The future of CRM in an AI-world
Reading time: 20 minutes
In 1964 the father of modern business consultancy, Peter Drucker, extolled that ‘the purpose of a business is to create a customer’ and the idea behind what was to become CRM and latterly CX was born.
However, if Drucker were alive 10 years ago and was reading the marketing and business media, he’d be forgiven for thinking that marketing - and business was broken.
Over the years, the Quantity of Customers rather than the Quality and Value of Customers became the name of the game with focus on acquisition at any cost vs driving value from an existing base; on the singular sale as key metric rather than customer value over time.
Unsurprisingly, this approach drove inexorably towards an enforced legislative compliance through the introduction of GDPR, and more recently the development of DPDI.
This customer and government focus on data privacy has forced marketers to think more sensitively about their customers. Throw-in the impact of the pandemic and the cost-of-living crisis and businesses are finding themselves interacting with their customers in very, very different ways to how they were just a few short years ago.
A new, more agile, more value driven, more considered form of marketing is emerging all underpinned by the speedy evolution of AI as an enabler – which is very exciting for brands, customers and consultancies alike!
The only thing that is constant is change
There are two certainties in life: death and change.
The problem with change today is that it has never been faster. Can you believe that just 13 months ago very few people outside of OpenAI had heard of ChatGPT - seems inconceivable to live without it now!
COVID also bears testament to this. On the 15th of March 2020 we were all going about our daily lives normally and by 23rd of March 2020 we were all at home, the schools were shut and we weren’t allowed out.
Moore’s Law serves as a perfect illustration of the exponential growth in the speed of change. In 1965 Gordon Moore, the co-founder of Intel, made the observation that processing power doubled every two years and that this would continue for the foreseeable future.
Forty years later and Moore’s Law is still applicable - in fact, Futurologist and Big Tech thinker Ray Kurzweil believes that the rate of change is speeding up and will get even faster because of The Law of Accelerating returns. If you map it, the graph will show that in five years our technology will be 32 times better than it is now. In 10 years, it will be 1,000 times better and in 20 years it will be a million times more advanced.
Take this thinking to its logical conclusion and the rate of technical advancement in 40 years will be a trillion times greater than today and a quadrillion by 2072.
These numbers are so enormous that it is hard for us to understand what this even means. Yet, understand we must.
It’s critical for marketers to keep one eye on how technology is changing - both in terms of how new technology can be used to communicate more effectively with consumers, but also the technology that consumers themselves are adopting into their everyday lives.
The Metaverse provides a very good example. Already, we are seeing brands dive in with both feet, a veritable bomb with not so much as a toe dip to test the water first. Is this the right approach? Only time will tell.
However, it’s not just technological change that marketers need to be wary of, it’s the whole ecosystem around it. Everything is interconnected. Fact. And the acceleration of tech advancement is leading to other changes - changes in consumer behaviour for example.
Change, disruption and consumer behaviour
We, as consumers, are altering the way we consume goods and services, and this is spawning disrupter businesses that are changing the rules. Again, the pandemic accelerated this trend, with businesses being forced to scrutinise their business models and adapt to the ‘new normal’. Disrupters were ahead of the game, as they had a different mindset to their more traditional counterparts and by their nature, they are more agile and unconstrained by legacy processes, technology and culture.
The businesses that thrived in the pandemic were those that did not hold back. They approached the complexity as an opportunity, not a challenge, and delivered some truly transformative experiences as a result. However, the now hackneyed examples of Uber Eats and GrubHub, could never have done so well during lockdown without the marked acceleration of the sharing economy adoption curve that came before.
The same is true of organisations that have quickly and efficiently integrated generative AI into their operations.
Those seeing generative AI as an enabler and opportunity are those that will progress further than those that view it with abject suspicion. It is fine to take the time to be pragmatic and analytical (as is discussed later in this white paper) but hang back for too long and you risk losing irretrievable competitive advantage.
What this shows is that the innovators and early adopters very quickly encouraged the early and late majority to join the party. And in both of these cases it has been extremely quick – months – not years. For forward thinking firms in the past, this took decades. For example, it took 64 years for the automotive industry to achieve a 50 million penetration. It took Twitter just two years. It is undeniable that a psychological shift in our behaviour that demands instant gratification means that consumers are speeding up.
So, we are seeing a technological shift alongside a complementary behavioural shift in expectations which is having a significant knock-on effect elsewhere. For instance, the days of 28-day delivery periods are long gone. Consumers expect things - now.
