Hard Re-set Required for Direct Marketing to Re-invent Itself

As a buyer of far too many computing gadgets over the years, I’ve become very familiar with the term ‘hard re-set’. This is typically used to describe a situation in which a system has got its inner workings so tied up in knots that the only way to fix it is to wipe the slate clean and start again.

I’m increasingly of the view that a hard re-set is what is required to re-invent the direct marketing industry (in which I include Facebook, Adwords et al) and in doing so prevent it from self-destructing. Before we get to what that hard re-set will involve, let’s be clear about what the problem is.

In my view, what’s killing the industry (which I’ve been part of since 1986) is its determination to cling on to the principle that unless an individual has ‘Opted Out’ then they are fair game to be targeted with marketing messages.

In some aspects of the direct marketing industry, e.g. direct mail prospecting, the interpretation of ‘opt out’ is not subtle, i.e. we’ll physically mail you with whatever we like, when we like…..and enough of you will respond to make it worth our while.

In other areas, e.g. e-mail marketing or loyalty/ retention marketing there is at least some form of value exchange in place….give us your contact details and consent so we can market to you, and we’ll let you have a look at content ‘for free’ or we’ll give you a discount on something you may buy (both of which, by the way, we may cover the cost of and more by selling your contact details and related data to someone else).

There are further aspects of the industry that are prone to what amounts to self-serving behaviours on behalf of the direct marketer. These typically involve the ‘grey areas’ such as ‘soft opt-in’ (deriving an opt-in from an existing ‘relationship’ rather than a pro-active customer consent); advertising within service communications; selective interpretation of how to use industry suppression files (such as the Mailing Preference Service in UK or Do Not Call list in USA); weak design of suppression files (i.e. too many exceptions left in place); burying the use being made of personal data either by summarising to a meaningless level, or losing within privacy policies that no-one reads other than those who drafted them.

But….guess what….. despite all this trickery, selective interpretation and manipulation, it’s still not working. Opt Out rates continue to climb on internal and external suppression files……, at least until the next work-around or piece of marketing spin makes them dip for a few months, before the inexorable upwards march continues.....and response rates on many direct marketing activities are zero.

What’s the direct marketing industry response to this? It’s simple – find new direct channels (e,g, Google Adwords, Facebook) and/ or send more messages. After all, e-mail costs peanuts to send, and on ‘digital’ we can at least pretend we have permission to market’. So, I’m really looking forward to counting how many ‘twelve days of xmas’ e-mail campaigns I get targeted with this year (in fact I got my first this morning); which marketer can turn down the opportunity to send e-messages 12 days in a row?

Of course none of this would matter if marketers were sending messages that were highly targeted, using good input data, and thus were relevant to the recipient. They are not – the average 98% non-response rate is enough evidence for that (wouldn’t it be good for the mind-set change if Marketing Directors tracked campaign performance via non-response rates instead of the response rates they ask for now!!!). And this issue of relevancy of message is where we realise that the inner workings of direct marketing as currently deployed need that hard re-set:

• Sending relevant communications requires rich, ‘needs’ based data (typically expressed as ‘intention’)
• The only source of accurate needs/ intention data is the individual
• But the individual knows that handing over rich, needs based data will increase the amount of direct marketing they are exposed to
• So they either don’t hand it over, or enter flawed or dummy data to get at what they want (where consent is being swapped for information)
• Leaving organisations to derive ‘needs’ from other sources (e.g. transaction history) – and thus send irrelevant messages informed by best guesswork.

