The Fine Art of Targeting

When examining the 3 components that make a direct mail piece successful, targeting was often considered as contributing 40% to its overall success, while offer and creative would traditionally have had a contribution level of 40% and 20%, respectively. Recent philosophy, however, as seen a shift in that ratio. Targeting is being viewed as playing more of a role in achieving a larger return on a firm’s direct marketing investment. It is no wonder why agencies are starting to beef up their database marketing capabilities and acquiring more sophisticated technology to hone in on their clients’ top performing market segments.

Connect5Marketing offers a more strategic approach when developing its direct marketing campaigns. Whether it’s for prospecting for new customers or marketing to a client’s customer base, refining targeting strategies is the first step. As scientific as the process may appear, the secret to effective targeting is more of an art form. Understanding a firm’s business model, their interaction with customers, as well as goals and objectives are the fundamental elements in building this Picasso. The technology merely acts as a paint brush, manipulated by the artist.

Like any masterpiece, the subject of one’s creation must be studied and conceptualized with the end product in mind. This is no different when developing a targeting strategy. Studying the customer provides in-depth insight into the many characteristics that are correlated to behavior. The caveat, however, is that no two customers are alike. In fact, rarely are any two customers considered of equal value to an organization. One will most always have a higher propensity to be a repeat consumer, to spend more, to use more services or to refer others. Based on these two realizations, we are forced to identify commonalities in customers who behave similarly and share a similar value to the organization. The canvas is now laid out; distinct customer segments begin to emerge and a customer profile is underway.

The purpose of a customer profile is to provide a framework for our painting as we want the image to reflect our muse. For prospecting, we want our final portrait to look exactly what our top customer segments look like. Connect5Marketing can use demographic and lifestyle information to model your customers’ characteristics in an effort to uncover clusters of similar traits that can help predict behavior.

There has been an increasing emergence of data compilers who have developed behavioral segmentation tools that have allowed Connect5Makreting to develop profiles based on behavioral patterns in lieu of the basic age and income selects. These segmentation systems are designed to group the US population into distinct clusters based on life stages and similar purchasing behavior.

With this arsenal, direct and database marketers are equipped to improve upon and refine targeting strategies for prospecting initiatives. These same tools, in addition to high-end modeling and analytical capabilities, have provided added value when targeting existing customers and increased the already successful repertoire of models, such as RFM (recency, frequency, monetary segmentation).

Expanding capabilities in targeting methodologies has opened the door for database and direct marketing as a more viable and successful marketing channel. Furthermore, there has been a seismic shift in advertisers to move from a mass marketing mindset to a more micro-marketing approach. Being more targeted will cut down on marketing costs and deliver a higher ROI.

The targeting component now represents a 50% share in the necessary ingredients that serve up a successful campaign. It does not diminish the importance of cultivating a strong creative piece and an attractive offer, both of which are critical to response. It simply means, investing more resources in improving your targeting strategy can result in huge payoffs and can represent the creation of your own work of art.

Is Price Everything?

It seems like more than ever, price is playing a critical role in consumers' purchasing decision. The obvious success of companies like Wal-Mart, Best Buy, and Amazon.com has spearheaded this low price revolution... and why not. If you have $100 to spend, who wouldn't want to get the most for that $100. Compounding the situation, we're witnessing a growing gap between the middle class and the affluent. The middle class are finding it difficult to pay premium prices when, just a little bit of research over the internet or a couple of phone calls, can save them a few bucks.

Are we, as entrepreneurs and small business owners forced to engage in this epic price battle? Several companies have shifted their focus towards becoming more customer centric and beefing up their customer service to combat the price war, but is that enough?

Being the business owner of a database and direct marketing agency (www.connectfivemarketing.com & www.directmailquarterback.com), I am faced with that question every day. I tell our agency clients that price is important, but credibility, trust and loyalty are just as critical and are perhaps more influencing factors. It’s very difficult to sustain being the lowest price provider at all times. As long as you’re in the ballpark, the relationship that you build with your customers can mean the difference between long-term loyalty and a group of consumers that can be easily swayed by the next “lowest price offer” seen on the internet. Not to mention the benefit that comes with having your most valued customers talk up your business and producing referrals.

Developing a relationship with your customer means knowing each one’s unique qualities. The more you know about an individual customer, the more you are able to personalize your service and the greater level of relevancy you can bring to the interaction. Trust and credibility is built upon the quality of each interaction. From first contact to product delivery, it’s all in the memory of the consumer. The greater the experience, the less likely your customer is willing to give a competitor, who comes along with a better price, a chance.

The term CRM has continued to evolve ever since I first got into the business and I’ve seen it have different meanings for specific applications. One central theme, however, governed the philosophy behind all CRM applications, that being the customer experience and establishing more personalized relationships. Capturing key data about each customer within a database, not only allows businesses to communicate better, provide more product relevancy and give the customer a more tailored and positive experience, but also gives marketers the capabilities to automate the relationship building process. Whereas, in the era of mass marketing we had a one-to-many relationship, in order to compete in a price sensitive and cut throat marketplace, we are wise to adopt a more one-to-one relationship approach.

With that said, I believe by being strategic in the way you capture, store and use your customer data, you can grow your business successfully in a price sensitive market.