A Rose by Any Other Name....

Before the turn of the century, way back in 1999, I met with an advertising agency regarding an email product I was responsible for developing. It wasn’t as much a meeting as a brainstorming session. Representatives from the agency were seated in Herman Miller chairs around a kidney-shaped table in a dimly lit conference room decorated in a purple-and-black checkerboard scheme. This was, after all, the height of the Internet boom.

They were attempting to describe an email product that would delight even their most discriminating client. My job was to listen to, and learn from, their input. One of the ideas to come out of the meeting was a product that would allow advertisers to target secondary and tertiary offers based on the actions of the original set of recipients of a primary offer. Representatives of the agency coined the phrase “cascade marketing” to describe this concept.

The idea behind cascade marketing is not a new one and has been used in the offline world by direct marketers since well before the Internet became a commercial vehicle. I have heard the concept behind cascade marketing also referred to as closed-loop marketing and waterfall marketing. As was done quite frequently in the late 1990s, an old idea was brushed off, applied to the Internet marketing vehicles, and given a new name. (Another example is the way the term cost per action has been used to describe something traditional direct marketers would call per-inquiry advertising.) In deference to our ancestors, I’ll use the term closed-loop marketing for the remainder of this column.

Here’s a simple online example of closed-loop marketing. An advertiser sends the primary promotional email offering a product at a 10 percent discount to a set of recipients. After 72 hours, a follow-up email is delivered to those original recipients who had clicked on the link in the primary offer but did not purchase the product. This secondary offer would include an additional discount of 5 percent as an added incentive to buy the product immediately. The logic behind the concept is the subset of original recipients demonstrated a level of interest in the product by clicking on the link in the primary offer and were, therefore, more likely to take the desired purchase action if a secondary offer was delivered.

Utilizing observed customer data collected from primary marketing campaigns to trigger targeted secondary and tertiary marketing campaigns is an important and valuable concept. The obvious goal is to increase response rates.

Recently, however, I have seen closed-loop marketing incorporate both offline and online vehicles with the intent of maintaining response rates while reducing total marketing expenses — thus driving the cost per sale down. Central to the idea is using closed-loop marketing to identify prospects who are most likely to purchase, then focusing the remaining marketing budget on those prospects.

As an example, one client I work with has traditionally used outbound telemarketing as the primary sales vehicle. This despite the fact the client has email addresses on nearly 60 percent of its customers. The client had been concerned about the rising cost of outbound telemarketing. As such, company executives wanted to develop a marketing strategy that would reduce the cost of contacting each customer in their database. The answer was a closed-loop marketing campaign.

The client sent a product-specific email to those customers for whom it had email addresses. The link in the email took customers to a Web page to learn more about the product offer and to request to be contacted. Each customer who requested contact was called immediately by a sales representative. Each customer who clicked on the link in the email but did not specifically request contact was segmented into a bucket of “interested” customers. After 10 days, the company began an outbound telemarketing campaign calling just “interested” customers and the remaining 40 percent of customers for whom it did not have email addresses. The result was similar conversion rates to previous marketing campaigns at approximately two-thirds the cost.

As a second example, MarketSmart Technologies has used the concept of closed-loop marketing intertwining direct mail and Internet vehicles. One of the company’s clients had concerns about the rising cost of direct mail. Historically, the client generated a majority of its sales revenue by sending a multipage, four-color direct mail catalog to its customers. Customers had the option of ordering via phone or going to the Web site to review a wider variety of merchandise and place orders. Despite the existence of the Web site, a majority of orders were placed via the phone. Recent postal rate increases have made the catalog increasingly expensive to send to the entire customer base. The solution was a closed-loop marketing campaign.

Instead of the multipage, four-color catalog being sent as the primary offer, the company sent customers a four-color, 6 inch x 8.5 inch postcard driving customers to the client’s Web site. The agency developed a process to assign each customer in the database a unique URL laser-printed on the postcard, redirecting the customer to the client’s home page. This allowed the individual identification of each customer who went to the Web site as a result of the postcard. These customers were then sent the multipage, four-color catalog. This approach resulted in similar conversion rates as previous marketing campaigns and a significant reduction in printing and postage expenses.

Cascade marketing, waterfall marketing, and closed-loop marketing: A rose by any other name is still a rose. If you’re looking to increase your response rates or reduce your marketing expenses, you may want to consider the concepts presented above… regardless of the trendy phrase you use to describe it.

Mark will speak at ClickZ Email Strategies in San Francisco, November 18-19.