Keywords

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FormalPara Overview

One important goal of customer value management is to profile the existing customers on the basis of their value and use this information to identify and acquire prospects matching this profile. A marketing campaign can be thought of as a series of activities used to market/promote a new or existing product/service using online and offline marketing channels. Marketing campaigns can be used by firms to:

  • Identify prospective customers.

  • Acquire customers.

  • Retain and reward existing customers.

For many prospects, the campaign is the first opportunity for engaging in a dialogue with the firm. A dialogue between the firm and customers can effectively change customers’ attitudes and behavior towards the firm. Hence it is very important for the firms to develop and plan with a specific end result in mind, and execute these campaigns effectively and analyze the campaign results carefully. There may be many desired results for a marketing campaign but they all begin with increasing the awareness of a firm, its products and/or its services. Marketing campaigns may be developed and executed within the company or in conjunction with a third party such as an advertising agency.

A marketing campaign may be executed through one or more channels of customer interaction: phone, direct mail, the Web, wireless devices, email, direct sales and partner network. The success of a campaign involves reaching out to the right customer with the right offer at the right time and through the right channel. The campaign acts as a rich source of information and once the campaign is completed, both the marketing manager and sales manager should evaluate the effectiveness of the campaign and use what they have learned for future planning. An example of a recent marketing campaign is provided in the following example.

In this chapter, we explain the different phases of Campaign Management processes such as Campaign Planning and development, Campaign execution, and Analysis and Control. The sub-phases in each of these main phases are shown in ◘ Fig. 11.1. In the discussion about Campaign planning and Development phase, we include issues such as identifying customers, developing communication strategies and media mix, developing an offer, and testing. The campaign execution phase involves actual implementation and subsequent fine tuning of the campaign. The last phase consists of measurement of campaign results, profile and response analysis.

Fig. 11.1
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The campaign management process

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1 Campaign Management

A campaign is a series of interconnected promotional efforts designed to achieve precise marketing goals. Managing a campaign encompasses planning, developing, executing, and finally analyzing the campaign results. A campaign is composed of one or more promotions, each of which is an initiative or a device designed to attract the customers’ interest. It can be aimed at prospects or existing customers and usually is undertaken within a defined timeframe (such as a season, and generally not exceeding a calendar year). Marketers could use the customer value metric as a means to profitably target campaigns.

As a general rule, a successful campaign management process comprises four connected stages:

  • Planning: Strategic process by which decisions are taken. The purposes and objectives of the campaign should be defined and rationalized at this stage.

  • Development: Tactical process that takes care of creating the offer, choosing the support and design, choosing the media, and selecting the customer names.

  • Execution: Operational process of running the campaign in the media chosen and controlling all related aspects.

  • Analysis: Evaluation process of the campaign results in light of the original, objectives.

In practice, these stages do not have well-defined boundaries between them and are performed at the same time. Very often, planning and development go together. In the next few sections, we will take a closer look at how each stage is managed.

2 Campaign Planning and Development

At the campaign planning stage, marketers make strategic decisions that help define the overall objectives of the campaign, the best communication message, and the best target audience. Once these strategic issues are defined, the development phase starts.

2.1 Setting Objectives and Strategies

Campaigns have a central role in annual marketing plans, so campaign objectives should be in line with overall marketing and corporate objectives. These objectives are often from the four following categories: market penetration (increase usage or market share); market extension (find new user groups or enter new segments); product development (new products or services); and diversification (new markets and products, new strategies).

The different marketing strategies already in place should be examined. Questions asked should pertain to the product strategy (What is the product mix?), the pricing strategy (Is price important for market positioning?), the distribution strategy (Which channels does the firm use?), and the promotion strategy (Is the creative strategy consistent with product positioning?).

When defining the campaign strategy, marketers should be able to answer the following additional questions:

  1. 1.

    Who do you want to target? (i.e., Who are the targeted customer segments?)

  2. 2.

    Where should you target? (i.e., What are the channels, and points of contact?)

  3. 3.

    How do you get to them? (i.e., What is the communication strategy and offer?)

  4. 4.

    When is the best time? (i.e., When should you schedule the campaign?)

2.1.1 Who Do You Want to Target?

To answer this question, the company has three options: focusing on existing customers (retention strategy), concentrating on getting new customers (acquisition strategy), or targeting existing and new customers at the same time (mixed strategy between retention-acquisition).

When pursuing a customer retention strategy, ideally the company should target its most profitable customers via LTV (lifetime value) and RFM (recency, frequency, and monetary) analysis. Here are some approaches to target these segments:

  • Develop loyalty from the existing customers, via a strong relationship or superior quality or service (e.g., loyalty programs, one-to-one relationships).

  • Develop tailor-made products adequate for the needs of the existing customer profiles.

  • Sell additional products to existing customers also known as cross-selling (e.g., selling an insurance policy to an existing bank customer).

  • Sell a superior product (with more features or additional services) to customers who already use similar products, also called up-selling (e.g., selling a gold credit card to a regular credit-card holder).

  • Merchandise different brands from different categories to the same customer, also known as cross-merchandising (e.g., sell the gold credit card with the best interest rate).

If the company pursues a customer acquisition strategy, it has two options: If it wants to sell the same product to new customers, it should target prospects based on the profile and behavior model of existing customers; if it wants to offer different products to new customers, it should develop new markets.

2.1.2 Where Should You Target?

The company either chooses to act in the markets it already knows (pursue market penetration or extension) or it can choose new markets (market diversification or new product development). It may choose a multichannel strategy (selling the same product in multiple channels like internet, store, phone, etc.) or a single-channel strategy (selling products in a single channel, like in a store).

