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E-Sales E-Service Feature Article
June 2002

Ask For Permission And Keep Your Customers

By Duane Lyons and Web Fletcher, Braun Consulting

Where can you find the leading edge of multi-channel, permission marketing? Maybe you should start with your favorite fishing products supplier.

Seems like an odd place to look. But after a friend recently gave me a gift certificate for this niche retailer, I dialed the toll-free number to place an order. At the end of the transaction, the customer service representative asked if I would be interested in receiving promotional e-mail messages in the future. I agreed, and several days later I received an extremely relevant and personalized e-mail, and I found myself making an online impulse buy.

The experience was painless and rewarding. But as most companies know, this seamless chain of events masked a vast web of complex organizational and information management challenges.

On its surface, permission-based marketing does appear simple. It's marketing to those customers who have given consent to be marketed to, either online, offline or both. It's about contacting individuals with targeted offers or messages in an agreed-upon format at agreed-upon intervals. Beneath that veneer of ease, however, it can also be quite tricky, because permission marketing requires a two-way, give-and-take relationship which can end abruptly. Customers can 'unsubscribe' anytime they want to stop hearing from you. They often do.

Permission-based marketing has become a fundamental element of nearly every business' marketing mix. In fact, some would suggest that permission-based marketing is a cost of entry for doing business online. At the same time, many companies are beginning to realize the increasing complexity and risks involved in effective permission marketing and are becoming more sensitive to the trade-off between potential revenue and customer resentment.

E-mail marketing, in particular, has emerged as a hot topic for businesses and customers alike. U.S. newspapers ran more than 4,500 stories about e-mail privacy in 2001 alone. Meanwhile, comprehensive federal and state legislation looms just over the horizon. To further complicate matters, the proliferation of innovative enabling technologies ' Internet-enabled cell phones, wireless PDAs and digital TV, to name a few ' is bringing the issues of permission marketing to entirely new channels and platforms.

In this fast-changing and increasingly complex environment, many companies are attempting to develop a strategy for permission marketing that is consistent with their customer management goals. They face tough questions like:

What is the financial value of customers who welcome unsolicited e-mail messages and begin to purchase products from your company? What is the financial impact of customers who will never purchase products from your company because they feel an unsolicited e-mail message is a violation of their privacy? What is the financial impact of negative publicity resulting from your failure to comply with accepted permission-marketing protocols?

If customers choose not to be contacted by e-mail, do they believe they also won't be contacted via direct mail? What does your marketing department think?
If customers grant permission to contact them, do you know when it was obtained and what version of the privacy policy was in effect at that time? Do you know when or why customers change their permissions?
If customers provide their permission preference, do you know through which channel they provided it (call center, retail location)? Do you know which employee captured it? Do you or the customer know for sure which channel or channels it applies to?

If the permission was obtained on the Web site, can you tell the difference between an opt-in or opt-out permission?

Do you know the precise wording of the policies used to obtain permissions from your customers? Are they the same or different across all your channels (Web site, call center or retail location)? Can you really fulfill the commitments these policies make?

Which of your business groups or functions e-mail your customers? How often are those campaigns coordinated and sequenced? How many e-mails do your best customers receive from your company in a given month? Are e-mail campaigns integrated with direct mail and OBTM campaigns?

Who is responsible for managing customer permissions and privacy? Where are those data stored and how are they monitored, managed and accessed?

Although opinions about the impact of permission-based marketing on ROI vary, few compelling case studies that address these questions exist. While many companies understand permission-based marketing on a conceptual level, operationalizing this concept can be difficult. In short, getting permissions is much more complicated than creating a 'my profile' page on your Web site. It requires an overall strategy that looks across your organization and includes significant process, organizational and technology challenges.

To maximize the impact of permission-based marketing programs and ensure a positive impact on revenue and customer loyalty, diligent marketers need to focus on five core elements of effective permission marketing:

  • Integrate the channels,
  • Give customers what they want,
  • Understand what's really going on below the surface,
  • Don't neglect the 'hole in the bucket,' and
  • Get the organization aligned.

Key Success Factors For Effective Permission-Based Marketing
Although the complexity and pitfalls of permission marketing will continue to grow, companies can effectively navigate these turbulent waters now, all while enhancing customer loyalty and marketing ROI. These five core principles offer a measure of guidance on that journey, allowing companies to strengthen their relationships with current customers and build relationships with new ones.

Integrate Your Channels
Companies have been struggling for years to coordinate and integrate their channels and reduce the mixed messages, inconsistent information and dropped hand-offs that plague their customer interactions. Permission marketing brings all these issues to a head, driven by customer demand and growing legislative efforts.
Legislative efforts, in fact, are a primary driver behind the application of online data practices to offline practices. In December 2001, the Federal Trade Commission (FTC) announced that it would consider a privacy policy posted on a company's Web site as 'in force' for offline data practices, unless the privacy policy explicitly states otherwise. As a result, many companies have been updating their privacy policies to reflect the differences between offline and online data collection practices. Unfortunately, changes to a privacy policy are not usually considered to be retroactive. Companies must ensure effective coordination and communication as these policies are updated.

Customer demand is another factor fueling this shift. Customers want to be in control of how and where their personal data are being used. A recent study revealed that 94 percent of all respondents want the ability to give permission before their personal data are used for any purposes other than the reason for which the information was originally solicited. After experiencing best-in-class service from companies that communicate with their customers effectively across multiple channels, more and more consumers will stop tolerating the frustration and poor service that channel confusion creates; instead, they'll simply migrate to competitors that are often only a click away. Companies must ensure that their policies, language, practices and information are consistent and coordinated across all the points that touch their customers.