As an aside, when deriving from transaction and interaction data, some organisations will direct market better than others…Amazon, Tesco, Network Solutions are some who do it well – at least in the current modus operandi. They typically take the time and effort to do rich analysis on the raw material they do have, and send communications based on it. But even their raw material has flaws; to illustrate:

• Amazon regularly send me e-mails along the lines of ‘other people who bought MySQL for Dummies bought MySQL for Beginners’; the problem being that the MySQL book I bought was for a developer working with us. The chances of me buying another one are zero – that need has long since gone. Of course Amazon could provide me with tools to flag that this book was not for me…..but why would I want to spend time cleaning up data (unless, of course, it was exportable to my own record)?
• Tesco – I have a Clubcard although could not honestly say that it ever influences my buying behaviour as I’ll buy groceries from whichever supermarket is near where I happen to be and rotate around the online deliverers waiting for one to come up to scratch. That said, Tesco don’t seem to bother me much with direct marketing, so I’m obviously not in a high value segment (according to the data they have anyway), and they are probably making enough money from me in re-selling what they do know to the FMCG manufacturers.
• Network Solutions. These guys are my favourites, they try so hard on cross and up-selling and have designed much of it very well that they could be a ‘poster child’ for CRM. The problem is they just don’t know when to stop deriving ‘new stuff we could sell’ from the scraps of data they have access to. Consider the screen-grab below, which is what they present me with each time I’m on their site. Granted, I do live in England; but surely even the most optimistic marketer is not going to expect to sell www.iainhenderson-england.com to a Scotsman!!!!

So….back to that hard re-set…..

I believe that there are four components of a solution that, when deployed, would revolutionise direct marketing; and in doing so build a more receptive customer base. A genuine win-win that would far outstrip the short-term headaches. The components are:

Cross-Media Suppression File

The first, and most fundamental, the hard re-set itself, is making available a blanket opt out of all direct marketing suppression file. That is to say, a reference file within which an individual can register their preference to receive NO direct marketing messages at all from point of registration onwards – unless they have actively and overtly opted in through a consents management vehicle under their control. This file would include all direct media (direct mail, e-mail, SMS, telephone, mobile telephone, VOIP, pop-ups/ i.e. tracking cookies – and any other direct media invented over time). The file would be created as a stand alone entity, but could be configured to take in feeds from existing suppression files such as Mailing Preference Service, Do Not Call, the proposed Do Not Track etc.

Persona/ Role Based Opt In Capability

Second - the capability for the individual to establish one or more ‘privacy profiles’ at persona/ role level. The ability to operate at persona level is key in that in different aspects of life an individual may wish to establish different communications preferences. For example an individual in their head of household mode may wish to receive ‘no junk mail’, but in their ‘Secretary of the Golf Club’ persona they may be happy to receive messages from useful business services only….but delivered to a different address.

Articulation of Needs/ Wants (Intentions) in Usable Format

Next - when the blanket opt out is established as a point of principle, the end user then must be enabled to opt back in to specific communications – but on their own terms. This means being able to specify some or all of:

• Who they wish to receive messages from
• Which message types they wish to receive (e.g. offers, quotations, reminders, news updates)
• About what do they wish to hear
• At what time do they wish messages to arrive
• Through which channel
• Over which time period should messaging be switched on

Message Management Capability

Lastly we need a message matching and management capability. The above capabilities, in combination, generate a file of ‘opted in, buying intentions requesting matching offers’. This must then be matched against a file of ‘people/ organisations that want to sell stuff/ provide requested offers or information. Where a match is found, an introduction is made, where not – no message is sent (or that no messages matching criteria set are available). Ideally the message matching and management capability will be able to work across all relevant media. It should also have ‘closed loop’ reporting capabilities in order that all parties can track the success of their actions/ learn for future use. It should also help the recipient understand the upsides and downsides of the various media options in the context of what they wish to receive in order that they choose which works best for each message. (e.g. a mailed catalogue may be most environmentally damaging, but may still be the best means of deciding which conservatory to buy as it offers most detailed visuals and descriptions in a format that can be browsed in a relaxed/ un-pressured manner.

In addition to these 4 building blocks, there is an implied commercial logic in such a modus operandi. This is quite simply that by respecting individuals’ right to chose the direct marketing messages they receive the response and conversion rates from these messages will be much higher.

