Prepare for the recovery with an agile offer optimization strategy

Prepare for the recovery with an agile offer optimization strategy

COVID-19 has changed the way business is being done, likely for good. Consumer expectations and behaviors have undergone a dramatic shift, and companies around the world are completing years’ worth of digital transformation in a matter of months in an effort to keep up.

Marketing departments are being hit by changes as well, with marketers now being asked to maintain or increase the business and digitally mature under difficult circumstances and with fewer resources. We’re exploring the new developments and challenges facing marketers and key industries, and what steps they can take to adapt and succeed in the post-COVID recovery.


New consumer behaviors are making old marketing methods obsolete

Consumers have very different priorities now than they did in 2019. In many instances, safety has replaced price as a key driver, particularly in industries based around travel and essential retail. Expectations for personal relevance have also increased significantly as people spend more time on digital platforms with deep personalization capabilities, such as Netflix, Spotify and Amazon. Additionally, behaviors are highly likely to keep changing as we move through the recovery—consider the overbuying that was happening at the start of the pandemic compared to how things have stabilized now.

These behavioral shifts are having a number of impacts on the marketing landscape. For one thing, they’re nullifying old segmentation models. Whether potential customers are segmented by behavior, demographics or both, they’re likely now being influenced by many new factors. For example, say you have two 46-year-old value shoppers who had similar buying patterns before the pandemic. If one has a family member with underlying health conditions, that person may shift to doing all their shopping online, while the other person may be looking forward to stores reopening to in-person shopping.

Adding to the challenge is the fact that new consumer expectations are making some marketing methods less effective. Consumers now expect a high level of relevance from every interaction with a brand, and that obviously does not bode well for one-size-fits-all offer campaigns. But even micro-segmented offers stand a high risk of failing when the segmentation models they are based on are no longer accurate.


3 steps to building marketing agility and digital maturity


With the economic recovery happening in fits and starts rather than a steady increase, your brand will need to get in front of consumers at the right time to leverage any upswings. That means you need to work quickly to recalibrate your predictive models, develop new ones and find ways to engage with consumers at every point in the customer journey. There are three keys to achieving that goal:

1. Focus on rapid experimentation

Rather than taking an extended time to design and run large experiments, run small ones with specific groups quickly so that you can continue to learn and execute on the results. For example, start with just two or three offer types to test, choosing them based on your business objectives. Our CEO here at Formation has a favorite saying, “don’t wait for perfect,” and we find that taking this perspective helps our customers’ marketing teams to be more agile and try different approaches. Just make sure that when your experiments are delivering the results you want, you have the right solutions in place to scale them quickly.

2. Automate tracking and measurement for quick insights

Experimentation is key to acquiring the new behavioral data and right-setting your predictive models. But having to manually compile insights from your data and figure out how to take action is not fast or efficient. Look for ways to automate the tracking and measurement of your experiments so that you can act on the results as quickly as you can test.

3. Build flexibility into your process so you can adapt to change

Customer behavior is almost guaranteed to change as the pandemic evolves and resolves. For example, demand for groceries may again accelerate as we head into the holiday season, but then decline again in the spring when outdoor dining reopens or a vaccine becomes available. Continuous experimentation and measurement will be key to catching these behavioral changes, but you’ll also need a way to adjust and leverage them quickly. In the case of the above example, restaurant chains would need a way to calculate when to quickly shift from to-go offers to dine-in offers to leverage the renewed interest in onsite dining.

By taking these three steps, you should be able to build accurate models and effective offer campaigns for the COVID recovery and beyond. They will also help you identify which customers are the most valuable now, since this will most likely have changed in recent months. However, making these changes can be challenging as headcounts are being cut and marketing teams are being asked to do more with fewer resources. You’ll need a way to help your team become more efficient without increasing your budget or staff.


Increase marketing efficiency 10x with the right technology


The answer is simple—more efficient and agile marketing with fewer resources means that more of your tasks need to be automated. Specifically, many of the tasks in the section above can be quite time consuming when performed by humans, but investing in the right MarTech solution can potentially address them all.

Adding an offer optimization platform to your MarTech stack will allow you to automate the entire offer development and distribution process, putting the right offer in front of each customer at the right point in their journey. Unlike a manual offer development process that can take weeks or months, a dynamic offer engine will be able to develop and deploy initial offers in a matter of days, track and learn from them, and then iterate future rounds of offers. Companies like Starbucks have already realized a 10x increase in marketing executions speed by implementing an offer optimization platform.

The technology you choose should not only be able to iterate offers, measure results and optimize, but it should be capable of doing so at scale. If you have a customer base of millions in your loyalty program, for example, your offer automation platform should be able to ultimately deliver offers to every single customer—ones that are highly relevant based on behavioral data, and are delivered on the right channel at the time the customer is most likely to act on it. Adding this capability will allow your team to reach digital maturity and enable it to react rapidly to changes in the market.

New customer trends and action steps for key verticals


We’ve mentioned how critical it is to leverage changes in customer behavior, so let’s look at a few key industries where significant change has occurred in the past few months, and examine what steps marketers in that vertical can take to help their brands benefit.

