On the Campaign Trail

May 15, 2005 9:30 PM  By

Online merchant Overstock.com offers more than 550,000 SKUs of discounted goods, ranging from apparel to videos. To keep its virtual registers ringing, the Salt Lake City, UT-based company has affiliate relationships with more than 50,000 other Websites, as well as with the major online shopping engines.

Jacob Hawkins, director of online marketing with the $495 million company, is charged with monitoring these marketing venues. He meets this challenge by first attaching a distinct tracking code to each promotional offer’s URL. If Overstock.com is promoting, say, both gardening supplies and kids’ toys on a particular shopping engine, each promotion will have a unique tracking code appended to its URL.

Hawkins then uses Overstock.com’s proprietary campaign management (CM) application to track the promotions. “We monitor the traffic to see if customers visiting our Website through each tracking code are converting at the proper rate and if the site is making enough money to hit its profit target,” he explains. Each day he and his team of eight review electronic reports for high-volume sites (those generating at least $10,000 in sales each day); reports for the other sites are reviewed monthly. Among other metrics, they check the number of orders, conversion rates, and profit margins.

Overstock.com developed its CM system inhouse four years ago. “No one had the functionality that we wanted at the time we needed it,” says Hawkins. While he won’t disclose the cost to build the system, Hawkins notes that it’s been an “excellent investment” that’s allowed Overstock.com to avoid throwing money away on ads that don’t work and to get better results from ads that do.

SIMPLIFYING THE COMPLEX

Case in point: Last year Hawkins’s team found that several product categories Overstock was promoting on one shopping engine were generating tremendous profit, while several others were breaking even, and a few were losing money. The company reduced its bids (the amount the marketer pays for each customer click) in the categories that were losing money and boosted its bid levels in the categories that were generating profits. “Even with the higher bids, we were still able to drive much higher top-line revenue profitably,” Hawkins says. In fact, the partnership with that particular engine went from an overall loss of 8% to a net profit of 5%.

As the example of Overstock.com shows, the goal of campaign management applications “is to design, execute, track, and improve complex marketing campaigns through a complete, closed-loop cycle,” according to Sait Dogru, founder/director of business development with CampaignRunner, a Woodbridge, NJ-based CM software firm.

CM systems automate the functions of campaign analysis that marketers have long performed manually or with the aid of spreadsheets. They gather and compare results from multiple sales and promotional campaigns so that you don’t have to. Rather than spending time compiling the information, you can instead focus on campaign analysis. CM systems “bring together all information on campaigns in one place so that you can dynamically manage them,” says Ed Mandel, vice president of enterprise systems with Richardson, TX-based Concerto Software, a provider of customer relationship management (CRM) solutions.

Catalogers, particularly smaller ones, can for a time manually tackle the tasks a CM system would handle. “But at some point the manual processes prevent you from taking your business to the next level,” says Andrew Hally, director of segment management with Unica Corp., a Waltham, MA-based CRM solutions provider.

While CM applications are part of and support CRM systems, there’s a difference, says CampaignRunner’s Dogru. But CRM applications enhance one-on-one communication with customers, while CM applications provide information on customer segments. For example, a CRM application may show call center employees the recent purchases made by customers calling in; the CM application will let marketers know which customer segments received which promotions and how they responded. CM software can make it easier for you to determine the most effective way of reaching different segments and can help you avoid inundating certain customers with marketing materials while ignoring others.

“The amount of time and resources needed to get a campaign out the door goes way down when companies use a [CM] package,” says Jackie Horowitz, a Chicago-based senior product manager with Epiphany, a CRM software provider in San Mateo, CA.

The value of CM software is clear. Yet research by Information Systems Marketing (ISM) indicates that only 20%-40% of the catalogers that could be using campaign management software actually are, says Barton Goldenberg, president of the Bethesda, MD-based consulting firm.

What’s holding them back? For starters, Goldenberg says, many companies don’t have their customer data in a format that will allow them to slice, dice, and segment the information they would obtain from a CM system. Their databases may contain numerous duplicate or outdated records and would need to be scrubbed before it could be useful.

In addition, many companies may not feel that it’s necessary to maintain promotion histories, says David Raab, principal with Chappaqua, NY-based consulting firm Raab Associates: “They may send catalogs to pretty much anyone who has a ghost of a chance of ordering.” And smaller catalogers whose customer lists contain fewer than a half-dozen segments can probably make do with spreadsheets.

Finally, CM applications aren’t cheap. Although the price tags start at four or five figures per user for hosted systems, purchased applications often run to six or seven figures. The cost varies with the number of users, the number and complexity of the marketing campaigns, the number of sources from which the application will pull data, and the number of other systems with which the CM application will interact. For instance, a more expensive system may be able to handle a number of marketing tasks, such as planning, job production, lead management, and customer communications, says Jeff Baker, senior product manager with Indianapolis-based marketing software provider Aprimo.

