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Rick Cook Control Group Marketing: The Benefits of Doing Nothing with CRM

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By Rick Cook

Control Group Marketing - With or Without CRM Software Systems

How much do your marketing campaigns actually affect customer behavior? It's an old question and an important one. If your campaign isn't producing any effect, it's obviously a failure. If the campaign costs exceed attributed revenue from the campaign, it is less obviously a failure (less obviously because many companies don't compare revenue generated with the cost of the campaign.) With consistent measurement of the basic performance metrics you can eliminate unprofitable marketing campaigns and fine tune profitable ones to generate improved response as well as more revenue more efficiently.

Even without sophisticated customer relationship management (CRM) software or marketing analytics, there's a simple way to track the impact of your campaign. A control group will give you an excellent idea of how well you're doing.

The basic idea of a control group is simple. Select a random (or nearly random) sample from your campaign's marketing list and exclude them from promotion. Then measure the control group's activity and compare it to the activity of the group targeted via a campaign. The difference between the control and campaign group gives you a pretty good notion of how effective – and profitable – the campaign is.

The theory is that a certain fraction of the customers in the campaign are going to purchase from you anyway during the campaign period. The control group lets you filter out that effect, as well as the effects of other channels which may be influencing behavior, such as display advertising, and shows you how much the campaign has affected customer behavior.

This is hardly a radical notion. Control groups are a standard best practice in all kinds of marketing analysis. In fact they are fundamental to statistical studies. However relatively few companies use them in their marketing. Marketing control groups become even more effective when combined with the customer analytics found in most marketing automation or customer relationship management systems.

With a CRM system and a control group you can also detect the halo effect of your campaign. These are purchases and other actions which are influenced by the campaign but don't come in through the normal campaign channels. An example is a customer who is so inspired by your campaign that he or she picks up the phone and orders your product directly instead of through the call to action channel. Another example is the customer who doesn't use the promotional coupon you included in your marketing campaign but who purchases the product anyway. You can assume that customers in the test group who respond in unconventional methods are still influenced by the campaign and so should be counted as part of the campaign effect.

Because CRM software lets you track all points of customer contact, and not just the direct response to the campaign, it can capture these halo customers.

Control group marketing is commonly combined with test marketing where only a sample of the marketing list is sent an offer to test the campaign. This allows you to determine the probable effects of the marketing campaign without spending a lot of money.

A common number for the size of the control group is 10 percent of the size of the campaign or test group.

Ideally you would like your control group to be a truly random sample of your campaign list. In practice complete randomness is hard to achieve. Many companies select their control group by a simpler process, such as selecting every 10th name on the list to make up the control group.

If you don't draw a random sample it's important to avoid getting an obviously biased sample. For example if you use every 10th name on the list, be sure to go through the entire list and not stop partway through because you've reached your sample size. If your sample is less than 10 percent, switch to a larger interval between names, say every 20th name.

This is especially important if you're working with a list that's ordered other than alphabetically. If, for example, your list is by customer number, the lower numbers are likely to have been customers longer. If you stop partway through the list you end up with a sample weighted toward your long-time customers.

Of course control group marketing works best when your campaign medium is highly targeted, such as a direct mail, email distribution or nurture marketing campaign. When you're using a mass medium promotion like display advertising or television it gets harder to get exact results.

The usual way of handling the broader media is by either suspending the campaign or limiting its effect. For example a restaurant might advertise specials that are only good on Tuesday, Thursday and Saturday and track the business on those days compared to Wednesday, Friday and Sunday (many restaurants are closed on Monday). Or run the special for a month and compare it to the previous or following month – taking into account seasonal fluctuations. This is closer to conventional test marketing and it isn't as rigorous, but it will still give you a solid indication of the incremental effect of your marketing campaign.

There's nothing particularly arcane about control group marketing. CRM software tools ease the analysis of the results and the information it yields, however, with or without CRM systems marketing control groups can pay off big in designing future campaigns, reallocating the marketing budget and demonstrating proven incremental progress to the executive team. End

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Comments (5) — Comments for this page are closed —
Guest Kim Spencer
  We regularly use control groups to test individual marketing treatments by dividing a defined group in half and applying the treatment to one half of the target group while not including it to the other half. With all other factors being equal, we're able to easily and quickly attribute the difference in buyer responses between the two groups to the marketing treatment. This simple process significantly improves our campaign treatments over time.

Guest divadear
  Control group marketing works well for small businesses, however, what do you recommend for customer segmentation at larger businesses which have to get our heads, and our marketing campaigns, around very large volumes of customer data?
  Denise Denise Holland
    CRM analytics or business intelligence tools probably offer your best option for customer segmentation around large data volumes. CRM analytical software tools can group customers according to various user-defined categories, measures or dimensions, and then permit 'what if' modeling or otherwise seek out relationships or patterns between those segments which can deliver customer insight and unique ideas for marketing campaigns.

Guest Sam Dvreck
  What do you mean by user-defined categories, measures or dimensions?
  Denise Denise Holland
    These are your customer segmentation groups. They might include categories such as demographic segmentation - such as company size, industry or location - or they may include more implicit segmentation such as propensity to purchase (this may be based on customer purchase history, and identify purchase patterns by product, promotion, discount, sales person, time of year or other factors) or customer profitability.

By using BI or customer analytics tools to merge, flex or model various customer segments (often called measures and dimensions in the BI world), marketers can extract correlations or patterns that are otherwise buried in large volumes of data, and use that information to better personalize campaigns or better predict promotional offers, for example, using what-if scenarios and predictive analysis to determine how likely a customer group that bought one product will buy another product.

 

 

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Control groups are a best practice in marketing analysis and effective in determining campaign performance. However relatively few companies use them in their marketing. Marketing control groups become even more effective when combined with the customer analytics found in most marketing automation or CRM systems.

 

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