Chapter 2

Communicating Directly with Your Customers

In This Chapter

Understanding the key components of a campaign

Using data to focus your efforts

Crafting your message with your data

Getting the timing right

You have no doubt pulled hundreds, if not thousands, of database marketing communications from your mailbox in your lifetime. From glossy catalogs to dull postcards addressed to Occupant, these mailings vary widely in quality. Some go directly into the recycling bin. Others get opened and read before being tossed. A precious few may actually capture your interest. This variation in quality and effectiveness is the result of the attention, or lack thereof, that was paid by the sender to the basics of database marketing.

In this chapter, I discuss the core components of database marketing campaigns. Your business model, marketing budget, and the quality of your marketing database may all limit how much you can do with a campaign. But regardless of your limitations, all database marketing campaigns have the same basic structure.

So, What Is a Database Marketing Campaign?

Database marketing campaigns are communications that are intended to get your customers to do something specific, like buy a widget. Often, these campaigns are designed to address a specific business opportunity. For example, you may be asked to help counteract a shortfall in projected sales. Or you may be asked to expand the customer base for a specific product.

When presented with such a task, you need to ask yourself some questions:

Who is likely to buy said product?

What would make them more likely to buy the product?

How should I communicate with them?

When should I communicate with them?

The answers to these questions form the basis for your database marketing campaign development.

Throughout this book, I stress the importance of staying focused on the customer. When developing marketing campaigns, it’s particularly important to start with understanding your audience. It is easy to fall into the trap of thinking “I have something to sell — find someone on the database to buy it.” It’s much more productive to start by trying to understand who’s in your database and what they’ve purchased in the past. This approach will help you to answer the what, how, and when questions in a much more meaningful way.

I recommend always taking an audience to offer approach rather than falling into the trap of offer to audience that happens so many times. The next section is an example of audience to offer, which means starting with the target audience, not your product or service.

Narrowing your focus to the target audience

One thing that distinguishes the discipline of database marketing from that of mass mailings is the way in which you go about deciding whom you communicate with. This decision is known as identifying the target audience.

In the case of mass mailings, the target audience is typically very large. Little or no effort is made to identify and exclude customers who are unlikely to respond to your communication. I’ve been known to refer to this strategy as carpet bombing.

Such mass mailings usually have very low response rates. I’ve personally seen campaigns that only got 1 response for every 400 pieces mailed. As you get more sophisticated in your targeting, you can invest more of your marketing budget in developing higher quality communications. In the case of direct mail, where postage and printing costs are high, this is particularly valuable.

Narrowing your target audience also makes it more likely that your message is relevant to your customer. You would craft a very different message to a family with young children than you would to a retired couple, for example. Relevant messages are far more likely to lead to customers doing business with you.

Showcasing what you have to offer

Many database marketing campaigns are designed to communicate discounts. You may want to announce an upcoming sale, for example. Or you may be offering a bargain on discontinued inventory. This enticement to your customer is known as an offer or promotion. An offer does not necessarily need to involve a discount. You may be offering information on how to use your new website or about the location of your new store. You may be offering to set up an appointment to look at new cars.

Setting up an appointment to look at new cars highlights another distinguishing aspect of database marketing: Your database may be able to tell you who’s ready to buy a new car. Such information would give you an opportunity to make that sale without having to entice the customer with a steep discount.

It’s not enough just to communicate your offer. You need to tell the customer how to respond. The call to action is a critical component of all of your marketing communications.

Visit our website at . . .

Stop into our store on Saturday . . .

Call now to receive . . .

are examples of calls to action. Always be clear and explicit about what you want the customer to do.

Deciding how you will communicate

How you will communicate is actually a two-part question. First, you need to decide on your communication channel. Traditionally, direct mail and e-mail have been the most common database marketing channels. But a growing number of electronic channels are also available to you, ranging from social media to text messaging. Your website can even be customized to serve up content based on what you know about your customers.

Chapter 4 talks about the pros and cons of some common database marketing channels. Timing, budget, and the nature of your message all play a role in which channel you chose. Some marketers like to use multiple channels in a communication stream. For example, they may send direct mail and follow up with an e-mail. I talk a little more about this later in this chapter.