Despite the price, many marketers have found that campaign management software can deliver an appreciable return on investment. For instance, United eWay, the marketing and campaign management system used by United Way of America, has helped the Alexandria, VA-based not-for-profit group boost donations.

After rolling out the system in 2002, United Way employees tested several Website messages to gauge donor response. They found that a person making a gift of $50 via the Website would be likely to positively respond to an onscreen message letting him know what could be done in the community with a gift of $75. They also learned that it didn’t make sense to suggest that the person make a gift of, say, $5,000, as it was highly unlikely that a $50 donor would give that much. “The technology would tell us the person’s interest of being upsold and their tolerance of that,” says Michael Schreiber, executive vice president of enterprise services with United Way.

Schreiber credits the system with generating a 30% increase in giving. To be sure, when comparing an individual’s giving from one year to the next, it’s difficult to pinpoint the reasons for changes. “But we see a pretty consistent 30% increase on the first-year ‘gift lift’ when using our tools,” he says.

SELECTING THE RIGHT SYSTEM

United Way used an outside contractor to develop the system; the price was in the low seven figures. Each year the organization spends several hundred thousand dollars to enhance the system.

If you decide to shop for a campaign management system, you’ll be faced with a number of decisions. One of the first is choosing whether to purchase or build the application or go with a hosted service.

Several considerations come into play. If you go the purchase/build route you obviously must be able to afford the investment. You’ll also need the resources to manage the system and stay abreast of changes in technology. Large companies with dedicated IT departments are most likely to feel comfortable taking on another application. They also may want the control and security that having the system inhouse can afford them.

What’s more, if you’ll be moving great volumes of data you may find it difficult to use a hosted system that you access via the Internet, says Ken Kornbluh, CEO of MarketingPilot, a Chicago-based software solutions provider. Transaction data for 500,000 customers, for instance, may consume 500 megabytes. “Moving that via the Internet would be painful,” he says.

You also need to consider how often you issue promotions and the volume of each, says Richard Muller, executive vice president of strategic consulting and analytics with KnowledgeBase Marketing, a marketing services provider based in Richardson, TX. “The greater the volume, the more your internal resources may be taxed in supporting it,” Muller says.

Many companies start with a hosted CM solution and move to an inhouse application as they get bigger, says ISM’s Goldenberg. That was the case with Ventura, CA-based Patagonia. The multichannel merchant of outdoor gear and apparel has been using the service bureau of New York-based DoubleClick to handle its list segmentation, says Patagonia circulation manager Ken Storey. Starting with its late-summer catalog, Patagonia will handle this itself, using DoubleClick’s ClearEDGE system.

“We prefer to be more in control of our segmentation and pulling of names,” Storey explains. All customer information, such as purchases in each channel, will feed into one database, giving Patagonia a more comprehensive view of its customers.

Effectively using CM systems usually requires changing processes and people as well as technology. As Steve Schultz, senior vice president of client services with Charlotte, NC-based solutions provider Quaero, puts it, “You don’t want to pave the cowpath.” Many systems that companies have patched together themselves over time contain less-than-efficient work-arounds. Implementing a CM application should allow for a more-streamlined overall process.

And keep in mind that the goal of a campaign management system isn’t simply to boost the number of campaigns or even the number of people responding to a campaign, says Ken Rudin, vice president/general manager of San Mateo, CA-based CRM solutions provider Siebel Systems. If a marketer sends a promotion to 1,000 customers and 50 respond, the goal isn’t simply to get the attention of the other 950. “The goal is to figure out how to send an e-mail to just the 50 who will respond and to get more-targeted campaigns, not more campaigns,” he says.


Some functions to look for in a CM system

The ability to tie into other applications

Minnetonka, MN-based freelance writer Karen M. Kroll has written for Inc. and IndustryWeek, among other business publications.

The ability to use data from a variety of sources

For instance, the campaign management software should link to any lead management system used by the sales force, says Ken Rudin, vice president/general manager of San Mateo, CA-based marketing solutions provider Siebel Systems. “You’re crippled if the marketing system is separate from the sales system.” After all, any marketing campaign should ultimately enhance sales.

Ease of use

Perhaps your company keeps customer purchase hisory in its transaction database while storing customer addresses in another database. A CM application should be able to integrate information from numerous databases into a single platform so that you can identify which campaigns work with different groups of customers. “Integration is the make-or-break point of the campaign management application,” says Sait Dogru, founder/director of business development for Woodbridge, NJ-based CM solutions provider CampaignRunner.

The ability to identify results from different campaigns

“You want easy access to data, and you want to easily create hundreds of segments,” says Casey Carey, vice president of marketing with the Abacus division of marketing services provider DoubleClick. For instance, the system should easily import segment definitions from a spreadsheet.

If a promotional e-mail prompts a customer to head to the mall to make a purchase, the system should recognize that.
KMK