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Connecting the dots toward a deeper understanding of customers Bringing Precision to CONVERSION MARKETING

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Page 1: Bringing Precision to CONVERSION MARKETINGcustomer toward a purchase or brand loyalty versus ... marketer’s first step is to conduct a deep data analysis in order to build a clearer

Connecting the dots

toward a deeper

understanding

of customers

Bringing Precision to

CONVERSIONMARKETING

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he quest for relevance is an age-old struggle in marketing, but it has taken on a new urgency in the digital age. Increasingly, the old rules of mass marketing no longer apply. Opportu-

nities to reach consumers through deeper insights and with greater precision abound in this era of data-driven marketing.

Recent trends are in the marketer’s favor. More consumers are exploring products and shopping on-line, for example, leaving behind a valuable digital footprint. Today’s digital marketing landscape is awash in so-called “hyper-personalization” tech-niques, as companies seek to leverage this data trail in order to tailor ad messages and promotional of-fers to increasingly smaller segments of their tar-get audience. Meanwhile, transactional data from sources like retailer loyalty card programs provides a window into purchase behavior and a platform from which to launch shopper programs that are targeted specifically to those behaviors.

The question is: To what end? Are marketers who employ all of these data-driven methods getting more of their messages through to the right recipients? Are they strengthening bonds with customers, providing real value in the form of more relevant offers or increasing the likelihood of purchases?

While there are no easy answers, evidence suggests that at least some of the efforts to target customers on a more personal level are falling on deaf ears. For instance, a recent global survey by Accenture found that 42% of consumers are willing to pay for ad blocking services that eliminate interruptions from online ads. The alarmingly high figure was a clear indication that “too many ads are poorly targeted,” said one top Accenture executive upon the release of the report. Simply put, a misplaced ad has a high chance of being regarded by consumers as irrelevant or a waste of time.

Such cautionary statistics have not curbed

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Marketers can achieve greater relevancy by connecting the dots on all of the available data and by working toward a deeper understanding of their customers.

“The technology marketers use to be

relevant is accelerating as quickly as

the technology consumers possess to

turn us off if we’re not.”

ALICIA SMESTAD, EVP, Senior Group Director and Senior Vice President, Catapult

DUE DILIGENCE: The Data AuditIf you ask any marketer, “How well do you know your customers?” you’re likely to raise a few eyebrows. The truth is, it is difficult to get an objective answer to this question. Experts in the field have a suggestion: Start by looking at the data.

“The reality is, most CPG companies have very limited and inconsistent information about their customers. Their databases are relatively thin,” says Mark Hertenstein, Senior Vice President of Enterprise Solutions at Epsilon.

A food manufacturer, for example, may have captured a customer’s name and e-mail address when he or she downloaded a recipe or signed up for a promotion. Often times, however, that’s where the data trail stops. A brand may have a basic demographic profile of its user base, thanks to first-party research from the likes of Nielsen or IRI. But it must then work with a third-party vendor like Epsilon to create additional contact points and a deeper understanding of those consumers, Hertenstein says.

“Now you not only know where they live, but what type of house they have, how many kids, their hobbies and interests,” he says. “Do that across your database, and then you have something to segment. Are they budget strapped? Health conscious? The deeper you go, the more meaningful the segments you can create.”

Have marketers done their data audit? Here are five key questions to ask: 1. Do you have a sense of who your shoppers/consumers are or could be?

2. Have you appended that basic profile with third-party data to complete the view of the consumer?

3. Are you distinguishing data for insights and data for action?

4. Are you connecting your message to the transaction?

5. Is your messaging driving the consumer towards a purchase?

BRINGING PRECISION TO CONVERSION MARKETING

marketers’ appetite for the digital ad medium. A recent eMarketer report, for example, cited a Duke University study in which CMOs across multiple industries – from healthcare, banking and technology to retail, manufacturing and consumer packaged goods – said they planned to increase their digital marketing spending over the next 12 months by anywhere from 8-22%. These same companies plan to reduce their traditional ad budgets by as much as 7-12%, according to the study, while upping their overall marketing spending in a wide range: anywhere from 1-20%.

