1. 38 ❘ M M M a r c h / A p r i l 2 0 0 8
Campaign Trail
Peter C. Ve rhoef, Christiaan Ph. Koenders, and Marijn Knaack

2. M M M a r c h / A p r i l 2 0 0 8 ❘ 39
H
ow can companies effectively connect
to their customers in today’s increas-
ingly cluttered media environment?
Managers are asking this question
constantly, as connecting to customers through
traditional mass media becomes more and
more difficult. One such approach is the use
of below-the-line (BTL) advertising. While
traditional above-the-line (ATL) advertising
uses mass-media (such as television, radio,
magazines, and newspapers), BTL advertising
campaigns use direct media (such as direct
mailings, e-mails, and short message service
messages). Recent market figures of the New
York-based Winterberry Group show that BTL
spending grows approximately 8% annually
in the United States. Similar figures can be
retrieved in Europe. Dutch companies have
increased their interactive marketing expendi-
tures by more than 8% in the last year.
Moreover, companies are moving budgets
from ATL advertising to BTL advertising
campaigns. The Dutch incumbent telecom
provider KPN lowered its ATL expenditures
by 30%, reallocating these expenditures to BTL
advertising with a focus on interactive media.
Traditional BTL advertising includes all adver-
tising where no media commissions are being
paid, such as direct media, sales promotions,
and public relations. Here we will primarily
focus on the interactive or direct media (i.e.,
direct mail, e-mail, and telemarketing) within
BTL advertising, and will not consider public
relations, event marketing, and the like.
According to the Direct Marketing Association,
U.S. expenditures on direct or interactive
marketing advertising were $166.5 billion in
2006, which is a 6% gain over 2005 spending.
A further increase of 5% was expected for
2007, leading to direct marketing spending
of $172.5 billion.
The increasing use of interactive media
within BTL advertising creates a new crucial
discipline within companies: interactive
campaign management. However, companies
struggle with the discouraging response to
their campaigns. Low response rates around
1% are not uncommon. At the same time,
McLean, Va.-based Capital One achieves a
strong competitive advantage with successful
interactive campaign management practices.
Why is the financial services company so
successful with its interactive marketing
campaigns, while many other companies do
not achieve positive results?
Here we present a study on the success fac-
tors of campaign management. Based on this
study and our experiences in campaign man-
agement, we provide guidelines for successful
campaign management at the campaign and
organizational level. Please note that this study
includes data from Dutch companies only.
But we feel the prescriptive elements can be
applied in other venues. Ultimately, we hope
that more studies will be done on this topic
in the United States, Asia, and Europe. We
believe that there is a strong need for develop-
ing more knowledge on campaign manage-
ment, and the results from this study should
point the way.
What works and what
doesn’t in marketing
campaigns.

3. Campaign Management
An interactive marketing campaign is used to acquire
prospects or potential customers, and to retain and reward
existing customers. It involves a series of interconnected inter-
active promotional efforts, designed to achieve precise mar-
keting goals. Interactive campaign management consists of
campaign planning, development, execution, and analysis of
the campaign results.
Four factors drive the increasing importance of interactive
campaign management:
1. Increased media fragmentation. This creates extensive
challenges for companies. Cambridge, Mass.-based Forrester
Research reports that the number of TV channels per home
increased to 82 from six between 1960 and 2004, while the
number of radio stations more than doubled in the same peri-
od. Moreover, new information channels constantly enter the
arena. In 2004, there were 25,000 Internet broadcast stations,
while 4.4 billion Web pages were indexed in Google. This
media clutter and channel fragmentation causes huge prob-
lems in getting connected to customers. Consumers easily zap
away, and attention for advertising is lacking. Moreover the
Internet is replacing the television. Teenagers spend most of
their time on the Internet with gaming and chatting with
friends.
2. Increasing availability of customer data. This creates
more opportunities for targeted campaigns and target selec-
tion. In particular, the increasing use of customer relationship
management (CRM) systems and software creates huge data-
bases with customer data. After initial problems with these
systems, companies can now capitalize on the data. One of the
premier examples of this has been Harrah’s Entertainment’s
large customer database, which is used extensively as part of
the Las Vegas-based company’s successful marketing strategy.
3. Short-term thinking. This trend also implies a shift from
longer-term oriented strategies (such as brand advertising) to
more sales-oriented tactics (such as direct mail and sales pro-
motions).
4. A call for more accountability. This leads to a shift
toward BTL advertising. Results of interactive marketing cam-
paigns can be measured almost immediately, and with signifi-
cant confidence. In contrast, marketers still face difficulties
assessing the performance of ATL campaigns.
