Archive for April 14, 2010

Go Beyond Customer Segmentation and Explore Predictive Analytics Part 2

Direct Marketing Magazine shared some ideas about predictive analytics.

Predictive Analytics Road Map

To get the most out of customer segmentation analysis, organizations could create road maps incorporating the following steps:

  1. Determine the Overall Business Objective. Get everyone on the same path and in agreement with what you want to accomplish, such as improving the yield on lead-generation efforts, identifying cross-sell opportunities or identifying customers most likely to go to a competitor.
  2. Capture All Potential Customer Data. Segmentation begins with gathering customer data from a wide variety of resources, including data warehouses, point-of-sale systems and loyalty programs. A database of static customer information is valuable, but until key active knowledge is applied—like preferences or motivations—there’s an incomplete picture of the customer. Capturing feedback from any touchpoint—in any language—provides a clearer understanding of customers’ needs, preferences and attitudes, and improves the segmentation process.
  3. Perform Recency, Frequency and Monetary (RFM) Analysis. To obtain the most accurate picture of customer lifetime value, organizations first should perform RFM analysis to classify customers according to: those who have spent the most—the most often and most recently; those who have spent the most—the most monetarily, but may not have purchased in a long time; those who spend the most in the fewest number of transactions; and those who spend the least, or rarely, and have not purchased in a long time.
  4. Outline the Segmentation Process. Once customers have been identified based on purchasing patterns, then segmentation analysis can begin to get to the core of the audience you want to target. The key to a successful segmentation program is to first define the many ways the results can be used. An approach might take the following path:
    • Create customer segments to enable differential marketing programs.
    • Use past purchase data and demographics to construct customer subgroups.
    • Isolate key performance factors linked to long-term customer value as major data drivers for the segmentation.
    • Use cluster analysis to form homogenous groups of differently valued customers.
    • Use techniques such as rule induction to automatically extract the profile of each cluster.
    • Align the marketing spending priorities against each subgroup.
    • Link product line or category affinity to each subgroup.
    • Develop marketing plans incorporating value-based budgeting and category affinity to make programs more relevant and efficient.
  5. Auto-Segmentation. With a customer base more clearly defined through effective segmentation, organizations then can add predictive modeling functionality within each segment to produce greater insight that’s required to more effectively and efficiently acquire, grow and retain the right customers, and also identify fraud and minimize risk. The modeling functionality in predictive analytics technology helps organizations accurately determine which customers best match specific offers or campaigns. By eliminating the guesswork when targeting customer groups, organizations quickly increase ROI through more efficient use of resources and reduced spending.
  6. Deploy and Share Results Throughout the Business. The final step is to create an environment in which an organization can manage and automate its analytical processes and easily deploy the results across the enterprise—thus improving productivity and collaboration and increasing ROI. This includes the ability to automate the database scoring process, publish and distribute output and reports, and integrate the analytical process into other business applications. For example, when a customer calls a call center, that agent should be able to pull up information on that specific customer and know what type of offer should be made at that particular time.

Hit the Target

With predictive analytics technology, organizations can move toward a one-to-one conversation with customers. Insight gained from even the most elementary analysis of customer characteristics can have profound implications on the business and result in marketing success.

Go Beyond Customer Segmentation and Explore Predictive Analytics Part 1

Direct Marketing Magazine shared some ideas about predictive analytics.

Personalize Customer Relationships

Segmentation is a way of grouping people or organizations with similar demographic profiles, attitudes, purchasing patterns, buying behaviors or other attributes. This helps to understand customers more thoroughly and thus market to them more effectively.

Many businesses use segmentation to recognize that customers have some unique characteristics. But they stop when going further may be possible, for this reason, segmentation can be a “blunt instrument,” leading to “one-to-some” marketing. It can perpetuate “accepted wisdom” about customers and the market that are not necessarily accurate.

Marketers can add predictive analytics to the segmentation process to generate insight needed to more effectively and efficiently acquire, grow and retain the right customers. The result could be a better understanding of what products and services customers are likely to want next. Predictive analytics can be thought of as auto-segmentation. This technology can discover groupings in customer data and find relevant patterns that are likely to be more subtle, extracting greater predictive insight than traditional segmentation. This would ensure that insight obtained into what customers want and how they behave, and marketing decisions made would be evidence-based and result in more profitable outcomes from one-to-one customer interactions.

