Personalization White Paper

By Cam Shapansky, cam@bluenorth.ca
Copyright © 2003. Cannot be quoted or redistributed without written consent of the author.

INTRODUCTION • CONVERSATIONS • THE OCTOPUS • CHANGE • CUSTOMERS • BE PROACTIVE
 RELATIONSHIP • WORK • SUCCESS • TOOLS • CONCLUSION

Thesis statement

An effective customer relationship can result from the following:

• Customers provide companies with lots of data

• Reduce the amount of clutter delivered across all channels, by sending only applicable information

• Companies utilize that data to:
  - Simplify the experience customers have with organizations
  - Enhance the value being provided by organizations (proactively offer more value)

This sounds simple. In principle it is. In practice there are challenges. These challenges can and have been overcome. This paper contains principles that require consideration, acceptance and action.

Is it worth the effort? Organizations basking in the glory of successful personalization initiatives certainly think so.

 

Introduction                                                                                                     ^

We work with a client in the investment industry that sends out millions of compliance documents each year. These documents are not well read — everybody knows that. Since they are offset-printed, generic documents, only a small percentage of the document is relevant to any given customer. They contain a lot of regulatory and legal language so they are not well understood. But regulations say they have to go out, so that's the end of the story, right? Wrong.

Our client decided that they could derive more value for the customer if they challenged the regulations and produced dynamic documents — ones that contained only relevant information, combined several compliance and regulatory documents, and saved lots of money in both postage and paper because only a fraction of the existing number of pages would need to be sent out.

A prototype of the new, personalized document was developed and tested with customers. Customers found it easier to understand, appreciated all of the trees that would be saved, and understood the content better. They also appreciated marketing information that was relevant and meaningful.

Our client then began the process of lobbying the regulators, and won. The document is currently being developed.

This is the power of personalization. Everybody wins. The result is less, but more meaningful information, which works to strengthen customer relationships. Everybody wants it, but can everyone do it? What are the pitfalls? What are the opportunities? It seemed to us that there was a need for a paper to answer those questions.

Over the past 10 or so years we, Blue North Strategies consultants Cam Shapansky and Brent Klassen, have worked with more than 100 large organizations. The focus of our work has been to help these organizations develop stronger customer relationships through relevant, personalized, data-driven communication. We have held focus groups and talked to thousands of customers and employees. Trends and commonalities have emerged. This paper draws on experiences and findings that have grown out of that body of work.

 

Conversations with the masses                                                                     ^

Without exception, every organization we have worked with wants to develop stronger, and to borrow a Web term, stickier relationships with their clients. While this desire is common, the realization of this desire is rare. There are classic examples of organizations that have successfully reinvented their companies in order to strengthen their customer relationships: 10 years ago the talk was about the Marriot hotel chain; more recently it's been South West Airlines.

Blue North has been intimately involved with organizations that have realized massive success through change initiatives. We have also seen organizations spend a tremendous amount of money and question the value. We have spent considerable time recently trying to understand the roots of successes. When we look at companies that have realized measurable success through improved, personalized communications initiatives, do we hear them talking about key software or technology purchases that enabled their transition? No. We hear about wholesale organizational change, embracing a new philosophy. In every case, the success these organizations experienced was supported by the right technology, but the technology was not the driving force.

This is an important distinction because when conversations about Content Management, Knowledge Management or Customer Relations Management (CRM) happen, they inevitably turn into product discussions. They shouldn't. In our work with dozens of financial institutions, telecommunications firms, utilities, retailers and technology companies, Blue North has maintained a consistent focus on helping them have more meaningful conversations with their clients. None of our work has required the acquisition of an enterprise CRM system. Often our customers will purchase such a system as part of their evolution, but that has not been the focus. Every organization can make a significant move forward by ensuring they are making the most out of their existing data and infrastructure.

 

Avoiding an octopus                                                                                              ^

This topic is a big one. It's a bit of an octopus. If we endeavour to talk about personalization, we have to follow one leg out to content management, another out to design and plain-language writing, and once we get a few legs going we'll end up tackling the enormous communications bucket called CRM (into which everything to do with marketing, contact management, content management, sales, call centres, data management, time management and several other disciplines have been thrown). This paper is not going to do that. That's a book. That's a big book. That could be a really boring book.

