Do-It-Yourself Customer Modeling creates High ROI Customer Marketing

Hi there, Jim Novo here.  This site is home for  The Drilling Down Project – a collection of articles and tools describing methods you can use to take control of your customer data and use it to improve profitability.  All of the ideas explained here, plus some more advanced version of these executions, are detailed in the Drilling Down Book.

If you are looking to avoid the risk and cost of installing a customer data analysis “solution,” but want to take advantage of high ROI customer marketing tactics, this site and book are for you.  You can develop a very simple toolkit, build experience with High ROI customer modeling techniques, and make more money using the Drilling Down method.

Here’s how it works: customers are scored on their transactional activity (purchases, page views, log-ins, etc.) with an Excel spreadsheet (or using some clever R code created by a reader of the book) or by your own application (business rules supplied).  The scores represent the likelihood of each customer to respond to marketing and remain a customer, allowing you to rank your customers by their potential value. 

Knowing potential value, you can:

  • Get more customers like the best ones
  • Focus on growing the profitability of middle potential customers
  • Stop wasting resources acquiring and marketing to low potential customers

Then, “trip wire” reports are run each week or month and changes in potential value scores are monitored.  Rising scores indicate the potential value of the customer is rising; falling scores indicate decreasing potential value – and signal the customer is becoming less likely to continue on as a customer.  Trip wire reports monitor changes in score and “flag” important changes in potential value, allowing you to:

  • Emphasize the ads, media, and products creating long term high potential value customers and downplay ones that don’t
  • Create High ROI marketing programs and make more money selling to customers
  • Predict when best customers are about to leave you and react with customer retention and save-a-customer programs
  • Quantify the profitability of marketing and operational initiatives by linking them to a change in potential customer value
  • Customers can be scored by segment (demo, geo, source, media, product) or as individuals.

The above approach is often referred to as Six Sigma Marketing, because the idea is (similar to IT systems that notify techs of system problems) this approach notifies marketers of customer value oportunities or problems, allowing marketers to optimiize programs and campaigns for highest productivity and profitability now and in the future.

You can get started right away discovering the clues to increased profitability locked away in your customer data without long lead times  and a lot of expense.  Then, when you have the experience and the ROI justification you need, you can move up to a more powerful solution at your own pace – and bring with you real-world experience in driving profitability using customer data for decision making.

Click Here for Step-by-Step Contents of Book

or you can read more about High ROI Customer Marketing techniques below…

High ROI Customer Marketing Tutorials

         Using Customer LifeCycles: 
Trip Wire Marketing  
           (5 pages, easiest to implement)

         Using LifeTime Value:
Comparing the Potential Value of Customer Groups  
           (5 pages, a little more challenging to implement)

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“Pre-CRM” Testing Techniques – Determining Potential for Marketing ROI Before You Buy

I was the VP of Marketing and Programming for Home Shopping Network, overseeing marketing and merchandising efforts for TV Shopping, the Catalog division, and Interactive on CompuServe, Prodigy, and the Internet.  

Over a 10 year period we developed and tested a method for increasing customer value while reducing marketing costs through modeling customer behavior.  Using simple query tools and tough ROI formulas, we frequently generated returns on marketing spending of over 100%, with some programs returning 400% or more.  This before “business AI” was even accessible.

How we did it is the subject of this site and the Drilling Down book.

Easy to Understand

The Drilling Down method is very mechanical in nature.  Customers are classified and compared with each other on a number of parameters using their transactions – not personally intrusive questions.  There’s not a lot of guesswork involved; the scores and changes in the scores tell you all you need to know.  You don’t have to be a database marketing expert – just someone with common business sense.  If an ad you run,  product you sell, or content you provide consistently creates low scoring customers, ditch it.  Focus resources on the ads, products, and content creating high value customers. 

IT people love this method (clue: it was developed from the beginning with IT people involved).  They think of the Drilling Down book as the “Customer Analysis Requirements Document” they could never manage to get out of Marketing, because it provides a very logical, iterative approach to allocating resources and increasing customer value.  IT folks without a lot of marketing support are just “running with it,” building up a store of important behavioral data to be used later on when the marketing support comes onboard.

Read user comments on the method

Why Does the Method Generate High ROI?

It’s a “low hanging fruit” idea and inexpensive to set up and use.  The Drilling Down method provides a structure for organizing your approach to customer data and identifying the highest ROI opportunities. You spend very little on new infrastructure, use existing IT resources, and drive real bottom line impact.  

Proven Approach, Real Results

This site is designed as a preview of the Drilling Down method, and provides many examples of customer marketing models and techniques you can start using today.  By reading the articles and taking the tutorials you will begin to understand there are real methods and metrics behind the hype you have been exposed to the past few years.

The fact is, some of these techniques have been around for decades, and have been over-complicated and over-hyped by the various players in the space.  I have personally been working with some of these methods since 1983.  Customer behavior modeling has a very long history of success, proven to work again and again across many different business models.  And it’s privacy friendly.  These methods work very well using only customer transactions (page views, purchases, log-ins, contacts, etc.) to predict future behavior.

Go to Specifically What the Book Teaches You

The topics covered on this site represent  “building blocks” used in the Drilling Down method, the foundation – and are actionable ideas by themselves.  As you go through the site, you will be building an appreciation for how powerful simple customer modeling can be, and understand you can do it yourself.

If you want to access the complete step-by-step Drilling Down method for creating high ROI customer marketing programs, you should consider purchasing the book.

Good luck to you!

                    – Jim Novo

Helpful Links:   The Drilling Down method is a tight integration of many concepts you read about all the time that never seem to make much sense by themselves.  The site was designed to teach you how to get started with behavior-based marketing even if you don’t have any previous experience.  There are 3 primary sections:

Marketing Approach describes how customer data is used to fuel High ROI Customer Marketing under different marketing scenarios.  Past customer behavior is predictive of future customer behavior – and if you can predict behavior, you can make more a lot more money marketing to customers.

Behavioral Analytics puts forth the basic  frameworks for thinking about behavior-based marketing and how it might help you.  Turning  marketing strategy into action based on predicting customer behavior is the focus here.

Customer Models are the simple tools you can use right away to create very High ROI Customer Marketing Programs.  Models are about who, when, and how to market to customers to ensure the very highest profits.

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