NEW YORK (AdAge.com) -- Ginger, a 27-year-old living in Indianapolis, is baffled as to why she gets the Pottery Barn catalog, let alone the Pottery Barn Kids catalog, considering that she has no children. Similarly, Jeanette, a Toledo, Ohio woman, has long received Limited Too, now Justice, mailings. At 49, she's far outside the brand's tween target. Lands' End, which she also regularly receives catalogs from, would be closer to the mark, except that she hasn't ordered anything from there in years. Even Amazon, which has better data-based marketing than most, has raised the ire of the occasional customer. Vicki ordered bike gear from the retailer for her husband, Nick, two or three Christmases ago. She was surprised to receive an e-mail just last week plugging complementary items.

In today's digital world it's easier than ever for retailers to slice and dice consumer data. Yet many have yet to crack the code and use the data they do have to serve up targeted, timely and relevant offers. A Forrester study found that only 10% of consumers feel the direct mail they receive is relevant, while just 7% believe e-mail marketing is relevant. Overall, 62% of consumers say they get too much direct mail, and 66% say they get too much e-mail marketing.

Consultants in the space blame retailers' reliance on mass marketing, noting that there is a history of merchandising and messaging to broad groups rather than individuals.

Dawn Maire, chief retail officer at Rapp, said that when retailers do pare down data and send relevant communications, they get five to 10 times the response rate and a 20% to 30% increases in sales. But the number of retailers moving in that direction, despite proven results, is disappointing.

"They're hooked on the heroin" of mass communication, Ms. Maire said, noting that retailers are afraid to cut back on the volume they put into the marketplace, figuring the shotgun method has proved to work -- even though a more targeted approach could work better. "Retailers have tremendous power at their fingertips and, often, they don't figure out how to use it to its full potential."

'Calling bullshit'
Every retailer claims they are engaged in data-based marketing and CRM programs, and indeed, the oft-repeated mantra of retailers is "focus on keeping existing customers over acquiring new customers."

According to David Frankland, principal analyst at Forrester, 33% of marketers cite relevance as a primary factor in the method of communication used to reach existing customers; some 47% say it's often a factor. Yet, he said, "I'd call bullshit on that," pointing out that almost one-third of marketers who capture at least one type of preference data on existing customers take no action based on it.

Indeed, the disconnect is in using data. Retailers have access to or could develop data that is transactional, behavioral, demographic and attitudinal to customize communications, said consultants in the space. But most don't, for many reasons, among them disparate databases running on varying technology platforms, a murky understanding of who owns the data and should be using it and, in some cases, an unwillingness to tackle what can be an expensive and time-consuming project.

Zain Raj, CEO-Euro RSCG Discovery and author of the forthcoming book, "Brand Rituals: How Successful Brands Bond Customers for Life," said that his anecdotal studies have found only 4% of retailers are using purchase histories and transaction data to personalize the content of their customer communications.

"Very few retailers are actually doing a good job of retention and loyalty marketing. Everything else is fundamentally acquisition driven or promotion driven, which is just spam against loyal customers," he said. "That's why you get three to four e-mails per week from every retailer you shop with. Very few retailers understand your behavior and are rewarding you for it."

For many retailers embracing an opt-in loyalty program and then mining that data is the first step toward a more functional data-based marketing program. Best Buy, Neiman Marcus and Sephora (see box), for example, have developed extensive loyalty programs that allow members to earn points and receive targeted communications and special offers. Others, like Amazon, iTunes and eBay, have succeeded at sending specialized offers based on previous selections without the benefit of loyalty programs.

Recession a game-changer
While that's still the exception rather than the rule, the recession could change all that. John Bartold, VP-loyalty solutions at Epsilon, said that between 2001 and 2008 retailers had little incentive to mine their databases as the economy boomed and sales steadily rose. Now, with razor-thin margins and slimmer budgets, retailers are looking for ways to squeeze productivity out of existing assets.

"A lot of people right now are sitting there and looking at their data for the first time," said Mr. Bartold. "You'll start seeing more things get done as we come out of this recession. ... What retailers have been doing is a mass- channel approach; as they build much richer data sets, targeting can be done one-on-one."

Already major catalogers have been fine-tuning circulation in the face of the recession. Williams-Sonoma, which owns brands including Pottery Barn, said it cut circulation by 19% in the second quarter, while J.Crew cut its circulation by 30% in the first half and expects the full year to be down between 25% and 27%.

Williams-Sonoma has said it is replacing some catalogs with e-mail marketing. It is also analyzing its database to zero in on its most profitable customers, seemingly adhering to the 80-20 rule that 80% of a retailers' sales are generated by 20% of its customers. J.Crew, meanwhile, has been eliminating duplications from its system and is testing niche mailings, creating catalogs that only feature women's products and sending them to women, for example. Developing a preference center and acting on those preferences, whether it means sending e-mails vs. catalogs or tailoring the type of product information sent, will immediately impact the bottom line, experts say. Indeed, simply whittling down the number of expensive catalogs that need to be sent can have an impact without effecting sales. J.Crew, for example, saw second quarter direct sales rise 6%, even as circulation of its catalog was cut by 36%.