Once you know what marketing channel you’re using, you need to develop the actual (or virtual) mail piece, which is commonly called collateral. This process is known as creative development. Creative development is a mix of art and science. It requires graphic design expertise and expertise in writing marketing copy. Many companies farm this work out to marketing agencies. A detailed discussion of the creative development process is beyond the scope of this book, but you can read about it in Alexander Hiam’s Marketing For Dummies (Wiley, 2009).

You likely will not be doing creative development yourself. But you will be providing guidance to your designers by providing them with a creative brief. This is where you tell your creative team what you’re trying to accomplish. Learning how to communicate your marketing strategy and business goals in a well-written creative brief is key to your success as a database marketer — for a lot more on this topic, see Marketing For Dummies.

Determining when to send it

Many database marketing campaigns are very time sensitive. Discount offers are valid for a limited time. Special events, like clearance sales, have specific dates associated with them, and so on. Your customers are busy people and typically cannot respond immediately to your call to action. They need planning time.

You need to get your message in market at the time that it’s most likely to have an impact. This timing depends quite a bit on the nature of your offer and on your business itself. A vacation to Australia requires a good bit of planning and saving by your customer. A new pair of shoes is more of an impulse buy.

You want to be in market early enough that the customer has time to respond to your offer. But you don’t want to be so early that the customer forgets about it. The Australia vacation offer probably needs to be in market several months before the offer is valid. A one day shoe sale promotion might only need a week or two of lead time.

The key building blocks of your database marketing campaign consist of the answers to the who, what, how, and when questions. Here is a summary of these building blocks:

The target audience is whom you are communicating with.

Your offer or promotion and the associated call to action are what you are communicating.

Your marketing collateral and marketing channel are how you are communicating.

Your in market date is when you are communicating.

Your database can help you in all four of these areas. In the following sections, I discuss in general terms using your database to plan your campaigns.

Hitting the Bull’s-eye: The Target Audience Isn’t Everyone

Even if you were so inclined, you probably can’t afford to mail everyone in your database. You want to focus your marketing efforts on those who are likely to buy. Your database has a good deal to say on this subject. In this section, I provide an overview of some basic ideas related to choosing your audience. In Part II, particularly in Chapter 7, I go into much more detail on this aspect of database marketing.

Some customers have requested that you not send them marketing messages. They can do that in a number of ways. In some cases, you’re legally obligated to honor these requests, which are generally referred to as opt-outs. Chapter 4 talks about opt-outs in more detail.

Understanding your customer base

You may have a pretty good sense of who is buying your product. Does your product appeal to a specific group of people? If you’re marketing wedding gowns, you probably don’t want to be communicating with young married couples. Your database can help you identify the niche groups that might be interested in your product.

There are a couple of ways of getting at these niche groups of potential buyers. One is to look for patterns that might distinguish past purchasers. Do they come from a narrow age range? Is there an income threshold that allows them to afford your product? Do they buy at the same time every year?

When exploring your data for common traits among your customers, don’t prejudge what’s important. Look at all the data you have available. Something might surprise you. Those surprises are valuable insights. I learned this lesson early in my banking career. It was widely understood at the time that a large percentage of the accounts held by our customers were simply unprofitable. I was asked to take a look at profitability at the customer level. What I found was that, contrary to popular belief, our unprofitable accounts were held disproportionately by very profitable customers. This discovery pointed out the potential dangers of trying to address profitability by taking a product-centric pricing approach. Raising fees on unprofitable accounts was just as likely to drive away profitable customer as it was to increase individual product revenue.

Another way to understand your customers better is to just ask them. Customer surveys are a great way to learn about who is buying and why. They also may give you some insight on why people aren’t buying. Your company may do surveys that serve a wide array of purposes beyond your specific database marketing needs. Advertising, pricing, and product development all benefit from survey research. Chapter 17 discusses how you can help with your company’s research efforts.

Get involved in the development of customer surveys. In particular, push for questions that match up with the kind of customer data you have. You want to be able to connect as much survey data back to your database as you can. Knowing that your best customers tend to sleep late may help in figuring out when to run TV commercials. But it won’t help you if that information is not in your database.

Suppose, for example, that you have household income data in your database. That income data comes in the form of income ranges: $20–$30K, $30–$40K, and so on. If you get survey research back that contains different ranges — say $20–$35K, $35–$50K, and so on — you can’t effectively line up the survey results with the data you have on hand. This sort of misalignment of data is actually pretty common. But it’s easy to avoid if you get involved up front.

