Using an Analytical Approach to Ride Out the Economy

We talk a lot about using an analytical approach in your direct marketing efforts.  And, it’s only because we are passionate about it!  We know that by using statistics and sound business knowledge, you can become an effective direct marketing machine.  Better yet, you can add profitability to your company’s bottom line — and you can prove your contribution.

We wanted to bring up another way that you can utilize an analytical approach.  In a faltering economy, you can use analytics to measure if what you are doing today still makes sense — and how you should be planning for the future.

We’ll present a couple of ideas on today’s post and continue to give you more food for thought as the week wears on.

First, take a solid look at your current marketing plan and how well it is lined up with what your company is attempting to accomplish — i.e., your company goals.  Traditionally, we set up our marketing objectives and then re-visit them at year-end.  Right now, that probably isn’t going to cut it.  You may want to consider performing an analysis of how you are currently quantifying your objectives and how those objectives are assisting your overall company bottom line.  As part of the analysis, take a close look at what you are currently measuring and why?  Does it still make sense?  What you may determine is that you need to add in other elements to track and measure — or that some of the things that you are measuring today are no longer relevant to your business.

A second key area where your analytical approach will really help you is in looking at your internal data stores.  We’ve performed data assessments for some of our clients and let us tell you . . . it is an excellent exercise.  Take stock of what data you are collecting today and what is missing.  Also, take a look at the data that you purchase.  We’ve found in more cases than not, that large organizations sometimes don’t have a good handle on all of the data purchases.  This results in lots of data being purchased — some of it redundant — and at a price-point much higher than if it was comprehensively purchased for the organization as a whole.   This analytical exercise also will give you a succinct idea of where your data is located between and across divisions company-wide.

Look for more of our economy-friendly analytical ideas coming right up!

Direct Marketing Strategy – Data Mining

As bloggers with an analytical bent, we talk about direct marketing strategy in just about every post. You know by now that our approach is based on solid analysis that is the basis for all of our strategy.  Unfortunately, however, we continue to see so many marketers in a frenzied state — just trying to get the campaigns out on time without fully thinking through how they will track and measure them on the back end. Therefore, the measurement step never occurs, or occurs half-way, and only as an afterthought.

What to do about this? Well, we found this excellent article in MultiChannel Merchant  that gives you some excellent advice on how to integrate analytics and data mining into your strategy. The article, written by Rich Brough or Transcontinental Database Marketing in Toronto, provides his ideas on what he feels are “the six stages in the hierarchy of data analytics, and the value of each to a well-rounded strategic approach.”  What’s also interesting is that Brough’s steps are nearly identical to the steps we take in our own analytical approach.  Brough emphasizes that the first thing that marketers need to employ is a consistent approach up-front to identify opportunities within the customer base. He argues that while this may take some time to put in place, the results will be well worth the effort. Therefore, he identifies these six stages for us to consider as part of building this framework:

1) Data access: This is the foundation on which marketers build by collecting all pertinent information about customers, including name, address, demographic data, history of transactions, product and service purchases, and responses to past campaigns. Every business should earmark the appropriate resources to ensure this data is as accurate and up-to-date as possible.

2) Reporting/profiling: Key performance indicators are developed and applied to track the performance of customer relationship management (CRM) initiatives over time and across customer segments. Here, marketers can also track client migrations across various segments, compare responders versus non-responders, and gauge campaign response over time.

3) Current value: The underlying premise for CRM is that not all customers provide equal value to an organization. Therefore, the first step for any CRM initiative is to measure customers by their value to the organization.

For example, 20% of clients might account for 80% of a company’s business, and would be worth a lot of the marketer’s time and money. Another 30% might be designated as moderately valuable, but having the potential to move up into the top 20%; they’d require a different kind of pitch.

The last 50% could account for just 5% of the company’s business; they are less committed, motivated largely by price, and require still another approach (or, maybe, none at all).

4) Segmentation: In this stage, marketers identify prospects who share similar characteristics – who, therefore, belong to one of several specific segments.

This provides the opportunity to focus on the highest-value segments and acquire new customers who match the segments identified as most desirable. As well, sales pitches can be custom-tailored to suit each segment using what is known about those segments. Customers can be segmented using many criteria.

