We live in precarious times. One day we read that the recession will get deeper and more difficult; the next, a more optimistic pundit tells us that the worst is over. In such a volatile environment, business plans must be extremely flexible and – if you’ll forgive the dirty word – hedged with strategies to deal with rapidly changing conditions. 

However, there are three consequences of the economic downturn that marketing managers can rely on with near certainty: 

• Retaining and up/cross-selling to existing customers will continue to become more important than acquiring new ones
• A scattergun approach to customer communications will become hard to justify. Return on marketing investment (ROMI) will become all important
• Companies will become much more sensitive to the risk that customers may be unable to pay for their products or services

Recently, SPSS surveyed 100 leading European businesses about their approach to customer retention and acquisition. The results were clear, with 34 per cent making retention their priority. Just eight per cent made acquisition their main focus.

In previous years, 40 per cent were concentrating on gaining customers. Now, attrition rates are high as customers look to shave a few pounds off their bills, defer purchases they consider non-essential or shop around for a better deal. In these circumstances, it’s important to know what customers think about your products or services, what leads them to consider deserting you and what you can do to keep their business. 

A substantial 68 per cent of the companies surveyed recognized this, believing that gathering feedback will be a crucial process that will help them increase customers’ satisfaction levels and the likelihood of retaining them. 

The increased focus on retention means that it’s critical for marketers to use tools that help them accurately identify which high-value customers are at risk of defection and which have the potential to be grown in value. A key technology for this is predictive analytics, which enables retention marketing to be focused where it’s needed and cross/up-selling campaigns to be targeted at customers most likely to respond. 

Predictive analytics isn’t limited to the “structured” data traditionally held in customer databases. It pulls together all types of data including free text – all forms of communication from customers – and attitudinal data gathered by surveys to help understand customers’ motivations for purchase and the drivers of (dis)satisfaction and (dis)loyalty.

During a recession, it’s likely that marketing budgets will be cut and a higher ROMI will be required to maintain marketing productivity. One way to achieve this is through campaigns that are more tightly focused – what has become known as micro-targeting. Micro-targeting was used very effectively by operatives working for both candidates for the recent US presidential election. 

According to Alexander Lundry of TargetPoint Consulting, a firm that worked for the Republican National Committee in support of Senator John McCain, micro-targeting is “the most advanced method of finding and messaging key voters [or customers] through direct contact programmes”. 

Using predictive analytics software, TargetPoint Consulting created “distinct groups of voters who [would] receive messages that resonate the most”. Three technological trends have made such micro-targeting possible: 

• The explosion of information linked to individual consumers
• The advent of computing power capable of discovering meaningful patterns and relationships within complex and seemingly unrelated data
• The availability of powerful analytical tools that can be used by marketers without help from technical gurus

 One factor that is particularly crucial for micro-targeting is access to a wide range of data sources. This is because micro-targeting depends not on one or two or even a dozen items of data, but on examining a great many pieces of possibly relevant data to identify the subtle, complex relationships that matter. Ken Strasma, president of Strategic Telemetry, which worked for President-elect Barack Obama’s campaign, says, “It’s when you see the interactions between hundreds of data points [that patterns emerge]”.

Micro-targeting certainly worked for the Obama campaign, and our experience with marketing shows that companies can use predictive analytics to reduce the volume of mailings by 40 per cent or more, conducting highly focused campaigns that continue to meet or exceed revenue targets. Typically, more accurate targeting drastically reduces marketing costs and will deliver dramatically higher response rates. 

Recent events have made minimization of risk a hot topic for businesses. For marketers, this means that if they are aiming to maximize the value they bring to the organization, they need to collaborate more with colleagues who manage risk. 

How often, during the past 10 years, did someone receive an offer of new credit when they were already at the limit of their existing facilities? How many times did we see reports about individuals who had debts of hundreds of thousands of pounds spread across half a dozen credit facilities?

These things happened because companies marketed products or services to people who were likely to buy them – but without consideration of the risk that they may not have been able to pay for them. Today, though, businesses are highly sensitive to risk, and know they have to take measures to control offers to risky customers.

This “joined up” approach to driving customer interactions is typical of how smart marketers will find themselves working with colleagues in other departments to ensure better, more holistic and more profitable relationships with customers.

Predictive analytics, adopted at an infrastructural level, delivers a common view of customers and consistent models of different aspects of their behaviors that can be applied across all areas of operations. Marketers can take the lead in driving a profit-sensitive, information-based approach to customer relationships that will be key to helping organizations cut costs, remain competitive and thrive despite the recession.