This marked a shift in focus from transactions to customer relationships. Even outside the marketing
arena, engineers and statisticians were contributing by following the lead of successful Japanese
industries that reengineered business processes around customers’ needs.
According to Anders Gronstedt, author of The Customer Century, power was shifting to the consumer,
and the management of communication processes was being elevated to strategic levels to help
build customer relations and drive business results. He contends that leading global companies like
Hewlett-Packard, Motorola, FedEx and others helped lead the movement from a “Production Century”
model of building products and finding customers to a “Customer Century” model of building
customer relationships and integrating communications across multiple channels.
In addition, other market realities continued to fuel the trend toward relationship marketing through
expanded communication and sales channels. Consider, for example:
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Competition increased while the co s t to acquire new customers soare d , making it i n c reasingly import a nt
to establish solid customer relationships, especially with those who projected high lifetime values.
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Customers in a satisfied business relationship became clearly recognized as the best source of new
business. They were the people who knew you, respected you and had a greater predisposition to buy
your products and services.
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Privacy concerns and governmental actions such as the new “Do Not Call” legislation placed greater
focus on establishing true relationships rather than trying to blindly attract buyers with hit or miss,
mass-communication tactics. Consumer response to the national “Do Not Call Registry,” along with
p revious “ j u n k ” fax legislation and “s p a m” e-mail legislat i o n , co ntinues to send marketers a clear signal.
Consumers are pushing back hard against unwanted and irrelevant intrusions in their daily lives.
Using customer data more effe ct i vely by personalizing co m m u n i c at i o n s, co o rd i n ating co m m u n i c at i o n
channels and getting consumers to opt-in allows marketers to be more effective.
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The number of channels available to marketers increased. Not only was there now recognition of the
importance of building customer relationships and integrating communications, but new electronic
media such as Web sites and e-mail also added channels. What’s more, there was less distinction
between pure communication channels and sales channels. Increasingly, the two were becoming one
and the same.
Database technologies and personalization advancements were also making it possible to communi-
cate one-to-one through a variety of print and electronic media. And the results of well-executed, per-
sonalized communications were stunning. Sellers commonly experienced, and continue to experi-
e n c e , a five- to 10- fold increase in response and co nversion rates based on personalized
communications. When print, e-mail, Web and telemarketing are combined in integrated, multi-chan-
nel campaigns, the results are even greater.
What is evident is that consumers prefer personalized communications, as indicated in Figure 1.
When you do receive hard copy direct mail, which type do you prefer?
When you do receive e-mail marketing messages, which type do you prefer?
Hard Copy Direct Mail
E-Mail
Non-personalized with messages
and offers that everyone receives
Non-personalized
31%
regardless of needs/interest
22%
Highly-personalized
Highly-personalized with messages and
69%
offers that are unique to my needs/interest
78%
N=317 Respondents
N=167 Respondents
Figure 1: Results of Survey on Personalization (Source: CAP Ventures, 2003)
The purpose of this white paper is to discuss methods for effective multi-channel marketing strategies to
enhance customer loyalty and retention efforts, with an emphasis on incorporating customization and
personalization for print and electronic channels.
Exploring Multi-Channel Marketing
New methods of marketing are emerging that seek to more effectively use prospect and customer data to
filter target lists, construct personalization rules and produce and execute marketing campaigns across and
among the full range of media channels available. The most successful campaigns reach consumers in a
sequenced and consistent manner. This creates an indirect benefit of enforcing and enhancing corporate
branding. Therefore, organizations that can harness the power of other marketing channels and produce more
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personalized communications could put themselves in a good position to capture market share from those
that don’t.
T h e re are two critical co m p o n e nts to effe ct i ve multi-channel marke t i n g :
1
C re ating re l eva nt o ffers via personalization
2
Co o rd i n ation and management of multiple marketing channels
In a multi-channel marketing co nt ex t , p e r s o n a l i zation means using what is known about the re c i p i e nt to cre ate
the offe r, c u s t o m i ze the messaging and deliver it to them in the fo r m at re q u e s t e d . For channels other than t e l e-
m a r ke t i n g, this can include personalized gre e t i n g s, re l eva nt messages based on demographics and co m p e l l i n g
g ra p h i c s . A survey completed by YesMail in July 2002 revealed t h at response rates increase dra m atically with an
i n c rease in the number of personalization element s . As the number of personalization elements increases from one
to seve n , the click- t h rough rate more than t r i p l e s, i n c reasing from 4. 7% to 14. 8 % .
