Part One of a series on the Digital Experience: It's direct marketing on steroids.
The “consumer-ization” of healthcare and threats to the long-established business model of the life insurance industry are just two examples of how traditional players are facing intensifying pressure to be more purposeful about their digital strategies.
No doubt about it, digital investments will continue to grow. To turn these investments into marketplace advantages, insurance brands can embrace what has worked in other sectors. As one of my favorite CEOs used to say, “steal shamelessly.”
I am constantly struck by how well the tried and true techniques of seemingly old-fashioned direct marketing can be applied to uncover how to make digital investments work harder. The discipline of direct marketing is all about having a continuous learning process that allows you to identify the leverage points for any brand engaging with its constituents. This applies to both B2B and B2C relationships. Such continuous learning leads to better focus on putting resources where the business payoff can be achieved. It also creates a fact basis for important, often high-stakes decisions.
These same processes can be applied with strong impact to digital investments, including mobile and social. The processes are relevant across sectors. Skilled direct marketers have been adapting a proven toolset for digital decisions for at least the past decade, so there are well-validated ways to do this with discipline and control. Of course, digital experience is like direct marketing on steroids – there is lots more data and lots more complexity, and, of course, everything happens a lot faster. By integrating on to your team capabilities in (1) how to develop hypotheses, (2) how to set up effective test-and-control experiments, (3) how to conduct those experiments and (4) how to integrate learning for continuous improvement, you will be amazed at the progress that can be made, even over a few quarters, to understand where your digital leverage really lies.
To make the point, I’d like to share a story of how a major credit card company, over the course of just a couple of years, set up a structured process to do exactly what I am advocating. As a result, the company enabled the complete transformation of its sales and service model from being almost entirely mail- and phone-based, to having a true omni-channel model with robust digital capabilities. In the course of doing this, the company effectively maintained its relevance as customers embraced developing digital channels. It also recalculated the economics of the business for all of the key consumer behavior drivers of financial performance.
Here’s the story:
Most executives in this business knew that digital was going to bring changes to the customer relationship but also questioned whether there would be positive financial impact. Was this just a financial sinkhole? Would it be justified as a growth story, or was it just about playing defense? How would existing distribution channels for sales, servicing and relationship management be affected?
The digital team was full of believers. They saw digital as a big opportunity to improve all aspects of the customer experience. They saw opportunity to differentiate through the customer experience, to improve business economics and to redefine how new accounts were attracted and booked. But they lacked the evidence to justify scaling digital programs or to accelerate the pace of change.
The team decided to borrow from their accumulated expertise as direct marketers. Leverage the past, but not be bound by it. Present familiar approaches to colleagues in the organization, as a means of building internal engagement and buy in.
Here are the key steps the team took to get moving:
- The head of digital created a senior role leading “profit enhancement” within the team. This signaled to the organization that, indeed, a connection existed between digital and financial performance. There was focus and accountability to enhance profits with digital technology, and to measure what was happening.
- The team created a process that engaged cross-functional teams of thought leaders in brainstorming sessions to formulate hypotheses of how digital technology, tools and experiences might affect customer behaviors that were P&L drivers.
- Hypotheses were prioritized and tested in-market, or through off-line simulations, depending upon the complexity of the tech support required for live testing. Regulatory considerations also affected the live testing priorities.
- Results were continuously monitored, communicated throughout the organization and used to refine and advance further tests and decisions.
- Focus was placed on two specific areas of inquiry: first, identifying the unit profit model behind a particular hypothesis and, second, finding the path to scaling positive results.
Over the course of the next three years, but beginning with results generated within the first several months of establishing the profit enhancement team and process, the team was able to discover, test and validate the impact of digital applications on all of the core customer behaviors that drove the income statement and balance sheet of this significant business, including attracting and booking new accounts, statement delivery, self-service, payments, relationship management and even collections of past due balances.
What drove the success of this approach:
- A high level of rigor. The process borrowed from direct marketing practices, but always with an overlay of openness and flexibility to allow for the unexpected, unanticipated, surprising results that can easily be missed when an experienced team gets too caught up in past success. I call this “rigor, but not rigor mortis.”
- A collaborative and transparent mindset. This attitude fostered support and reduced resistance. By including people from all over the organization, particularly in the brainstorming and hypothesis-vetting stages, the digital team got new recruits to the “army of the willing.” The team started to make believers out of fence-sitters, and to reduce the impact of nay-sayers. Of huge importance was a tight collaboration built between the digital team and thought leaders in both risk management and decision management. These two teams were the analytic talent who drove modeling, pricing and product structures.
- Tapping into the culture of test-and-learn. By following frameworks familiar to a traditional direct marketing organization, people had an easier time relating to the digital efforts. This further contributed to winning people over to the cause.
- CEO sponsorship: necessary but insufficient. Winning the popular vote was a matter of the points I’ve made above regarding ways to get people on board. It was about everyday process, relationships, communications … and, ultimately, showing results.
- Acknowledging and assembling the right mix of skills. Essential skills, activated with the right leadership wiring, enabled the everyday process to be effective. A team of digital natives with limited business knowledge would have been alienating (and unhappy) in this very traditional business that was proud of its legacy. A team of traditionalists might have found it really difficult to separate from the status quo. Building a team with real diversity of thought, background, approach – with a common denominator of a belief in collaboration – enabled progress and ultimately tremendous success.