For example, I already know that I will lease a new car next April when my existing lease runs out. I have a pretty good idea which manufacturers I’ll consider, and which cars within those manufacturers. And what I don’t know now, I will research through buyer-centric information sources such as Which, Edmonds or similar. Once I’ve made up my mind on a preferred option, with all the options I want tagged, and two fall back positions then I’ll ‘go to market’ with a very clear spec, defined time lines, and money waiting to close the deal. I’ll end up with what I want at a fair price, and the suppliers I engage with will either have closed a sale, or come close without wasting too much time/ effort.

My colleagues and I have built a VRM Proof of Concept that demonstrates the above, it is accessible here.

This proof of concept shows a scenario in which the individual is fully in charge of the direct marketing messages they receive. It shows illustrative deployments of the 4 building blocks above. It’s not fully built out by any means – no organisation is using the suppression file in anger, only a few products and services in the opt-in table have any substance behind them (ipods and travel insurance), product/ service selection itself could be built out in many alternate ways, and e-mail is the only messaging protocol demonstrated.

…..but it does show how an individual could be empowered to only receive the direct marketing messages they want to receive….and only those messages.

What would be required to shift from the current approach to something like that shown in the Privacy Preference Service?

Firstly, let’s be clear – it’s not about technology, although that helps in specific aspects of the challenge. Also, it’s not about changes in legislation – all that ever does is raise the bar on a temporary basis until commerce demands that work-arounds be found. New/ upgraded legislation will emerge in the privacy space over time, and will help – but it won’t be leading the charge.

It’s really about that mind-set change, which is, of course, helped if it is underpinned by commercial logic. Organisations must recognise that they are alienating their customers and prospects by sending irrelevant marketing messages. They must also realise, difficult as it will be, that ramping up spend on data mining, customer insight, real-time ‘next best offers’, Facebook beacons etc etc, and all the latest CRM wizardry is not the answer. The real answer is to cede control of ‘customer needs’ data to the customer themselves, and to build tools and services that allow this data to flow.

That’s what Project VRM will do. The logic behind Project VRM is clear - that the tools require to balance relationships must be built on the customer side. Permission management tools such as those discussed above are a good start point.

Comments

[Axiotatow]

Waow enjoyed reading this article. I submitted your rss to my blogreader.

[Jeff Paul Internet Business]

There are some amateur internet marketers that think about renting domain names for promoting their sites. Well honestly it’s a bad plan but it also can be a good business idea.

[Iain Henderson]

Funnily enough The Journal of The Institute of Direct Marketing has agreed to publish a longer version of this post in their July edition.

[Bart Stevens]

I think I found the answer already

Have a look at: http://www.micropersuasion.com/2008/04/study-a-billion.html

It's about a billion USD ... !!!

VRM could "be worth" a lot of money ... :|

Bart

[Mike Butcher]

The Tech is way ahead on these issues and will have destroyed the direct marketing industry and re-made it in its own image before anyone knows what has happened - see http://dataportability.org/

[Bart Stevens]

All,

Could we make an guesstimate on the money saved/gained by building such a system for marketeers? I mean, they spend money "bombarding us", but if they stop with this, and accept VRM applications, they would increase their revenue by XYZ.

I know it's a long shot. But you know, "money talks". Iain ?

Cheers,

Bart

[Nic Brisbourne]

Great post Iain. You set out the many of the features of a great VRM service. The one additional challenge I would mention is finding a way to build a service that is compelling for the first user on the first day - e.g. the way Flickr was a great way to store photos.

I'm going to blog this myself now.

[christine temple-wolfe]

Excellent article...i can't tell you how many clients i've tried to persuade to take this approach and they are blind to the value. Given the resources just to get a functioning user management system, they just won't allocate the time or expertise to get this done right. Its unfortunate, but i loved your detail -

[Digital Expert]

The current mindset of 'if we bombard enough people we will get some results' in marketing is flawed, I agree, but I do think the situation is getting slightly better in terms of more precise targeting. Your recommendations make a lot of sense