Assessing Current Practices
We studied the campaign management practices of 19
Dutch companies. These companies are active in several
industries, such as financial services, telecom, pharmaceuti-
cals, and entertainment. The participating companies are
either clients of Netherlands-based VODW Marketing or
members of the knowledge center on customer insights of
the University of Groningen (also in The Netherlands). Our
research was pretty intense, as our aim was to gain an in-
depth understanding of campaign management practices of
these companies.
As we indicated earlier, we believe that our results might
be valuable for U.S. companies as well. Although the U.S.
market is much larger than the Dutch market, there are multi-
ple similarities. First, in the Dutch market, companies spend
39% of their marketing budget on direct marketing (DM)
advertising. According to the Dutch Direct Marketing
Association (DDMA), Dutch companies spend approximately
between 5 billion and 7.5 billion euros on DM advertising. Not
surprisingly, this is much less than total DM advertising
spending in the United States. However, the DM advertising
budget as a percent of gross national product is 1.5% for The
Netherlands and 2% for the United States, respectively. Thus,
40 ❘ M M M a r c h / A p r i l 2 0 0 8
With the increasing difficulty of connecting to customers with mass marketing, interactive
campaign management has become a crucial discipline in today’s business. For successful
interactive campaigns, testing, small target group sizes, and the use of multi-step campaigns
are key. A lack of flexibility, systematic campaign knowledge and capabilities, and the clash between marketing and sales
are hurdles for successful campaign management at the organization level.
EXECUTIVE
briefing
■ Exhibit 1
Capacity allocation and revenue percentage
0% 20% 40% 60% 80% 100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Non
campaigners
Stars
Core
campaigners
Problem
campaigners
Percentage of the revenue generated with BTL campaigns

4. M M M a r c h / A p r i l 2 0 0 8 ❘ 41
correcting for size effects, DM advertising expenditures are
pretty comparable. Second, like U.S. companies, Dutch com-
panies have also been confronted with increased media frag-
mentation. For example, the number of television channels has
increased substantially in the last years. There is also a drop in
television viewing among Dutch consumers, recently measur-
ing a 10% decline in number of hours watched. Third, like
many U.S. companies, Dutch companies have invested heavily
in CRM systems for the management of their customer con-
tacts. And fourth, we observe that as in many Western
economies, the service sector and its increasing number of
customer touch points are becoming very important in the
Dutch economy.
We first assessed the intensity of campaign management
practices, and found convincing evidence for its increasing
importance. All companies had increased the number of tar-
geted campaigns since 2004, and aimed to increase that in the
next years as well.
Next, we assessed the general campaign management exe-
cution. For this, we used two metrics. First, we measured the
percentage of the revenue generated with campaigns. This
measure shows how important campaigns are for the business
of a firm. Second, we measured the percentage of the market-
ing capacity in terms of staff allocated toward interactive BTL
campaigns. If we combine these two metrics in a two-by-two
matrix we can assess which companies executed interactive
campaign management successfully, and which companies
executed interactive campaign management problematically.
Exhibit 1 shows this two-by-two matrix. We classified compa-
nies into four groups: non-campaigners, problem campaign-
ers, core-campaigners, and stars. We found a large number of
problem campaigners. These companies allocate too much
capacity to interactive BTL campaigns in comparison with the
related revenue results. These companies should become more
efficient and/or generate more revenues with their cam-
paigns. There are only a few stars, which need only limited
marketing capacity to generate a large part of the company’s
revenue. The core campaigners seem to have their capacity
and revenue results in line.
Using our two-by-two matrix, companies can easily assess
the performance of their campaign management execution.
Problem campaigners in particular should reconsider their
campaign management practices.
Executing More Successful Campaigns
We identified four potential success factors of a campaign.
These characteristics concern elements of the campaign itself,
and do not concern organizational issues.
• Target group size. For successful campaigns, it is essential
to select the right customer at the right time with the right
product/service offer. Small target groups reflect the firm’s
ability to select specific, defined groups of customers with
specific needs that match the provided offer.
• Testing. Testing is a very important element in interactive
campaign management. With testing, the changes in perform-
ance due to changes in the campaign elements can be
assessed. Moreover, testing can be used to select the right cus-
tomers. Capital One is an excellent example of testing prac-
tices. The financial services company adopted a testing and
learning strategy, with each new interactive campaign being
extensively tested before execution. Based on the testing
results and prior experience (the learning part), the company
develops the optimal campaign and selects the right cus-
tomers.
• Multi-step vs. single step campaigns. We identified two
types of interactive campaigns. In a single-step campaign, the
customer gets the offer with a call for action immediately. In a
multi-step campaign, the firm first communicates to the cus-
tomer to get attention and interest. In a next step, the offer is
sent to the customer, which involves a call for action. This
method follows the well-known AIDA-process model (atten-
tion, interest, desire, and action) in communication research.
Multi-step campaigns following this AIDA process garner
more response.