2.1.3 How Do You Get to Them?

Getting your customers’ and prospects’ attention will be one of the goals of the company’s communication strategy. Choosing the most effective media (for retention and acquisition strategies) will allow the company to efficiently reach its target segments. The offer proposition will also have a predominant role. What kind of incentives-coupons, gifts, loyalty schemes, and so on-suit a particular customer group? The company should develop the offer according to customer preferences, with the campaign budget being a constraint.

2.1.4 When Is the Best Time?

When preparing a campaign, marketers should be aware that some seasons are better to promote products and services than others. For example, new computer games are released and campaigned during November and December just before Christmas season. Retail banks may campaign for credit cards or personal loans in January, because people are expected to be short on money due to Christmas and New Year expenses. In addition to these examples, the product itself can be seasonable or it can have a short life cycle. For example, sunscreen lotions are sold during summer. Similarly, outdoor sports equipment is advertised before summer time. ◘ Figure 11.2 highlights the core market and product decisions for customer retention and/or customer acquisition strategies.

Fig. 11.2
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Customer retention and acquisition strategies

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2.2 Identifying Customer Segments

Once the campaign objectives are established, the next step involves identifying the customer segments the campaign will target. Customer segments are homogenous groups of individuals that have similar tastes, wants, and needs with respect to the company’s products or services, Lifetime segmentation and profiling should guide in targeting the specific customer segments most likely to respond to the company’s offer.

Customer segments can be identified in two ways: purchase behavior and profile data. Purchase behavior is recorded in the CRM database and will allow the marketer to segment by product need and by LTV. Profile data will relate the individual customer to his or her response to past campaigns, allowing the implementation of an ROI-driven marketing campaign, Profile data also identify tastes, needs, and preferences of customers, and therefore can be used to target new customers accurately.

Obtaining a successful campaign involves a careful choice of customer segments. Marketers can focus on a strategy-mix of three types of customer groups: the existing customers, the prospects, and the defectors. The existing customers are an important source of information. They provide information about their purchasing behavior, attitudes, and tastes. Their interests, motivations, multi-channel usage, and profile can be used to target prospect clients who exhibit a similar profile. The CRM database should record all the information from transactions, surveys, focus groups, complaint records, loyalty card data, web traffic analysis, and other external sources. Identifying profiles of existing customers will help identify new customers on the market. Defecting customers also provide enlightening information. When defecting, these clients have a reason to do so. Customers can be dissatisfied with the product itself, with the quality of the service offered, or with the company channel management. Paying attention to these customers will help the company learn from past errors, This information is very useful because it allows product improvement and development; better targeting, and better service, If the company listens to what its customers are saying, then it will be able to better satisfy their needs and consequently be profitable in the long run.

2.2.1 How Are Customer Segments Targeted?

Segmentation, as obvious as it sounds, is in many cases not straightforward. The CRM database plays a central role in this step of the campaign process. Effective use of the information on customer behaviors and profiles, channel preferences, and brand awareness will allow the accurate definition of the target segments. Of course, the segmentation can only be as good as the quality of the underlying data.

If the campaign is aimed at retaining existing clients, the firm’s CRM system is central to analyzing the recorded purchase behaviors and profiles which will help the marketer adjust the offer to meet the unsatisfied needs of customers. Several analyses could be performed at this stage (e.g., lifetime value segmentation, profiling and RPM).

2.3 Developing the Communication Strategy

Marketing communications (marcom) are targeted interactions between the company and its customers and prospects, using one or more media, such as direct mail, newspapers and magazines, television, radio, telemarketing, and the Internet. A marcom campaign may use a single approach (e.g., direct mail) or it can combine several approaches (e.g., direct mail with advertising in television, radio, and newspapers).

When defining the communication strategy, the company identifies and defines to whom the campaign is directed (the target audience), what the campaign message is (content), and which are the best contact channels or media to deliver the content. The marketing team frequently develops the marketing communication plan, but a marketing communication agency (such as an advertising agency or a direct marketing agency) may help in its preparation. If the company chooses to outsource, it hires an agency to execute the marketing communications plan.

The campaign communication strategy will be more effective if planned in an integrated manner. Integrated marketing communications (IMC) is a process that involves the management and organization of the marketing communication tools (media, messages, promotions, and channels) in a way that delivers a dear and consistent message about the company and about the product. The CRM database system allows the effective use of IMC because it stores information about customer and prospect preferences and allows the firm to focus marketing activities toward specific targets.

Marketing communication activities can vary from very small discrete pieces of promotion (such as a mailer), to the development of a larger campaign, which involves many promotional tools (direct mail, press inserts, TV spots), and to the coordination of multiple campaigns to achieve a global objective (increasing the level of cross-selling, customer retention, etc.) It is important to build one or more interlinked databases of each medium as part of the CRM database.

2.3.1 Which Communication Strategy?

Generally, marketers use hybrid combinations of strategies when developing the communication strategy. Some of these strategic approaches are enumerated in ◘ Table 11.1.

Table 11.1 Communication strategy
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Prioritizing the target segments that provide a higher potential yield is one objective of the marcom strategy. Targeting the customers in an effective way should maximize the marketing communications ROI. Naturally, some media are more effective at targeting certain groups of customers than others. The challenge is to choose those media that are both effective in achieving the campaign objective and cost-efficient.

The choice of media depends in part on whether existing customers or prospects are targeted. If customers are nonaddressable, broadcast media are used for acquisition. If the prospects addresses are known, direct-to-customer media may be more effective. In the case of retention, the firm may spend more on personalized contacts (salesperson, telephone) with high-value clients. For low-value relationships, companies might opt for lower-cost contact channels such as the internet or mail. In practice, customer acquisition and retention strategies are often mixed. If a company is launching a new product directed at existing customers and new customers, it will use both kinds of media. A brief description of these media is available in ◘ Table 11.2. The effect of using media-mix in acquisition and retention strategies can be seen in the following example.