Click-Through Rate
16.00%
14.80%
12.00%
8.00%
7.50%
7.60%
4.00%
4.70%
4.60%
0.00%
No
1 to 2
3 to 4
5 to 6
7 or More
Personalization
Figure 2: Effect of Personalization on Click-Through Rates (Source: YesMail, 2002)
The other critical element lies in the design and execution of campaigns that coordinate among the full
breadth of channels available to reach prospective buyers. Much like personalization, this requires strategic
and tactical planning. When marketers can sequence communications and “hit” prospective customers with
co n s i s t e nt co m m u n i c ations t h rough various media channels, the effe ct i veness of campaigns increases gre at l y.
A research study by AMR Research in January 2002 demonstrated that companies that followed up e-mails
with other dire ct co m m u n i c ations re a l i zed an increase of 5-10% in their response rat e s, with some org a n i zat i o n s
seeing increases of 15% or more. This is due in large part to the “multiplier effe ct” when multiple media channels
are coordinated.
Will One Channel Steal from Another?
Many executives fear that one channel will take business away from another. The Web site will steal from the
catalog, for example. The truth is that customers who interact with your company over multiple channels are
more loyal and profitable than single-channel customers. To become a successful multi-channel marketer, you
first need to understand your customers and their preferences, then communicate effectively through the
desired channels.
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Jack Aaro n s o n , CEO of the Aaronson Group and a fre q u e nt l e ct u rer on customer loya l t y, p rofitability and multi-
channel solutions, s u ggests t h at you think about channels as if t h ey were pro d u ct s . Apply the same marke t i n g
techniques yo u ’d use to sell pro d u ct s, including acquisition, re t e ntion and share of wa l l e t. These t e c h n i q u e s
applied to channels assume the higher purpose of making users more loyal by enco u raging customer int e ra ct i o n
over multiple channels.
To cre ate a channel acquisition strat e gy, he enco u rages using the same scoring techniques you curre ntly use t o
determine which customers would be most l i kely to buy a new pro d u ct you marke t. S co re them acco rding t o
their most l i kely “ n ex t c h a n n e l .” After yo u 've identified these new “c h a n n e l - re a d y ” s e g m e nt s, use your marke t i n g
knowledge to sell the channel as if it w e re a pro d u ct.
It's critical to think about encouraging customers to add channels, not to migrate to a different channel. Don’t
replace a user's preferred channel, but instead, convert a single-channel user into a multi-channel user.
Understand what channels and channel combinations a user currently uses. For example, you don’t want to
introduce a user to a channel that's less cost effective. The exception would be when the climate sometimes
calls for loss-leader channels that reach a new audience and will pay off in the future.
Fi n a l l y, A a ronson emphasizes the importance of thinking of your co m p a ny as multi-c h a n n e l . When channels
b e come siloed rather than co nve rging into a unified user experience (unified funct i o n a l i t y, vo i c e , look and fe e l )
the co m p a ny is acting like a co n s o rtium of single-channel co m p a n i e s .
Multi-Channel Marke t i n g : B e s t P ra ct i ces and Re q u i re m e nt s
An example of an organization using effective personalized communications illustrates the possible returns
from effective multi-channel marketing.
A financial services provider wa nts to t a rg e t new customers for a re c e ntly launched re t i re m e nt i nve s t m e nt
product. Using all of the collected data about the prospective customers — including key demo-
graphic information — the organization generates a full-color personalized brochure. This customized
collateral explains the returns the recipient can generate over a long-term investment horizon, based
on their current income. The call to action in the direct mail piece is a custom Web page URL. This
leads recipients to a page where they can further research the offer or the company, chat live with or
be called by a representative and sign up to become a customer.
Coordinated with the printed direct mailing is an e-mail campaign with identical branding and
messaging with a link to the same URL. The company can also use telemarketing to follow up w i t h
those consumers who visited the Web site and made inquiries, b u t did not sign up for the serv i c e.
Further, the communications and customer responses can be centrally monitored and measured
via the Web in real-time. Marketing executives can easily gauge the effectiveness of campaigns and
optimize them in real-time based on formatting or messaging that proves effective. They can also
more effectively track marketing expenditures with the sales generated from specific campaigns.
This provides detailed return on investment information. In other words, this type of system enables
marketers to perform “closed-loop marketing.”