• Differentiation. Customizing the offer to specific needs of
customers creates more response on a campaign. For example,
different customers might be approached with different mes-
sages and offers, and through different channels, because their
■ Exhibit 2
Influence of campaign characteristics on conversion ratio
Potential Impact on Significant
success factor conversion ratio
Target group size - Yes
Testing of campaign + Yes
Multi-step vs. single step + Yes
Differentiation of campaign - No
14%
12%
10%
8%
6%
4%
2%
0%
Current
situation
Decrease target
group size
All campaigns
are tested
Only multi-step
campaigns
7%
8%
11%
■ Exhibit 3
The impact of improving campaign characteristics
12%

5. 42 ❘ M M M a r c h / A p r i l 2 0 0 8
needs differ. This differentiation should increase the effective-
ness of the interactive campaign.
Many interactive campaigns fall short on one or more of
these success factors. Consider for example, the campaign of a
Dutch bank focusing on the creation of more attention and
interest among intermediaries for mortgage loans. Each inter-
mediary was approached via direct mail, with a winning code
referring to the specific campaign Web site. After viewing a
non-customized commercial on the Web site,
the intermediary received a message saying
whether he or she had won a VIP ticket for a
racing event on a Dutch car racing circuit.
This campaign has a multi-step approach
involving multiple media. However, it lacks
differentiation, as it assumes that all inter-
mediaries are interested in car racing.
But what is the net impact of each of
these potential success factors on campaign
performance? To address this question, we
further investigated 70 executed campaigns
of the participating 19 companies. Each firm
provided information on potential success
factors for multiple, recently executed cam-
paigns with different objectives: customer
acquisition, customer retention, cross-sell-
ing, and winning back customers. On
average, we garnered approximately 3.5
campaigns per firm. An important insight
concerns the current campaign management
practices. Only 31% of the campaigns are
tested, while 38.8% involve a multi-step
campaign. An average campaign is differentiated on 2.6
elements. The low percentage of campaigns being tested is
remarkable! We used the provided conversion ratio of each
campaign as a performance metric. Depending on the objec-
tive of the campaign, the conversion ratio is the number of
acquired customers/retained customers/cross-sell success-
es/win-back customers divided by the target group size. The
average conversion percentage of the interactive campaigns
was 7%.
We used a regression model to assess the impact of the
identified success factors on the conversion ratio of each cam-
paign. This conversion ratio was defined as the number of
buyers, divided by the number of respondents, multiplied by
100. In the model we controlled for company specific effects
with the inclusion of firm dummies, as some companies might
have higher conversion ratios—due to the specific markets in
which they operate or their own internal processes. In Exhibit
2, we show our model results. The first column shows the fac-
tors included. In the second column we show the sign of the
regression coefficient, while the third column shows whether
the found effect has significant impact (we consider p-value
below .10 given the small sample size).
The estimated model explains 49% of the variance. As we
have data at one point in time for multiple companies, an
explained variance of 49% is satisfactory. Usually, higher
explained variances (e.g., approximately 90%) are only
achieved when there are data over time and one is comparing
current performance with past performance. We confirm the
importance of the majority of the identified success factors.
Having a small target group is essential, while testing leads
to significantly higher conversion ratios.
Multi-step campaigns have a significantly
higher performance than single-step cam-
paigns stressing the relevance of campaigns
following the AIDA principle. Surprisingly,
we don’t find a significant effect from dif-
ferentiation. Perhaps the differentiation
methods used are not meaningful for cus-
tomers.
Our study thus clearly shows the rele-
vance of the majority of the identified suc-
cess factors. To further understand the
implications of our results, we developed
three scenarios for companies to improve
their conversion ratio: (1) Decrease target
group size by 10%, (2) test all campaigns,
and (3) make all campaigns multi-step.
If we simulate these scenarios with our
model, our results indicate that the conver-
sion ratios improve substantially (see
Exhibit 3). If all campaigns had been tested,
our model indicates that the conversion
ratio should have increased by 4% to 11%,
while using only multi-step campaigns would increase the
conversion ratio by 5% to 12%. Thus, by adjusting only one
campaign characteristic, a conversion ratio of more than 50%
is achieved. Moreover, combining multiple adjustments could
potentially more than double the conversion ratio. Using
these insights, problem campaigners might become core
campaigners.
Overcoming Hurdles
The aforementioned insights can be used to improve the
performance of individual campaigns. But, even knowing this,
companies still struggle with effective campaign management.
We identified four hurdles for effective campaign manage-
ment at the organizational level.
1. Lack of systematic campaign knowledge. There are only
a few companies building up campaign management knowl-
edge databases with information on the performance of past
campaigns and characteristics of the campaign and its process.
An excellent example of this is Capital One, which has built a
large database of executed campaigns. This database is crucial
in its campaign management testing and learning strategy.
