What Does Poor Data Quality Cost You?

As you work hard to squeeze the most out of every direct marketing dollar, one of the most important ingredients -- and one that is often overlooked -- is data quality. And, as we market to our customer databases, it is so important that the data that is housed within it is accurate.

In a recent article in BtoBOnline, Bob Orf, President of Data Mentors describes how the cost of direct marketing with dirty data can wreak havoc on already stretched budgets. As Bob points out, "As one-to-one relationship marketing becomes more the norm, databases are expanding at exponential rates. In fact, corporate databases double in size roughly every six to nine months. These two factors alone should be sufficient stimulus for businesses to get their databases in order in a cost-effective manner. The average business database contains a staggering amount—15% to 40%—of bad data. That means roughly one in four pieces of marketing material mailed is worthless."

Yikes! That'll keep you up at night -- 25% of your direct mail is not getting to the intended recipient? I can imagine the C-Levels all over the country clutching their hearts over this statistic. In an economy that demands that every dollar be spent as intelligently as possible, you would think that this would be totally unacceptable at any company.

When you think about it, it isn't that difficult to clean up your customer database. Let's face it -- the widely available data hygiene tools are cheap and readily available in the marketplace. There just isn't a good reason anymore to have dirty data.

And, once you get your data assets cleaned up with these hygiene tools, it's easier and more cost effective than it used to be to keep your data managed effectively. Not only does this save you money, effective data management enables you to touch your customers efficiently. Once you've got this orchestrated, this will positively impact customer satisfaction as well.

The savings realized by effectively fixing your data quality issues can be staggering. Let's look at Orf's example:

Let’s assume a company’s 10 million-record database consists of 15% bad data. The company uses the database to conduct synchronized direct response mail and one-to-one relationship marketing campaigns. It touches the entire customer base quarterly. That’s an annual total of 40 million pieces of printed material at an average unit cost of approximately $1.05 each (labor, material, postage). Shaving 10 points off the bad data percentage would translate into a gross savings exceeding $4 million.

$4 million in savings will make anyone look like a hero in their organization. When you add in the positive impact to customer satisfaction and all of the time and resources saved by implementing a sound data quality strategy, you've hit a home-run!

CRM Delivered Via Software-as-a-Service Solutions

HA! We've come across yet another direct marketing term and acronym -- SaaS (AKA Software-as-a-Service). What this term describes is the increased ability for companies to deliver CRM to their global workforce via flexible software that can be utilized by large numbers of users in different places. As companies expand and their product/service offerings are extended, this becomes increasingly important for both sales, marketing and -- most importantly -- customer satisfaction.

A recent press release reports on a survey conducted by the Aberdeen Group (a Harte-Hanks company). It reports that "the top pressure causing all organizations to focus resources on SaaS as a CRM delivery method is the need to provide access to account information anywhere to an increasingly mobile and global workforce." The survey reported that "Best-in-Class companies indicated that they currently blend organizational capabilities, such as the ability to provide remote access to employees (95%) and CRM security processes (57%), with technology deployment to positively affect the productivity of sales reps, while reducing the IT constraints that would accompany an on-premise solution.

There have been some excellent results reported when SaaS is utilized in these "Best-In-Class" companies. The press release reports that these companies "have reduced Time-to-Close 30% more than Laggards" (those not currently using this approach). An additional benefit is also reported: "71% of Best-in-Class companies integrate lead management technology with a CRM solution to provide increased visibility into the sales pipeline."

From our perspective, SaaS is enabling real Customer Relationship Management. This occurs when the firm's stakeholders (Leadership, IT, Marketing, and Sales) are all able to successfully manage the customer relationship from wherever they happen to be. This is an efficient way for sales to input all of the intelligence that they glean from their customer interactions -- and a great way for Leadership to manage to corporate revenue objectives.

You can obtain a full copy of this report from the Aberdeen Group. And, congratulations to them for putting this research together. Over time, it seems as though when companies invested in CRM systems, many have been stymied as to how to actually get the various divisions to accurately utilize the technology. We have seen situations where -- after a huge investment -- it is extremely difficult to learn how to use CRM tools, and that there is sometimes very little trust in the data that comes out of them. Furthermore, it takes a further investment of both time and money to get everyone on the same page.

Have any of you had any success stories at your companies using SaaS? We'd love to hear them!

Customer Data Management is Good for the Environment!