Table 11.2 Retention and acquisition media
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Marketing Media Tools Most of the media referred in the earlier sections are known as direct marketing media tools. ◘ Table 11.3 gives a brief description of what they are and how they are used, together with their advantages and disadvantages. It provides a snapshot of different advertising mediums and their principal characteristics.

Table 11.3 Media characteristics.
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2.4 Developing the Offer

Developing the offer consists of offering the customer some kind of incentive which will induce him to buy or to ask the company for more information. This offer may range from a free product sample (e.g., getting a free sample of a shampoo in the mail) to price-related incentives (e.g., buying two CDs for the price of one), or an item providing information on the firm (e.g., a free promotion video about the firm’s new products).

When developing the offer, the company must keep in mind the established objectives. Some examples of these objectives may be to attract new customers or members, obtain repeated business from existing customers, reactivate lapsed customers, produce sales leads, or acquire new customers. The offer planning should develop upon the required elements.

  • What is the product positioning?

  • What is the price?

  • What is the length of commitment?

  • What are the payment terms?

  • What are the risk reduction mechanisms?

At the same time as marketers look at these elements, they should also be seeking answers to the following questions:

  • How much can they afford to spend on the incentive? For example, what is the allowable marketing cost?

  • Which promotion type should be used as an incentive? (price-incentives, free samples, coupons, etc.)

  • What should be the promotional package? (creative message, design, materials, etc.)

  • Which promotional media should be used? (television, radio, directs mail, etc.)

  • Does it involve one-stage or several stages?

Answers to these questions will help estimate campaign costs and profitability. These answers should be recorded in the CRM system. They will be used as a model to fine-tune the campaign results.

◘ Table 11.4 provides a list and a brief description of what kind of options a company can offer its customers and prospects. The example of MetLife gives an example of a company that used a successful retention strategy to do repeat business with its existing customers.

Table 11.4 Offer options
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2.5 Campaign Budget

The campaign budget allocates resources and coordinates expenditures across the marketing activities associated with the campaign (advertising fees, testing costs, list rentals, etc.). When calculating the campaign budget, the marketer will use a mix of estimates for both directly measurable and less easily measured activities (e.g., the long-term effect of advertising). In reality; the estimates for these less measurable activities come from similar past experiences, benchmarking, or plain guesswork. Although this might look unconventional, it is still better to make an educated guess than to neglect these estimates. In general; allocating the optimum financial resource level to each activity is a difficult task, and that is why arriving at a campaign budget should be a balance between measurement, financial calculations, competitive analysis, and good judgment.

There are many ways to calculate a budget. Some companies think of the campaign budget as a percentage of turnover derived from the sales forecast of a particular product or service (e.g., the general management establishes a sales objective of $2 million and states that the marketing department can only afford $500,000 on marketing activities with this product). Other firms may look at the previous year’s budget and adjust it for the campaigns for the current year (e.g., the company spent $500,000. on last year’s marketing activities and this year is going to adjust it for the price increase of advertisement fees, inflation, etc.)

While there are no right or wrong ways to calculate a budget, we will present seven common methods to calculate a budget and present their main advantages and disadvantages:

  1. 1.

    Preset budgeting

  2. 2.

    Budgeting for an allowable marketing cost

  3. 3.

    Budgeting with the competitive parity method

  4. 4.

    Budgeting with the objective and task method

  5. 5.

    Budgeting with the percentage of sales method

  6. 6.

    Budgeting with key performance indicators

  7. 7.

    Budgeting using the lifetime value method

2.5.1 Preset Budgeting

Most companies determine a given year’s marketing expenditure on the basis of what they spent the year before, by applying a ratio that adjusts media cost inflation, projected sales increase or decrease, market conditions, and so on.

2.5.1.1 Advantages

The campaign budget won’t be drastically cut over the years, so it will follow a more or less steady expenditure flow.

2.5.1.2 Disadvantages

Working with a preset budget that doesn’t take into account last year’s sales is the least effective way of calculating a budget. Companies treat marketing as an expenditure instead of as an investment to boost future sales. As a consequence, working with this kind of budget planning may be hazardous for the firm, rendering its business less competitive and slower to change.

Although this is the least effective way to establish a budget, it is, in fact, one of the most commonly adopted.

2.5.2 Budgeting for an Allowable Marketing Cost

Budgeting for an allowable marketing cost (AMC) consists of determining the amount that can be spent on campaign marketing activities, while preserving the required profit margin. Each potential expenditure is given priority according to its forecast for return on investment, and each investment is given equal consideration. Its objective is to achieve the optimum revenue per customer and maximize sale profits. The AMC is obtained by subtracting the costs (cost of goods + distribution costs) and the required profit margin from the total sales value.

2.5.2.1 Advantages

When using the AMC there is no preset limit to the campaign budget unless a cash-flow constraint is imposed. By using this method the company controls costs.

2.5.2.2 Disadvantages

Many activities are hard to accurately forecast, and some activities may not pay back in a given year. These intricacies lead to a degree of conservatism that inhibits the aggressive pursuit of an AMC marketing policy.

Example

One of the main sources of revenue for «Old Books Limited» comes from the subscription fees of its monthly magazine, Rare Books. In order to preserve this source of revenue, it has two choices: either put in place a cold mailing to obtain new subscribers or a mailing-to existing subscribers, inviting them to renew their subscription. It calculated the allowable marginal cost of each activity and discovered that sending four invitations (i.e., four direct mailings) to existing customers had a lower marginal cost than doing a cold mailing.

