Customer Insight: Coming into view

Customer insight should lie at the heart of effective direct marketing.

If data analysis doesn't result in actionable customer insight then direct marketers should pack their bags and go home.

But despite its obvious role, the very phrase 'customer insight' seems to stir up strong feelings among the direct marketing fraternity.

"It is a deeply over-used phrase that is hopelessly contaminated," declares Simon Calvert, strategic planning director at Proximity London.

Andy Wood, managing director at Total DM is another sceptic. "It is being peddled as the next Messiah but unless people know what they're doing and understand its potential flaws, it will be another waste of time."

One thing soon becomes clear - everyone has their own take on what customer insight is. For Calvert it is "a surprising piece of understanding that changes the way a company communicates with people". For Paul Cook, head of data planning at Hicklin Slade & Partners, it is "the use of analysis and research to produce actionable knowledge". But he adds: "If you can't do anything strategically or tactically off the back of it, then customer insight is simply information for information's sake."

Two elements of Cook's definition will strike a chord with most direct marketers. First, the bringing together of different sources of data, most notably transactional data with research-based attitudinal data, to create a much deeper, three-dimensional view of the customer.

Crucially, this doesn't just tell marketers how their customers behave in terms of product purchase information, but reveals the underlying motivations that trigger that behaviour. While this ambition is not new (Marks & Spencer has had a customer insight unit for more than six years), the degree to which it is being taken seriously and the sophistication of the techniques being used certainly are.

Second, the focus on actionable knowledge is key. Cook, who previously worked in the Marks & Spencer unit, describes this as the "so what?" factor.

He says: "Insight must be able to answer the question: 'so what?' If it can't be interpreted into a set of actionable strategies it is just a bunch of interesting statistics."

Making the most of your existing data

So how can companies harness the obvious power of customer insight? For a start don't be put off by all the negatives which can surround customer insight - opponents say it is difficult to embark upon, the results can be unreliable and it is expensive. You do need to start with very clear objectives about what you want to achieve and the key pieces of information you need to complete your picture of the customer.

The good news is that plenty of companies have jumped on the attitudinal bandwagon in the past year with products that promise a greater insight into how consumers think (see box, page 40).

But before linking up with any third party, Gary Childs, head of analytics at Identex, advises that a company should closely interrogate what it already knows about its customers. "Before organisations embark on the next big analytical technique they should ask themselves whether they actually use their existing data and the knowledge it can provide as effectively as possible. There is little point undertaking more complicated analysis if you haven't already got the most out of the data you have," he says.

Most companies with a heritage in direct marketing are likely to hold rich transactional data - such as recency of purchase, frequency of purchase and monetary value (RFM). Companies might have also supplemented their knowledge with geodemographic analysis, family composition and household income, for example.

But where companies are likely to fall down is on attitudinal insight.

The reason is that acquiring attitudinal data takes the industry into new territories which have largely been the domain of media or advertising agencies. Because above-the-line agencies lack customer data, their expertise resides in getting under the skin of the consumer using research-based techniques.

Now it's times for direct marketing agencies to "get out of their ivory tower and talk to people, watch them, and listen to what they have to say", says Proximity's Calvert. "We need to get more adventurous about using new research techniques which are well established in other disciplines."

There's no doubt that companies need to get smarter about talking to customers to understand their buying motivations, but face-to-face contact is not necessarily practical on a large scale. "Understandably, research is undertaken on a sample of the base but quite often these samples are too small and sometimes haven't been selected appropriately," says Childs.

"There is a danger of market research having little potential for generalisation."

One alternative is for companies to make better use of existing customer touch points to glean attitudinal information. The internet has opened up a wealth of opportunities for capturing attitudinal data, either when people register on the site or through a short online questionnaire.

Inbound telephone contact is another opportunity to gather additional insight on a customer. Dataforce, for example, runs the Heinz customer careline handling all direct communications for ten brands, including John West, The Linda McCartney range of foods and WeightWatchers. All phone, email, text and direct mail contact from customers is handled by Dataforce, representing a valuable opportunity to collect values-based attitudinal information.

Customer care is revealing

The company also works for a major pet food manufacturer and recently embarked on a major qualitative piece of research which involved calling more than half a million pet owners in the UK. Dataforce information systems director Stuart Ducker explains that a handful of key questions can be very illuminating about a respondent's attitudes to their pets. "A simple question, such as 'does your dog sleep in your bedroom?', tells you if the pet is pampered or not. People who let their pet sleep on their bed are more likely to pamper their pets and therefore buy high-end pet food rather than mainstream products," says Ducker.

