CD World's Database Effort Brings in Record Results
CD World, South Plainfield, NJ, has 10 retail shops in New Jersey and sales of more than $20 million per year. To shop at any of the stores, customers have to join the company's Club CD.
For about $12 per year, Club CD members can buy the latest CDs, videos, DVDs and accessories at a discount; get free previews; exchange opened but undamaged items within seven days; and get three monthly chances to win a $100 gift certificate.
The Club CD database includes 200,000 names, home addresses, e-mail addresses if available and other pertinent information, such as what radio stations the members listen to and what they purchase.
Each week CD World sends direct mail postcards or e-mails to the Club CD member database. The postcards and e-mails promote new CDs, DVDs or videos and tell the recipient how much the new release will cost along with the discounts available. About 30,000 members receive e-mail messages, and the rest receive direct mail postcards.
CD World's average annual direct marketing budget for the postcards and e-mail marketing campaign is $150,000, but its return on investment is "incalculable," said company president David Lang. "If we did not have the direct mail programs, we would not have the customer retention that we have," he said.
Lang said 75 percent of its club customers resubscribe every year.
CD World sends mass e-mails about specials and in-store promotions from time to time. But it receives the best response rates, an average of 12 percent in the first two weeks, from targeted campaigns. In fact, response rates for targeted campaigns have been as high as 28 percent.
"The key to our success is that we target market," Lang said. "And we can do this by capturing information about our customers at our point-of-sale systems in our retail stores. ... As a result, we know who our customers are and what they buy, and then we can promote items to them that we know they are most likely going to buy."
For example, if a new album by U2 is coming out "and a customer had previously purchased a U2 record, then logic dictates that they might want to buy the new U2 record," Lang said.
But sometimes target marketing requires deeper research. As a result, Lang said CD World also relies on a market research system created inhouse -- called TAP, or Transactions Are Power -- that allows the company to look at information other than purchase history to figure out what customers might want to buy.
For example, the system may show that many males age 30 to 40 who buy U2 CDs also have a tendency to buy records by R.E.M. So when a new R.E.M. release is available, CD World can send an announcement about it to this group.
Lang said he has sold the TAP system to VNU, the Dutch-based media and information company, which now manages it. Every week CD World sends its customer data to VNU, and the company cleans it up and puts it in order, then sends it back to CD World, where it is analyzed.