Posts Tagged ‘database marketing’

Why Surveys Go Well With Predictive Models

October 13, 2010

Thanks to advancements in technology, companies now have the capability to analyze millions – if not billions – of transactional, demographic, and psychographic records in a short time and develop sophisticated models that can assess several scenarios: how likely a customer is likely to purchase again; when he/she will purchase again; how much he/she will spend in the next year; how likely he/she will defect; and many more. Yet, by themselves, predictive models don’t provide a complete picture or profile of the customer. While models can provide information on a prospect or customer’s willingness and ability to purchase based on similar characteristics of current customers, they don’t provide much information about the customer or prospect’s readiness to buy. Hence, a survey can be a highly useful supplement.

Using a survey before a promotion – assuming no effort is made trying to sell to the customer under the guise of the survey – can provide valuable information. With a simple attitudinal and behavioral survey, a marketer can gain a read on the market’s readiness and willingness to buy at that moment. Moreover, the marketer can gauge the purchase readiness of certain customer groups and segments, so that he/she can structure marketing promotions in a manner that makes the best use of marketing dollars. In addition, if certain groups are wary of or unwilling to buy a product, the marketer can look for ways to reach out to these groups for the future.

Another benefit of surveys is to help classify customers and prospects into market segments based on their answers to carefully designed questions. Often, surveys can capture data about prospects and customers that transactional and third-party overlay data sources cannot.

Surprisingly, many companies either do marketing research or predictive modeling, but not both. This is squandering a great marketing opportunity. These two approaches together can provide the missing pieces to the puzzle that will help marketers improve their planning, increase their marketing ROI, and maximize their profits and market share.

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Charities are Spying on You – But That’s Not Necessarily a Bad Thing!

May 26, 2010

The June 2010 issue of SmartMoney magazine contained an interesting article, “Are Charities Spying On You?,” which discussed the different ways nonprofit organizations are trying to find out information – available from public sources – on current and prospective donors. As one who has worked in the field of data mining and predictive analytics, I found the article interesting in large part because of how well the nonprofit sector has made use of these very techniques in designing their campaigns, solicitations, and programming.

At first glance, it can seem frightening what charities can learn about you. For instance, the article mentions how some charities’ prospect-research departments look at LinkedIn profiles, survey your salary history, and even use satellite images to get information on the home in which you live. And there is a wealth of information out there about us: Zillow.com gives info about the value of our homes and those around it; if you write articles or letters to the editor of your newspaper, online versions can often be found on Google; buy or sell any real estate? That too gets published in the online version of the newspaper; and online bridal and baby shower registries, graduation and wedding announcements, and any other news are fair game. And your shopping history! If you buy online or through a catalog, your name ends up on mailing lists that charities buy. Face it, there’s a lot of information about us that is widely and publicly available.

But is this so terrible? For the most part, I don’t think so. Surely, it’s bad if that information is being used against you. But think of the ways this data mining proves beneficial:

Customization

Let’s assume that you and I are both donors to the Republican National Committee. That suggests we’re both politically active and politically conservative. But are we engaged with the RNC in the same way? Most likely not. You might have donated to the RNC because you’re a wealthy individual who values low taxes and opposes a national health care plan; I might have donated because I am a social conservative who wants prayer in public schools, favors school choice, and opposes abortion. By seeking out information on us, the RNC can tailor its communications in a manner that speaks to each of us individually, sending you information about how it’s fighting proposed tax hikes in various states, and sending me information about school choice initiatives. In this way, the RNC maintains its relevance to each of us.

In addition, it’s very likely, in this example, that you’re donating a lot more money to the RNC than I am. Hence, that would likely lead the RNC to offer you special perks, such as free passes for you and a guest to meet various candidates or attend special luncheons or events. For me, I might at best be given an autographed photo of the event – in exchange for a donation of course – or an invite to the same events, but with a donation of a lot of money requested. I might get information about when the next Tea Party rally in my area will be held. Or even a brief newsletter. One can argue that the treatment you’re getting vs. that of what I’m getting is unfair. However, think of it like this: at a casino, people who gamble regularly and heavily are given all sorts of complimentary perks: drinks, food, a host to attend to their needs, and even special reduced rate stays. That’s because these gamblers are making so much money for the casino, that the cost of these “comps” is small in comparison. In addition, the casino wants to make it more fun for these gamblers to lose money, so that they’ll keep on playing. In short, the special treatment you’re getting is something you’re paying for, if indirectly. I’m getting less because I’m giving less; you’re getting more because you’re giving more. And the charity will give you more to keep you giving more!