2.5.3 Budgeting with the Competitive Parity Method

Competitive parity tries to equate budget allocation with those of competitors. Organizations in competitive environments may opt for this budget technique.

2.5.3.1 Advantages

In this method, emphasis is on competitor intelligence. By checking out what the competition is doing, the company is adapting itself to the market conditions.

2.5.3.2 Disadvantages

It is difficult to be precise as to who your competitors are. It is also difficult to estimate the relative size of competitors, because a company’s nearest competitor may be significantly bigger or smaller than your company. Next, marketing communication strategies are certainly different for market leaders and for market followers and budgeting based on parity may thus not be very wise. This method cannot satisfactorily take into account sudden changes in the competitive activity or objectives. It does not take into account the company’s own objectives.

2.5.4 Budgeting with the Objective and Task Method

This method focuses on, first, determining the marketing objectives, and then deciding on the marketing communication tasks needed to achieve those objectives. By calculating the costs of these tasks, a budget can be set.

2.5.4.1 Advantages

This method focuses on marketing objectives. The resources are expended according to the objectives.

2.5.4.2 Disadvantages

Implementing this method is a difficult task because it is not always easy to define the objectives and to quantify their implementation costs. This method also makes an important presumption: It assumes that the relationship between objectives and tasks is well known and understood.

2.5.5 Budgeting with the Percentage of Sales Method

A fixed percentage of turnover is allocated to marketing communications. The marketing communication expenditure is directly linked to sales level. In order to determine the exact percentage to be allocated, the company looks at competitor allocations and industry averages. To define the turnover, the company can look at historic sales.

2.5.5.1 Advantages

This method incorporates a series of alternatives, and it allocates costs to the objectives.

2.5.5.2 Disadvantages

It may be difficult to determine the percentage of sales that must be allocated. Competitors may have a small advertising budget and concentrate their budgets on the sales force, and this would be a deceiving benchmark.

2.5.6 Budgeting with Key Performance Indicators

Determining the campaign budget via some key performance indicators is a process that allows the company to figure out, in a quick way, how much it can afford to spend on a special promotion. Sometimes this analysis is called front-end analysis. This analysis is done with simple performance measures such as the cost per sale, the conversion rate, the cost per inquiry, the marketing cost ratio, or the return on investment. These performance indicators are summarized in ◘ Table 11.5.

Table 11.5 Key performance indicators
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E-mail presents itself as an effective way to engage customers in a dialogue. As a flexible and consumer-preferred communication vehicle, e-mail has applications across acquisition, retention, and customer service. Messages can be tailored to each customer based on her/his stage of the buying process. E-mail also allows customers to opt-in with their own preferences.

◘ Tables 11.6 and 11.7 show the key performance indicators from a study performed by Forrester research, «the e-mail marketing dialogue,» which shows that in 1999, e-mail was the second most effective technique for driving traffic to a Website (Nail, 2000). Retention e-mail generated 10% click-through rates on in-house lists. But, using e-mail as a customer acquisition tool is expensive because rented lists are also expensive.

Table 11.6 Email key performance indicators
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Table 11.7 E-Mail campaign and customer acquisition and retention parameters
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2.5.7 Budgeting with the Lifetime Value Method

Budgeting in the most effective and efficient way would imply reducing expenditures to a unit cost basis in order to focus on the value of individual customers and on the different values per customer. Given the data recorded in the CRM database, the company may predict ongoing customer value rather than only the individual sales revenue. Knowing the lifetime value of each customer will allow the company to compare returns on alternative marketing expenditures and to compare return on expenditure from obtaining business from existing customers or from new ones. This gives the opportunity to efficiently allocate the budget using the most profitable strategies.

2.5.7.1 Advantages

Using the CRM database information allows the company to predict, in a more accurate way, the cost of the campaign. At the same time, it efficiently allocates resources between strategies because it allows a comparison between the returns of alternative marketing campaigns.

2.5.7.2 Disadvantages

It is very difficult to keep track of customer values because most companies lack transactional data from customers. Forecasting the customer LTV as a budgeting measure is still in its infancy. Also, if the company doesn’t keep track of the performance results of past campaigns, it won’t be able to compare these results with similar campaigns and learn from past errors. Sometimes the strategy that produces the highest ROI does not provide the fastest return and therefore, it can be replaced by faster strategies with lower ROI.

Ideally, budgeting should use LTV forecasts to determine the cost of a campaign. In practice, this may be hard to implement. So in this case, the marketer should proceed with both front-end analysis and with the allowable marketing cost analysis. Keep in mind that no budget should be done without estimation of the return of marketing investment (ROI rates). Unfortunately, the preset budgeting is still a very common practice among companies, but it should ideally be replaced by the other methods discussed.

2.6 Testing

Testing involves conducting a comparison between different ways of proceeding with a campaign. In general, it is performed under a simple rule: You test individual campaign elements, other elements remaining constant, and you measure the resultant change in the performance of the campaign. Testing should concentrate first and foremost on the most important variables and parameters. More importantly, one should aim to test all the key parameters, not just one of them.

Testing is based on a basic principle. Take the current set-up of the campaign and use it as the control for the test. Then select the element you want to test and change it. Next, select a sample of your target customers and run a test with the changed element. Comparing the performance results of the test version with the control will illustrate the impact of this variable on the overall campaign objectives.

2.6.1 What Are the Benefits of Testing?

Testing has value-added benefits that can improve your campaign success and performance. Some of the most important ones are listed as follows:

  • Testing shows real behavior, because it provides a (close to) real environment in which behavior is validated.

  • Testing augments and validates research.

  • Testing also stimulates creativity, since it not only provides healthy internal competition but also presents a challenge to the creative team to find ways to beat the control campaign.

  • Tests protect the company’s greatest asset (the customers): By using only small samples with each test you will finally give your customers the proven offer.

