December Relationship Marketing Newsletter

Drilling Down Newsletter - December 2000 - pre-CRM & E-mail Testing

In this issue:
*Best of the Best Customer Retention Links
*New Article: How To Measure Future Customer Value and Manage it with E-mail
*Drilling Down Site: Practice What You Preach
*Questions from fellow Drillers: pre-CRM testing
---------------------------------------
Hi again Folks, Jim Novo here.
Let's do some Drillin'!
---------------------------------------

Customer Retention Links
======================

The following are must read articles on measuring and managing customer retention. Their "free status" on the DM News website expires 30 days after the publication date listed. If you don't read them by then, you'll have to pay $25 to read them in the DM News archives.

Note: I provide links to many more articles like these as they become available on the Drilling Down site. If you don't want to miss any of them, you might want to check this page weekly for updates to the article links:
http://www.jimnovo.com
/fresharticles.htm

Note to web site visitors: These links may have expired by the time you read this. You can get these " must read" links e-mailed to you each month 2 weeks before they expire by subscribing to the newsletter.

The last two weeks have been very slow for new articles on database marketing and customer retention; I expect everyone will gear back up after the 1st of the New Year.

* Personalize the Online Experience
December 7, 2000   DM News
Folks, this is not another one of those lame
personalization articles. This person speaks truth. Imagine, he says good customer retention starts with targeted acquisition, and customers who come from different media have different Lifetime Values. Plus, he thinks you should do some customer analysis before you buy an analytical CRM solution. Where have I heard that before?
http://www.dmnews.com/articles
/2000-12-04/11988.html

* Leveraging Lifetime Customer Value
December 6, 2000   DM News
Now we're talking the talk. Customer value by media source, targeted customer retention (not all customers, just the most profitable ones), identifying current low value customers with high future value - this one's got it all.
http://www.dmnews.com/articles/
2000-12-04/12010.html

* CRM Won't Kill Database Marketing
December 5, 2000   DM News
This is a very simple idea with very powerful implications. What good is all this reactive CRM stuff if they don't come back to the site? I usually get strange looks for my position on this topic, but I'm not alone...
http://www.dmnews.com/articles/
2000-12-04/11959.html

Measure and Manage Customer
Retention with E-mail
======================

Behind this deceptively simple title is a powerful article, explaining in detail how to measure potential customer retention problems, then set up, test, and roll out a profitable retention program. It's a simple ROI driven model and is perfect for automation through your own systems or a rules-based CRM engine. The key is identifying the point in the customer LifeCycle where defecting customers can be "re-started" at the highest profitability. This article shows you how to do it!
http://www.jimnovo.com/
Customer-Retention-Email.htm

Drilling Down Site - Practice What You Preach
======================

High customer retention rates depend quite a bit on acquiring the right customers in the first place. Last month I promised to get into the details of the pay-for-performance search engines, which are capable of delivering very targeted audience for as little as 1 cent a click. I mentioned a few newsletters ago the conversion rate (number of site visits to book purchase) had moved up from .2% to 1%, a five-fold increase, by using pay-per-click. How did I go about figuring out the keywords, pricing, and copy?

There are 3 keys to success:

1. Really know all the keywords your audience uses to search for their interests on the Web, and find out how popular each one of them is relative to the others.

2. Don't bid on the "most popular" terms unless they're available for a steal; pricing is critical.

3. Think hard about what people want to know when searching for these terms and write "action-oriented" copy fulfilling this need.   Constantly evaluate your copy and modify it to increase click-through to your site.

Let's step through these one at a time.

1. Keyword selection

If you are not using Wordtracker to evaluate keywords, you're missing out on a valuable tool for direct marketing oriented site owners. They have a database of about 40 million searches from the previous 6 months (largely from meta-crawlers) which allows you to slice and dice your usual key phrases. They're able to tell you what types of searches are going on for your topic, then show you all kinds of variants people are using with your keywords.

For example, "Relationship Marketing" is my most important keyword phrase. From Wordtracker, I discovered these 2 critical issues related to this phrase I never would have guessed:

* Apparently, a huge number of people interested in the topic I would describe as "Relationship Marketing" now search for information on this topic using the phrase "Customer Loyalty."

