Monday, September 22, 2008

Want a Good Response Rate? Better Get Personal

Today, most direct marketing takes the form of push marketing. It pushes email or print collateral out to the mailboxes of prospects who have not requested it. Rather than giving prospects a chance to reach out for a product or service that meets their needs, it is based on guesses about what customers want. It's no wonder over 95 percent of junk mail and email ends up in the wastebasket. Wouldn't it make more sense to invest in marketing campaigns that focus on actual expectations and requirements?

Push marketing has response rates of one or two percent at best because most people view unsolicited mail and email as intrusive. Just about everyone ignores junk mail and spam, even when it comes from their own financial institution. In short, over 95 percent of the effort, money, time and labor that go into such materials are wasted. Worse, it actually drives prospects away. Think of it as collateral damage.

What exactly is the problem with push marketing? It is based on the assumption that all customers have the same attributes and therefore will have the same banking needs. In today's market, nothing could be further from the truth.

So how can marketing be targeted better to address the consumer as an individual rather than part of an amorphous entity? A step in the right direction is to add the recipient's name to a direct mail piece. That alone can increase response rates by over 40 percent. But an even more effective way to target marketing communications is to base them on transactional data and personal customer information stored in the bank's database. This increases response rates by over 500 percent, even in a traditional direct mail campaign.

Consider the following personalized marketing communications tools as a way to increase response rates, boost sales and encourage customers to act.

Monthly or quarterly account statements may be regulatory requirements, but they can also double as a strategic communications vehicle to engage and connect with customers. Marketing that takes the form of in-context messaging in conjunction with traditional statements has several benefits. It saves money because the mailing serves a dual purpose. Also, customers usually open and read their statements. Moreover, marketing messages included with statements are based on factual information on the recipient's requirements and preferences as evident from the statement. Marketing monologues become conversations.

Similarly, billing and other notifications specific to customers can double as marketing vehicles. New loyalty programs and even partners' cross-selling offers are less likely to be discarded when they are personalized rather than sent out en masse to everyone. More progressive banks are even considering dynamic pricing, which can now be enabled by "the last mile" in personalized customer communication as a new source of revenue.

A few progressive organizations have already created personalized web portals for customers. These portals capture and store the customer's profile and are linked to a document publishing solution, allowing customers to request information on new products and services at the click of a button. Whether content includes travel offers, high net worth programs or financial planning tools, financial institutions can send the requested information as customized pieces based on the parameters established through the portal.

Some financial institutions have linked customer analytics and event management systems to create a personalized customer communication tool. Targeted communications are triggered by events such as account activity alerts, the customer's purchase of a home or life stage events.

A prerequisite for the success of such programs is an integrated customer communications technology platform that can do it all, from database management to the design of engaging paper documents and e-mail, to web publishing, to the creation of dynamic, personalized content for marketing messages.

One of the world's largest diversified financial services firms, with operations in more than 100 countries worldwide, avoids "collateral damage" by using technology for customer communications management. The company is using e-mail to distribute correspondence that cannot be realistically sent in paper format, such as alerts or reminders about e-statement availability. In addition, it uses e-mail to drive customers to the company's website for additional service needs to decrease the need for calls to the customer service center. It generates real-time email (delivered within 30 seconds) and just-in-time email (delivered within 15 minutes) for correspondence such as confirmation email or follow-up servicing correspondence related to customer service calls. Extensive use of email has helped increase the number of customer touch points and reduced customer service costs while monthly volumes went up from 40,000 print-only letters to more than 11 million letters for distribution via print and email. The company saved more than $20 million, reducing cost per correspondence by more than 95 percent.

Personalized marketing communications not only increase response rates, they build better customer relationships. It typically costs about $300 for a bank to acquire a new customer and attrition rates range from 10 to 40 percent. Since it takes about three years to recover the cost of acquiring a new customer, keeping customers through cross-selling and up-selling of more profitable and "sticky" products is critical. Personalized customer communications open the door for further communication and establish strong relationships with customers, making these approaches far more effective than anonymous push marketing. For example, 35-40 percent of all customer attrition is related to life stage events. By sending event-triggered communications, financial services organizations can leverage these changes in customers' lives.

In addition to a flexible technology infrastructure that drives personalized customer communications, there are other prerequisites for effective customer onboarding. The most successful loyalty building marketing programs are:

Relevant. They are founded upon a clear understanding of the targeted customer segment's demographics, attributes and past relationship with the bank, if any. Never assume all customers are the same. Pinpoint a relevant message that really meets their requirements.

Consistent. It's not just about acquiring customers, but also managing them through relationship building throughout the customer lifecycle. Keep messages consistent and consider the customer's satisfaction throughout the relationship, particularly with regard to life stages that might cause a switch in institutions.

Cost-effective. The challenge for marketing departments is to keep campaigns cost-effective and show ROI. Customer communications management platforms, tools and infrastructure are a worthwhile investment because they drive more effective, personalized messages to individual customers.

Push marketing drives customers away. Personalized, customized marketing pulls them in with products and services that meet their needs. Individually targeted messages sent with statements, notifications and other regular communications are less likely to join junk mail in the virtual or real wastebasket.