But segments should focus on identifying customers with similar product and service needs as implied through neighborhood socio-demographic characteristics, life stage, usage behavior, or needs and attitudes as identified by market research.

5) Predictive analytics: Use this to predict each customer’s likelihood to initiate a particular activity in future based on their unique characteristics and past behavior.

The benefits represent a “win-win” for the organization and its customers, with marketing ROI rising, and customers receiving more relevant offers – the principle of “right message to the right customer.” Predictive models are developed to assist marketing at all stages of the customer lifecycle, including acquisition, cross-sell and up-sell, retention, and re-activation.

6) Potential value: This is assessed by combining each customer’s current value with their potential to buy more in the future. As with current value, potential value creates an even clearer way to identify the most valuable customers, the ones worth keeping.

It also helps to identify those less valuable customers with potential for entering the most-valuable category, and those low-value clients on whom it may not be necessary to spend as much.

I’m sure that you’ll agree that this is excellent advice. As Brogh’s states: “Using these six stages, marketers can develop a database-marketing strategic framework that differentiates customers based on the value they currently contribute to an organization, their product and service needs, and their potential future value.” This is a much more strategic approach to direct marketing, and one that will have a positive impact on your ROI.

Let’s face it, if we are consistently in a hurry in getting out our campaigns, we need to be as efficient as possible. This approach may take some time to set up at the beginning. However, as you move through time, your campaigns will take you less time to create, they’ll be more responsive, you’ll be targeting the most profitable customers, and you’ll be able to demonstrate that your DM efforts are paying off — in terms of bottom-line profitability.

Analytics for Mobile Marketing

We’ve done a lot of talking about how to implement an analytical approach into your direct marketing strategy . . . but what about mobile marketing? Yesterday, we posted on our Direct Marketing blog about the increasing importance of Mobile Marketing — and how it will continue to grow over the next few years (to an estimated $19 Billion by 2012).

Well, to build on that theme, in a recent Businesswire article it is reported that mobile marketers have already jumped on the analytical bandwagon.  In fact, the article reports on Bango Analytics, who provides a hosted service that allows mobile marketers everywhere to connect their sites to Bango’s analytical service to receive results — who’s responding, how long are they on the site, where are they clicking, etc — for free and in minutes. Very forward-thinking!

Bango has published some of their results on click through and conversion rates from these mobile advertising campaigns. “Banner and text ads on mobile websites typically have a click through rate of 2-8% with a conversion rate of 2-5% which can be as high as 12% on some networks.” So, very high conversion rates! In addition, Bango’s data “clearly shows that when the offer is closely aligned to the needs of a particular consumer profile, click-through and conversion rates increase, often doubling.” For those of you who have been reading our blog for a while now, you know that we truly believe in the power of the customer profile. Here, again it is proven to increase conversion rates on mobile marketing campaigns. The bottom line here? You’ve got to really understand and define your customer base. With these types of response rates, it is crazy not to go through the customer profile exercise.

The other thing to consider about the use of this free analytical service, is that mobile site owners can easily determine the characteristics of those most receptive to their marketing message. According to the article, “This information is then used to focus marketing campaigns on the countries, networks and handsets which return the highest conversion rates.”

Kudos to Bango for being savvy enough to offer this service to their customers — this is using intelligent marketing at it’s best. Bango benefits by gaining more clients, and by offering this value-added service, their clients benefit by marketing more specifically to those prospects who will be most highly likely to respond and convert. This is a true win-win scenario!

Partnering with Smart Analytical Firms for Intelligent Direct Marketing

I recently attended a trade show — it was a traditional direct marketing event at its best.  It catered to printers, lettershops and data firms — as well as those industries that supported them.  I cruised around the exhibition hall chanting my analytical mantra to those folks who would hear it.  Actually, it turned out to be a great experience for me because there were some firms there who are very open — and see the value of — integrating an analytical approach into their direct marketing strategy.

Interestingly enough, the folks who seemed most open to my message were firms that specialized in marketing data.  And of those firms, those who really understood the power of targeting through analytics got most excited about potentially partnering with our company.