Instead, we're going to cut off one piece. We are going to look at the development of dynamic communications (print, Web, ATM, call centre, etc). These communications are dynamic because they utilize customer data to become more effective. These communications cross-sell, up-sell, and retain better because they present only relevant information to customers. We have seen, and will talk about, organizations that have been able to change cultures and habits, save money, raise retention rates, reduce call centre calls, and sell additional products, all through a focused effort to create more meaningful and relevant customer communications. In almost every case, our customers have started this process with minimal IT effort and utilized the customer data they already possessed.

Change and know-how                                                                                     ^

A lot of money has been spent developing disappointing products. Over the past several years, I have talked to many organizations that bought into the 1:1 dream and ended up walking away from it, thinking it was just an expensive mistake. Looking back at these situations, almost all can be attributed to either a lack of ability to change the way things are done, or a lack of information/understanding of how to accomplish successful personalized communication.

You've got to change

A tremendous amount of money is spent within organizations in order to avoid change. When it comes to developing stickier customer relationships, you can either think about it, develop programs and practices, work at creating a new organizational personality, struggle with new and more effective ways of communicating, or you can hire a reputable technology consulting firm to recommend and install a CRM system — after all, nobody ever got fired for hiring . . .

It's easy, then: You put in the system and it communicates better with your clients and all those other headaches just kind of go away, right . . . right . . . right?

We all know this is not right and it is an oversimplification, but it happens all the time, even within the biggest and most progressive organizations. Starting to communicate more effectively with clients requires changing the way things are done. It might mean pooling the direct mail budget, Internet development budget and the bill and statement print and production budget to come up with an integrated program that meets the needs of all three at an overall lower cost. This is a huge problem. Saying the words "pooling budgets" is a lot easier than doing it. For the most part, people in large organizations are trained to be pit-bullishly protective of budgets, and pit bulls are not bred to share that well. It might mean a sharper emphasis on internal communications to ensure employees understand the new programs. It might mean marketing people may need to work with IT folks to develop creative ideas. Yikes — okay, that's a point unto itself.

People like to talk change. People do not have an easy time embracing change. It's not business, it's just life. If you're not happy with your current communications initiatives, but you want to have an impact on your customers, you've got to do things differently. To do things differently means that people must change what they do on a daily basis. This is difficult. People are generally pretty comfortable doing things the way they usually do them.

In order to get people to change you need to be able to demonstrate benefits. We call it priming the pump. It is not feasible to simply ask people to change and expect it to happen. By its very nature, change means doing things that people have not done before and therefore quite likely do not know how to do.

For this reason, when developing a personalized communication program for the first time, organizations need to invest in getting a sample program externally developed or at least developed with the support of external resources. This support will involve the development of a messaging strategy. The end result needs to be a combination of marketing expertise, an understanding of available data, comfort with if/then/else type logic, and familiarity with dynamic print/presentation technology. Pulling all of this together will inevitably mean that people who generally do not talk to each other have to work together to get things figured out.

It is important to highlight at this point that while personalized communications programs can be powerful and effective, they can also be disappointing. Most often they are disappointing when organizations attempt to use dynamic tools to continue doing things the way they have always been doing them.

In a recent project with one of Canada's banks, we worked with an agency that was helping to develop the strategy for a dynamic, full-colour newsletter. They had produced this newsletter for several years and had always relied on six different variations of the newsletter based on customer profile type. They devised a strategy whereby they would use a full-colour digital printer and a dynamic document composition tool to produce six different newsletter versions on the fly. The result would have been a far more expensive product - with no better results. It does not make sense to go to the effort and expense of creating a dynamic document if you are not going to do anything more than was done before. We worked with them to develop a strategy that integrated their newsletter with their statements, utilize statement data to drive dynamic content and personalized scenarios, send specific articles to high-risk customers, and produce personalized offers. This document is currently being piloted, and it is expected to save money and impact retention rates.

The key is not to simply use new technology to continue doing things the way they've always been done. That being the case, it is better to continue doing things the same way. It's about change.

You need more than the right tools

While organizations need to be willing to change, I do not point all blame in their direction. Suppliers of dynamic document solutions have also been guilty of selling composition tools, printers, stream manipulators, real-time messaging solutions, etc. that are capable of great things, but then stopping short of showing customers how to realize all of this potential. There is a big gap between having a tool that is capable of using if/then logic to put variable messages on a Web page or document and knowing how to leverage data, build a message matrix, write dynamic copy, test it and make it happen.