Predictive analytics incorporates data collection, statistics, modeling and deployment capabilities. This drives the entire segmentation process, from gathering customer information at every interaction to analyzing the data and providing specific, real-time recommendations on the best action to take at a particular time, with a particular customer. The result is more effective customer relationship management strategies, including advertising and marketing campaigns; upsell and cross-sell initiatives; and long-term customer loyalty, retention and rewards programs.

In the next post we will look at a predictive analytics “road map”.

Tips for Print Buying

We are all being pressured to produce more with less. More powerful campaigns, more cutting-edge designs, more targeted pieces, more tangible ROI, more pizzazz than your competitors’ materials, more pressure to deliver faster with less money in your marketing budget.

These tips should apply in any economy, but right now it is so important to save every possible fraction of a cent.

  1. Maintain a list of vendors and their capabilities, they offer different services at different prices, this is due the differences in press sizes and other equipment features. Also track information about concerns, list the name of the vendor, dates and any possible problems.
  2. Get recommendations from other buyers and designers who produce similar types of materials, ask about pricing, service, ability to meet deadlines.
  3. Don’t expect printing to be done overnight.
  4. What matters most to you, delivery date, price, print quality or “wow!”? Know your priorities and share them with your printer.
  5. Get quotes from new suppliers and develop relationships during times when you are not busy, the more details you provide a potential printer, the better estimate you will receive.
  6. If you plan to mail the pieces, think about schedules, post office regulations, designing for mailing, USPS rates/costs, mailing lists, mailing houses, fulfillment, and so on. Dean’s Mailing is happy to review proofs before they go to press to look for possible improvements.
  7. Take advantage of payment terms and discounts.
  8. Consider direct paper stock purchases, paper is the biggest cost factor of a print job.
  9. Meet with paper vendors to determine what paper stocks can bring the most value and look for incentive programs.
  10. Work with up to five printers, don’t concentrate all your resources with just one vendor.
  11. Find the printers who can offer your more; creative ideas, lots of experience, current with the technology, and people who understand your business.

Make the Most of What You Have

Direct Magazine published an article titled, “Make the Most of What You’ve Got”. Author, Carol Lustig, shared some realistic practical information with a great attitude. She talked about how her information technology systems were not completely up to date and she was not able to get the exact customer purchase data that she wanted to use for a new campaign.

The result was that working with what was available, a new campaign has been launched and customer relationships are being retained using targeted specific information.

We have talked about the ideals of customer segmentation and market analysis, but the other side of those ideas is that we just need to do something! Maybe that something is just to start with what we have.

Please talk to us, we are here to save you every possible fraction of a cent on postage and that sensibility can help you make the most from what you already have (creative ideas, artwork, customer information, extra mailing pieces, samples…).

Media Choices

The multitude of media choices available to target and deliver  messages is amazing. And there are more options headed our way. This means that readers are strapped for time and bombarded with marketing communications, great writing alone probably won’t get your messages opened and read. Pat Friesen offered some understanding of how to deliver the message at the right time and in the right place in Target Marketing Magazine.

Tips for delivering maximum impact from a direct marketing writer.

• Don’t be overwhelmed by choices. Remember what’s worked in the past, and test new options that make strategic sense for reaching your audience and meeting your business objectives.

• Apply common sense and basic direct marketing principles. Measure and evaluate results, including initial response, closure rates, average order size (dollars and units), abandon/cancellation rates, lifetime value, etc. Remember, direct marketers track and measure the level of response.

• Cheaper on the front end isn’t necessarily more cost-effective on the back end. Track, measure and compare results.

• Not all media is direct response media … but that doesn’t mean you shouldn’t use it. Public relations, special events, and social media are marketing tools with the power to influence buying decisions. Use them accordingly.

• Don’t put all your eggs in one basket. Even with a successful 15 percent to 20 percent e-mail open rate, you still are not reaching 80 percent to 85 percent of your highly qualified buyers. Common sense dictates using both e-mail and postal mail to maximize results.

• Just because you know your offer is on your Web site or featured in your organization’s magazine, that doesn’t mean your customer knows it. A targeted phone call, e-mail, letter or even a postcard may be appropriate to communicate your offer.

• Not all messages are appropriate for all media. A letter still looks more personal, more valuable and more confidential than e-mail. It’s also less easily “trashed” by mistake or intentionally. If you offer financial services or other products of personal importance (e.g., legal, medical, upscale travel), don’t forgo postal mail for e-mail without testing.

