The Interactive Direct Marketing Ecosystem

September 13, 2012





A few weeks ago I blogged about Nate Elliott’s post on the Interactive Brand Ecosystem.

Essentially Nate is arguing that we need to move from a TV-centric way of thinking and adapt to a planning process that puts the website at the heart of digital marketing.

I agree with this, but I don’t think the model is completely right for direct response digital marketing activity. If you skip to the bottom of this post, I’ve had a shot at revising the model. Having said that, the entire landscape right now is in a state of flux so it’s difficult to predict exactly where all the pieces will end up.

What does the Interactive Direct Marketing Ecosystem look like?

This is a fascinating time to be working in direct marketing. Over the past ten years, the rise of digital marketing has created an entirely new way to interact with customers.

In fact over that decade digital marketing has grown from virtually nothing to be the largest single marketing channel – bigger in marketing spend terms than press or TV. The change has been remarkable – and yet I believe the biggest changes within the channel are yet to come.

The vast majority of marketing spend on digital is in pursuit of direct marketing goals. In the UK, 80% of spend goes on paid search and online classified advertising which are essentially focused on the direct acquisition of customers. Even within display media, a very small percentage of spend goes on the kind of interruptive, interactive formats that are used to support brand campaigns.

To show how things have changed and are about to change still more, I want to focus on three key areas for digital direct marketers – segmentation, permission and email marketing – and look at how they are changing.

1. Segmentation and targeting

The gold standard of offline targeting and customer segmentation is demographic targeting where target audiences are defined in terms of age, sex and socio-economic group.

Demographic targeting is also used in the digital world, but generally it plays a subsidiary role to behavioural targeting. In fact much of what we do from a planning point of view can be summed up in a simple philosophy – don’t ask, observe.

At its purest form, choice of search terms is a brilliant indicator of purchase intention. Search marketing then lets you overlay keyword selection with other factors like time of day, day of week, location and – belatedly – demographic information.

But demographic information can be a false friend. The office manager and the company director will have very different characteristics – yet the director’s fancy foreign trips may be being researched and booked by the office manager. Search marketing avoids these issues – if you are searching, you are potentially researching and purchasing.

Display media is where targeting gets really interesting. When you land on a web page, before a banner is served there is a ‘data exchange event’ – a real-time conversation between your web browser and multiple adservers to work out which banner should be displayed.

Whilst all this data is anonymous, it is still incredibly rich. We can potentially target on some or all of these factors:

Demographic data – age, gender, income etc.
Environment – device, operating system, type of browser, bandwidth, ISP
Behaviour – recent visits to a website, recent search history
Context – content on the page where the banner is being displayed. Targeting could be by relevant section – say the finance section – or targeted to specific keywords appearing on a page.
Time and location – time of day, day of week, computer location.

To add a further level of complexity, some of these criteria could be used to target a specific audience and others could be used as triggers for dynamic creative.

For instance, Harvest Digital has created campaigns for Interflora using dynamic creative based on time of day. If the banner is displayed before 3pm, the call to action is: “Order now for same day delivery”; after 3pm, the banner automatically switches to “Order now for next day delivery”.

To give another example, Orbitz in the United States realised that visitors to their website using Apple computers tended to have a higher disposable income. So when their banners are shown on Apple devices, they automatically show hotel rooms that are 30% more expensive than the norm.

The rise in web browsing from smart phones and other mobile devices is now giving us yet another segmentation opportunity – user location. For instance, we can bid more to display ads on the mobile phones of consumers who are physically at certain locations – for instance, within walking distance of a particular retail outlet.

These are all exciting opportunities for direct marketers. We have moved from an essentially static form of targeting based at its core on physical location – i.e. demographic data derived from postcodes – to fluid, real-time targeting based on the changing patterns of consumer behaviour.

2. Gaining permission

This is a really interesting area because change has for once been driven by legislation and consumer action.

Permission in the narrowest sense refers to explicit data capture – normally in digital marketing the acquisition of an email address. As I go on to argue, this kind of permission and the value exchange that supports it is more important than ever.

However, particularly in Europe, we are seeing the development of a secondary level of permission around the acceptance of cookies.

Marketers have generally seen this requirement to get some form of (in practise quite weak) permission to use cookies as a major inconvenience. However I’d suggest that it can be viewed in a positive light.

The ‘permission landscape’ now looks like this. The inner circle is customers where you have transaction related emails alongside marketing email. Beyond that is prospects who have given you permission to email them, perhaps in exchange for a software trial, a free offer or an informative newsletter. And now there is an outer circle, of consumers who have visited our website and given us permission to deploy a range of tracking cookies.

This final category can be reached through retargeted display advertising. We can’t personalise communications since the cookie data is anonymous – but we can infer quite a lot from the other data associated with that cookie.

From a content point of view, retargeted advertising has got a little bogged down on simply replaying the last product you looked at on a website. That’s OK on an ecommerce site – although as the same fridge follows you round the Internet it does get tedious quite quickly.

However, there is much more that could potentially be done via retargeting. It is possible to drive retargeting strategy off rich web analytics data

3. Email marketing

Finally email marketing. Email is important to digital marketing as the primary channel we use to deliver CRM programmes – but the rise of mobile devices is turning email into a much more powerful channel.

According to MailChimp research, in the UK, some 30% of email is now delivered to mobile devices. In the US, that figure is over 40% and in Japan it is approaching 60%.

So email is no longer a way of reaching customers on a desktop computer during work hours – it is a way of reaching customers in real time to wherever they are.

This is already making profound changes to the way we create email marketing campaigns. Creative needs to be adapted to work on smaller screens operated by fatter fingers. Conventional thinking about email delivery times needs to be revised.

But beyond this, mobile email will need to adapt to the capabilities of its environment. We can see the possibilities by looking at mobile search marketing, which in addition to offering a conventional click-to-website functionality also offers click-to-call and click-to-view-map.

Thinking further into the future, the mobile phone will become the primary payment mechanism – a kind of mobile wallet. At that point, email becomes an extremely powerful channel to deliver vouchers and offers direct to the consumer, direct to their payment device.

The interactive direct response ecosystem

These add up to really important changes in areas that are the bedrock of the new direct marketing. So what does this do for our diagram?direct-response-ecosystem-e1347536005748I have left offline media off this diagram, because I just want to focus on the digital journey. The big changes here are identifying remarketing and email as separate channels.

Here’s another way of looking at these relationships, which shows how channel strategy lines up against a typical customer journey.Screen-Shot-2012-09-13-at-13.51.14So where are we heading? Across targeting, gaining permission and email marketing, the potential is there for digital direct marketing to be even more effective than before.

However, it is vital that we bring consumers with us on this journey. We have seen from resistance to text marketing that consumers are very protective of what they see as personal spaces – and hence people may become even more resistant to email marketing as it moves from desktop to mobile.

The key to success will I think come down to the central concept of permission marketing – the value exchange between customer and company at the point at which permission is granted. For this to be a value exchange, we need to have something of value to offer – relevant content, great offers, exclusive information. If we don’t offer value, this will become a sterile conversation that consumers will turn their backs on.

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