A Customer Centricity Paradox, a 2012 Acxiom & Digiday State of the Industry Report

a customer centricity paradoxthe 2012 acxiom and digiday “state of the industry” reportstudy finds customer centricity is an aspirational goal but not yet a reality for most marketers

better connections. Better resuLts.

executive summary

Marketers, whether for agency, media or technology companies, are increasingly aware of

the need to connect with consumers … audiences that have more online, offline, social,

entertainment, media and communications choices than ever before. The majority of

marketers want to understand their customers and engage them with personal, relevant

experiences in this era of the empowered consumer.

However, most of us struggle:

• 70%havesuboptimalornoabilitytointegratecustomerdatabetweenonlineand

offline sources

• 80%don’tapplycustomervaluescores

• 74%can’trecognizecustomersinrealtime

In addition, marketers may be underestimating privacy issues that will affect trust, a

customer-centricity imperative. Inadequate investment and lack of strategic alignment

hinder the ability to access valuable customer data trapped in customer databases. Poor data

integrationpracticesleavetoday’smarketersillpreparedtouseaddressabledatatobetter

understand their audiences and measure success at the customer level.

But, there is good news. We have role models to emulate — trend-setting companies

thatenableengagementthatfeelsauthentic,thatenablepersonalizedandintegrated

experiences, and that do for and not to their customers. Increasingly marketers are focusing

on cross-pollinating online and offline marketing in specific, strategic ways. And, with client

experiences—capturedinthe2011reportandhighlightingpayoffsforcustomercentricity

that still apply — the upsides have not changed.

a customer centricity paradoxstudy finds customer centricity is an aspirational goal but not yet a reality for most marketers

Acxiom Corporation | 601 E. Third, Little Rock, AR 72201 | www.acxiom.comFor acxiom’s view on privacy, visit www.acxiom.com/privacy© 2012 acxiom corporation. all rights reserved.

the 2012 acxiom and digiday “state of the industry” report • 1

2012 Survey Background WedistributedtheAcxiomandDigiday2012StateoftheIndustrysurveyto30,000digitalagency,mediaandtechnology professionals who either subscribe to Digiday publications or have attended a Digiday conference.

Weasked15questionsonavarietyofsubjectsfrommarketers’topconcernsandchallengestowhetherornottherespondents’companieshaverecognitionandtargetingcapabilities.The259respondentsrepresentedabalanceddistribution(Figure1)fromthebuyandsellsidesofmarketing:

• Agencies:38%

• Mediacompanies:22%

• Technologycompanies:17%

• Advertisers:9%

• Other:14%(consultantsandeducators)

Nearly72percentoftherespondentsworkinjobsthattheydescribedaseithermarketingorsales,withmost of the remainder representing analytics and audience management.

Nearly two-thirds of the respondents work in finance and insurance, while health care represented another 24percent.Additionalhighlightsfromtheindustrycategoriesinclude:

• Retail:36%

• Travelandentertainment:33%

• Mediaandcommunications:32%

• Technology:31%

• Consumerpackagegoods(CPG):31%

NOTE:respondentscouldselectmorethanonecategory.

Advertiser and Agency

Media, Tech and Other

47%53%

FIGURE 1: BALANCED DISTRIBUTION OF BUY AND SELL


reSultS: top concernS and challengeSThesurveyresults(Figure2)showthatmarketers’topconcernis“understandingcustomersandengaging them with personal, relevant experiences.”

While the difference between respondent groups tells us some are more concerned than others are, most indicate agreement:

• Agencies:74%

• Advertisers:70%

• Mediacompanies:47%

Regardlessofbuysideorsellside,allgroupsexpressedacommonunderlyingchallenge—acrosstheboard,agencies and marketers face tremendous hurdles providing consistent, relevant engagement; integrating databases;andreducingwaste(Figure3.)

Access to and integratingback-end customer databases

Collaborating with directmarketing to understand what’s

working for them and how digital

Rationalizing budgets with moreeffective ROI metrics

Adopting new media technologysuch as social, mobile and video

Understanding customers andengaging them with personal,

relevant experiences

Most Important Not Important

37%

39%

6%

17%

6%

1%

3%

21%

23%

51%

FIGURE 2: TOP CONCERNS

can improve results


Onerespondentwrote,“My biggest concern is with finding the most efficient and cost-effective way to integrate all of the above aspects — leveraging the digital path-to-purchase.” Anotherrespondentagreed,“TheseFIVEconcernsare MOSTIMPORTANT.”