From Personalization to PrecisionClearly, there is a widening gap between what marketers consider to be “personalized” and what consumers perceive as relevant. Many of us have experienced this in our everyday lives. You may casually browse an online retailer just once and be bombarded for the next several days by overtures from the company as if you were a loyal customer. Just think about all the “exclusive for you” branded promotional offers delivered through our e-mail inboxes or favorite web pages that end up ignored or discarded as if they were the equivalent of spam.

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So where are marketers going wrong? “Marketers are not using all of the available data

to get a better picture of who their customers are or what might be useful or relevant to them,” says Alicia Smestad, EVP, Senior Group Director at Catapult. “The same types of marketing, messaging and targeting get repeated because the brand or retailer hasn’t tied back to the fact that what they’ve sent their customers before hasn’t worked and is not relevant. They’re not doing anything significant to learn how to change the approach or close the loop on a purchase.”

Despite the widespread availability of data from a variety of independent sources, Smestad says that very few marketers have taken the necessary steps to access complete information about their customers’ demographic profiles and lifestyle interests. Even those who have, she argues, often do not connect the dots between this type of research and transactional data or online search behaviors to generate a more holistic view of how brands fit into their customers’ lives. (See “The Data Audit” on page 3.)

Smestad believes the intent of personalization is a good one; however, she says the process needs to be directed at understanding what motivates a customer toward a purchase or brand loyalty versus tailoring specific messages to a particular audience.

“Pushing different messages versus pulling is the goal of much of the industry right now,” she says. “Personalization is focused on a custom message for each person throughout channels, or on different messages for different user groups. This is progress,

robust way, either because they don’t see the value of it or they think it’s covered by consumer insights,” Smestad says. “Generally speaking, shopper insights are seen as an afterthought.”

Consumer insights seek to uncover people’s wants and needs: their usage or attitudes towards a brand or product. Shopper insights delve into behavioral factors such as barriers to purchase in an attempt to position a brand within a unique shopping solution. By thinking of these as two unrelated sets of data, marketers often fail to gain a complete picture of the shopper’s decision-making process.

“Because today’s shopping journey is so fragment-ed and there are so many digital behaviors involved, you cannot isolate the consumer from the shopper,” says Mark Hertenstein, Senior Vice President of Enterprise Solutions at Epsilon. “We have to chal-lenge our usual definitions of consumer insights and frame them more around the shopper. We need to start asking deeper questions in order to figure out how we should engage and talk to our customers along their digital and physical journeys.”

Knowing which questions to ask is part of the learning process as brands go deeper into segmentation. Normally, a brand conducts segmentation by grouping people in a one-dimensional demographic index (for example, by region or household income level), while a retailer may construct its segments around a particular shopping behavior (such as people who only buy a certain category on sale).

Catapult’s new approach goes much further. It combines more detailed demographic and lifestyle information with transactional data to create multi-layered segments, and then builds an entire marketing plan around each of those segments. “What’s really

demographic indexing. Too often, it tries to tailor a one-size-fits-all message to groups that may or may not represent a company’s most valuable customers.

“Adding this new layer of precision to conver-sion marketing helps minimize waste because we’re delivering the right message to the right people at the right time,” says Brian Cohen, Executive Vice President/Group Director and Head of Digital Integration at Catapult. “It will get us closer to the point where we stop thinking about reach, frequen-cy and impressions. We need to focus on sales and other key performance indicators that marketers are increasingly judged on for their success.”

A 10-step action plan can be found on page 6. In the following sections, we examine how marketers can merge shopper/consumer insights, improve the segmentation process, strengthen messaging and enrich measurement techniques – the four key pillars of a more precise conversion-marketing strategy.