Organizations are resisting change because they are overwhelmed and do not know how to make it all happen.

 

The customer relationship                                                                               ^

Personalizing your customer communications is about enhancing customer relationships. In fact we would argue that it is about creating customer relationships, because most organizational-customer relationships are dysfunctional, if they exist at all. The following insights look at issues surrounding this "relationship."

Customers can be dumb

This is not something that is easy to say, especially when you come from a sales and marketing background. It is not consistent with the "customer is always right" message that has been drilled into a lot of bright minds. This statement is intended in the best and most charitable of ways. When we are communicating with a mass audience, whether that audience is hundreds of thousands or millions of people, you need to target your message to the lowest common denominator, and that lowest is unfortunately low. Two examples come to mind:

I remember walking through the call centre of a large Canadian credit card issuer. We were working at developing a statement that was easier for customers to understand and would ultimately reduce the number of question calls that come into the call centre. Call centre folks often call these "dump calls" — no value is added, and staff are simply trying to explain something that shouldn't have to be explained. We were talking about problems that the new statement should address. The senior call centre manager said that one thing they would like to reduce is the number of people who pay their credit balance on their statements. Confused, I asked for clarification. He went on to say it is quite common for people to escalate their credit balance month after month by seeing the credit number at the bottom of the page and paying it (eg. You have a $50 credit on your statement, you pay it, the next month you have a $100 credit. You pay that, the next $200, and so on). He said that after five or six months customers call, quite upset that they keep paying their card off, not using it and the balance keeps going up! I asked with a hopeful tone, "Has this happened once or twice?" He replied that it happens hundreds of times every month.

 

Another statement story. . .

The head of Customer Care for one of the world's largest telcos tells the story of redesigning their monthly phone bill. In the envelope, with the bill, they put an insert that had a shrunk-down bill sample with fictitious names and numbers and annotations describing the fancy features of the new bill. Now, he said, many people actually paid the amount due on the sample, which is astounding enough, but the call he remembers is an older chap who called in to dispute one of the transaction lines. Never mind that the name was wrong, the services were wrong, the phone numbers were wrong, it was shrunk and glossy with arrows all over it, this gentleman found fault with one specific transaction line. My friend insisted this story was sad but true.

These two examples demonstrate the level of general confusion that exists within the customer base. The reason that this is critical is that while many companies are looking to consolidate multiple services into one bill, and cross-sell and up-sell customers using personalized direct mail and billing messaging, customers are out there paying amounts due on brochures. It is a mistake to give customers too much credit. The best way to turn a success story into a failure is to launch a new program and have your call centre lines light up and overload for three weeks. While there are many opportunities to cross-sell, up-sell and retain through personalization, it is important to remain focused on keeping messaging simple — on simplifying the customer experience rather than complicating it.

In order to avoid confusing customers, adequate customer testing must be done ahead of time. It is often surprising what confuses customers. While general principles can be followed, customer research is really the only way to ensure that an element doesn't exist that will cause problems. In addition to testing communications pieces there are two key elements that help this process along. They are effective information design, building documents on a predictable grid in order to make them customer-intuitive, and use of plain language throughout all documents. Design and plain language require a dedicated focus and will not be dealt with in this paper. While we're talking about personalization, it is also important to add that another approach is to segment the audience by sophistication level (mutual fund and investment companies have started doing this) and do more hand-holding as we work our way down the evolution chain.

So are customers dumb? No, but it doesn't hurt to gear your communications to a level that could be understood by them if they were.

Customers are cynical

Recently we worked with a utility company that was determined to simplify the terms used to describe the distribution and consumption of their product. We worked hard to develop terms that more clearly described what was being offered. When these new terms were presented to actual customers in focus groups, they responded with outrage. Why? Because they saw terms they had not seen before and they assumed the company was trying to pass off new charges on them. When asked what the old terms meant, they had no idea, but they conditioned themselves to knowing what was there every month and knowing what they were paying for.

For the most part, clients feel that organizational boardrooms are used to plot and plan ways to take advantage of them and rip them off. This cynicism is not easily overcome. It is important to recognize that customers may be feeling this way and to target communications that will start to counter these feelings.

