Recession Renders Many Marketers' Databases Useless

Consumer Behavior Has Changed So Much in Industries Such as Travel, Retail That History Is No Help

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NEW YORK (AdAge.com) -- Customer databases, which cull years of spending and behavioral information to try to boost conversion and revenue, have long been a staple for marketers in industries such as travel, hospitality, retail and financial. But what happens when a massive disruption -- say, a meltdown of the economy -- alters consumer behavior so dramatically that it renders historical data useless?

In some cases, it might just be better to throw out existing databases and start from scratch.

John Wallis, global head of marketing and brand strategy, Hyatt
John Wallis, global head of marketing and brand strategy, Hyatt
That's what John Wallis, Hyatt's global head of marketing and brand strategy, suggested in an interview with Ad Age earlier this month, as marketers continue to confront the deepest global recession in a half century, one that's managed to effect potentially long-term changes in consumer spending and psychology.

Mr. Wallis, who took the role at Hyatt in November, conceded that he stopped short of tossing Hyatt's database of names out the window, but told his colleagues, "I don't even want to look at this data" for the near future.

"Every single one of our behaviors has changed in one little way or another, so anyone who is looking at the way I used to behave is looking at data that makes no sense," he said more recently. "I can't think of anything worse than sending a message to someone who lost their job asking them to come and stay with us. We haven't communicated with anyone who hasn't stayed with us since September."

Revising models
His plan was to focus the company's energy on those still traveling and staying at Hyatts. "If we didn't know who was staying with us tomorrow, at least we knew who was staying with us today," he said. "So we made sure we were looking after them and communicating with them in total relevance."

Steve Crowell, senior manager of database marketing at Southwest Airlines, said the budget carrier recently built entirely new database models, as it refocused investment in database marketing. He said 70% of the rebuilding was due to the reinvestment effort, but the remaining 30% was driven by the fact that the "the world had changed."

Southwest used to outsource its database marketing, but since Mr. Crowell was brought onboard last year, it has moved that in-house and partnered with Acxiom on model development. The new data models include data from the downturn.

While Mr. Crowell agrees that the most recent and relevant data are important, he said, not every historical model is obsolete. If it was "built before the crisis and is still differentiating customer performance accurately ... you don't need to throw out that model."

The question is whether response rates for all the segments in the model are down. If so, it's probably still working fine. But if suddenly one of the middle segment becomes the best-performing one and the top segment drops to worst, something's out of whack, and the model may need to be tossed.

The recession is one of two challenges facing database marketers; the other is the influx of digital data, such as site visits, widget downloads and online-reputation scores.

"We're dealing with the destabilization caused by a macroeconomic trend and, more importantly, so much data coming from new sources that don't allow us to use traditional algorithms, methodologies or data points," said Loren Grossman, global chief strategy officer at Omnicom Group's Rapp. But he said intelligent use of databases can help give marketers something to sell besides price.

"In hard times, when everyone is marketing on price, that intangible element of recognition and relevance can be a differentiator and allow you a little bit of price elasticity. ... That's harder for the competition to replicate and gives you first-mover advantage."

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