PILLAR ONE: Insights

Bring shopper to the forefront of consumer insights

As marketers work to refine their methods, they must also confront certain organizational challenges. One imperative is to forge greater collaboration between consumer insights and shopper insights groups. Most marketing departments tend to view these as entirely separate functions, often placing far greater emphasis on the former than on the latter. “Most companies have not established shopper insights teams in a

but it is still too focused on delivery improvement and optimization, versus relevance.”

Over the past two years, Catapult has been refining its chief marketing model, known as conversion marketing, adding depth and precision through enhanced segmentation techniques. Its new approach centers on developing ways to communicate with real people versus activating against vague consumer targets.

“We’re having a deeper conversation on how we help and execute marketing that identifies, reaches and messages to a specific customer or customer seg-ment,” says Peter Cloutier, Chief Marketing Officer at Catapult. “We do this in service of building a brand connection and get someone to do something – click, share, download, post and ultimately buy. This is the core of conversion marketing.”

In the updated segmentation approach, a marketer’s first step is to conduct a deep data analysis in order to build a clearer portrait of its customer base and to identify segments that make the most sense to target based on who they are and how they shop. The scope of this analysis, including the number and nature of the segments, will vary depending upon the brand’s marketing objectives.

This process, in turn, enables a brand or retailer to conduct its marketing more efficiently because it can work simultaneously to optimize its message and audience – i.e., to craft a message that is most likely to resonate with a carefully identified group. By contrast, traditional mass marketing loosely defines its customer base with broader segments using

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“The shopper journey has spark points:

It could be a billboard, banner ad,

seeing a sign inside a venue or even

talking to your friends on social media.”

BRIAN COHEN, EVP/Group Director and Head of Digital Integration, Catapult

BRINGING PRECISION TO CONVERSION MARKETING

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Answer: It should start by learning more about the customers it already has.

“Think about all the people who have glasses or who need glasses; what motivates them to buy; what types of brands, styles and price you need to have for certain groups of people in different stores – these are all consumer insights,” Smestad says.

As it compares this information with behavior-al data and purchase transactions, the retailer may discover a value segment of suburban shoppers who buy glasses once every three years; that could

new is the idea of connecting the segments to each pillar of your marketing strategy, so that everything is working together,” Hertenstein says.

So how does this work? Consider the following scenario:

Let’s say that a major eyewear retailer wants to grow its customer base by expanding one of its top-selling product lines. As part of the initiative, it is looking to add new styles of frames and conduct var-ious promotional activities. How should this retailer build and execute its customer acquisition strategy?

above analysis is how many segments to create, and how many different customer profile and behavioral attributes to assign to each segment. “Part of this is you’re learning how to segment as you go along,” Smestad says. “There are an unlimited number of possible segments, but it’s a good idea to start with less because you can always add more as you get better at the process.”

A CPG manufacturer, for example, might start with a segment of value-seeking Hispanic shoppers who live in the southwestern U.S. and then assign lifestyle attributes to further distinguish consumers within that segment, such as “pragmatists” or “dreamers.” Next, it might cross-populate the segment with “Mom” pragmatists or “Mom” dreamers who live in another part of the country, or with Boomer pragmatists and Boomer dreamers who live in the Southwest.

Any number of additional behavioral variables could be added to further illuminate the identities and motivations of these segments, such as attitudes towards shopping (e.g., pleasure versus chore) and a low, medium or high level of coupon usage. Each permutation creates a potentially valuable new segment and the need for a dedicated messaging strategy. For example, this particular CPG brand would not want to speak to its pragmatic consumers in the same way it does to dreamers, even if both groups share the other traits of being value-seeking shoppers with kids living at home.

Among brick-and-mortar retailers, Kroger has taken this process to the extreme, using powerful computer algorithms and granular data from its

be one component of its strategy. Another group might be a sub-segment of urban Millennials, who are less sensitive about price but want to feel like they’re keeping up with the latest trends in eyewear. “This segment would have a very different reason for coming into the store,” Smestad says. “You have to build your assortment and messaging to each of these segments very differently.”

