AUGUST 2010

Part I: Getting Personal with Your Customers—Fighting Marketing FatiguePart one of a two-part series on automated interactive one-to-onepersonalization

How relevant are your marketing campaigns?Mass mailing, mass emails or SMS blasts — ask any business to consumer(B2C) marketing professional what they think of them and they will probablytell you there’s been a shift away from such indiscriminate approaches in favorof more targeted campaigns. And they’ll tell you that the main reason for thisshift is that customers are more demanding; asking to be recognized asindividuals and expecting communications to be relevant to their uniquelifestyles, wants and needs.

Accordingly, in a 2008 survey conducted by the Aberdeen Group, 96 percentof marketers said they thought One-to-One personalization would improveresponse rates1.

But despite marketers being positive about the concept of personalizingcampaigns, evidence suggests that in reality, marketers are not going farenough to actually make their campaigns relevant to individual consumers.Consequently, response rates to campaigns are inexorably declining and directmarketing effectiveness is waning.

CEOs are — quite rightly — putting their marketing directors under pressureto deliver more value from marketing investments and initiatives.

Marketing fatigueThere’s a growing body of evidence to show that the cause of the decline inresponse rates is that consumers are simply fed up with being bombardedincessantly by overwhelming quantities of irrelevant marketing material.Research quoted by analysts Forrester Research Inc.,2 is sobering:

• “Say they receive too much marketing. Two-thirds of U.S. consumers (66%)say there is too much advertising today. Sixty-two percent say they get toomuch direct mail, 66% say they get too much email marketing, and 67% gettoo much telemarketing.” (see Figure [2]).

• “View marketing as irrelevant. Only 14% of U.S. consumers agree that theads they see are relevant to their wants and needs, and even fewer agreethat the direct mail (10%) and email marketing (7%) that they receive isrelevant.” (See Figure [1]).

AUGUST 20102

“Consumers are

taking ever more

direct action to avoid

communications

from companies

pushing irrelevancy.”

Source:Forrester Research, Inc.53621

Strongly disagree [1][2][3][4]Strongly agree [5]

The marketing emails Ireceive are relevant to

my wants and needs

The direct mail I receiveis relevant to my want

and needs

The ads I see arerelevant to my

personal wantsand needs

Base: US adults(percentages may not total 100 because of rounding)

N=

4,545

4,609

4,506

17%30%40%9%5%

35%30%26%7%3%

48%26%19%5%2%

“Indicate how much you agree or disagree with following statements regardingadvertisements over.”

Source: North American Technographics® Media, Marketing, Consumer Technology, Healthcare, And AutomativeBenchmark Survey, Q3 2008

Figure 1: Consumers Don’t Believe That Marketing Is Relevant

These results suggest that people are suffering from ‘marketing fatigue’ as aresult of the incessant and too often irrelevant product campaigns blasted atthem.

The consumer’s first reaction is — no reaction! They simply don’t pay attentionto communications from companies that have not won their trust throughalways being relevant, and they don’t buy the products promoted. Consumersare taking ever more direct action to avoid communications from companiespushing irrelevancy. They opt out and register with do-not-call lists. In the caseof marketing emails, they block them as SPAM. At worst, when their patienceruns out, consumers may reject not just a brand’s direct marketing, but thebrand itself.

If marketers really are attempting to personalize campaign communications, thenthe only conclusion to draw is that what they are doing really isn’t working.

Evidence suggests that quite typically when marketers talk of personalization,what they mean is ‘segmentation-based personalization,’ meaning that all thecustomers belonging to a segment selected by the marketer will receive thesame message and offer. Sure, the customer’s own name might appear at thetop, but that’s all that is truly individualized. In the 21st century, customers aresavvy and expect a lot more before being prompted to engage.

Marketers who do not pay heed to the voice of the customer and simplycontinue to target them with irrelevant messages and campaigns, do so attheir peril. Such campaigns are counterproductive and unlikely to pay back.Pushy sales pitches turn customers off; but personally relevant and interactiveconversations switch them on.

The One-to-One Personalization Era Starts TodayOne-to-One personalization has long been held up as a kind of marketingnirvana — an idyllic state where the brand can hold personal relationships withpotentially millions of customers. Here, well considered offers are presented asa part of natural customer marketing conversations. One-to-One campaignstarget the customer’s current situation, their expressed and implied wants andneeds. Messages are timely and relevant for the customer and they deliver thedesired results for the marketer. But just how far away are marketers from thisholy grail?

Levels of personalizationThere is evidence that five degrees of personalization exist today withinmarketing organizations:

•Mass emailing, where one message is sent to all.

• Name based personalization (or light personalization) is superficial. Thecustomer’s name is typically placed at the top of what is otherwise thesame message sent to all recipients. Customers can see through this andquickly tire of opening messages that are still no more relevant in content.

• Segment based personalization (or medium personalization), goes one stepfurther. It hinges on selecting often very large target groups, then creatingone message for each group. All of the people in each target segmentreceive the same message. Even though each customer is an individual andhas their own relationship with the company — their own preferences, andinteraction history — none of that is referred to in the communication theyreceive.

AUGUST 20103

“One-to-One

campaigns target

the customer’s

current situation,

their expressed

and implied wants

and needs.”