Green marketing and direct mail seems like an oxymoron. I don't know about you, but I still get a ton of direct mail (and I love it, as you know). As an environmentally-minded person who is involved in direct marketing, nothing makes me madder than direct marketers who over-mail for no good reason. Case in point: My husband fancies a tall-person's retailer, Rochester's Big and Tall. Therefore, I normally purchase clothes for him from these folks. I love getting their catalogs, particularly around the various holidays. However, not only do I get a catalog from them at my home address, my husband gets his very own copy at our home address, and I get a third copy at our post office box. Now, being a good direct mail steward, I have contacted Rochester's to tell them that we really only need one catalog -- not three. I just called them again (because I just received more catalogs -- hence the rant), and I'll let you know if it works this time around. Grrr.

So, what's my point? Not only does it make good business sense to be green, it also makes for better customer relationships. Green marketing is about more effective data management -- that's it in a nutshell. There are businesses and consumers out there who love to receive direct mail -- they want to be communicated with in this fashion. The key is to identify them and communicate with them more efficiently.

In an article from Multi-Channel Merchant, appropriately entitled "Is Your Data Green," author Jeff Zabin stresses this point. "Each year, more than 100 million trees are destroyed, three million cars’ worth of energy is consumed and reprehensible-by-any-measure amounts of greenhouse gas is emitted into the atmosphere—all in the name of producing, distributing and disposing of direct mail solicitations." Yikes! That really drives the point home.

But there is also some good news. Zabin notes that some of the largest retailers, such as Office Depot, is taking steps towards greener direct marketing. "For its part, Office Depot has adopted a number of database marketing practices and technologies to help eliminate duplicate and returned catalogs, including a real-time customer data integration solution. The solution combines transaction data with advanced analytics to enable employees at the point-of-sale to cross-sell and up-sell in a more effective manner. It also allows Office Depot to know which (and how many) direct mail offers and catalogs to send to which customers—and when—to maximize revenues while minimizing both costs and environmental waste."

This is an excellent example of utilizing intelligent data management tools to increase Office Depot's ROI and increase customer satisfaction. While this example utilizes real-time customer integration techniques, there are also lower-tech data management tools that can increase your efficiency. We have clients who have simply added in old-fashioned address hygiene tools and effectively decreased the amount of returned mail that they had been receiving. In addition, there are many companies out there who don't update their data as often as they need to. So, you can go as high or low-tech as your particular business needs dictate. The important thing to remember is that what you do impacts both your profitability and helps to cut down on your carbon footprint. It's a win-win scenario.

Zabin is so passionate about this, he is in the process of creating a benchmark report “Green Marketing: Leveraging Customer Data to Reduce Environmental Waste" for his company the Aberdeen Group. According to Zabin, "The goal of the report is to further educate the marketplace about the value of customer data management from a green marketing perspective." We applaud Zabin and the Aberdeen Group for bringing greater focus to this area. We've also written a handy white paper on Effective Customer Data Management if you're interested in learning more about the different types of data management tools available for you to use in your businesses.

Once again, it IS easy to be Green!

Managing Customer Loyalty

You know the old saying, "It costs five-times more to get a new customer than to keep an existing customer." Well, it's true! And, it's relevant to whatever business that you're in. The multiplier may change but it is definitely much more profitable to keep and grow your customers than to continually lose them.

The telecommunications industry is very familiar with this issue. They call this type of customer loss "churn." In the 1990s, it was common to hear customer churn rates of almost 100%. In other words, telecommunications firms were losing an equal amount of customers that they gained. I think we can all agree that this was quite the frightening trend. Consumers and businesses became very price focused, and the telecom providers would come out with one promotion after another to "win-back" their customer's business -- totally based upon price. It was definitely war! I know -- I was there. I worked at AT&T during that time and it was brutal.

Here's what I saw to be the problem -- we didn't have the marketing tools to properly care for our customers. Once the salesperson won the customer back, the customer would get lost. Not only would they not get an offer of a better calling plan as their usage increased, if the plan they were on "expired," they'd automatically receive the most expensive pricing plan as a default and their bill would triple. And this was the thanks that they received for being a loyal customer. Nutty!

The problem still exists today -- and not just in telecommunications but in many industries. However, with Cable and traditional telecommunications companies going head-to-head for all services -- including internet and television -- it's happening again. It's a somewhat new set of competitors (some old, some new, some just under a new name), however, the business problem is exactly the same. It's even worsened because with all of the mergers and acquisitions in telecommunications, each firm has inherited a multitude of customer data warehouses, billing information, etc. This really makes it difficult to manage customer relationships without the right technology.

