Nick Martin's Marketing Pages

Now for Public Deleveraging

Nearly 2 years ago I wrote about the risks of a double dip recession. 

Here's what The Economist  had to say about likely economic impact of debt reduction, in a study released in January 2010.

It (the study) finds 32 examples of sustained deleveraging (at least three consecutive years in which ratios of total debt to GDP fell by at least 10%) in the aftermath of a financial crisis. In some cases the debt burden was reduced by default. In others it was inflated away. But in about half the cases—which the report regards as the most appropriate points of comparison—the deleveraging came through a prolonged period of belt-tightening, where credit grew more slowly than output. The message from these episodes is sobering. Typically deleveraging began about two years after the beginning of the financial crisis and lasted for six to seven years. In almost every case output shrank for the first two or three years of the process. 

Bang on cue, we are in all probability now entering a new, massively significant phase of debt reduction, two years on. That's why the banking crisis that became the soveriegn debt crisis may once again turn into a painful liquidity squeeze.

Whilst quantitative easing saved the world from depression - effectively replacing money supply growth that in the normal course of events would be provided by business investment - countries now have no alternative other than to reduce levels of public debt. The fact we've finally reached the point of unsustainability is evidenced by the urgency with which countries need to manage the rates at which they borrow, and to rebuild shattered investor and investment confidence.

As public debt is deleveraged, we must hope that the process of private debt reduction is nearing the bottom. If not, another recession is surely all but guaranteed. That's why everything must be done, however radical, to encourage private sector investment and hope for a rapid return to more predictable functioning of markets.

Dangerous 'peep show' of EU banking sector

A second round of EU banking stress tests - designed to bring transparency and hence confidence to shore up confidence in the eurozone, may well have served simpy to score another own goal.

The European Banking Authority said eight of the 90 banks it examined fell short of the required amount of capital under the tests' simulations of a deep, two-year economic downturn. Those banks faced a total shortage of €2.5 billion ($3.54 billion) of capital.

Compare these results to the last set of stress tests conducted a year ago that saw 7 banks fail, with a combined deficit of €3.5 billion. If this first attempt at flushing out banks with shaky foundations failed to inspire market confidence, do we really think this year's much vaunted round of weighty stats will do any better, the analysis of which adds just 2 more banks to the 'at risk' register with a valued shortage in Tier 1 Capital of a measly €2.5bn?

Sure, banks have raised tens of billions in the intervening period to increase their financial cushions, but is it enough if leading indicators deteriorate? Have current asset values on banks' balance sheets in the property markets of Southern Europe been factored in, or are lenders holding back on write-downs? 

If stress tests are meant to determine the ability of banks to withstand the worst realistically imaginable scenario, how meaningful are the tests when they exclude the shock of a debt default by Greece or Portugal? Whilst such a default may be politically unpalatable, that isn't a good reason not to countenance it. What happens when the strengthened EU Stability Fund comes knocking asking for banks to take haircuts on their holdings of debt, assuming they've not already been sold on to the next institution down the line?

These sorts of impossibly difficult questions point to some of the potential challenges we might face in the months to couple of years ahead. In this scenario, we can expect stuttering growth, with sluggish consumer spending as banks restrict outflows and households pay down debt at record rates. The dismantling of rocky high street retailers will surely continue with an outcrop of liquidations in the faltering weeks following each quarter end.

This isn't to say that the EU banking sector is at risk, but simply to point out that lending to business and funding the consumer, whilst strengthening their own balance sheets and ensuring that they can transparently meet the stress tests' criteria are incompatible goals, with lending certain to take a back seat to the more pressing factors.

Meanwhile, companies will increase focus on investments that have a direct and immediate return. Firms that have built up strong cash reserves are in a wonderful position to pick and choose their moves and are very well placed for a consumer uptick, whereas those that are tight on cash will surely draw in their horns. This is the perfect backdrop for disruptive innovation, driven by market appetite towards lower cost, more transparent and direct ways of delivering value to buyers. In this context, business & marketing innovation, stellar reputation and strong cash flow truly matter.

Google grips its social tiger firmly by the tail

Google+, the search giant's new social sharing project, looks like it's going to be a blockbuster.

