As competition unfolds in the energy market, there are valuable lessons to be learned from other deregulated industries. Unless your organization has extremely deep pockets, you should attempt to market your products and services to the segments of your prospect and/or customer databases that will give you the best return on investment.
The question becomes how and to whom should you direct your marketing efforts? Most energy marketers know little about the customers and prospects in their databases other than names, addresses and some usage data. There is a wealth of data that can be used to beef up your efforts, and often this data can pay for itself in savings. Consider this case study:
A regional Bell operating company faced competition for local phone service for the first time. Its old ways of marketing were no longer sufficient to meet the demands of the marketplace or the competitive environment. Its cost of acquisition was too high. Its marketing database consisted of name, address, usage data and a third-party cluster code. Its primary targeting strategy was based on historical revenue. Sound familiar?
A strategy was devised to gather more complete customer data and use that data to drive direct marketing campaigns. Since it had treated each local access line as an individual account, the first step was to merge multiple accounts into a common household. Next, in order to build a more robust model of consumer needs, demographic and attitudinal data had to be added to the usage data the RBOC already had. Lastly, that information had to be incorporated into the direct marketing communications.
The communications stream began with a 12-question survey to its high revenue customers. Questions were asked to the customers about the make up of their households, reasons for using the telephone, calling habits, likes, dislikes and how satisfied they were with their current service. More than 15 percent responded without an incentive. Combining the survey data with the usage data in addition to a demographic overlay, models were developed that predicted who was most likely to want services like call waiting, three-way calling and additional local access lines.
Predictive models of potential responders were also created for people who did not respond to the survey. Next, the responder model was segmented into groups that included homes with teen-agers, home-based offices and computer/Internet users. For each segment, relevant creative messages were crafted. All of this information was then incorporated into a campaign, which promoted the installation of additional phone lines.
As a result, the very next mailing dramatically lowered the cost of acquisition of additional lines. The company was able to save a substantial sum by mailing 40 percent fewer pieces than a previous program. Despite the lower quantities mailed, the program was able to double the total number of sales. The overall conversion rate of inquiries to sales also was higher. In particular, it experienced up to a 500 percent lift in sales by delivering targeted, creative messages to the segments with — you guessed it — teen-agers and Internet access.
How much did all this hi-tech data cost the company? Virtually nothing. The savings that were realized by mailing fewer and smarter allowed it to recover the additional costs on its very first campaign.
One of the first resources that you should tap into is you're existing customers. It never fails to amaze me how much information a customer will give you when you ask. Not only can you capture product preferences, you can also gauge attitudes. Just think how successful your next campaign would be if you could actually address the needs and wants of your customers.
Another source of valuable data that can help is the information assembled by the major list compilers. They have gathered a wealth of data, which can become crucial if you have a limited marketing budget. Whose business would you rather earn, the single apartment dweller or the family of six?
If small businesses represent a potential market, similar information is also available for this segment. Type of business, number of employees and geography are just a few of the selections available. We found on a recent gas campaign that the difference in the title of the person receiving our offer resulted in a 133 percent lift in response. Taking the time to learn about your current customers will pay great dividends in the not too distant future.
This brings me to the final point. Even though deregulation will not affect you for a year or two, you should address the issue of enhancing your database now. Take advantage of the opportunity to build a powerful marketing engine before you have to enter the competitive arena. The future energy marketing battlefields will be reminiscent of the telecommunications wars. And, like all wars, the winners will be those that are best equipped and prepared. Information is power, and a well-designed database provides actionable marketing information. It can take six months to a year to build a strong marketing database. It makes sense to start now. Treat your database like the corporate asset that it is, and it will pay many dividends in the future.
Martin Agius is senior vice president of business development at Marketing Resources of New York Inc., Orchard Park, NY, a full-service direct marketing agency. His e-mail address is [email protected]