  • Tests minimize financial risk and avoid costly errors.

  • Tests uncover ways to reduce costs.

In general, tests help maximize the performance of the campaign. They are low cost (when compared with the overall campaign costs) and fast in providing results. They are reliable (as you resort to quantitative analyses), simple to execute, and easy to prepare (as there are less customers involved). It is important that tests be done on an ongoing basis, and not be looked at as a one-time task.

2.6.2 What Should You Test?

We can test almost everything in a campaign. A key variable is the target audience, which is in the form of a list of targeted customers and prospects. We can also test the offer variables (prices, incentives, proposition), the format (physical shape, the feel and the size), the creative element (the appeal, the tone, and the message), the media, and/or the timing.

When determining the budget, the company should consider the importance it wants to give to testing, since this has a cost. If the marketing campaign is based on a well-known process (e.g., the company uses past designs of campaigns to promote similar products or services), then testing could be carried out with one or two tests, in order to make minor improvements. If the campaign aims at something new, like product or market development then testing should be more exhaustive. The following case provides an example of testing the media.

2.6.3 Does Testing Predict the Future?

Testing allows you to do a small-scale measurement of the potential campaign results. It can accurately give you the performance results for the overall campaign, through the testing of the following performance measures:

  • Response to the campaign, in percentage: Running a test campaign will generate results from the customers selected to participate in it. The number of responses obtained (e.g., customer subjects who responded positively to the incentive), divided by the total number of customers selected, will give the response rate, in percentage. This number will serve as an indicator of the success that the particular campaign being tested can achieve.

  • Campaign profitability: The performance results of the test allow you to do an estimate of the revenues of the real campaign. From this, you should deduct the total campaign costs (expenses of preparing the campaign, testing costs plus those of running the campaign). This gives you a prediction for the profitability of the campaign.

2.6.4 Testing in Different Media

  • Direct Mail: Just about any element in the direct mail is testable, ranging from the format and the package, the message, the creativity concept, the distribution lists to the offer itself. This is possible for direct mail because the direct marketer controls every aspect of the campaign, including the timing and the budget.

  • Telemarketing: In one call session, the telephone operators can promote a particular product or service, can test a different script, or can test a promotion. In a single day direct marketers can have enough responses to obtain a fairly good indication about the success of the offer. The time of response to a phone call is one of the unquestionable advantages of telemarketing.Footnote 1

  • Press and Inserts: When testing in print advertisement, the direct marketer can test almost everything about the editorial fit: the audience composition, the magazine/newspaper circulation, the ad placement cost, the timing of the ad placement, its frequency, and the position of the ad or its color. Although testing is possible, it is not as easy and inexpensive as telemarketing or direct mail. The most used tests are split-run testing, A/B splits, and cross-over testing.

  • Split-Run Testing: Split-run testing is usually used for inserts. It compares the same title or message in two different insert formats, by alternating them in the print run. Basically, you insert a different code or a different phone number in each format so as to track which version has the best response rate.

Example of a Split-Run Test: A company that produces crystal glasses for different types of wine is going to test four different ads (B, C, D, and E) against a control ad A to find out which ad performs better. This test will be performed in four different wine magazines with different audiences.

Analyzing the test results given in ◘ Table 11.11, ads B, C and E reveal a greater lift than ad A. In this particular test, ad C will be chosen to run the campaign because it presents the greatest lift of all the ads tested.

  • A/B splits: You run two versions of the print run (A and B) in alternative copies of the same publication. Usually, creative or color changes are tested this way. As in split-run testing you should devise a mechanism for tracking response.

  • Cross-Over Testing: You run two versions of the same advertisement: one version changes the creative message (A), the other changes the color (B). Then you insert version A in the first issue of magazine 1 and in the second issue of magazine 2. You then insert version B in the second issue of magazine 1 and in the first issue of magazine 2. This enables you to compare the response improvement when creative elements or color were changed. The response change in magazine 1 assesses the creative elements change, while response change in magazine 2 evaluates the color effect.

Table 11.11 Example of a split-run test
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Example of a Cross-Over Test: Following the preceding example, imagine that the company wants to cross-over test ad A with ad B in two wine magazines.

In this case it is possible to compare the results of each issue of both magazines and compare creative concepts. As ◘ Table 11.12 shows, ad A performed better in the first issue of World Wine than in the second issue of Food and Wine. Ad B performed better in the first issue of Food and Wine than in the second issue of World Wine. If we compare the creative concepts, we realize that ad A always obtains higher responses than ad B. The test conclusion would be, always roll out with ad A.

Table 11.12 Example of a cross-over test
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2.6.5 How Reliable Are the Test Predictions?

Testing is meant to allow the marketer to make inferences using established methods of analysis. It is beyond the scope of this book to explain in detail the statistical models used to analyze test results. Some of the statistical techniques that can be used for this purpose are hypothesis testing, confidence intervals, and analysis of variance. For more on these techniques, readers can refer to Marketing Research by Aaker, Kumar, and Day (2004).

2.6.6 What Are the Potential Problems in Testing?

For testing to support profitable campaigns, one should be aware of the following potential errors:

  • The marketer should avoid performing several tests with the same set of customers: If you keep using the same group of customers for several runs of one campaign test, you should expect lower response rates. The same thing happens if you use the same fixed group for several campaigns in a short period of time. You must be aware of the extent to which there are diminishing returns. Therefore, you should plan the ideal frequency with which a customer is approached (i.e., the point where the marginal cost of testing exceeds the marginal revenue generated by the test).

  • Testing results have limited time validity: Since customer preferences change over periods of time, conclusions drawn from tests are sometimes short-lived. Ongoing tests may provide adequate responses which reflect these changes.