This is an important concept in a sluggish economy.  You must really understand your customers so that you can keep them loyal, while acquiring new ones at the same time.  What makes them your customers?  What do they look like demographically or from a lifestyles perspective?  What are their likes and dislikes?  Do they have children?  How much money do they make?

If you can answer these questions, you’ll be well on your way to understanding how better to market to your customers, and how to target those prospects that most resemble them for the greatest DM success.

Here’s another case to consider.  CNN Online News has recently reported that Rugs Direct has partnered with Omniture to “gain increased understanding of consumer trends and behaviors associated with the company’s Web site content, promotions and merchandising strategies.”  Rugs Direct is one of the countries largest providers of area rugs.  According to Rugs Direct President, Randy Kremer, “From personalized products to exclusive merchandise, we use our online channel to drive a significant portion of our sales. It’s important that we understand how to effectively acquire new customers, present them with relevant offers and achieve the highest levels of customer satisfaction. Omniture promises to provide us with online marketing and search technologies as well as significant retail consulting expertise — augmenting our in-house marketing team to execute on targeted campaigns and gain increased ROI.”

See . . . it doesn’t matter if you’re marketing online, offline or both.  Here is an example of a perfect partnership.  Rugs Direct knew exactly what was missing in their marketing plan, and Omniture provided them with the technology to better understand their valuable customers.  They provided Rugs Direct with analytical support in addition to the search technologies to better hone in and attract new customers.  The end result?  More profitability!

Hence, my mantra.  Whether you’re attending a traditional direct marketing tradeshow or working with a savvy, online e-tailer companies are getting it.  It is no longer even thinkable to blanket the marketplace with your message.  We must make those we are targeting want to do business with us because of our relevant, interesting and targeted offers.  Using an analytical approach will help you structure the strategy that will get you there.  Doing this will ensure that you will be a successful marketer — regardless of the state of the economy.

Long live intelligent direct marketing!

Customer Profiling – Our Approach

So many businesspeople view their customers as one large undefined group. They analyze their business in terms of sales made and profits realized. However, we’ve seen that many businesspeople do not understand the importance of obtaining a thorough understanding of their customers.

And, without a thorough understanding, it’s virtually impossible to ensure that you are developing the appropriate strategies for today, and for tomorrow. If you don’t have a handle on the make-up of your customer base, it’s tough to create new products, for example, or to plan new marketing campaigns.

Analyze Your Customers Profile services provides marketers with the tools to think strategically and ensure that your business grows based on a deep understanding of your customers.

Profiling Objective
Customer profiling answers one or more of the following questions:

1. What does my customer base look like, in terms of core demographics, real property data and behavioral data?
2. Are there any surprises in my customer base? Do I really have a good understanding of my customers?
3. How do customers differ from prospects? What types of attributes make my customers unique—different from the universe at large?
4. How well have I penetrated my market? How much prospecting opportunity is there in the marketplace, in terms of numbers of qualified leads?

With the Analyze Your Customers comprehensive report package, we’ve answered each of the above questions!

The Customer Profile report package:

Your report package includes the following:

• Overview of the processing performed, including a recap of data analyzed
• Complete Customer Profile Reports
• Customer and Prospect Profile Comparison Reports
• Key findings
• Prospecting recommendations

We deliver a comprehensive report package that analyzes your customers in terms of consumer attributes such as demographics, purchase history and real estate characteristics. For businesses, we report on size, type and other key characteristics.

Analyze Your Customers Profile services give you the data to think strategically and ensure that your business grows based on a deep understanding of your customers.

The best way to see the value of this report package is to actually see a sample report. Sign up here and we’ll send you the report, at no charge, of course.

Why Analytics is so Important Today

Like us, you probably read many different direct marketing periodicals. Over time, we’ve all heard every single buzzword out there that was going to be the end-all, be-all in direct marketing strategy.

In our sputtering economy, we need more than the newest acronym to pull us through. This is why we are such huge fans of using an analytical approach. In fact, we’ve built our business on it.

Using analytics can help you realize the full potential of every single marketing dollar spent. Put simply, those who implement an analytical strategy into their business will survive, and those who don’t . . . well, we’re not so sure they will.

