Up Close and Personal

• Under half of top UK companies use data-driven marketing techniques to manage face-to-face contact with customers

• Face-to-face is the most vulnerable point of customer contact, holding the potential to eliminate return on investment from other marketing activity if the customer experience is poor

• Financial services companies come top of the sectors studied for data-driven face-to-face customer management, but were expected to do better

• Mobile Telecoms does well, inspired by fierce competition and high rates of customer churn

• Insurers also do particularly well, considering they have to work mainly through the conduit of third party intermediaries – brokers and IFAs

• Retail’s performance was felt to be lacklustre, given the sector’s reliance on in-store experience

• Travel scores below average, but this was felt to be skewed by the huge investment that travel companies have put into successful Web marketing

• Hotel and Leisure companies also significantly under-performed, something that the industry has to address given that personal interaction with staff is a key part of the product itself

Introduction

It is ironic that the largest element of Customer Relationship Management (CRM) investment goes into communications that have the least impact.

CRM has traditionally been likened to the knowledge that a corner shop owner has of his or her customers. Modern CRM strategies and systems are designed to emulate and automate that corner shop intimacy and relevance, so that customers receive relevant communications and feel that the company knows and recognizes their individual needs and preferences. However, investment has not been put where it most affects the customer.

The UK advertising industry is worth somewhere in the region of £17bn per year. The UK direct marketing industry is worth some £13.6bn. But even in the field of direct marketing, which uses customer and prospect information to target relevant offers at relevant people, most of that direct marketing investment goes into remote communications with customers rather than more intimate conversations. In fact, despite the huge investment in customer data gathering that is the hallmark of direct marketing (often now called data-driven or database marketing), such personalisation is generally focused on the mail or email, is still not sufficiently implemented in the call center, and is a minority affair when dealing with customers face-to-face in the branch, the store, at events or through intermediaries.

We can therefore see that the relative investment in different customer touchpoints (in terms of marketing budgets in general, and data-driven marketing in particular) is in fact directly inverse to the importance of those touchpoints and their impact on the customer. Most money still goes into above-the-line TV advertising, yet in terms of its effect on the customer in an increasingly media-fragmented world, its influence is on the wane, and is certainly the most distanced and remote from of advertising and customer communication.

Now the penny is dropping. Which ‘touchpoint’ has the most effect on a customer? A conversation in person with a live assistant, of course. Where do many business sectors still have a huge proportion of their costs? Outlets or branches, of course. If they do not have a large property portfolio, then they usually operate through intermediaries who – collectively – have.

Some leading thinkers are now submitting face-to-face to the same disciplines, and giving it the same level of database support, that you find in the mailing house or the call centre. Field marketing exercises, previously just reaction-testing promotions, are now used to gather individual data and then apply those insights to the whole customer base. Branch systems are now being adapted to offer staff the ability to talk to customers in a more relevant and individual manner.

What Face-to-face Constitutes

Some discussion of what face-to-face customer contact constitutes is necessary at this point. The proponents of ‘experiential marketing’ like to push the size and growth that their industry is seeing. ‘Experiential marketing’ means promotions or events that encourage the customer to ‘experience’ the brand and the product. Some might say that this is simply a new name for field marketing. Certainly, though, the numbers are impressive. Spend on experiential activity in the UK is said to have already topped £250m/year[1], and in the US spending has topped $100bn [2].

Face-to-face is, however, much more than special promotions and events, which after all make up the least proportion of a customer or prospect’s interaction with a company. Face-to-face embraces all live contacts, including:-

• The till or transaction desk
• The customer service point
• Field marketing
• Loyalty events
• Branch, outlet or store assistants
• Intermediaries
• Sponsorships
• Door-to-door
• Product delivery
• On-site service

All of these are points of potential brand gain for the company, but are equally very volatile points of brand exposure. Poor experiences face-to-face can irredeemably damage customer relationships, wasting the large investments that have been put into more remote forms of data-driven marketing.

The gains from making face-to-face systematically data-driven are several:-

• Protection of brand image at most vulnerable point
• Delivery of consistent service levels across the business
• Gathering addition customer intelligence to enhance customer database
• Verification the relevance of remote communications
• Gaining contact permissions from customers and prospects
• Improvement of market research (bridging the gap between sample market research and full testing rollout)
• Improving staff ability to talk relevantly with customers, and also reduce reliance on individual staff or intermediary skills
• Improve immediate sales closure

Contact permission gathering through face-to-face activity is becoming particularly critical to marketers as direct marketing restrictions increase. Opt-out from the Electoral Register is now around 30%. The EU Directive on Privacy and Electronic Communications makes it illegal to send people unsolicited emails unless they are a customer or have actively opted in to the process. And registrations on the Telephone Preference Service are now heading for the 10 million mark.

The Results

In order to assess the level of attention (or inattention) that UK marketers are currently paying to systematic management of face-to-face contact with customers and prospects, Ion Group commissioned original research amongst the country’s top 1000 companies. Respondents were asked to assess their own and other industries’ ability to use individual customer data to manage face-to-face contact.

The overall results of the research were both encouraging and disappointing. 47.7% of these top companies were found to be conducting some level of data-driven face-to-face contact, using the individual customer intelligence they held to improve the impression made on customers in the store, the branch or at an event. As an average, this is higher than we expected. Nevertheless, it is of great concern that the proportion of UK top 1000 companies applying data-driven techniques to high brand exposure face-to-face contact is still (just) in the minority.

Sector Variations

In order to drill down into that overall average, it is worth describing the sector variations that the research revealed, and exploring some of the reasons why these variations are occurring.