Sizing your audience

By focusing your attention one whether customers share key traits, you also gain some flexibility in the number of people you contact. If your budget is limited, for example, you may want to tighten some of your audience selection criteria to produce fewer contacts.

For example, including customers with household incomes above $50K may produce too many names for you to mail. Increasing this threshold will naturally reduce the number of names in your mail file.

Your set of selection criteria can become quite complex. You may want to consider such criteria as the following:

Age

Income

Family size

Home value

Geography

You can also use a host of other information in selecting your audience. In Chapter 7, I describe several common types of data that can be used to identify useful customer traits. You choose some threshold or range for each of these variables, which qualifies a customer to be included in your mailing.

It’s often very helpful to understand how each of these variables affects the size of your mail file. An easy way to do this is to produce a report that shows how much the target audience shrinks as each individual variable is considered. This is known as a waterfall report. Table 2-1 is a simple example of such a report.

Waterfall reports help you understand which of your selection criteria exclude the most customers. They also help you see which criteria are really not excluding anyone and might be candidates for more restrictive thresholds.

There will be times when your selection criteria produce an audience smaller than you would have liked. You may have a budget that assumes 100,000 ­contacts, but you only find 50,000 customers who fit the profile you’re looking for. You may be tempted to expand the audience by loosening some of your thresholds.

Tread carefully here. If you set your thresholds based on a solid understanding of your customers, then loosening the thresholds will reduce your response rates. Just mailing to a larger audience may not significantly increase the overall effectiveness of your campaign. Consider other ways to use the extra budget money. You may find that first-class postage, a higher quality mail piece, or even spending your money on a different campaign better serves your goals.

Crafting Your Offer

Your database probably has less to say about this component of your campaign than it does about the other three. Often what you are promoting and the discount, if any, are already defined by the time you are asked to execute a campaign. Pricing is beyond the scope of this book, but I’ll mention a couple ways in which your database can help.

For one thing, you’re in a position to understand price sensitivity. Some customers always wait for discounts or sales. Others tend to buy either on impulse or when they need something. Your database can help in deciding when and if a discounted offer is really necessary.

Your database can also help in defining the appropriate call to action. Knowing that a customer typically buys online, for example, means you should probably be directing them to your website.

It’s always tempting for businesses to try to drive customers to purchase points that are less costly. Banks would rather you use their online services than walk into a branch, for example. But changing established customer behaviors is extremely difficult to do and impossible to do quickly. In the world of database marketing, it’s generally a good idea to go with the flow and send your customers where they are already comfortable. At least give them that option.

Talking Directly to Your Customer: Using Data to Tailor Your Message

You spent a great deal of time and effort understanding and selecting your target audience. You can use that insight in crafting a message that resonates with your customer. I only hint here at the ways in which your data can help you craft messages — see Chapter 12 for much more on this. The simplest way to do this is to use your selection criteria in your message. If you’re ­targeting families with young children, for example, mention children in your message or include them in your imagery. If you’re targeting customers in a particular geographic region, use that fact in your message. Tell people from the panhandle that you “Don’t mess with Texas.”

It’s not necessary to talk to everyone the same way. You can have several different versions of your message. Your target audience may have several traits in common, but they don’t have everything in common. Look beyond just your selection criteria for information about your customers that might help you get through to them.

If you’re marketing baby supplies like bottles and pacifiers, you may find that your primary target audience is women in their 20s and 30s. But you may also find that it’s useful to distinguish between women who are buying these supplies for their own children and women who are buying them as baby shower gifts for their friends and colleagues. The latter group may be much more willing to buy higher-end, more expensive products, for example. By taking into account marital status and presence of children, you can fashion offers and messages that resonate differently with the two groups.

Taking versions to the extreme, it’s also possible to craft messages that are completely customized down to the level of the individual you’re speaking to. Include specific details about the last product they bought. Mention the date of their last stay at one of your hotels. Digital printing and the world of e-mail make this sort of customization increasingly easy and affordable. I address this topic in more detail in Chapter 12. The marketing channel you use is also important. When selecting a marketing channel, looking at your campaign history is important. Simply put, check to see who has responded to direct mail or e-mail in the past. As I discuss in Chapter 4, you can even encourage your customers to tell you how to contact them.