Over the last couple of weeks, we’ve posted about everything from how to integrate analytics into your retention, cross-sell/upsell, and acquisition campaigns to how to use analytics with your credit-data-driven campaigns. Are you sensing a theme here? Using analytics within all marketing campaigns can make everything you do more profitable. And, as time goes on, you’ll market smarter and smarter.

So, what to do when you run into someone who simply won’t listen? Let’s take a look at an example of a company that we work with who shies away from using an analytical approach. This company specializes in selling land that they purchase from landowners nationwide. They are very successful and like many of our clients, are lean in terms of resources and do a lot of marketing by the seat of their pants. It’s tough to get an audience with them because they have little time to spend planning or strategizing. They’re too busy executing.

As you can imagine, this is a very frustrating experience for us, the consultants who work with them. We love these guys, they’re a blast to work with but we can’t get them to implement the ideas that we know will make their business more successful — and save them money. It just drives us crazy!

We’ve done a ton of analysis on their customer base. We know precisely what those people who buy from them look like — demographically, ethnically, and financially — the whole enchilada. Today, we are helping them purchase the right data to target better than they were when they were just buying prospect lists willy-nilly. So, from that perspective, we’ve been successful and saved them money, increased response rates, yadda yadda.

However, now that we’ve gone down this path, we know how much more we can really assist them in targeting better, smarter — getting better response rates and more purchases which equals greater profit. It is so hard to not take the next step — but its tough to make the case because this is new, uncharted territory for these folks. They’ve drank the kool-aid around the customer profiling exercise, and they got some “aha’s” out of the read-out, but getting their bandwidth to build a full response model is proving hard to accomplish. Don’t get me wrong, we’ll continue to try to convince them because we believe in it so much, and we believe that one day we will win them over to our way of thinking.

Why do we try so hard? It’s a matter of profitability. When we look at what they’re doing, we know that they could be doing it so much better. And, we know that the investment that they’d make with us would be a fraction compared to the financial gains that they’d receive from that investment.

If you find yourself in the same position in your company or with the client that you serve, don’t give up. Sooner or later someone will come along who will listen to you — or the someones that you are working with today will finally come to understand that they need to listen to you. Analytics prove themselves — and in this economy you need proof on a daily basis that what you are doing is the best thing for the business right now.

We’d love to hear your experiences in this arena. How did you convince your powers-that-be to move forward with an analytical strategy?

Using Credit Data to Improve Marketing Performance

We’ve all received them—those credit card offers shouting: You’re “Pre-Approved” for this fabulous, low-interest card! Or, how about those mailings from your local auto dealership telling you to come on in and walk out with the new car that you’re “pre-qualified” for?

Now, how did they know that your current auto lease was just about to expire? Or, that you were searching for a new credit card to transfer balances from your old card—the card that was charging you an arm and a leg in interest?

It’s pretty simple, actually. Financial services marketers have the ability to access consumer credit reports, and present marketing offers to the people they believe will most need them.

Just think about the information on your own credit report. It lists the various loans you have along with any associated balances on the accounts. It also contains the types of credit cards you carry. It reports on when you took a car loan, and which company you used for financing. Your mortgage (and monthly payments) are known. Whether you’ve had late payments or even if there’s a bankruptcy on file is included on your credit report.

Idea 8: Consider Testing Credit Pre-screen Services

The wealth of credit information is critical to marketers. You can understand if a consumer needs your product/service. Further, you’ll know (based on other commitments and payment history) if they’ll be inclined to pay you. And, there are literally hundreds of credit attributes available to be mined and maximized in your targeting efforts.

The use of credit data can lessen the risk that your firm takes on in direct marketing campaigns. If you utilize it today, you know it makes your CFO happy that you are effectively managing the risk of your customer portfolio as you continue to bring on new clients.

As marketers, we want to reach as many people as possible; we want high response rates. However, it’s key to keep approval rates high, too. The secret is finding that appropriate middle ground – where you are taking on some risk but still building your overall profitability.

So, what’s the catch? Why aren’t all direct marketers using this valuable source of data?

