When the topic is database marketing, plenty of other subjects enter into the discussion. At least that was the case in April, when Catalog Age sat down with five executives in Philadelphia for a roundtable discussion on customer databases. While the participants shared their thoughts on house files, prospecting, segmentation, and co-op databases, they had plenty to say about merchandising, e-commerce, and retail initiatives as well.
The roundtable participants
Nicole Edmund, vice president of sales and marketing for Edmund Optics, a business-to-business cataloger of optical equipment in Barrington, NJ.
Amy Steele, marketing manager for apparel and home decor marketer Anthropologie Direct, a division of Philadelphia-based Urban Outfitters.
Ed Weiss, general manager of Movies Unlimited, a cataloger of videos and DVDs based in Philadelphia.
Maria Youth, director of catalog for Langhorne, PA-based Lenox Collections, a manufacturer/marketer of tabletop items and collectibles.
Arnie Zaslow, executive vice president of ATD-American, a Wyncote, PA-based mailer of office supplies and accessories for governments and other institutional buyers.
Catalog Age managing editor Melissa Dowling and special projects manager Shayn Ferriolo moderated the discussion.
Keeping track — and on track
Catalog Age: When it comes to your house file, what kind of customer information are you storing?
Nicole Edmund: We record and keep track of the sales order history, those kinds of things. We do use source codes, but in the b-to-b world, the ability to trace is a lot harder, so that is secondary to RFM analysis.
Catalog Age: Do you use SIC codes?
Edmund: We do, and we have another market typification system that is internal that we append off.
Maria Youth: At Lenox we source-code everything, and everything is tied to a unique item number, so we basically keep track of everything from when the customer bought to what channel they bought in, how much they spent, and which product they bought. We keep this data on file for five years, and then we really measure their activity across all channels as well as if they came in through a media acquisition and if we cross-sold them through direct mail pieces.
Amy Steele: At Anthropologie we track basic RFM and source. We are in a heavy acquisition mode right now, so we are tracking what lists customers came from and what they are buying. We are very meticulous about tracking where they are coming from and how much they are spending to assess lifetime value and make sure that our acquisition costs are in line with profitability.
We have three distinct customers: home [decor] customers, apparel customers, and combination customers who buy both home products and apparel. Our ultimate goal is to have all our customers become combination buyers, so we do track what they are buying. We don’t use the information as much as we would like to. We would like to take it to the next level over the next year.
Ed Weiss: We are probably the least sophisticated of everyone here, though we do have the information. We do use source codes and the order history. That is basic to me. But we probably don’t analyze it as much as most other catalog companies.
Arnie Zaslow: I suspect that we may be different from most other catalogs in that we sell a wide variety of products to a number of different markets. For example, we supply the educational market, the correctional market, the government market, healthcare, religious organizations. We have a wide array of categories of products such as textiles, furniture, medical and surgical equipment, security devices. We capture the who, the what, the where, and the when. It is actually quite primitive. The where is important because we might send out a solo [mailer] on outdoor furniture to the eastern market during the summer months, but it would be ludicrous to offer it in months when it is not warm, while there are western markets where this offer may work year-round.
Catalog Age: Is anyone modeling his or her database?
Youth: We do internal house file modeling.
Edmund: Our company used to have a consumer component, and we were using it there, but we found that you couldn’t apply many of the basic techniques to the b-to-b data. But we certainly understand the value and will probably work toward that in the upcoming years.
Zaslow: The number of variables that occur in our marketplace are such that it makes it difficult to forecast the actions to what you think is a meaningful component. It’s like testing. How many of us have tested and got marvelous results, so you roll out and you think you have found the magic button, and it flops. In the b-to-b market, the response rates are significantly lower than for consumer catalogs, so what appears to be a sign of significance might not be more than statistical standard deviation.
Catalog Age: Amy, is Anthropologie modeling?
Steele: We are actually not. We launched our catalog five years ago, so right now our file is not at a point where it can be done. We are keeping the data so that eventually we can do it, hopefully five years down the road, but we do model for prospecting. We model off our house list so that we can use selections from compiled databases.
Weiss: I can say that we have been fortunate in our prospecting in that we think we do better than the average catalog, and we do it without modeling or without much staff. It is a matter of knowing who your customers are and finding lists that you think match your customers. Over the course of the years that we have been prospecting we have been very successful.
Catalog Age: Do you think that may be a function of being a relatively small company?
