Why promotion history counts in successful data mining

Successful data mining depends on having rich and valuable customer data on hand to inform marketing decisions, rang­ing from product purchase history and channel of preference behavior to geography, demographics, and psychographics. Promotion history is often neglected in the data mining process but can be pivotal to its success.

Promotion history is a record of a marketer’s communications with a given customer or prospect, including when it was sent, how it was sent (channel of communication), and the offer/cre­ative used. All of this information can be kept on a readily avail­able relational marketing database.

Promotion history creates a customer-centric view of promo­tional events. This does not diminish the need for tried-and-true campaign performance metrics, but it provides an alternative view that enables marketers to connect the dots between the number of times promoted, the nature of promotions, the timing of promotions, and response, all of which are critical in the decision-making process.

Promotion history makes it possible to answer a number of questions, including:

How many times did I have to contact a prospect before they became my customer? We all know that the cost of acquiring new customers is high, partly because you have to establish your credibility through multiple contacts with prospects. While mea­suring the return on investment for a given campaign is simple, you need promotion history to measure the cost of acquiring a given customer. Prospecting promotion history provides you with a richer picture of your new-to-file customers.

How many times do I have to contact a customer in order to generate incremental response? Promotion history allows you to benchmark response behavior, accurately compare a customer’s behavior to the norm, and calculate the point of diminishing returns in promoting certain customer segments. Promotion his­tory can help you segment your customers to create an optimal contract strategy and related budget.

What type of offer is a particular customer most responsive to? Promotion history helps identify customers who respond only to sales or other offers such as free shipping, or who respond offers that highlight certain product categories.

What channels of communication work best in eliciting a positive response from a particular customer? Keeping track of all promo­tions in all channels (direct mail, e-mail, telephone) lets you see if a customer is more sensitive to messages in one channel vs. another and/or determine which combination of channels is most effective. As you test and analyze, you should be able to develop contact strategies that alter the mix of promotions.

What is the true lifetime value of the customer? Promotional his­tory and its associated costs are essential elements in the calcula­tion of lifetime value. While marketers may not use promotional costs on a day-to-day basis to segment their customers and select their campaigns, these costs are a vital factor in the background calculations for lifetime value and other model scores.

Andrea Miskovsky is chief client officer at MBS. Reach her at [email protected].

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