Leveraging customer data to enhance people-based marketing definitely isn’t a novel concept by any stretch of the imagination. Many organizations have these efforts under-way, given all the data collection and experience management solutions that are available in the market. Typically, this is interpreted to enhance personalization across all touchpoints that a customer may have with a brand. Focus on these efforts is a driving force to help a brand improve engagement and become more customer-centric, but this is just the tip of the iceberg.
Where organizations can evolve even further is utilizing customer data and insights to inform planning and budgeting. Not only can customer data be the driving force behind people-based marketing, but it can also deliver great benefits from a performance perspective as well.
Focus on the Customer
Planning and budgeting is sometimes executed as a top-down financial planning exercise where functional departments have distributed budgets based on targeted top-line revenue goals. Within marketing organizations though, focus must be put on the customer, and what types of customers are being targeted. Often organizations focus on short-term revenue, or sales goals, and fall into the conundrum of attracting large amounts of “one and done” type customers. Immediate targets may be met with this approach, but over time, it won’t be sustainable for a business with changing market dynamics. Additionally, with the evolution of omni-channel customer experience design being vital to attract digitally savvy consumers, organizations are having to interact with customers through multiple channels, which can become very expensive if not executed efficiently.
Customer data is extremely powerful and analyzing the right types of data can aid an organization with moving toward becoming more efficient
The first major step is developing a segmentation schema that makes sense for your organization. A few simple dimensions to consider are past purchase behaviors, product line(s) adopters, or potentially e-commerce vs. in-store customers. A more robust approach though, is to consider all these dimensions, plus lifestyle and motivational insights. The packaging of all these data points about a customer base can really shed light into how natural clusters of customers separate themselves from one another.
Once this segmentation exercise is completed, the next step is to closely analyze the financial profiles of each segment. What are the costs to acquire each segment? What is the lifetime value of your customers? What channels are most engaging to your customers? Where do they purchase?
Merkle recently partnered with a leading entertainment company and was tasked with helping them to transition to be more audience centric in their approach to planning and budgeting. We initially developed new audience segments and conducted a financial analysis on customers acquired over the past 12 months. The results were extremely interesting. Surprisingly, it was found that over 40% of new customers acquired came from the lowest LTV, highest churn, and second highest cost to acquire segment. On the flip side, the segment with the highest LTV and lowest churn rate only made up 7% of recent acquisitions. Many factors contributed to this, including market size for each segment, but the organization realized its distribution of spend to acquiring new customers and retaining them was not optimal.
These types of insights can be extremely powerful as they will start to shed light into where budgets should be prioritized across each segment. This will have implications for spend across outbound (i.e., email, SMS, direct mail, digital), and inbound (i.e., call center, website, retail store) experience management. When an organization can align itself around this approach, adjustments can be made to ensure each segment is acquired and retained profitably, and a balance can be established to drive revenue and long-term growth. Then it’s possible to scale up to adjustments at a planning and budgeting level for the entire marketing function to ensure that higher level sales goals can be met.
Conclusion
Effective planning and budgeting are essential to drive sustainable business growth. Having a clear understanding of your customers’ value and costs to manage them can illuminate numerous opportunities. Adapting an approach that is customer centric helps you acquire the right types of customers for the right cost. To accomplish this, each stakeholder must buy in and agree on goals aligned to this new approach. This includes having a balance of driving sales with acquiring customers at various value levels. Once these goals are established, this approach has to be funneled down to program managers and operators to determine program spend and to manage acquisition and retention of the right types of customers.