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Marketers Get Serious
Looking for ways to measure ROI, executives turn to contextual marketing.
For the rest of the May 2002 issue of CRM magazine please click here
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The new era in the evolution of marketing is what David Kenny calls contextual marketing. Kenny, chairman and chief executive of Boston-based marketing and technology firm Digitas LLC, coined this term to describe the concept of targeting the right message to the right customer through the right channel at the right time for the right price. To do so ensures return on investment. "Marketing productivity, where campaigns look for ROI, is an elusive goal, but it's starting to be possible," Kenny says. "Optimizing marketing productivity is the outcome of CRM." Kenny, whose firm has created contextual marketing strategies for such companies as AT&T, FedEx Corp., and General Motors Corp., offers four business models for using contextual marketing to achieve ROI. Each is based on a different channel. 1) E-marketing/direct marketing focused: Companies, such as L.L. Bean Inc. and American Express Co., that use targeted e-marketing and direct marketing, especially via telemarketing and the Web, can use their databases to turn service calls into cross-sell opportunities. In fact, American Express doubled it relationships per customers over the past four years using this strategy. 2) Mix of virtual and in-person channels: Companies such as Delta Air Lines, Pottery Barn, and Williams-Sonoma Inc. that use this mix need to connect the store and the Web based on customer preferences to create a continuous experience back and forth. When done correctly this helps companies turn their databases into yield-management platforms that will help them mine for better opportunities. For example, Delta knows it will generate a certain level of business in its hub cities. As a part of its plan to battle current economic conditions, the airline is looking for growth opportunities. Using its database it is mining for the highest-potential customers in more competitive markets. 3) Sales force driven: The trick for companies like Bank of America N.A. and American Express Merchandising Services, whose sales forces bring in the bulk of their business, is changing the whole process to a more hybrid model. In other words, these companies must help their salespeople migrate low-end customers or transactions to the Web and focus their face time on high-end customers. "Many good companies have slashed their sales forces, and when the economy rebounds, smart companies will not hire them back," Kenny says. "Instead, smart salespeople will use technology to be more productive."
4) Indirect sales channels: Companies like The Gillette Co., PepsiCo Inc., and General Motors that sell through channels have a unique set of circumstances. They do not have direct customer interaction, so the relationship belongs to the reseller channel; the store has a better chance of influencing the buyer's purchase decision. These companies need to figure out where their customers shop and what media they consume, then use cobranded efforts to embed themselves in the decision-making and purchasing processes. For example, General Motors uses it OnStar services as a key relationship-building tool toward future purchases. "It is still very early in the CRM game for these companies," Kenny says. "They're fighting on margins right now. It could be ten years before CRM is a core issue for them." Even small gains achieved using contextual marketing strategies can pay off big. "Modest shifts in customer behavior translates to significant incremental growth. CRM moving five percent of customers can double profits," Kenny says. "In the long run the most productive marketers will win, because they have more money to reinvest as a result of the higher margins achieved by having a larger share of customer."
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