Download RMR Vol 2.12

Relationship
Marketing
Report
Volume II, Issue XII
January, 1999
USING INFORMATION TO BUILD AND MAINTAIN RELATIONSHIPS WITH YOUR CUSTOMERS
The Money Trap:
Why You Can't Develop Forward-Thinking Salespeople with a Backward Compensation Plan
Business-to-Business Internet Marketing: Five
Proven Strategies for Increasing Profits
by Barry Silverstein
by Don Peppers and Martha Rogers, Ph.D.
Part 1—Generating and Qualifying Leads with the
Internet
When we left the Agricultural Era, we did not stop
eating—or farming. But most people no longer depended
on agriculture for their livelihoods. We changed the way
we defined work—and the way we rewarded it.
As we move to the next chapter of human history—the
age of Interactivity and Information—we will again
redefine work, productivity, and compensation. Successful companies will be based on customers, and the
information about each one that makes a real relationship possible. And these companies reconsider the timehonored tradition of commissioning product sales. The
most successful companies will reward their front-line
customer managers for building share of customer, getting information, keeping customers longer, and growing
the value of each customer to the company.
During the Agricultural Era, most people earned a living
by working on farms. As technology delivered us into
the Industrial Age a hundred years ago, people moved
away from farms and near factories. The basis of the
economy shifted to products— and services—that could
be delivered more or less the same way to everyone.
Standardizing the products and services led to
economies which took advantage of new assembly-line
technologies. Businesses defined themselves by the
products they designed and produced. For the past 100
years, the goal has been to develop a product—or service—and then to find customers for that product.
Now technology once again changes the underlying
premise of competition and business strategy. As we
enter the Age of Information and Interactivity, the basis
(Continued on page 2)
This is the first in a series of 5 articles based on the new
book Business-to-Business Internet Marketing by Barry
Silverstein (copyright 1999, Barry Silverstein, published
by Maximum Press, ISBN 1-885068-35-2, $19.95).
The lead generation and qualification process is common
to virtually every business-to-business marketer, large
and small, regardless of industry or target audience. Most
marketers know they could be doing it better, and many
wonder if the Internet can really help improve the process.
(Continued on page 4)
A Method to the Madness for
Business-to-Business Companies
by Andy Birol
Your marketing and sales team says the best way to increase sales is to buy new database marketing software.
Or launch new distribution strategies. Or have salespeople make more cold calls. Or add telemarketing. What's
the right answer?
Your customers feel neglected or don’t do as much business with you as they used to. Your customer service
(Continued on page 7)
Also in this Issue
Technology for Complex Segmenting ......Page 8
Interactive Voice Response.....................Page 10
Index of Articles .......................................Page 12
A PUBLICATION OF THE DATABASE MARKETING INSTITUTE
Relationship Marketing Report
(Money Trap, continued from page 1)
of tomorrow's successful businesses will not lie just in great
products and services, but in great relationships. Just as the
shift to the Industrial Age signaled a change in business
strategies and practices, so the shift in technology is again
changing the way a company must evaluate its underlying
assumptions.
Today, the ability to use computers to track, remember, and
predict what a customer will want next—coupled with new
interactive and mass customization capabilities—will again
change the way we work, earn a living, design our basic
business strategies, and compensate success.
Beginning now, the successful company will develop a
customer, then find products for that customer. Instead of
trying to sell as much product as possible to whoever will
buy it, tomorrow's sales force will be rewarded for increasing the value of each customer to a company. The firm
itself, instead of designing strategies focused on winning
market share, will concentrate instead on winning a greater
and greater share of each customer's business. The basic
strategy shifts - from market to customer, from traditional to
one-to-one, or 1:1.
The 1:1 marketer will not just differentiate products
and brands, but will differentiate customers.
The ability to see that each different customer has a different value to your company guides the allocation of time and
resources to that customer. And the ability to see that each
different customer has a different need from your company
will help the company mass customize the communication,
the service, the invoicing, and in many cases, the product
itself to each individual customer. The time and effort a
customer spends teaching your firm how to serve his needs
best is an investment that pays off when the customer gets
back exactly what he needs. This Learning Relationship is
the key to customer retention and profitable growth.