The answer: Most marketers are regulated against using credit data. There’s an act called the Fair Credit Reporting Act (FCRA) that limits marketers’ access to consumer credit data. While the following provides an overview of legal requirements, for complete information, we urge you to visit the Federal Trade Commission’s website: www.ftc.gov/credit.

FCRA: An Overview

Here’s the biggest requirement: Users of credit data must have a “Permissable Purpose”. For marketing programs, this means that the marketer must extend a valid (called “firm”) offer of credit to the consumer. In other words, if you are using consumer credit data to understand if you should make an offer to a specific individual, you then have to move forward and extend that offer. The marketer/lender is obligated to make good on its offer of a loan, credit card or other financial product, once they have been privy to an individual’s credit information.

 

We’ve just scratched the surface of how to use consumer credit data in your marketing efforts. But, if you’re a financial marketer of consumer products, you definitely should explore working with consumer credit data. Yes, the legislation is complicated, and yes, the contracts process is grueling. However, the data is valuable. You can target your market with pinpoint precision, reaching those consumers most in need of your specific product or service.

Prior Test-and-Learn articles:

Idea 1: Evaluate Testing Strategies for New Customer Acquisition Programs

Idea 2: Get Your Analytical House in Order

Idea 3: Integrate Your Data to Understand Your Customer Relationships

Idea 4: Grow Your Customer Relationships

Idea 5: Evaluate Your Retention Program

Idea 6: Test New Channels to Reach Your Customer Base

Idea 7: Test to See if Generational Attributes Impact Results

More Direct Marketing Testing Components

Our fourth article in this weeks’ Test-and-Learn series focuses on testing components that you may not currently be evaluating. It’s pretty common to test creative, list and offer, but in our experience we see fewer marketers looking at:

1. Channel–are there channels that you should be using that you currently ignore?
2. How do generational attributes impact campaign success?

Idea 6: Test New Channels to Reach Your Customer Base

It’s key to integrate all of your marketing efforts in order to maximize the marketing investment. If done correctly, a multi-channel marketing approach should reap more profits than the sum of the programs deployed alone.

It’s critical to understand the correct communications ‘path’. For example, should you send a direct mail piece, followed up with a phone call? Should you also e-mail? And, how do you control for the other offers out there in print or on TV?

It’s also imperative to understand channel preferences. Do you know which customers prefer to receive a catalog, which like e-mail, and which customers simply want to be left alone—they’ll contact you when they’re ready to buy? There are some tactical methodologies that can maximize your overall marketing investment, including using predictive modeling that considers how your customers have interacted with you in the past to predict how they’d like to interact with you in the future.

We’ve written a White Paper that features market leading channel integration practices. Let us know (via e-mail or comment) if you’d like a copy.

Idea 7: Test to See if Generational Attributes Impact Results

Today there are five living generations. Each one interprets information differently and possesses unique buying behaviors. The generation of the future, The Millennials will be your decision-makers in 2010 and beyond. It is important to understand this generation as you are planning product and service enhancements, and as you develop future marketing strategy.

The Millennials are the largest in size of any generation and will significantly impact each of us in our marketing efforts. Consider tweaking your message and/or offer so that it resonates with each of the five generations. If done correctly, you should see improved results as you are communicating with them in a language they can understand.

By the way, we’ve also documented the key attributes of each of the generational groups. Let us know if you’d like this document.

Prior Test-and-Learn articles:

Idea 1: Evaluate Testing Strategies for New Customer Acquisition Programs

Idea 2: Get Your Analytical House in Order

Idea 3: Integrate Your Data to Understand Your Customer Relationships

Idea 4: Grow Your Customer Relationships

Idea 5: Evaluate Your Retention Program

Customer Relationship Marketing

Here is our third installment of this weeks’ series focusing on Test-and-Learn methodology. Today it’s all about how to maximize the relationships you already have with your customers.

Idea 4: Grow Your Customer Relationships

Continuously test campaigns to leverage your relationships with your customers. Assess if each of your customers is using as many products as possible from you as they possibly can be. Ask yourself these questions:

• Are you their primary supplier of services?
• What are they buying from you?
• What are they buying from your competitors?