In a recent article from TMCnet, Arthur Middleton Hughes discusses the new "Triple Play" that these companies are competing with today to get the bulk of broadband, phone service and TV services from consumers and businesses. And the competition is, once again, fierce. Hughes argues that telecommunications firms can combat high churn rates simply by practicing sound database marketing strategy. Hughes states: "Using database marketing, it is possible to build a relationship with customers that will keep them from leaving. The secret? Personalized communications. If you can develop a dialog with your customers, they will rarely leave. "

We agree. Hughes also provides these 11 steps that a company can take to ensure that they don't lose their customers. We think that these are great suggestions that translate well across industries.

1. Review their price plans. Study each customer individually, and develop price plans for each of them that recognize their value and reward them. Don't make this a public announcement. Make it a personal message from you to each customer.
2. Use analytics to predict defection. With a modern database it is possible to identify potential churners with an accuracy of better than 90%. Once you know who is thinking of leaving, create a message with an offer that will head them off at the pass.
3. Cross Sell: Sell them a second product. This is why the Triple Play is important. Bundle the pricing of the second product with their current plan so that they end up better off. Make it expensive to switch back.
4. Thank them for their business. You can send a simple letter: "You have been a Verizon customer for five years on June 24th, Mr. Williams. We just wanted to thank you and to let you know how much we value your business. '
5. Don't rely on statement stuffers to communicate. Everyone knows that advertisements can be put into the envelope with the monthly bill. The postage is free. How wonderful! But don't fool yourself into thinking that this is a communication. Most people chuck out the junk that comes with the monthly statement. You must communicate with your customers to keep their loyalty, but this is not the best way. If you think it is, compare the response rate to statement stuffers with that of a personalized direct mail or email piece. Typically, a well-crafted personalized direct mail or email piece will generate several times the level of response and conversion of a statement stuffer. To be effective, however, the message must be personal: 'Dear Mr. Hughes.' And it must be offering the Next Best Product for Arthur Hughes determined by analytics, not the 'Product of the Month' that is sent to everyone.
6. Develop a customer contact strategy. Some companies have a policy of six touches per year, remembering that a bill is not a touch. Every one of these six touches should be personal, and as far as you can determine, of interest to the subscriber. Finally, they should promote one, and only one, product: shift to digital, or upgrade, or a better price plan. Don't give them a menu of choices. Give them a single specific offer. Study after study confirms that choice kills response.
7. Review each customer's situation on a daily basis in real time. Once a month is far too slow in this fast moving Telecom world. Modern databases can be updated several times a day. The updates are used to score all customers by their LTV and churn potential. The matrix can then be used to review each customer on a nightly basis, and develop automatic communications before it is too late.
8. Let customers manage their services themselves. As customers invest more of their time to managing their accounts they feel more committed to the relationship. Churn goes down.
9. Get customers to become advocates. Referred customers typically have a lower churn rate than the average customer. So set up a program to reward your customers for providing you with referrals that sign up for your service. Advocates have lower churn rates as well. So you will be getting double mileage out of a referral program.
10. Study the calendar. Churn typically happens mainly in certain months, or certain periods of time after the customer first signs up. When you know which are the most active churning months for each customer, mount an aggressive proactive campaign to head them off at the pass.
11. Study Usage. When usage suddenly drops or declines, you know that churn is coming.

While these 11 steps may seem a bit overwhelming at first, utilizing the correct marketing database tools can automate most or all of this for you. By taking the time to really understand what your needs are and the appropriate technology to fit those needs, you can not only stem your churn problem, but you can bury your competitors by keeping your customers loyal to your product/service.

Good luck in keeping all of your valuable customer relationships! Also, if you're interested in our white paper on effective data management, we'd be happy to share it with you.

Intelligent Direct Marketing with Effective Use of Data

I'll bet you're all familiar with those cute little robot vacuums -- the Roomba -- right? Well, not only are they cool machines, but iRobot is using all of the right direct marketing techniques to understand and build their customer relationships. By using RightNow Technologies, iRobot has managed to use data to "get into their customer's head."

RightNow's approach is very intelligent. The AdWeek article reports on their novel approach. "To stay in synch with individual customers, the company also tracks every interaction with each consumer, so past interactions can be used to improve subsequent interactions. That data is fed back into e-mail marketing campaigns that produce more consumer data and generate sales of the circular $300 vacuuming robots. In all, hundreds of thousands of customer interactions across multiple channels are tracked and managed each month, and the data is used to constantly refine its communications. To prospective iRobot consumers, it can seem that the company is reading their minds."

RightNow accomplishes this by tracking iRobot's self-service web site and its phone and email interactions with customers. This is effective customer data integration and management at its best. They then utilize all of this customer intelligence in their direct marketing campaigns.

