© The Economist Intelligence Unit Limited 2015

Beyond personalisationA UK perspective on contextual marketing

UK marketing executives are keen to explore the possibilities of marketing in context, but encouraging customers to share contextual information is the key challenge

The information that marketers can collect about their customers and prospects is becoming ever more granular, thanks to digital technology. Once, marketers were lucky if they could tell the age and sex of an individual. Now, as social media and mobile devices penetrate our lives, our thoughts, habits, locations and buying intentions are increasingly available to marketers.

This innovation has given rise to contextual marketing—the use of information about an individual’s current context in order to serve relevant and effective marketing messages. It is seen by some as the next evolution in marketing beyond personalisation.

“Context is absolutely central to where marketing is going,” says Will Shuckburgh, managing director at loyalty programme provider Nectar UK. “Context allows us to make sure customers get relevant and tailored messages, integrated seamlessly into their lives.”

According to a survey of marketing executives by The Economist Intelligence Unit, sponsored by SAP, UK marketers already have a detailed picture of their customers and prospects, thanks to their current marketing channels. For example, 67% of UK respondents say they can tell when customers intend to switch to a competitor, more than in any other country included in the study.

Nevertheless, they are keen to know more. Nearly half of UK marketing executives surveyed (48%) count understanding their customers better among their top three strategic priorities, second only to improving awareness and perception of their brand.

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About the surveyThis article draws on a survey of 165 chief marketing offi cers conducted by The Economist Intelligence Unit in the summer of 2015. In addition to 35 marketing executives from the UK, the survey includes respondents from France, Italy, the Netherlands and three Nordics (Denmark, Norway and Sweden). One-half of respondents represent organisations in the retail sector, with the remainder drawn from a range of industries. Of these, just under one-half (47%) represent companies with US$100m-500m in annual revenue, the remainder companies with US$500m and above.

Beyond personalisation: European perspectives on contextual marketing

2 © The Economist Intelligence Unit Limited 2015

Beyond personalisation: European perspectives on contextual marketing

UK marketing executives are also especially keen to improve their communications with prospective customers: 58% believe prospects would like marketing interactions to be more relevant, compared with an average of 30% across other countries.

For UK telecommunications provider giffgaff, using contextual information to provide relevant and timely information is not simply a tool to promote offers and services—it is intrinsic to the experience it offers customers.

“We honestly believe we can provide an improved experience to our members through the use of contextual marketing and personalisation,” says Kim Faura, chief commercial officer at the company. “If everyone was presented with the same information at all stages of their life cycle, we would expect to see a dip in our [customer] satisfaction scores.”

UK companies currently collect a great deal of contextual information. More than three-quarters (76%) collect information about their customers’ current interests, for example, and 42% collect information about who their customers’ friends are or who they are with.

This information is put to a variety of uses, the most common of which are communicating with prospective customers and building customer loyalty (both 61%). For Nectar UK, the contextual information it collects through retail partners provides a wealth of contextual insight, which it uses for special offers, rewards and discounts.

UK Europe(% respondents)Which of the following are currently your top strategic marketing priorities? Select up to three

Improving awareness and perception of our brand(s)

Understanding our customers better

Increasing customer engagement (e.g. interaction on social media)

Improving customer loyalty

Becoming more cost effective

Improving return on investment of marketing activities

Ensuring our marketing staff have the right skills for our current and future activities

Improving the customer experience

Other (please specify)

6458

4841

3641

3637

3330

3030

2430

1828

31

3© The Economist Intelligence Unit Limited 2015

Beyond personalisation: European perspectives on contextual marketing

“Because we are in loyalty marketing, we have huge insight into our customers’ daily lives,” explains Mr Shuckburgh. “We are in quite a privileged position because our customers share a lot of data with us. We might have a customer that buys something with a partner online, then buys groceries and gas. That gives us a pretty wide range of insights into off- and online behaviour. We are obligated to find ways to use that data for the good of the customer.”

The most common sources of contextual information for UK companies are the company website, as used by 80% of respondents, social media (70%) and email (70%).

For example, giffgaff gleans information about its existing members via these three channels. But for insights on new prospects the company also looks to online media channels. “[Online] media partners provide us with advanced segmentation and targeting capabilities,” explains Mr Faura. “These enable us to refine our advertisements to best-performing sites, geographical areas, gender, time of day, etc. We find contextual targeting to be relevant to the end user as an optimal way to invest in media efficiently.”

In the UK, as in all other countries surveyed, much of the contextual information that companies collect is not used for marketing purposes. For example, although 64% of UK respondents say they collect information about their customers’ current behaviour, only 39% use it for marketing purposes.

Evidently, not all contextual information is of equal value. When asked to identify the biggest challenge they face in using contextual information, over half of UK survey respondents (55%) cite

UK Europe(% respondents)

Which of the following, if any, do you consider to be the greatest challenges to using contextual information?Select up to three

Encouraging customers and prospects to share contextual information

Producing messages that are effective in particular contexts

Hiring the creative skills required by contextual marketing

Respecting customer privacy

Identifying relevant contexts in which to target customers

Hiring the technical skills required by contextual marketing

Measuring the success of contextual marketing campaigns

Adapting our marketing /campaign processes to incorporate contextual marketing

Other (please specify)

5550

4850

4845

3934

3645

3347

2115

128

32

4 © The Economist Intelligence Unit Limited 2015

Beyond personalisation: European perspectives on contextual marketing

persuading customers to share contextual information. This implies that, while they already collect plenty of contextual data, customers still need encouragement to share—or rather, grant marketers permission to use—contextual information that they can put to good use.

A common concern among marketers is that by using contextual information in a way that customers consider intrusive, they will damage their brand and encourage customers to withdraw, for example by blocking ads or unsubscribing from emails. Just under four in ten (39%) UK respondents cite respecting customer privacy as a key challenge, while damaging the brand by making customers feel uncomfortable is considered the greatest risk associated with contextual marketing.

It is certainly a consideration for Nectar UK as it develops a mobile phone app that detects the users’ precise location.

“Our vision is to be able to send push notification when a customer walks past a particular location,” says Mr Shuckburgh. “Right now we are taking time to understand how customers want that experience delivered. We do not want customers bombarded with marketing, as in ‘Minority Report’ [the science-fiction film from 2002].”

“Undoubtedly, there is a creepy line between being really helpful and invading customers’ privacy,” he adds. “We take data relations with customers very seriously. We have industry-leading guidelines. We use four values to guide our customer data policy: transparency, added value, control, and trust (TACT). This means that we are transparent in how we use data, that we must always add value for our customers, that they can always control their data, and that trust is central to having a data relationship with them.”

Despite the challenges and risks, companies such as Nectar UK are eager to explore the possibilities. “Contextual marketing is about the right customer, the right time, the right place and the right message,” explains Mr Shuckburgh. “Today is one of the most exciting times in the history of marketing. We have the opportunity to do that at scale and on an individual basis. There is no rule book about how to do it, no established template. Over the next few years we will see real innovation in marketing and a real challenge to traditional media channels.”

UK marketing executives seem keen to explore the myriad opportunities contextual marketing offers—but they will need to balance their objectives with the concerns and preferences of their customers.