Personalization can be powerful. The best way to counter customer cynicism is to deliver messages that are meaningful, relevant and timely. For the most part, organizations know what products the customer holds. They also have a great deal of personal information that allows organizations to use every bill, every Web visit, every direct mail piece and every newsletter to provide information that is helpful to the customer.

We do work for a U.S. bank, and like most banks, its advertising campaign was about personalized service and community-based banking. This was their advertising campaign, but customers found their own experiences to be quite different. We worked with this organization to do some very simple things that helped to counter a cynical, and therefore volatile customer base. One simple thing the bank decided to do was to link key pieces of information from the call centre database to the monthly statement file. This meant that if a customer called with a complaint or concern the call code was sent to the statement print file, and a message could be generated from that code. The message would say something like this: "You called on June 16 with a concern. If this has not been resolved to your satisfaction please call . . ." (routed to retention-trained CSRs). This message would apply only to serious codes and there were a variety of other messages developed depending on the severity of the code. This simple program demonstrated a number of important things to customers:

• Indeed the bank does take concerns to heart.

• The bank shares information and (ultimately) it doesn't matter if I go to the ATM, call the call centre,   go to the branch or get my statement, they know me. It's one relationship.

• The bank is working to keep me happy.

In addition to this program, this bank has developed a sophisticated message matrix that uses readily available customer data to actively communicate with customers, ensuring that they have the right products and services for their individual needs.

This scenario may not apply to all organizations, but it is an example of utilizing customer data to battle the cynical nature of customers.

Customers have spent time giving you information

This is important. As consultants this has been our battle cry for several years, but most companies still aren't hearing it. This is exactly why we say it is not the most important thing to go out and buy a CRM system. The place to start is looking at the data you already have on your customers and using it to make their experience richer.

Over the years we've given many examples of organizations that continue to treat customers like numbers even after those customers have repeatedly given very personal information to them in a wide array of formats. Everybody can think of an organization they deal with that does this, and just about everyone can think about an organization that uses that data to make their experience more meaningful. Very small organizations do this well. For them the data is often in their heads. My local Starbucks knows that I like a Grande, Misto, No Fat, No Foam. I'll drive a block to go there because I don't have to get the service people up to speed - they know what I want. At the same time, I just bought a replacement cellular phone. I had to call the call centre five times over the course of three days to get everything figured out. Each time I called I had to provide all of the information, right from the beginning, over again.

Everybody likes equity. Everybody likes to feel like a big shot. The way to give customers both of these feelings is to provide them with service and content that shows them you know who they are, you know what they like, and they don't need to tell you two or three times.

IT people might be saying that this is easier said than done. I beg to differ. Some data is hard to get at; some is easy. Look first to the easier stuff and get as much mileage as you possibly can from it.

All communication that goes to customers should take customer data into consideration. You are spending money to send information out, so take the time to make sure it's relevant to everyone who receives it.

Privacy                                                                                                                    ^

There is a lot of talk and concern about utilization of data for marketing purposes. Laws are being written to either prevent it or ensure that consent is received before it is done. Incidentally, we worked on a project with a large client that decided to test this out — they used a call centre to seek permission from their customers to send a personalized marketing piece that promoted new products, and approximately 30% of their customers consented. It's a sticky topic. Do we find it to be a big concern for the topic being covered? No.

We've done a lot of focus groups with clients utilizing customer data. If you ask customers, "Do you mind if we use your data to market to you?" they will tell you that yes, they do mind. If you ask clients, "Do you mind if we use the information we have on you to ensure we send you only relevant information and offers?" they will tell you that they do not mind. It is important to have a privacy statement that assures customers that you will not sell their data to others, etc. Customers will not mind you using data to make their lives easier. Of the many customers we have worked with, we have never had customer backlash to utilization of data. We have had customers experience concern over a particular data-driven message (usually as a result of unclean data) but not to the principle. Generally, customers view the time they spend giving companies information about themselves to be an investment. For this investment, they want to see a return. The return they want is to know that they have been heard. Once they know this they will in turn reward their product and service providers with loyalty rather than going through the bother of getting another one up to speed.

