Archive for the ‘DataBase Marketing’ Category

Norms of Reciprocity

Friday, June 26th, 2009

Social Marketing Doesn’t Rely on Social Media

Do you believe human beings share certain fundamental traits that define “being human”?

If so, do you believe that human beings tend to behave in certain ways under certain circumstances?

If so, do you then believe since human behavior has these tendencies, it can often be predicted?

If so, then do you think perhaps the study of Psychology and Sociology might provide you some clues to creating successful businesses, campaigns, products, and services?  While your friends and competitors are all iterating their way into oblivion?

On the web, time and time again, we see the same themes repeating.  Yet with each introduction of a new technology, these themes tend to be treated like a new discovery, even though the theme has been well established in the past.

Norms of Reciprocity is a constant human theme.  You may know the expression of these norms as ”Sharing”.  Web old timers will probably recognize this idea as “Give, then Take” from the I-Sales discussion list as early as 1995.  In various forms, this theme goes back to the beginning of human history, all the way back to the handshake and other greeting gestures.  This same theme is embedded in countless Religions all over the world: “Do onto others as you would wish them do onto you”.  At least a couple centuries old, this idea.

Norms of Reciprocity simply means this: When you do something nice for a human being, help them in some way, this human tends to feel Gratitude towards ”the doer” and tends to do something nice back.  Gratitude drives the desire to Reciprocate, because it’s just what humans do, it’s normal, a “norm”.

Norms of Reciprocity.

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Hacking the RFM Model

Friday, May 29th, 2009

The following is from the May 2009 Drilling Down Newsletter.  Got a question about Customer Measurement, Management, Valuation, Retention, Loyalty, Defection?  Just ask your question.  Also, feel free to leave a comment. 

Want to see the answers to previous questions?  Here’s the blog archive; the pre-blog newsletter archives are here.

Q:  First of all thank you for your help.  I have some questions I would be pleased if you answer them for me.

A:  No problem!

Q:  1. RFM analysis – is it possible to use some other ranking technique rather than quintiles? Using quintiles for bigger databases will cause many tied values, isn’t it a problem?

A:  Sure, you can use it any way it works best for you.  There is no “magic” behind quintiles, you can use deciles or whatever works best. It’s the idea of ranking by Recency, Frequency, and Value that is the key concept in the model.

I’ve seen dozens and perhaps hundreds of variations on the core RFM model, depending on how you classify a “variation”.  One change that’s common is changing the scaling, as you mention above, to accommodate the size of the database.  Smaller databases use quartiles or even tertiles.  Larger databases, choose the ordered distribution that meets the need.

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Got Discount Proneness?

Friday, May 15th, 2009

Discount Proneness is what happens when you “teach” customers to expect discounts.  Over time, they won’t buy unless you send them a discount.  They wait for it, expect it.  Unraveling this behavior is a very painful process you do not want to experience.

The latest shiny object where Coupon Proneness comes into play is the “shopping cart recapture” program.  Mark my words, if it is not happening already, these programs are teaching customers to “Add to Cart” and then abandon it, waiting for an e-mail with a discount to “recapture” this sale – a sale that for many receiving the e-mail, would have taken place anyway. 

The best way to measure this effect is to use a Control Group.

When I hear people talking about programs like this (for example, in the Yahoo analytics group) what I hear is “the faster you send the e-mail, the higher the response rate you get”.

That, my friends, is pretty much a guarantee that a majority of the people receiving that e-mail would have bought anyway.  Hold out a random sample of the population and prove it to yourself.  There is a best, most profitable time to send such an e-mail, and that time will be revealed to you using a controlled test.  The correct timing is almost certainly not within 24 or even 48 hours.

That is, if you care about Profits over Sales, and trust me, somebody at your company does.  They just have not told you yet!

When you give away margin you do not have to give away on a sale, that is a cost.  Unless you are including that cost in your campaign analysis, you are not reflecting the true financial nature of the campaigns you are doing.  If you are an analyst, that’s a problem.

If you are using cart recapture campaigns, please do a controlled test sooner rather than later.  Because once your customers have Discount Proneness, it will be very painful to fix.

