A recent report from the Aberdeen Group explores the critical role closed-loop marketing plays in today’s Best-in-Class organizations, and the dynamic shift in the tools, technologies and processes that support today’s top-performing closed-loop marketing initiatives. Significantly, 88 percent of top-performing organizations indicated they leverage closed-loop marketing.
The term “closed-loop marketing” has been around for decades. However, the complexity of optimizing and leveraging closed-loop marketing has increased dramatically over the past five to seven years. Today, there are a plethora of relatively new technologies (and channels) that help automate and streamline closed-loop marketing processes. So, is it time to lay down the red carpet and dub closed-loop marketing with a cliche like “2.0”? Frankly, who cares what we call it.
Closed-loop marketing is more important today than any other time in history and, fortunately, there are lots of new and emerging technologies that will play integral roles in automating closed-loop marketing to optimize sales and marketing effectiveness.
The proliferation of marketing channels adds complexity to the challenge of optimizing outbound marketing to deliver relevant messages to customers and prospects. The average organization touches prospects across so many different channels (Web site, e-mail, call center, print and media advertising, mobile marketing, etc.), it’s just plain overwhelming to think about how to bring all these disparate data sources together to close the loop in marketing messages.
What’s more, many organizations struggle to understand what closed-loop marketing is, and how to truly leverage closed-loop marketing to increase sales and marketing effectiveness. Aberdeen research reveals closed-loop marketing practices and processes are fundamental drivers of superior performance for Best-in-Class companies, making closed-loop marketing as important today as it ever was in the past. All respondents look to closed-loop marketing practices to help increase top-line revenue in online and offline channels (62 percent) and return on marketing investments (47 percent).
Consumers are bombarded by marketing messages on a daily basis. As consumers, we have come to expect some degree of personalization when we search online or register to be contacted by organizations over e-mail. Even the definition of spam is changing: Many consumers believe organizations are spamming them when messages aren’t relevant to them, even though the consumer may be are familiar with the sender and opted in to being contacted by the sender. For this reason, message relevancy plays a critical role in increasing conversion and improving return on marketing investments. As a result, closed-loop marketing is essential to every organizations marketing strategy.
What Is Closed-Loop Marketing?
Closed-loop marketing refers to the feedback loop between the customer and the marketing message. Simply put, customer data and behavior are used to adjust marketing campaigns to direct and refine marketing strategy and tactics, creating a constantly optimizing closed-loop system. Here are the steps involved:
- Create a message.
- Expose the customer to the marketing message.
- The customer reacts to the marketing message. (Do they purchase, click or ignore it?)
- Analyze the customer’s reaction (segment, target, etc.).
- Adjust the marketing message.
- The process starts over.
There are many ways to leverage closed-loop marketing. The concept of closed-loop marketing is universal across a single marketing message, an individual campaign (e-mail, direct mail), or across multichannel campaigns. It’s about optimizing the marketing message and increasing message relevancy to the customer. Every marketer relies on past experience to dictate and shape the effectiveness of their marketing campaigns; in a sense, all marketers practice closed-loop marketing on a daily basis.
In a recent Aberdeen study, “The CMO Strategic Agenda: Automating Closed-Loop Marketing,” the research reveals that top-performing organizations are deploying far more advanced closed-loop marketing processes and practices in pursuit of higher revenue and return on marketing investments. Closed-loop marketing is a constantly optimizing cycle designed to consistently increase relevancy, increase conversion and thus increase return on marketing investments.
Closed-loop marketing is sometimes referred to as the process of closing the loop between sales and marketing. However, sales and marketing integration is actually a subset of closed-loop marketing, and is essential for analyzing how customers react to marketing messages (did they click an e-mail, purchase a product or purchase a cross-sell?), which requires extensive integration between sales and marketing technologies. Ultimately, closed-loop marketing is about increasing the relevancy of marketing messages to lift conversion, grow revenue and improve return on marketing investments.
Best Practices in Closed-Loop Marketing
Aberdeen’s research reveals the most critical component to developing a robust closed-loop marketing strategy is a centralized customer database. Closed-loop marketing starts with data that is centralized and accessible for marketing and sales. Fifty-nine percent of Best-in-Class companies use a centralized marketing database containing customer profiles, marketing activity and data on customer behavior (versus 45 percent of Laggards).
However, data is only useful when it is transformed into actionable and timely information. As a result, Best-in-Class companies seek processes and technologies that will automate closed-loop marketing interactions (marketing message, channel, delivery vehicle, etc.) based on customer behavior or profile data within the marketing database.
Closed-loop marketing requires a blend of people, process and technology. The study identifies the technologies and organizational processes that support top-performing organizations. Best-in-Class companies support closed-loop marketing with the following capabilities:
- Fifty-six percent analyze customer behavior to segment and target markets with future marketing efforts (vs. 35 percent of Laggards);
- Forty-two percent documented processes to collect and manage customer response from all customer-facing functions in the organization (vs. 15 percent of Laggards); and
- Fifty percent utilize processes to adjust/react to customer responses to marketing campaigns (vs. 21 percent of Laggards).
Implementing or Optimizing Closed-Loop Marketing
Here are some recommendations to implement or optimize closed-loop marketing:
- Don’t bite off more than you can chew. Closed-loop marketing will require support from people, process and technology. Industry Average organizations already leverage many of the technologies that support closed-loop marketing efforts. Sixty-seven percent of Industry Average companies have marketing databases, which are essential elements to closed-loop marketing. Consider the following:
1. Executive support for closed-loop marketing initiatives is essential.
2. Start by tracking simple metrics like click-through rates, conversion rates and click-stream analysis. Get the organization accustomed to identifying the impact of messaging on these metrics. Track and monitor them over time and identify correlated variables that have a direct impact on these metrics: time, demographics, promotions, cross-sells, etc.
3. Move to light personalization in outbound marketing (for example, the customer’s name in the e-mail salutation). Measure and identify the impact. Measurable positive results will demonstrate the value of closed-loop marketing and help maintain momentum for future investments.
4. Start using the customer database to segment and target a handful of customers or prospects. Personalize offers to these individuals and measure the results. This may require investments in new technologies with segmentation capabilities. However, 48 percent of Industry Average organizations already segment customers.
5. Consider ways to automate closed-loop marketing through technology. Use existing experience to validate the impact of various technologies. Focus on adopting technologies that are aligned with your company’s business goals and objectives — if a Web presence is desired — and consider event-based e-mail marketing or multivariate testing capabilities.
- Analyze customer behavior more often. Best-in-Class organizations are four times more likely than Laggards to analyze customer analytics during marketing campaigns and 3.3 times more likely to analyze customer behavior in real-time.
Closed-loop marketing is a continuous cycle of optimization. The Best-in-Class realize superior performance because they have intimate knowledge of message relevancy and customer reaction at all times.
- Automate closed-loop processes by increasing investments in new technologies. This is a top-two strategy for the Best-in-Class. Consider technologies that marketing can own and maintain. Marketing ownership of closed-loop marketing optimization is essential to the continued success of these initiatives.
Your peers are considering investments in the following technologies in the next 12 months: predictive analytics (72 percent); Web analytics (87 percent); targeting and segmenting tools (79 percent); multi-variant testing (60 percent);event-triggered tool/rules engine (60 percent); Web content management (53 percent); and recommendation solutions (42 percent).
The Aberdeen report, “The CMO Strategic Agenda: Automating Closed-Loop Marketing,” is available for free on the Aberdeen Web site.
Ian Michiels is a senior research analyst at the Aberdeen Group. Michiels covers marketing management and digital marketing in the customer experience management group. He can be reached at firstname.lastname@example.org.