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Measurement from the Customer's Point of View - Part II

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Aug 24 2009

In my first post on the subject, I talked about how challenging it is for companies to link marketing activity to financial impact and identified the need for a customer-centric measurement system.  Now, let's see it in action.

We work with a financial services client that has three different lines of business-organized around product and channel-all talking to the same valuable customer with no knowledge of the other's activity. The result is more than 50 contacts to any one customer in a given year. That's close to one contact a week. But it isn't just the sheer volume of contacts creating saturation and decreased performance; it is also the lack of a coordinated effort to understand who the customers are and where they are in the buy cycle for a given product, relative to their lifetime value.

So, we created segments that roll up data from the three businesses and focus on customer profitability and unrealized potential. This provides one critical customer view across lines of business. Then we built a new measurement framework around the customer purchase cycle and mapped the appropriate marketing metrics - marketing activity (number of contacts by vehicle), marketing performance (response rates, conversion rates), marketing financials (ROMI, ROI) and customer metrics (customer value, share of wallet) - to those customer segments.

Through this lens, we understood the volume, efficiency and effectiveness of all marketing contacts by segment across the purchase cycle. The answer was obvious: fewer, but more effective, contacts. The buy cycle framework provided the "when" and the "what" of those contacts. Analyzing the relationship between buy cycle stages helped identify where marketing campaigns could be optimally deployed to create a sequence of events triggering a response. Additionally, an understanding of conversion rates at each stage isolated the steps in the process that were creating sales bottlenecks. Now we have ongoing tests to fine-tune how we might use the marketing mix (and the right message) to move a customer through a purchase cycle.

A win for you and your customer

The result of all of this is a better relationship with your customer. The right message at the right time is not just marketing rhetoric; it is a way of showing your customers you truly understand their needs. And it increases marketing efficiency. Our financial services client was able to increase the annual return on its marketing investment by 18 percent.

By spending less money on fewer but more effective marketing activities, the company was able to increase response rates and decrease its cost per sale. This new measurement system has nearly eliminated the need for shortfall spending because of the increased financial impact of the existing budget. In fact, our client is now sometimes asked to spend additional dollars to capitalize on the momentum. And that's a win for everyone.

 

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