Asurprisingnote:54percentoftherespondentsranked“ensuringprivacyandprovidingsufficientnotice,choiceandtransparency…”asanunimportantchallenge.Giventhepaceoftechnologychangesandthedegreeto which data use conversations are highlighted in the media, does this mean most of the respondents believe they have this area covered?

then where is the paradox?Thefirst“customercentricityparadox”playsoutinthejuxtapositionofanswerstothesequestions:

• Whichofthefollowingbestdescribesyourorganization’scustomer-centriccapabilities?

• Whatisyourorganization’sabilitytomeasureyourmarketingresultsatthecustomerlevel?

Paradox #1:whilemostrespondentsassesstheirowncustomer-centriccapabilitiesashigh(Figure4)fewcansuccessfullymeasureresponseatthecustomerlevel(Figure5.)

54%

13%

8%

19%

7%

8%

10%

20%

26%

37%

Ensuring privacy and providingsufficient notice, choice and

transparency in gathering and using data

Coordinating the timing and cadence of multi-channel

communications and feedback

Reducing waste and inefficiency when targeting and serving the right customers and prospects

Integrating multiple back-end customer databases

Providing consistent and relevant engagement for customers


FIGURE 3: TOP CHALLENGES


Mostoftoday’smarketersmeasureresultsonlyatthechannellevel.Onequarterconfesstheirabilityis“notgreat,”or“westruggletomeasureresultsatthecustomerlevel.”Amere8percentmeasureandcross-correlatewhile assigning a value score to customers. Individually:

• Agenciescandosoonlyattheindividualchannellevel:38%

• Advertiserssaytheymeasureandcross-correlateacrossallchannels:42%

• Mediacompaniesstruggletomeasureresultsatthecustomerlevel:36%

• Manytechnologycompaniesagree:33%

48%

19%

14%

14%

5%

We have a relentless focus on building customerinsights to better understand and recognize

high-value customer segments

We invest and focus more onacquisition than retention

Both direct response and digital marketerscollaborate on timing and creative to more

efficiently reach customers across allchannels in a coordinated fashion

We invest and focus more onretention than acquisition

We're integrating back-end systems toreduce waste and inefficiency while coordinating

multichannel campaigns and measurement

FIGURE 4: CUSTOMER-CENTRIC CAPABILITIES

Have or will have valuescore for each customer

Channel or cross-channel

80%21%

FIGURE 5: FEW CAN MEASURE VALUE

80%21%


paradoX #1: whiLe most respondents assess their own customer-centric capaBIlItIeS aS hIgh, FeW can SucceSSFully measure response at the customer LeveL.

Thesecond“customercentricityparadox”playsoutinthejarringdisconnectbetweentheanswersto these questions:

• Whichofthefollowingbestdescribesyourorganization’scustomer-centriccapabilities?

• Whatareyourbiggestbarrierstointegratedcustomer-centricmarketing?

Respondentsemphasizedtheirbiggestbarrierstointegratedcustomer-centricmarketing(Figure6) were lack of:

• Properdataortechnology:54%

• Measuresandincentives:24%

• Resources:22%

Paradox #2: so while many respondents said they had a relentless focus on building customer insights to betterunderstandandrecognizehigh-valuecustomersegmentsitseemsthisfocusisnottightlyaligned withtheircompanies’overallinvestmentstrategy.

Why the disconnect? Why do companies rank themselves high in customer centricity but low in the capabilities and alignment strategies required to actually fulfill being customer centric?

Data or Technology

Resources

Measures and Incentives

80%21%

FIGURE 6: BIGGEST BARRIERS TO INTEGRATED CUSTOMER-CENTRIC MARKETING

24%

22%

54%


paradox #2: whiLe many respondents said they had a relentleSS FocuS on BuIldIng cuStomer InSIghtS…thIS FocuS IS not tIghtly alIgned WIth theIr companIeS’ overall InveStment Strategy.

realIty: poor data IntegratIon aBoundSInthesurveyresponses,oneareastandsout:poordataintegration.It’sclear,customerdatasilosarerampantandimpedecustomercentricity.Specifically,thesurveyfindingsindicate:

• Mostmarketers(16%)assessthemselvesaspoorlyintegratingdatafromonlineandofflinesources(Figure7)

• 14%havechannelsconnectedinacentralizedfashiontorecognizecustomersinrealtime(Figure8)

• 76%havechallengesworkingandintegratingacrossmultipledatabases(Figure9)

• 50%ofadvertisersandonlyone-thirdofmediacompanyandagencyrespondentssaidtheycouldtrackwhat customers do in social media and one or two other channels.