It’s no surprise, therefore, that patents have been filed for predictive distribution and drone delivery is likely to be a fully-fledged option by the turn of the decade.
Likewise, customer service. We expect to be able to contact an organisation at any hour of any day, through any medium we choose and be answered almost instantaneously. Sunday and half-day closing for retailers are a distant memory and a completely alien concept to Millennials, Generation Z and Gen Alpha.
The rise of consultancy
Unsurprisingly, given this rate of change, Management Consultancy is booming. MCA figures show that during the pandemic the sector grew by 4.5 per cent as the industry supported their clients with pivoting and then recovery. And now with supply chain issues, combined with price rises everywhere, more and more organisations are turning to the experts to help them navigate the hostile business environment.
But interestingly it’s the independents that are coming out on top. Research amongst 250 C-Suite execs across businesses in the UK, Germany, the Netherlands and Switzerland found that only 19 per cent of organisations would rely on a traditional consultancy firm for specific expertise. Whilst 37 per cent would turn to independent consultants. Another study reinforces this. The Economist Intelligence Unit’s report reveals that 19 per cent of multinational companies over $1billion in turnover are spending more than 25 per cent of their management consultancy budget with SME consultancies.
This is quite a trend. So why is it happening? In our experience it’s the fault of what we term the ‘consultancy gap’. Traditional consultancies and large marketing agencies are spectacular at strategizing, problem solving, recommending technology platforms and providing route maps to success. However, what they don’t do is turn the plan into a reality or help integrate said tech platform. Ironically, given that last statement a study by Gartner reveals that organisations only use 58 per cent of their technology stack’s full capability and potential. Clearly, knowing what you need to do doesn’t help you to do it! All too often we hear about inexecutable marketing strategies, or clients being left high and dry with a new technological platform but no idea of how to use it, or marketing campaigns that have taken months to implement. What this shows is that modern marketing consultancy can’t rely on strategy alone, it must be execution-focused and be nimble and agile enough to execute at speed – or risk being left behind. Moreover, as we will see traditional outsourced consultancy no longer sits well with the changing DNA of client-side marketers.
The DNA of a Post Pandemic Marketer
‘The colouring–in department’, ‘fluffy’, ‘creative-types’ – just a few of the derogatory labels used to describe marketers over the years. But the advent of the Internet has revolutionised accountability and made marketing more compelling in the boardroom through the demonstration of clear ROI. As a result, the modern, post-pandemic marketer is a very different breed to Don Draper. They have to be. Why? Because since Covid convergence is now the single biggest trend transforming the business arena, according to IBM’s Global C-Suite study.
So, what does a modern marketer look like? Twenty years ago, businesses were traditionally organised by function and the different departments were encouraged to keep themselves to themselves. But as the world has become increasingly connected the silos have fragmented and cross-collaboration is now strongly encouraged. Working from home actually helped this as people wanted to talk and without the logistics of having to get everyone physically in a room together meant that the number of people in any one meeting increased by a third.
Despite this new culture of teamwork and inter-departmental co-operation many organisations’ outsourcing policies have not caught up. Collaboration can only be truly realised when it is entrenched in an organisation’s culture and DNA. Having multiple competing agencies/consultancies with their own specialist skill sets is a barrier to the holistic marketing approach that is necessary to capitalise on convergence.
Likewise, marketers themselves must be more inter-connected and have a holistic business knowledge, stretching from finance through to operations. Most importantly they must be able to talk the language of the boardroom. Presenting operational marketing metrics like Page Views or Facebook Likes to the board is much less compelling than the ability to report on business outcomes, such as a six per cent increase in incremental sales from Millennials resulting in an uplift of £500,000 revenue in six weeks.
The ability to communicate marketing effectiveness in business terms needs marketers that are results driven and committed to accountability whilst simultaneously being strategic and outcome focused. They need to have an appreciation of the overall corporate strategy and be able to pragmatically identify the areas where marketing can make the most difference.
This means that the ability to derive meaningful information from data is crucial. Today, business decisions are founded on data. The complexity of data analysis, especially in the context of big data, means that data literacy requires knowledge of mathematics and statistics, something the marketing department is not famed for! Yet, this must not be to the detriment of creativity. Imagination and the ability to formulate original ideas remain as important as they ever were. Creativity needs to apply to technology, too. Technological curiosity is vital in terms of keeping an eye on what’s in the pipeline, seeing how other sectors and functions are applying new tech, like the Metaverse, blockchain, AI and machine learning and staying on top of platform developments including algorithm updates and new features. And it goes without saying that modem marketers must be fast paced and inspirational leaders that are both able to facilitate change and motivate others to work quickly and efficiently.