* The second most popular search using the phrase "Relationship Marketing" is phrased as "Relationship Marketing Articles."

Now, maybe I'm just stupid, but these two items hit me like a ton of bricks. To me, customer loyalty is a very different topic from Relationship Marketing. And adding the word "Articles" to my best keyword phrase gives me the second most popular search on the topic? Who knew?

Even better, these items ended up being true! Overall, "Customer Loyalty" is my second most popular search phrase, and "Relationship Marketing Articles" is a strong 3rd. "Customer Retention," which I thought was going to
be my strongest phrase, is way down the list.

Update 5/2006: There is a new player in this "search phrase" tracking; they are called KeywordDiscovery. Some think this is a better service than WordTracker; I guess time will tell (I just signed up).

Wordtracker costs $52 / month or $260 / year, also offers daily and weekly rates. KeywordDiscovery costs $50 / month or $390 / year. Both offer free trials. There is a lot more on the sites I can't possibly cover in the newsletter. See:

2. Pricing of keywords

Naturally, I thought I should pay up for "Relationship Marketing" and I still do. But if it keeps rising I'll dump it. Why pay 70 cents for "Relationship Marketing" when I can get "Relationship Marketing Articles" for 1 cent? Yes, you would be astounded at how many terms are not taken. The more specific a term is, the less likely it is taken (meaning it's cheap) and at the same time, the more likely it is to drive qualified traffic to your site.

It's a direct marketer's dream. I'm sure you know most media rises in price the more targeted it gets. In general, pay-per-click falls in price the more specific it gets. This is another reason you want to use Wordtracker, to find all the permutations of your keyword being used. Here's the dirty little secret : many search phrases bid at $1 or more fall to 1 cent by just changing the order of the words in the phrase, or by adding a word likely to be used by searchers. A qualified visit for a penny? You betcha bottom dollar.

3. Write action-oriented copy and test it for response Remember the mindset of a searcher. For traffic you want to convert into business, you don't want "surfers." You want people in action mode, trying to solve a problem that you have the solution for. So make sure you don't write copy that just describes what's on your site, but instead offers solutions to people who are actively pursuing a goal with the search phrase.

The best pay per click environment to try your hand at this is on Google. Now, Google's program is not exactly pay-per-click; it's more like "pay for placement." They charge $15 per thousand impressions or less for a small text ad to appear when people use your search terms, regardless of whether it is clicked on or not. This is super cheap for a targeted ad, and the more specific your search phrase is, the more targeted the impression will be.

But the real advantage to the Google program is the ability for you to change your ad on the fly, watching your response rates and tuning your copy for highest click-through. There is no waiting for ad changes to be "approved" and your results are available in real time, with great reporting. Very slick.

For example, the first ad I ran for the search phrase "Lifetime Value" had this headline: LifeTime Value Explained. It got a .66% click-through. About noon on the second day I changed the headline to: Calculate LifeTime Value. Note this is a more action-oriented headline. One hour later, click-through jumped to 2.6%. You read that right, 2.6 %. And it has remained at there since, so it's not a fluke (you should always let an ad run for a day or two to get a stable read on the overall response rate.)

Google keeps track of all the changes you make, remembers all your old ads, and shows you what the response was for each ad, current and past, right next to each ad you have run. You set limits on the total they charge you and the ad simply ends when you reach the limit. You can be automatically notified when the ad is reaching the spending limit.

These features make the Google program an ideal environment for those beginning to explore the world of pay-per-click ad creation and optimization. Spend $50 on Google to find out what headlines get the highest click-throughs for various keywords and phrases, then go set up your 1 cent per click ads on the pay-per-click sites. Google's ad program is here:

https://adwords.google.com/
AdWords/Welcome.html

The biggest pay-per-click engines with the widest distribution are GoTo.com and Sprinks (part of About.com). Combined, their listings are carried on almost every major "spider" based search engine. Paid listings are not, as yet, carried in the major directories like Yahoo. Here are links for these two pay-per-click engines:
http://www.goto.com/
d/about/advertisers/

http://sprinks.about.com/

GoTo is pretty straightforward, has the largest distribution, and provides better reporting than Sprinks, so try GoTo first. Also, regarding Sprinks, I would _not_ use the option to link with the 700 category listings on About.com. It sounds like a good idea, and you do get more exposure, but it's less targeted and I found these listings just burned up cash without nearly as good results. Depending on your keywords, it may be an option, but I would not be tempted to do this again - it breaks all the targeting rules we have discussed above.