  • Don’t test the same things all over again: As testing means only changing one or few variables, other things equal, change the analysis variable so you can see what changes in the results.

  • Overall marketing objectives should drive your testing: More important than optimizing a particular campaign is to have a successful marketing program.

3 Campaign Execution

The campaign execution stage is the operational process by which a campaign is implemented. There are two important aspects at this stage: implementation and monitoring.

3.1 Implementation and Coordination

A thin line separates the development from the implementation stage. This difference arises from the fact that implementation summarizes everything that was developed and identifies all that has to be done before actually running the campaign. In order to implement the campaign, an action plan should be prepared to guide this process and all the resources involved. This plan should be divided into three sub-plans:

  1. 1.

    Campaign program

  2. 2.

    Campaign schedule

  3. 3.

    Activity schedule

3.1.1 Campaign Program

The campaign program is a summary of everything that has to be executed to run the campaign. It should lay out the list of tasks to be accomplished. These are to be assigned to a list of team members. It should contain the campaign briefing forms designed for members of the team and outside suppliers (e.g. advertising agency, merchandise suppliers, etc.). In order to coordinate the tasks between all persons involved, each task should be defined a deadline for completion. The summary of all these deadlines should result in the campaign timetable. Once the media and the promotion offer are chosen, the marketing team should do a description of all materials to be produced (the format, the color, the creative message) and events to take place (if it is a one-stage or a two-stage campaign).

3.1.2 Campaign Schedule

The campaign schedule lists the events that are planned and their respective timing. If this campaign is planned to coincide with other marketing activity a clash schedule should be done in order to identify potential conflicts of resources, timing and customer targets.

There are two key differences between the campaign and the activity schedule. The first one is directly related to the campaign components and the second one relates with the operational activity of the company itself.

3.1.3 Activity Schedule

It is very important to organize your company’s activity during a campaign. Interdependent actions should be identified and time should be efficiently allocated for the completion of activities. It is at this stage that the critical path method can be applied. The critical path technique involves placing a time factor in each phase of the campaign, figuring what are the necessary precedent activities for each one and sequencing all the campaign phases (basically it works as a backward timetable). One advantage of this method is that it identifies potential bottlenecks and allows revision of allowed timings.

One important feature of activity scheduling is that not only does it allow sufficient time for completion and approval of the tasks but it also keeps the information up-to-date. Even when the campaign is running, its status will continue to be reported. The example of a Gantt chartFootnote 2 is shown in ◘ Fig. 11.3.

Fig. 11.3
figure 3

A Gantt chart in a direct campaign

Full size image

3.2 Monitoring and Fine-Tuning

Monitoring is an ongoing process. When waiting until the end of the campaign one cannot make adjustments, such as schedule modifications. Nevertheless, the full effect of the campaign cannot be totally known until all the results have been received and analyzed. If the company is running an integrated campaign where results can be tracked through response, then the first status report will show the preliminary results that should be compared with the forecast results in order to show progress. Acting on the first results will allow a timely corrective action and the more up-to-date is the report, the more useful the corrections will be.

One question that should arise is «How can this process be fine-tuned?» Depending on the first measurable effects of a campaign, fine-tuning can be done in the following cases:

  • The planning may be revised based on enquiry or orders performance alone. This adjustment is done based on the assumption that the conversion rate stays close to the forecasted level.

  • The media selection may be adjusted. The first media results will determine if the advertising space in a specific media is profitable and if the media booking or cost should be cancelled or renegotiated.

  • If the campaign included a first sequence of creative and offer testing, then corrective action should be undertaken as quickly as possible.

3.3 Problems to Take into Account

Campaign management and particularly campaign execution involves the marketing team, other departments (sales force, call center, operations department, etc.), top management and outside suppliers. Many things can go wrong during the process. If the marketer runs a direct mail to customers requiring them to call the company’s call-center and if the telemarketing team is not adequately informed about the campaign features, then the most probable outcome is that the campaign will be a failure On the other hand, suppliers should be briefed on the campaign program (the delivery dates, paper quality, color process, package dimensions, the script, etc.) in order to avoid rush work or imperfections. Then again, briefing every actor involved in this process is fundamental to the campaigns’ success.

We have identified some causes of campaign failures:

  • When the marketing planning is undertaken at a functional level and does not integrate with other functional areas of the company, then the campaign will be largely ineffective.

  • Separating the responsibilities of operational marketing and strategic marketing planning will lead to a divergence of short and long term objectives. Concern over short-term results at the operational level will make the company less competitive in the long term.

  • If top management doesn’t take an active role in marketing planning then it will probably not be an effective system.

  • If the degree of formalization of campaign management is not adapted to the diversity of operations within the company and its size, then campaign execution process won’t be effective.

4 Analysis and Control

Analysis and control end the campaign management cycle. In this phase, marketers should be able to draw some conclusions about the campaign success and use these results not only to improve their customer knowledge but also to improve future campaigns. This is an important stage because it evaluates campaign results in light of the original objectives and determines the campaign level of success or failure. Features that run well should be used as «best practices» for other campaigns. For features that didn’t perform well, marketers should search the reasons why this has happened. This research should be recorded in the CRM database to serve as a learning lesson to future campaigns.

Campaign analysis can be done in many ways. Marketers can use campaign key performance indicators (KPI) and compare them with budgeted KPI’s and campaign objectives. They can also perform back end performance analysis to determine the purchase behavior of campaign respondents. Finally, more elaborated analysis can be performed, such as profile and response analysis, to link profiles and behavior with the campaign.

