The nudge towards eCRM

There are still some companies that haven’t understood the significance of eCRM (Electronic Customer Relationship Marketing). Yes, eCRM, that marketing nirvana, which comes with investment barriers that might make it impossible to buy. How could you turn down something that’s going to take a year to get right, that may cost a quarter of a million pounds but that might make you millions in new revenues?

It feels like an impossible proposition. It’s so difficult for brands to buy that many of them don’t. Those big innovators with money to burn can afford to experiment and reap the rewards, but most brands just can’t see it. Most brands have to focus on their immediate tactical requirements (sell, sell, sell!), and perhaps try social because they’ve heard they can do it for ten grand.

Most brands can’t afford to do eCRM, no matter how big the rewards, and how much it differentiates them from the rest of the market. Or can they?

Let’s go back a few years to when the first major eCRM campaigns started. In 2003 Underwired Amaze proposed to Virgin Holidays taking over an existing email newsletter campaign and building something more sophisticated.

The campaign became segmented, largely by behaviour to start with. What Customer Type 1’s preferred destination, time of year of booking, or decision making time was likely to be, informed when they’d get a special offer on a certain Florida hotel. Quite quickly the second dimension demographics came into play as well. Sending an offer for a free flight for your second child to parents of two made a big impact. The first segmented email sent generated £3million in direct holiday bookings. Virgin Holidays had taken a leap of faith and invested in a campaign that cost around £30k and justified a programme with an ROI of 100:1.

But once the initial surprise had worn off and customers got used to it, there was a long period of lots of detailed activity, lots of creative work going on, but not – it seemed – much return. It changed though, reached a critical mass after about a year, and finally the smiles started reappearing on the client’s faces. And stayed as the programme’s ROI three years later was still averaging 26:1. Fantastic.

The Virgin engagement went exactly like every other eCRM project. It started with a big bang that makes everyone very happy, and settles down. After a few months the quick wins have worn off and it starts looking like nothing is happening at all. After a long, long year though, the eCRM programme starts paying for itself again. But there’s this big, long, frustrating period of doldrums, where the project owner gets disillusioned and it all looks like very hard work for no return, and it’s this that I want to come back to. Why? Because actually it’s this period when the principles that really drive eCRM are hardest at work.

The first principle is segmentation, and if you will indulge me while I teach granny to suck eggs for minute it will set the scene for the second. Segmentation is based on a simple idea, that if you send a specific call to action (an offer, for the sake of this example) that is relevant to the right person at the right time, it’s more likely to be acted on than if you send it to the wrong person or at the wrong time. Let’s take an example. You have three hundred people, 100 are golfers, 100 football fans and 100 cricket fans. You have three offers to go see the Ryder Cup, the FA Cup and the Ashes, in an email, one after the other with a paragraph each. You send the email to everyone. 100 football fans will see the golf offer first, and a third of them will bin the email. The golf players will see golf first and be happy. The cricketers, well two thirds will bin the email before seeing the third, cricket, offer. Your maximum response rate will be 200 – because only 200 of the 300 recipients will have read the offer that appeals to them. Simple. Segmentation says, send one email with one offer to each group (yes, the right offer!), and your maximum response rate is 300 out of 300, a fifty percent improvement.

The second principle is the principle of the nudge. eCRM isn’t an advertising medium, it doesn’t work by bombarding people with messages until they buy – in fact, if you send too many emails it’s obvious what will happen: after the initial hit of increased response people stop reading, after a while they add you to their junk filter, and you never know because after too many emails they can’t even be bothered to unsubscribe.

The job of eCRM is to create relationships. So while the segmentation principle is important, it must be balanced against the need to create a relationship. What we want to do is change people’s behaviour subtly over time. Small calls to action, little asks, are what is required. I want every customer to spend a tiny little bit more every time. I want them to increase their purchase frequency by 2% over six months. I want a 0.1 percentage point increase in average transaction value. Why so little?

What the big innovator brands realised a while ago is that little nudges add up. If I suggest you double your turnover in two years you’d think it impossible. Yet if I suggest you increase it by 3% this coming month you might feel it’s much more realistic. And what happens if you increase your turnover by 3% a month for the next two years? The laws of compound interest say you’ve doubled your turnover. That’s why eCRM is, really, so compelling. Yes there’s a quick win, and yes, there’s a long dull patch, but patience pays off.