Weiss: When you are small you don’t have someone who has the time to do modeling and things like that. But I think that because we are smaller, we can react faster to whether we are getting a good lift from a list.
What’s the use?
Catalog Age: In general, how do you use your database?
Youth: The top function that we do is affinity mailing. Basically, it all depends on what you came in buying; we then send you a million other targeted mailings based on that response. The challenge is what to do with the Internet buyers. Are they going to convert to a direct mail buyer or a catalog customer? I am trying to get them as an additional segment for me to mail.
Weiss: Do you think that the catalog you send out increases your Internet sales?
Youth: Yes we do, absolutely. When the catalog mails there is definitely a surge in Internet activity. But over time the response from the catalog is declining, and we are seeing that they actually prefer to shop online. So now we are trying to dig deeper and see if we can get them to shop in both channels or figure out if once they have purchased online, will they stay online or will they migrate.
Weiss: Does it really make a difference to you if they migrate?
Youth: No, but for analysis’s sake if someone is a multichannel buyer she is more valuable. You can probably offer her more products, and she will more than likely buy from you.
Zaslow: Our Website generates more leads than sales. That may be because our products have such high price points and also because we are selling large quantities to institutions, and people just don’t want to place that large an order on the Web.
Edmund: We use our site as a sales channel, but it is more like a value-added customer service tool, and that is where we are evolving it. We use our database, from a mailing point of view, to segment the types of customers. There are purchasers and end users. We try to target our end users with more of the how-to information, while the purchasers are getting more customer service information.
Catalog Age: Is anyone using his or her database information to upsell or cross-sell?
Zaslow: Every time someone calls and orders chairs, we offer them a table. Every time they call for a table, we go after them for chairs. Or a hospital may be buying textiles from us, and we see that is all they are buying, but they should be buying furniture and medical equipment too. So we go after them that way using outbound telemarketing.
Youth: We do outbound telemarketing also. We will even call a customer and say, “We noticed you are a garden-bird collection buyer. Here is the latest piece in that collection.” And if they say no, the CSRs have the purchase history in front of them, so they may suggest other things that fit with the other items the customer has. And then we repromote by e-mail for Internet buyers as well as with a follow-up direct mail piece.
Steele: We are hoping to venture into that, but with our product mix, it is difficult. It is seasonal, and we are fashion- and trend-oriented. You need to have a real savvy CSR to upsell, and that comes down to training as well as database.
Weiss: We have tried in the past, on a limited basis, to upsell on the phone, and we found that for us it was not successful. I believe that at least for our type of business, if I want to get a higher sale I need to organize my catalog and Website in such a manner that the consumer will be enticed to buy more than one or two items. Someone who orders one movie from me once a year I cannot make money from — I need somebody who is going to order on a regular basis, order three movies at a pop or more. Our catalog is over 800 pages and is very well organized for someone who is collecting movies. If they are interested in a comedy from the 1940s they will find many selections like that grouped together. Most other catalogers do the same thing. You merchandise things together to hopefully create maximum salability.
Edmund: Our product is very dependent on specific projects and what the customer is working on. It is very project-driven, application-driven. So we can’t say, “You bought this piece of equipment and you need a lens to go with it.” We did try for a while, to take obvious applications from what our customer base is doing and create a supplemental catalog specifically targeted at that application. Customers never bought from it. In the end, they always wanted the big book because they wanted to make sure they had the full selection. They ended up buying the same pieces contained in the smaller book, but we found that they wanted to see everything and have that choice.
Catalog Age: What about using your customer data to create and run loyalty programs?
Youth: We have a VIP Club based on spending levels, which is a soft loyalty program. They get exclusive offerings and special phone numbers to call. But Lenox has a policy that we don’t discount at all. What we do is emphasize the exclusivity: This is from the Lenox Gold Collection, and only Gold Club buyers will get the offer.
Steele: We have a contact strategy for our best customers, but until we integrate with retail we are in no position to unroll the level of loyalty program that we would like. If we do it, we want to do it right. We do contact our best customers, and they do get perks. We base it on the whole picture, not just sales — for instance, we look at returns, because that is a big [issue] for us. The accounts are labeled so that the CSR knows that these customers get return mailing labels and perks like that. It is definitely a low-key program that we are not promoting until we can roll it out through all channels.
Catalog Age: Do you use database or circulation consultants?
Edmund: We use them for lists and a service bureau for merge/purge. Both of them give us a lot of counseling. They are with us when we do our circulation planning and database building. It is more value-added than a straight consultant.
