Thinking outside the mailbox

Feb 01, 1999 10:30 PM  By

Let’s say a cataloger of tabletop items is discontinuing a china pattern. Database triggers could stimulate this mailer to telephone all the high-value customers who had bought that particular pattern and offer them the china at a special price. Another cataloger sells greeting cards by print catalog and on the Internet. Driven by its database, this company uses e-mail to contact customers and tell them it’s time to send a birthday card to Uncle Joe or Aunt May.

Both these catalogers, using contact management strategies, are going beyond the mailbox to better serve their customers-and increase sales.

To succeed in the catalog business, you’ve got to understand your customers and how to communicate with them. Contact management strategies, methods of communicating with your customers based on their past behavior, require you to look beyond a calendar-based, one-campaign-fits-all mailing schedule and instead determine how and when to reach buyers based on their needs and preferences. By addressing the special needs of individual customers, instead of playing to a theoretical average consumer, contact management strategies can result in significant incremental gains. Using such strategies enables you to move from the blunt instrument of circulation-based models and focus with laserlike precision on more sophisticated methodologies.

Moreover, a wealth of new information technology (IT) tools are making contact management more appealing, more effective, and more affordable each year. Catalog companies with the foresight, courage, and resources to engage in sophisticated modeling and targeting strategies can typically realize a 10-to-1 return on investment within six months, depending on the product line and purchase cycle. A jewelry cataloger, for instance, may need a longer season to reap the benefits than an apparel mailer, since consumers buy clothing more frequently than jewelry.

Contact management in action Granted, for many successful catalogers the notion of trying new technology goes against the if-it-ain’t-broke-don’t-fix-it philosophy of systems redesign. But the results of contact management programs are indisputable. Take the example of a regional Bell operating company (RBOC) that used its customer contact management model to assess business-to-business customers’ needs and buying patterns before launching a marketing initiative.

The drill: The telephone service provider hired a call center to contact midvalue business customers four times a year, with an offer for product A in the first quarter, service B in the second quarter, and so on.

The problem: Corporate needs for 800-lines, voice mail systems, and other telephone products and services aren’t seasonal, and the telemarketing program offers often fell on deaf ears due to rigid timing that was out of sync with customer purchasing cycles. The costly program produced mediocre results.

The solution: The RBOC continued to telemarket products and service enhancements that would appeal to a majority of customers, but the call center reps also conducted a needs-based survey to find out the current and future needs of the company’s target customers. Information regarding whether a business planned to move or hire more employees, for example, helped the RBOC determine future phone service needs.

The new program also included innovative database triggers-factors or events that spurred the RBOC to contact certain customers. For example, if a high-volume customer’s phone service consumption suddenly dropped to below a certain level, the program software would alert the RBOC to call the customer to find out why.

The result: By employing a customer contact management strategy rather than a broad-based telemarketing campaign, the RBOC quadrupled its success rate in selling products and services. The contact management program cost more than traditional methods, but the improved results far outweighed the expense.

As is evident from this example, telemarketing often plays a prominent role in many contact management programs. But some companies-particularly those in business-to-business marketing-are combining mail, telemarketing, online, and direct sales tactics in a sophisticated contact management strategy aimed at better serving their customers.

Circulation-based security blankets Despite the success that telecommunications, consumer, and financial services firms have reported from using such contact management strategies, and despite the promise of a 10-to-1 return on investment, many catalogers still remain reluctant to stray from their circulation-based, pure-mail security blankets.

After all, circulation planning is a predictable numbers game in which, if you have the right budget and distribute catalogs on the right scale, the odds are with you for achieving a predictable revenue target.

Fear of the unknown is a major strike against contact management, as many mailers consider the strategy new, untried, and therefore suspect. It’s also more complicated than conventional circulation planning:

* You have to identify the customer behavior patterns that should influence your communications strategies.

* You have to customize your communications strategies based on these customer behavior patterns.

* You have to manage multiple messages for multiple audiences in multiple media in a complex communications juggling act.

To identify customer behavior patterns, you must understand the anthropology of acquisition in all its subtlety and variety. In other words, you have to understand what your customers want, why they want it, when they want to buy it, and in what medium.

Consider simply identifying behavior timing: Some apparel shoppers, for example, cluster wardrobe purchases in a seasonal pattern. Many men fall into this category, buying their spring/summer or their fall/winter wardrobe in one fell swoop-and buying no more clothing the rest of the year.

Using customer contact management, after identifying your customers who fit that pattern, you could limit your mailings to them to a spring/summer catalog and a fall/winter catalog, and save a fortune in print, production, and mailing costs.

Tools for campaign management For state-of-the-art customer contact management, you can’t avoid using datamining software tools, such as SAS Enterprise Miner, Datamind, and IBM Intelligent Dataminder, which enable you to delve into the data on your file and identify patterns. (For more information, see “The realities of datamining” in the January issue.) These tools are essential for combing through catalog databases to gain in-depth understanding of customer behavior patterns, which can reveal important information relating to customer purchase cycles and timing, merchandise and brand preferences, price sensitivity, and a host of other variables.

Datamining tools are sophisticated additions to any inhouse IT infrastructure, so you’ll need analytic statisticians on staff-or at least on call-to use the tools effectively and to interpret results in an informed and consistent fashion. The statisticians will work with you to create contact management models that produce sharp improvements in upgrading, cross-selling, and other marketing initiatives. These models can also establish retention mechanisms on a customer-by-customer basis, spotting diminishing purchase volumes and remedying the problem before temporary drops become outright defections.

What’s more, such models can help you anticipate a recent customer’s most likely next purchase and provide you with the means to satisfy that need-before your competitor can. Aside from impressing customers with your knowledge of their most recent behavior, the appropriate contact management model can be highly effective in building a true dialogue with your customer. If you’re a jewelry cataloger, for instance, you can follow up the purchase of an engagement ring with an e-mail or a telemarketing promotion for wedding bands, wedding party gifts, sterling flatware, or other sales opportunities that become additional links in a long-term, increasingly profitable relationship.

As mentioned in the RBOC case study, database triggers provide many marketing opportunities. If you’re a business-to-business cataloger, triggers can enhance the performance of your regional sales reps. Using customer databases intelligently, the field salespeople can tailor merchandise and services to match each customer profile, boosting sales each visit by pitching the products most relevant to the customer.

Take the plunge! Those catalogers not using the latest technologies and contact strategies to understand buyer needs will have a tougher time remaining profitable in the future. Sears’s catalog operation is a case in point. By trying to be all things to all people, the legendary general merchandiser ended up being nothing in particular to anyone…and a casualty of a horde of niche marketers.

Finding the right marketing niche and securing it through proper contact management may be the key to survival, especially as customers become more demanding. Of course, you must be willing to take a few risks and invest in the development of new and better products and processes. But even a few false starts in the pursuit of the customer contact management ideal may be a far more constructive experience than you ever imagined.

The creation and implementation of contact management models isn’t done in a vacuum. Testing becomes the medium through which failure is as good as success when it reveals a conceptual marketing weakness that suggests a better database model. This concept requires establishing the mindset and infrastructure to relentlessly test basic marketing/customer assumptions, refine your strategies, and retest.

Fortunately, you can test without affecting your overall results, by taking a sample of customers out of your database and testing them separately, then measuring the response against that of your other customers. You can gradually expand your experimental customer sample as results dictate.