By creating more informed segments in this way, the retailer will know exactly which customers it is going after and how best to communicate with them. It can then use this framework to create a resonant message for each group.

PILLAR TWO: Messaging

Creative must be an integral part of the strategy: Make the message fit the audience.

In today’s non-egalitarian marketing world, a handful of powerful brands can afford to run outrageously expensive ad campaigns that may grab attention without saying anything that might make a particular group of people want to buy the product. (A certain chatty green lizard comes to mind.) For all other marketers, it is far more economical to tailor a creative strategy to the needs of a specific audience. And that will require a better understanding of the people the marketer is trying to reach.

Along this vein, one of the critical decisions in the

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ACTION PLAN 1. Build a deeper view of your existing

consumers: • What they buy: purchase data and

behaviors• Who they are: demographic data• What they do: shopping, media, interests

2. Build current user “clusters” and non-user clusters.

3. Develop strategies for growth based on testing these clusters. A sample strategy might work as follows: Assume that there are 100 types of con-sumers that use your brand today based on the modeling of attributes across the deeper data sources outlined in the follow-ing sections. Now take those 100 dif-

ferent groups and get to know them through testing scalable segments.

4. Who buys your brand a lot? Can you find others who look like them? What would you say/message/offer them?

5. Who buys your brand infrequently? What might help them think of your brand more or in a different way?

6. Who do you think is your next “white space” to reinvent your brand to a new segment/cluster? How would you propose to be relevant to that group?

7. Reset what you “know” to what data you can connect together to “learn.”

BRINGING PRECISION TO CONVERSION MARKETING

8. Work with partners to enhance the data you have and the data you don’t. This will be an ongoing endeavor.

9. Measurement of sales impact is the only way to validate your relevance. Focus on bringing that key data set in as table stakes.

10. Get results that amplify your strategies to continue year-over-year growth versus simply looking for “what’s next.”

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der to create a 360-degree view of the consumer.”The previous scenario provides insights into how

messaging is derived from the segmentation. When communicating with style-conscious Millennials, for example, the eyewear retailer might dispense with a standard one-size-fits-all offer (e.g., “Get $100 off a pair of glasses with your next eye exam”) and try to create a more individualized message. For instance, it might shift from the pragmatic “It’s time to replace your glasses” to the more aspirational “Check out the latest frames we have in store.”

There are a variety of ways to scale messaging that is tailored to the unique needs of each group. One method is to overlay the notion of programmatic advertising (which currently focuses on the delivery and placement of ads) onto the creative itself. For

loyalty card program to segment down to the individual customer level. Even in this case, however, the retailer’s marketing and communications strategy is still tethered to only one facet of its customer base – i.e., their purchasing patterns. Similarly, Amazon is a master at cross-selling products to customers based on their browsing histories, but doesn’t necessarily bundle or promote offers in a way that suggests a deep knowledge of those customers.

“Shopper data from retailers is purely transactional: It tells you who is buying the brand or category, but it doesn’t tell you anything about who those people are or what is motivating their purchases,” Hertenstein says. “You have to layer in attitudinal behaviors and lifestyle behaviors. These are all very different types of data, and you must use them in combination in or-

PILLAR THREE: Media

Shift the focus from media buying to media delivery

Of the four pillars discussed here, media perhaps has the most direct correlation with the concept of precision. Traditionally, media is purchased with the goal of reaching a broad demographic audience. Instead, the goal should be to reframe the conversa-tion about delivering the right message to the right audience in a way that’s non-intrusive and relevant. “The question becomes: Can you be more impact-ful with a precise buy than a mass market spend to

example, let’s say a marketer has identified four segments of moms for its brand of baby food: organic, natural, mainstream and value. The core creative may remain the same for each group, but individual segments may receive a slightly different message based on different visuals contained within the ads.