Zaslow: I think Nicole has a great point. If you are dealing with the appropriate vendors they can be an invaluable aid. I know we have found that the guidance that we have gotten from some of our sources of compiled lists have been so knowledgable and so expert, it has been invaluable.
Weiss: The people who are good at what they are doing, they are doing it on a regular basis, more than I am doing it. So hopefully they can identify which lists will work. As for consultants, I had one guy come in about four or five years ago just to give me a little bit of guidance, since I had no idea what I was doing at that point. [Laughter] I don’t have much of an idea now. [More laughter] He brought up a lot of great points. I still use his advice.
Steele: We have had very good luck leveraging our service bureaus and our list management team, and we have gotten so much value-added out of it. Last year we had a vendor summit. We brought in all of our vendors and bought them lunch for the first time ever and outlined our strategies for the upcoming year — what we have done in the past and where we are hoping to go. It was wonderful. We were able to share ideas and to work together as a team. As much as they invest in us, we really invest in them. That really works out well and sets a great tone for the year. We don’t specifically use consultants, but we definitely harness every resource that we can.
Catalog Age: Is this emphasis on value-added services more prevalent in light of the economic downturn?
Youth: This year we have the same advertising budget [as last year], but our sales goals have been increased. We are forced to find better ways to spend those advertising dollars. I’ve been meeting with [cooperative database] Abacus. They can take the tape of who we are planning on mailing and model it for us and estimate how much each customer will yield and steer us toward the more profitable segment. We’ve cut prospecting a little bit, but that is really to keep profitability up.
Edmund: We are in the same boat: the same amount of money to spend for increased results. We are looking to see what is that bottom 10% of our circulation that we can eliminate. We are mostly using SIC codes — we have average order profiles on all the different SIC codes.
Catalog Age: Maria, you mentioned Abacus. Is anyone else using cooperative databases?
Weiss: We have looked into it, but we are not currently using them.
Steele: They work for us. We have been able to fine-tune our models much more in the past six months because we just started getting the history. It is difficult because trend drives the business. You may acquire a bunch of customers who come onto your file from a specific trend, and a year later a new trend comes along, and that is not your customer anymore. We try to understand when they come on our file and where they come from so that we can effectively model them. A lot of the larger lists don’t work for us, so we need to not just take specific selects but to actually model the list itself. Cooperative databases have helped us do that.
Catalog Age: Is there any worry about overmailing as a result of participating co-op databases?
Steele: It is definitely a concern. Yes, [when you participate in a co-op database] your customers get hit [with mailings from other co-op participants], but most of our competitors are also in the database, so it is a robbing-Peter-to-pay-Paul situation.
Youth: Our initial fear years ago with Abacus was along the same lines, that everyone was going to join this co-op, and everyone was going to get mailed to, and over time response was going to decline. Thankfully that is not happening.
Weiss: What percentage do you mail from co-op databases vs. outside lists?
Young: My prospecting for fall is half and half.
Catalog Age: What about on the b-to-b side?
Zaslow: We do some list swapping, but that is the extent of it.
Edmund: Abacus now has a b-to-b co-op. We listened to the pitch, since Abacus did work really well when we had the consumer portion of the company; it was in fact our best-performing prospecting tool. But because we are not targeting individuals we don’t think it can yield good results for b-to-b.
Integrating the data
Catalog Age: Pretty much everyone here is multichannel. Are your databases integrated?
Weiss: My one database controls my whole business, from creating my catalog to building my site on a nightly basis. But it is proprietary. It isn’t something you can buy off the shelf. It has been built over the course of many years. I don’t see how you can operate well without integrating the databases.
Catalog Age: Even larger catalog companies with vast resources are having difficulty with integration. Do you think it may actually be easier for smaller companies?
Weiss: There is less bureaucracy, I can tell you that.
Youth: We have definitely integrated the catalog data with the Web and direct mail buyers data, but the wholesale division is completely separate. Retail is not part of the database. It is actually a company initiative within the next couple of years to take all of the names and put them in one database and code them accurately, track them, and mail them.
Catalog Age: Are you able to glean anything from reverse-appending and those sort of applications?
Steele: In the past we have used credit-card reverse-append. We do not currently have the [point-of-sale] system in place to collect data [in our stores], though that is something we understand the importance of. We have 33 stores, and we plan on opening more, and we recognize that the more places we can get customers to buy, the more valuable they become. It is just a matter of finding the right vendor to help us integrate the data, getting the funding, and then getting it done.