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An example return on the type of multi-channel marketing described above is:
Traditional Campaign
Personalized Multi-Channel Campaign
1.3% response rate
9.4% response rate
3.3% click-thru rate
56% click-thru rate
2.9% order conversion
31% order conversion
It is important to recognize the tremendous multiplier effect from the employment of multiple, coordinated
channels. In the example above, if the campaign targeted 1,000 recipients and the average order was $1,500,
the difference would be hundreds of thousands of dollars.
Firms in a wide range of industries — targeting both consumers and businesses — are increasingly taking
advantage of this innovative and effective method of running multi-channel campaigns, particularly financial
services, insurance, healthcare, manufacturing, automotive and technology companies. Service providers,
including advertising agencies and print providers, are also beginning to offer multi-channel capabilities,
along with strategy development, to help organizations create campaigns and support content that best
leverages them.
The days of tactical, disjointed marketing campaigns and programs are numbered. Given the commercial and
custom solutions and services available today, selling organizations are increasingly able to generate sales
t h rough multiple channels. Following is a review of seve ral key channels with some usage examples highlight e d .
Data and Content Management
More than half the battle in effective marketing campaigns is acquiring and maintaining good prospect and
customer data. It is important for sellers to build a repository that allows them to effectively utilize unique
attributes to segment prospects and customers. Using these attributes, marketing managers can build the
personalization rules and determine which prospects should receive proscribed offers, and more specifically,
which messages. Once the campaign is designed, in many cases the seller (and often a third-party service
provider such as an advertising agency) creates the content to support the marketing campaign.
Tra d i t i o n a l l y, sellers have cre ated co nt e nt specifically for each campaign in a t a ctical fa s h i o n , failing to leve ra g e
the messaging and graphical elements for other channels. Sellers are increasingly developing and managing
content in a more strategic, collaborative fashion that enables content to be shared not only among media
channels, but also across campaigns.
Printing and Direct Mail
From a print perspective, direct mail remains a very powerful tool for marketers. Personalized direct mail cam-
paigns, which utilize variable data printing, have proven to be extremely effective, particularly as the level of
personalization leads to increased relevance. Sellers can expect a five- to 10-fold increase in response rates for
well-designed direct mailers as compared to traditional static direct mail.
While the co s t per page for variable printing has historically been an obstacle, the price is dropping substant i a l l y
as user adoption increases. Even with a higher unit production cost, the return on investment for producing
highly personalized offers can be dramatically greater, as illustrated in the following scenario.
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Table 1: Production Cost and ROI for Personalized Direct Mail
Low-Level
High-Level
Targeting & Personalization
Targeting & Personalization
Production costs: 25,000 pieces @ $.40 each = $10,000
Production costs: 12,500 pieces @ $.80 each = $10,000
2% Response rate = 500
10% response rate = 1,250
Revenue model: 500 @ $100 average sale = $50,000
Revenue model: 1,250 @ $100 average sale = $125,000
Production cost as % of revenue = 20%
Production cost as % of revenue = 8%
R.O.I. = 5.0 x
R.O.I. = 12.5 x
Cost per response = $20
Cost per response = $8
Profit = $40,000
Profit = $115,000
Response rate is the most widely used metric for evaluating direct marketing efforts. In related CAP Ventures
studies conducted in 1997 and 2001, personalization programs demonstrated the following impact on other
important metrics as they relate to printed marketing campaigns:
% Improvement from Using Personalization Programs
Response Rate
34.0%
Average Order Size/Value
24.5%
Repeat Orders/Retention
47.6%
Overall Revenue/Profit
31.6%
Response Time
34.9%
This overall return rate, based on personalized print, should also factor in the costs of developing the content
and designing the personalization rules. Certainly, creating content for communications with a high level of
personalization will require additional investment on the part of sellers. However, organizations that leverage
a content repository have the ability to reuse content across a wide range of marketing and sales activities.
Sellers can also leverage variable data personalized printing to reduce the costs of collateral fulfillment by
providing collateral materials “on-demand” to those who express interest.
E-mail Marketing
Much like printed dire ct m a i l , o p t-in e-mail-based campaigns can be a ve ry effe ct i ve method of co m m u n i-
c ating with customers. Fi r s t , the co s t of executing an e-mail campaign is ex t remely low co m p a red to other
co m m u n i c ation channels. G a rt n e r G roup estimates t h at e-mail costs about $5 to $7 per thousand ve r s u s
p r i nted dire ct m a i l , which can range from $500 to $700 per t h o u s a n d . Along with sender anonymity and
readily accessible e-mail dat a b a s e s, low co s t is a large part of the reason t h at spam (unsolicited e-mail) has
b e come such an issue.