In beta phase by invitation only or by request from the Google+ page, beta user numbers shot up to 10M before Google temporarily closed the platform to new requestors.  

Most beta users have GMail accounts, a rich future seam of (currently) 170M consumers worldwide.

Econsultancy report that several thousands brands are said to be extremely keen to get involved early.   

There are two aspects of Google+ that excites me as a marketer:

• Google Circles enables the user to categorise groups of connections or friends according to interests. This compartmentalisation makes sense from the user perspective and may encourage more mature consumer groups to use social media in a more widespread sense. From a brand marketing perspective, it permits a higher degree of segmentation and targeting, should make it easier to tap into the long tail.

• Google+ takes an important step to evaluating the relative behavioural strength of social networks. Just because you're highly connected on Facebook doesn't mean that you're friends with all of them, or that they have any influence over the things you decide to do or buy.  Functionality within Google+  opens up possibilities to sift and separate the relevant from the irrelevant. An individual may have lots of apparent connections, but how many of them have significance? 

Understanding these nuances should help brands determine who is influential within groups and what recommendation strategies are likely to be most powerful in kicking off purchasing journeys.

July is shaping up to be a good month for Google. On the back of tremendous quarterly results showing a 36% jump in earnings, could Google+ represent a major new marketing channel, where the undoubted power of trusted recommendation takes a further significant step in capturing a material slice of online marketing spend? 

 

Email marketing maturity profile?

The latest research from Marketing Sherpa, looking at the most commonly utilised performance metrics by maturity phase of the email marketing enduser, provides some interesting insights into how deeply practitioners systematically measure. 

Of particular interest is seeing the proportion of endusers who do not measure things, even at the mature, strategic, end of the scale. Take a look at the following graph:

So, 40% of mature users don't analyse the different link click-throughs; 56% don't look at the performance of different data segments; and 38% don't or can't analyse post click conversion rates.

This fresh-to-release  study, conducted a few months after the European benchmark survey I authored for FEDMA last year, reminded me of some of the key conclusions of that earlier report. Strikingly, users who had considered themselves strategic email marketing practitioners hadn't projected that sense of savvy when it came to campaign performance practise. Those who saw email marketing as strategically important for their organisations nonetheless often had poor visibility of metrics such as conversion to sale and conversion to action.

With just 16% of campaigns entirely data driven, and 38% of campaigns driven by some data, it is apparent that there is a way to go before the critical insight and testing necessary for optimising the email marketing channel is systematically practised.

Even when metrics are in widespread use, such as delivery rate, are practitioners really measuring in full awareness and knowledge? Most practitioners will determine deliverability as delivery to Internet or to mail server as the primary measure (i.e. less the hard and soft bounce codes), but delivery to inbox or Inbox Placement Rate (IPR) is a far better measure. Why? Because around 18% of email never ends up in the Inbox, or even in a Spam folder; nor  is it accounted for in the bounce data. It simply disappears, into a virtual Bermuda Triangle. The worse your reputation, the greater the problem. 

Much in the same way practitioners focus on improving their click through rates, they must also monitor, manage and take steps to continually improve their reputation to improve IPR, campaign performance and user engagement.

What this evident gap in email practise perception and reality truly highlights, is that whilst we tend to view email as a mature marketing channel, there is still a way to go to master it. Whilst email may have been around as a viable marketing channel for more than a decade, we are far from the point where outstanding direct marketing disciplines are routinely applied to it, and where the nuances of the medium are yet globally understood and managed.

Radian6 highlights shift in Social from defence to value creation

Salesforce.com certainly splashed the cash on Radian6 - to the tune of $340M - because they believe that Social will profoundly change sales and marketing, and want to connect market conversations with marketing and sales.

As SF's PR put it:

Radian6’s unique technology captures hundreds of millions of conversations every day across Facebook, Twitter, YouTube, LinkedIn, blogs and online communities. The intelligence gained from these conversations has become critical in helping companies better market and sell to prospects, serve customers and understand what’s being said about their brands, products and competitors. With Radian6, salesforce.com will add the ability to monitor and join in these public conversations across its products, bringing the heart of the public social web to customers’ business.

