Customer Data Mining

Over the past few weeks we have encouraged companies to make nine improvements to their email marketing efforts. Leverage the previous nine improvements, keep adding customer, behavior, purchase and product information on a daily basis with an automated customer data engine, and you will achieve our tenth improvement: Targeting.

 

If your email campaign is obsessed with relevant targeting, not only are you most likely committing the cardinal sin of “blasting,” you’re also behind the curve. You’re not competing effectively. A recent survey from email marketing provider AWeber shows that behavioral targeting dramatically increases email key performance indicators. By specifically targeting email campaigns toward subscribers who have taken an action (opened a particular email, clicked on a link, made a prior purchase), nearly 50 percent of respondents indicated that behavioral targeting increases their conversion rates either significantly or moderately. An overwhelming majority of respondents (71.4 percent) plan to increase their focus on behavioral targeting in their email campaigns over the next year. So avoid this marketing opportunity at your competitive risk.

 

Targeting is the sum total of the right email effort. If you are focused on the most relevant message to your customers, if you know the value of your customers, and if you are focused on each customer’s own unique lifecycle, you stand a very good chance of targeting them appropriately. You will avoid “nag marketing” that, when looked at from the customer’s perspective is seen as “Did you buy? Are you ready to buy now? You didn’t buy just now, so are you ready to buy now?”  Your marketing will be more like that of the personal trainer we mentioned in earlier that customizes a training program depending on an individual customer’s needs instead of being generic and telling everyone to go run a marathon on a broken leg. Most likely your customers will not follow-through on your suggestion.

 

 

 

I’ll be the first to admit that I take this email stuff pretty seriously. That’s because it is so underutilized and poorly executed by so many companies and I passionately believe it is essential to an effective customer strategy. But at this point, after we’ve posted six serious ways that your company can improve its email efforts, let’s lighten up.

 

I’m not suggesting that your casual dining chain hire joke writers for your email campaign. And I don’t think taking a comedic turn when you’ve spent years cultivating a serious tone as a high-end fashion retailer is advisable. Fun has everything to do with a concept I call “surprise and delight.” It’s kind of like the “shock and awe” of email marketing.

 

Surprise and delight means that every now and then you’re going to extend an offer, a discount, an experience, or an information package that is unexpected. This experience must be worth the customer’s while, not a frivolous venture. Like anything else it is also based on data. 

 

There are two kinds of surprise and delight. The first is somewhat random but still based on customer data. Example: A fashion retailer can spice up the dog days of midsummer with an unscheduled email to its most valuable customer segments based on total revenue as a “summer recess” discount. That makes your company more valued and less predictable. And it just might keep those customers on watch for the next campaign you send on the normal schedule.

 

The second kind is an “earned” surprise and delight. In this case, a company can set an internal marker for a certain set of customers based on their behavior. You must don’t need to let the customers know you’re doing it. Example: If a casual dining chain wants to spike its happy hour business, it can email an offer for a “martini night” for its customer that have shown the biggest percentage revenue jump, or even for the customers that have most recently joined its loyalty program.

 

The element of surprise is one that some companies have quite frankly abused. But it doesn’t need to be that way. Gain a trusted relationship by running a quality email program based on data and value, and you can move to surprise and delight. More work for you maybe, but a lot of fun for your customers.

The catalog has been the workhorse of direct marketers since Hammacher Schlemmer, Montgomery Ward, JC Penny and Sears began selling to frontier settlers (or that is how the legend has been spun for me.) Since then a lot has changed, yet at the same time, a lot has not. Digital printing and online delivery of catalog content has revolutionized the cost and customer ordering structure of this business. But the objective is still to engage customers and prospects, get them to look at products, increase purchase intent and then make a purchase. Simple concept, yet often very complicated. The focus for print catalogs is finite; the opportunity infinite.

 

Today the print catalog is still a powerful tool that contributes to converting the coveted sale. Although it no longer stands alone, it feeds the mix of outbound marketing channels, including email, phone, text, and social media. Additionally, the impact of the catalog on consumer's lives and the company's database can vary wildly, depending on the data, segmentation analysis and lifecycle channel understanding that goes into the targeting of those that will receive a company's catalog.