Individually these competencies are common traits in the marketing arena, but when taken together, they describe the kind of marketer that will join the ranks of the Marketing Society’s Hall of Fame and ultimately change the reputation of the industry.
The challenges faced by today’s marketers
Whilst researching this paper, we spoke to a number of client-side modern marketing directors to understand the challenges they face every day. The same five issues kept coming up, these included:
1. The inability to turn strategy into outcomes
Strategy is inherently complex, but executing it requires simplicity. Research by The Economist Intelligence Unit reveals that typically strategies fail to deliver 50 per cent of their promised gains and this is because of the ‘strategic-performance gap’. In other words, the inability to turn the strategy into actionable day-to-day activities. Despite the enormous time and energy that goes into strategy development, many have little to show for the effort. The old adage is true that a strategy without execution is merely an hallucination.
2. Fear of complexity
The famous saying ‘no-one ever got fired for hiring IBM’ sums up many organisations’ risk attitude. Fear of the new or unknown is rife. Anything that is considered outside of the norm is difficult to get buy-in for because if it all goes wrong someone must take the fall. Consequently, implementing effective, game-changing marketing is difficult, particularly strategies that are based on emerging and exciting technology like AI, The Metaverse, blockchain, deep learning and big data. By definition big data is data that is too large for human comprehension. So by its nature, worryingly, and resultantly many organisations are happy to stay with the status quo rather than risk the possibility of trying something innovative with the potential of great returns. This is why modern marketers need to be inspirational leaders - people who can motivate and push through an exciting concept.
3. Inability to make the most of technology
Investing in new technology but not making the most of it is a common problem. For instance, an automotive company that purchased a new marketing platform. Everyone from the board down to those that were going to be using it were excited about the promise it offered. It was supposed to revolutionise marketing campaigns, engender greater customer loyalty and ultimately increase revenue. But there was one small problem. Three months later it was still sitting in its bubble wrap. Another brand (this one retail) made the switch from a well-honed but very basic platform to a new higher spec, “modern” and more sophisticated solution. The entire process was handled by IT, with marketing only consulted at a very basic and high level. This meant that the resulting platform, whilst technologically superior with all the bells and whistles, had massive gaps in its functionality. The purchasing team had no appreciation of what the platform needed to do. And it ended up costing more than double, with a six month hold up to make it fit for purpose. And even now it’s still not completely there. Finally, a b2b organisation we spoke to spent thousands on a new platform three years earlier only to realise that to date they had only scratched the surface of its functionality. Having the right team in place at the offset and properly scoping out what the technology needs to do means that time, money and effort will be saved in the long run.
4. The band wagon effect
A transport company came to us saying they wanted to upgrade their social marketing after reading about Taco Bell’s Cinco De Mayo activity. The campaign saw the brand launch a sponsored lens that turned people’s heads into a giant taco shell. It resulted in 224 million views in one day. However, turning someone into a vehicle is definitely not as compelling! This campaign worked because of the context, execution and customer. The transport company merely wanted to jump on the bandwagon. We’re seeing this with the Metaverse. It makes sense for an energy drink brand to sell rocket fuel packs, but does it also make sense for an electricity company? Probably not. The optics are all wrong. The same with Generative AI. Everyone is wanting to integrate it yesterday, without really thinking about the value add. This is further compounded by the launch of new bells and whistles giving everyone massive FOMO. However, it is worth remembering pragmatism. Ultimately, the lure of success of other brands’ campaigns results in an ‘and us’ mentality where channels are adopted with no strategic reasoning behind them.
5. Rigidity of suppliers
Another challenge faced by modern marketers is the rigidity of their suppliers. For example one client we spoke to was bound into a large network and could only execute campaigns using the technology underpinning those agencies. There was no flexibility in terms of buying in new solutions that would have supported more personalised, one-to-one marketing. On the flip side are the independent specialists – yet clients fall foul of these too. For instance, when researching this paper, a B2B marketers told us of his frustration when he asked his data platform provider to undertake a simple web design project and their refusal/inability to do so. As a result, he was forced to outsource losing any kind of scale efficiencies he might otherwise have achieved if he were with a networked agency.
