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The DMSI e-NEWSLETTER... Rants and raves from the database pros at DMSI.
Serving 4000+ Marketing Pros Worldwide

In This Issue:

Dear Friends,

Love Me Two Times … a direct marketer doesn't need The Doors to explain the importance of repeat customers. In this issue - devoted to consumer database marketing - we begin with a discussion of getting that elusive second order.

Again this year, we are privileged to have Olivia Parr-Rud contribute her perspective on the history of data mining - a critical function for large scale consumer marketing. Finally, we close with The Art of Consumer Database Marketing -- 3 Questions every consumer marketer should ask themselves (and how WiseGuys can help!)

As always, please let us know how DMSI can fit into your database plans!

Bruce Gregoire,
President and founder,
Desktop Marketing Solutions, Inc (DMSI)

Adjunct Professor, Marketing Information Systems
Johns Hopkins University Graduate School

The Professor's Corner: for new DB Marketing practitioners
Love Me Two Times - Getting That Elusive Second Order

Some years ago I was helping a client analyze their customer buying patterns. We discovered what now seems obvious: customers who ordered a 2nd time were likely to order 3 or more times in the future with a probability of 40%. I was reminded of this recently during my Database Marketing class at Johns Hopkins - when a student of mine presented a very similar buying pattern from his own experience. Some marketers will say that until a customer buys a 2nd time, they really are not yet your customer: they may be just a "tire kicker" without enduring loyalty. What can you do to find the first time customers who may truly become future loyal customers? In the case of my own client, we instituted a call back campaign. The very next day after a customer's first order, the customer was called with incentives to order a 2nd time. This resulted in a dramatic increase in repeat customers - and higher customer lifetime value!

Learn More: Measuring repeat customers is a key component of Customer Lifetime Value that you don't want to ignore. Contact DMSI offices at (703) 941-8109 or info@DesktopMarketingInc.com for a free copy of our LTV Excel spreadsheet - it might show you dramatic ways to improve your own marketing efforts!
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Data Mining: Past, Present and Future
By C. Olivia Parr-Rud

Definition
Lots of people talk about data mining. Lots of people do data mining. But does anyone agree on what data mining is? The way I look at it, there is a narrow definition and a broad definition. To best understand this, let's look into the past.

Historically, statistical analysis involved having a theory and developing a hypothesis to prove or disprove the theory. If someone analyzed data without a predefined hypothesis, he or she was accused of "data dredging." For most statisticians, this type of analysis was not worthy of consideration. As technology improved, the "data dredgers" began finding valuable pieces or "nuggets" of information. Many of these "nuggets" lead to huge profits or savings of millions of dollar. So the term "data dredging" had to be replaced. And "data mining" was born.

As the word "Data Mining" gained popularity, industry experts began to call everything "Data Mining." So in a broader context, "data mining" includes looking for patterns in large data sets as well as database marketing analytics, segmentation, profiling, predictive modeling, text mining and more.

A Brief History
Years ago, most businesses were small and localized. This allowed business owners to have very personal relationships with their customers. For example, when a regular customer would enter their local grocery or dry goods store, the owner would know what cut of meat or what type of fabric that customer typically purchased. It was as if the storeowner had a "data mart" in his or her head. This personal attention helped to build loyalty and profits.

There were also challenges. Product availability was limited and distribution was slow. Credit purchases were based on the discretion of the storeowner. It's rare that you'll find a storeowner today who says, "Just pay me at the end of the week."

Privacy issues were more localized and less regulated. Local phone operators knew everyone's business. And if word got around that someone wasn't trustworthy, businesses could refuse credit or even ban an individual from purchasing. Times have certainly changed.

As World War II ended, companies found themselves with a great deal of access capacity. The country was poised for growth and young adults were starting families. This was the beginning of the baby boom.

Everyone wanted products. Mass marketing was born. Manufacturers and retailers began producing and selling all types of products such as cars, appliances and furniture to meet demand. In the beginning, most goods within a product group looked identical. Branding was important because most companies sold similar products. It was difficult to measure the effectiveness of advertising.

As markets became saturated, consumers grew more selective. They began to want products and services that would distinguish themselves from their neighbors. At the same time, companies became so large that they lost that personal connection with their customers. This led to some major changes in marketing.

The Paradigm Shift
The growth of technology facilitated a major change in the marketplace. Companies began collecting and analyzing data to improve their marketing effectiveness. This allowed them to build the personal relationship with their customers. This new knowledge also allowed companies to understand the products and services their customers were buying. The goal was one-to-one marketing: to offer the right product to the right person at the right time, at the right price, through the right channel. Today, many companies fall short because to achieve the goal of one-to-one marketing companies have to collect and store their customer information in such a way that they have a 360º view of their customers. This requires not only complex data storage and management systems but also a realignment of the entire company including processes, compensation and structure.

New Core Competencies
Why is this so difficult? Because once the data infrastructure is built, the remaining competencies needed to achieve the 360º view are primarily intangible. The first challenge is to dismantle the product silos. The new alignment must be around function or process. This requires effective communication, collaboration and teamwork.

The introduction of technology also increases the complexity of many positions within the company. This creates the need for a new style of leadership. The Harvard Business Review says that 70% of business intelligence projects fail due to poor leadership. Managing highly skilled analysts and technologists requires a visionary, mentoring style of leadership. The lack of these skills can lead to apathy and dissatisfaction. Top talent will begin to look elsewhere.