Reduced Waste

Before direct marketing got so sophisticated, mass marketing was the only tactic. If you had a product to sell, you sent the same solicitation to thousands, if not millions of people and hoped for a 1-2% response rate. Most people simply threw your solicitation in the garbage when it came in the mail. Many recipients didn’t have a need for the item you were selling or the appeal for which you were soliciting, and disregarded your piece. As a result, lots of paper was wasted, and the phrase “junk mail” came into existence. In addition, if you used follow-up methods, such as phone calls after the mailing, that got costly trying to qualify the leads, just because of the labor involved.

Now, with targeted marketing and list rental, sales, and sharing, charities can build predictive models that estimate each current and prospective donor’s likelihood of responding to a promotion. As a result, the charity doesn’t need to send out quite a large mailing; it can mail solely to those with the best chance of responding, reducing the amount of paper, print, and postage involved, not to mention reduced labor costs involved, both in the production of the piece and in the staffing of the outbound call center. In short, the charity’s data mining is helping the environment, reducing overhead, and increasing the top and bottom lines.

Better Programming

By knowing more about you, the charity can know what makes you “tick,” so that it can come up with programs that fit your needs. Even if you’re not a large donor, if you and other donors feel strongly about certain issues, or value certain programs, the charity can develop programs that are suitable to its members at large. And while many larger donors may be granted special privileges, their large donations can help fund the programs of those who donate less. Everybody wins.

Not bad at all

The data mining tactics charities use aren’t bad. People don’t want to be bombarded with solicitations for which they see no value in it for themselves. Data mining makes it very possible to give you an offer that is relevant to your situation, is cost-effective and resource-efficient, and design programs from which you’re likely to benefit. It is important to note, that while major donors get several great perks, charities must not ignore those whose donations are smaller, for two reasons: first, they have the potential to become major donors, and second, because of their smaller donations, it’s very likely their frequency of giving is greater. This can mean a great stream of gifts to the charity over time. Hence, charities should do things that show these donors they’re appreciated – and, quite often, this too is often accomplished by data mining.

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Making Smart Marketing Decisions with Marketing Analytics

April 7, 2009

Which marketing media(um) work(s) best for my company?  Which customers are my most valuable?  Which customers are at risk of defecting?  Which prospects are most likely to respond to my latest direct mail campaign?  How do I get customers to increase their average spend?

At some point you’ve asked yourself questions like these.  And with today’s economic challenges, there has never been a greater need to maximize the return on  every marketing dollar.

That’s where marketing analytics comes in.  With some statistical methods and data you have collected on your promotions, customers, and transactions, you can easily answer the questions above and tailor your marketing strategy for maximum performance.

Many companies, small and large, can reap enormous benefits from marketing analytics.  If, for example, you run a boutique, all kinds of information about your customer become available to you – if you are willing and able to collect it.

Some of the information available to your boutique include:

  • Purchase history – the brands your customer buys, the type of apparel he/she buys, the dates on which he/she bought, and the amount of each purchase;
  • Demographics – if you collect your customers’ names and addresses, you can get gender and geographic information, and thanks to the Census Bureau, a ZIP code lookup will enable you to make good estimates of income, home ownership and other demographic variables; and
  • Psychographics – if certain types of apparel in your store are geared towards certain activities (e.g., a night on the town, recreational sports, etc.) you can get a good gauge of your customers’ interests.

These are just a few examples of the data that can be collected.  Let’s see how they can be put into practice.

As the boutique owner, you look at your database and you find that a customer purchases from you once every two months on average, and spends an average of $100 each time.  Your goals for this customer might be to shorten his/her purchase cycle and increase his/her purchase amount.  So, one month after this customer’s last purchase, you send him/her a letter or other promotion piece offering a discount or some other giveaway if the customer makes a purchase of $150 or more within two weeks. 

You might even make your marketing analytics program even more sophisticated by tailoring it to a brand this customer frequently purchases, the area in which he/she lives, or even to a specific occasion, if the customer frequently makes a purchase around the same time each year.

The possibilities of marketing analytics are limitless, but they will be worthless unless you know beforehand what you want marketing analytics to help you accomplish; are able to collect the data you need for the effort; and your analytics efforts generate insights upon which you can act.