A System to Tackle Tough DM Tasks

Jun 01, 2004 9:30 PM  By

When the great jazz composer, pianist, and bandleader Duke Ellington wanted to offer the highest praise, he would say that something or someone was “beyond category.” And that is probably the best way to describe direct marketing resources provider Direct Logic Solutions: beyond category. The company offers a multifaceted merchandise management forecasting system (which in itself is an integrated planning tool — integrated with other enterprise systems as well as integrating multiple data streams to provide a comprehensive promotion planning platform), an e-mail list segmentation and response tracking application, database marketing and analysis services, market research services, e-commerce consulting, and Website design.

The Direct Integration (DI) Enterprise Suite, the Peoria, IL-based company’s flagship offering, combines financial planning, marketing analysis, demand forecasting, and inventory management in a Windows-based SQL/Server system. Catalogers can use DI to manage the full gamut of product-related data, importing not only product cost, demand, and sales (gross and net) from the order management system but also page layout, pagination, and square-inch data, along with page layout images from the creative platform, plus catalog production, version, circulation, and mail drop data. It can also maintain all list and segment information, along with circulation plans.

All of this data supports detailed analysis of previous promotions and allows you to forecast demand (by catalog, business unit, channel, country, brand, theme, product, date range, or other variables). The system will generate conversion rates by media and response and payment curves, with adjustments for special promotions.

In addition to importing data from enterprise applications, you can exchange data with Excel or Access and copy data from one catalog to the next for editing. You can also exchange data with an accounting system.

Demand forecasting

In addition to serving as a platform for tracking and managing catalog promotion, circulation, and product information, DI supports e-commerce demand forecasting and e-mail marketing analysis. The system can manage estimates of click rates, buy rates, and demand by product, then compare these to actuals to create dynamic response forecasts, not only for e-commerce sites but for banner ads and e-mail efforts as well, accounting for cost-per-thousand (CPM) impressions, cost per click, and cost per customer acquisition.

There is no retail channel management in DI at the moment. Promotion management and tracking is dedicated to print media (catalogs, space, direct mail), inbound and outbound telemarketing, and Internet-based promotions. Variables that can be managed include square-inch analysis, cost of goods sold, contribution per page, promotion costs, returns, bad debt, advertising-to-sales ratio, profit per piece mailed, and overall ROI.

DI can manage data across multiple years (within a 10-year period, broken down by week, month, quarter, year-to-date, and annual data), with multiple tables and promotion variables to forecast promotions based on planned demand, response rate, clicks, advertising-to-sales ratio, or operating income percentage.

It will also manage forecasts of unit demand, sales, advertising expense, and financial results by business unit, division, media type, affinity, individual product or product series, or promotion. Results and reports — standard, flash, and ad hoc — can be e-mailed to designated managers in tabular or graphic format.

The kinds of mission-critical information that DI manages include:

  • Where do we stand with budget vs. projected year-end sales?
  • What lines or brands are up/down compared with budget?
  • What media channels are working best for us?
  • What customer segments produce the most revenue?
  • How many customers have we acquired this year?
  • What is our average order amount, cost per new customer, and cost per click?
  • Are my merchants and marketing managers meeting their budgets?

In addition to merchandise and assortment planning, DI manages information that can be used to help optimize fill rates, reduce overstocks, improve order flow and fulfillment planning, highlight contribution by list or promotion segment, and calculate return on promotion dollar investments.

A typical P&L report accounts for gross sales, defective returns (in dollars), adjusted net sales, cost of goods (exfactory, or not including freight), standard cost variable, other cost variables, scrap and shrink, obsolescence, labor, freight in, freight out, product margin, royalties, media costs, accrual costs, selling expenses, marketing costs, database management expense, administrative costs, overhead allowance, commissions, bad debt expense, and other operational costs (shown in dollars and as percentages of overall totals).

A system such as DI requires careful set-up, and it also relies on an ongoing stream of reliable data. If you have the resources to capture such data, the advantage is that DI provides a single consolidated platform from which to gain a comprehensive view of operational and promotional activity on a historical, current, and forecast basis. Should you wish to do more-complex statistical analysis, the data can be exported to a system like SAS or SPSS.

Tracking customer behavior

While DI puts the focus on products and promotions, Direct Logic’s Pharos CRM (also Windows based) captures all customer-related data and marketing information from enterprise databases, order entry systems, shopping carts, and related data marts to perform customer management, scoring, and analysis across catalog and Web channels based on such criteria as purchase history, channel behavior, RFM scores, promotion history, and segmentation analysis.

Direct Logic Solutions, which offers DI and Pharos on an application service provider (ASP) basis as well as in a licensed software format, also provides hosted database management and analysis services that include statistical analysis, customer modeling and segmentation, and data cleansing. Reports and analysis available include customer lifetime value, product or brand ROI, media and channel ROI, and customer segmentation based on media, brand, product responsiveness, purchase frequency, amount spent to date, and demographic variables.

The company also offers personalized e-mail promotion development (both text and HTML), management (including opt-out requests and suppressions to customers who have already purchased the promoted products), and tracking, all on a service bureau basis.

Its analysis tools can be applied to analyzing and forecasting the e-mail promotions, with reports on e-mails delivered and opened, bad addresses and bounce-backs, click-throughs, purchases, dollars generated, opt-out totals, e-mails forwarded, and total campaign ROI.

Mix and match

DI’s Enterprise Suite is a comprehensive planning tool for merchandise and promotion analysis; the Pharos customer management application is a companion solution for segmentation and analysis. They can be used with each other, but so far the company’s clients have chosen a “piecemeal” approach to the applications.

Adoption of the programs seems to be an iterative process, however. In Catch 22 fashion, DI can be hard to appreciate unless you are already struggling to achieve the same results by other means. Not every marketer has the same level of analytical standards, and for many, spreadsheets seem adequate. For others, query tools and OLAP platforms offer more freedom (though much less discipline) than a focused application.

But you can “try before you buy,” either on an ASP basis or by using the company’s fully loaded service options on a trial basis. If these trials demonstrate value, an eventual purchase of the systems for inhouse management would be more easily justified, with a better understanding of what is involved in making the best use of these complex but powerful applications.


Ernie Schell is president of Marketing Systems Analysis, a Southampton, PA-based database marketing solutions consultancy.

DIRECT INTEGRATION AND PHAROS CRM

Direct Logic Solutions

856-222-0725www.direct-logic.com

Platform: Windows ▪ Language: Clarion 5.5

Database: SQL/Server ▪ Base Price: $75,000++