Advanced

No/Suboptimal

30%

FIGURE 7: INTEGRATE DATA FROM ONLINE AND OFFLINE?

70%

Have channels connected or have a central repository

No or outbound or social only

FIGURE 8: RECOGNIZE CUSTOMERS IN REAL TIME?

26%

74%


it is cLear that customer data siLos are rampant and impede customer centrIcIty … 76% oF reSpondentS have challengeS WorkIng and IntegratIng across muLtipLe dataBases

BegInnIng the IntegratIon danceThereisgoodnews.Allrespondentsinoursurvey—advertisers(42percent)agencies(55percent)mediacompanies(40percent)andtechnologycompanies(47percent)—aredeterminedtogetitrightand move forward.

The first step in this journey — blending or borrowing creative from online and offline campaigns to create a more integrated conversation with consumers — is already a slam-dunk for most respondents.

We don't have acustomer database

We have everything weneed or databases are

already integrated

1-3 databases

4-6 databases

7-10 databases

10+ databases 9%

6%

28%

33%

13%

FIGURE 9: HOW MANY DATABASES FOR INTEGRATED MARKETING?

11%


Itisclearthatmarketersarealsousingavarietyofonlinetargetingtactics(Figure11.)

11%

14%

16%

19%

41%

Yes, we match marketing tosite visitors via cookies, and

name and other addressable data

Yes, we match marketing tosite visitors via cookies

Yes, we extend the fullcapabilities of our database

into our online campaigns

No, we don't do anytargeting online

Yes, we leverage behavioraland other ad targeting

FIGURE 11: BEHAVIORAL LEADS WAY IN VARIETY OF ONLINE TARGETING

FIGURE 10: MOST BLEND CREATIVE ACROSS ONLINE AND OFFLINE

No16%

Yes84%

But, while marketers are doing some of the basics well, completely closing the loop is extremely hard.

Most marketers assess that they poorly integrate the data that comes back from online and offline sources. The majority conduct their integration efforts as occasional batch updates.

Despite the challenges, marketers want to move forward and see advanced targeting and attribution as top datapriorities(Figure12)citingthefollowingspecificdeliverablesaslacking(inorderofimportance):

• Addressabledatatobetterunderstandandreachouraudience• Betterunderstandingresultsfromcampaignstoknowwhat’sworking• Borrowingcreativetocoordinatemorepersonalizedoffers.

In addition, instead of just focusing on acquisition and retention, marketers are trying tomoveforwardbyemphasizingholisticcustomermarketingandbranding(Figure13.)


30%

2%

28%

40%

12%

Addressable data to better understandand reach our audience

A way to borrow creative to coordinatemore personalized offers

To better understand results fromcampaigns to know what's working

None of the above

None of the (below)

FIGURE 12: WHAT DO YOU NEED FROM DIRECT?

27%

26%

17%

5%

26%

8%

25%

21%

20%

25%

More options to expandtargeting beyond acquisition

Acquisition/direct response

Branding/extending ourregular branding efforts

Loyalty and retention/givingcustomers more options to

connect with the brand

Interacting with our customerswhere they spend their time


FIGURE 13: EMPHASIS SHIFTING TO MARKETING, BRANDING AND ACQUISITION


cuStomer centrIcIty remaInS an attractIve goalLet’spauseforamoment.Whyarewesointerestedincustomercentricityanyway?Isitthestatisticalproof thatholdspromiseortheintuitive,“thisfeelsrightandwecandoit”thatdrivestherespondents?

Marketersmayclaimtobe“relentless”intheirpursuitofbecomingmorecustomer-focusedpreciselybecausetheybelieveitcanbedone.Respondentsseeabigupsideincustomercentricityandlearningfromtheirtop role models.