Give Customers What They Want
Multiple studies have shown that consumers are ready and willing to provide customer data and permission if it benefits them and is used appropriately. Highlights from recent surveys include statistics such as:

  • 'Fifty-one percent of respondents are willing to provide personal information for a truly personalized online experience and/or targeted marketing messages that are relevant''
  • 'Of those willing to provide personal data, 95 percent are willing to provide e-mail addresses if offered a personalized/customized experience''
  • 'Seventy-three percent of respondents see it as helpful when a Web site remembers basic information''

Assuming that customers trust how their data will be used, the first step to getting permission is to offer a compelling value proposition to the customer. The value proposition can come in the form of a personalized experience at the Web site and/or other touch points; targeted marketing messages that are relevant to the customer; or informational outbound messages.

After establishing a compelling value proposition, the next step is to ask for permission. Simply having a 'my profile' page on the Web site is not enough. Permission should be requested every time an interaction occurs with the customer, clearly putting customers in control of the interaction. Customers are willing to engage in a more robust and profitable dialog with the companies they prefer, but only when they are given meaningful choices for how and when those exchanges take place.

Understand What's Really Going On Below The Surface
Whenever a customer unsubscribes from future marketing messages, it has a measurable impact on the bottom line. Losing permission limits your ability to market your products or services to the customer. It also limits your ability to manage the relationship with this customer. We call this dynamic 'permission churn.'

The first step in minimizing permission churn is to create the ability to measure it. A lot of companies know how many customers they have permissions from at the end of each month, but they do not know the difference between new, 'permissioned' customers versus customers who unsubscribed.

For example, in a one-month period, a popular Web site may experience an aggregate increase in the number of permissioned customers of more than a million. Unfortunately, without knowing the details, it's possible the Web site may actually have gained 3 million new customers with permission that month, while losing 2 million customers via the unsubscribe process. On an annual basis, this represents an annual loss of 24 million prospective customers! If even 10 percent of the unsubscribers can be retained, perhaps through analytical techniques and testing, that represents 2.4 million new customers.

Don't Neglect 'The Hole In The Bottom Of The Bucket'
After developing the ability to measure permission churn, the next step is to develop and test strategies to minimize it.

First, implement a contact plan that establishes how frequently customers should be contacted. Unfortunately, this 'one-size-fits-all' approach doesn't recognize the inherent differences in customers. As a result, many companies are starting to investigate more complicated strategies. Two distinct approaches that have emerged, depending on the sophistication of firms' marketing analyses, include: 1) allowing customers to control the frequency they receive marketing messages; and 2) using analytical techniques to predict how often a customer is willing to receive marketing messages.

The advantage of the first approach is that it places the control in the hands of customers, allowing them to specify the frequency at which they receive marketing messages. Unfortunately, though, the process for providing permissions becomes more time-consuming for customers. Luckily, there's an alternative, hybrid approach that can work effectively.

  • When obtaining permission from new customers visiting the Web site, make the process as streamlined as possible without asking for frequency or similar details,
  • Provide an 'advanced options' sub-menu on the 'my profile' page that allows existing customers to select and change their frequency, and
  • When customers decide to unsubscribe, offer them an alternative; for example, allow them to reduce the frequency of marketing messages or alter their channel preferences.

By understanding and focusing on the permission churn going on below the surface in the customer base, companies can create significant improvements in 'permission loyalty' and subsequent revenue potential. Giving customers the flexibility to define the nature and intensity of their communication with the business is a critical element in maximizing that loyalty.

Align The Organization
The power of permission marketing ' and perhaps its biggest challenge ' is that it touches customers across all their interactions with the company and is not isolated to one channel or functional group. Permission marketing and the overlapping issues of customer privacy are critical customer management concerns that span marketing, customer service and IT.

High-performing, customer-focused companies have thought hard about these issues, have analyzed the processes, touch points and potential breakdowns, and have made investments to ensure there is clear understanding and accountability for providing customer management that drives revenue and loyalty. Unfortunately, most companies have not yet made these investments, and like most cross-functional, channel-spanning issues, permission and privacy often fall between the cracks of the organization. The inevitable result is high customer frustration and defection, inconsistent messages and procedures across channels, and incomplete and inconsistent information about the business. Companies dedicated to high-performance customer management must make the investments to understand all the places permission marketing touches their customers and their organizations, and develop the processes, roles, responsibilities and data management structures that enable success.

Permission-based marketing is no longer simply about users checking off a box to receive information from a company. In fact, it's becoming a necessary component of all direct marketing strategies. At its essence, permission-based marketing is about collecting as much information about customers' preferences as possible, and using this information judiciously to add value to their interactions and enhance their loyalty.

There are no shortcuts in permission-based marketing, and when companies get it wrong consumers will end up buying less. As such, savvy marketers need to think about how they acquire ' and keep ' customer permissions to ensure the long-term success of their marketing efforts.

Duane Lyons is a senior manager within the Customer Solutions practice of Chicago-based Braun Consulting. He can be reached at [email protected]. Web Fletcher is a vice president of the Customer Solutions practice of Braun Consulting. He can be reached at [email protected]. Headquartered in Chicago, Braun Consulting, Inc. is a professional services firm that delivers customer-focused solutions to FORTUNE 1000 and middle-market companies. Founded in 1993, Braun provides solutions to integrate strategy with technology and optimize the relationship between supply and customer demand.

[ Return To The June 2002 Table Of Contents ]

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