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THE AVERAGE PERSON, "database marketing" is a mystery. This article is intended to help non-technical decision-makers get a “high altitude fly-by” overview of the many data-driven tools now available to boost sales, revenues and profits. You can get more in-depth explanations elsewhere in the Management Analytics Group library. |
WHAT ARE THE BENEFITS OF USING DATA-DRIVEN MARKETING TOOLS?
First, data-driven marketing is effective. Each customer’s behavior is recognized for just what it is. No broad assumptions or generalizations are involved. This lets you precisely design campaigns and offers that generate high response rates -- and keep track of the specific customers that respond.
Second, data-driven marketing is efficient. Communications and offers go only to those who are likely to respond. It doesn't matter what media is used. By contacting only those who are likely to respond, you can easily trim contact costs and avoid bothering uninterested people. In today's world of higher mailing costs and tighter emailing regulations, this is important!
Third, it is measurable. Data-driven tools allow you to create and test new marketing and campaign ideas with “rifle shot” precision and minimal expense – and then measure your results objectively to learn how to do better next time.
HOW DO DATA-DRIVEN MARKETING TOOLS WORK?
The heart of all data-driven techniques is a "management analytics database." This database is much simpler than any Customer Relationship Management ("CRM") or "contact management" system. It does not require fancy computer software nor a lot of investment. You can find a more detailed discussion of the differences between these kinds of systems in What is a management analytics database?
It is created from the data you already have in your existing systems and does not require training or equipment upgrades.
Companies usually already have this information in their systems. However, it is rarely organized in a way that is useful for marketing and sales tracking decisions. This specialized collection of data keeps track of the following information:
- Who each of your customers are.
- Where each customer is located.
- When and how you have contacted each customer.
- What each customer has purchased from you.
- How much they paid for it.
- When they purchased from you.
For more details, take a look at What Goes Into a management analytics database? Having this data lets you take full advantage of these common-sense axioms of marketing:
Axiom #1: What people do says
more than what they say. Data-driven marketing
(including sales campaign tracking) is based upon objectively counting
customer behaviors -- that is, what people actually do with their money
and with their time.
Axiom #2: Past
behavior is the best predictor of future behavior. This is true
for almost everyone, but especially true for customers. When we
clearly understand how a customer has behaved in the past, we can reliably
predict how they will behave in the future. We are all creatures
of habit.
Axiom #3: Not
all customers are created equal. Vilfredo Pareto (a 19th-century
Italian economist) observed that 80% of a company's profits came from
20% of their customers. As competition and costs increase, it's even
more important for today's businesses to know and nurture their "profitable
20%" customers!
Axiom #4: Keeping customers is more important than getting customers. It is far more profitable to discourage a customer from leaving through the "back door" than it is to encourage a new customers to come in through the "front door." One of MAG's most valuable reports provides managers early warning about the specific customers who seem to be drifting away -- in time for retention efforts to be effective.
WHAT DO YOU DATA-DRIVEN MARKETING FOR?
The purpose of data-driven marketing is simple: to help people make better, more efficient and more effective marketing decisions. This means making better choices about (1) who to contact, (2) how to contact them, (3) what to offer them, and (4) how to spend your advertising dollars most wisely. A management analytics database lets you:
- Identify “best” (and "worst") buyers.
- Identify cross-selling opportunities.
- Retain and grow profitable customers.
- Plan and measure marketing campaigns.
- Control marketing and advertising costs.
- Track sales force efforts and success.
- Locate new customers that "look like" your best, most profitable customers.
Take a look at Good Questions Generate Great Results for examples of good questions that experienced marketing managers ask to guide their strategic decisions.
WHAT'S THE BOTTOM LINE?
The “bottom line” of using data-driven techniques is higher revenues and profits. Data-driven tools tell you which customers to contact, how to contact them, when and how often. It tells you what to offer them and how much you can afford to spend and still come out ahead in the end. Data-driven marketing also tells you who not to contact because it will cost you more to contact them than they are likely to generate in revenues.
The paradoxical result of using data-driven management analytics database tools is that you will probably contact many fewer “names” than you would with a conventional approach. Nevertheless, response rates will increase and your ROI and revenues generally rise. Most organizations use the money they save to gain new customers and boost customer retention.
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