Identifying and measuring these intangibles is a new challenge for many companies. New tools such as Six Sigma, Balanced Scorecard and IntegrityIQ are stepping in to meet the need. Companies that master these intangible skills will definitely have the competitive edge in the coming decade.

Learn More: C. Olivia Parr-Rud, author of Data Mining Cookbook (Wiley 2001), has over 23 years in the database marketing industry with a 13-year emphasis in data mining, modeling and segmentation for a variety of industries. In addition to data mining consulting, she offers coaching, team-building and leadership training for the information age. She can be reached through her web site at www.OliviaGroup.com
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The Art of Consumer Database Marketing -- 3 Questions every consumer marketer should ask themselves.
Background: All too often, we become so caught up in the big picture of marketing that we overlook the fundamental pieces, the keys to seeing the success of our efforts through to the end. As you move into 2006 with great anticipation and a lean marketing budget, here are 3 questions to ask yourself:

1. Integrated Marketing - Do you plug the bathtub before turning the water on? Chances are you've worked tirelessly to incorporate the multiple transactional systems necessary to operate your business on a daily basis. You've given your customers infinite channels to place orders, ask questions, track shipments, complain, and offer suggestions for improvement. At the end of the day, however, we often forget the most important step in the whole process: channel integration. I got a good taste of why this is important during this past holiday season.

Here's what happens when you don't: I placed a sizable online order with a well-known company, and qualified for free shipping. But I forgot to add two items that I wanted. When I called the company to add to the order within five minutes of placing it, I was given two options that were unsatisfactory, in my opinion. To make matters worse, I no longer qualified for free shipping on my original order. This disconnect occurred because the company was not able to append an online order over the phone.

Plug the tub first. Linking together decentralized information, or providing access to information physically centralized, is the key to effective integrated campaigns. Bringing your information into a central repository provides a meaningful way to get access to high-level business metrics and the details to make informed decisions. Decisions can now be made about long term strategy as well as day to day campaign tactics.

2. Response Reporting - Do you drive with your eyes closed? We go to great lengths to anticipate and respond to the desires of our clients and prospects; we allocate large portions of our budget to launch targeted campaigns, but often miss an important step: planning up front to measure their effectiveness. I'm continually amazed at the number of companies who run their campaigns blindly, with no ability to decipher what works and what doesn't. Here's what happens when you do: A classic example of this is running two campaigns consecutively; let's say print and radio. You're spending three times as much on radio ads as you are in print, but you have no way of measuring the results of one against another. Chances are one is producing far better results-perhaps the less expensive of the two-but you're continuing to pour money into both funnels at the same rate.

Open your eyes. If you're running two campaigns at the same time, determining where your success is coming from allows you to allocate your budget to the areas that will bring you the greatest increase in sales. The only way to truly know if what you're doing is effective is by linking your responses with your promotional campaigns. If you are not technically able to link responses with your promotional campaigns (with source codes, matchback processes, or other means), you are missing a fundamental step. Today, marketers can no more afford ineffective advertising than manufacturers can support enormous overages of materials sitting in warehouses.

3. Customer Retention - Do you wait for the cable to be disconnected to tell you it's time to pay the bill? You've worked hard to create your customer base; you've earned their trust, loyalty and respect. Becoming complacent and waiting until they've moved on to show them you're a great catch is just like a sad love story. It's far more cost-effective to retain your current customers than it is to keep finding new ones.

Here's what happens when you do: Let's face it, customers like to be adored and appreciated; they like to feel like part of the inner circle. Feeling insignificant, like just another record in your database, can be a big turn off. If you've ordered coffee on a monthly basis for more than a year and suddenly stop, that company should notice right away. If you were given a subscription as a gift, that company should know when the subscription is about to lapse and warn you well in advance.

Pay your bill on time. In today's competitive market, loyal customers should be treated like family. It is important to know your customer base like the back of your hand. Finding customers who have just lapsed (or predicting those who may be about to lapse) should top the stack on your desk, be part of your dashboard. These customers are still more valuable than any prospect list, and should be given special treatment. Make sure your database staff is able to produce for you a "lapsed customer" list-then prepare a win-back strategy to get them buying again.

Learn More: See how DMSI approached the challenges of Integrated Marketing, Response Reporting and Customer Retention with our WiseGuys Marketing Software application. WiseGuys functionality resolves these issues with a user-friendly MS-Access desktop solution.
Download the WiseGuys FAQ

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How Desktop Marketing Solutions, Inc. can help you!
DMSI is a full-service resource for database marketing software, programming, installation and applications. Whether you're considering a new software system or just need help assessing your current one, DMSI can help. The staff at DMSI offer the rare combination of database know-how and direct marketing expertise. Our niche is small to mid-size organizations who need the power of advanced database techniques to grow their business. We provide software product installation and customization for "best of breed" marketing database and CRM packages.

And now, pick up the phone! One call gets you 15 minutes of Free Database Advice
Step 1: Call DMSI offices anytime at (703) 941-8109
Step 2: "Ask the Experts" at DMSI - give us your toughest database question.
Step 3: No charge - no obligation. 15 minutes may be all the help you need to start solving your marketing database problem.
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