Drilling Down Newsletter - March 2001 -
Geodemographics, Database Marketing
In this issue:
# Best of the Best Customer Retention Links -
*** Alert: These expire soon!
# Getting "Must Read" Links Before they Expire
# Thunder Lizard - Web Marketing 2001
# New Article: Getting Up to Speed on
Database and Direct Marketing
# Questions from fellow Drillers: Geodemographics
------------------------------
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
By the way, the new publishing implementation at the DM News web site
creates URL's so darn long they get all broken up in the newsletter,
so I have to "link to the link" on my site to get you a
clickable link. Sorry for the "doubleclick."
*** Alert *** The links below expire very soon!
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.
* Customer Loyalty Without the Points
March 2, 2001 DM News
Customer Retention, we call it. Fact is, there is a tremendous
amount you can do to keep customers with you and raise their value -
and it's not nearly as hard as all the CRM companies keep telling you
it is.
http://www.jimnovo.com/fresharticles.htm#cl
* Fighting Internal Resistance to CRM
March 2, 2001 DM News
This article has some absolutely classic examples of the pitfalls
inherent in "silo thinking." Don't laugh too hard,
this stuff happens all the time - and you're next!
http://www.jimnovo.com/fresharticles.htm#fr
* Customer Relationships in the New Age
March 2, 2001 DM News
So you're going to pick on RFM, eh?
If you're not using any method to assess future customer value and
likelihood to respond, RFM is a heck of a lot better than nothing.
But I agree, the way RFM has been used in the past, as a
"snapshot" of behavior, is not optimal. You have to
look at behavior over time, which is exactly what the Drilling Down
book is about. http://www.jimnovo.com/fresharticles.htm#cr
Getting "Must Read" Links Before they Expire
=====================
Once again this month the "Must Read" Links list contains
soon-to-expire links. Everyone who responded to my query in last
month's newsletter liked the idea of always having 2 weeks to read the
articles before they expire. So starting in April, you will
receive a list of no more than 5 Must Read articles mid-month (without
newsletter content), and a list of links in the regular end of the
month newsletter.
As a reminder, these are links to short-in-supply articles
containing customer retention metrics, tactics, and case studies.
Hopefully this approach will eliminate the "you're an idiot"
e-mail I get every month regarding DM News links expiring before
people get to read them. Glad to know people appreciate the
service; this little fine tuning should fix the last problem.
Thunder Lizard - Web Marketing 2001
============================
Monterey is a pretty place, but there were a ton of web marketers
there for more than the scenery. You'd recognize many of the presenters
(including myself) from their contributions to ClickZ
- Nick Usborne, Geoff Ramsey, Rick Bruner, Sean Carton, Richard Hoy,
Tom Kuegler, Kim MacPherson, and Eric Ward were all there, delivering
the "How To" Thunder
Lizard is known for.
It was great to meet some of you, and thank you for your kind words on
the Drilling Down Project book, site, and newsletter. The word
is spreading and it appears the original mission of this Project - to
show people how to take advantage of customer
retention methods the pros use without incurring all the costs -
is on target and well timed. The backlash against over-complicated
and high cost CRM is growing, and it seems folks really appreciate the
alternative Drilling Down offers.
Some of what I learned at the show:
Complex and high cost CRM applications are appropriate for some
businesses - the presentation by Jim Dickie of ITG on medical sales
CRM was absolutely stunning. I couldn't stop thinking about it.
A $26 million CRM implementation using suggestive selling on sales rep
PDA's paid back in 6 months. The key to success was in the
planning and partnership with vendors who supplied the detailed
information and upsell / cross-sell criteria on the 30,000 products
the sales force handles. Stunning was the only word for it!
Direct / Database marketing will rule the web. Period. And
many, many offline companies are completely unprepared for this,
because they have never used their customer data for anything but
routine billing tasks. This continues to amaze me; I had no idea
people were so profoundly unprepared for database marketing.
Web marketing people have somehow skipped a whole generation of
marketing learning. CRM software was supposed to "do it
all"; people didn't really have to know database marketing
techniques or have any hands-on experience . The truth is,
software is just a tool, and experience matters.
There is a very real shortage of people who know how to take advantage
of all CRM software offers. Think about how much of the
functionality you use in Microsoft Word. The reason you hear
about so much "failure" regarding CRM marketing achieving
ROI is simply people don't know how to take advantage of the software
functionality. They're drowning in data and the problem is
largely self-inflicted.
