Most direct marketing targets the wrong people, Patrick Surry, Pitney Bowes global solution owner for customer analytics, told an audience at the Predictive Analytics World Conference in Chicago on Monday.
Most direct marketing campaigns waste money by focusing on many who will act anyway, may not react positively, and some may even react negatively. For example, a direct marketing campaign sent to wireless telephone customers whose contacts are up for renewal might generate a few renewals and will result in reminding some that it’s time to find a new carriers, but is unlikely to influence the renew or switch decision for most customers.
“For most companies, the organizational culture needs to change,” Surry said. “Most companies want to make sure that they spend their entire marketing budget so that it doesn’t get cut. And they determine the effectiveness of their marketing by measuring gross responses.”
So these campaigns focus on targeting large numbers of customers and prospects, most of whom will not be persuaded by the marketing message one way or another.
A much more effective marketing approach instead focuses on only those customers who can be persuaded to take action as a result of the message, known as uplift marketing. Leveraging “uplift marketing” helps companies determine which customers are actually persuadable before a company markets, enabling a firm to:
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Improve campaign results by 30 to 300 percent versus traditional analytic methods
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Slash campaign spending by as much as 40 percent.
The key is using small control groups not only to determine marketing messages and targets, but to use these control groups to target different messages to different groups, Surry said. For example, Dell had used this idea to determine if people responded more if a marketing message had a red or blue background, and then sent the same message to everyone with the same background, a typical target marketing technique. Uplift marketing takes that concept one level further, Surry explained, by looking at the attributes of the control group customers who had responded to the different messages, then sending out messages with different backgrounds to customers and prospects most likely to respond to each.
Some companies have started conducting this uplift marketing, but they are still in the minority, according to Surry, who estimates only 2 percent to 5 percent of companies use uplift marketing today, and about 10 percent of firms are aware of the concept. “There’s still a lot of work to do.”
Before there’s wide adoption of the concept, it there will need to be more scrutiny by chief financial officers about how chief marketing officers are spending their budgets, Surry said. That is starting to happen now due to the ravages of the weak economy over the last few years, prompting firms to pay much more attention to the total spending and effectiveness of spending in marketing and in other areas. As a result, Surry expects a large increase in the deployment of uplift marketing over the next few years.