Again, by focusing on your customer database, you can determine the next best product to offer your clients. Plus, you can continue to enhance your relationship with them by recognizing their value to you by offering them loyalty programs that cause them to give you more business (making you happy) and give them a discount or reward for giving you the business (making them happy).

Cross-sell and up-sell programs are instrumental in making each and every customer relationship as profitable as possible. The added side benefit is that the more products that an individual has with you, the less likely they are to leave you. Which is a great segue to the next Test-and-Learn idea.

Idea 5: Evaluate Your Retention Program

How long has it been since you’ve looked at your retention program? Are you focusing efforts on the right customer segments? Do you consider life-time profitability when you are determining which customers to focus ‘save’ dollars on?

We’ve seen too many times that companies treat their entire portfolio the same. Perhaps it’s time to ensure that you are focusing retention efforts on customers who are likely to leave you, and who also are highly profitable. And, if you can isolate this group, think creatively about new and unique loyalty programs. It’s so difficult to get a new customer, make sure that you are doing all that you can to keep the good customers you already have.

The following chart is an excellent representation of how you can matrix profitability against likelihood to defect to help you figure out where to focus your retention budget.  We believe that the bulk of your retention dollars should be spent on the top right quadrant–those customers who are not only highly profitable, but who are also highly likely to churn.

Prior Test-and-Learn articles:

Idea 1: Evaluate Testing Strategies for New Customer Acquisition Programs

Idea 2: Get Your Analytical House in Order

Idea 3: Integrate Your Data to Understand Your Customer Relationships

Data Integration

We hope that you enjoyed yesterday’s post, the first in our “Test-and-Learn” series. Continuing with the series, today we’ll focus on data integration.

Idea 3: Integrate Your Data to Understand Your Customer Relationships

Understanding the complete customer relationship goes a long way toward building loyalty and creating satisfied customers. If you have the ability to understand the full extent of what each client is purchasing from you, you can ensure that you are treating them appropriately. Additionally, if you have an idea of what they aren’t purchasing from you, you can cross-sell and up-sell them more effectively.

There are many data integration tools available from the leading data processors. While the offerings can be complex, it’s fairly simple to test to see which bring out the hidden relationships in your data.

Let’s first define Data Integration. We define Data Integration as any process that results in cleaner, more accurate customer and/or prospect data. These processes can range from simple data hygiene tools, such as National Change of Address (NCOA) that have been available to marketers for years, to merge/purge deduplication to relatively new, referential data linking services.

Data Hygiene: This category includes the U.S. Postal Services products available from all of the leading data processing firms, as well as supplementary services often offered in conjunction with the USPS clean-up services.

Merge/Purge De-duplication Services: This is the process of comparing multiple input files and searching for duplicates. Service providers employ either off-the-shelf software or highly customized proprietary logic to maximize data matching. Many can process both consumer and business data in one process.

Other key considerations when evaluating merge/purge providers are: 1) their flexibility in reporting and 2) your ability to customize the matching algorithms. Additional benefits of an effective merge/purge solution are the identification of Prison, APO/FPO and DMA Do Not Solicit addresses.

But the most important consideration when choosing your service provider is their matching ability. Does the selected firm identify the maximum number of duplicates?And, are those duplicates accurate?

Referential Linking: Referential data matching is offered by data compilers that maintain a reference database of historical and current views of a customer, such as prior addresses, aliases and other name variations. These referential linking providers (Experian and Acxiom are the two biggest) use the power of their rich data stores to maximize the accuracy of matching and linking data on disparate databases, thereby providing the view to your total customer relationship.

The primary benefit of Referential Linking is that it assigns a unique and persistent identifier to each record. This persistent ID is vital if you are maintaining a customer/prospect database environment. Additionally, you’ll benefit from additional matches that merge/purge does not recognize. Further, Referential Matching providers also facilitate real-time data access, as they commonly offer real-time data access and matching services.

We’ve put together a comprehensive white paper that outlines all of the tools available to build data quality, and which provides an action-plan on how to use them. We’d be happy to share this with you—just let us know with an e-mail or a comment.