So what does this all add up to? A virtuous cycle of change. A fast-changing business environment, a change in the DNA of marketers and a change in the challenges faced by the new breed of marketer. If innovation is the handmaiden of change, then the role of the modern marketer is to facilitate innovation.
What’s the solution?
A new approach to innovation in marketing
We believe there are two types of innovation in marketing that matter: optimisation and disruption. Or to put it another way: efficiency and effectiveness. The key word here is AND. The past has traditionally separated the two, with one school focusing on marginal gains and the other propounding the benefits of game changing strategies. But why not both? What is interesting to observe from disrupter businesses, such as SpaceX, Instagram, Alibaba etc. they are not confined by brand heritage, their marketing strategies tend to combine both forms of innovation - enabling the little things to become more valuable than the sum of their parts and transformational activity that elevates them even further. Take for example SurveyMonkey, no. 15 in CNBC’s Disruptor 50 report. The business concentrated its ‘business as usual (BAU)’ marketing activity to look after the marginal gains – such as supporting initiatives including ‘recommend a friend’ and ‘upgrade free for three months’, whilst also working on a transformational campaign designed to take the survey-platform to a new level. The concept behind it was to set a playbook for business change, define the business’ next stride, and define the elusive but magnetic characteristic that galvanised people around a common mission. In doing this SurveyMonkey found that to its customer the brand meant much more than research results. People were using the tool to unleash their creative thinking and move beyond the assumptions that often get in the way of innovation. This led to a complete overhaul of its products, processes, and procedures and was considered responsible for its considerable growth. However, if the game changing activity hadn’t been underpinned by BAU or if the company had focused on BAU alone, the growth would have been much less significant, demonstrating the power of an effective and efficient mind set.
So, post-pandemic in this fast-changing landscape, the question that remains is how to manage innovation. This is where we introduce PATH, four pillars that will help eradicate the challenges faced by marketers and inspire innovation.
1. Plan
2. Architecture
3. Touchpoints
4. Handling
Planning focuses on identifying the strategy – finding pragmatic solutions to marketing problems that will deliver tangible results - and then translating it into an easy actionable set of instructions. The next step is the architecture the strategy is based upon- essentially the data foundation. Next is the execution phase which facilitates the touchpoints that will deliver relevant and one-to-one communications and finally the handling phase that controls the marketing activity, provides accountability to all stakeholders and feeds learning back into the system.
Plan: strategic approach
Today this must be about creating truly personalised connections with customers. Unfortunately, “1-2-1”, “real time”, “hyper-relevant” and “integrated” are now so overused that they’ve become almost meaningless, but despite their degradation the fact remains that relevant communication is key to both achieving marginal gains and creating game changing campaigns. This means building a true customer experience across CRM, digital and data strategy. Through strong project management building a plan that is translated into a network plan of actions meaning campaigns can be delivered quickly and efficiently. Using the most up-to-date customer journey technology, sophisticated analytics and segmentations powered by AI and machine learning the resulting insights deliver a true omnichannel experience for customers.
Architecture
American Singer, David Allan Coe was right when he said: “It is not the beauty of a building you should look at; it’s the construction of the foundation that will stand the test of time.” Underpinning the strategy is the marketing stack that enables omnichannel experiences.
Research by Be the Business and Open University reveals that 77 percent of marketers do not currently leverage the full potential of their martech, resulting in significant wastage in investment. So much potential lies in underutilised technology. And often the key is not adding new functionality, but in unlocking what’s already there!
With data accessibility now a key concern for businesses; getting the architecture right is now critical.
Touchpoints
The old marketing adage right person, right message, right time holds as true now as it did when it first came to prominence. The touchpoint phase is therefore all about defining and understanding the customer journey, the key points at which the value exchange can be leveraged, as well as defining missions and giving your customers reasons to interact and buy.
Handling
In modern, accountability-focused, marketing the handling or control phase is one of the most important. Ensuring that all communications are compliant to marketing legislature is of course no longer a nice to have, but a must have. In the current marketing landscape, a brand’s approach to privacy has never been more important and being aware of the changes being made by the likes of Apple and Google is critical. We know that since the introduction of GDPR back in 2018 consumer complaints about the handling of their data have increased by 160 per cent. As consumers we are now far more aware about the value of our personal information and what is and isn’t all right when it comes to the use of our data. We have a saying at The Thread Team: Just because you can, doesn’t mean you should! Creepy marketing is not cool.
