Transcript A New Beginning - Database marketing Institute

October 9, 2003
Database Marketing:
A New Beginning
Houston DMA
Arthur Middleton Hughes
Director, Database Marketing Strategy
Doubleclick Data Management Solutions
[email protected]
What we at DoubleClick do
• Design, build and maintain marketing
databases
• Do merge purge, clean and manage data
• Provide millions of new customers to
catalogers, through the Abacus Alliance
• Provide DARTmail to send your emails
• Provide strategic advice on how to profit from
your database
The value of long term customers
•
•
•
•
•
•
•
Buy more per year
Buy higher priced options
Buy more often
Are less price sensitive
Are less costly to serve
Are more loyal
Have a higher lifetime value
Retention is the way to measure loyalty
90%
80%
70%
Percentage
Retained
from
Previous
Year
60%
50%
40%
30%
20%
10%
0%
1
2
3
4
Years as a customer
5
Retention pays better than acquisition
Annual Profit
$48
$60
$40
$20
$0
($20)
($40)
($60)
($80)
($62)
New Customer
3rd Year
Customer
Two Kinds of Database People
• Constructors
People who build databases
Merge/Purge, Hardware, Software
• Creators
People who understand strategy
Build loyalty and repeat sales
• You need both kinds!
What proves that relationship building works?
•
•
•
•
Manufacturer of building products
Catalog sent to 45,000 contractors
Previous policy: wait for the orders
Test: pick 1,200 customers, split into test of
600 and control of 600
• Two person pilot program build relationship
with test customers to see the results
Credit: Hunter Business Direct
Change in the number of orders after 6 months
112%
120%
82%
100%
Change in
number of
orders
80%
60%
40%
20%
0%
1
2
Control vs Test Groups
Change in the Average Order Size
114%
120%
86%
100%
80%
Change in
average 60%
order size
40%
20%
0%
1
2
Control vs Test Group
Total revenue gain: $2.6 million dollars over six months
127%
140%
120%
100%
Change in
total
revenue
70%
80%
60%
40%
20%
0%
1
2
Control vs Test Group
This stuff works!
• Building a relationship with customers
can be highly profitable
• Using a database to recreate the old
family grocer is a winning strategy
• Business to business relationship
marketing is the way to go
How a modern customer database works
Promotions
Marketing
Staff
Customer
Purchases
Marketing
Database
Transactions from
Retail, Phone, Web
Data Access
And Analysis
Software
What doesn’t work:
Treating all customers alike
79.67%
80.00%
60.00%
24.82%
40.00%
This 28% lost 22% of the
bank’s profits!
15.83%
1.52%
20.00%
0.00%
-20.00%
-21.83%
-40.00%
5%
11%
28%
28%
28%
Bank Customers by Profitability
Marketing to Customer Segments
Your Best Customers 80% of Revenue
Your Best Hope for New
Gold Customers
1% of Total
Revenue
GOLD
Move Up
These may be losers
Spend Service
Dollars Here
Spend Marketing
Dollars Here
Reactivate or
Archive
If you are not an airline, what can you do for gold
customers?
• Cataloger selected 4,000 gold customers.
• Sent a free gift and a letter (with a catalog) to
2,000.
• Sent only the catalog to the other 2,000.
• Result: sales 20% higher to those who got the
free gift.
• Gift: a discontinued item which was left over
and could not be sold.
Retail Sales Database Marketing Example
• Video rental company sent 170,000 email
newsletters about movies every two weeks to
those who asked for them
• They kept an identical group of 16,000 as a
control who got no newsletters.
• After six months, those who got the newsletters
spent 28% more than those who did not.
• Building a relationship with customers can be
very profitable.
Telecommunications Company DBM Example
• Cell phone company spent $7.38 per customer
per year on retention messages.
• Despite this, attrition was high.
• Built a customer database.
• Determined Lifetime Value of each customer
• Used a model to predict attrition
• Developed a Risk Revenue Matrix
Focus on the right segments
Probability of Leaving Soon
LTV
High
Medium Low
High
Priority A Priority B Priority C
Medium Priority B Priority B Priority C
Low
Priority C Priority C Priority C
Results of focus on priorities A and B
• Reduced cost per customer per year from
$7.38 to $1.38
• Reduced the attrition rate by 1.3% (millions of
dollars saved per year)
• Increased by 5% the average phone usage by
those contacted
Cataloger Database Marketing Example
• Cataloger sends millions of catalogs per year.
• Collected emails from those who used the web
• Conducted a test: 20,000 got emails along with
the catalogs in three mailings in 2003
• 20,000 (who had also bought on the web) got
no emails, just the catalogs.
• Those who got the emails bought 18% more
than those who did not.
One of three emails they sent
Insurance Database Marketing Example
• Property and Casualty insurance company
mailed 1.2 million households per month
• Based on database of 9 million households
• Developed a model to determine return on
promotion, based on demographics and credit
scores.
• Use of the model increased profit by 96%
How the model increased sales and profits.
Number Selected
Cost of Mailing
Number of Responses
Response Rate
Number of Sales
Sales Rate
Total Revenue
Revenue per sale
Profit
Control
Group
1,264,571
$547,559
13,366
1.06%
1,599
12.0%
$2,605,603
$1,630
$95,986
Optimized
%
Group
Change
1,264,571
0%
$547,559
0%
16,090
20%
1.27%
20%
2,323
45%
14.4%
21%
$3,158,811
21%
-17%
$1,360
$187,851
96%
Examples of Profitable Strategies
•
•
•
•
•
•
Newsletters
Surveys and Responses
Loyalty Programs
Customer and Technical Services
Friendly, interesting interactive web site
Event Driven Communications
Event driven communication:
Dear Mr. Hughes:
Ridgeway Fashions
Leesburg, VA 22069
I would like to remind you that your wife Helena’s birthday is
coming up in two weeks on November 5th. We have the perfect gift
for her in stock.
As you know, she loves Liz Claiborne clothing. We have an
absolutely beautiful new suit in blue, her favorite color, in a
fourteen, her size, priced at $232.00.
If you like, I can gift wrap the suit at no extra charge and
deliver it to you next week, so that you will have it in plenty of
time for her birthday. Or, I can put it aside so you can come in to
pick it up. Please call me at (703) 754-4470 to let me know which
you’d prefer.
Sincerely yours,
Robin Baumgartner
Robin Baumgartner, Store Manager
Sending an email
Where else can you get these results in 3 days?
Speech Email Follow Up Results on 3rd Day
Delivered
Viewed
Clicked
Do Not Mail
168
131
75
0
Download % Viewed % Clicked % Download
68
78%
45%
40%
Viral
Marketing
Viral Email results in
more emails and
data capture
Susan: If you want to
have some friends
come to Hawaii with
you, list them here and
if they decide to go,
we will give each of you
a 10% discount on your
trips.
Arthur Hughes [email protected]
Helena Errazuris [email protected]
Dudley Foulke [email protected]
Dear Helena: Rick and I are
going to Hawaii on August
7th. We thought it would be
great if you could come with
Us. We are staying at the
Maui Surfside which is a great
deal. To find out about it
Click here! Hope you can
Join us! Susan
Database
Summary: What you should do right now
• Build a database with transactions and promo
history
• Use it to analyze your customers and create
personalized communications
• Put yourself in your customer’s shoes: say
“Why would I want to be on that database?”
• Constantly test new strategies
• Use test and controls groups to prove that your
strategies are working
Books by Arthur Hughes
From McGraw Hill. Order at
www.dbmarketing.com