Marketers spent $21.3 billion on catalogs and another $35.2 billion on direct mail last year, according to the Direct Marketing Association. Both figures include the cost of postage and production. It's perhaps no wonder that consumers are looking for ways to cut back the amount of communications they receive from marketers. In fact, according to Forrester, 20% of marketers acknowledge they send too much direct mail, while 34% believe they're stuffing inboxes with too much e-mail.

In response, sites like DMAChoice.org have been created to explain how consumers end up on marketers' lists and how to whittle down the number of marketing pieces received. And as consumers become increasingly environmentally conscious -- various anti-junk mail groups claim 62 billion pieces of junk mail are produced annually, destroying more than 100 million trees -- consumers are opting out. DMAChoice.org boasts four million registered users and stops some 930 million mailings annually.

Likewise, major e-mail platforms, like Yahoo, have said that they will begin looking to engagement metrics -- open rates, clicks and other actions -- to help identify wanted and unwanted e-mail. Being tagged as spam or bulk mail would make it that much more difficult for a retailer to get its message through to consumers.

"Once someone opts out, you have lost them," said Mr. Frankland. "Some companies will try to pre-empt that by trying to find out what is the preference, so a consumer doesn't opt out."

Multiple databases
While collecting and using preference information is a logical and relatively easy-to-execute first step, the ultimate goal should be to integrate data gathered across a variety of channels. Retailers often have numerous sources of data coming in from online, catalog and in-store transactions as well as from promotional sweepstakes, mobile marketing programs, store credit cards and wedding registries, for example. One multichannel retailer interviewed by Mr. Raj admitted to having 31 different databases, he said, declining to name the retailer.

"Retailers are doing multiple channel marketing, not multichannel marketing," said Tim Suther, senior VP-global multichannel marketing services at Acxiom. "It's wasteful. Unless you have the ability to connect insights, you will waste money and resources and you will have messages that conflict with one another" (see tips, left).

But there are hurdles, including competing priorities and territory disputes over who owns the information. Cathy Hotka, a retail IT consultant, said she's often asked retailers about that. The response she gets? "Everyone [owns it], which means no one is looking at it. It's not somebody's deliverable."

Ms. Maire believes the responsibility should fall to the marketing team, noting it is best equipped to coordinate the communications going out the door. Even then, some experts say it's the marketing team that is holding retailers back from improving customer targeting.

"From a technology standpoint and an intellectual capability, we are there," said Mr. Raj. "But the problem is that marketing organizations are focused on traffic and awareness, not retention and building loyalty. ... There needs to be senior marketing people that have an appreciation of what data-based marketing can do for them, and there aren't a lot of them."

~ ~ ~
Contributing: Michael Bush

How to maximize your retail database

Ten tips culled from database-marketing experts

1. Understand the data you have. What format is it in? Is it integrated? Who owns it?

2. Take responsibility. Assign someone to take charge of data-driven marketing, and make them deliver.

3. Remember that not all customers are created equal. Focus disproportionately on customer segments most likely to be valuable.

4. Determine customer value. The industry calls it RFM (recency, frequency and monetary), but what it really means is determining how recently someone shopped with you, how frequently they shop with you and how much they spend. The greatest predictor of future behavior is how recently they visited.

5. Consider starting from scratch. This recession has so altered consumer buying habits that some believe existing databases will be rendered obsolete.

6. Collect and use customer preferences. If you stop sending catalogs to customers who prefer e-mail, you'll save big bucks and curry favor with that customer.

7. Keep it simple. Focus on simple upgrades that will show immediate results. Upgrade shipping confirmations to include complementary product suggestions, for example.

8. Personalize communications. Include the customer's name, a product recommendation or an invitation to a store event. One personalized element will dramatically increase response rates.

9. Pare down. You're more likely to avoid spam filters and raise the ire of environmentalists, and yes, customers will also thank you.

10. Connect the insights. Giant infrastructure projects are expensive and potential problems, but a jumble of information with no analysis is useless.

Who's doing it right?

We searched high and low for a stellar example of a retailer with a well-designed, well-executed database-marketing program that goes beyond just a loyalty program -- and we came up empty-handed. (If you know of one, shoot us an e-mail or comment on this story on AdAge.com.) But one loyalty program that stands out is Sephora's, which uses Acxiom technologies to deliver its Beauty Insider customers highly personalized marketing messages.

WHAT SEPHORA KNOWS:
Whether a shopper prefers shopping online or in-store, as well as their preferred products, brands and categories. Customers are also encouraged to fill out personal profiles which include eye color, hair type and skin tone, as well as skin and hair concerns and favorite fragrances, to help customize offers.

HOW SEPHORA USES WHAT IT KNOWS:
"To provide clients with the most relevant content possible," said Julie Bornstein, senior VP-Sephora Direct. "If you have dry skin, we want to show you our newest and most-effective moisturizers."

WHAT IT'S DONE FOR SEPHORA:
The retailer declined to discuss the sales results of the program but said customers have proved more likely to make purchases when presented with targeted communications. Response rates have more than doubled. Sephora's parent company, LVMH, has consistently highlighted Sephora as a bright spot, noting revenue and market-share gains in 2008 and the first half of 2009, but it does not break out results of individual businesses.