• Put your message with a measurable call to action on your shipping box or packing materials. Create a product insert (not package) that encourages a second purchase. Be creative, be inventive and put your message in multiple places where your customer will see it.

• Some market segments respond better to specific types of media than others. For example, mature audiences 75-plus years old remain more comfortable with postal mail even if they have e-mail addresses.

• Test. Studies, case histories and anecdotal reports confirm that marketers who are most successful across the board using all types of media follow the direct marketer’s mantra of test, test, test.

• Don’t take a message written for one medium and plop it into another without careful review. Be aware that e-newsletters are different than ink-on-paper newsletters. Web ads are read differently than space ads. Readers’ expectations after opening an e-mail are different than after pulling a letter out of an envelope.

• All messages (no matter which type of media delivers them) have hot spots. Know where they are, and use them to your advantage.

• Consider the appropriateness of your media. The media you use for prospecting may not be the same as you use for communicating with your customers.

• Use different media to communicate with different customer segments. Just because you send a personal First Class letter with a 44-cent stamp to the top 20 percent of your customers who generate 80 percent of your sales doesn’t mean you have to mail First Class letters to all your customers.

• Save money; prospect within your own database. Cross-sell, upgrade, reactivate. They are very cost-effective ways to generate new business.

• If you limit yourself to using only one medium, you limit your opportunity for success. The more places consumers see you and the more ways they hear from you, the better they know you, the more they like you and the better they trust you.

• When your contact strategy includes a series of messages, have a strategy for your mix of media. Do what is appropriate for your message, audience and business objective. It could be an initial phone call, followed by a personal letter, then e-mail communications.

• No matter how cheap it is, media isn’t a good investment if it doesn’t generate the cost-effective results you need. Weigh the pros and cons of any media choice including cost, open rates, security concerns, deliverability rates, recipients’ perceptions of the medium, how it supports your brand, etc.

• Timing is as important as the media and message. Factor in time of delivery, holidays, how soon is too soon and how often is too often.

Inexpensive Marketing Maneuvers

Forbes Magazine featured a story about some marketing ideas. Our favorite was to make your customer the star.

Using a classic cooperative strategy, you could create their marketing for them. If you provide services or products to other businesses, can you help them with creative marketing featuring your products. Do you sell framing materials to frame shops, create postcards featuring finished frames.

To feed egos of your customers, feature a few them enjoying your products and services. Make them look really good, help them say smart, witty things or touch on their vanity with great lighting, hair and makeup.

To draw your customers into your creative process, what about a creative writing, illustration or visual contest? The contest could be tied to something new like a product launch and the reward for submitting an entry could be a sample of the new product. Contests are also great opportunities for publicity and free media coverage. Since you really want to stay in touch with your current and past customers, sending them a postcard or letter explaining the contest accomplishes many goals at once.

The Future of Marketing?

Is it really the economy, or is the recovery sluggish because people are not being reached when they want to consider marketing messages?

In a post that appeared on a Harvard Business Review blog, Dick Patton suggested that the four P’s of the traditional marketing mix (product, price, placement and promotion) be replaced. His article suggests a new acrostic: ROIDs

  • Responsibility marketing, including social responsibility, green marketing, and sustainability
  • Organizational leadership, requiring marketing to touch as much of the value chain as possible
  • Insights about customers, based on new analytic techniques that replace yesterday’s market research
  • Digital marketing, requiring companies to master an amorphous bundle of fast-changing media

What about the four D’s?

  • Dependability, as in marketing that is accountable, conscientious and responsible
  • Direction, marketing should be an integral part of determining where the company goes
  • Discernment, understanding of customers and the environment
  • Digital, companies must harness the power of ever-changing media, but be careful not to give it more influence than it deserves

Direct marketing needs to stay an integral part of this future; even as the environment, the rules, the models and what is really working and yielding results and returns on investment keep changing. Many businesses in many sectors have put more and more resources toward marketing using new technology, but the profits and revenue have not been created.

We need to talk to people when they want to receive information, not when they are in the middle of trying to just get through 50 emails or when they are gathering information for what they are ready to buy right now.

Define Your Customers Part 2

This is the second part from Target Marketing Magazine’s invitation to take a look at who your customers really are.