Inour2011report,wesharedclientexperiencesthatgeneratedthefollowingcustomer-centricitypayoffs:

• 15-30%LiftinMarketingROI Experienceindicatesapotential15-30percentincreaseinreturnonmarketinginvestment

• 10-15%IncreaseinCustomerGrossMargins Make marketing more effective by focusing on improving the value of the customer portfolio

• 5-7%ImprovedPricing Createvalue-addopportunitiesforwhichconsumersarewillingtopaymore.

Andseeingisproof.Amajorityofrespondentsconsistentlyrecognizedfivebrandsasbeingtheir“topidols.”Accordingtotheresponses,Amazon,Apple,Zappos,StarbucksandSouthwestAirlinesaremostadmiredfortheir common themes:

• Engagementfeelsauthentictobrand

• Institutionalmemoryenablespersonalizedandintegratedexperiences.Thesebrandsdoforand not to customers

• Sustainingloyalty/preference…thesebrandscreatemorevaluethantheycapture

Significantly,manyrespondentsfeltallfivebrandshaveacorecustomer-centricmodelandstrategyarounddata, technology, resources, measures and incentives that enable better connections and personal experiences.

Digitaladvertisersemphasizetheirtopconcernis“understandingcustomersandengagingthemwithpersonal,relevant experiences.” It sounds so simple on the surface. But the role-model companies driving these trends are working hard and aligning relentless aspirational focus with practical and meaningful data, technology and resource enablers.

the Bottom LineThroughthesurvey,259digitalagency,mediaandtechnologyprofessionalsdescribedtheircapabilities,concerns and challenges, their aspirations and beliefs. The results are littered with paradox.

• Whilemostrespondentsassesstheirowncustomer-centriccapabilitieshighly,fewcansuccessfullymeasure response at the customer level

• Manyrespondentssaidtheyhadarelentlessfocusonbuildingcustomerinsightstobetterunderstandandrecognizehigh-valuecustomersegments,yetitseemsthisfocusmaynotbetightlyalignedwiththeircompany’soverallstrategy

• Customercentricityisanaspirationalgoalbutnotyetarealityformostmarketers:– 70%havesuboptimalornoonline/offlineintegration– 80%don’thaveorwon’thavecustomervaluescores– 74%can’trecognizecustomersinrealtime

• Inadequateinvestmentandlackofstrategicalignmenthindertheabilitytoaccessvaluablecustomerdata trapped in siloed databases

• Poordataintegrationpracticesleavetoday’smarketersillpreparedtotargetaudiences,driveactivityandmeasure success at the customer level

• Buildingtrustisavitalimperative,butmarketersmaybeunderestimatingprivacyissuesand their impact


Butit’snotallbadnews.Marketerswanttomoveforward.Tocapturelargepayoffs,theyarefocusingincreasinglyon relevance and attribution. There are role models to emulate — trend-setting companies that enable engagementthatfeelsauthentic,thatenablepersonalizedandintegratedexperiences,andthatdoforandnottotheir customers. Marketers are cross-pollinating online and offline marketing in strategic ways. There are lessons to learn for those who dare reach for precise customer-centric marketing instruments.

Andthepayoffstogettingthisright—liftsinmarketingROI,increasesinmargin,anddefendablepricing—are all within reach.

aBout acxiomAcxiomisarecognizedleaderinmarketingservicesandtechnologythatenablesmarketerstosuccessfullymanageaudiences,personalizeconsumerexperiencesandcreateprofitablecustomerrelationships.Oursuperior industry-focused, consultative approach combines consumer data and analytics, databases, data integrationandconsultingsolutionsforpersonalized,multichannelmarketingstrategies.Acxiomleveragesmorethan40yearsofexperienceindatamanagementtodeliverhigh-performance,highlysecure,reliableinformationmanagementservices.Foundedin1969,AcxiomisheadquarteredinLittleRock,Arkansas,USA,andservesclientsaroundtheworldfromlocationsintheUnitedStates,Europe,Asia-PacificandSouthAmerica. For more information about Acxiom, visit www.acxiom.com.

aBout dIgIdayDigiday is a media company and community for professionals who work in the digital media, marketing and advertisingindustry.Ourmissionistoconnecttheindustrywithinsightfulanalysisandperspective,aswellaseach other. We provide key insights and information through our online publications and conferences that cover the changes, trends — and why they matter. The focus is on quality, not quantity, and honesty instead of spin.Wecovertheindustrywithanexpertise,depthandtoneyouwon’tfindanywhereelse.TheentireteamatDigidayisdriventoproducethehighestqualitypublications,conferences,andresourcesforourindustry.SeeDigiday.com to read or subscribe to our publications or for information on events; join Digiday LinkedIn or Facebook groups; follow us on Twitter @Digiday; or tune into livestreamed and archived video coverage of our events on our Livestream channel.

