Articles - Written by Arthur Hughes - 16 Comments
Database Marketing in Britain: A Success Story
We all talk about 1:1 marketing, but few people are actually doing it. It is difficult. It is complex. But, it can be highly profitable and satisfying for the customers. Here is how one large British corporation went about developing 1:1 customer communications with the help of a very experienced US direct agency.
British Telecommunications has been around for a century. It was originally part of the postal system in the UK. Privatized in 1984, BT now has twenty million customers, which represent 90% of the households in a country of fifty million. Until recently, they had no competition. That is not true anymore. In the 1990’s worldwide telecommunications competition came to Britain in a big way. They now have over 100 competitors. To promote retention, they decided to conduct quarterly mailings to the eleven million customers in their database on a regular basis. This is the story of how they went about it.
To manage the operation, Nigel Grimes, head of the Direct Marketing Consumer Division for BT turned to Devon Direct, a full service direct marketing advertising agency located in Berwyn, PA. Devon has fourteen years in direct marketing focused on the telecommunications industry. Their clients include AT&T, Bell Atlantic and MCI.
The goal of the BT program was primarily retention. In England, BT is like apple pie. Everyone knows it, and most people like it. But it is seen as older, stodgy and high cost. The newer competitors were primarily competing on price. They were targeting BT’s top customers. Unlike their competitors, BT offers a full line: local service, long distance, international, charge cards, Internet, call waiting, caller ID, return call. Faced with stiff competition, they decided to copy MCI and offer Friends and Family.
The mailing piece created by Devon for the quarterly mailings is a variable text brochure containing from twelve to twenty four pages. Each page introduces a new product or service. The personal savings review and the order form are custom printed for each customer, based on the information in the database record, with a different offer and a different primary message. The main selling brochure is segmented into up to six versions which vary by customer. BT was mailing one million pieces a week, with considerable personalization. No one in the U.K. had the capability of producing this volume of customized communications, so they were printed in the US and airlifted to Britain for the mailings.
In the package, BT was able to offer fully customized and personalized piece based on the information in the customer’s database record. The beauty of the personalized piece was that they were able to use the data in the database to make sure that every one of the million pieces mailed every week was different from every other piece. If the customers were already members of Friends and Family, the message would tell them what savings they were making. If they were not, it would encourage them to join. One page dealt with discount plans for which the customer was eligible. The page would tell the customer how much she could save per quarter by switching to a discount plan, based on her existing phone usage history. If the quarterly savings were too low, the text shifts to annual savings. If even that was too low, there would be no mention of the discount plan at all.
BT offers a combination of up to 20 different services to their 11 million customers. If a customer already has one of the services, that is not offered. If a customer is not eligible for a service (because of low volume, for example), the service is not offered. The order forms are completely lasered, driven by customer data. It is made very easy for the customers.
“You have already saved £6 per quarter from your current Friends and Family membership. You can save £6 more if your add 8 more friends to your calling circle. Add them today, and your total annual savings will be £48!”
It may sound simple to create such a paragraph in a customized quarterly brochure, but it is not simple at all. The software structure behind the wording is extremely complex. The personal end benefit to each customer is vital to the success of the program. In some cases, usage would suggest that this customer would gain very little by adding to her calling circle. Rather than suggest ridiculously low savings, it is better to say, “keep saving with…”
The US MCI Friends and Family plan asked customers to provide the names of the people they wanted in their calling circle. The BT system is different. It begins with the customer database and provides the customer with the ten phone numbers that they call the most. They are asked “Is it all right if we include these in your calling circle?” It tells the customer, “I know your situation. I understand you, and want to help you.” It gives the customer a choice.
In the UK, most telephone bills are sent out once a quarter, not monthly as in the US. This gives customers a three-month record to look at. On that page, text tells the customer how much they would save if they were a premier customer, based on their three month statement that is right in front of them. There are customized graphs and charts showing the two countries that they call the most. “You made calls to the US and Canada during the last three months. Here is what you paid for those calls, and here is what you would have saved if you would sign up for the Premier Program. In addition, if you sign up for Friends and Family, here is what you will save.”
Behind the scenes, BT has up to 80 text modules combined with up to 20 services, making up to 4,500 possible permutations and combinations of text in the brochures. It is impossible to proof. If you add more products to the offer, as product managers keep wanting to do, the number of possible combinations explodes. The careful checking of the software is critical.
One of the main objectives of the BT quarterly mailings is brand reinforcement. BT is one of the few British companies that have not been bought out by the Germans, the Japanese or the Americans. They intend to stay that way. The brand says: trustworthy, good value, competitive, service oriented, and British.
Results
What has come about as a result of these unique and expensive quarterly mailings? A response rate of between 14% to 32%. In one mailing, one third of the 11.5 million targeted households actually responded to the mailing and bought one product or other. On the average, customers buy 1.5 products per response. The Friends and Family Customer Database is now in excess of 14 million, up from 1 million when the program began. These results have been greatly enhanced by an intensive telemarketing operation which takes both inbound and outbound calls.
The relationship building program has had a positive impact on the overall retention rate and reduction in the churn rate. As Nigel Grimes explained: “BT is looking for an even more segmented and targeted approach based on the knowledge and information resulting from our two way conversations with our customers. We actually ask them questions about their lifestyle. Do they work at home? Do they use the Internet? Are they an international caller, or a previous international caller? What is their attitude towards BT? What is their propensity to leave BT, or to buy certain products?”
Why has it been so successful? Personalized based on customer data in the database. BT has been among the first to exploit the latest in personalization technology. The average UK household gets 44 items of direct mail per year. The average US household gets more than 700 pieces per year. The UK is still virgin territory. This information should be studied by any US company that wants to invest in direct mail in the UK. The profit potential is definitely there. With response rates like this, direct mail in Britain should be high on any US marketer’s to-do list.
Arthur Middleton Hughes is Vice President of The Database Marketing Institute that does research and consulting for e-mail and database marketing companies. He would love to hear about your problems. Perhaps he could help. He can be reached at Arthur.hughes@dbmarketing.com or 954 767 4558. His new book Strategic Database Marketing 4th Edition is due out from McGraw-Hill in 2011.
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