Market Segment Analysis

The single view should enable analytics for the purpose of marketing. The focus of those analytics should always be our customer. Now, we all know that I am not like you and you are not like the person sitting next to you and so on. The analysis will show us how different we are. Yes, there are demographic differences and psychographic nuances, yet what really matters to your business is behavior. My behavior may be motivated by discounts (frugal Yankee) and you may be driven by quality (you want the best.) Knowing where a customer is along that specific lifecycle will also impact what they buy. If I’ve made 10 purchases and that person sitting next to you is another frugal Yankee, and they’ve only just made their first purchase, then we will most likely purchase something similar, yet different. The single view and the analysis will provide the strategic insight that can be translated down to actual tactics.

This insight gained from preference, lifecycle and actual behavior will also help to show which channel is optimum for marketing. Because of the price, we are tempted to use email for all customers, all the time. Sure, every campaign will generate an average level of incremental sales, while causing only “some customers” to opt-out. But that is a shortsighted and in the end economically inefficient way to view email for catalog marketing. Every customer that has engaged at the level of joining your email list is a good customer. When you lose a few because of an irrelevant email, those few build up over a short period of time. Eventually it will drive down your brand’s reputation. 

For catalogs the cost of printing and mailing does add up to a real number, often significant. Catalogs should be used only for those customers that are real buyers. Targeting beyond RFM is needed. Targeting should use the single view of the customer for segmentation, opportunity analysis, predictive customer and product modeling, and more. This will really show companies whether that print catalog represents value. It will also show who should receive emails echoing our catalogs, along with the appropriate associated offer level, the product to be featured, and the appropriate timing.

Now that we have dynamic catalogs and emails reaching out to targeted customers with different messages, offers, products and timing, we have cause to use both sides of our collective brains. Failing to do so will lead to a split brand personality. 

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.