Is 50 redemptions worth 17,925 Opt Outs?

Wei Kuan Lim, Vice President of Client Services & Partnerships, autoGraph Inc. 

A Case Study in the relationship between reach, redemption and customer opt-in

With many retailers facing strong trading headwinds and shifting consumer tastes, CMOs are under pressure to leverage as many promotional campaigns as possible to drive sales. Multiple requests from the product and trading teams to add ‘just a small plug’ for their respective areas of responsibilities, into the next scheduled communications to the customer base probably sounds familiar to many of us.

There is now a multitude of advanced marketing, advertising and analytics tools available today, meaning that CRM execution teams are expected to identify the right audience to receive the most appropriate message, at the right time and place.

Impending changes in privacy regulations are now less than a year away, so CMOs are also placing a value on customer consent.  Many have dedicated resources working on programs future-proofing one of their most prized assets – the right to directly communicate with their customers. Every opt-out means that a business will lose all future communications with that customer or spend more re-acquiring the permission to market to this customer.

At autoGraph, we’ve drawn some observations and key learnings from an A|B test of one campaign, to explore the trade-off between reach, redemptions and customer opt-ins to marketing.

Focus on more than just REACH and clicks

Decide upon on a balanced set of campaign outcomes. Maximizing reach and clicks only potentially compromises your ability to market to your customers in the longer run.

Customer Segmentation is not always fit for purpose

Your customers are an excellent source of their preferences and attitudes. Make sure to engage with them in order to find out more.

To illustrate this point, the following shows the key measures of an identical campaign that was promoted in two distinct ways. Which one do you think performed better?

Campaign A Campaign B
Reach 150,000 16,000
Sales and Redemption Volume (Rate in %)

450

(0.3%)

400

(2.5%)

CRM Opt Out Volume

(Rate in %)

18,000

(12%)

75

(< 0.5%)

 

A team focused on sales results will only potentially be rewarded for the highest sales volume with results from Campaign A. However, the ‘success’ of the broader reach approach of Campaign A carries a cost in higher opt-outs relative to Campaign B. It’s important to note that Campaign A was not an ill-informed, broad blast to the entire CRM base. It was targeted on the basis of a long-standing customer segment that the business had defined.

In comparison, Campaign B applied entirely different targeting criteria, lowering reach yet still maintaining a strong redemption outcome. Take notice that not as many customers opted out. The targeting feature was an attitudinal trait that the brand learned through explicit interaction with customers. Customers who understand what businesses know about them usually have higher levels of trust and engagement with the brand, resulting in a win-win on both sides.

The test also exposed the limitations of segmentation that result in broad sub-groups of customers. There is opportunity in exploring different datasets surrounding your customers and continually optimizing to find the maximum relevance, optimum reach and avoid the counter-productive zones of irrelevant, offensive and wasteful messages.

12% of CRM Opt-Ins Saved with autoGraph

Are 50 units of incremental sales worth 17,925 customer opt outs? Some may say it depends on the value of each incremental sale unit. However, the loss of 12% of the CRM base marketing consent from the targeted audience should be alarming!

For all businesses out there, don’t bet the farm for short-term sales because you may be leaking permissions to talk to your customers in the long run.