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Heavy Lifting

Friday, April 3rd, 2009

Another eMetrics (Toronto) has passed and I have to say this:  Web Analysts and Marketers proved once again they are up to the task of continuously improving the Productivity of their efforts!

At the same time, (and as I expressed during the sessions on the analytical culture), I fear that many in the web analyst community are becoming very “inwardly focused”.  They tend to talk more among themselves about the pennies they are making / saving while tripping over the dollars that are right there to be had if they reached out to other analytical disciplines in the company or measurement community.

Many among us knew this was a danger from our BI experiences.  If all you ever do is talk to each other about new shiny objects, your contribution to the business effort can suffer.  BI struggles every day with this weight, the challenge of being labeled “really smart but irrelevant”.  I don’t think we want this to happen to WA.

So with this backdrop, some of the conversations I heard at eMetrics Toronto about certain measurement practices were disturbing.  For example, it seems very few people are measuring their customer contact efforts properly, and in time this lack of analytical rigor is going to damage the WA effort for all practitioners.

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Use Discounts for Customer Retention?

Friday, March 27th, 2009

The following is from the March 2009 Drilling Down Newsletter.  Got a question about Customer Measurement, Management, Valuation, Retention, Loyalty, Defection?  Just ask your question.  Also, feel free to leave a comment. 

Want to see the answers to previous questions?  Here’s the blog archive; the pre-blog newsletter archives are here.

Q:  Most CRM experts agree that discount is a terrible way to attract new customers.  They seem to all agree that these “transaction buyers” are money-losing customers and have no loyalty.

A:  I think using discounts profitably for customer acquisition depends a lot on your “Brand Personality” and your business model.  That said, often people screw this up and attract the wrong kind of customer.

Q:  But, I have seen a  lot of different opinions on the use of discounts to increase loyalty and retention among current customers.  I have seen experts contradicting themselves on this subject saying that discount is a terrible way to reward gold customers or to move up customers to a “better segment” and after some time they contradict themselves mentioning a successful discount case study (points are a common method used).  Jim, what is your opinion about using discounts as a weapon in a retention program?

A:  First, we have to define “discount”.  Price discounts have the effect of reducing margins, but so do “better service” ideas like “VIP phone lines” and loyalty programs.  So you can take your discount on the top line or the operational line, the fact is it costs money to provide good service to best customers in hopes of keeping them.  I mean, what’s the $10 million you spent on a CRM system?  Choose your poison, it costs money to retain customers.

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Analytical Culture – 3 Books

Friday, March 13th, 2009

The web analytics conference season is upon us and I find myself sitting on several panels dealing with analytical culture issues.

“The Culture” is a tremendously important issue and am pleased to see the progress since developing the Creating and Managing the Analytical Business Culture course for the WAA.

At eMetrics Toronto, I will be moderating a Round Table discussion group called “Getting Buy-in and creating an Online Analytics Culture” and on a panel moderated by Jim Sterne called “From Web Analytics to Online Intelligence“.  At Webtrends Engage, I’ll be on a panel called “Socialization of Data” moderated by Barry Parshall.

With all this activity surrounding the Analytical Culture, I can’t help but suggest 3 books for those of you who are interested in / struggling with these analytical culture issues.  The first book you probably know about, but for the sake of providing a complete toolkit, I include it - best book for “CEO buy in” I can think of. 

The 2nd two books are probably off your radar screen because they deal with organizational issues, but trust me, these are the concepts the senior people need to understand to get any action going.  I find the biggest impediment to creating a proper analytical culture is the “roadmap” problem, and these two books together pretty much spell it out for you, including lots of tools to get you moving.

Here’s the list:

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Relationship Marketing in Manufacturing

Friday, March 6th, 2009

The following is from the February 2009 Drilling Down Newsletter.  Got a question about Customer Measurement, Management, Valuation, Retention, Loyalty, Defection?  Just ask your question.  Also, feel free to leave a comment. 

Want to see the answers to previous questions?  Here’s the blog archive; the pre-blog newsletter archives are here.

Q:  Do the principals in the Drilling Down book apply to manufacturing?  I was first introduced to Relationship Marketing in an MBA course years ago.  I have been looking for an opportunity to test these ideas and now find that chance in this job (I was and still am a foot soldier, but now have more responsibility in these areas).  