 

Certainly there is skill in the development process and execution that can generate substantial revenue from catalogs. But that revenue by itself pales next to the opportunity of using a print catalog to feed a multichannel retail engine, revving on customer data and its relevant opportunity for high-octane cross-promotions and loyalty programs. The real opportunity is to move beyond the standard catalog mantra of R-F-M (recency of last purchase, frequency of purchases and monetary value of purchases) to segmentation by past purchases, channel preference, lifecycle stage, and next best offer modeling. This is made possible with a marketing database foundation that is fully integrated with all the touchpoints providing a single view of each customer. This view allows for analysis of the customer showing what they have done, what they will do and then showing if they actually did do it. The up-side is infinite.

 

The opportunity now is to use the catalog in the marketing mix for targeting those customers that are most likely to convert via the most relevant marketing “push”, while avoiding those we know will convert with just an email, postcard or on their own with no encouragement. The approach is as traditional as the print catalog, and as old-fashioned as thrift. But with the right mix of print, online, and even socially enabled marketing catalog marketers can  target the right customers with the right catalog to earn decidedly modern revenue. 

I saw another interesting research study today that reported that 50% of email users delete marketing emails within two seconds of opening them. That’s according to Litmus Analytics. I’d hate to be one of those companies. It means they’ve engaged half their customers powerfully enough to get them to take that necessary step. But it means the email content is failing.

Any company suffering from a high deletion rate has most likely made a critical mistake that relates to my June 19 post on improving retail email practices. That one pointed out the need to drastically improve your understanding of the customer lifecycle. All customers are not the same. They don’t buy the same products as their neighbor or colleague now, and they won’t have the same value to your company a year from now. Yet, too many companies send the same email to the same customer at the same time. That will crash your open rate for sure.

I’ll also bet that companies who have high deletion rates do not consider the value exchange inherent in email marketing. You, the retailer, are sending your customers much more than an email. You sending them communications that promises value. They provide value by giving you their money, and maybe even an ongoing stream of information. If you are not giving them a valuable communication in return, of course they aren’t going to you’re your email or share it. They’ll hit the delete button as a force of habit. And you have wasted precious time, effort, personnel and customer equity.

A commitment to value exchange means your company is going beyond asking a customer to join your list with the possibility that they will be invited to special events or extended a discount at some point. Retailing is much more immediate than that. You need to use email to make the customer feel special. And there’s no magic algorithm to do it.

Here’s three ways to improve what I call your value exchange quotient (VQ).

 

1. Base your frequency on customer data. If I say “buy” twice, that translates to “bye-bye.” Email cannot be yet another way to nag customers into a purchase or information-based relationship. Use customer data to understand how often different customers want to receive an email. It’s not about your email marketing program that says “blast the back-to-school discount every week starting August 15.” It’s about the customer data that indicates the email list members that have school-aged kids, and have responded to frequent emails in the past.
2.  Attach an offer. Even if you properly segment your list and send relevant timely messages, include a compelling offer. Just letting the customer know there’s a back to school offer is not enough. Offer a loyalty program if the customer has more than two kids, for example. Offer a discount for holiday purchases to keep the back-to-school customer coming back.
3. Work hard and work smart. I use the exercise analogy. The guy who’s 30 pounds overweight and drinking beer every night in front of the TV is not going to run a marathon next week. But he could go for a walk instead of drinking beer. If you have not been running an email program that extends value now, don’t expect that you will win awards for one next month. But you can begin to identify the communications that will be valuable to them and move customers toward higher value to your company. That takes hard work, rigorous analysis, and always striving for the next level of value. 

There’s a part of me that thinks the recent Facebook mea culpa was admirable. You could give Mark Zuckerberg kudos for acting quickly to reverse some of his bad decisions on the “Like” program and the virtual takeover of shared data. But for me the initial act outweighs any possible reaction. Facebook trampled the boundary between its users and their personal information. They may get away with it. But it points out the dangers of too much personally identifiable information given to one network.