Programmatic creative may also be applied to search marketing. Fandango can send an e-mail to a customer that says, “Save $2 on your next movie,” and if that customer opens the email within 100 yards of a given movie theater, the content/message (i.e., movies/ads) will be the same as the ones nearby. “This is not easy to do,” Cloutier says, “but it can increase relevance to the customer by ten-fold.”

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KEY CONCEPT: Shopper JourneysFor years, marketers have tried any number of ways to describe and capture the consumer’s path to purchase. “Nobody shops in the same way,” says Brian Cohen, EVP/Group Director and Head of Digital Integration at Catapult. “But as marketers, we all tend to plan in the same ways and like to think we know exactly what the user experience looks like.”

That user experience is becoming more complex as new technologies provide digitally savvy shoppers with an increasing array of options. There are multiple decisions to make at every step along today’s shopper journey.

To account for these trends, Cohen uses a mapping model that he describes as a sophisticated decision tree. “The shopper journey is like a highway with off-ramps, and each exit has a number of turns where any number of decisions can be made,” he explains. “These are what I call spark points: It could be a billboard, banner ad, seeing a sign inside a venue or even talking to your friends on social media.”

At each of these spark points, he inserts a conversion mechanism – a key perfor-mance indicator that provides a measure of the consumer response. In the case of a banner ad, “Do you ignore it, click on it, or keep in the back of your head?” he asks. “There’s always a next step. We want to know what the conversion mechanism will be at each of those steps.”

Cohen sees this process as moving consumers along the highway. “We can’t force someone to buy something,” he says. “Marketers can’t change behavior, but we can enable behavior. When consumers do decide to make a purchase, we can make sure that we’re in the right place at the right time – with something that works for them.”

“Everyone seems to be measuring with

a short-term sales lift mentality. We

should be measuring with the intent of

learning.”

CHARLEY CIRESI, Vice President of Client Services, Catapult/Nsight Connect.

BRINGING PRECISION TO CONVERSION MARKETING

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reach a certain number of eyeballs, and can you pro-duce the same result for a lot less money?” Smestad says. It’s a laser versus a shotgun approach.

In the short term, brands may still want to rely on the broad reach of national media, particularly if they have the general sales results to show for it. But going forward, marketers will start to think of media less in terms of reach against an audience and more in terms of intersecting with their segments – whether measuring against acquisition (new household prospects) or frequency (current house-hold KPIs). The next section includes more on this evolving approach to media and measurement.

Marketers, of course, are already coming to terms with a drastic shift in how media gets bought and sold in today’s fragmented advertising landscape. The increasing role of digital ad platforms like the Facebook Exchange and streaming services like those of Netflix and Pandora mean that almost any company can be in the business of buying media. Major marketers including Procter & Gamble are bringing more of their programmatic ad buying in-house, and the responsibility for ad placement is increasingly being divvied up between the traditional media buying houses, integrated agencies (including shopper marketing agencies) and third-party vendors.

Given these dramatic changes in the media mar-ketplace, it is particularly important for shopper marketers to remain focused on their specific client objectives, says Charley Ciresi, Vice President of Client Services at Catapult/Nsight Connect.

“If your goal is to build brand equity or brand awareness over the longer term, you may still want to think of media in terms of reach and frequency,” says Ciresi. “In shopper marketing, we have to think about what’s converting the shopper to a buyer, so our results metrics are going to be very different in

Smestad says. “They’re measuring, but they’re not measuring enough and they’re not learning how to improve the program with each successive try.”

With so much clutter in the marketplace, it is difficult for any marketer to know which tactics or circumstances in any given campaign or program led directly to a sale. By setting up a test versus control measurement system, however, a brand or retailer has a statistically relevant sample in which it can connect household data to stores to markets in order to isolate the factors or components that worked best.

