From: Direct Response - Digest of Direct Marketing
Publisher’s Corner

Database Marketing

Remember to back-end, up-sell and cross-sell
your present customers

A surprising number of companies fail to back-end, up-sell and cross-sell their customers following the initial sale. Once the customers have purchased, they are allowed to disappear. You should be making a list of all the people who buy, or even inquire, about your product or service, then attempt to sell them related products, services and/or upgrades.

If you’re a copier dealer, you should add on service and supply contracts, fax machines, and any other obviously related products or services. If you’re a real estate agent, you might consider making arrangements with painters, wallpaper hangers, carpenters or yard services. Refer your qualified clients to them for a percentage of the sale. Have those you refer do the same for you.

Brainstorm with your salespeople and office staff to find related products. If you don’t want to sell the related items you come up with yourself, make a deal with someone who does. Give them the names of your customers in exchange for a nice cut of the profit. Don’t be afraid to ask for as much as 50%. After all, it’s a sale they probably would never have made without you.

The ability to go back and replace what you sold your customers in the first place is another obvious, but often overlooked, sales opportunity.

The truth is that you don’t necessarily need to make a profit on your initial sale. If each customer is worth $1,000 in profit to you in the long run, you could afford to lose almost that much to get him as a customer. You must keep in mind the lifetime value of each customer. Otherwise, you may be throwing away thousands of dollars in lost profits.

Database Marketing

Your database is the key to survival in bad times. And, it’s the key to maximum profits in good times. The goal of your database is to maximize customer value through conversion, retention and repeat sales. And, it allows you to create new marketing opportunities.

Everyone is collecting data on who is, or should be, buying their products or services. This data does not just consist of names and addresses. It includes buying history: what people bought, when they bought, and how much they bought. It also includes birth dates, anniversary dates, marriage status, number and age of children, likes and dislikes. It opens up new ways to market more products and services for both consumer and business-to-business marketers.

It means:

• New ways to market smarter and reduce costs.

• New ways to market additional products or services.

• New ways to keep customers—through extended product usage.

The business market today is changing rapidly. Those who properly master the understanding of how, what and why customers make purchases, and those who are able to influence buying decisions with highly targeted marketing efforts—mail, video, telemarketing, etc.—are going to come out on top.

Let’s briefly look at the database.

Far More Than Just Names

A database is not just a collection of names. It’s a collection of individualized, consumer behavioral information, isolated to each customer. The database concept inputs data and generates information that allows for selective targeted marketing. It provides comprehensive, up-to-date and relevant information about prospects and/or clients, and will pay for itself quickly with visible, measurable sales.

Murray Raphael has created two graphics which help show how comprehensive your database can be.

New Breakthrough

As database marketing has evolved during the last 20 years, it has become more and more cost-effective.

In 1973, it cost $7.14 to access a customer’s name, address and purchasing information. Today, it costs about $.01-.02. This is due to advanced microchip technology that makes processing information faster and easier than ever before.

Building Your Database

As you start your database, the most elementary data collected is your customer’s buying history: what they bought, when, how much and the source of the order.

Here is an example of a typical database structure. An element of information about the customer is called an attribute—a fact about the individual or company. The following attributes are common to most direct marketing databases:

Your goal is to ultimately develop a high-quality, long-standing relationship of repeat business. With proper analysis of the database, predictive models can be created to mail selectively and with the right frequency.

The ultimate result is that you can provide your customers with what they really want, when they need it. Properly implemented, you can increase your response rate and lower your cost-per-order. The result is higher profits.

A Wealth Of Information

Additional information in your database may include birth dates, marriage status, number of children, personal likes and dislikes, plus a host of other important information that meets your own special needs.

In fact, you can combine thousands of different characteristics of a customer or prospect to develop a detailed psychographic, demographic or geographic profile

The Up-Sell: An Untapped Source Of Profit

One of the major benefits of a database is that it enables you to aggressively up-sell your customer base. You can:

• Sell them more of the same product.

• Sell them a more expensive version of the product.

• Create continuity or automatic purchases. The pyramid to the left shows a way to conceptualize your database.

The Cross-Sell: Marketing Other Products

Another important feature of database marketing is cross-selling. What other product can be marketed to your database and secure your relationship with your customer?

A database also allows you to develop new products, based upon analysis of product/category strengths and buying patterns of brand merchandise.

For example, Levi Strauss discovered a wealth of new product marketing opportunities. They took advantage of one of these opportunities by introducing a diverse line of casual clothing for men, women and children to complement and expand the jeanware for which they were famous. It was the marketing challenge of this line that forced Levi Strauss to turn to direct marketing.

The company had encountered problems in retail stores because Levi Strauss offered a wider range of sizes and styles than the stores were able to display. So, they began looking for a media which would display all of the styles, sizes and colors available. They finally decided that a catalog was the answer. It would give them room to display all of their merchandise and provide availability of the items to the public.

After testing a mailing against the Spiegel catalog in the fall of 1985 with great success, the catalog was mailed.

Levi Strauss expected their direct mail consumers to be slightly different than their typical consumer, but they were surprised by the variety of customers they attracted.

A customer profile revealed that the shoppers attracted to their catalog ranged between the ages of 35–54—75% were female, while 25% were male. The annual household income was $25,000 and up.

This profile revealed a much different consumer base than Levi expected. The consumers were older, had more money, fewer children and were dominated by females. Their tastes were different from Levi Strauss’ normal consumer base.

These new consumers purchased the #1 ranked “501” jeans after purchasing diaper covers and the drop-yoke pants. In fact, of the 15 most demanded merchandise, 4 were in the top 100 products for the company.

The next surprise was in the geographical locations of the catalog consumers. Levi Strauss had always enjoyed success in both the West and Northeast, but the catalog was most successful in the Midwest and Northeast.

Just one catalog mailing assured Levi Strauss they were capable of successfully marketing a wide array of products, while cost-effectively testing new items.

How Database Marketing Is Used

Here are some examples of the use of database marketing:

• Radio Shack has been using database marketing for years. If you haven’t been to one of their stores—go. Buy something and try to leave without giving your address.

• Supermarkets use database marketing. Many identify their customers, analyze consumer buying behavior and even develop customer loyalty programs.

For example:

A&P customers are identified through issuance of so-called check-cashing cards. In Duluth, Georgia, a database program was made of prospects with the goal of conversion to customers. A local A&P store mailed to all 73,000 area homes for its grand opening. 10,000 stormed A&P on opening day, astounding management. 10,000 names of buyers were collected, unheard of for first-week sales. Plus, they identified 63,000 who did not come in.

RJ Reynolds Tobacco Co. reportedly spent $100 million for a database of 55 million smokers in America. After careful testing, RJR now pulls 30-50% response on database-driven direct marketing programs. Incremental sales generated by these efforts now pay for the database.

General Foods is considered the most sophisticated direct marketer to the consumer market with a database of at least 20 million names. The names were generated from sweepstakes entrants, premium buyers and coupon redeemers who have responded to direct mail. GF also sells its database to non-competitors and zeros in on cross-selling opportunities.

The database can also isolate names of consumers who, for example, drink P&G Folgers coffee. GF can then mail incentives to lure them away from Folgers. Or, GF can pull names of homes with kids who use GF products. A children’s magazine is then sent with promotions for its adult products.

Database marketing is efficient marketing. It’s accountable. It will increase your profitability. And, it will give you an edge on the competition.

I’ll be glad to talk to you about these powerful marketing tools. One of them could provide you with the marketing breakthrough you’ve been looking for. Please call me at (310) 212-5727 or e-mail me at craig@cdmginc.com.