From a marketing perspective, I continue to stress to clients that Internet targeting, as we know it in all its forms, can be very effectively executed without the amount of personal data that Facebook and other sites collect and use. I don’t think a major fashion retailer, for example, is limited by targeting “moms who use coupons and shop for groceries three times a week.” That kind of non-personal profiling gives any company access to a campaign that will achieve superior ROI. Can that fashion retailer company do better with names, addresses, birthdays, and names of friends? Maybe. That fashion retailer would certainly be limited by targeting only “moms.” That’s a big universe that has been defined in a far more scientific fashion.  

Targeting customers has reached a tipping point with consumers because of the Facebook overreach and the Google wifi data grab. It’s unfortunate, because I do believe that responsible use of personally identifiable information will help consumers become smarter and more economically efficient when it comes to couponing , clienteling, customer service, and loyalty programs. But the events of the past month will understandably put consumers on guard.

For brand advertisers, its time to keep then momentum when it comes to targeting. I’ve always said that if consumers saw one day of the Internet experience without any targeting technology, they would be so disappointed with the irrelevant content and advertising that they would want the targeting back in a hurry. That momentum for right now needs to be with behavioral targeting rather than a blind run to gather as much personal information as possible.

It’s also important right now to restore customer confidence. Data breaches will be magnified now. Data responsibility, while using it for good business purposes, is still job one.

There have been a few milestones in the annals of customer-centric marketing and customer loyalty. Unfortunately a lot of them have been milestones of bad behavior. In fact I would put Facebook’s recent trampling of customer data rights as a bad one. I would put Johnson & Johnson’s Tylenol recall in the 80s as a good milestone. And looking back, I see the airline industry as the first to have put in place customer centric programs with a very clear and compelling customer value exchange. The way I saw it: you traveled, you were rewarded; the more you did it the bigger the reward with free flights, better seats and perhaps even a cocktail along the way.

It was easy to understand and it influenced my behavior and purchases. It was a strategic approach that many have since followed, including hotels, credit cards, retailers and more. The airlines certainly did not invent this, yet they perhaps were the first to package it up on an international enterprise scale along with significant rewards that translated into big bucks.

But what are they doing now? Have they forgotten me, the customer? Gone is the customer centric program that was initially introduced. Frequent flyer programs have been diluted, complicated, and stretched to the point that they are completely different product that what they started with.

An article in the NYTimes on May 11th detailed the convoluted rules, black outs, and hoops that a customer needs to do today to be able to redeem and get a reward. The article, The Calculus Of Upgrades, makes it clear that the airlines customer centric points program have degenerated into a massive customer disenfranchise initiative.

The airlines need to pause and become the customer again. Perhaps it is time for them to stop looking at the customer metrics that show a downturn in seats, a bigger competitive set from low-cost carriers and look at frequent flyer programs as if they were a member. If they do, I’m sure we will all be much happier and less grumpy when we next have to bring our own peanuts along on the flight.

The “customer” is often spoken about by marketers in the same manner as politicians say “the American People.” It sounds like a group of people who now share similar characteristics because they happen to be buying from a company, just the same way a politician thinks that everyone in the electorate is buying from the same party platform. They say it because it makes them sound like they intimately understand whom they are speaking about,, yet they could not be further from the mark.

The customer and the customer experience are critcial to business success. When they interact with a brand, or a product the overall experience from research through purchase is the most important part of your company's value. The actual value of a business is made up of the sum total of their customers. The “customer” is not a faceless group. If this is true, and I believe emphatically that it is, then why do we know so little about this valuable asset? And why are we so frequently not concerned about the customer’s experience when they engage with our business?

I tell prospective and current clients that this concept of the “customer” is both a holistic and an individual entity. For example, when a fashion retailer tallies up the first week of spring collections, it’s easy to analyze who came to the store, what they wanted and how they percieved the same thing: New clothes. The larger the group of customers that can be analyized, the better. Put another way, the more people shopping for those clothes, the more complete the customer data picture can look. Perhaps the “customer” can be compared to a school of fish that all swim the same direction and periodically they will all zig or zag simultaneously and then set off together on a new course.

