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NMOA Direct Marketing Article
Mail Order Analytics
By Mike Talbot, Chief Technology Officer, Alterian

Mail order businesses are in a prime position to benefit from cost savings and increased sales as the result of analytics of their data, more than any other type of business.

First of all, mail order organizations normally have a high cost sales device, such as a catalogue. Sending catalogues to people who don't purchase anything is a massive waste. Analytics can significantly reduce mail order waste by segmenting targets to increase Return on Investment.

Secondly, mail order organizations often carry a wide range of products and choose to promote these to potential shoppers either through direct mailings or in specially designed subset catalogues. Again, analytics can help define who will respond best to a particular combination of offers and can help in designing sub collections to appeal to specific segments in the market.

The great news for mail order providers is that they have at hand a rich source of information - their databases contain records of all transactions for a customer over time and this golden information can be used to derive new knowledge and direct marketing operations. Additionally, many people will provide personal details when they shop and this can help to refine the picture further.

In a downturn cost saving is often the first order of the day. Using the existing transactional information, marketers can work out the average purchase cycle for each product category in the range and the average depth of repeat (number of times an individual will purchase the same product) - this information can then be used on an individual basis to identify whether this is a likely time for them to purchase products. There is no point in sending mailings and sub catalogues to people who are early in their next purchase cycle and there are significant benefits in contacting customers when it's almost time for them to consider buying again.

One of the simplest ways to reduce costs is to build a simple ‘model’ of spend- likelihood for each customer in the database - this model will draw on past transactions and customer information. Once the model is built it can then be used to identify the 5, 10 or 20 percent of individuals who are least likely to purchase a product and these groups can then be excluded from catalogue mailings or other promotional activities. This strategy improves profitability by reducing costs while protecting sales figures.

If mail order companies want to sell more products then using simple 'combinatorics' (product combination analysis) it is possible to define clusters of products that are purchased together and also to identify which are key products – the products that trigger or support others in the range – and can be used to start a buying session that may well make a much larger basket of goods.

So far this description of analytics has been largely about transactional data - it gets even more powerful when you fully mix in the customer information. Many businesses will also benefit from adding third party data such as PRIZM or MOSAIC codes which help to classify customers based on the people who live in their neighborhood. The use of customer level information makes it possible to identify different segments that shop in different ways and are attracted to different product combinations.

Increasingly, digital print and email allow mail order companies to target their communications more efficiently. Using the segmentation of customers described above, it may well be cost effective to produce promotional materials specifically targeted to the identified segments; such targeting usually yields significant improvement in sales and in brand identification caused by the perceived increase in relevance to the recipient.

Analytics can also help with identifying the best product mix for a mail order company and to predict the necessary stock levels of different categories, this helps in creating a relevant brand and reduces the costs of over stocking particular items. When an item isn't selling, examining the behaviors in the customer base will help to target the right individuals with special offer messages and can also identify the kinds of offers that the recipients are most likely to respond to.

If the company has a web site that has traffic driven by email, or that allows customers to "log in", then this information can also be pulled into the marketing database and analyzed. Promotions can then be made based on what the customer has been viewing on the web and the web site can be tailored to fit the customers segment or previous buying behavior.

Mail order companies employ smart people in both product selection and marketing, analytics needs to be used as a tool by these individuals to enhance their innate abilities - often even the word "analytics" appears to imply some complex set of mathematical formulas that are anathema to the more creatively focussed. This mathematical skill requirement is really no longer the case and marketers and designers alike can now get simple to understand trends and profiles without resorting to mile high stacks of software manuals or dusty old stats textbooks. With so much to gain from analyzing a rich and descriptive data source, mail order companies not actively engaged in profiling the customers and segmenting their audience are missing a competitive edge that will have a rapid return on investment.

About the Author
Mike Talbot is the Chief Technology Officer for Alterian, responsible for the market vision of the Alterian product range and the technology vision that underpins it. Mike is an expert on technology enabled marketing and consults with partners and clients on driving cutting edge, multichannel marketing campaigns with a special focus on the integration of online communication.

About Alterian
Alterian (LSE: ALN) empowers organizations to create relevant, effective and engaging experiences with their audience that help build value and reinforce commitment to their brand, through the use of the Alterian Integrated Marketing Platform. Alterian drives the transformation of marketing and communications, making it practical and cost-effective for companies to orchestrate multichannel engagement with the individual.

Alterian’s unprecedented integration of analytics, content and execution through industry leading tools, such as the Dynamic Messenger email platform, SM2 Social Media Monitoring platform and the award winning Content Management solutions, enables companies to build integrated communication strategies which create a true picture of the individual.

Alterian works with marketing services partners, system integrators and agencies who recognize the need to plan and deliver coordinated customer engagement services in partnership with their clients. For more information about Alterian, products within the Alterian Integrated Marketing Platform or Alterian’s Partner Network, visit www.alterian.com or the Alterian blog at www.engagingtimes.com.

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