Why Databases Make Us Executives Mad

WHY DATABASES MAKE US EXECUTIVES MAD

by Monica C. Smith

Recently, we did a comprehensive review of a prominent niche luxury retailer’s customer’s path to purchase. What does that mean? We identified customer trends over the course of five years in gender, age, and product category purchases. Then we mapped subsequent customer behavior correlating it to what the Brand had done from these three perspectives – marketing communication/content, merchandise introduction (price point/gender), and changes to the originally purchased product line.

We articulated the information on the customer’s path to purchase and buying behavior to demonstrate the importance of communication with the customer and keeping track of the different values of customers based on gender, age, spend, or product purchase. We also added the view point of a customer who bought multiple times versus one time (new to the file).

• While the Brand has focused more on women’s product over the last three years, women have shown an increase of 17% in lifetime spend and men’s spending has grown at a faster rate, by a 29% lift.
  • Observation: The desire to include woman in the Brand worked, but it inspired men more. Men loved the product so much they wanted to buy for women in a Brand they trusted and where they were comfortable. Introducing women’s product is complex. Although the needle moved for the business, the goal of increasing women’s participation in the Brand was not a great success.
• Three of the top five SKU’s purchased by men and women were the same, but the next two were different. However a majority of the sales is coming from the top three SKU’s.
  • Observation: Again the introduction of female product was successful, but it did not break through to become a significant revenue producer after two years, nor increase the customer base. Did it increase the number of transactions from the current customers? Yes. Did it create new customers? Not likely.
• Time lapsed between purchases was 12.06 months for males and 10.98 months for females.
  • Observation: Great improvement.
• As offline contacts increased (by 12%), transactions per customer increased (by 10%).
  • Observation: Mailing to customers drove them to the retail stores, to the web, and to the call center. As we see in the following point, increased mailing to customers nearly doubled the percent of customers who repurchased.
• Multi buyer trends showed that with increased contact 27% of customers who bought in 2005 bought again in the same year, but in 2007, 52% bought again in the same year.

The use of this information becomes important in creating the budget and strategy for this client that must tie to the client goals for the next 12 months: the design of the communication, the recognition of the merchandise, ensuring the layout of catalog, store, and web work together as part of an integrated plan to increase traffic and conversion. The data goals are loaded into the contact strategy which includes viable testing opportunities, back up for roll-outs, and continuation of successful store and web traffic drivers. Results are tracked and evaluated to ensure the ball is being moved up field. Critical movement for Brand direction is fed to the top in monthly analytical reports and communicated on the ground for consistency at the customer level.

I give this example to show how far we have come in the past 15 years. We made this presentation to the top Brand executives who want to know how their customers are behaving, what are the multiple paths to purchase for different customer groups, and how can they capitalize on that information. There was a time when data were the province of an IT department and marketers did not know how to access information or even define what they needed, much less ask for it.

When I first started my career at Waldenbooks, the IT department was mammoth, elusive, and filled with individuals who seemed to me, at the time, to spend their time thinking of ways to be obstructionists. I felt as if understanding purchasing history were not a science at all but an endless cycle of ask a question or submit a request, then wait a week, get the report, and discover the question was not asked right and the answer only was only part of a bigger story, unveiling itself much faster than the reports could be spun or interpreted.
On the other hand, I have to admit that the system was amazingly accurate, great at consolidating massive amounts of SKU information through the retail and direct channel, and was the repository for the data from the first customer point of purchase initiative.

So, while working with IT departments can be challenging, since they may be protecting their turf and are sometimes prickly by nature, the reality is that the questions being asked of them are often poorly structured, not thought out, and sometimes the questions themselves are elusive because the answer lies in two different places that can not be linked or joined (Sound familiar?). I look back on those times at Waldenbooks especially and realize that they were very talented folks and I was a very, very green young marketer.

Out of the frustration marketers felt because of their strong need for data, information, and maybe interpretation came the creation of a whole new industry sector: The outsourced marketing database.
My early experiences have led me to understand the critical importance of a marketing database as an underpinning to any healthy and effective marketing strategy.

One of the questions most often asked of me is, “What is a marketing database?”

A marketing database is a repository that allows for customer data to be consolidated, read, and interpreted. The database brings together many data feeds or points of origin (e.g. web, retail transactions, customer service logs, operational systems) into one repository that allows data to be maintained consistently, building a history and picture of customer behavior over time. Not only is it important to have a database, I think it is essential for marketing in today’s environment, no matter what your size. It ensures an ongoing and stable record of preferences (e.g. a customer’s desire to be communicated to and through what mediums) and provides an integrated record of communication strategies across every channel. It allows you to know exactly how many times each one of your customers was communicated with and how, as well as to know exactly where each customer came from and her/his value to the brand.