What Customers Believe

Understanding customer beliefs leads to building a powerful brand and can pay dividends in creative presentations and communications. Psychographics, or attitudinal data, are generally established by evaluating the thoughts and feelings of various cohort groups—groups of consumers in similar age ranges or stages of life.

Overlaying your customer data with psychographic information allows you to classify customers in one of a number of predefined segments. These segments are named and grouped based on common beliefs held among members. Psychographic data goes beyond demographics by exploring how people feel about everything from finances to shopping to technology to family and friends to religion, and more. Often, “messaging briefs” or tips for communicating with each group better and more specifically to their own beliefs also accompany these overlays.

If you conduct demographic and psychographic overlays you produce a picture of what the customer looks like and what she believes. To continue building a better picture of the customer, though, we have to know what she says.

What Customers Will Tell You

A good survey provides actionable answers to questions that discern the respondents in one group from those in another. By building a customer survey—one that can be executed online as well as over the phone—you can get the customer’s opinions of your brand as well as your competitors’ brands. The essence of brand differentiation is defining what you stand for and knowing what you don’t stand for in the mind of the customer.

Asking customers a variety of questions about themselves, your company and the competition, you begin to develop an understanding of what’s important to them in making purchasing decisions and how you rate on those issues versus the competition. In a perfect scenario, you find that you excel in the areas that are most important to your customers and that you have a significant advantage over the competition in those same areas.

Surveys don’t have to be long; seven minutes is an eternity on the phone. What surveys must do is ask the right questions. And to highlight your strengths even more, put non-buyers and lapsed buyers into the survey mix along with “better” customers. This way you see how your best buyers perceive you compared to your older buyers and nonbuyers.

What Customers Buy

Square-inch analysis, or squinch analysis, sheds light on product performance. In an effort to understand customer behavior completely, you should enhance your profiles with merchandise analysis. Asking questions like, “Do my best customers buy differently from my worst customers?” helps you address merchandise mix; price point; and creative issues in the catalog, on the Web site and in direct mail. It is at this stage that you’ve not only developed but implemented a better, more meaningful view of your customers.

Demographics are great for modeling, but if you want to paint the best picture possible of who your customers are, you can  move beyond age and gender to an understanding of what they believe and what they think about your company. Putting all of the pieces of the customer information puzzle together allows you to build more targeted and relevant creative, a more appealing merchandise mix and a more profitable contact strategy by contributing to an ironclad brand positioning. To define yourself, you first must define your customers.

Define Your Customers Part 1

Target Marketing Magazine printed an invitation to take a look at who your customers really are.

Many marketers think of customers in straight-forward terms: females, 45 to 60 years old, $75,000-plus household incomes, for example. These broad-sweeping descriptors have a place in customer definitions but aren’t the end in defining who does business with you.

Many of the data points necessary to understand your customer are available in your database. Purchasing data, for example, provides the foundation of analysis in marketing, merchandising and price points. But some of the more meaningful data—the information that allows you to complete the puzzle—is often available through knowledgeable providers. These professionals can offer data appends that allow you a more complete and robust view of who the customer really is.

Let’s look at several techniques you can use to learn more about your customers (and even your noncustomers) and how, put together, they give you the intelligence and insights to tighten your brand, improve your marketing and boost profits.

What Customers Are

The first step in building a comprehensive customer profile is the application of demographic data. There are more than a thousand different demographic variables that can be appended to the typical consumer’s name and address record. These demographics, or descriptive characteristics, can range from age and income to gender and ethnicity to home ownership and consumer credit availability. By compiling data from a variety of outside sources, a professional list provider can overlay demographics data onto any consumer data file and provide back either a series of descriptive reports or, better yet, appended data for additional analysis.

The demographics most commonly employed in developing customer profiles are generally age, income and gender. Additionally though, it can be powerful to know more about the customer, like how much she paid for her home and how long she’s lived there; how wealthy she is, beyond just annual income estimates; etc. By applying these data points, you start to paint a picture of the person “materially”—essentially the 45- to 60-year-old, $75,000-plus household income female mentioned earlier. The additional demos also allow for more understanding about the kind of home she lives in, how thin she spreads her income, how settled she is and more. And from a marketing standpoint, demographics can enhance RFM (recency, frequency, monetary value) selection as well.

In the next post we will look at customer beliefs (psychographics) and the meaning of purchasing patterns.