4.1 Measuring Campaign Results

Marketers can start measuring campaign results while the campaign is still running. As discussed in the previous section, as soon the results are known and analyzed the sooner action can be taken to fine-tune the campaign execution. Standard performance measures are the key performance indicators (KPI) discussed in the budget section. Comparing the CPM, CPS, ROI, and the CR with the budgeted KIP will give an intuitive idea about the campaign results. But marketers should look deeper and try to understand which target segment is driving the campaign success or what medium performed better and why. Back-end performance analysis is one of the answers to evaluate campaign results. It relates the behavior of a group of respondents with sales, contribution, and profit achieved in the campaign. It also relates this group of respondents with the advertising medium that converted them into customers.

In order to measure back-end performance it is necessary to maintain a system in which each customer is identified as coming from a specific advertising medium. Only then it is possible to analyze the behavior of all customers coming from the same initial source medium and calculate average sales, contribution and profits. Back-end performance will vary significantly from one advertising medium to another. For example, results from some direct marketing campaigns show that buyers acquired from direct mail buy more often than customers acquired through a magazine or newspaper insertion. Then it becomes vital to track customer performance in terms of its original medium source group, so that the decision to reinvest in a particular medium can be made on the basis of proven performance.

Back-end performance can be measured in many ways. For example, in a direct mailing, the measurement of back-end performance is simply the statement of profit or loss for the campaign promotion. For a loyalty program, this measurement should be done in terms of the allowable marketing cost and the break-even. These two indicators will then be compared with the customer acquisition cost to determine customer contribution. Contribution is a formula that deducts from the gross margin the campaign costs and then divides the resulting value by the number of new customers. In the case of loyalty campaigns it is more adequate to calculate contribution in terms of the new customer lifetime value, because it can forecast future sales and profits from the new comers. Another measure to take into account is the attrition rate. This measure is used to determine the rate at which customers defect. When evaluating the profitability, for example, of a newspaper or magazine campaign to increase subscriptions or renewals, the KPI to take into account are the conversion rate, the renewal rates and the response rate to promotions.

In all cases, when running a promotions campaign, marketers should always calculate the return on promotion (ROP). ROP is a way of calculating the return on investment of a particular promotion:

$$ \mathrm{ROP}=\left[\frac{\left(\mathrm{Contribution}-\mathrm{Cost}\ \mathrm{per}\ \mathrm{order}\right)}{\mathrm{Cost}\ \mathrm{per}\ \mathrm{order}}\right]\times 100 $$

The return is measured by the difference between the contribution that results from all the purchases that occur due to the promotion and the cost of acquiring the purchase.

4.2 Response Analysis

Response analysis calculates the campaign results up-to-date, projects its final results, such as responses, inquiries and leads, and analyzes these results. Response analyzes can be performed with customer and market segments, product lines, campaigns, offers and promotions, media or advertising agencies. To be able to perform this type of analysis, responses should be summarized by time—that is, by arrival date. Each response should be recorded at the CRM database and should have the calendar date it arrived. Results can then be analyzed as soon as the first campaign responses are known and eventually they can correct the campaign progression. Response analysis uses statistical models such as regression analysis models to determine the impact of several variables of interest (age, gender, level of income, etc.) on probability of response.

4.3 Profile Analysis

Profile analysis is used to define and compare the profile of campaign responders with the actual profile of the company’s customers and prospects. This comparison will allow marketers to verify if the initial targeted profile actually corresponds with the responder’s profiles, i.e., if the customer segments were well targeted. Profile analyses can and should be performed at different stages of the campaign. It should be performed at the campaign planning stage, when defining the target segments; as part of the designing tests, as campaign results are received and after a campaign is completed to verify attrition.

The profile characteristics are recorded in the CRM database and they are used in this type of analysis if they can be related to the customer or prospect name. These characteristics may be fundamental (birth date, gender) or derived (age, score). Profile analysis considers the input (generally geographic, demographic or psychographic) and clusters names into groups with similar tastes and preferences. Two other statistical techniques used in profiles analysis are automatic interaction detection (AID) and chi-square automatic interaction detection (CHAID). These are not discussed in this text6; for more information on these techniques, see Marketing Research by Aaker et al. (2004).

By predicting the actions of customers or prospects by using these analyses, the company is refining and improving its marketing strategy.

5 Campaign Feedback

Everyday practice shows that it is far more valuable to have a reliable assessment of the measurable effects of marketing campaigns upfront. The effective registration of past marketing activities and their results, combined with modeling methods, different media and customer segments, enable the marketer to support campaign decisions in advance and to optimize them at the implementation stage. Information on successes, failures and the circumstances under which the campaigns were carried out should be stored. Patterns can be found and correlation between historical successes and campaign elements can be used as learning to ensure future success.

Companies should compile detailed information about the main aspects of campaigns, such as concepts, target groups, media used and campaign performance, into their CRM database. This way models can be designed to describe causal relationships between the variables under the marketer’s control and criteria for success. The use of this stored information supports informed future action because it allows the prediction of the market environment in which certain campaigns will succeed. Recording and analyzing the success and failures of past campaigns improves the profitability of future campaigns. Deviations between achieved and desired results are minimized through the correct use of this compiled knowledge.

Keep in mind that three steps should be implemented in order to ensure successful campaigns and to enhance knowledge for the company:

  1. 1.

    Record all relevant data about campaign planning, implementation and results.

  2. 2.

    Model relationships between the data gathered, the controllable variables and the campaign results.

  3. 3.

    Apply this knowledge to future campaigns. If information is not sufficient, test the important variables to fill the gaps in knowledge.

