Developing a structured response to the changes coming to digital marketing will present an interesting challenge. Here we investigate ways to prepare.
It’s been ten years since Game of Thrones first aired and it seemed like a fitting backdrop to some interesting changes coming to the way digital marketers are going to be able to access customers in the future.
McKinsey & Co recently published an insightful and interesting review on what it refers to as the impending ‘profound and abrupt shift’ for the $150bn dollar digital advertising industry, which is based, in significant part, on accessing customers via third-party cookies or permissions. This has already caused significant changes, for example, the end of Google’s third party cookies and Apple’s recent decision to give options to customers on whether platforms can market to them.
The specific change is the California Consumer Privacy Act due to enter legislative books in 2022 and the focus of the paper is on the effect on the digital marketing platforms. They refer to a term that, if you’re like me, you haven’t heard or thought about for a few years: the walled garden.
They define walled gardens as ‘closed ecosystems in which the service provider owns and controls applications and content’. In other words, they are platforms that have a direct relationship with a consumer and the ability to collect transactional, voluntary and behavioural data. They are able to analyse that data to infer preferences, predict timing of purchases and — critically — communicate with them directly to try to build influence on future actions.
But what McKinsey identifies as the benefits to walled gardens don’t necessarily just apply to digital marketing platforms, but could also relate to you. If you work for a business that has consumers as customers, you are as likely to take advantage of the shifting budgets as the online ad industry adapts as the big walled gardens like Facebook. But not necessarily in an obvious way — advertisers are not going to switch to your site, but there are ways of taking advantage of this seismic event.
Customer Relationship Management (CRM) actually has a huge amount to say for companies as they adapt their digital marketing plans to accommodate the impending 2022 changes. So we thought it would be timely to revisit some core principles of developing, managing and sustaining those relationships.
This has to be core to any CRM idea, of course. The context of this paper is about reaching consumers and using direct-relationship and relational legitimacy to have more cut-through on offers or suggestions for future actions.
However, in the same way that your product will fail if the customers’ needs are not at the heart of it, your relationships will fail if you misuse that legitimacy. Pick the wrong product partner or ancillary revenue option and you’re sunk. And wrong in this context is any offer that does not genuinely add value to the customer experience or fulfil the needs they came to you in the first place to solve.
Needs are the key point. Banking and event tickets may not be obvious bedfellows, unless you think about them from a needs perspective. A customer chooses a bank in the hope that they can be trusted to provide a service that will minimise risk and maximise utility. So yes, that’s our savings, but that’s a product-centric view. Risk and utility are involved in a ticket purchase, so why wouldn’t we trust a financial services company to keep us safe and give us an easy life in that world? Take Amex as a prime example of a company that has offered aligned services that relate to one of the key things its customers want to do — travel. From a needs perspective, they are an obvious choice.
Satisfaction (or really, making the right promise)
In a way, this is too obvious and basic to include. Customers who are satisfied are more likely to want to build a relationship with a firm and are more likely to be loyal with all that entails. There we said it, candidate for the most blindingly obvious statement of the week.
But actually, there’s something more interesting and trickier related to satisfaction that has fascinated me for years and it involves cognitive dissonance theory. Really, it’s related to the notion that our perception of satisfaction is directly affected by our expectation of the product or service in the first place. We’ve all been to the party we dreaded but surprised ourselves at how much fun we had. Or to the concert we’d been looking forward to for a year since we bought the tickets but it all felt a bit flat, even if the singing was not. Cognitive dissonance.
The same is true of our relationship with companies we buy from. The greater our expectations, the harder we are to please. For many years British Airways used the tagline ‘The World’s Favourite Airline’ — which is a tough claim to live up to. It was qualified as being a statement of vision rather than reality but justified on customer numbers when it was adopted in 1983.
Focus on the life of the relationship
The best example I ever heard for this was someone asking me why, when you asked for the location of the sweetcorn in a supermarket, does the assistant take you there. This just isn’t cost-effective for a bag of frozen veg. However, if the supermarket takes into account the life-time value of their customers (let’s say £300,000), the time spent in offering this service is a drop in the ocean.
And, the lifetime value (LTV) goes way beyond your current proposition, of course. Consider product extensions, brand partnerships, innovations and sources of ancillary revenue. These may not make it into your LTV calculations now but maybe they should?
All of the above examples should be considered in the light of the changes to third party cookies that are discussed at the start of the paper. Neither CRM initiatives or developing the right ancillary revenue propositions are overnight tasks, and the clock is ticking to some seismic changes that could make both even more attractive than they have been.
Advocacy vs Engagement
In all the CRM textbooks that were written in the height of the concept (late 1990’s) Advocacy was the goal. If a brand could get their customers talking enthusiastically about them, they were winning.
However, in the age of social media, this concept has been re-considered. In a paper from 2012 Dr CM Sashi puts forward a compelling argument to say that Engagement is of even greater value. This is partially due to the democratization of brand / consumer communication that was heralded by social media.
In Sashi’s view engagement assumes all the benefits of advocacy are in place, but in addition, that the consumer has the opportunity to engage in dialogue with the brand to make it better. A number of brands manage this really well: Hiut Denim for one whose customers engage with them openly about product improvements. This idea is referred to as socialCRM (or SCRM) in many places, where brands are encouraged to apply CRM principles to the way they manage their social interactions.
Return on Investment from CRM
Last but certainly not least is ROI. Any business initiative needs to stand or fall by its benefits case and there are tried and tested ways of establishing this for CRM. Spend on enhanced satisfaction programmes, additional service wraparounds, loyalty rewards, and partnerships with brands to extend the proposition footprint all cost money. Every pound spent must return at least a few as a direct result of the activity.
This is a much bigger topic than can be covered in one paper, never mind the last section of one, so here are some key questions we might suggest you ask:
- Is the initiative going to prompt repeat purchase behaviour or are we going to be spending money encouraging new thinking with only a one-off purchase?
- Can expectations / satisfaction trade-off be managed more effectively as a result of this initiative?
- More specifically than #2, is the initiative going to lead to more recommendations and 5* reviews?
- Does the promise of the ancillary revenue outweigh the cost-to-serve integrations and any potential cannibalisation to our core proposition?
- Will the extension elevate our brand in the perception of the customer that will lead to enhanced repeat purchase / recommendation cycles?
Honestly, my view is that if the answer is yes to these questions above that are relevant to your project now, the prize in 2022 is big enough that it’s worth investing in even if you can’t quantify them at this stage.
This is the first in a series of papers considering this important topic. Please let us know if you’d like us to highlight the next ones to you (throw us a permission and build a relationship … why not?). In the next, we’ll specifically look at sources of ancillary revenue in the travel and hospitality industry and how Tickitto might help with that.
This paper was researched and collated by the team at Tickitto as part of a series which we want to share with clients, partners and anyone interested in the travel and events sector.
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