 

You know your customer — demonstrate it, be proactive                        ^

"We don't want to cannibalize revenue." An organization has got to be careful with this one. Personalization is a very effective way to right-sell customers into products that fit, and there is no better place than an activity statement to do it.

You are a Web service provider that has two plans: A) $9.95 for 10 hours, and B) $15.95 for up to 50 hours. A customer is on plan B but uses only two hours of service. This is a perfect opportunity to tell the customer that there is another plan for lower usage. We've seen two views to this type of recommendation and neither is motivated solely by a sense of charity. Some organizations say, let's get all we can from them. Others say, let's make sure we've got them in the right plan or they're going to get poached by another company. Based on our experience, retention is higher among organizations that are concerned about proactively providing customers with the services that best suit their needs.

To an earlier point, this is an ideal way to battle customer cynicism — show them that you are committed to providing the best possible customer service. It needs to be said here that some caution has to be taken to ensure that recommendations aren't being strongly made based on an anomaly.

Organizations should consciously make a decision about which approach they are going to take; we often find that there are differing opinions on this topic and no official company stand.

Look at the whole relationship                                                                         ^

When developing a personalized messaging strategy, it is important to look at all communication vehicles as well as untapped communication opportunities, and establish an ideal future mix. For example, as an organization you may send the following to customers:

• Four different newsletters depending on product

• Two e-zines

• A quarterly direct mail campaign

• A monthly statement

• An annual outbound call campaign

When building a future state it is important to look at opportunities to simplify, consolidate and send out less, but more meaningful, information. Two things will happen if you decide to simply personalize all of your existing material: first, you will overwhelm customers with content, and second, your marketing people will need to hire a small army of writers because remember, although personalized content means less for each customer, creating all of the variations and options ends up requiring much more content.

When looking at the mix of customer touchpoints above, the opportunity might be to reshape those vehicles into:

• One personalized newsletter that can either be delivered electronically or in paper (quarterly along with
    the statement), depending on the customer's preference. This newsletter considers purchase
    history, geography and life events to deliver meaningful content

• One personalized direct mail drop per year, along with two generic drops

• A monthly statement delivered electronically or in paper depending on the customer's preference

• A quarterly, selective outbound campaign

The result of this kind of consolidation is often reduced or level cost, with increased response: a difficult proposition to turn down. Not only is there greater value added to your organization, but customers are happier as well. Looking back at the hundreds of customers we've interviewed on this topic, one message rings true across the board and that is: "Why are they sending so much stuff, very little of which is of any interest to me?" Ask yourself — wouldn't it be nice to have an organization "prescreen" your mail and just send out information of relevance?

Once again, in order to take advantage of this type of consolidation, change is required. Often budgets need to be pooled, etc., and this is not easily accomplished in a corporate environment.

Making it all work                                                                                                 ^

Once you accept the fact that personalizing customer communication is a good thing, there are a few key start-up issues that need to be looked at.

Know your data, and keep adding to it

Every organization we have dealt with is disappointed with the quality of data that they have available. This discipline would not require any explanation or support if ideal data were available in all cases. The reality is that data is often incomplete, inaccurate, inconsistently entered, all upper case, and in many cases not easily accessible. This is every organization's (or certainly the vast majority's) reality. This is far from a reason to not continue. The challenge of developing an effective personalized communication program is determining how to make the most out of the data that is available.

We worked with a U.S.-based financial institution that was trying to demonstrate that while they were a national institution they serviced their customers like a small, local bank. They decided that they were going to send out a document with each customer's local branch on the top of it. The problem was that the data was not reliable. While they knew the "home" branch, they did not know which branch the customer used on a daily basis. I'm a good example of this — my home branch is in the city I grew up in and went to university in and I now live in another city 30 minutes away. I haven't been to my home branch in several years. For this reason, our client decided to base a localized message on zip code instead, thereby meeting the objective with reliable, available data.

Now while this is an example of an organization that creatively sought alternative data to meet an objective, we would not advocate geographical data as being a high-impact data source. When creatively thinking about the kind of data-driven messages that you want to deliver to customers, force yourself to think beyond the "Dear John Doe: You may have won ..." address and name personalization. Think in terms of a customer relationship — how you can add value to individuals with things that you know about them.