While spam e-mail certainly has some detrimental impact on the overall effectiveness of e-mail, permission-
based e-mail still remains efficient and effective. Gartner analysts validate that permission-based and opt-in
marketing strategies are critical to higher e-mail response rates.
In general, they assert that response rates measured by action taken from direct mail are the same as e-mail,
hovering at 1 percent. On permission-based e-mails, the average click-through rate is between 6 and 8 p e rc e nt.
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Fu rt h e r m o re , the speed at which e-mail campaigns can be executed is much faster than other channels. E-mail
campaigns can often be run over the course of seven to 10 days, where it generally takes four to six weeks to
execute a direct mail campaign.
Like many of the other forms of customer communication, the keys to successful e-mail marketing lie within
the following factors:
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Quality of the e-mail list » E-mail campaigns are most effective when targeted at recipients where
more is known than just an e-mail address. Existing customers are a good fit for e-mail communica-
tions because the offers can be tailored based on their purchase history, registered products or
stated preferences.
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Design and measurement of the e-mail » Including desired customer behavior when opening the
e-mail, clicking on certain links and converting to a registration or purchase.
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Consistency with other campaigns and corporate branding guidelines » Including the use of rich text
or html-based e-mails, which draw the recipient’s attention and use familiar branding that can drive
read and response rates.
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Frequency of communications » While it is often tempting, organizations want to ensure that they do
not overuse e-mail and ensure that they explicitly offer customers an interaction channel to alter or
discontinue e-mail subscriptions.
Along with direct e-mail offers, e-mail newsletters can be an effective means by which to communicate with
both prospects and customers. Newsletters provide useful information to consumers, which can build credi-
bility and loyalty, while also providing important links for creating a purchase opportunity.
Internet Solutions
Internet technologies continue to gain importance as an essential component for multi-channel marketing by
acting as a communications medium and a method to inexpensively facilitate transactions and process orders.
The nature of Web technologies also provides tracking and reporting mechanisms that offer marketing exec-
utives a wealth of information, including trend analysis and real-time analytics.
Of the many ways in which the Internet improves marketing processes, three key areas are important to this
discussion:
1
As demonstrated previously in the deployment scenario, the Internet complements other marketing
channels by providing an information-rich, low-cost means for customers to interact with a selling
organization.
2
Web technologies can facilitate the collaboration among the marketing content, campaign develop-
ment and deployment teams. This collaborative environment can be used to quickly create virtual
teams composed of multi-company, multi-disciplinary resources.
3
Finally, the Internet can provide a centralized console for the management, operation and reporting of
marketing campaigns. When these elements are combined, such as in a self-service customer portal,
the efficiency and effectiveness results are very high.
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Fi ve Key Strategies for Effe ct i ve Multi-Channel Marketing
in To d ay ’s Business Env i ro n m e nt
1
The Customer (Data) is King » Just as an oil company would not blindly drill small holes in the earth in
search of oil, your organization shouldn’t contact millions of consumers blindly, banking on a very
small portion accepting your offer. Rather, seek out or build a repository that identifies which con-
sumers are more likely to find your offer compelling.
2
Get Customers to “Opt-in” » Companies that can build their own opt-in lists, or use qualified industry
opt-in resources, are in a better position to communicate and market to both consumers and
businesses. Explore methods, such as periodic e-mail newsletters, that provide valuable information
and purchase opportunities simultaneously.
3
Invest in Personalizing Communications » The overwhelming response to the “do not call” registry
underscores consumer frustration with intrusive, irrelevant communications. Research shows that by
a ratio of over 3:1, recipients prefer personalized communications. Research also shows that the more
personalized an offer is, the higher likelihood of response. It will require an increased investment in
creating content and designing campaigns, but you can expect double-digit response rates.
4
Leverage More Effective Customer Channels » Design and execute new marketing campaigns that
leverage the full spectrum of marketing channels. Personalized direct mail, permission-based e-mail
and Int e r n e t technologies can be employed to dra m atically increase the returns on the marketing dollar.
Coordinate marketing campaigns using multiple channels and take advantage of the “multiplier
effect.”
5
Simplify the Transition by Using Service Providers » Personalizing communications and running multi-
channel campaigns can be a challenge for those selling organizations that do not currently have the
technology or process infrastructure to develop multi-channel strategies, manage customer data,
manage marketing content and execute integrated campaigns. Sellers will find that there are several
service providers that can help them transition from their current practices to leverage more effective
marketing practices.
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