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IN A PREVIOUS ARTICLE (Segmentation Secrets), we examined some of the secrets that are typically uncovered when reviewing marketing data. In this article, we will look at the secrets for the more experienced marketer. |
Unlike the secrets discussed in the previous article, these "trade secrets" are things that are usually learned the hard way and not always grasped by people who haven't been in marketing. "Trade secrets" are often the next step up for marketers who are using their databases effectively.
By going from a snapshot analytical approach to reviewing marketing data over time, and by looking at many different situations, I've so far uncovered here a dozen of the most important "trade secrets' for database marketers.
TRADE SECRET #1
Take an iterative approach to building the marketing database. The most important thing to do with marketing data is to use it -- right away. Building the "perfect" marketing database is time-consuming, expensive and will rarely achieve expectations. Perfection is impossible.
There are many surprises found in marketing data. How data is captured will change over time, data may be omitted for a variety of reasons and the market itself changes. No matter how well the computer and software works, there is no way to know how well a marketing database works until it is used and tested for marketing.
A better strategy is to start with what is available now, make mistakes on a smaller scale (while still learning) and expand the database effort with the benefit of lessons learned along the way. Fortunately, the most valuable marketing data is usually the easiest to uncover. This makes the approach of starting small and improving over time a much smarter and safer way to go -- both financially and career-wise!
TRADE SECRET #2
Buyers of many different items are more loyal and more profitable than customers who cherry pick only a few items.. There is a strong positive correlation between customer spending and the number of product categories customers buy. Most marketers look at RFM or make reselling efforts to buyers of certain product categories.
Pinpointing which buyers have only bought from one or two categories and targeting them with cross-sell offers has the potential of increasing both sales and loyalty. The old saying "The more they buy from you, the more they will buy from you" is true for both dollars and product categories.
TRADE SECRET #3
Look at cross-sell reports to find opportunities. Some cross-selling opportunities are obvious. A customer may be buying computers and not monitors, or desks but not chairs. It may take a special offer to convince them to buy a complementary item but most often it is simply a matter of asking.
Another way to find cross-selling opportunities is to find out what your customers buy that you don't sell. This can be surmised by finding out who rents your list regularly. For catalogers, using Abacus can do this. If buying your product means they use another, they may be waiting for you to sell them both!
TRADE SECRET #4
Quite often, companies that sell through retailers or distributors set out to build a database of end users. "We have no marketing database and we have to get one," they say. Unfortunately, they usually find they cannot determine who is the final consumer as the reseller controls that information.
In many of these situations, we find they haven't even kept track of their resellers! The company has sales data for each reseller, but marketing has made no use of it. A relatively simple, low-cost marketing database effort could reap major dividends here. Look at this from the other side: how good would a consumer database be if there was no database of resellers?
Ultimately, most companies want both. Just make sure you build the reseller database first.
TRADE SECRET #5
Build the database for the resellers. One way manufacturers get access to individual consumer data is to build the database for their resellers or dealers. This may be as complex as creating software that resellers use to manage their business or as simple as managing their marketing data for them. As long as resellers are willing to share data with the manufacturer, this can be an effective approach.
TRADE SECRET #6
Recency-Frequency-Average Order. Buyers often have a tendency to spend a certain amount per order. It is not unusual to see one-time buyers with $100 in lifetime sales respond better than two-time buyers with $100 in lifetime sales. Average Order is sometimes a better tool for targeting offers than life-to-date sales, commonly referred to as "Monetary". Look at both RFM and RFA to see which works best for you.
TRADE SECRET #7
Drill down into sales spikes. Whenever there is a major sales spike for a certain product, product category or sales territory, check to see if it was caused by only one or a few buyers. A single buyer may take a close-out of an old item you don't want to restock, or it could be a one-time sale.
Just knowing how many buyers correlated with sales -- and if only a few, who they are -- is very useful.
TRADE SECRET #8
Analyze marketing data like an investor. Marketers tend to think mainly of the next promotion or how to use their advertising budget. Periodically, take the lifetime value ("LTV") information built through the marketing database about customer and prospecting efforts and relate it to the company in total. How much are all the customers in the database worth? How much will they be worth next year, two years or three years from now? Look at lifetime value as if you were analyzing stocks and consider how you can use it to increase the bottom line.
TRADE SECRET #9
Measure LTV of reactivation. Now this one takes a little time. First, you have to have fewer recent customers to reactivate, then make reactivation efforts, then measure the results. Reactivated customers may become like average customers, some may be better or they may be buyers who wait for a deal. If you've got the data to measure this, it can have a real impact on how you mine marginal segments of your database.
TRADE SECRET #10
Balance acquisition and retention. Marketers tend to focus mainly on either acquisition or retention but few focus upon balancing the two. It is not uncommon to find companies that don't do enough retention marketing to maximize profits and find others who don't try hard enough to acquire customers who will be profitable. Growing market share through acquisition is important, but the profits earned from marketing to existing customers is what pays for it.
TRADE SECRET #11
Twelve months out, the eventual winner has already won! Low acquisition cost does not guarantee high lifetime value. Lifetime value calculations usually cover three to five years. Most companies want to earn back prospecting investment within twelve months. Fortunately, the prospecting efforts with the highest three-to five-year return are almost always the efforts with the highest 12-month return. Look at life-to-date sales (Monetary) from customers acquired through prospecting sources 12 months after each promotion. The best prospecting sources after twelve months will probably have the highest eventual lifetime value.
TRADE SECRET #12
Analyze why key codes are not captured. Look at each response device. If you were taking the order, could you gather the data? The problem may be just one or two people, so look at key codes by operator. See if blank or unknown codes are coming from one or a few operators. (Some operators pick a favorite key code and us it over and over again.) Check to see if unusual circumstances affect capture -- such as when the phones roll over to an outside supplier after business hours or when there is heavy call volume. The problems are usually not with everybody. Find out specifically what the problems are so you can fix them.
CONCLUSION
Fine-tuning marketing database efforts is an iterative process. Some of these "trade secrets" are ones you can take advantage of now. Others will become more useful to you down the road.
If you've already learned how these "trade secrets" apply for your company, congratulations! You must be an expert! If you are almost there, look for an experienced marketer to help you get the rest of the way. Once you've mastered these, you'll know your marketing database is really working.
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