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Delta Education gets a good grade for its segmentation tactics

after segmenting its database by channel, educational products company Delta Education discovered that online catalog requesters outperformed all other groups by two-to-one.

But that’s not the only benefit it got from divvying up its database in a both traditional and not-so-traditional ways. Delta Education also improved response on a number of fronts and is on track to grow at greater than 20% this year, says Mary Ann Kleinfelter, vice president of sales and marketing for the Nashua, NH-based company.

Delta Education has sales in excess of $50 million and sells science- and math-related products primarily to teachers. (Its products, which are sold through catalogs, a Web site and some retail stores, range in price from $5 to $5,000.) But the segmentation tactics used by the firm can be easily applied across both large and small businesses, Kleinfelter says.

Channel segmentation aside, RFM (recency, frequency, monetary) remains the primary building block of sensible direct marketing.

The key, Kleinfelter says, is to test a large enough segment to produce statistically valid results.

“I like a number that will give me at least 100 to 200 responses in a promotion,” she says.

However, it may prove difficult for smaller firms to produce hundreds of responses with one segment. In that case, she says, smaller mailers can compile reliable results by tracking segments, including RFM, over time.

“Pick what’s important in your business,” she says. “For us, it’s important to know when a teacher buys math or science products, or both. And,” she adds, “if you mail that segment repetitively over time and watch its response at sales and profits, you will get a somewhat reliable picture of how it works.”

Trending segments over time is conducted religiously at Delta Education, Kleinfelter notes. And once those “bellweather” segments have been defined, they need to be watched over time based on sales and profits so offers can be adjusted.

“Sometimes [the bellweather segment] is your first indication that you’ve got problems,” Kleinfelter says.

Kleinfelter also adds a twist to the common tactic of dividing data by one-time versus multibuyers.

“One-time buyers that have been on the file since Buck was a pup means they have no intention of buying from you again,” she says.

She suggests further dividing the one-time buyer file by recency and then targeting the most recent buyers within that segment.

“The [more] recent ones are the ones you want to convince to buy from you again,” she says. “The faster they get from that first order to that second order, experience shows, the better their lifetime value and retention.”

When looking at monetary value, Kleinfelter suggests segmenting by both average dollars spent over time, combined with frequency and the dollar value of the one-time purchase.

She adds that marketers often make the mistake of looking at both as an average, which can affect response. Chances are the one-shot shopper has a higher spending authority, she says.

The next suggestion includes keeping an eye on different products. Track which products retain better, which products people are more likely to buy the first time they make a purchase, and which products don’t retain well. Follow the history to discover the differences in performance and craft offers around those results.

“This is all probably in your database,” she notes. “It’s just a matter of getting it out.”

Determining the potential and penetration of individual sites – or physical businesses – is another tactic to beef up response, but a tougher challenge now that the door-to-door salesman has gone the way of the Johnson Box, she says. But forbusiness marketers, it is still crucial to be able to determine how many purchasing agents are on site or what is the size of the spending budget.

“If you’ve reached four [purchasing agents] and you know there are five, you know you don’t have that much farther to go,” Kleinfelter says. “And you also know that instead of trying to sell to more people, you need to sell those people more product.”

Delta Education turns to compilers for information on the students, teachers and spending limits. The compilers also supply information on purchasing agents and number of employees that can help fine-tune marketing plans.

“The wonderful thing about it is that you don’t have to get a lot of sophisticated information,” Kleinfelter says. “All you need to know is what the old salesman on the beat used to know: Is this a big joint or small joint?”

As for those online catalog inquirers that are outperforming space ads, card decks and other catalog request offers, Kleinfelter says to brings those inquirers – and any rented names – into the database. Match the names against the house file to determine which inquirers come from existing customers and which come from non-buying sites.

“Separate these inquires or the rented names into buying and non-buying sites,” she says. “Test them in the mail and I promise you that you can get as much or more than double the response from the buying sites than the non-buying sites.”