Category: Marketing (page 1 of 2)

Database Marketing 2 of 2: Tactics

In my previous post we covered the database strategy. This time I wanted to dig into tactics, mainly looking at email which is currently the core database marketing channel for most e-commerce businesses (my strong suspicion is that won’t be true soon).

Anyway, given the strategic objective of maximising the value of the database, let’s look at some tactical considerations:

1. Are we simply bringing forward sales that would have happened anyway?
2. Are we offering a discount to a customer who would pay full price?
3. Are we mailing at the right frequency?
4. Is the content right?
5. What product personalisation should we be using?
6. How strong an offer do we need?
7. Who could be a Member-Get-Member advocate?
8. Who is at risk of leaving us?

On reflection, it becomes clear that there just isn’t one answer to these questions. They are fundamentally questions about segmentation.

The first question should really be “Who is going to buy anyway and who needs to be prompted?”. The other questions could be re-written in a similar way.

These questions are inherently much more complex than our strategic question which could be answered with one simple formula to measure the value of the database. There’s a lot of crossover between the questions: some people probably do need a strong offer at a high frequency for example.

These sort of complex, multivariable questions are very well suited to machine learning where we can just put a bunch of data into an API and action what comes out.

This is what we are currently working on at our new startup Machine Labs. If you are interested in joining us as a beta customer then please get in touch.

Database Marketing 1 of 2: Strategy

At their heart, nearly all e-commerce businesses are database businesses. Oddly enough it’s a side of the business that tends to be ignored. There is a virtual obsession with customer recruitment and conversion rates but almost no discussion about database marketing.

This is ironic because the database is where all of the profit comes from. In an efficient market, which the e-commerce world tends to be, it will be impossible to recruit profitably. So logically profit has to come from the database.

Currently most e-commerce businesses market to their database mainly be email so I will focus on that for now.

So the strategy should be to maximise the value of the database. I think that is quite an uncontroversial statement. I would however suggest that the vast majority of marketers don’t do this.

The first thing is to think of what the value of the database currently is. In investment there’s a very simple Net Present Value (NPV) calculation:

NPV Formula

This is just a sum of the cash flows from the database with the future cash flows discounted back to its present value. NPV is very widely used for valuing assets.

The tricky bit though is working out what the future cash flows from the database are likely to be. I would divide this into two parts:

1. What is the value of leads?
2. What is the value of customers?

Valuing leads should be based on i) the likelihood of them turning into customers and ii) when that is likely to happen. This is generally a fairly simply calculation providing the database has about 6 months of history. (Leads tend to go off faster than fish.) The more metadata you have the more accurate this calculation is likely to be.

Valuing customers is about estimating lifetime value. There are several ways of doing this. One method would be to add up historical lifetime values and use survival analytics (we’re Python developers at Move Fresh so we like Python Life Lines for this) to estimate future lifetime values of current customers.

Another approach would simply be to dump the dataset into a machine learning API and see what comes back, although you would need a good few years for this to work. This has the advantage that many more variables could be taken into account.

Once you have your estimate of cash flows you can then calculate the NPV of your database at will. This gives you a very different way of thinking about your business.

For recruitment campaigns, instead of thinking of Cost per Customer Acquired you can think of cost of the recruitment campaign v. increase in NPV of the database.

It also helps you understand how to email the database. The value of sales of an email campaign must be greater than the decrease in NPV of the database as a result of sending the campaign out. Thus you should be well on the way to maximising the value of the database without killing the golden goose by over mailing.

Finally, it will also help you to understand how much capital is sensible to allocate to marketing. If a marketing campaign results in £3 of NPV for every £1 of spend then that would be very powerful.

In my next post I’ll cover tactics.

Dewar’s whisky: Victorian punks

I started my marketing career with Dewar’s whisky. Dewar’s is fairly unknown in its Scottish home but is the number one selling whisky blend in the USA.

The brand started in 1846 and within 50 years was the market leader, largely down to Tommy Dewar who was an incredibly colourful character, to put it mildly. This blog is not a suitable place to record all of his personal indiscretions.

He constantly caused outrage in the business world, was involved in regular publicity stunts (such as sending a case of Dewar’s to the President of the United States during prohibition) and adopted new technology including the first ever cinema advert for any product.

Over a century later Martin Dickie and James Watt at BrewDog have a very similar style with #DontMakeUsDoThis and their punk beer.

Of course nowadays Dewar’s advertising is very far from punk. As it should be, a nearly 200 year old business which is the biggest blended whisky brand in the biggest market in the world should not be behaving like BrewDog.

But for those of us starting out, it’s good to remember that today’s corporate brands with their multimillion dollar campaigns and everything focus grouped to death, began in a very different way.

Move Fresh update Q1 2018

When we bought back Diet Chef from Piper Private Equity (who are a great investor!) in 2015 we did this to leverage the massive investment we had made in systems and infrastructure (see Andrew’s post on this).

It took us a little longer to move Diet Chef into a couple of adjacent categories and optimise our marketing but we are very pleased with the 2017 financial results which have exceeded our expectations and generated around £1m of EBITDA.

Our growth strategy wasn’t simply focused on generating cash from Diet Chef but more to invest this cash flow in adjacent categories that our infrastructure can serve.