Summary

A campaign is a series of interconnected promotional efforts usually undertaken within a defined timeframe, designed to capture customer’s interest, and thereby achieve precise marketing goals. A successful campaign management process comprises of planning, development, execution and analysis. At the campaign planning stage, marketers make strategic decisions that define the overall objectives of the campaign, the best communication message and the best target audience. The objectives often are market penetration, market extension, product development or diversification. When pursuing a customer retention strategy, ideally the company should target its most profitable customers via LTV (lifetime value) and RFM (recency, frequency, and monetary) analyses. The company can choose to pursue market penetration or extension, market diversification or new product development. Communication strategy involves choosing the most effective message and media (for retention and acquisition strategies) to efficiently reach its target segments.

Identification of the customer segments (homogenous groups of individuals that have similar tastes, wants and needs regarding the company’s products or services) that the campaign will target can be done using lifetime segmentation and profiling, and on the basis of purchase behavior and profile data. The CRM database plays a central role in the segmentation process by providing information on customer behaviors and profiles, channel preferences and brand awareness. Marketing communications (marcom) are targeted interactions between the company and its customers and prospects using one or more media. Integrated marketing communications (IMC) involves the management and organization of all the marketing communication tools to deliver a clear and consistent message about the company and the product. Targeting the customers that provide a higher potential yield should be done in a way that maximizes the marketing communications ROI. Developing the offer consists of offering the customer some kind of incentive that will induce him/her to buy or to ask the company for more information.

The campaign budget allocates resources and coordinates expenditures across the marketing activities associated with the campaign. Making a campaign budget should be a balance between measurement, financial calculations, competitive analysis and good judgment. There are several methods to calculate a budget. Pre-set budgeting determines a given year’s marketing expenditure on the basis of what they spent the year before, by applying a ratio that adjusts media cost inflation, projected sales increase or decrease, market conditions, etc. Budgeting for an allowable marketing cost (AMC) consists of determining the amount that can be spent on campaign marketing activities, while preserving the required profit margin. The AMC is obtained by subtracting the costs (cost of goods + distribution costs) and the required profit margin from the total sales value. Competitive parity method tries to equate budget allocation with those of competitors. Budgeting with the objective and task method focuses on determining the marketing objectives and then deciding on the marketing communications tasks that are needed to achieve those objectives. In the percentage of sales method, the company looks at the competitor allocations and on the industry averages, to determine the exact percentage that should be allocated. Front-end analysis allows the company to figure out, in a quick way, how much it can afford to spend on a special promotion.

Pre-set budgeting should ideally be replaced by LTV forecasts, front-end analysis, allowable marketing cost analysis and estimation of the return of marketing investment (ROI rates) because this will allow the company to compare returns on alternative marketing expenditures.

Tests help maximize the performance of the campaign. Key variables in testing are the target audience, the offer, the format, the creative element, the media and/or the timing. Testing can accurately predict performance measures like response to the campaign in percentage and campaign profitability.

Campaign implementation plan should be divided into three sub-plans: the campaign program, the campaign schedule and the activity schedule. In the analysis and control stage, marketers should be able to draw conclusions about the campaign success and use these results not only to improve their customer knowledge but also to improve future campaigns. Campaign analysis can be done using campaign key performance indicators (KPI) and comparing them with budgeted KPI’s and campaign objectives, by using back end performance analysis, or even profile and response analysis, to link profiles and behavior with the campaign. When running a promotions campaign, marketers should always calculate the return on promotion (ROP). While response analysis calculates the campaign results up-to-date, projects its final results, such as responses, inquiries and leads, and analyzes these results, profile analysis is used to define and compare the profile of campaign responders with the actual profile of the company’s customers and prospects. Recording and analyzing the success and failures of past campaigns improves the profitability of future campaigns.

International Perspectives: Did You Know?

  1. 1.

    In 2014, United Overseas Bank (UOB) in Singapore started a marketing campaign to introduce e-statements and paperless online banking to their customers. The bank launched an online game that was available on various platforms (desktop, mobile, and tablet) for a promotion period of two and a half months. The gaming challenge for customers was to toss as many paperbacks as possible within a given timeframe into the bin. The game was accessible via the customers’ online banking account. This promotion campaign was a huge success. Customers could win rewards in terms of cash credit that was deposited into their bank account. In order to win prizes customers need to achieve a certain scoring level and fulfill other conditions such as being the first fifty registered customers for a specific promotion period. The underlying goal of this gamification campaign was to get consumers used to online management of their banking account and increase the propensity of paperless interaction with UOB.

  2. 2.

    In 2015, Turkish Airlines was the first airline that launched a live broadcasted flight from Istanbul to New York in conjunction with the Periscope video streaming app. The live stream shows the processing of the flight and provides exclusive insights into the crews department. While live streaming the flight, the back-up crew answered question on social media channels such as Twitter or Facebook. The firm’s intention is to showcase the flight experience with Turkish Airlines by providing consumers with the opportunity of a first-hand up-front evaluation enabled by livestreaming. The aim of this campaign was to increase consumer awareness of the firm and its services and acquire new customers as well as increase the consumers’ experience level with the brand. The results showed that Turkish Airlines had about 5.000 new followers and received 293.000 likes on Twitter. The broadcasting campaign was successful in increasing the interaction level on each digital platform and positioned Turkish Airline as a highly professional and innovative company (Shortyawards, 2017).

Exercise Questions

  1. 1.

    Explain the three key steps in the management of campaigns.

  2. 2.

    Imagine you are the manager of a chain of 25 seafood restaurants in Virginia. The restaurant has a mainstream positioning. You are planning a campaign to attract new clients and your available budget is $30.000. Describe how you would go about implementing this campaign.

  3. 3.

    Explain the ideas around the concept of campaign testing? Do you think that testing in general will become more important in the future? Why or why not?

  4. 4.

    Give examples for key performance indicators for the evaluation of campaign success.

  5. 5.

    Explain the advantages and disadvantages of the various campaign budget setting methods.