Database, Targeted DM Lets Book Seller Take on Big Chain

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When three Barnes & Noble bookstores planned to set up shop in his Milwaukee neighborhood in 1995, independent bookstore businessman A. David Schwartz didn't worry -- he took action.


Schwartz, president of Harry W. Schwartz Bookshops, developed a cause-related database and direct marketing program to create customer loyalty so his sales wouldn't be affected by the new kids on the block.


Already his campaign has paid off. Since the program was launched in late 1995, it has helped Schwartz not only increase customer loyalty but has increased new business, reduced mailing costs and aimed marketing dollars at targeted customers as well.


The program, which was devised with the help of Great Lakes Communications Inc., Milwaukee, a full-service direct mail and direct marketing company, works like this: Whenever members enrolled in the ongoing campaign -- called Schwartz Gives Backs (SGB) -- make a purchase at any of his four bookstores, 1 percent is contributed to a local charity of their choice from among 19 possibilities.


To be in the program, customers must provide their name, address, telephone number, when and what they purchased and how much they spent to the cashiers, who record the information.


A key benefit of the program is that it has helped identify Schwartz's best customers. Before this was launched, his mailing list of 32,000 records contained only names and addresses. The company could not determine who actually purchased books over the last year.


The SGB list contains fewer records -- 25,000 -- but it reflects only customers who have purchased books. By sending its 11 catalogs and mailings to this new list, the company has reduced mailing costs over the past few years by more than $25,000.


"Before the program, we were spending about $150,000 per year on customer newsletters and catalog mailings, sending them out to everyone who visited our stores, instead of just to people who actually bought books," Schwartz said. "Now, we are spending about $125,000 per year, sending mailings out only to those customers who have purchased books within the year."


Also, since the best customers now are easily identified, quarterly promotional and monthly mailings are sent to the top 5 percent of the list. Before, "everybody was getting everything," he said.


"While our list has less people contained in it, we know exactly who these people are, and we are now dropping people off of the program who have not purchased within a year's time," Schwartz said. "Also, because we can identify customers by who they are, what their interests are and what their financial quality is, we can reward them by sending them gift certificates and other special tokens."


Indeed, the database allows for more targeted mailings. For instance, post cards announcing author visits are sent to customers who have purchased books by the visiting author or by authors of the same genre.


The program has been a sweeping success. Besides helping to create its current list of purchasing customers, it found that members spend at least 50 percent more per store visit than nonmembers and that members are not as discount-driven as nonmembers. In short, they spend more and help increase overall gross margin. It also helped to increase new business -- 1,000 customers are added to the list each month.


Currently, Schwartz is in the process of upgrading the database so it can be more flexible. For example, much of its analytic functions are not run centrally, so each individual store must retrieve its own data, which is then brought to a central location, where it is massaged.


"The system we are using now is not particularly good. It is basically an inventory system with some primitive mailing list functions on it," Schwartz said. "It is our overall system for inventory control, so we can't abandon it without creating a huge amount of problems."


Great Lakes Communications, however, has advised the company not to implement anything new until seeing the database and direct marketing module expected from the American Booksellers Association for its potential members.


"There are several main database vendors that specifically focus on booksellers, so we are waiting for these three or four key suppliers to put together a database module for potential members needs," said Steve Weingrod, a senior consultant at Great Lakes Communications.


In addition, the company may launch category catalogs, such as a special catalog of children's books, that could be produced for those customers whose history shows purchases in this category.


According to Weingrod, the customer loyalty program is so successful partly because of the nature of the book retailing industry.


"Buying a book is a more personalized purchase and lends itself to more personalized selling," he said. "Also, the cause-related angle worked because in terms of demographics, there is a high correlation between people who read a lot, i.e. book buyers, and people who contribute to nonprofits. Both groups are well-informed."
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