October 16, 2006
By Jessica Sebor,

Tools for Gold: Marketing That Mines Best Customers

Savvy companies give customers love according to how much they will get back in return, according to a new report from the Aberdeen Group. "The Precision Marketing Benchmark Report: How Top Performers Turbo-Charge Their Investments," says that companies that use precision marketing tools to seek out their most valuable customers deliver markedly better customer service, higher customer-retention rates, and increased profits from cross- and upsell campaigns. The report shows that although many companies hesitate to implement pricey precision-marketing software, if implemented with a goal-based technique and using proven best practices, the investments are sure to pay off.

Leslie Ament, director of customer intelligence research practice at Aberdeen, sees an increased focus on precision marketing tools and techniques and believes that this focus will sharpen in the upcoming year. "Companies are going to continue to interact with customers according to customer value, because they've optimized themselves to the point where it's the only way to cut cost and increase profitability," she says. Ament explains that companies in some sectors, such as hospitality, have been using these techniques for years, but now companies in all verticals are beginning to find value in precision marketing. An airline giving perks to platinum customer is the basic idea, according to Ament.

The study compared best-in-class companies using precision marketing to other benchmarked groups to see how they differed in service delivery and ROI. The report found that 51 percent of best-in-class companies garnered customer satisfaction levels that exceeded 70 percent as compared to only 10 percent of other benchmarked groups. Additionally, more than half of top-performing companies have customers who purchase multiple products or services from their company every year, while only a quarter of other companies see this kind of customer purchasing action.

Across the board, top performers have higher investment rates in marketing tools, found the report. Forty percent of leaders had Web analytics or performance management tools, as opposed to 27 percent of all others. Similarly, top performers had a 10 percent higher adoption rate of BI and predictive analytics tools and a 20 percent higher adoption rate of marketing resource management software. However, only 16 percent of leaders had invested in marketing service providers or agencies, while 40 percent of other companies had gone this route. Ament says that software provides ample advantage over human service providers. Simple problems can take days to explain and sort out when discussion is necessary, but can take only hours if marketers can use tools to find metrics themselves, cutting out the middleman. "It's about getting closer to the customer."

The payoff from precision marketing tools is clear, but there are still many roadblocks to successful implementation, according to the report. The cost of these tools remains a worry for many companies, and was found to be the biggest concern for both top performers (60 percent) and all other companies (55 percent) while looking to invest. Postimplementation challenges can cause headaches as well, including the difficulty of establishing measurable goals (37 percent of companies listed this as their biggest challenge), the ability to measure performance per goal (35 percent), and securing budget and resources for deployment (28 percent).

Despite the hurdles, Ament says that precision marketing will ultimately pay off because of its ability to "find the optimal balance between cost and value." She underlines the idea that it is important not only to invest in technology, but to face challenges head on to properly leverage the investment. "It's not just about which technology--although some are easier to use than others--it's more about deployment and process."

Related articles:

Competitive Intelligence + Market Research = Optimized Market Intelligence

The Maturation of MRM

The Right Size MRM Solution for Your Company