Yet, within that school we have the individuals. I am different from others and from a different school of thought. I am different from others my same age and same sex. I am different from my neighbor. I am even different from my spouse and my kids. For a business to make me happy, engaged and likely to shop again, they will be well off providing me a relevant and consistent customer experience. They have the data; why don’t they use it? If they understand what I like, when I like it, how I like it and what price or offer type is needed to get me off the couch, then they’ve got me, hook, line and sinker.

Customer data can be fed by the aggregate of customers and then it enables a company to serve individuals. It is not guesswork anymore.

Although we might want it to, building brand loyalty doesn’t move at the speed of technology. It moves at the speed of the customer. It’s important to remember this as mobile technology starts to round the corner. Mobile is a brilliant way to communicate with the customer and acquire customers. And like anything that has customer acquisition involved, data is essential.

We have seen some very smart mobile applications lately. Recognizing consumers' need to use mobile phones while shopping, Motorola has launched Mobile Loyalty Solution, which serves as an extension of existing loyalty card programs or as the basis for new digital efforts. The service eliminates the need for membership cards and paper coupons. More importantly retailers are using it to build a database of shopper product interests, purchase habits and preferences. The Motorola offering works with most smartphones, and will allows retailers to target consumers with the best offers and discounts on products that interest them. But let’s not forget smartphones are somewhere around 35 to 40 percent of your customers. It’s part of your customer base and will grow. Use data to track that growth.
The mobile loyalty programs are just starting to find a foothold in the QSR vertical loyalty programs, according to a 2009 report from information commerce provider First Data.

But they are starting to show themselves. Southern California pizza chain zPizza is implementing a mobile partnership with Mocapay, a Denver-based company that created a mobile platform for zpizza to use for loyalty and gift-card efforts. The platform allows customers to use mobile phones in place of plastic loyalty or gift cards. They can pay at point of sale and check card balances simply by using their phone.

Will it work? Depends how you define success. We encourage retailers in the QSR space to look hard at mobile loyalty programs for customer segmentation, and customer market research  as their customers integrate mobile commerce into their lives. Remember that the technology is not the driver. Remember that customer retention and engagement are the key drivers. Look at your customer data first, and proceed with caution.

Hate to say “I told you so.” But….

We have been saying for about a year now that marketers are doing a good job at cookie-cutter customer loyalty programs. A new CMO Council Survey released earlier this week confirms that. Unfortunately, the survey confirms another more disturbing trend that we have predicted: Marketers think they could be doing better at loyalty.

And they could.

Here are the details: Surveying more than 600 marketers with active loyalty programs the CMO Council found that most (61 percent) believe that loyalty program participants are the best and most profitable customers. An almost equal number of respondents (65 percent) view customer loyalty program investments as a very essential, or a quite valuable part of the marketing mix. Unfortunately, only 13 percent of respondents believe they have been highly effective in leveraging loyalty and brand preference among club members, and nearly 20 percent don't even have a strategy for this. Another 25 percent admit they have not mobilized brand loyalists to become active advocacy agents, either.

The study also reveals that marketers are mostly inducing loyalty with discounts or free products and premiums rather than quicker, better service or improved customer handling. Some 39 percent of respondents view discounts and savings as the key member benefits, 34 percent view free products and premiums as essential incentives, while 33 percent are committed to offering points for merchandise redemption as a further motivator.

The report contains other good information points that show the dichotomy between what marketers like and what they wish they could do with their loyalty programs. Suffice to say that loyalty programs will continue to be a preferred customer retention model. But in order to close this dissonance between loyalty reality and the desired state, we recommend the following actions:

Stop shelling out random and predictable points: If a company thinks rewards are points and points only, something’s wrong. If you truly understand what your customer wants, it has to be more than points. It’s a relationship and an experience. Points can be given by your competitor. Get your data engine running to find out what moves the valuable customer and it will add to your program’s profitability.

Surprise and delight: Customer data can provide clues about the experiences that will set you apart. Maybe it’s a discount for frequent customers. Maybe it’s an invite to an in-store only event for customers that have fallen off in their spending habits. If you don’t find out, you’re stuck on the point treadmill.

Segment beyond loyalty members: Most companies look at their loyalty program members as one large segment. That’s a mistake. There are plenty of behavioral segments, value segments, and demographic segments within the loyalty membership.