Hybrid pricing is the only way to optimize marketing spend

At a point in history, when all eyes were on the inbox, scale and reliability were critical points of differentiation. CPM, as a measure of email volume, was a great fit because it tracked to where unique value was created – the execution of the send. And while certainly these factors are still important, they aren’t as valuable anymore because they are now readily available.

Winning today isn’t based upon scale, but smarts. Differentiation will be fueled by an appetite for data and the ability to consistently apply its derived insight across all addressable channels. In this new competitive landscape a pricing model based solely on email CPM doesn’t make sense, because it doesn’t align to where the most value is created. As marketers seize upon this and shift focus from volume to quality of the customer experience, they are going to need a new pricing model that best aligns to their ability to create value for the brand.

It’s not the dawn of the cross-channel era, but early morning

That said, we can’t simply replace email CPM with another single metric. Adobe’s recent announcement that they were throwing out an email CPM-based pricing model in favor of one based predominately on customer profiles, isn’t the flexible, customer-centric model they want the market to believe it is. Within a profiles-only pricing model, many brands will be forced to pay for what they aren’t using because the truth is that most marketers are evolving towards cross-channel marketing; it’s a strategic vision, not yet an execution reality.

Customer profiles alone are too blunt an instrument. Are your email teams responsible for updating Facebook and Twitter feeds? Does your e-commerce or website team determine dynamic content in email? Do you incorporate mobile into your lifecycle or nurturing campaigns? Do you still have a direct mail program? If you answered no to these, or many, many other scenarios, then you will be overcharged on a profile-only model.

At a time when marketers are under incredible pressure to do more with the same or less, there is no room for spending on functionality that has no near term business benefit. It’s this belief that led us in a multi-month partnership with key clients to identify the factors that are driving the value for brands today. Until brands have mastered cross-channel, an alternate pricing model to customer profiles (or email CPM) is needed to optimize their marketing spend.

Pricing to market sophistication

As a cross-channel technology provider, we believe that a true customer-centric pricing model is about understanding the needs of our customers and delivering to that need. Therefore, pricing needs to be optimized to the brand reality today – to charge solely for things that will impact EBIT today, this month, this quarter.

This enables brands to pay only for what they use and need.

What we’ve found is that no single metric can be optimized to the needs of today’s marketer. The right approach, given the state of market maturation, is a hybrid approach. For the past year, Experian Marketing Services has trialed different mixes and, together with our clients, have triangulated what we feel to be the optimal mix:

  • Profiles: Along the maturation to cross-channel, an important step for all marketers is the movement of the customer to the center of strategy, planning and execution. From that perspective, using profile as a component of pricing is important on a symbolic basis. Functionally, however, it also serves as an excellent proxy for representing data usage, a critical success factor today, without punitively charging for its usage.
  • Volume: Reliably delivering at scale is still important. As is the ability to seamlessly deliver a consistent experience across all addressable (e.g., email, SMS, push, web, display, social, DM, etc.) channels. When these functioned as independent silos it was a necessity to power pricing with high CPM’s. Now, as differentiated value shifts to data and services, so too shall price.
  • People: The evolution to cross-channel marketing can be considered as a pilgrimage for marketers. This is a journey of self-discovery. And a journey that will require guidance and helping hands. Service and support elements should not be buried in another line item. They can make all the difference, convey value and should be explicitly priced.

Unlike single variable models, like CPM or customer profiles, these three measures together can be used to eliminate spend on services that don’t have direct, immediate impact. A hybrid approach, therefore, is prerequisite for getting the greatest return for a marketing budget.

Cross-channel marketing is a journey. Execution requires seamless and instantaneous transformation of data into insight that can be acted upon at the moment of interaction. Technology exists today that makes this possible, cost-efficient and scalable for everyone from the largest consumer brands to the smallest specialty retailers. The reality, however, is that technology is no longer the chief barrier. The people factor is as large, if not larger. Whether due to structure, behavioral economics, experience or a mixture of factors, we can’t expect  that marketing organizations will simply transform themselves overnight.

Future success in consumer marketing will be defined by the ability to harness data to power optimized experiences across channels and we need to partner with marketers to help them on the journey to realize their customer-centric vision, not penalize them for it.