Database marketing shifts to customer intelligence

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Dave Frankland is VP-principal analyst at Forrester Research. StraightLine Direct recently asked Frankland about trends in direct and database marketing, as well as the value of analytics in providing customer intelligence about the best prospects to go after.

StraightLine Direct: How is the world of database marketing changing?

Frankland: It's changing along with how customers' behavior is changing. The progression has moved from the traditional direct marketer, who simply builds a repository of names, to a world where that data can be brought to bear to gain a universe of information about companies. What marketers have to realize is that this culture change means not just trying to get hundreds of thousands of names to target, but rather deciding on who your best customers are and might be.

In January, we published our “Forrester Wave: U.S. Database Marketing Service Providers, Q1 2011.” From our perspective, it's no longer about direct marketing; it's about customer intelligence. It's a digital world empowered by a customer world—and with customers in control.

StraightLine Direct: What can marketers do about this?

Frankland: In our analysis, what we've found is that many are stuck in marketing-campaign mode. Instead, they must start to think differently about customer intelligence that extends far beyond marketing. They need to use customer intelligence to deliver customer knowledge and insight, to improve customer service, enhance product development and transform business operations and strategy.

It's similar to understanding the difference between acquisition marketing and retention marketing. The truism that everyone ignores is that it's more expensive to acquire customers than to retain one. But finding out what you know about existing customers can also help you in your acquisition efforts.

StraightLine Direct: What's key to know about existing customers?

Frankland: As Larry Selden and Geoffrey Colvin say in their book, “Angel Customers and Demon Customers” (Portfolio Hardcover, 2003), 20% of your customers are draining your profit by 80%. These are people who cost you more to service than what they spend with you. You don't want to just buy a list when 20% of the names will be automatically unprofitable—the “demon” customers. But you also want to understand who your best customers are in order to find more [like] them.

Taking this approach forces database marketers to think differently. Consider: What if you incentivized sales around closing deals only with those customers with the attributes of being most profitable instead of just closing any and all deals? When you do this, you can shift the mindset of an entire organization.

StraightLine Direct: How are customers responding?

Frankland: We come from a direct marketing world where it's easy to build a repository of names, to build lists. And then you run through this cycle every two or three months of acquiring new names and pushing them out through the mailstream. Today, however, customers won't accept that. If I go into a bank today, I expect there to be institutional knowledge about me and for me to be treated differently as a result. This customercentric approach is not just desirable today; it's expected.

For marketers, this also means using databases in multiple ways, not just in direct mail or e-mail. It also has the potential of being smart about, for example, digital advertising. For instance, if you can identify those higher-value customers and the sites they visit, and plan your digital advertising campaign accordingly, you might be happy even with a higher CPM. And this can contribute to the success of interactive marketing by using customer knowledge to create relevant e-mail, deliver real-time offers in online channels and optimize media buying.

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