Don’t Sell Snow Shovels in July: Timing Your Message

Message timing depends on a couple of different factors. Seasonality is a big one. You want to be marketing products to your customers when they actually need them. Not selling snow shovels in July, at least in most places, may seem obvious. But seasonality may not always be so obvious.

Christmas specialty stores puzzled me for years. How could these places stay open all year around? Isn’t Christmas the ultimate seasonal marketing opportunity? It finally dawned on me that I almost always ran across these stores when I was on vacation, usually at a very touristy destination.

The attraction of these stores has as much to do with preserving the memory of a vacation as it does with Christmas. It’s not the holiday season that makes them relevant — it’s the timing of the customer’s vacation. Another factor to consider is how long it takes your customer to make a purchase decision. As mentioned earlier in this chapter, impulse buys require far less lead time than international vacations do.

Understanding how your customers make purchase decisions is a popular topic for survey research. You can also learn something from looking at past campaigns to see how long it took for people to respond. You can actually get quite sophisticated in timing your campaigns. In Chapter 10, I talk more about some ways to let your database choose the timing for you.

Using Database Marketing Effectively: The Tactical Advantage

Database marketing campaigns are rarely done in a vacuum. Your company has marketing campaigns on TV and radio and in magazines and various other places. Each of these campaigns has an audience, offer, message, and in-market date. These campaigns all have slightly different purposes and may reach different audiences.

Your database marketing campaigns need to be coordinated with your company’s wider marketing efforts. Your brand is most effective if it’s represented consistently. You don’t want your database marketing offer to be undercut by an offer being advertised on TV. Ideally, your company’s overall marketing strategy should be reinforced across your entire media presence.

That said, there are some things that database marketing is particularly good at. You have insight into what individual customers are doing. This insight gives you a powerful tactical advantage over broader advertising campaigns.

Customer-retention tactics

You can lose customers in a number of different ways. They move out of your company’s footprint. They have a bad experience and walk out in a huff. A product wears out, and they replace it with your competitor’s product. They make a reservation and then cancel it.

In many cases, your database signals that a customer is about to leave. The customer may have logged a complaint. You know when the customer bought a particular product and when the product needs to be replaced. This advanced knowledge gives you the opportunity to intervene before the fact. You can contact the customer to address the complaint. You can communicate about the latest and greatest replacement for the one that’s wearing out. Chapter 10 gives some more detailed examples of customer-retention tactics.

Cross-sell tactics

If you’ve ever bought anything online, you’re familiar with the “People who bought that also bought this” pitch. This is a classic example of cross-selling. The basic idea is that there are natural product bundles: pen and paper, beer and peanuts, airline tickets and hotel reservations. When I read a book that I enjoy, I frequently proceed to find everything else the author has ever written.

By analyzing your past purchase data, you can identify naturally occurring product bundles. This is a particularly powerful technique in consumer goods industries. Even a specialty retail store, such as a pet store, has a wide array of products. Knowing that someone bought a dog collar or a litter box or a ferret cage is powerful information that can predict what they’re likely to buy in the future. Once you understand your product bundles, you can put that knowledge to work by monitoring future purchases. When a customer purchases a product that’s part of a bundle, you offer them other products in that bundle.

Product bundles aren’t unique to consumer goods industries. People often open bank accounts in bundles — an overdraft protection line of credit with a checking account, for example. Insurance companies often bundle auto and homeowners policies together.

Any industry that offers an array of products can benefit from understanding their product bundles. Cross-selling to customers who buy into these bundles is an effective way to increase sales. And it all starts with your database.

Upsell tactics

Many companies have similar products that are differentiated by price or quality. Automobile companies make compact cars and luxury sedans and everything in between. Airlines sell coach, business class, and first-class tickets. The butcher shop sells everything from ground chuck to filet mignon.

Naturally, you’d like to sell as many of your higher-end (more expensive) products as you can. If you recognize that a customer is interested in one of your products, you can often entice them to buy one that’s a little higher grade. This is known as upselling.

Upselling works because you already have a willing purchaser. The customer has already become resigned to paying a given amount for a product. This allows you to focus the customer on the difference in price between one product and another. A customer may not initially be inclined to pay $16.99 a pound for filet mignon. But if that customer is already inclined to pay $12.99 a pound for a strip steak, you can focus on the relatively small $4 difference.

The automobile industry understands this concept very well. It’s the reason that virtually every large auto manufacturer makes cars across a broad spectrum of price ranges. And the difference in price between one model and the next higher one is generally pretty small.

