october 9, 2003 database marketing: a new beginning houston dma arthur middleton hughes director,...
TRANSCRIPT
October 9, 2003
Database Marketing:A New Beginning
Houston DMA
Arthur Middleton Hughes
Director, Database Marketing Strategy
Doubleclick Data Management Solutions
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
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Percentage Retained
from Previous
Year
1 2 3 4 5
Years as a customer
Retention is the way to measure loyalty
Retention pays better than acquisition
($62)
$48
($80)($60)($40)($20)
$0$20$40$60
New Customer 3rd YearCustomer
Annual Profit
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!
• 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
What proves that relationship building works?
82%
112%
0%
20%
40%
60%
80%
100%
120%
Change in number of
orders
1 2
Control vs Test Groups
Change in the number of orders after 6 months
86%
114%
0%
20%
40%
60%
80%
100%
120%
Change in average
order size
1 2
Control vs Test Group
Change in the Average Order Size
70%
127%
0%
20%
40%
60%
80%
100%
120%
140%
Change in total
revenue
1 2
Control vs Test Group
Total revenue gain: $2.6 million dollars over six months
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
MarketingDatabase Data Access
And AnalysisSoftware
Customer Purchases
Marketing Staff
Transactions from Retail, Phone, Web
Promotions
What doesn’t work:Treating all customers alike
79.67%
24.82%15.83%
1.52%
-21.83%
-40.00%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
5% 11% 28% 28% 28%
This 28% lost 22% of the bank’s profits!
Bank Customers by Profitability
GOLD Spend Service Dollars Here
Spend Marketing Dollars Here
Reactivate or Archive
Your Best Customers - 80% of Revenue
Your Best Hope for New Gold Customers
Move Up
1% of Total Revenue These may be losers
Marketing to Customer Segments
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 SoonLTV High Medium LowHigh Priority A Priority B Priority CMedium Priority B Priority B Priority CLow 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.
Control Optimized %
Group Group Change
Number Selected 1,264,571 1,264,571 0%
Cost of Mailing $547,559 $547,559 0%
Number of Responses 13,366 16,090 20%
Response Rate 1.06% 1.27% 20%
Number of Sales 1,599 2,323 45%
Sales Rate 12.0% 14.4% 21%
Total Revenue $2,605,603 $3,158,811 21%
Revenue per sale $1,630 $1,360 -17%
Profit $95,986 $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:
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
Ridgeway Fashions
Leesburg, VA 22069
Sending an email
Where else can you get these results in 3 days?
Speech Email Follow Up Results on 3rd DayDelivered Viewed Clicked Do Not Mail
168 131 75 0
Download % Viewed % Clicked % Download68 78% 45% 40%
Susan: If you want to have some friendscome to Hawaii withyou, list them here andif they decide to go, we will give each of youa 10% discount on yourtrips.
Dudley Foulke [email protected]
Helena Errazuris [email protected]
Arthur Hughes [email protected]
Dear Helena: Rick and I aregoing to Hawaii on August7th. We thought it would begreat if you could come withUs. We are staying at theMaui Surfside which is a greatdeal. To find out about itClick here! Hope you can Join us! Susan
Database
Viral Email results in more emails and
data capture
Viral Marketing Susan: If you want to
have some friendscome to Hawaii withyou, list them here andif they decide to go, we will give each of youa 10% discount on yourtrips.
Dudley Foulke [email protected]
Helena Errazuris [email protected]
Arthur Hughes [email protected]
Dear Helena: Rick and I aregoing to Hawaii on August7th. We thought it would begreat if you could come withUs. We are staying at theMaui Surfside which is a greatdeal. To find out about itClick here! Hope you can Join us! Susan
Database
Viral Email results in more emails and
data capture
Susan: If you want to have some friendscome to Hawaii withyou, list them here andif they decide to go, we will give each of youa 10% discount on yourtrips.
Dudley Foulke [email protected]
Helena Errazuris [email protected]
Arthur Hughes [email protected]
Dear Helena: Rick and I aregoing to Hawaii on August7th. We thought it would begreat if you could come withUs. We are staying at theMaui Surfside which is a greatdeal. To find out about itClick here! Hope you can Join us! Susan
Database
Viral Email results in more emails and
data capture
Viral Marketing
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