Blue North follows this process to utilize the best available data:

• Meet with marketers and product people to learn about business goals and issues

• Brainstorm all available vehicles and develop a high-level touchpoint strategy (which messages belong
    in which vehicles and how many times per year a customer should be touched by any given message)

• Develop a series of message zones within each vehicle that create content buckets that align with
    the objectives

• Identify a series of message ideas that fit into each of the zones

• Together with IT and data people, comb through readily available data to determine how objectives
    might be met by rules-based messages using available data

• Draft content for messages

Once customers start to see some return on their investment they'll invest further. After you have used the data that you have to add to the customer experience, customers can be asked to provide more. But don't ask for information that has already been provided. Also, customers should be given the option of saying exactly what they receive and how they receive it.

Marketing has something to offer, IT has something to offer, neither can do it alone

This point likely goes without saying, but while it is not hard to understand and not even hard to implement, it seldom happens well. There is a peculiar delta that exists between marketing people and IT. I'd go so far as to say that in most organizations they don't even like each other. I've often told the story of the insurance company that put us on retainer to be the interpreter between their IT and marketing groups. If marketers wanted something done that required IT support they'd call us and we'd interpret the request to IT, and vice versa.

If personalized messaging is going to happen successfully, both groups need to contribute. If this relationship is working well (nobody is saying the two groups have to become friends, they just need to recognize the role they play and be willing to do their part) the following scenario may occur: marketers will explain objectives and request a certain piece of unavailable data to trigger a personalized message. The IT team, understanding the objective and knowing what is available, may say, "Well we can't do that, but we do have a piece of data ‘X,' and we could accomplish the objective by doing this instead." Both groups are contributing, and both are focused on the end objective.

The IT/marketing relationship seems to fall apart as a result of a profound misunderstanding of the other's perspective. Marketing people feel that the IT group constantly throws up mysterious roadblocks to any request and so eventually they give up asking. IT people tend to respond to every request with, "Anything is possible, it's just a matter of time and money." Neither of these approaches results in creatively working towards a reasonable solution. While anything is possible, and marketers have no idea what is reasonable, collaboration is required.

The ability for an IT group to be able to collaboratively brainstorm and problem-solve with a marketing group willing to share objectives is very much a competitive advantage and a rare occurrence.

Measure success                                                                                                 ^

Before undertaking a personalized communication approach, it is important to establish success measures up front. The biggest challenge to accurately measuring results is that any changes need to be tested in pilot format so that a control group can be tested against a sample group to accurately measure change. Without this pilot approach, an environmental, economic, product, call centre or other change could be credited for the change in results.

Success measures do not need to be large items like increased retention or a lift in sales. Many organizations have successfully built business cases around measures such as reduced call centre calls, or reduced print production costs. Not only are these items often easier to quantify but they can more than justify the business case.

Without success measures identified and known before launch, it is difficult to maintain momentum within the organization for ongoing initiatives.

Personalization (Document Composition) Tools                                         ^

Something needs to be said about the software tools used to compose dynamic documents. Basically, the composition can happen at three levels:

• The document creation stage — packages like Quark Xpress, Microsoft Word, Acrobat, etc.

• Print stream creation stage — CSF, CompuSet, Exstream, Papyrus, etc.

• Post stream, print stage — Streamweaver, etc.

Tools at each stage have their advantages. Traditionally, stage two tools offer the greatest personalization flexibility while offering a fast and efficient print stream for high-volume production printing.

Vendors will try to say that their tool is the only way to go. This is not true. Effective, personalized documents can be done with any number of tools. (Do keep in mind that while stage three tools are easiest from an IT perspective, they offer very limited personalization opportunities.)

It is important to understand your tool's ability to generate rules-based personalization (personalization based on if/then/else logic) and ability to create last -minute, "on the fly" messages. Both of these are important requirements.

While vendors will often present messaging extensions as tools that marketers can use with ease, they most comfortably reside in the IT or QA area.

Conclusion                                                                                                          ^

As stated at the outset, organizations are not generally spending time deciding whether or not they want to strengthen their customer relationships. It is a given. The questions organizations are asking are how to do it, and, if it involves personalizing communications, whether they are capable of doing it.

The simple answer is yes. We have worked with many organizations that have experienced and quantified the benefits of a personalized communications approach. The more relevant questions are: "Are we up to it?" "Are we willing?"