Category Archives: DataBase Marketing

Match Cost of Effort with Value of the Customer

DataBase Marketing, Driller Q & A

Jim answers questions from fellow Drillers
(More questions with answers here, Work Overview here, Index of concepts here)

Topic Overview

Hi again folks, Jim Novo here.

Sure, you can do a ton of analysis and find out all kinds of cool things about the behavior of your customers. But what about implementation, how do you execute on all this info? There are some universal rules, and one of them is to match up cost of effort to customer value. That way the ROI monsters in Finance will always be giving you a smile. Ready for the Drillin’ ?

Q: My boss (VP of phone sales) is really looking to try out some new ideas and RFM is one he has latched onto.  He actually has explored this concept for a few years but never acted upon it.  Anyway, he just purchased your book and after finding that he did not have time to read it he gave it to me.  My job was to read and understand at a high level and to lead a discussion with the marketing group to get them excited about the concept.  I am a finance guy by trade so this concept was very interesting.

A: That’s funny, the people who really “get it” the most are finance people and IT people, because it is kind of “black and white,” very numbers driven.  Stuff either works or it doesn’t – did you make money or not?  ROI is the name of the game.

Q: Obviously I either did not do a good enough job explaining RFM, Latency, tripwires, etc. or they just are unwilling to have someone from their team tackle the concept.  The question they always wanted answered was “We don’t know why the customer behaved as they did.  Thus a sales call needs to be made not a marketing campaign.

A: “Why” is not really the issue; defection is happening.  Depending on the biz, a sales call might be exactly what is needed.  These models are always about allocation, putting scarce resources to the highest and best use.  Per customer, sales calls are expensive; direct mail is not, email even less so.  If you have a formal “wall” between sales and marketing, usually the “whose responsibility is it” issue is decided by “degree of pain” e.g. how valuable is the customer to the business overall?

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LTV of Car Buyers

Customer Experience, DataBase Marketing, Driller Q & A, Measuring Engagement

Jim answers questions from fellow Drillers
(More questions with answers here, Work Overview here, Index of concepts here)

Topic Overview

Hi again folks, Jim Novo here.

The car business is interesting because the Customer Lifecycles can be so long and the value of a customer beyond just the car (service, etc.) is a huge factor. Can this industry use Lifecycle ideas? You betcha, Drillin’ is Drillin’ …

Q: Do you happen to know approx. calculations of LTV for the car-industry? I wonder what this might be for a person that buys every a new car every 3 – 5 years, including service profits, etc.

A: The only published, verified study I know of on this was done by General Motors for their Cadillac division. To quote:

“Each new customer that comes through the door of a Cadillac dealership represents a potential LTV of more than $322,000. The figure is a projection of the number of automobiles the customer is likely to purchase over his or her lifetime, as well as the services those automobiles will require over a lifetime.”

Take that number and extrapolate based on the average margin on sales and service for any other car, and you should get pretty close. Looks to be somewhere around 6x – 8x the original purchase price, perhaps?

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The Cost of Queuing Customers

Analytical Culture, Brand Management, Customer Experience, DataBase Marketing, Driller Q & A, Measuring Engagement,

Jim answers questions from fellow Drillers
(More questions with answers here, Work Overview here, Index of concepts here)

Topic Overview

Hi again folks, Jim Novo here.

If customers have to “wait” for service, does the inconvenience / possible frustration impact their value? Great question; problem is, most businesses don’t know how to answer it in a way that will be meaningful to the value of the business. You know our Drillers though, they’ll get about it with actionable results in mind. On to the Drillin’!

Q:  Are you familiar with (or can you refer me to someone who is familiar with) customer satisfaction around queuing up for service?

A:  This is a Frequently Asked Question for sure, and not one there is a lot of statistically believable data on…at least that people are willing to release.  Kind of a sensitive subject, as you might think…

Q:  I work for a large bank.  We have perceived queuing problems in some of our branches – generally due to layout restrictions. I say perceived because although a queue is long, it moves fairly quickly with the actual wait time to see a teller often less than 5 minutes (considered at par with our competition). 

However, customers grumble when they walk into the branch and see the line and continue to grumble out loud until they reach the teller  and then continue to communicate their dissatisfaction to the teller.  Do you know if any work has been done in this area with other large companies that tend to have long queues (like airline ticket counters, large retailers)?

Thanking you in advance for your response.

A:  I think this issue can be an illusion; let me tell you what I mean. 

For e-commerce, somebody like Gartner does a survey that says people hate shipping charges, and every web site kicks in “free shipping.”  Guess what? People have always hated shipping charges since 1850 when the catalog business started.  And why not?  It looks like extra cost to the customer.  But if you run your business correctly, you price with shipping in mind and manage costs so that you still make a profit.

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