Manufacturers typically look at the highest revenue-producing customer, then pull out the manufacturing directory and start calling every company in the same business.  Not really marketing.  Can CRM be used to mine the data we need to be predictive and focused on the value of customers and retention?

ASure, same core issues and metrics apply:

1. Retention: Identify best customers, determine order cycles, set up a report that tells you who “should have” ordered but did not based past on past history, either market to them or send this info to sales, depending on the value of the customer.

2. Recapture / Defection: Identify best customers who have stopped purchasing and find out why, take action aligned with the value of the customer.  You may not get these customers back, but you will learn critically valuable information that will help you retain customers in the future – is there reason in common why these customers left you?  Was there a common Salesperson?  A common Product line?  A common type of Machine used?  A common Material?  Take these findings back into Operations and find out if the issue can be corrected.

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Off the Marketing Richter Scale

Friday, February 27th, 2009

Man, what a month in Marketing land.

First, you have one of the largest Ad Agencies in the world admitting their business model is broken, because agencies are not in charge of the fundamentals of Branding – service, innovation, engagement, and execution.  I would add the same thing could often be said of the client side; MarCom people spend way too much time on ”Com” and not enough on ”Mar” – is it time for a realignment?

Then, in an even more spectacularly unexpected move, you have C-Level folks at 2 gargantuan Advertising Agencies (though both part of WPP) co-writing an article declaring that Brand and Response are the Same.  Here’s the opener: “the value that brands bring to a company’s total business value is exaggerated.”

Holy Branding Batman, that’s one heck of a thing to say for an Ad Agency, know what I mean?  But they are absolutely right, the nature of a Brand has changed, this ain’t the 1960’s.

This is how they get to “the singularity”:

“What was once sales is now enhancing the brand expe­rience, because through direct marketing technology and strategies, a brand can reinforce its ability to listen, customize and learn from the consumer. This is not just direct marketing, its direct engagement with every potential customer, sometimes at the moment they’re introduced to the brand.  In fact, in a world of compressed consumer decision-making, direct response is now a potent form of brand­ing.”

I love it when you talk that way.

Let’s be clear on this.

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Best Seller Gone Bad

Friday, February 13th, 2009

Electronic keyboards were expensive in the 80’s and early 90’s, especially good ones.  Then came Casio, and the whole business changed.  At HSN, we loved the electronic keyboard business.

The category was made for TV shopping – the demonstrations were killer, and with all the new-fangled automation on board, “anybody can play the keyboard”.  In HSN language, “keyboards screamed” and you always got a call center “whoosh” – the sound you hear when inbound calls ramp from 100 to 1000 in 30 seconds.

So I’m talking with the keys merchant, and he says they’re having a supply disruption, and there will be challenges keeping the keys in stock because they sell so well.  This is a problem for me, because I’m publishing the monthly customer (offline) magazine and we’ve got some layouts and articles on the product.

I ask for a simple merchandising run on the SKUs to get a feeling for product in pipeline, to see if maybe I have to kill the spread.  We’ve sold 45,000 of the little beggars, which is pretty good for (what was then) a $500+ item.  It averages about $1,000 a minute in Margin, which is great versus network overhead cost of $300 per minute.

Problem is, we’ve only ever purchased 17,000 of them.

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Visitor Retention Mapping

Friday, January 30th, 2009

The following is from the January 2009 Drilling Down Newsletter.  Got a question about Customer Measurement, Management, Valuation, Retention, Loyalty, Defection?  Just ask your question.  Also, feel free to leave a comment. 

Want to see the answers to previous questions?  The pre-blog newsletter archives are here.

Q: The research folks in my company are trying to convince me that measuring sessions and Page Views per Session is more effective than using Recency and Sessions, as you advocate in your book, for a retention metric.

A: For a content site, the Page Views / Session measure can be used as a measure of visitor quality and appropriate marketing to the right audience – a customer acquisition idea – not retention.  And it really needs to be broken out by Source – the average has little actionable meaning.  You want to know the Visitor Sources, and then look at this metric by Source.  This is still Frequency though  – what about visitors who don’t come back?

Q: I am having some difficulty in making a decision regarding this. They want to give me a matrix with Page Views per Session on the Y axis and Total Sessions on the X axis as the “customer retention map”.

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