One of our major clients with more than 11 million customers is successfully migrating from MACS by Smith-Gardener/Ecometry/Escalate to Junction Solutions MS DAX system.
We have been handling their circulation modeling and list pulls for several years. There are many significant challenges migrating from one legacy system to another. An area often neglected is the connection between the old data and the new. Not only does a new file structure require a new interface into the marketing database, but also, new product categories, customer types, division codes, group codes, suppression codes all have to be unified on the database. Most importantly, if customer segmentation is required, old product classifications must be converted to new systems so that customer preferences will include both new and old (so we can figure out what kinds of products they prefer).
Jim Berry, our database guru, said, "Most people don't realize that conversion of an existing marketing database to a new operations system is more difficult than building one from scratch."
Bottom line, if you have either, MACS or DAX, we have an interface and database ready for you.
Saturday, September 5, 2009
Friday, April 3, 2009
Integrity as a modeling variable
The direct marketing magazines are loaded with articles on the benefits of better understanding your customers. Especially in difficult economic times, these suggestions get paraded out. Rarely is much detail offered, especially about how many or what kinds of customer variables are most beneficial. Usually geodemographic clusters are alluded to, sometimes specific demographics and most talk about Recency, Frequency and Monetary (RFM). My experience suggests that only another two or three hundred are important in getting a complete picture of your customers' behavior. Even then, they never seem to quite match what you're looking for. You might guess that soccer moms probably drive SUV's since lots of them do in your neighborhood... but is it worth getting vehicle type when it will only match on 5% of your customers. I never cease to be amazed at how difficult it is to get just what you're looking for. In fact, I have a theory that there are an infinite number of possible variables about each one of your customers. Now, I'm also pretty certain that most of them aren't worth building, like how far is customer X from the center of the sun. Or, how many witches per capita live in each ZIP code. Now its not impossible that those be relevant... on the other hand, we should attempt some kind of a theory to create a variable. But that isn't really the topic of discussion. The variable I'm interested in is not in the customer database... it is in the modeler.
After decades of successes in modeling, I have run across my share of defeats as well. Thankfully, most of those were handed to other modelers. There was a simple pattern in most of them. We beat them because we built more variables, did more models and validations... I guess we out worked them. Which brings me to perhaps the most important variable missing in most marketing databases - integrity.
Integrity basically means doing what you say. But in modeling, its so easy to stop with ‘good enough'. Its so easy to pack up at 5 pm and hope it works fine. Tonight, we will be working through the night on a complex triple model. We found out yesterday that our client had mis-specified the deadline - its due tomorrow, not a week from now. Believe me, it is very easy to tell yourself - this is good enough - but we follow our regular procedures - which means probably two dozen validations - a count review and finally three separate pulls. Most importantly, we will continue to look for interesting connections - ways to make our client's project more successful.
After decades of successes in modeling, I have run across my share of defeats as well. Thankfully, most of those were handed to other modelers. There was a simple pattern in most of them. We beat them because we built more variables, did more models and validations... I guess we out worked them. Which brings me to perhaps the most important variable missing in most marketing databases - integrity.
Integrity basically means doing what you say. But in modeling, its so easy to stop with ‘good enough'. Its so easy to pack up at 5 pm and hope it works fine. Tonight, we will be working through the night on a complex triple model. We found out yesterday that our client had mis-specified the deadline - its due tomorrow, not a week from now. Believe me, it is very easy to tell yourself - this is good enough - but we follow our regular procedures - which means probably two dozen validations - a count review and finally three separate pulls. Most importantly, we will continue to look for interesting connections - ways to make our client's project more successful.
Wednesday, February 4, 2009
The RFM Trap
How is all this data going to help me increase the bang for my marketing buck?
(click to enlarge)
A friend sent me the above chart and asked me what I thought of it. The author suggests, “Shaded cells reflect that 80,495 customers reside in those cells that received a 2% or more response rate. So about 80.5% of the mailing went to customers who had 2% plus response rate. To the right of the sales grid, you will notice that the sales generated from these customers were $4,062,183 or about 97.3% of the total sales for the event. Hey, that means 97% of the sales were generated from 80.5% of the cost. Why would I mail to the other 19.5% of the mailed file? If we had known in advance which of the cells would have generated less than 2% response rate, we probably would not have mailed them. Wouldn't it be nice to know in advance which cells will generate the most sales.” He claims that if he took the top 86% and mailed it twice, he could have increased revenues 72%.
(click to enlarge)A friend sent me the above chart and asked me what I thought of it. The author suggests, “Shaded cells reflect that 80,495 customers reside in those cells that received a 2% or more response rate. So about 80.5% of the mailing went to customers who had 2% plus response rate. To the right of the sales grid, you will notice that the sales generated from these customers were $4,062,183 or about 97.3% of the total sales for the event. Hey, that means 97% of the sales were generated from 80.5% of the cost. Why would I mail to the other 19.5% of the mailed file? If we had known in advance which of the cells would have generated less than 2% response rate, we probably would not have mailed them. Wouldn't it be nice to know in advance which cells will generate the most sales.” He claims that if he took the top 86% and mailed it twice, he could have increased revenues 72%.
Sounds magical right? This is classic RFM (Recency, Frequency, Monetary) analysis. But each time he applies the same analysis, he will have to cut another 20% to make his scheme work.
The largest publisher of children's books used to send them out before collecting the money. Their CFO suggested that they should cut out the highest non-paying ZIP codes. Sure enough, their bad debt plummeted. It worked so well, that they did it again next year. By the third year, their warehouse was getting larger than necessary and sales dropped dramatically.
Everyone wants to cut wasted spending. Retail pioneer, John Wanamaker said, “Half my advertising is wasted... I only wish I knew which half.” Few companies SHRINK to greatness.
Dick Cabela's in his common sense wisdom said, “I don't want to know that I can cut 20% of my mailing and only lose 5% of sales, tell me how to grow my circulation, not shrink it.”
You cannot grow circulation with RFM. It is the worst possible strategy for anything but the shortest term. Followed for the long haul, it will DESTROY your company.
Miglautsch Marketing has been helping companies GROW their circulation for decades. Give us a call and we can offer you positive, understandable alternatives to RFM.
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