My wife is fanatical about taking care of her car. She takes it to the dealership religiously to have the scheduled service done. Every time, they give her a loaner car for the day, and that car is always a step or two higher in quality than the one she drives. They know she’ll eventually by a new car, and they want the higher-end model on her mind when she does. They’re grooming her for the eventual upsell.

By understanding the past purchase behavior of your customers, you put yourself in a position to know how far up the product scale you can move them. You’re probably not going to move them from a two-door compact to a high-performance luxury sedan. But you may be able to move them from a two-door to a four-door. I discuss database marketing upsell tactics in more detail in Chapter 10.

Beyond Mass Mailings: More Sophisticated Campaigns

So far in this chapter, I’ve been discussing database marketing as if every campaign involves a simple mail drop. You actually have a great deal more flexibility in how you structure your campaign. A campaign can have several stages. It can use multiple channels. You can even set up a campaign to run continuously.

Communication streams

I’ve done a fair bit of college teaching over the years. It’s been drilled into me by my mentors that students won’t really absorb a concept until they’ve heard it several times. Three seems to be the magic number, I’m told. A similar idea applies in marketing. It may be necessary to communicate more than once with a customer to really get the message through. This is one reason why, with the exception of certain Super Bowl commercials, TV ads run more than once.

The idea is also valid in database marketing. It’s sometimes helpful to follow up a message with a reminder. I frequently get direct mail from various retail stores announcing upcoming sales. Sometimes they send coupons or an offer of $50 toward my next purchase of $100 or more. These offers and sales are all limited in time. They all expire.

But the retailers don’t just mail the offers and leave it at that. These database marketing campaigns have a second phase. I usually get one or more e-mails reminding me of the offer. And often I get an e-mail informing me when the offer is about to expire.

Each of these communications has a slightly different purpose. The first is meant to inform me and pique my interest. The reminder is meant to reinforce the first message. The final, expiration-related message is intended to impress on me a sense of urgency. In many cases, this last message is the one that actually pushes the customer into action.

This type of multiphase and multichannel campaign produces significantly better response rates than a simple one-time mail drop. The multichannel part is important. Because e-mail is so much less expensive than direct mail, the later phases don’t add significant cost to the campaign.

Some industries have another reason for using multistage campaigns. Sometimes products have multiple components that need to be purchased over time. My wife and I recently took a Caribbean cruise. We actually responded to a direct mail offer that offered us a discount. When we called and booked the cruise, we were told we couldn’t book many of the things we were interested in at that time.

Over the next few months, the cruise line sent us a series of e-mails. One told us we could now book fine dining reservations. Another told us that spa appointments were now being taken. Yet another told us that shore excursions could now be booked. And ultimately they sent us a personalized packet that included our luggage tags and all the details of our reservations and bookings.

This whole process really impressed us. And it served to reinforce our purchase. My wife and I both know from experience in the travel industry that cancellations are a big issue. The cruise line’s multistage post-booking campaign confronted our potential cancellation head-on by continually reminding us of all the great things we were going to experience.

Event-triggered messages

One of your biggest advantages as a database marketer is that you can see what your individual customers are doing. You can also tell when something about the customer has changed. This puts you in a position to recognize and act on opportunities as they arise. Messages that are sent in response to a customer’s behavior or status are known as event-triggered messages. Chapter 10 addressed this subject in detail.

Event-triggered campaigns are typically small. They tend to run continuously. Communications are sent every day or every week. Some sophisticated campaigns are executed in near real time as some customer event occurs.

Automobile leases provide a simple example of an event-triggered campaign. The dealership you leased your car from knows when you leased it, and they know when that lease is up. In other words, they know when you will be shopping for a new car. This allows them to send you a message about their latest models, offers, and rates at the time when it’s most relevant to you.

A bank may recognize strange transactions on a credit card and take action to mitigate the risk of fraud. That’s a near real-time event trigger. The bank may also communicate investment information to people as they near retirement.

Event triggers can take many forms. They can be based on transactions, product expirations, changes in age or income, birth of children, retirement, and more. Almost every customer trait that you track on your database changes over time. Using those changes to your advantage is what event-triggered marketing is all about. The power of event-triggered campaigns lies in their timing. Often the window of opportunity is fairly small. By striking when the iron is hot, you can address your customers’ needs in a way that your competitors can’t.