Marketing Whims
Whim: 1. An idea, vision, passing thought, or fool notion. 2. What It Means.
Saturday, April 01, 2006
The Missing Leg Of The Marketing Stool
In a March 2006 Harvard Business Review article titled “Knowing What to Sell, When, and to Whom, the authors state that direct marketers typically make two calculations: 1) the likelihood that a customer will choose a particular product, and 2) the probability that a customer will make a purchase at a given time.
Unfortunately for financial services marketers, this is one leg short of a stool. The third calculation they must make is the likelihood that their customer will purchase that particular product from their firm.
Forrester Research has documented the problem over the past few years: Few consumers will consider their primary bank for financial products beyond deposit products. Less than half of consumers will consider their current bank for a mortgage or home equity loan, one-quarter will consider that firm for a credit card, and less than one in ten will turn to their bank for a brokerage account or insurance policy.
It’s no wonder, then, that response rates on campaigns are so low. Marketers may actually be doing a good job of predicting product need and timing, but are pitching customers who aren’t inclined to buy from them.
Look at the math: If marketers predict both product need and timing correctly 60% of the time, they should expect a 36% response rate. But if only 25% of customers will consider that firm for the product, than the expected response rate is just 9% -- which is a whole lot closer to what firms actually experience.
Improving future purchase consideration should be a top priority for financial services -- in fact, it's more important than improving the accuracy of predicting product need and timing. Why? Let’s go back to the math: If the accuracy of predicting timing improves by 10 percentage points, to 70%, the expected response rate rises to 10.5% (.6*.7*.25=.105). But if that 10 percentage point gain comes in the form of future purchase consideration, then expected response rate goes up to 12.6% (.6*.6*.35=.126).
Consideration and preference campaigns should precede purchase-oriented campaigns. By how long, I don’t know -- marketers will need to test and learn. But building consideration first -- before prospects are in the market for products -- will improve campaign success. Why? Because it fits how consumers go through the decision making process for financial products, which increasingly involves a conscious research and evaluation phase.
What are you doing to improve purchase consideration among your customers and prospects?
For more on this topic, please go to my active site, Marketing ROI: Whims From Ron Shevlin
Unfortunately for financial services marketers, this is one leg short of a stool. The third calculation they must make is the likelihood that their customer will purchase that particular product from their firm.
Forrester Research has documented the problem over the past few years: Few consumers will consider their primary bank for financial products beyond deposit products. Less than half of consumers will consider their current bank for a mortgage or home equity loan, one-quarter will consider that firm for a credit card, and less than one in ten will turn to their bank for a brokerage account or insurance policy.
It’s no wonder, then, that response rates on campaigns are so low. Marketers may actually be doing a good job of predicting product need and timing, but are pitching customers who aren’t inclined to buy from them.
Look at the math: If marketers predict both product need and timing correctly 60% of the time, they should expect a 36% response rate. But if only 25% of customers will consider that firm for the product, than the expected response rate is just 9% -- which is a whole lot closer to what firms actually experience.
Improving future purchase consideration should be a top priority for financial services -- in fact, it's more important than improving the accuracy of predicting product need and timing. Why? Let’s go back to the math: If the accuracy of predicting timing improves by 10 percentage points, to 70%, the expected response rate rises to 10.5% (.6*.7*.25=.105). But if that 10 percentage point gain comes in the form of future purchase consideration, then expected response rate goes up to 12.6% (.6*.6*.35=.126).
Whim: Financial firms should alter the mix of their marketing campaigns from purchase-oriented messages to messages focused on influencing product purchase consideration and preference.
Consideration and preference campaigns should precede purchase-oriented campaigns. By how long, I don’t know -- marketers will need to test and learn. But building consideration first -- before prospects are in the market for products -- will improve campaign success. Why? Because it fits how consumers go through the decision making process for financial products, which increasingly involves a conscious research and evaluation phase.
What are you doing to improve purchase consideration among your customers and prospects?
For more on this topic, please go to my active site, Marketing ROI: Whims From Ron Shevlin
Ron Shevlin, 8:24 AM