Last week we began our discussion of marketing analytics that drive ROI. Today I’d like to finish that discussion.
Just a little caveat here, these aren’t the only marketing analytics that drive ROI — certainly a bunch of analytical metrics contribute to ROI. I’m simply focusing on those that come into play throughout the customer journey.
Marketing analytics that drive ROI in the customer relationship
Unfortunately, many examples of the conversion or marketing funnel stop with conversion. There’s no underestimating the importance of conversion, especially in the short-term, but you need a longer term view of marketing to ensure the continual growth of the firm.
Today then, let’s move on to the last 2 elements of the marketing funnel — customer relationship management and retention.
When I first started working in marketing, we took a very transactional view of marketing that ended with conversion. In the ’90s, we started talking about building relationships with customers because researchers discovered retaining a customer is 5X better (revenue, cost) than attracting a new one.
In the intervening years, CRM became fashionable, although it was focused on tactics rather than generating true customer relationships. Instead of working to ensure customers were engaged and happy, marketers focused on remarketing and tactics designed to extract the most value from customers and visitors. In other words, they focused on selling them, not truly caring about the customer experience.
I could give you a ton of metrics to reflect that selling focus, but I’d rather focus on the customer experience end of things — the part that drives customer loyalty and evangelism.
Why? You might ask.
Because customer loyalty (true loyalty not just behavioral loyalty) and evangelism are propellers for market performance that far outstrip your selling efforts.
As I mentioned above, we’re gonna focus on CRM metrics from the customer’s point of view, not the firms. I like the image above as a strategy for improving the customer experience.
Service audit – is the first step. Here you need research to identify current performance and factors that impact market performance. Redo the service audit over time as factors impacting performance change over time. Here are some metrics that help:
- Customer satisfaction – both quantitative from surveys and qualitative from online sentiment
- Engagement – is an early indicator of how customer feel about your brand. The more engagement, the more they support your brand — and the greater reach your message achieves. Social indicators of engagement are Likes, RT, Shares, and similar metric. Watch how these metrics change over time and what causes spikes or dips.
- Response time – how long it took you to resolve a customer problem, answer a question, or applaud positive feedback. You likely want to separate different channels and identify your response time across channels. Current thinking suggests response time expectations are very short on social channels — Brandwatch reported a study showing 65% of consumers expect a response within 2 hours of a Tweet. And, don’t stop with managing complaints. Answer questions quickly and recognize folks who engage with your brand. That’s the surest way to increase engagement.
- I’m sure there are lots more metrics that help your marketing analytics improve ROI and likely you have some specific to your business/market. My point here is that simply tracking sales is an incredibly poor way to monitor the health of your brand as it often lags actual customer attitudes.
Measure progress – obviously, you don’t stop with assessing performance, you set goals then determine your progress toward achieving them.
The hallmark of CRM is two-way communication. Obviously, you’re gonna monitor your communications with customers, such as email open/ click rates, but you also want to monitor customer communication with you or with other customers. Customer-to-Customer or C2C interactions are critically important for market performance as they are more trusted than B2C or B2B communications.
Metrics related to 2-way communication include things like user-generated content, the most important of which is consumers answering questions or supplying reviews for your products, participating in community forums, or other ways to support your brand community.
And, don’t just think online when you think about community. Think about things like HOG rallies (Harley Owners Group), attendance at company sponsored events, or other forms on real community.
Optimize customer revenue
Image courtesy of RevDev Europe
Yield management is a term for optimizing your revenue by manipulating pricing or other factors. Yield management is especially important in industries with a high fixed cost structure — such as airlines, hotels, amusement parks where the cost per visitor is very low and the costs of the operation are very high. But, you can think about any product as having some element of this. For instance, if you make toasters, sure, the cost per toaster is high, thus the cost per customer is also high. Thinking long-term, however, you discover the cost of your property, plant, and equipment is much higher. So you can think of yield management as there are a limited number of toasters you can turn out and you need to get the best price for them.
Traditional yield management seeks to use price as a tool for moderating demand — the higher the need, the greater the price. That’s why business travelers often pay more for airline flights and hotels than vacation travelers. Disney used yield management when they increased prices for weekend visits versus those during the week.
A modified version of yield management comes into play when you think about which products to make or sell, as there is limited capacity for both.
Another factor in revenue optimization is the revenue each customer represents — with different types of customers representing a different amount of revenue. For instance, a customer who shops in your store occasionally doesn’t contribute the same revenue as one who shops in your store routinely. Businesses try to maximize revenue using customer loyalty programs and contests to drive shoppers to their store and products.
Image courtesy of Custora
Customer lifetime value or CLV is a term we use to measure, quantitatively, the value of different types of customers. Sometimes, companies even “fire” customers reflecting low value or increase fees to these customers to increase their value.
Here’s the formula, where t=time, m=monthly customer revenue, r=retention rate, and d=discount rate. Commonly, you create customer segments and calculate the CLV for each segment. Now, you have clear guidance for generating marketing strategies for each segment.
Hence, customer groups that represent higher value, should get more perks, like airlines that give frequent fliers extra stuff.
A word of caution here. Beware of treating low CLV customers badly, as they talk. Bad customer service travels 5X farther than good. Also, treating customers differently may bleed over into animosity. Finally, remember that low CLV folks can transform into high CLV folks, with the right incentives.
Think about CLV in the long-run, not just the short-run.
Final thoughts on marketing analytics that drive ROI
Just monitoring revenue isn’t enough. You need to monitor performance across all aspects that drive ROI.
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Marketing Analytics that Drive ROI: Part 2