In 2017 we invested and launched Parsley Box (www.parsleybox.com) a reimagined elderly nutrition brand that is growing very strongly against a stagnant revenue comparison of our two larger competitors.

We have achieved this by letting the management team focus almost 100% of their time on customer recruitment and building the team. Move Fresh has provided the logistics and supply chain to allow the scaling of the marketing at a rate most startups would fail to keep operational efficiency at.

So as we get into 2018 we plan to invest in other adjacent areas and to reach the consumer in different channels, one of the reasons we appointed Henrik Pade to our board of directors.

We will both look at doing this organically and through acquisitions if we can find the right ones. Let us know if you think you can help us on this journey, either as an experienced startup founder or if your company would be interested in joining our journey – its going to be fun!

Removing emotion (and gut) from Marketing

We spend a lot of money every day on customer recruitment and marketing.

Sometimes I pinch myself and look at the marketing investment we are making and look at the amount we spend – then I think about mistakes we made over the year (quite a lot!).

Cost per thousand (CPT) is the single best way to evaluate the media investment. How much will it cost me to reach 1,000 consumers – something that we forget about.

So get an accurate number of the audience (readership, viewers, impressions) and then look at how much this costs. Don’t be fooled by online and offline – who cares – I want or reach an audience – how much?

We offer everyone that joins marketing this simple training and test:

Compare the following (real numbers!):

  • An exhibition visited by 1,000 people at £500 + 20% VAT
  • A TV advert reaching 10,000 people for £2.50 Cost per Thousand.
  • £10 CPM + VAT for a magazine with 20,000 readers.
  • 30,000 PD inserts at £40 per thousand.
  • £1200 for online advertising at £6 CPM.

Calculate which would be the best and show workings.

Which would be the worst?

Answers on a postcard (it costs around 30p for a postcard delivered at volume) so what’s the CPT?

Where it all began?

It is 10 years this month since we started Diet Chef with £100 of equity investment and some contacts in the food industry.

We have done quite a lot over the last 10 years and also spoken to a large number of other food tech businesses.

The history of why two guys from the technology industry got into food is a very interesting one (worth chatting over a beer about) but the seismic shift of the UK grocery retail landscape was pretty obvious to us 10 years ago.

UK shopping habits in grocery have changed dramatically in that period. We have moved away from “multiple” large box retailers (Tesco and Sainsbury’s) into buying from discounters (Aldi & Lidl) and convenience stores (Sainsbury’s local & Tesco Metro).

This is partly driven by convenience – a large number of smaller stores have popped up in every town in the UK. We therefore don’t tend to do a “weekly shop” (if we do it tends to come by Tesco.com) and pick some items up locally and more often.

Diet Chef was born pretty much out of this phenomenon – it just happened in diet earlier. We used to buy specialist diet products in store, but multiple retailers couldn’t stock over 100 items in 300-400 stores they could stock 5-10 perhaps.

Consumers have therefore used online to fill this gap, and in speciality grocery it’s a great place to do it.

There are lots of great successes over the last 10 years in FMCG direct to consumer but they all tend to be in own brand speciality grocery – definitely where we are focusing.

Parsley Box Hits the Big Screen

Using the extensive experience in DRTV within Move Fresh we helped the Parsley Box team on making their very first TV ad

Take a look

Update from Parsley Box

We launched our latest brand Parsley Box around 8 weeks ago.  In this age of digital media and engagement we have seen a lack of digital channels that work for this demographic but have rejoiced in moving back into traditional media (print, direct mail, catalogues!).

Today most digital media talks about response rate, click through rate and conversion rate – all skills that have been prevalent in traditional direct response for many years before it was taken over by digital.

Having recruited more than 1,000 customers in this short period we are using old mechanics like the catalogue to engage in the same way that we use email in many of our other brands.

The majority of our orders are taken on the telephone and we are hearing great stories from our customers that we plan to use in future media.

Finally, TV is going to play a part – and next week we plan to shoot our first TV ad for Parsley Box.

While recipe box companies pile into competitive areas hankering after the aloof millennial we are sticky to the knitting and using direct marketing techniques to broaden our customer base.

Stay tuned for our latest advert once it’s complete in the next few weeks

Digital first?

There are an enormous number of marketing job adverts that say the prospective employee should have a “digital first” outlook.

This is something we disagree with quite strongly. The approach should be “cost per customer acquired first” which may well result in the choice of a digital channel but that is a completely different thing from starting with a prejudiced view that the digital channel will work best.

Nowadays the main digital advertising channels are based on Generalised Second Price auctions. In an ordinary auction (called an English auction) a product will be sold to the highest bidder at the price they bid. In a GSP auction, the first place will go to the highest bidder who will pay the price of the second bidder and so on. (Bids are adjusted by Google based on Click Thru Rates as of course the highest bidder may not receive clicks and will therefore not have to pay for their bid.)

The good news is that the GSP is sightly less prone to the Winner’s Curse than the English Auction (as we need more than one bidder to get their bid wrong). But it is still the case that the number of participants in the auction will tend to increase the price per customer acquired.

At Move Fresh we have found that many of the PPC auctions have now increased so much in cost that we are much better buying more conventional media (such as inserts).

The point is that we are not a digital first marketing company: we are an acquisition first company. We are completely agnostic on media. We think “digital first” is as dangerous as suggesting that a company should focus purely on traditional marketing.

It’s what works.

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