The Computer Salesman's Dilemma
How would the 1:1 sales force think about its task? We met
a computer salesman who was understandably proud of his
recent success record. The day we met him, he was busting
his buttons over his carefully-choreographed ten million
dollar sale to a Fortune 500 company. Very impressive
volume, but what was his share-of-customer, we asked. He
was stumped. He knew how to calculate volume. How
would he figure share of customer (SOC). And why?
To arrive at an understanding of share-of-customer, he
would need three pieces of information. He would have to
first be able to know the identification of his customer.
A Database Marketing Institute Publication
January 1999
Easy. Next, he would have to know how much business
his customer was giving him. Piece of cake: ten million
dollars. Now, he would need to know how much business
the customer is doing with the competition.
Ah. Much harder. In fact, impossible without building a
dialogue and learning the answer from the customer! But
in our brief meeting, we did some estimates, and helped
the salesman figure that the customer company was probably doing about 100 million dollars' worth of computer
business per year. So although the ten million dollar
figure looked—indeed, it was—impressive on its own,
the perspective was slightly different when viewed as
share of customer. This salesman's hard work, to date,
had yielded only 10% SOC.
Why does this matter? Our next questions were these:
Why did you get any of this customer's business?
Who has the other 90%? One competitor? Or several?
Why don't these competitors have the 10% you got?
How can you get more of the business they're getting
now?
Most important: What happens to you when one of these
competitors shifts its strategy and goes after 100% share
of this customer's business?
Changing the Way We Measure and Reward Success
Throughout the Industrial Era, the role of the manager has
been to measure activity—to oversee hours worked on a
factory floor, or in a secretarial pool. The role of a sales
manager has likewise been to measure the level of sales
activity: number of calls made, visits to prospects, proposals written, and most importantly, volume of business—measured in closed deals and product volume.
Quota has been the Holy Grail.
As businesses move toward 1:1 strategies, they will be
asking their salespeople for different accomplishments.
The very life of the company depends on it. And only a
sales manager who lives in Dilbert's world would expect
to change the behavior of a sales force without changing
the definition of what a company expects, the measures of
achievement, and the rewards and compensation for success.
The traditional sales manager has rewarded his sales
force based on two primary measures of success: product
volume and dollar sales. Both are worthy goals. Add to
these the more recently used measures of customer satis(Continued on page 3)
2
Copyright 1999 by MPI
Relationship Marketing Report
January 1999
(Money Trap, continued from page 2)
faction and market share, and most companies sleep pretty
soundly on the decisions they make to hire, train, and keep
salespeople who can accomplish these missions. The best
salespeople use 3x5 cards or computer contact software to
manage their relationships with customers, and headquarters hears from them when the order gets placed, or the
salesperson needs a discount to make the deal happen.
Salespeople are rewarded for their hard work with sales
commission. Things rumble along pretty well like this, so
long as the goal is, primarily, selling product.
But if the underlying strategy of your business shifts to
winning a greater and greater share of each customer's
business, salespeople will be asked to accomplish a different mission. Fundamentally, they will be asked to get all
the business they can from each assigned customer and
prospect. Their day-to-day activities will undergo a
change, and if they are asked to do things differently, you
must be prepared to reward them differently.
The 1:1 salesperson will be evaluated and rewarded
for:
Customer satisfaction— not just the level of satisfaction
with this transaction (wink, wink), but his ongoing trust
and commitment to your company. This will mean it's in
the salesperson's best interest not to oversell for short-term
gain but instead to practice marketing which looks out for
the customer's best interests and focuses on helping the
customer achieve goals rather than focusing on a shortterm product sales quota.
Growing share of customer—getting a greater and
greater share of a customer's business, measured by increased SOC. This is done by finding products for a
customer, through effective cross-selling within your organization (measured by multilineness), as well as building
strategic alliances with other companies whose core competencies don't overlap your own and yet are needed by
your customers. The goal here will be to keep the customer
—never to send the customer out the door to become
somebody else's customer—and to predict the next logical
thing this customer will need from your company.
Providing a continuous and accurate flow of information about the customer into your company's
database— making it possible for your company and the
salesperson to co-own the relationship.