Groceries

New customer trends: Grocery purchases were up 55% in March, as shoppers tried to stockpile essentials from flour to paper products and limit their number of shopping trips. They also reduced the number of stores they frequented, down to 1-2 from a previous 4-5. Shopping patterns changed to include more foods with long shelf lives as customers prepared for possible self-isolation. Demand for digital ordering, grocery deliveries and curbside pickups all spiked; initially, demand for these services outstripped supply, but many stores have since been able to offer increased capacity. More recently, stockpiling has declined during the partial reopening.

What to expect now: Sales may rise again due to fears of COVID spikes during the fall and winter. In the US, concerns over post-election instability may also drive a temporary purchase increase. Shoppers will continue to arrive early to find their preferred items in stock, and curbside pick-ups and deliveries are likely to remain popular as consumers try to maintain their personal safety during the holiday season. Most importantly, because grocers have earned a larger share of customers’ wallets, they’ll need to take steps to retain as much of that share as they can.

How to adapt: Implement an agile, data-led strategy to understand the changes in your customers’ behavior. You can then incentivize customers to maintain or change their behavior (depending what’s beneficial for your brand). For example:

  • When some items are in low supply, replace that shopping pattern with a different one. Offer incentives on items that customers purchased prior to the pandemic, but have not bought recently.
  • If stores are too full at certain times of day, incentivize shopping during off-peak hours to reduce lines and crowding.
  • If deliveries or pickups are overbooked, use incentives to encourage booking times that are further out or less popular.
  • To maintain highly valuable new buying patterns, such as customers buying more items from you due to consolidated shopping, reinforce those behaviors by creating offers around them, and experiment to see which offers are most effective for retention.


Air travel


New customer trends: Travel from mid-March through April nearly ground to a halt, with most consumers canceling their travel plans due to coronavirus concerns and stay-at-home orders. Airline communications focused primarily on customer service, assisting customers with deferring travel, or making adjustments to their rewards program to maintain the loyalty of their best customers. As partial reopening took place over the summer, some customers exhibited an increased readiness to travel, while many others were still waiting for additional health and safety indicators.

What to expect now: Readiness to travel will be decided at the individual level by factors like health and risk tolerance, not by demographics or geographical indicators alone. As airlines compete for a smaller number of travelers, we’ll see them vying to be the safest, offering COVID testing options and touting increased sanitization measures. As a result, we’ll see unexpected brand partnerships, such as United Airlines’ partnership with Clorox. The airlines likely to see the bulk of bookings during this time are the ones that can best gauge individual traveler readiness and get in front of those who are ready quickly, while still maintaining engagement with those who are further back in their travel recovery.

How to adapt: Use behavioral data gathered from your customers to gauge traveler readiness and engage travelers according to the stage of their recovery journey.

  • Understand your customers’ activity—for example, let’s say Customer A is a top tier rewards member, but hasn’t searched for flights since the pandemic began. Meanwhile Customer B, although entry-level, is actively searching for flights. This could indicate that Customer B feels it’s safe to start traveling, while Customer A has not yet reached that point.
  • Create marketing offers and communications that are personalized to the customer’s journey stage. In the case of the example above, Customer B could be sent a loyalty offer to encourage a new booking. Customer A, however, is not yet ready to fly. Instead, they can be sent engagement communications to keep them apprised of new developments like extra safety precautions.


Quick-serve restaurants


New customer trends: During the shutdown, many restaurants were closed completely, while others remained open for only takeout service. Combined with pandemic fears, this made the commonly used “try a new item” offer highly ineffective. In adapting to the lack of dine-in service, many restaurants got creative with their menus to appeal to customers, creating family meal deals, offering take-home DIY kits and bundling necessities like toilet paper with large purchases.

What to expect now: Data shows that some continued store closures are likely, as the pandemic has forced 1 in 6 US restaurants to close. Purchasing patterns will also have changed—for example, with many people working from home, people will have less need for that pre-work cup of coffee. Instead, QSR visits may become more of an indulgence or fun treat for those with limited restaurant and recreational options. QSR chains will need a way to identify which of their customers are retaining old behaviors and which are adopting new ones.

How to adapt: Delve into the differences between your pre-pandemic and post-pandemic data.

  • Adjust your predictive modeling to account for temporary behavior changes and permanent behavior changes, as well as changes to the consumer environment such as store closures. Create alternative incentives that are relevant to the current situations, like offers that drive traffic to the nearest open store or offers for drive-thru visits or visits on weekends.
  • Leverage mobile device information from your loyalty app to learn more about your customers. Are they working from home and staying in the same place every day? Are they essential workers traveling only from point A to point B? This type of knowledge can help you personalize your offerings, whether that means customizing them to the consumer’s travel route or adjusting them to new days or dayparts.

Find the right approach for the rebound

COVID-19 has changed and continues to change consumer behavior and the economy. As Rich Lesser, chief executive of the Boston Consulting Group, stated, “Shutting down was hard, but opening up is going to be harder.” This era calls for flexibility, and the brands that will best be able to achieve it are those with agile strategies that allow for continuous offer testing and learning—without putting a strain on resources. By using automation to develop speed and efficiency, your brand will be able to adapt for whatever this “new economy” has in store.

Learn more about the importance of customer loyalty in building strong relationships with your customers. Read our latest white paper, “How to Uplevel Your Customer Loyalty Program,” now.