Bottom line - for most companies / people, using this software is like
trying to get a Ph.D. without going to high school or college first -
a whole generation of "how to" knowledge, the classic texts
of database marketing, were never read or practiced by CRM users, and
the result is a high failure rate on the marketing side of CRM.
I'm afraid there is no easy solution for this problem, because it's
experience more than reading books that drives successful
database marketing.
Solutions? Hire or rent yourself a marketing person with real
database marketing experience (10+ years) to head your CRM project
(not just a stats person, either - their view is too limited).
Where to look? Mail order / catalog or other database marketing
companies. People should have proven results in the ROI area -
ask for specific wins!
New Article: Getting Up to Speed on
Database and Direct Marketing
====================
I thought people could use a little help in the database marketing
area - that's why I wrote the Drilling Down book. But I had no
idea how serious this "lack of knowledge" problem was.
As part of this more complete realization described in the previous
section, I thought it might be a good time to make some suggestions on
how people can try to get themselves up to speed on database
marketing. So I wrote an article covering 5 actions you should
take if you happen to be in the unfortunate position of using CRM with
no real database marketing experience. You'll find this new
article here:
http://www.jimnovo.com/database-learning.htm
Questions from Fellow Drillers
======================
Short question this month to balance out the longer sections above.
Don't want to take too much of your time with the newsletter.
Q: Jim, do you know anything about "geodemographics"?
We have vendors calling us that want to "enhance" our
database with demographic information based on the physical location
of our customers. Will this help our marketing efforts?
A: Hmmm...it might. Geodemogrpahics, for those that
don't know, consist of census and other information coded to the zip,
zip+4, or census tract level. The idea is if you know where your
customer lives, you can apply the "average demographics" of
the neighborhood to your customer and perhaps learn something valuable
for targeting campaigns.
As with any other database marketing technique, you have to test it.
Don't do anything without getting a sample of your database enhanced
and testing it versus an un-enhanced version for performance.
Reliable and honest vendors of geo-dems would never refuse such a
request, because if they are pros, they know the answer to the above
question is "it all depends on your business and customers."
That said, here are some issues to consider:
1. Customer behavior will always be a better predictor of future
profitability than any kind of demographics, so using customer
behavior to drive high ROI campaigns will always be more efficient
than demographic enhancements ever will be. And besides,
behavior data is free to you; geo-dems will cost you money and
lower your ROI. In other words, the profitability of a campaign
based on geo-dems has to improve enough over the un-enhanced campaign
to at least pay for the cost of all the enhancements to your database.
2. If your customers are concentrated in certain zip codes, geo-dems
may be helpful. If they are spread thin over many zips, it
probably won't. Think about it. If the geo-dems are the
average for the geographical unit, if you only have one customer
in the zip (zip+4, census tract), what is the likelihood your customer
really looks like the average? Think about zips in your
neighborhood - is there at least one elderly complex in the upscale
zip, one warehouse in the retail zip, etc.? The lower your
customer penetration, the higher the likelihood the geo-dems won't
represent your customer.
3. Geo-dems are most helpful in an advanced modeling
environment, where you have already constructed basic models of
customer behavior (like the RF technique
described in my book)
and are looking for extra "lift" to these models.
Adding geodemographic information to the modeling mix, particularly
when you are using data mining, can help improve response rate,
average sale, etc. because even if the dems aren't completely
accurate, they can be predictive (I won't go into why in this
space). We did a project like this at Home Shopping Network and
it turned out just fine.
4. Geo-dems are really hot for retail applications like choosing
sites for stores or creating sales territories, where a large
percentage of the population are likely customers. I used them
to estimate the TV Shopping sales value of a cable franchise with
great accuracy. These applications work because the average
demographic becomes very meaningful when the customer penetration
potential exceeds 50% - 60% of total households in the geographic unit.
I know there are people on this list who work at geodemographic
enhancement companies. Equal time for you in the next newsletter
if you'd like to challenge or augment what I've said here.
-------------------------------
NOTE: Got a question on database or
high ROI customer marketing? What are
you waiting for? Ask me!
-------------------------------
That's it for this month's edition of the Drilling Down
newsletter. If you like the newsletter, please forward it to a
friend! Subscription instructions are at the top and bottom.
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.
'Til next time, keep Drilling Down!
Jim Novo
Copyright 2001, 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.
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