Neal Sosnowski, Vice President Hoyne Associates, Inc.
Mar 27, 2003
Now that the war against Iraq is underway, what are the consequences for direct marketing? If youíre a good database marketer, you can handle it. The same marketing-analytics structure, metrics and multi-channel infrastructure required to perform sophisticated database marketing are the same resources required to respond to abrupt changes in the economy.
In business marketing, major business investment has slowed. In the worst-case scenario, the economy will fall back into recession as it did in the first Gulf War. Now, though, companies will focus on keeping their current plans on track, or they will trim spending in expectation of a slower economy. In either case, marketers will postpone significant unplanned investments. Hopefully, this slowdown will last only a month or two.
A personal experience in the first Gulf War illustrates the initial effects on consumer markets. The day after the bombing commenced in 1991, my wife and I went to an antique auction. There is nothing like an auction to illustrate the value of goods at a point in time. Low priced collectibles went for a normal price. Medium priced goods went cheaply--about 75% of normal. Expensive goods went for less than 50% of normal. The auctioneer, when we expressed our delight with our purchases, said he had never seen prices as low as this.
With war news broadcast constantly, consumers are glued to their TV sets. They will not be leafing through catalogs, going to restaurants or buying major appliances. Publishers and media agencies are already reporting that major advertisers such as American Express are planning to curtail campaigns until the uncertainty clears up. How quickly advertising and consumer spending returns to normal will depend on the course of the war, potential terrorist reprisals within the country and the prospects at the time for jobs and the economy. What should the database marketer do?
The purchase of luxury goods can be postponed, so marketers of these products will clearly be impacted more than those who sell goods the consumer views as necessities. Shifting promotional efforts to a time when the message will reach people better is one course to take. On the other hand, if you are offering CNN, then it should be full speed ahead. Itís not a bad idea to postpone acquisition efforts, as the customerís attention to your message will be better if you have an established relationship.
If you have segmented your customers on natural characteristics such as gender, geography, income or household size, then you may be able to focus marketing efforts on segments that are less affected by the warís strain. Whether you segment behaviorally on RFM/P or more sophisticated statistical models, focus on your most profitable segments.
Normally, the experienced marketer will promote to marginal segments since the lifetime value increase of the buyers that you do obtain often outweighs the slight promotion loss that you expect on the segment. This is probably a good time to let the marginal segments sit until the situation stabilizes. If your product line has a natural buying cycle that you have tracked, now is the time to focus on keeping that cycle from being disrupted.
Efforts aimed at forestalling attrition probably wonít have the same impact during the first month of the war. Be prepared to re-double efforts as the situation returns to normal. Retention efforts aimed at best customers are still the best investmentóthe cost of a lost best customer can be huge.
In a volatile time direct channels such as e-mail, Web sites and telemarketing are advantageous (although consumers may find telemarketing particularly unwelcome as the war unfolds). Efforts in these channels can be tracked more quickly than slower cycle channels such as direct mail and catalogs. Focus on the quick feedback channels and be prepared to react quickly to your customersí responses.
Marketers seldom make time for scenario planning. But in volatile times, this becomes particularly worthwhile. The recommended approach is to describe several end-point scenarios on the best-case to worst-case spectrum. Then, imagine how you might have arrived there. Next, consider what events may have warned you to change course to enhance the best cases or mitigate the worst ones. This will help create a mind set to prepare you to respond to unforeseen events.
HOYNE ASSOCIATES, INC.
Focused on Direct Marketing(sm)