The rub. Since very few database service providers actually have their own internal database solution, there is a great deal of third party software/hardware that is being added to the platform as providers try to differentiate themselves. This additional hardware/software has great value to the marketing database but unfortunately little value to the company that does not have the time, the experience, or the plan to use it. This makes executives mad.

The challenge in today’s market, especially for those merchants who want to communicate directly with their consumers, is the high cost of a marketing database through the traditional service bureau or an internal demigod IT department. The cost of those solutions is unaffordable or the value too low for those companies with under $30,000,000 in revenue for the entire Brand or the channel of their focus. The systems are often underused by most marketers. The skill and understanding necessary to use a marketing database to pull out the compelling and game changing answers is elusive and not often taught; consequently business models feel burdened by the cost of the monthly update charges and fees.

So, what is the answer? A low cost, high value alternative. If the mission of your database is clear, there are options to meet your needs and within your budget. If you need help identifying or assessing those, call us.

We use marketing databases to stabilize, unify, and understand data. The database does not solve your business problems; it provides information that gives insight necessary to solve your business problems, if you ask the right relevant questions. Relevant questions include:

1. What is the value of a multichannel customer compared to a single channel customer? Does that value change by season or is it the same year round?
2. How many contacts does it take for a customer to repurchase?
3. Do my males have different purchase behavior than my females?
4. If yes, when and why?
5. When I stop mailing a catalog to a specific persona group, what happens to revenue, how does web traffic hold up?
6. How many retail customers will buy after a catalog has dropped, and for how long? What would happen to the same group if we did not mail them a catalog?
7. How long does it take a subsequent purchase to happen when no catalog is mailed and just email sent?
8. Does our customer spend more or less than the first purchase on his/her subsequent purchase?
9. Do the customers who have opted out of a catalog, but receive emails, buy again with us?
10. How many customers have migrated from retail to web and not returned to retail?

Finally, what do all of these answers look like over time?

Databases can be intimidating and IT folks do not always speak the same language as marketers. But I urge you to persevere.

Databases fail when technology drives the expectations and processes, when we are looking for solutions from them rather than answers. Databases succeed when the Brand expert who understands the brand drives the process, asking the questions and using the answers as the basis for developing a marketing strategy and plan. And the data are reviewed regularly to refine and improve upon the plan.

We find that when we work with companies that do not have a database, in almost every case, the data they have are dirty, and we must fix the data in order to create the most effective strategies. We see files with 20% duplication of which only 5% will be caught by standard matching logic, files where 10% is missing critical elements for a viable address, files of email opt outs that are not part of the core customer file so there is not a complete picture of customer preferences (which can leave the company open to complaints of not honoring preferences).

Every Brand and every organization that sells directly to customers, in my professional opinion, needs to have a marketing database. The database must include different matching algorithms as well as outside sources that cleanse data ensuring the company can have the highest level of confidence in its file of names. That is the starting point for an effective marketing database.

A database can be built to meet the needs of a company with revenue under $5 million in 60 to 90 days and can serve as the master of a channel that is growing, needs to be understood or driven to a higher level within a larger entity. There is no company today that should not have a form of marketing database if it is looking to move forward.

We believe that a company can and should recover the cost of that database build immediately within the first season after the build, in which customers are mailed and not just poorly constructed addresses are selected, merged and mailed. The next clear value point is that month over month indices show changes in customer behavior, opportunity, and weakness.

In this new and improved transparent world where we market, we must be looking at only the clearest view of the customers and their interaction with your Brand. A marketing database provides the insight that allows your Brand to establish a relationship with your customers through understanding their paths to purchase. As can be seen in our opening example, the luxury retailer has been given an articulated profile of its customers, their differences and likenesses, their strengths and weaknesses, what they are buying and what they are staying away from – in the Brand overall and in every channel. The Brand marketers can now act with sight and not from gut. They can celebrate their wins and not repeat what was terribly wrong. No more guessing or confusion, and the darts have been put back on the shelf.

Don’t get mad, get smart. Marketsmith can help you evaluate what you need in a database solution or how to use your current database to market most effectively.

Tags: brand, brand building, brand strategy, branding, customer path to purchase, database marketing, marketing strategy, Marketsmith, Monica C Smith, multichannel marketing, multichannel marketing consultant Category: News, Newsletter Articles. Both comments and pings are currently closed.