You've seen the headlines: 40% return on Acme's latest database marketing campaign! “If Acme can do that, we can too,” says your boss. “Do it next week.”
Here's the real scoop. There is no silver bullet in database marketing. Yes, some companies have had successful campaigns, but they didn't create the database, process or campaign overnight. There is no one component that makes a database marketing campaign effective and there are no quick wins that will sustain success over time. It's the combination of good data, compatible technology solutions, advanced analytics, efficient processes and creative marketing that produces great campaigns. Many firms have used database marketing as part of their overall marketing strategy for a long time, but it's always helpful to have a refresher on the fundamentals.
Development of a successful database marketing system is similar to building a house. The first step in building a house is to construct a solid foundation. The foundation of database marketing is a customer-centric database.
A successful DM campaign must begin with an accurate view of your customers. This includes integrating all the information from each channel — the Web, call centers, e-mail, surveys, etc.
And to make sure your marketing decisions are based on sound information, your data hygiene processes and tools must be used to integrate, enhance and improve the quality of information. Some of the tools include postal processing software to correct addresses, NCOA to update customer addresses, e-mail syntax verification, telephone number overlays, duplicate detection and householding software that helps identify all the contacts customers have with you.
The most effective way to ensure accurate data is to be careful during the data collection process. This can involve developing training programs for sales staff, call center representatives and the like; incorporating syntax verification tools on Web pages; and creating easy-to-understand customer forms and surveys. Then you can supplement that information with back-end correction using some of the tools already mentioned. Maximizing the effectiveness and efficiency of your marketing budget must begin with clean and accurate data.
After creating a solid foundation, a builder dumps a pile of lumber in your front yard, which is similar to terabytes of data piling up in your database every day. It's time to convert data into segments distinguished by various customer needs, just as you would use lumber to partition the open space of your house into smaller, more manageable rooms.
It's good to know information about your customers, such as what they've purchased, preferred shopping channels and contact information. It's even better to analyze this data and produce meaningful segments that you can use to create targeted marketing programs. Defined customer segments allow you to direct offers to your best customers at the most appropriate moment, which can help boost response and profits.
Besides creating customer segments, data analysis provides intelligence for strategic marketing decisions and performance measurement benchmarks. For example, by analyzing the shopping behavior of your best in-store, online and catalog customers, you might discover that the most profitable buyers shop all three channels. However, this group only represents 5% of the customer base. To improve profit, you want to increase the number of multichannel shoppers, so your marketing strategy is altered to influence this shift in behavior.
Here's why it's imperative to set performance benchmarks before beginning any database marketing program: First, you want to make sure you have the data necessary to track the success of your campaigns. Second, you want to have a base to measure actual results against.
Now that your valuable customer data is divided into many “rooms” full of insightful information, you need doors and windows for accessing the data. It's time to add some essential applications on top of the database to obtain the best information in an efficient manner.
Campaign management, query and reporting tools allow you to track marketing program results, answer questions about customer behavior and provide summary-level information. A campaign management application can track response to any campaign — direct mail, e-mail or telemarketing — when it's implemented and integrated properly with your database and other systems. Results from the campaign management tool will feed the reporting tool for testing and campaign results. An easy-to-use reporting tool with drill-down capabilities is essential for strategic planning, day-to-day management and campaign tracking. Having a solid data foundation is only valuable if you can see the insights and intelligence within it.
Database marketing processes are like the wiring and plumbing in a house — essential to the overall goal, but hidden behind the walls. Processes are some of the most important, yet often overlooked, components of a database marketing system. Some database marketing processes include those related to contact management, testing strategies and internal communication. Why are they critical to success? Processes make action happen in an efficient and disciplined manner — a cornerstone of the database marketing foundation. Lack of a process allows for errors, inefficiency, frustration and inability to read results. It all can end in a lot of dissatisfied customers.
Contact management defines the rules for how often, how many times and by what method you communicate with customers. These rules are likely to be different for various segments, include processes related to honoring customers' privacy preferences, and set forth procedures for conflicts between departments. Many contact processes should be automated. For example, customers contacted the maximum number of times during the last 90 days should be suppressed by means of business rules that govern customer contact preferences.
Testing processes are the guidelines that govern database marketing testing and results reporting. Setting up consistent test processes ensures that results are statistically valid and can be compared with previous tests and campaigns without negating the results of another test. For example, you need to set a common definition of response rate for a test — is it a sale, through which channels, within what time period and for which products? By setting up the process in the beginning of a testing program, you also verify that all the data necessary to track results is captured and accessible for compiling results. A thorough process assures you haven't overlooked any element of testing before you start to test.
Internal communication processes include approvals, reviews and notices to all personnel affected by a database marketing campaign. Marketing segment managers and brand managers should approve communications for message and brand consistency. They also should make certain the campaign coincides with — or at least doesn't conflict with — mass market advertising that's running at the same time.
Campaigns should also be reviewed by call center and Web site operations teams to make appropriate adjustments to staffing and capacity. Involvement of these groups should also ensure that scripting — whether through call center staff or Web pages — is consistent with the promotion messages. It's counter-productive to get great response to a catalog and not have enough call center reps to fulfill orders, or to issue messages that are inconsistent with the promotion.
For a retail environment, it's essential that store personnel be aware of the details of each campaign and how to execute any special offers. Internal communications will vary by organization, but can be achieved through intranets, sales collateral, e-mail and memos. The key is that processes must be followed in the same manner for every campaign.
With a few touches here and there, once the basics of your house are taken care of, you can begin the most visible task: decorating. For a database marketing campaign, this is where the results of all the hard work over many months are translated into customer contact.
Using results from analytical work, you can devise a targeted marketing strategy for each of the segments identified. Based on that strategy, you can follow the processes previously designed to create multichannel campaigns to meet your goals.
Once the effort is under way, results are fed into the campaign management application, enabling you to gauge performance through standardized reports and benchmarks. Over time, campaign intelligence is incorporated into your analysis and marketing strategies can be refined for even higher response rates and profit.
Kim Martin is lead consultant for the customer strategy group of Fair, Isaac and Co. Inc., Dallas.