In other words, from SF's perspective, Radian6 will bridge the conversations happening on public social networks, such as Facebook and Twitter, and Salesforce.com’s private corporate social network, Chatter. 

To date social media monitoring has been used a bit like Talk Radio - defensively. Brands have learned that they can no longer smother isolated unhappy customers with broadcast market messaging, and need to nip destructive conversations in the bud - which have an unpredicatable tendency of catching like wildfires.

 

Now brands are trying to work out how to integrate social into their marketing and relationship management strategy. 

Where are we likely to go from here? How about leveraging social networks through recommendations from trusted sources? It's like adding a whole new dimension to targeting, just as the traditional push marketing model is flagging.

World class prospecting and market development is as much about trust as it is about cut through, and solutions that simplify that challenge and make it easy to deploy authoritative acquisition and development programmes will help solve one of marketing and sales' great current challenges.

Image courtesy of Brian Solis

 

CRM 3.0 - where do we go from here?

I'm increasingly firming up the view that the desire of marketing services providers to sell meta systems to large enterprises is not shared by those target organisations, nor, significantly, the big 4 Consultancies. These are the guys with the ear of the Boardroom, and their views matter - to an ever-increasing extent trumping the Advisory firms.

Having invested and reinvested over the last decade in core platforms for creating a single customer view, relationship management et al, there is no desire to do it all over again.

Multichannel marketing is perhaps better approched by thinking about the extent to which your customers have a propensity to be channel agnostic (Forrester). I've set out my stall that trying to deploy integrated, do-it-all multichannel CRM platforms is wrong headed. Far better to have fit-for-purpose specialised execution platforms, with the activity, history and response data looping into the single customer view.

Organisations want to see a return on their investments to date, and are looking for components that can leverage their previous investments. 

• To that end, one overlooked area is marketing resource management, and the speed of deployment benefits to an organisation by alignment of DAMs with customer databases and segmentation. 
• Another emerging channel looks like being on-site assistance, with high predictability and personalisation assured through integrating knowledge bases, scripting, and embedding objects/ web services to determine which experience to serve to different consumer profiles common trigger-based events such as Next Best Offer.

Both of these areas help improve the customer experience, a rising discipline within global enterprises. Why, these guys even have their own thriving industry association! This growing area will, in turn, drive the use of analytics to support marketing and customer relationship based decisions. Expect to see the use of analytics shift from a typically modelled, theoretical basis to more sensitive analysis of real behavioural data. 

 

Welcome to 2011

I unapologetically reproduce an economic viewpoint for 2011-12 from a Chinese source (Andy Xie: my1510.cn) since continued short term economic relative stability is surely inextricably linked with China. Before you question what an economic piece is doing in a marketing  blog, let us just agree that the global economic context affects market behaviour and business priorities. In any case, it makes for fascinating reading!

2011 may look like 2010, beginning with hope, sliding into fear in the middle, and ending with hope again. Read more....

Who ate all the pies? Social marketing.

New research from Sherpa shows - surprise, surprise - that social media marketing is absorbing increasing marketing spend, principally in support of driving traffic, lead generation, sales revenue and SEO.

In an improving but cost-conscious environment, this new slice of the pie means that other slices will continue to shrivel, albeit progressively to begin with as businesses trial the impact of facilitating, joining and influencing/ monitoring conversations; as they seek to identify key opinion leaders and their social networks and vital effects; as they try to understand how to improve search effectiveness... 

Sherpa touched upon the evolving shape of the marketing department as most near-term cost goes into recruiting fresh staff with the digital competencies needed to develop engagement strategies that don't conform to traditional campaign constructs. Businesses can't afford the time and trial and error rates associated with converting existing talent pools, and consequently digital marketing recruitment is exploding. 

UK freezes in face of new ePrivacy Directive: Respond to the Consultation

The UK Department for Business, Innovation and Skills (BIS) has just published a public consultation on the implementation of the revised EU Telecoms Package. 