Finally, here's a link to a list of the other pay-per-click engines:
http://www.payperclicksearchengines.com/

I don't use any of the others (yet) so I can't offer an opinion; I have heard positive things about FindWhat from other people. I do know you should stay away from any search engine paying users for the searches they perform. The people using these services are unlikely to be good prospects, unless you are in the gaming, sweepstakes, or "wealth opportunity" business area.

If you have any questions on this pay-per-click engine topic, feel free to send them to me.at the address at the end of the newsletter. I'd be glad to help you sort it out or clarify your issues.

Questions from fellow Drillers
======================

OK, we're a little long in the newsletter (again), so we'll take one question from the audience, this time from the CRM side of customer retention and relationship marketing:

Q. Like many companies, we're looking into CRM options and frankly, we're dumbfounded. Every decision seems to depend on increasing the LifeTime Value of a customer to pay for our CRM software and installation, but how do we estimate what the increase in customer value will be for our particular business?

A: Thanks for the "easy" question. First, let's distinguish "which CRM" we're talking about. Operational CRM generally looks at increasing efficiency by joining multiple channels of customer interaction into one place, and is largely customer service / cost reduction oriented.

Analytical CRM is about using the customer data generated in operational CRM to create marketing programs which increase the LifeTime Value of customers. I think you are asking about analytical CRM, the customer value side.

There's an interesting trend developing on this topic - the idea of a "pre-CRM" program, also known as "walk before you run." I was turned on to this by a group of my own customers who are IT managers.

The idea is you can directly measure the likely effects of analytical CRM marketing prior to purchasing all the bells and whistles. You don't have to create a data warehouse or install a lot of fancy software to do some basic pre-CRM analytical marketing tests. It will require your IT folks to do a little ad hoc work - run a few reports, generate some customer lists for marketing to use, and do some backend analysis. None of this is technically difficult, it just requires basic report writing and data extraction. A lack of IT resources is usually the only issue standing in the way. But when you compare this use of resources to the time and money spent implementing a CRM solution, it sure sounds like a test would be worth it.

Examples of what I'm talking about are on the Drilling Down site under the advanced articles:
http://www.jimnovo.com/
advanced.htm

In particular, read the new article mentioned above for business rule details:
http://www.jimnovo.com/
Customer-Retention-Email.htm

If you can imagine your IT folks doing this kind of work, you can design a very reliable pre-CRM testing program to discover just what your ability is to increase the profitability of your customers.

(end answer to question)

Newsletter readers: Are you interested in more coverage of pre-CRM testing in this newsletter? Perhaps in separate newsletter? Drop me an e-mail with your opinions or specific questions on pre-CRM testing using this e-mail address.

Also, for those already knee-deep into CRM, remember I'll be speaking at the Thunder Lizard conference in Monterey, CA March 12-14, 2001. The topic of the piece is "CRM Rules You Can Use"
---------------------------------------

That's it for this month's edition of the Drilling Down newsletter. If you like the newsletter, please forward it to a friend; the subscription is free! Subscription instructions are at the top and bottom of the newsletter.

Any comments on the newsletter (it's too long, too short, topic suggestions, etc.) please send them right along to me, along with any other questions on customer Valuation, Retention, Loyalty, and Defection to me.

'Til next time, keep Drilling Down!

Jim Novo

Copyright 2000, The Drilling Down Project by Jim Novo. All rights reserved. You are free to use material from this newsletter in whole or in part as long as you include complete attribution, including live web site link and/or e-mail link. Please also notify me as to when and where the material will appear.