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Using Market Research to strengthen DM efforts

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Brian Fine is chairman of amr interactive Australia and an Honorary Life Fellow of the International Marketing Institute of Australia. Brian has extensive international experience in market research, with specific emphasis on advertising research, brand equity research and strategic research. Brian can be contacted on 02 9020 6700.

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Not enough understanding exists of how and when market research can be used to minimise risk and optimise sales and profitability, contends Brian Fine. Here, he looks at some of the tools available to put you on the path to DM glory.

Are your campaigns minimising wasted creative and reducing your cost of sales? Good market research should be able to help you with your initial sale and subsequent sales. Sophisticated analysis can then assist you in segmenting your target groups and measuring your ROI.

The value of sales is not just the measurement of revenue, but profitability. You therefore need to take account of not only the initial sale, but the ‘lifetime value’ of the customer and the value of all referral sales too.

In this regard, the work of marketing writer Ray Kordupleski in the area of valuing customers may be of assistance. Kordupleski, author of Mastering Customer Value Brand Management, defines the CVA (Customer Value Added) rate as:

CVA = The average perceived worth of your company’s products and services
The average perceived worth of competitive offers

He says perceived worth is measured by asking customers, considering everything, “Are the products and services worth what you paid for them?” This question and the relative-to-competition CVA ratio are at the heart of the customer value management.

Setting your objectives

Objectives drive strategic choice. Strategy questions are ‘or’ questions: ‘You do this’ or ‘this’. Any ‘and’ question is tactical and isn’t related to ‘big’ objectives, but incremental gain. For example, an objective to attract Generation Ys drives strategy to target people under the age of 29 instead of over the age of 29. An objective related to how a direct mail execution should look is tactical.

In designing any direct marketing campaign you need to take account of immediacy objectives – the advertising and communication need to work quickly and be measurable. The best measurement is the immediate sales generated, and this is easily measurable in an absolute sense. Underneath all of this is the fact you are dealing with individuals, not brand categories.

Understanding those individuals, their lifestyle, family context and needs will ensure that any campaign design is well targeted. Market research is terrific in assisting with segmentation and needs analysis.

Don Pepper and Martha Rogers write about one-to-one marketing, where there is a need to know each customer as an individual and to design processes to meet individual needs, even when dealing with a large customer base.

In a similar vein, strategic database marketer Arthur Hughes says that surveys tell you more personal information about each customer than you could ever get from overlays or models. “Many people like to be asked their opinions or desires, particularly when they think that someone will pay some attention to what they say,” says Hughes.

Not all attributes you communicate will be equal. Some are worth far more to you than others. The trick is finding out which ones are most valuable, because a dollar spent against the most important areas is worth a lot more in sales than a dollar spent on less relevant ones.

Market research uses multi-variate analysis to identify the utility values of each ‘driver’. Prior to this stage, qualitative research can be used to ensure the most relevant attributes are covered in the research and the multi-variate analysis is meaningful.

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