The Telecoms Package, a set of five directives that regulate the electronic communications sector in the European Union, contains the so-called e-Privacy Directive. As part of the review, the existing opt-out rule for the use of browser cookies, which are widely used to deliver targeted marketing messages on the internet, was replaced by a requirement to collect the consumers' "consent". This ambiguous wording leaves it up to national governments to clarify whether they interpret "consent" to mean "prior opt-in consent", or whether they prefer to stick with the existing "implicit opt-out consent" rule.

BIS proposes to implement the relevant parts of the Directive by copying the exact wording into the new, national law - without clarifying whether "consent" is to be interpreted as an opt-in or opt-out approach. In practice, this would mean that the exact meaning of "consent" is to be interpreted by the data protection regulator, the UK Information Commissioner's Office (ICO).

According to Outlaw.com, BIS recognises the importance of cookies (AKA targeting) to make the Internet work and deliver value to users:

 "The internet as we know it today would be impossible without the use of […] cookies," says BIS. "Many of the most popular websites and services would be unusable or severely restricted and so it is important that this provision is not implemented in a way which would damage the experience of UK Internet users or place a burden on UK and EU companies that use the web."

"The Directive acknowledges this by saying that consent is not required when the cookie is strictly necessary to deliver a service which has been explicitly requested by the user," it says.

BIS goes on to say that since the range of uses where a cookie is strictly necessary to deliver a service online are impossible to define due to the fast moving nature of the Internet, and therefore it will be down to the Information Commissioner's Office (ICO) to interpret the Directive in practise.

The risk, and likely outcome of this tactic, is that any degree of certainty around the use of 3rd party cookies for online targeted advertising, or online behavioural advertising, gets kicked into the long grass until next spring 2011 by which time the ICO will be forced one way or another to declare its hand. 

In the meantime, we await the moment that some EU member states will no doubt feel compelled to be more forthcoming - and give their view on what constitutes personal data; the weight they will give to Recital 66 (non binding guidance that suggests browser settings could constitute an affirmative consent mechanism), and illuminating examples of application areas that are to be construed to need cookies to deliver a service.

Imagine a scenario where every member state interprets the e-Privacy Directive differently. Now combine that with a further scenario which obliges business to apply country of destination laws to their online activities (instead of country of origin laws) and you end up in with an almightly mess. This, I'm afraid to say, is exactly the scenario we are about to face in reality.

That's why it's important to participate in BIS's Consultation, specifically responding to the impact assessment questions.

BIS Consultation is open until December 3rd. You can respond with your point of view and any evidence via this link or directly online via BIS's Survey Monkey. Don't just listen to the debate, submit your view to the UK Government and help legislators understand the impact of a literal implementation of the ePrivacy Directive.  

Call centres & the rise of personal assistants

Speaking at the Travel Technology Initiative’s Innovation Summit, Continental Airlines senior director of merchandising and ancillary revenue Chris Amenechi said the industry would have more intelligent approaches to the phone.

He also predicted the widespread use of kiosks and mobile kiosks to solve queuing and other passenger issues going forward.

“Wouldn’t you rather talk to someone who knew you and you can talk to in any language? That’s innovation, that’s avatar,” he said.

Amenechi added that for medium to high-touch customers, call-centres would still be important and be staffed with consultants with skill sets different to today.

He also talked about the development of mobile applications for exclusive services that travellers would be willing to pay for such as airport shopping concierges.

Continental launched its virtual agent Alex a year ago to try to deal with some of the traffic to the call-centre.

Amenechi said specific applications and the use of avatars for the trip cycle from pre-travel and post travel would increase revenue and drive down costs.

“A new way of travel is going to happen. You can imagine the avatar as a personal assistant going out and scouring sites and bringing back all the information to you. In-flight entertainment will change the way we enjoy travel and mobile will proliferate everything. The way we travel and these long lines will be a thing of the past.”

The technology behind personal assistants is coming of age: avatars are lifelike and conversational, they can self learn, will represent a business, its values and externalise internal knowledge in a consistently accurate and predictable way that outsourced call centres will forever struggle to emulate except at premium levels. 

Personal Assistant technology is now widely available, delivered via such programs as Azigo and Vlingo. Connect this technology with human-like avatars and Chris Amenechi's vision for the travel industry is born.

Core story courtesy of Travolution.co.uk