Customer relationship programs fail at an alarming rate — 70%, said Devyani Sadh, quoting industry statistics.
So why bother? Why go through the headaches of setting up a database marketing system at all?
A database allows marketers to “develop loyalty by focusing [their] marketing dollars on customers that are most likely to buy and spend less on customers that are less likely to buy,” according to Sadh, CEO and founder of database consultancy Data Square. And loyalty is essential: A 5% lift in customer retention can generate up to 70% growth in profitability. Furthermore, the cost of cultivating a prospect can be between five and 10 times as high as retaining an existing customer.
In a wide-ranging pre-National Center for Database Marketing conference intensive, Sadh introduced an overflow audience to basic concepts in database marketing, loyalty and analytics. Her talk ranged from the cautionary (marketers should make sure business objectives are clearly defined before a single nickel is spent on database systems) to the educational (fundamental considerations of data analysis).
Her audience was engaged and, at times, confrontational. When Sadh displayed a flow chart detailing how data are integrated, cleansed, turned into a unified marketing database, broken out into task-, product- or audience-specific data marts, used to generate reports and allow data mining, and ultimately turned into sales efforts, one listener yelled out “We’re doing some of that, but it’s probably not as neat as on the slide.”
But the task doesn’t stop at assembling data. “The half-life of customer address data is around two years,” Sadh cautioned. She mentioned appearing on a panel with a U.S. Postal Service representative, who said that 30% of all direct mail is undeliverable. “If you’re not doing first class, you don’t know your undeliverable rate,” she added.
Her audience was especially eager to hear about digital channels, and how they fit into the database marketing mix. Sadh ran through a litany of the various channels’ growth (1.4 billion people use wireless phones; consumers send 25 billion SMS — short message service, or text — messages every month; e-commerce has topped $80 billion in 18 years) and wi-fi hotspots, virtually unheard of 10 years ago, are edging up to 100,000 locations.
All of these developments, and many more like them, are enabling not just marketers’ ability to contact consumers on a round-the-clock basis, but many are giving voice and control to consumers. Marketers looking to take advantage of these dynamic channels will need to invest in regular content updates that provide relevant information to consumers, Sadh said. She also advocated creating member-access-only content — even if free, a member-only gate allows marketers to collect information about inquirers.
Sadh concluded with an overview of predictive modeling terminology and techniques, file segmentation and classification, and lifetime value calculation.
The National Center for Database Marketing conference runs through Wednesday.