Data mining to lift response

Jul 01, 1998 9:30 PM  By

Based on initial testing, Airshop, a small New York-based cataloger and Website marketer of junior teen apparel, fully expects to increase its response rate 1 percentage point and its sales by $3 million when it begins using a new data mining software system this month.

Since February, Airshop has been developing a database model with Hyperparallel, a San Francisco-based service bureau. Hyperparallel will run both Airshop’s 15,000-name house file and rental lists (with permission) through the model, which matches data on customers and prospects to identify those most likely to buy Airshop products.

The model uses Discovery data mining software developed by Hyperparallel, which reviews Airshop customer data-purchase history, demographics, address, and the length of time someone has been a customer, among other details-and develops a prototype of the top three grades of customers most likely to buy.

“We chose Hyperparallel’s program because it gives us a business solution rather than a technology solution,” says Airshop senior vice president Bonnie Gringer. “And we don’t have to buy the technology; instead, we use Hyperparallel technicians’ expertise on a daily basis.”

A pay-for-performance model Gringer chose Hyperparallel over a similar system offered by IBM’s data mining software division primarily to avoid the up-front costs involved in purchasing the hardware and software. “Being that we are a small company, we don’t have the cash flow to fund such a project,” Gringer says. Instead, Airshop works with Hyperparallel on a pay-for-performance model, wherein the cataloger pays the supplier 4.5% of all incremental revenue it gains from the program, says Hyperparallel director of marketing Stephen Goldsmith.

Gringer says the new program will help the company’s rapid growth plan, in which catalog circulation will increase from 4 million books this year to 7 million in ’99 and 14 million in 2000.

In the June List Watch, we incorrectly reported that Acxiom had purchased Reed Elsevier subsidiary Mardev Ltd. The deal was only for Mardev’s management and brokerage portfolio. Also, on p. 8 in the June Update section, the Gruppo, Levey & Capell catalog transaction chart incorrectly listed a deal between Initio, Inc. and Pioneer Ventures Associates as a “buyout.” The $5 million deal was a private placement.