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the three payoFFs, in detaiLIntheprocessofpublishingour2011report,wesharedclientexperiencesthatgeneratedthesepayoffsfrom customer centricity:

15-30 percent lift in marketing roiAsanindustry,ouroverallreportcardisnotgreat:37percentofalladvertisingintheU.S.iswasted;80percentofonlineadvertising fails to reach its intended target. The culprit for both sad states is the same: insufficient use of the right data. Unfortunately,between80and90percentoftoday’sadvertisingisstillbasedonageandgender.

Asaresult,advertisingfailstoproducebecauseit’smostlyirrelevant;mistimed,misplacedandmis-messaged,failingtocapitalizeonnuancesinindividualinterestsandintent.Andwhenadvertisingdoesn’tfullywork,marketerssimplyspendandwastemore,addingfurthertotheclutter.Somehow,we’veendedupinastateof“moreadvertising”when it’s“betteradvertising”weneed.Thus,akeytoimprovingmarketingROIistogetsmarterabouttheplace,timeandmessage of advertising.

Onaverage,byembracingcustomercentricity,ourclients’experienceindicatesapotential15-30percentincreaseinreturnonmarketinginvestment.So,it’sreasonabletoredirect$15millionto$30millionofa$100millionadbudget to better alternatives, dropping the savings directly to the bottom line.

10-15 percent increase in customer gross marginsWhile enormously valuable, making marketing more efficient is just the start. The second opportunity is to make marketing more effective, by focusing on improving the value of the customer portfolio. While some companies can be successful competing on price or distribution or innovation, most companies will need to compete on their ability to attract and serve the right customers.

Ourclientsseeahugeopportunityinadoptingthisstrategy:a10-to-15percentimprovementincustomerprofitability.Therefore,foracompanywith$1billioninannualrevenue,that’spotentiallyanother$100millionto$150millioningross profit a year.

Driving customer portfolio value is highly dependent on information systems and strategy — the goal is to invest proportionallytocustomers’projectedlifetimevalue.Thebestprojectionsoflifetimevaluearemultidimensional,refined from purchases, stated intentions and external measures like share of wallet and influence. Ultimately, you shouldusecustomerlifetimevalue(CLV)-orientedkeyperformanceindicators(KPIs)toguidedecision-making.

Tactically,leadersstartbyoptimizingtheircurrentcustomerportfolio,increasingfocusonrelationshipswiththe mostpotential,whileredirectingfromthoseofferinglesspotential.Effectivemarketerswillseektooptimizecustomervalueateveryinteraction.It’scrucialheretorecognizereturncustomersandconnectvitalinformationaboutthemtoengage appropriately.

5-7 percent improved pricingThe first two payoffs, improved efficiency and marketing effectiveness, are complemented by a third, the ability to raise and defend pricing. Why is this important? The answer is that the long-term health of your company and your employees’jobsareatriskifyoucan’t.

Manyfirmsfallintothecomfortzoneofofferinglowpricesanddiscountsastheprimaryincentivetoattractcustomers.Price is easy to comprehend and it does drive traffic, but it can have devastating and resonating impacts on the brand. As an alternative, marketers should create value-add opportunities for which consumers are willing to pay more, but which requires better understanding consumer interests. Multidimensional insight is the foundational key to that understanding.

Ourresearchindicatesthatformostcompanies,thereisa5to7percentgrossmarginimprovementopportunity(inadditiontothe10to15percentachievablethroughcustomerportfoliooptimization).So,acompanywith$500millioninannualrevenuehasanopportunityfor$25millionto$35millioninadditionalgrossprofitperyear.

© 2012 acxiom corporation. all rights reserved. acxiom is a registered trademark of acxiom corporation. all other trademarks and service marks mentioned herein are property of their respective owners.

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Documents

A Customer Centricity Paradox, a 2012 Acxiom & Digiday State of the Industry Report