In our opinion, utilizing data intelligence with analytical tools allows for the most efficient direct marketing campaigns. Not only are you effectively communicating with your customer base, you are consistently utilizing customer feedback to hone your campaigns for the greatest response and conversion rates. This leads to campaigns that become better over time and helps your company to become proactive in terms of product/service development. This approach assists in the creation of marketing campaigns that can be measured and reported on to the leadership team for the ever-important profitability metrics.

If your company has had success using intelligent direct marketing, let us know so that we can share your success in an upcoming post. We love acknowledging savvy direct marketers and reporting on DM successes. It makes us all better at what we do every day!

Effective Data Management: The Key to Green Direct Marketing

As in all industries, there is increasing pressure to be more environmentally efficient as direct marketers. In recent news from QAS, it is reported that the Envelope Manufacturers Association, in conjunction with the Direct Marketing Association and the Magazine Publishers Association, have launched a recycling initiative. It is hoped that this initiative will "encourage companies to recycle more of their waste and to combat suggestions that the direct marketing industry is not doing enough to tackle environmental issues."

As QAS reports, this is a wonderful step in the right direction, however, they feel that by utilizing effective data management techniques even more can be done to make our industry more eco-friendly. We heartily agree with QAS!

Here's the thing: When we integrate sound data management techniques into our direct marketing strategy, "companies can ensure that they are not sending information to incorrect or out-of-date addresses, meaning that packages are not simply wasted." In addition, by utilizing analytics with sound data management practices, you can more accurately target those who are most likely to respond to you -- and really boost your direct marketing efficiency by mailing less, while increasing your response rates. All-in-all, this is a sound strategy for increasing profitability for your company, while supporting the environment at the same time. This goes right in line with our philosophy of consistently working towards building more profitable customer relationships.

So, kudos to the Envelope Manufacturing Association, the DMA and the Magazine Publishers Association for taking this first step. Now, it is incumbent on the rest of us to ensure that we are practicing sound data management techniques to take environmentally-focused direct marketing to the next level. We've written a white paper on effective data management strategies if you're interested in learning more about this important subject.

Once again, some good ideas for becoming more green! TGIF!

Customer Data Management -- Avoiding the Walking Dead

There are many schools of thought on how to most effectively direct market to your existing customers. This is especially true when you are looking at cross-sell, up-sell campaigns. How do you make sure that you are making the best-next-product offer to your clients at a time when they will be most open to it?

Well, there's some new, recently-completed research on this very subject that was conducted by the Wharton School of the University of Pennsylvania. Marketing Professor, Peter Fader is the co-author of the study and comments on his research in a very interesting article. In the research, three general states were identified that define a customer's relationship with a company. The research was conducted on a telecommunications firm.

"In State 1, customers are close to certain key services, such as basic cable. 'In this introductory state, you're just dipping your toes in the water and trying out one or two services to see if they meet your needs and if you like working with the company,' Fader said.

In State 2, 'you broaden your relationship, often acquiring additional services, like premium channels,' Fader noted. But that's not always a good thing. 'A customer who moves rapidly into State 2 is likely to reconsider his portfolio more quickly and possibly acquire additional services. However, while such customers may appear tempting, these same customers are also likely to transition into State 3 quickly and reconsider their portfolios (i.e., drop all services) without much delay,' the researchers write.

State 3 customers, the walking dead, are just one move away from severing their ties with the company. 'However, customers' transition to this state may not be immediately observable; they may maintain their current portfolio for several months (or longer) due to inertia. Having plateaued in their level of service, their next change almost certainly will be to drop all services,' the researchers state.

Fader adds an important caveat: 'While we see a relatively sudden drop in this particular dataset, there could be additional states in other settings. Customers might gradually shed their services as they slowly sever their relationship with the firm. It would be interesting to compare these evolutionary processes across different types of multi-service providers.' "

Understanding which customers are in each of these defined states can allow your company to better identify the next-best-product path for each customer segment, thus enabling you to market products and services appropriately to each specific customer state. We've conducted several studies that have helped our clients better determine which customers they should spend their time marketing to and which customers should be "pruned" because further marketing efforts and customer service efforts will be wasted -- or at the very least, not very profitable. In fact, we've created a case study on Building Customer Profitability.

So, as the Summer Solstice approaches, perhaps it's time to take a look at your customer database and determine which of your customers resemble the walking dead -- and which of your customers you can treat more like the living by continuing to build solid, profitable customer relationships.