Today, consumers looking for sportswear, lingerie, toys, sporting goods or products in just about any other category can choose how they want to shop — at the local retail store or from a catalog. But many catalogs have expanded their customer reach by opening retail or outlet stores.
At the same time, traditional retailers have been launching catalogs in support of their retail operations. And for the majority, database marketing strategies can drive significant incremental revenue. By combining the marketing efforts of the catalogs and retail, companies can improve the effectiveness of their marketing efforts and bring a new dimension of performance to their lifetime value, cross-selling and profitability applications.
Requirements for implementing a marketing database solution include multiple source data, associations, ad-hoc analysis, update frequency, exporting and incremental updating.
If a catalog marketing team can use its marketing database solution to ask more “quality” questions about a particular group of customers, the company ultimately will make better decisions about use of its resources.
Looking forward to the bottom line: In any business venture, it is good to start with the end in mind. By understanding the costs and benefits of the investment in a marketing database solution, catalog or retail marketers can establish the appropriate expectations of both ROI and risk.
Take, for example, a company with 1 million customers, a 2 percent response rate for each catalog mailed, 12 catalogs mailed per year per customer, a retail operation with its own credit card, credit transactions captured at the point of sale, an average transaction of $100 and a $750,000 marketing database solution.
If the company cross-uses a marketing database solution to give a 1 percent increase in cross-sell ratio, it could realize an increase of $12,967,500 in gross margin over three years. And the company could pay off its original investment in 63 days. Although the marketing database has no impact upon the cross-sell ratio, it can decrease the company's gross margin by two-tenths of 2 percent. To minimize risk and maximize the chance of expected or greater ROI, the company can implement a marketing database solution to meet several optimal requirements.
Gather data from multiple sources: Whether a customer last shopped at the retail store or ordered from the holiday catalog, integration of transactional data across all sales channels is the first requirement to building the marketing database.
The marketing database needs to have tools that allow you to convert data types and format, as well as to accept data from source systems. Internal order entry, point of sale and administrative systems should all be considered sources of data for the marketing database. In addition, you will probably need to use demographic and behavioral data acquired externally.
Create and track associations: When building the database, it is critical that the system can create associations within the data that match the company's total relationship with the customer. Namely, recognize that catalog customer John Doe who lives at 123 Main St. is the same person as the retail customer Jon Doe that receives mail at P.O. Box 806. Thus, the marketing database must be able to link by logical algorithms.
Conduct ad-hoc analysis: To achieve the best decision-making ability, the marketing database should support true ad-hoc analysis without sacrificing performance. The acid test for ad-hoc performance is the ability to ask a question that may not have been planned and get a response in about the same amount of time as for those questions that were planned. You should not need to modify or optimize the database in order to get answers in a reasonable response time for any question you might have. The system needs to perform at a level that supports the iterative learning process, not inhibit it.
Update frequency: Needless to say, old data cannot yield new information. The marketing database needs to be updated with new transactional data at the same frequency as your marketing cycles. For example, if you send one catalog every 15 days, you will need to update your database every 15 days. This will produce the most accurate understanding of customers for that period.
And it also is important that the solution offer the ability to update the database in an ad-hoc fashion. Moreover, the database needs to be able to add new transactions as well as new customer records.
Exporting: When it is time to take action on marketing plans, the chosen marketing database solution must provide the ability to export any field of data into different formats. In addition, you should be able to sort the data, insert decoy records, encrypt and add new fields. The performance of the export should not be less than 2 million names and address records in one hour.
Meeting these fundamental requirements allows true integration of customer information and lets a company synchronize its offers to produce the best response and the greatest profitability. By analyzing customer behavior across all channels, database marketers can identify which customers are retail store patrons, outlet store patrons and/or catalog shoppers. And they may learn that a many customers do business through two, or even three, channels.
Using database marketing technology, these retail/catalog marketers can carefully track all of their customers' behavior across all possible channels, plan marketing strategies and, above all, remain competitive.
Cary Stronach is regional sales manager and Carla McEachern is manager of
professional services at Customer Insight Co., Englewood, CO.