Developing Revenue Streams From Your Database

Those who are new to database or retention marketing often look at the associated costs as simple expenses and fail to realize the long-term economic impact of these initiatives. You can most easily understand this by thinking of your customer base as an asset.

In an effort to best leverage this asset for the organization, you will likely seek to build an ongoing, data-driven relationship that focuses initially on upgrade/cross-sell and moves quickly to long-term retention.

As you create these marketing programs, you produce two new customer relationship assets for your organization: proprietary customer marketing vehicles and proprietary customer data.

Learn to think about customer marketing in terms of building assets vs. creating costs, and a whole new world will open up to you. You've probably seen this starting to happen with customer databases. Companies that view their database as an asset understand they can capitalize the cost of building a database vs. accounting for it as an expense — an immediate financial advantage over typical marketing expenses. This concept of viewing databases as assets vs. expenses has been in the headlines lately with companies in bankruptcy that are forced to liquidate their database assets by selling customer names.

So how do you leverage proprietary data and marketing vehicles to drive incremental revenue above and beyond the return from the customer-marketing program itself? Start by understanding what you have to sell.

Value of Your Data

Names and addresses (online, offline). These have the highest value when they can be selected using transactional data (where the customer shops, what products she buys, etc.) or consist of “in demand” marketing segments such as new movers, high-value customers or engaged couples. You also do not need to actually sell the information to make money. An alternative is to establish a service whereby you will send an e-mail or proprietary mail piece on behalf of the partner to your customers — never revealing the name unless the customer chooses to respond to the partner.

Customer data for analytic purposes. Your vendors (and many analytic firms) may be interested in buying information on specific customers to model relevant purchase patterns or profile key audiences. The vendor does not need the names and addresses to obtain value from this type of analysis.

Analysis/measurement. Alternatively, you can use inhouse analysts to offer completed customer level promotion measurement reports or analytic reports for sale so that no actual data ever leaves your database.

Marketing Vehicles

Targeted inserts. These inserts are especially valuable if you have developed a customer retention program that includes ongoing communications to top customers. Inserts fetch a higher price if they can be highly targeted, especially using transactional data.

Targeted event sponsorship. If you develop a customer program with proprietary events for targeted audiences (a fashion show for top customers only, etc.) you can sell sponsorships of event invitations, agendas and displays.

Targeted online advertising. If you develop a customer microsite as part of a marketing initiative, you can sell links, advertising and sponsorships of articles.

Targeted newsletter space. If your customer program includes a newsletter or similar vehicle, you can sell both advertising space and article sponsorship.

Targeted scripting/sampling. If your customers routinely visit your location, you can entice (in your ongoing communications) selected audiences to come in for a free sample, special offer or product provided by a vendor. Not only can you receive revenue for each sample distributed, you can even obtain additional dollars if your sales associates read a script while delivering the product.

Next, determine which business model makes sense for your company and your marketing goals.

Shared revenue. In this model, an upfront partnership drives revenue generation. All initial costs of developing a customer-marketing program are shared. In turn, the partner fully shares in back-end revenue generation, co-owns data or gains exclusive sponsorship rights in proprietary marketing vehicles. A large marketing company in the direct marketing arena or a major vendor is the likely target for this type of partnership.

Back-end purchase. Revenue is generated entirely on the back end, once a program is tested and up and running. A sales initiative is put in place to sell data and marketing vehicle space to multiple partners.

Equal consideration. With equal consideration, links, offers, inserts, even names are traded with other companies for marketing capital of equal value. For example, a vendor may give you a free item or sweepstakes prize in exchange for free media placement within your top customer mailing series.

The last step is to consider all relevant operational issues. If you establish a revenue-generating partnership with multiple partners, you will need to develop sales materials, a sales process and an ongoing fulfillment process to manage order taking and billing. Also, many partners will ask for exclusivity within a marketing package or will test only a small audience before they make a larger purchase commitment to you. Both of these will affect your program economics.

As a final consideration, think about establishing a mini-BTB retention program for revenue partners so you are communicating to these valuable sponsors on an ongoing basis and maintaining their interest over time.

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