However, we also observed that campaigns are often separate
The low
percentage
of campaigns
being tested
is remarkable!

6. M M M a r c h / A p r i l 2 0 0 8 ❘ 43
ad-hoc processes without any learning. This can have damag-
ing consequences for the return on investment (ROI) of cam-
paigns. This problem becomes more severe because campaign
marketers have a short turnaround time. They come and go
within organizations.
2. Lack of flexibility. Imagine that a telecom company has
implemented strict procedures, whereby the campaign mar-
keter must show the effectiveness of the campaign with for-
mal procedures and testing. In general, this leads to improved
campaigns. However, at some point a major competitor sur-
faces with an aggressive pricing-oriented campaign aimed at
attracting the telecom’s customers. This triggers an immediate
aggressive reaction. The campaign marketer wants to start his
own campaign immediately, but knows it will take more than
four weeks to go through the formal procedures. At that point,
the competitor might have already attracted a significant part
of its customer base. The lesson learned is that companies
should have quick standardized procedures for campaign
execution in place, with sufficient flexibility for specific envi-
ronmental situations.
3. Lack of capabilities. Companies lack campaign manage-
ment capabilities. The major problem that they face is a lack of
analytical/statistical skills. They face difficulties in attracting
well-trained statistical employees for good testing and target
group selection. Once again, Capital One has multiple
employees with a strong statistical background that enable the
company to be successful in its testing and learning strategy.
Another firm also known for hiring such employees is the
Readers Digest. With the increasing attention on campaign
management, hiring these employees becomes more critical.
Companies have now started to invest in specific training pro-
grams. For example, the Dutch telecom company KPN has set
up a two-year marketing intelligence academy to train new
employees.
4. Clash between marketing and sales. As the use of cam-
paign management increases, traditional brand marketers will
want to use campaigns for long-term, brand-building purposes.
At the same time, sales managers will see using campaigns to
achieve short-term-oriented sales objectives. This leads to a
clash between sales and marketing with the campaign marketer
in between. Campaign marketers might easily be tempted to
serve two masters, thus leading to unclear campaigns. We
believe that companies should clearly state which objectives
they want to achieve with different communication methods.
Most campaigns are best suited for sales-oriented purposes.
Remember Accountability
Interactive campaign management is an approach to recon-
necting with customers. However, only a few companies can
be considered as interactive campaign management stars.
Here we have discussed potential success factors at the cam-
paign and organizational levels. At the campaign level, com-
panies can improve campaign performance by having smaller
target group sizes, improving testing practices, and using
multi-step campaigns.
At the organizational level, different structural changes
should be implemented. The most important change is that
marketers should be forced to calculate pre- and post-ROIs
before executing an interactive campaign. Nowadays, too
many companies lack a solid accountability of interactive
marketing campaigns and tend to implement the great ideas
of campaign marketers too soon without considering the ROI
of the campaign. When calculating ROI, companies should not
only consider the direct response on the mailing, but also pos-
sible long-term effects and cannibalization effects. For exam-
ple, having a campaign to sell a new savings account with
high interest rates might cannibalize on existing savings
accounts—leading to a loss in value. To achieve these solid
ROI calculations, companies should invest in improving
analytical and accounting skills of interactive campaign mar-
keters. Companies might have to develop on-the-job training
programs, as good campaign marketers are hard to find. To
calculate ROI, companies should clearly state which objectives
they want to achieve with their interactive campaigns. At this
point we would support sales-oriented objectives of BTL
campaigns. In our experience, we found marginal evidence for
the brand-building effects of campaigns. Implementing formal
ROI procedures before campaign execution should not result
in a lack of flexibility and creativity. If we consider the experi-
ences of companies that applied ROI principles, we see that
analytically examining the drivers of successful campaigns
leads to more and deeper thinking on how this success can
be improved. ■
Additional Reading
Kumar, V. and Werner Reinartz (2005), Customer Relationship
Management: A Databased Approach, John Wiley & Sons,
Chichester.
Verhoef, Peter C., Penny N. Spring, Janny C. Hoekstra and Peter
S.H. Leeflang (2003), “The commercial use of segmentation and
predictive modeling techniques for database marketing” in The
Netherlands, Decision Support Systems, 34 (4), 471- 481.
Winer, Russell S., “A Framework for Customer Relationship
Management”, California Management Review, 43 (Summer),
89–108.
About the Authors
Peter C. Verhoef is professor of marketing at the University
of Groningen in The Netherlands. He may be reached at
p.c.verhoef@rug.nl. Christiaan Ph. Koenders is a managing
consultant at VODW Marketing in Leusden, The Netherlands.
He may be reached at ckoenders@vodw.com. Marijn Knaack
is a database marketing analyst at Dutch Energy Company
NUON in The Netherlands. She may be reached at
marijn.knaack@nuon.co.