Recession Looming: Analytics to the Rescue?

Here in the U.K., recent statistics have confirmed that the economy has stopped expanding and it’s possible we may head into recession. We have had continuous economic growth for the last 16 years or so and for many people operating in a recessionary environment is going to be new. If it’s like the last recession we had in 1991-92, then it could be tough. So, when it comes to marketing, there’s probably two ways that organisations and businesses might react.

The dumb way to react will be to slash sales and marketing costs across the board, batten down the hatches, and hope to ride out the storm. Marketing services costs like investments in measurement, analytics, and research will be some of the first causalities because they are seen as “discretionary” costs and not core to the business operations. Also each channel or division will take a similar hit.

The smart way to react will also be to reduce sales and marketing costs. After all, if you are selling less, you have to react accordingly to maintain profitability. However, the smart organization will look at how to significantly increase the efficiency and effectiveness of their marketing expenditure and what are the important activities and tools they need to be able to do that.

In a recession, the online channel may be the winner. Smart organizations will look to see how they can acquire or service customers more cheaply through the e-channel than through other channels. Even with the digital channels, the marketing emphasis is likely to shift with three possible trends:

• An increased focus on multi-channel acquisition optimization.
• Greater deployment of conversion optimization tools and applications.
• Development of more robust and sophisticated retention marketing programs.

As acquisition budgets come under pressure, digital marketers will need to focus on how they get more bang for their buck. Classic single channel optimization techniques such as PPC (define) bid optimization will only work to a certain extent because all organizations will be looking to do the same. However single channel optimization will essentially remain sub-optimal.

Smart organizations will allow invest in tools and analytics to understand how to optimize budgets across digital acquisition channels such as display, affiliates, and PPC. They will ensure they have improved attribution models that enable them to understand how channels work alongside each other (or not) and which channels are delivering value. They will also ensure that they are able to reduce the costs of cost per acquisition (CPA) programs not only through better channel optimization but also through correct attribution of sales or conversions to the correct channel. To do this, organizations must look at how they collect, manage, and analyze their campaign-related data. Joined up marketing is difficult to achieve without joined up data. Organizations also need the right tools and skills sets to analyze that data to understand that data. Improved effectiveness will come from improved analytics.

Having persuaded someone to visit the Web site, the trick is to get them to do something of value. Conversion optimization has come of age in recent years but is still a nascent practice in many organizations. To leverage the investments in acquisition, organizations must ensure that conversion rates increase. Site designs need to continue to improve and the customer experience enhanced. To do this will require a greater understanding of what’s working and what isn’t. Good site tracking will be vital not optional. Also testing and experimental tools as well as behavioural targeting platforms can be viewed as investments that have a measurable ROI (define). Therefore despite a potential squeeze on budgets these capabilities can pay for themselves in a relatively short period of time if deployed correctly. Organizations should look to improve the effectiveness and efficiency of their processes and procedures around the tools to save money rather than reduce the investments in the tools themselves.

Finally, the other trend will be the development of more robust and accountable retention marketing programs. The digital world is a “world of ones.” Most people who visit your Web site only ever visit it once. A lot of them only ever look at one page or stay for one minute. If they convert, they only do that once. Most of the challenge in digital marketing seems to be to get people to do something twice. Visit twice, make the second click, place the second order, and so on.

The classic saying is that it’s far cheaper to retain a customer than to acquire a new one. In recessionary times it makes sense then to focus on extracting more value from the investments already made in customer acquisition and conversion than spending more on the same. For me the definition of retention marketing is the process of converting someone twice or more without paying the costs of acquisition and conversion twice. At the point of initial conversion there is usually an exchange of value. You sell them something; they tell you their name and address. They download something, you get their e-mail address. You also know what they bought or downloaded and so that insight forms the basis of improving their propensity to transact with you again with relevant communication at the right time. Using tools and techniques such as segmentation and predictive analytics will help with both relevancy and timeliness.

If there are stormy waters ahead, what are you going to do? Batten down the hatches and hope for the best? Or invest in the right navigation equipment, learn how to use it, and plot the smoothest possible course to keep ahead of the pack?