• One-to-One personalization (or heavy personalization), comprises contentthat is specific and relevant to the individual customer. It’s drawn from adetailed and living profile of the customer, their profile, behavior, needs,wants. Name and address, offer content, partner offers, branding and layoutcan all be adjusted to provide a best fit for every individual customer.Communication channel used and frequency of contact is respectful ofcustomer preferences as well. Increasingly marketers are willing to shift toOne-to-One personalization.

• Interactive One-to-One personalization. This applies the One-to-One conceptto interactive channels, enabling content delivered through web pages andonline assistants (avatars), for example, to be personalized in real-timewhile being consistent with messages delivered through other channels

Aberdeen has observed the proportions of organizations practicing thesevarious degrees of personalization:

The reality is that when marketers say they are practicing personalization,they are usually referring to ‘light’ or ‘medium’ personalization. i.e. name orsegmented personalization. Only 16% of marketers are actually using One-to-One personalization (Heavy personalization) to tailor their messages tocustomers’ needs.

Does One-to-One Personalization work?There is evidence to support the concept that as personalization increases,marketing fatigue falls and conversion rates increase to a model approximatedby the following diagram:

AUGUST 20104

“Pushy sales

pitches turn

customers off;

but personally

relevant and

interactive

conversations

switch them on.”

Level of Personalization Percentage Currently Using

Mass emailing 43%

Light personalization 63%

Medium personalization 33%

Heavy personalization 16%

Figure 2: Personalization Trends in emails (Source: Aberdeen 2008)

NoneName

Segment

One-To-One

InteractiveOne-To-OneV

alu

eR

OM

I

Timeline

Maturity Fatigue

ConversionRates

Personaliztion Sophistication/Maturity

Figure 3 (Source: Neolane, Inc)

The evidence for this concept comes both through market research andthrough empirical observation.

Market research evidenceAccording to a survey reported in Print Week3:

• 70 percent of UK adults say they are 5-10 times more likely to respond to‘properly personalized marketing’ compared to superficially personalizeddirect mail.

• 66 percent of UK adults say they are more likely to respond to directmarketing that reaches them at the right time.

An independent analyst firm4 has also conducted research that suggests that amove from segmentation-based marketing to One-to-One personalization canmakes a tangible difference. The findings suggest that:

• Conversion rates improve by 22 percent when shifting from segmentationbased personalization to One-to-One.

• Customer retention rates improve by 60 percent when shifting fromsegmentation based personalization to One-to-One.

Empirical evidenceThere is an increasing amount of experiential evidence from companies thathave made the switch:

• Accor Hotels: The world’s fourth largest hotel group increased onlinerevenue by $200 million. A survey of customers revealed that 35 percent ofnewsletter subscribers were directly influenced in booking a room by thepersonalized communications they had received.

• EMI Music (France): In 18 months, EMI improved it’s digital revenue andtripled its customer database size when it personalized the content of artist-to-fan communications via email, mobile and social.

• Sephora: The beauty chain with 500+ stores worldwide doubled responserates when it switched to personalized-content direct mail.

• Bales Worldwide: The luxury travel operator conducted a champion/challenger campaign comparing segmentation versus One-to-One basedpersonalized emails. It measured an increase in conversion of 100 percentand a tripling of brochure mailing responses. The firm credits campaignpersonalization with delivering a five percent revenue growth.

• AXA Bank: Personalized approaches raised opening rates of loyalty emailsto 60-80 percent and achieved a 5-10 percent conversion rate.

• DigitalGlobe: The satellite imagery provider improved email opening ratesby up to 15 percent and reduced opt-outs to 0.33 percent.

AUGUST 20105

Conversion rates

improve by

22 percent when

shifting from

segmentation based

personalization to

One-to-One.”

The way aheadTo reach customers in ways that they accept and prompt positive responses,campaigns must be relevant. Content and timing must be individualized toeach customer’s circumstances and it must be consistent and coherent acrossall channels — direct mail, email, mobile messaging, call center, Web andsocial media. There is an increasing body of survey and case study evidence toprove that One-to-One personalization is the answer: evidence that conversionrates leap as relevancy is improved.

Companies must get more personal with their customers and marketingtechnology now provides the answer.

We invite you to learn more about how Neolane can help your organizationfight marketing fatigue. Contact Neolane at +1 617 467-6760 or visitwww.neolane.com. Please look for the second installment of our series,“Getting Personal with Your Customers – Beyond Segmentation,”available soon.

About NeolaneNeolane provides the only enterprise marketing software specifically designed tomanage, automate and optimize programs across traditional and emergingchannels including direct mail, email and mobile. With Neolane’s cross-channelmarketing and lead management solutions, marketers can manage campaigns,resources, customer data and analytics from a single platform to dramaticallyimprove effectiveness and ROI. Built by marketers for marketers, Neolane is usedby more than 240 of the world’s leading companies including Accor Hotels,Alcatel-Lucent, Orange, and Sephora.

1 “Email Marketing — Get Personal with your Customers,” Aberdeen Group, June, 20082 “Marketers: Stop the Abuse! Adopt Preference Management,” Forrester Research, Inc., July 20093 Print Week: GI Direct survey: Properly personalized direct mail boosts business, March 20094 Aberdeen 2008 — ‘Email Marketing: Get personal with your customers’

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AUGUST 20107