In a recent conversation with a chief technology officer, he asserted all digital technology changes in his organisation were being led by IT and not by marketing. It made me wonder: How long a marketing function like this could survive?
Marketing automation is a key enabler for targeted and personalised customer engagement. But it’s the data-driven customer insights that are vital in identifying who you want to target and what you want to target them with.
Next Gen Health and Lifestyle Clubs went live with a new digital marketing platform in March, adopting Salesforce Marketing Cloud and a fresh customer communications strategy based on tailored interactions across a range of distinct customer journeys. Less than six months in, the group has already chalked up significant results, including a 10 per cent lift year-on-year in membership sales, and a 93 per cent increase in conversions on gym trial activities.
But it’s the work undertaken on better understanding its customer base and their needs that provided the foundation for this more effective marketing approach.
Next Gen marketing director, Andrew Savage, told CMO the company underwent a substantial rebranding and repositioning exercise last year. Mid-way through the six-month project, the decision was made to refresh and expand the group’s customer segmentation analysis. The key driver was developing a much better insights-led approach to target prospective members with higher propensity to join, longer retention, and higher lifetime value, he said.
Partnering with Experian Marketing Services, Next Gen handed over its first-party data, incorporating its entire membership base as well as former customers. This was matched against third-party data, with the intention of tapping customer trends, demographics and behavioural insights.
Previously, Next Gen just relied on Mosaic types to understand customer groups the clubs had an overrepresentation or underrepresentation in. The work with Experian was the first time it canvassed its entire customer membership base, Savage said.
Over a four-month period, Next Gen and Experian created a seven bespoke customer segmentation groups, using unique attributes across the company’s entire customer base.
The seven groups represent from 3 per cent to 32 per cent of the entire membership base apiece. Each has a persona attached that demonstrates specific attributes such as demographics, income and net wealth, lifestage, family status, and their most likely Mosaic group. Importantly, they’re also based on behavioural attributes such as interests, decision making process, marketing channels and the types of messaging a segment is more likely to respond to.
An example of a segment is ‘affluent elite’.These are wealthy, established households in prime locations, Savage said. They’re overrepresented in age group of 45-64, with a slight female skew, are commonly drawn towards the gym’s raquet facilities.
“Then we look at lifetime attendance, average spend, tenure and media consumption,” Savage said. “We knew they have low commercial TV and radio consumption but heavy newspaper, but they’re also influenced by product reviews and research before purchasing.”
These insights are now being used to inform all aspects of Next Gen’s marketing strategy.
“We are a bricks and mortar business, so we wanted to turn that into tangible information to go forward with for targeted marketing,” Savage said. “We created local catchments based around the drive time of each club. Within those, we determined the current population penetration of each segment, and that was indexed against total population, which allowed us to see which groups were overrepresented and which one were an opportunity for growth.
“We used a heatmap to see where members are based, and which different segments have a higher concentration, so we could use that for out-of-home and other local marketing activity.”
In each catchment, Next Gen licensed direct mail data, EDM data and also Facebook custom data, then incorporated programmatic display targeting most the likely Mosaic groups. That allowed the team to adapt an omni-channel approach to marketing, Savage said.
“We are able to use segment specific channels, imagery and direct response all aligned to insights from the analysis on the acquisition side,” he explained. “We then appended that analysis again our existing customer base, which means we can track ongoing attributes such as spend, attendance, referrals and retention. We also still incorporate segment groups when we’re looking at designing new programs or seeing where CAPEX should be sent, as we can determine which segment groups can be impacted.
“Based on their lifetime value, it helps us drive decision making processes around channelling funds and activity.”
The number of segments an organisations needs to determine comes down to what they want to use the insights for, he said.
“We wanted to define new opportunities for growth,” he said. “If it’s being used purely for internal purposes for the membership base, then we could have had more groups. But because we needed to take this out to market and within certain catchments look at other professional in that universe, that is where it needs to be at an aggregate level where you’re confident enough in the data for look-a-like to occur.”
In Next Gen’s case, the customer segments are even helping with new site evaluations by ensuring an area in certain segment groups is big enough to enable current penetration of a mature membership base, Savage said.
New customer creation
It’s not just existing audiences Next Gen is now tapping into. Savage said the group is investing in new audience creation, particularly through Facebook, using look-a-like audiences based on its existing segment groups to further target outside known segments.
“We also do segmentation around category specific targeting as we have a range of different membership options, so we can just target active retirees, or those new to the workforce,” he said.
Savage said the segmentation investment has proved its worth. Combined with the digital transformation piece launched this year, this has led to a 24 per cent year-on-year increase in inquiry level, and a 16 per cent increase in sales volume.
“Segmentation enables us to work out who to speak to most effectively, then the marketing automation allows that to channel that communication and drive reinforcement as well,”Savage continued. “They’re very much aligned together.”
A key challenge marketers face when it comes to such levels of data-driven customer insight is getting data sets in order. Savage said he was fortunate in that Next Gen uses a centralised CRM which manages all personal information as well as financials, point-of-sale and attendance records.
“Because of that single interface, it’s so much easier to have a single customer view,” he said. “That’s also aligned to success with marketing automation. The key is to get the right information in a timely manner that you can do great things with.”
Customer insights aren’t restricted to the marketing department either, and Savage said it’s important for customer insights to be closely aligned with sales team and at a local level.
“Sales are well aware that when we’re marketing to specific groups by channel specific messaging, and those inquiries come back and can tag where they have originated from,” Savage said. “Using personas and segment insights, they can tailor their approach to communicate in the most effective way.”
Next Gen is also using customer segments to figure out how to enhance member services. “For example, when introducing new programs, we look at which segment groups we target and how they are going to benefit from it, and we develop a communications strategy,” Savage said.
Savage noted that several Next Gen gyms are undergoing renovation to include new fitness zones.
“Within these, we’re thinking through which segments are going to be closely aligned to which zones to ensure we have an effective mix,” he said. “Then as we educate customers on using the zone, we can use communication that is appropriate to that segment groups.”
One of the ongoing questions is whether to focus on the bread-and-butter customers segments predisposed to joining, or targeting those Next Gen is underindexed in. Savage said it’s striving for a bit of both.
The other thing that’s important is that segments keep evolving as new members join. Savage is also looking at ways of refining some of the larger segments.
In addition, with custom audience matching opportunities coming through other channels such as AdRoll with display advertising and Facebook social ads, there’s more ways for Next Gen to use its segmentation data to create new audiences across different groups, he said.
Overall, Savage said the exercise opened the group’s eyes to how broad the membership mix really is.
“If you are not adopting a data-driven approach, you’re really only guessing what your really is, and how they relate to you and your product,” he said. “You may not be aware of optimum ways of communication either.
“Thanks to this work, we’re able to be so much more efficient with marketing, who we are targeting, how we speak to them, and responses to our messaging.It’s transformational once you have that data-driven approach.”