The key is to be focused about the questions you ask and avoid what Stuart Hopwood, managing partner at Datalytics, describes as "paralysis by analysis".

Hopwood adds: "This is becoming a real issue for many businesses with analysts spending ages sifting through all manner of data without necessarily coming to any conclusions."

Conclusions must form a strategy

Crucially, any conclusions that a company comes to must then be translated into a communication strategy that delivers greater profits - or the entire exercise has been a waste of time.

One company that knows this all too well is Hicklin Slade & Partners.

The company is remunerated partly on the basis of the performance of its campaigns, so there is no point analysing data just for the sake of it, says Cook.

A good example of this approach is the company's work for its client Honda. More than two year's ago the agency conducted a major customer segmentation programme for Honda which established seven different customer groups.

Honda is a relatively data-rich company and collects data at every consumer touch point, including its dealerships, local events and all phone, web and interactive TV enquiries. But this data is supplemented with attitudinal insight based on customer clinics and more informal focus groups. "The research enables us to develop more detailed pen portraits of the seven customer groups," explains Cook.

But has this detailed understanding of its customer and prospect base improved the performance of Honda's marketing activity? The answer is a resounding yes. A prospect relationship marketing (PRM) campaign to 145,000 prospects in February this year generated a response rate of more than eight per cent - significantly more than the industry average.

Prospect relationship executive for Honda (UK) Lee Anne Crossley comments: "The PRM programme has enabled us to cut in half the cost per sale for direct marketing campaigns. With new cars such as the FR-V launching this year, we have challenged the PRM programme to treble its performance in 2005. It's a tough challenge but from the evidence we have seen this year we believe this data-led strategy can be extremely beneficial to us."

Honda's experiences are a ringing endorsement of the value of 360-degree customer insight. Honda's strapline is 'The Power of Dreams'. But perhaps 'The Power of Customer Insight' would be more appropriate - if not quite as catchy.

PRODUCT DEVELOPMENT IN MARKET RESEARCH

Last month parenting expert Bounty and research company Research Now! joined forces to develop an online panel of 5,000 new and expectant mothers recruited through Bounty's database.

Mum's are invited to join through the Mums' Opinions website (www.mumsopinions) and brands can tap into this pool of opinion to get under the skin of women with families in the 25 to 44-year-old age bracket.

Debbie Davis, associate director at Bounty, says: "Companies may already know 'what' through their transactional data, but they won't necessarily know 'why'. This panel gives them access to the softer attributes to help them understand the motivations that underpin behaviour."

Davis adds that although the panel has obvious appeal to companies in the core baby market, the onset of family life can trigger other buying decisions, such as redecorating, buying a car, moving house and investing in savings schemes.

In-depth understanding of consumer attitudes is also behind the launch of a new segmentation product from Wegener DM called REALmotivations.

The company has combined market research data with its own database to identify seven key consumer profiles.

These profiles flesh out customer profiles with attitudinal insight.

Suzanne Soper, executive director at Wegener DM, says: "Existing geodemographic or lifestyle profiles might show two identical families in the same postcode, but by using REALmotivations we can show that one family is switched on by traditional brands and the reliability factor where the other is keen to experiment."

CASE STUDY: AIR MILES

When Air Miles appointed Dunnhumby to bring together its customer insight last year, it faced a serious data-consolidation challenge.

The travel company had five different customer datasets collected from its partners including Tesco, Natwest, Shell and House of Fraser, as well as its own data from customer touchpoints, such as its call centre and the web.

Add to this qualitative data from Air Miles focus groups, and it was clear that Dunnhumby had quite a task on its hands to create a consolidated view of the company's six million-strong customer and prospect base.

But that is exactly what the company has done, establishing 13 different customer types. This insight feeds through to the creative process, as Laura Scarlett, managing director of creative agency Dunnhumby Cinnamon, explains: "The statement the customer receives reflects the differences between the types of collectors. In the next mailing of statements there will be 600 different versions of the creative message depending on the collectors' profile."

An important insight pointed out by the focus groups is attainability.

If customers have a low balance of Air Miles but are sent offers for a long weekend break in New York which requires thousands of miles, it is a major turn off. Now, the offers included in the statement are more achievable for the customer, based on the number of Air Miles they have at their disposal. In other words, know your product and audience and deliver accordingly.

This article was first published on Direct Response

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