For example, the eyewear retailer could test stores within two major metro markets: one that received the $100 off promotion, and the other that did not. “It would require matching samples with sufficient scale; the stores in the two markets have to be similar in terms of brand development, distribution and so forth,” Smestad says. “There’s a lot of planning in this system, but it allows you to eliminate all the other variables out-side of what you’re testing that contributed to a sale.”

The chart below illustrates one type of hard-data measurement model using four distinct data categories (increasing in predictive power from right to left).

Within each section are steps to add precision to a conversion marketing strategy through four key pillars: insights, messaging, media and measurement.

the shorter term. This is where precision marketing can play a critical role. It can help you better define your audience and eliminate inefficiencies as you work to balance the brand’s priorities and objectives.”

PILLAR FOUR: Measurement

Transition from soft to hard metrics; understand what needs to be measured and why

Going forward, marketers will need to embrace a shift in priorities with regard to measurement. Marketers today remain largely focused on “soft” metrics – such as engagement rates, clicks and im-pressions – versus looking at hard data that would indicate a more direct impact on purchases. After all, it’s one thing for a brand to know whether or for how long consumers watched its video-enabled ad, and another to determine if the views caused those consumers to take any action with their wallets.

Even as marketers have become increasingly ac-countable for showing sales results, they are not nec-essarily clear on what needs to be measured, or why, says Ciresi. “Everyone seems to be measuring with a short-term sales lift mentality,” he says. “Instead, we should be measuring with the intent of learning, so we can continually optimize our campaigns and programs as we go.”

In the previous eyewear scenario, for example, the retailer is likely to use total store volume to assess the success of its customer acquisition strategy. Howev-er, that single metric does not allow it to dig further – i.e., to know which parts of the program worked with different segments. “They don’t know who’s coming into which stores or what brought them in,”

With all of these tools in hand, marketers can begin to build a strategy that – regardless of the specific tactics or brands – is guided by the core principle of creating value for customers through relevance. Thus, marketers can reframe the conversation from concerns about privacy, ad blockers and the myriad ways in which consumers can tune out messages, to an opportunity to become (at the very least) a more welcome intrusion into their lives.

“The technology that we as marketers use in order to be relevant is accelerating as quickly as the technology the consumer possesses to turn us off if we are not,” Smestad says. “Relevance is the currency of value. And if you’ve achieved that, you will have earned the right to talk to your customers.” n

About the Author: Michael Applebaum is a freelance writer and editor who specializes in developing features that address all aspects of marketing. He trained in the New York City publishing industry and held senior-level editorships at Brandweek, Photo District News and Spy magazine. He has covered marketing since 2000 and now produces various independent research, copywriting and editing projects for businesses and agencies. His marketing journalism work has been regularly featured in Adweek and Shopper Marketing magazine. He is based in Chicago.

HARD MEASURES: Primary MethodsTEST VS. CONTROL

• Household tagged and purchase data available for “exposed” vs. “unexposed” matching

• Stores matched and store level sales data available for test vs. control groups of stores

• Markets matched and sales data available for test vs. control groups

PRE VS. POST

• Sales data read for trends 4 weeks prior compared to during and post-event sales

• Sales data read for year-over-year results

• Cannot separate impact of overlapping support and cannot isolate other market factors (competition, seasonality, pricing)

SURVEY

• Shopper intercepts or online surveys to capture purchase intent changes or brand perception changes of those exposed vs. unexposed or pre vs. post event

REGRESSION/MIX

• Significant gathering of inputs across all spending to build models to isolate the impact of specific stimuli

Planned before execution for feasibility & cost

Requires enough scale to see a difference

Reported data vs. actual data

Reads only “big stuff”

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BRINGING PRECISION TO CONVERSION MARKETING

“We have to challenge our usual

definitions of consumer insights and

frame them more around the shopper.”

MARK HERTENSTEIN, Senior Vice President of Enterprise Solutions, Epsilon

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