Privacy and responsible marketing is not the only consideration at this stage of the model. So too, is feedback. Ensuring that all learning from the activity is firstly identified and secondly recorded so that it can be fed into future campaigns. All too often we move on to the next pressing marketing concern, without taking stock of what has unfolded before. They say that the definition of insanity is doing the same things over and over and expecting a different outcome and in marketing this is certainly the case – measurement and evaluation ensures that you don’t get stuck in the same groove.
PATH IN ACTION: Reactivating lapsed customers
Since July 2008 when Apple launched its App Store, over 3 million unique apps have been made available on Google Play, App Store, Windows Store and Amazon App Store. A phone’s home page is prime real estate.
Research shows that 76% of time is spent on the top three apps and 96% of time is spent on the top 10. Consequently, the problem for many brands is how to keep customers that have downloaded the app engaged and even more problematic, for apps that are also a sales channel, how to keep customers spending.
We were asked by a global fast-service food restaurant to run an experiment in one of their key APAC markets.
Despite having strong customer engagement with the app where guests could order food and drinks - click and collect or get it delivered - they wanted to grow the frequency of use, reactivate lapsed guests and bolster incremental revenue.
The tried and tested tactic of continuously sending out money-off coupons was no longer working.
The challenge we had was that to increase incremental frequency we would need to encourage guests to visit more often, but the reality was many of them already visited a lot. Where others had tried to crack this conundrum and failed, we knew we had to break the cycle and do something different.
Rather than looking for meaningful patterns in what lapsed guests bought and comparing to active guests - we analysed transactional & behavioural data.
Experience told us that the best way to reach our objective was not to create new behaviours but to reinforce existing ones in order to reactivate lapsed guests.
This meant that we could deliver super-relevant messages that connected with individual guest’s missions - rather than selling a burger or a coffee, we were selling ease, convenience and value.
From quite early on we could see that there was no difference in pattern between the behaviour of lapsed and active app users reinforcing our hypothesis.
What we could see though was that there were actionable differences in the frequency of app usage and the likelihood of using a coupon in a transaction. We then identified some clear habit-forming milestones - and layered them with the behaviours we were seeing in the analysis.
We quickly realised that the vast majority of guests fell into three distinct behavioural cohorts:
The Fan: These guys value the convenience of ordering via the app above all else (regardless of offer) and use it to access the brand across their daily lives - like a remote control. They account for 15 percent of guests but 55 percent of transactions. So, our objective for this group was to maintain and grow their habitual app use.
The Promo Hunter: On the flip side we saw a group of guests who responded quickly and almost exclusively to promotional activity, but then resumed their normal habit and behaviour. They make-up 10 percent of guests and 5 percent of transactions. Our objective here was to build habit and manage the value we traded.
The Value Seeker: Keeping things really simple and actionable we defined one more group. These guys valued the convenience of the app and could be activated by promotions. We saw that they needed a clearly defined occasion or mission to engage. They were the largest group with 75 percent of guests and 40 percent of transactions - so our objective was to nurture them towards regular usage, maintain and grow their app habit.
Combining these and a whole raft of other insights meant we were able to diagnose the most important attribute for each cohort. For fans we needed to reinforce convenience. For value seekers we needed to inspire usage by providing them with occasions and missions for use and finally we wanted to provide promotional junkies with a low risk easy way to use the app by offering dynamic pricing.
To support our hypothesis that the best way to reactivate lapsed users was to reflect previous behaviour meant that we landed on three occasions from a raft of suggestions that many of the guests had participated in previously and incentivised each:
Weekend occasions: Inspire family moments with a prompt to dine together at the weekend.
Delivery occasions: Offer lazy weekend moments to hard working guests with a nudge to enjoy breakfast delivery at the weekend.
Local occasions: Remind busy commuters that ordering breakfast with the app means they can beat the queues and make the morning commute less hassle.
Using a blend of Facebook ads and in-app coupons we ran the activity over a period of 8 weeks, including Christmas, Chinese New Year and a whole bunch of political and health related factors!
We successfully proved that using past behaviour as a trigger rather than trying to establish new behaviour was an effective way to trigger lapsed users and significantly bolster incremental revenue.
Our activity drove incremental reactivation against a control by 136% and generated more than 3 times the value of incremental sales.
We literally turned this on its head to create the step change and answers they needed and we are now working to develop an always-on reactivation programme for them!
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