The Convergence of OEM and ECM - Largest Independent ECM Vendor Open Text to Buy Captaris for $131M

Open Text has acquired Captaris a leading provider of software products that automate document-centric processes for $131M. Under the terms of the agreement, Captaris shareholders will receive cash consideration of approximately US $131 million in total, or $4.80 per share in exchange for their Captaris stock. The deal, which is expected to close by the end of the year, is another example of the on-going consolidation in the office and enterprise solutions markets.

 Captaris is a provider of computer products that automate document-centric business processes. With a comprehensive suite of software, hardware and services, they help organizations gain control over many processes that include the need to integrate documents more securely and efficiently. They develop products and services for document capture, intelligent document recognition and classification, routing, workflow, document management and document delivery. Captaris has a large installed base of customers that includes many Fortune 100 companies, the majority of the Global 2000 companies, and thousands of mid-sized enterprises.  The customers use Captaris products to reduce costs, comply with regulations, increase the performance and productivity of critical business processes, and leverage their IT system investments.

 Captaris products and services include the following categories:

  • Intelligent document capture, recognition, classification, and routing solutions that create “smart documents” and automatically deliver them to meet the collaboration and compliance needs of today’s business environment.
  •  Business process management software that automates both functional and vertical business processes, helps organizations maintain accountability, supports compliance initiatives and increases productivity; and
  • Document management software products that target business needs for reducing paper by storing and accessing digital content throughout the information lifecycle and supporting compliance and collaboration within organizations.

 This acquisition fills out the ‘Capture’ gap within Open Text’s ECM portfolio of offerings while also adding $95M to its top line putting them on track to become a billion dollar firm as the only independent ECM vendor.  Today about 80% of the enterprise information consists of unstructured data stored in hard copy documents and other digital formats.  Captaris’ technology will strengthen Open Text’s ECM solutions by providing another on-ramp for integrating content into our ECM solutions.  Captaris’ software products let customers convert paper documents to digital content, and manage associated processes.  The acquisition will also expand Open Text’s partnership offerings by creating tighter integration with Open Text's invoice management solutions that work with SAP and Oracle.  Considering Open Text’s tighter integration with SAP and its fruitful channel partnership particularly in Europe, this move further cements the company’s strategic relationship with SAP.  Captaris also offers business information and delivery solutions built on the Microsoft .NET framework which integrate process and automate the flow of content.  Following SharePoint’s introduction, Microsoft started commoditizing the lower end of the EMC spectrum with basic content services capabilities now embedded in the MS Office bundle for the enterprise clients that need only entry-level functions, such as version control, check in/out, access control and audit trail.  Open Text’s acquisition will further help enterprise clients improve their ROI on SharePoint while also providing tighter integration into Open Text platform Livelink ECM 10.  

From a solutions perspective, Open Text will be able to further monetize its compliance and litigation solutions leveraging Captaris’ OEM relationships providing on-ramps (e.g. smart MFPs capturing and distributing files at a corporate legal department in preparation for discovery) to capture and digitize hard copy enterprise documents.  Traditionally, compliance and risk oriented initiatives within organizations have been haphazard and fragmented. The unifying element that compounds the challenges organizations face with compliance, risk, and governance activities is the ever-exploding volume of enterprise content. Gartner expects the worldwide ECM software market will reach $4.2 billion in 2010. In 2007, worldwide ECM revenue is projected to total $2.9 billion, a 12.8 percent increase from 2006. More than half of the growth is driven by compliance and litigation related corporate investments.

 This acquisition will likely displace some of Captaris’ competitors forcing them to be acquired by larger competitors; In the fax server and document delivery segment, some of their competitors are Esker, Biscom, Kofax/TOPCALL, Fenestrae, and GFI Software.  Captaris already had the leading market share worldwide and this would further consolidate the market.  In the capture segment where they acquired Oce’s Document technologies business, they face several more formidable competitors; In the optical character recognition (OCR) market, they go up against Nuance’s Scansoft division, ABBYY and Iris. In the intelligent document recognition (IDR) market, they compete against EMC/Captiva, Dicom/Kofax, and ReadSoft among others; these vendors provide packaged solutions. In comparison, Open Text’s acquisition will help them better compete in this segment thanks to Open Text’s size, reach and customer installed base particularly in the Global 1000 segment.   Captaris’ document management solutions compete primarily in the mid-market and MFP dealer channels based on functionality and price.  Their main competitors are Hyland Software (based on the OnBase product), EMC Corporation / Documentum (based on the ApplicationXtender product), Westbrook Technologies (based on the Fortis product) and Compulink Business Systems (based on the Laserfiche product). We would expect to see further consolidation among these vendors as the ECM segment is getting consolidated itself.

Another implication is that we will see the convergence of OEM market with Enterprise Content Management.  Creating and maintaining OEM and strategic relationships for vendors such as Captaris is important to their success because these relationships enable them to market and distribute our products to a larger customer base than we could otherwise reach through our direct marketing efforts. Captaris’ relationship with vendors like Xerox, HP and other has helped them transform their multi-function products into intelligent office utility as an on-ramp to client’s document-intensive business processes.

 Open Text, thanks to its healthy balance sheet and cash generation capacity should continue to make strategic acquisitions to fill in gaps within its Livelink platform and to increase its installed base of customers and channel relationships. This move will further boost Open Text’s strategic value to the major consolidators in the ECM.  SAP and Oracle would be the two top candidates to acquire Open Text within the next 12-18 months.