Using the information provided by the customer, together with information provided by your company, to
keep the customer longer than might otherwise be
expected—Retention rates will be analyzed and rewarded.
The goal for each salesperson will be to make sure that
once a customer buys from your company the customer
doesn't buy from anyone else.
Growing lifetime value—the current, predictable "run
rate" of a customer's profit to a company, as well as
"strategic value"—the potential value a customer would
have to your company if he could be persuaded to give you
more business, or do a greater overall volume of business.
Consider the long-term goal of modeling lifetime value, or
LTV, and using it as a primary measure of the success of
your business. Imagine reporting aggregate LTV as a
year-end asset, compared with the value of the customer
base this time last year.
The 1:1 Car Sales Associate's Compensation Package
Most car dealerships reward their salespeople for moving
sheet metal. Each car sale results in a commission. The
salesperson is incentivized to, well, sell cars. And once
that's accomplished, in many dealerships, the salesperson
turns his attention to finding a new customer for the next
sale.
Imagine rewarding your car salespeople differently.
What if, in addition to a token sales commission, the
dealership rewarded the sales associate for long-term satisfaction, such as high 18-month satisfaction scores? This
would incentivize the salesperson to follow up with the
customer, to make sure the service department was handling the customer well, and that invoicing was appropriate and workable.
The sales associate who is rewarded for SOC would find
out what else is in the customer's garage, and concentrate
on ways to use your dealership's products to build "share
of garage." Such a salesperson, if rewarded for multilineness, would find service, repair, and accessories for a
customer, and get them all under your roof. You would
know what this customer will want next, and when. You
would reward your salesperson for feeding customer information to your database, gathered a little at a time, so the
customer could be served well even if your sales associate
was on a well-earned vacation, and so your dealership and
the salesperson could work together to track customer
needs electronically. Such a salesperson would receive an
increasing reward for each additional sale to existing
(Continued on page 4)
A Database Marketing Institute Publication
3
Copyright 1999 by MPI
Relationship Marketing Report
(Money Trap, continued from page 3)
customers, and thus would focus on keeping customers
rather than trawling for new ones.
Most important, this salesperson would be rewarded for
increasing customer lifetime value—perhaps by receiving a
tiny percentage of every dollar ever spent by this customer
at this dealership on cars, financing, insurance, service, and
repair—and would thus be motivated, not just to make a
sale, but to make sure each customer came back to this
dealership for everything, forever.
Technology is propelling us into a new way of thinking
about business strategy and the ways we define success.
The compensation has to keep up. Salespeople will do what
they're rewarded for doing. Your goal will be to incentivize
them to build real relationships between your customers
and your company, to increase your share of each customer's business, and to increase the value of each customer
to your company.
Don Peppers and Martha Rogers, Ph.D., co-authored The
One to One Fieldbook: the Complete Toolkit for Implementing a 1to1 Program (with Bob Dorf), (Currency/Doubleday, 1999) Enterprise One to One: Tools for Competing
in the Interactive Age (Currency/Doubleday, 1997) and The
One to One Future: Building Relationships One Customer
at a Time (Currency/Doubleday, 1993). Their consulting
firm, Marketing 1to1/Peppers and Rogers Group is based
in Stamford, CT. To receive INSIDE 1to1, their free weekly
email newsletter, visit their web site at http://
www.1to1.com or send a message to [email protected].
January 1999
But imagine if you could target interactive media just as
you target direct mail. And imagine if the incremental
cost of Internet direct marketing was so low that you
could improve the results of your direct mail lead generation campaign at very little risk.
Let's look at a specific example to see how this is
possible.
First, here’s a direct mail lead generation program
utilizing only traditional media:
Joan Marketer at AnyNet (a fictional company) is about
to mail a high quality mailing, first class, to 20,000
Networking Managers in medium to large-size companies. Her goal: generate qualified leads for an Internet
networking product solution, “TraffiKop,” with an average sale of $15,000.
Joan has executed these kinds of mailings previously, so
she knows the approximate cost as well as the anticipated results. She will have a direct marketing agency
rent a number of mailing lists, eliminate the duplicates
and build a mail file, create a high quality, four-color
self-mailing piece, and mail it for 33 cents each. Joan
plans to offer a free Analyst’s Report about TraffiKop.
