Tag Archives: direct marketing

Are Scams Killing Direct Marketing?

We are facing an epidemic that is only going to get worse – the scourge of cyber and telephone-based scams against individuals and businesses. Scammers are becoming so sophisticated that it is difficult for even the most educated and tech-savvy individuals to avoid being conned. It is actually difficult to find someone who has not fallen for some kind of scheme that resulted in stolen money or a stolen identity.

These highly sophisticated and organized criminals are now able to assemble substantial information about an individual, their relationships with others, the products they own and the businesses they interact with. This allows scammers to create credible, convincing stories and interactions that instill confidence or fear, causing people to give out sensitive personal information, credit card information or other financial details. Some of these schemes are so involved that they span days or weeks and result in individuals wiring significant amounts of money to these villains. Other plots are based on ransomware that extorts money in exchange for the release of locked up digital information.

See also: Most Firms Still Lack a Cyber Strategy  

The result of this barrage of attacks – especially against individuals – is that many people are just shutting down. You’ve probably seen the advice in recent articles that you should hang up immediately when the caller is not recognized, because criminals are now enticing the person to say “yes,” recording their voice, then using that recording as consent to conduct illegal financial transactions. In addition, phishing scams are becoming more and more realistic, so it is not as easy as it once was to spot a fake request. SMS texting-based scams are on the rise, so individuals are becoming cautious about responding to what they receive via those modes. The bottom line: More and more people are unwilling to take an inbound call, answer an unknown email or communicate with someone on social media who asks for information.

Add to this the fact that millennials are notorious for avoiding actual “live” phone conversations, and you have a serious problem for any company trying to do outbound marketing of any sort. Sure, the direct mail will still fill up the mailbox, but virtually anything communicated electronically is now suspect.

Quite a few people I know (including myself), are taking the strategy that the only time they will buy something, renew a subscription, donate to a charitable cause or provide any personal information is when they initiate the interaction.

This has some serious implications for the insurance industry – both negative and positive. The contact center operations with predictive dialers and other advanced technologies are used extensively by many insurers, especially the Tier 1 companies. And these outbound calls are not just for marketing and prospecting, but also for existing policyholders for insurance-to-value assessments, customer satisfaction surveys and other activities. Emails are also prevalent among insurers for prospecting and for communicating with policyholders and members. Insurers, as well as companies in other industries, may face more and more resistance to these approaches over time.

If there is any silver lining in this, it comes from the enormous societal need for advice on preventing and dodging these scams and for indemnification against these types of attacks. Insurers have the opportunity, and perhaps the obligation, to determine the industry role in this area. Cyber liability coverage could be expanded significantly across all lines of business. Loss-control engineering should increasingly include expertise in these areas to help customers. Insurers should promote legislation, encourage technology solutions and find other ways to thwart this increasing threat.

See also: Cyber Insurance: Coming of Age in ’17?  

It may sound like hyperbole to say that direct marketing is headed for a crash, but preemptive actions by insurers, other industries and governments need to kick into overdrive if this problem is to be solved … not just for the sake of marketing but for the protection of the customer, as well.

I’m Spending a Fortune on Digital…So Where Are the Profits?

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:

  1. 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.
  2. 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.
  3. 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.
  4. Results were continuously monitored, communicated throughout the organization and used to refine and advance further tests and decisions.
  5. 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:

  1. 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.”
  2. 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.
  3. 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.
  4. 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.
  5. 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.