Above the all industries average, we have three financial services sectors – Banks, Building Societies and the Insurance Industry. Banks have invested the greatest sums of any single sector since the late 1990s in CRM systems. Moreover, the normal interaction with customers requires that they identify themselves, or their account, for security purposes. The fact that banks are the top sector for deploying customer knowledge shows that this expensively-bought data-basis is being generally employed. The same is true of building societies. However, the authors of this report have to question why over 40% of banks are not using customer data in the branch to improve the relevance and impact of that person-to-person contact. Evidently, there is still a rump of banking organizations that remain account-centric, rather than customer-centric, an issue which leading players were addressing in the early nineties.

Far more laudable is the position of the insurance industry, which is still 80% intermediated and needs to manage customer relationships through the medium of an intermediary. Given the structural hurdles which intermediation presents for marketers and CRM professionals, we regard the insurance industry’s penetration of data-driven face-to-face customer management to be a remarkable achievement. This effort mainly consists of providing brokers and IFAs with rapid access (usually web-based) customer information to support client meetings and their preparation.

Also noticeable in the above-average scorers is the Mobile Telecoms sector. Research from Group 1 has shown that this sector still suffers from the highest rates of customer churn compared to other major UK industries. Deregulation has forced fierce price wars, as has oversupply in the market. Therefore, players are keenly exploring ways of cementing customer loyalty, and delivering an added-value proposition to customers that will help stem defection. Much customer service is delivered through high street outlets or dealers, and easily retrieved individual information on customers, along with automated value scoring, is being used by many to up-sell, cross-sell, reward loyalty and usage, grant individually based privileges, and capture additional details on interests and preferences.

Sitting on or around the average, we have IFAs, Retailers and Travel companies. It is arguable that many IFAs are able to know and manage their customers on an individual basis, and do not need sophisticated databases to remind them of the customer’s profile or potential. However, our respondents represented many of the large UK IFA groups, where such data-based intelligence is fundamental across large customer bases. Our research from 2004 has revealed the incredible level of trust that IFAs command amongst consumers. Perhaps the larger groups are exhibiting a level of complacency over this industry reputation?

Retailers are, by definition, dependent on face-to-face activity. However, the industry’s legacy has been one that traditionally could not identify the individual customer, their transactions and their profile. Now, though, retail is one of the larger spenders on direct marketing activity, and has invested millions in loyalty schemes that help to identify and understand the customer. Nevertheless, the sector seems to be lagging behind its retail financial services counterparts in employing that customer intelligence face-to-face in the store. Current consumer spending pressures make it unlikely that the sector as a whole will upgrade Point of Sale systems to better utilize customer data, yet this very sector slowdown also means that those who are making this leap into data-driven face-to-face are likely to realize particularly high return on investment at the moment.

The below-average score for the Travel sector is the result, we believe, of the polarity of investment in the industry between the high street and the Web. Nevertheless, there is a need – even if just from an efficiency point of view – to integrate branch, Web and call center systems. If this integration has been achieved, then high street outlets will naturally have customer data at their fingertips, with which to talk more personally to people and improve the likelihood of sales closure. We know of one top 4 travel company that has recently invested in precisely this kind of database integration, and can now data-capture, sell, process and document the sale within a few minutes, whether that sale is live, over the telephone or online.

Utilities are probably little concerned with their face-to-face activity at the moment in the face of more structural work taking place in the industry around the core product and distribution network. At the moment, face-to-face customer contact is confined (for most players) to meter readings, engineer visits, door-to-door selling and product delivery. We have no doubt that most utility companies will eventually extend their range of products and services in order to serve and monetise their customer base. However, at this very moment, few apart from Centrica really have a wide product range to sell, so the commercial motivation for data-driven marketing as a whole is much lower than in other industries.

Automotive firms seem from our survey to be far less effective at supporting their dealer channel than the other intermediated industry studied – insurance. However, the level of symbiosis between product originator and reseller in automotive has been gradually diminishing over the last few years. The lifting of the net import agreement and block exemptions have effectively removed a large level of manufacturer control over the sales channel. This has made manufacturers keener than ever on developing direct channels to the customer or prospect, rather than relying on the channel. In turn, large dealer groups are using their new found freedoms to use data-driven marketing to develop customer relationships, especially in the combination of mailing campaigns and face-to-face contact.

Finally, the Hotel and Leisure industries lag worryingly in our survey. This is a cause for great concern. Not only is face-to-face critical to good customer management, but because the product is location-based, face-to-face is arguably part of the product experience itself. Larger chains or groups have no hope of remembering things about every customer in order to make them feel individually cared for. They need to know what happened to customers across a number of establishments or venues. Staff change all the time. Yet a system which automates the processes of remembering customer details, and then using them to personalise and improve the experience, provides an effective memory substitute and trigger for personalised action. Follow-up, post-visit, provides an additional opportunity to use the data already gathered, as well as obtain feedback about pleasures and disappointments which help inform more targeted sales enquiry handling next time round.

Conclusion

In short, this research project reveals that UK plc is generally under-utilising database marketing techniques in the ways that customers are dealt with face-to-face. This is a major mistake for British business, in that live experiences have the greatest impact on the consumer, and if they go wrong, almost invariably waste all the investment that may have gone into other forms of data-driven marketing. The theory of CRM has always been to treat customers consistently and relevantly across all channels. For over half the country’s largest companies, face-to-face is the forgotten channel.

[1]David O’Connor, Experiential Key to Bonding, January 2005
[2]Promo Marketing Conference and Expo 2005

Methodology
Research Period:- August/September 2005
Research Base:- UK top 1000 companies
Fieldwork:- MarketingUK
Method:- Email and telephone surveys