She will use a business reply card, fax-back, and 800
number response paths in the mailing piece.
Joan’s projected ROI, based on her previous experience
with direct mail promotions, is shown in the chart called
"Program A."
Program A:
Traditional Direct Mail Lead Generation
Quantity mailed
20,000 pieces
Total mailing cost
(B-to-B Internet Marketing, continued from page 1)
Today, the primary challenge in lead generation is diminishing returns. Typical direct mail lead generation raw
response rates range from about 2% to 4% response. When
a traditional lead generation mailing exceeds 4%, it is often
a time for celebration. Order generation response rates
generally fall below 2%, because generating an order with
direct mail is a tougher challenge than generating a lead.
Unit cost
Some business-to-business direct marketers have achieved
significant success boosting response rates by adding telemarketing to the media mix. Industry experience suggests
that telemarketing seems to have the most positive impact
on direct mail when it is used to follow up with both
respondents and non-respondents.
Projected sales at 10% close rate
A Database Marketing Institute Publication
4
$ 60,000
$ 3.00
2.5% response
500 responses
Cost per response
Qualified lead rate of 20%
$ 120.00
100 qualified leads
Potential sales at $15,000 average sale
Sales close rate of 10%
Projected ROI
$ 1,500,000
10 sales
$ 150,000
2.5 : 1
Now let’s ENHANCE that same direct mail lead
(Continued on page 5)
Copyright 1999 by MPI
Relationship Marketing Report
January 1999
(B-to-B Internet Marketing, continued from page 4)
Develop a Web Response Form
generation program with Internet direct marketing.
Joan has a special Web Response Form created to post on
her Web site. The form uses the same look and feel as the
mailing piece and reiterates the major copy points. The
Web Response Form asks the visiting prospect to answer
several qualifying questions. When these questions are
answered, the prospect will be able to instantly access and
read the offer, the Analyst’s Report, online.
Joan does the same mailing for the same amount of money,
but she enhances the direct mail with Internet direct
marketing as follows:
1. Joan uses a Web banner ad on AnyNet’s Web site
home page to reinforce the direct mail promotion.
2. Joan runs that same banner ad as a test banner ad
campaign for one month on one Web site targeted to
network managers.
3. Joan incorporates a special Web URL into the mailing
piece as one of the response paths.
4. The URL leads to a mailing-specific Web Response
Form posted on AnyNet’s corporate Web site.
5. Joan asks prospects to include their e-mail addresses on
the direct mail reply card or on the Web Response Form.
She asks if AnyNet can use the prospect’s e-mail address
for future communications. She collects the e-mail addresses of respondents who provided them for a follow-up
campaign.
Let’s look at each of these steps in further detail.
Step 1:
Create a Web banner ad
Joan has a Web banner ad created to coordinate with the
direct mail.
Cost: $2,500.
She invites her Webmaster to lunch and gets him to agree
to place it on the AnyNet home page. The banner is linked
to a special Web Response Form (see Step 4).
Step 2:
The Web Response Form has a link to AnyNet’s home
page at the end of the form. Versions of the form are
created to accommodate the two different banner ads (one
on the AnyNet site, and one on the commercial site targeted to networking managers) so response can be measured separately.
Cost to create the Web Response Form: $2,000 (not
including response processing or reporting.)
Step 5:
Collect the e-mail addresses for a follow-up campaign
On the Web Response Form, prospects are asked to provide AnyNet with permission to communicate with them
via e-mail. Those who answer “Yes” and include their
e-mail addresses are added to an e-mailing list. These
respondents receive an e-mail acknowledgment to their
response.
They also receive a follow-up e-mailing two weeks later
which makes a special limited time offer if they purchase
“TraffiKop.”
Cost for the e-mailing: Joan purchases an e-mail software distribution product for a few hundred dollars
and decides to handle this part of the campaign inhouse.
What’s the Payback?
Place the Web banner ad
Joan also places the banner ad for one month on a Web site
targeted to networking managers. The Web site guarantees
that the banner ad will appear 100,000 times in that month.
The banner is linked to a special Web Response Form.
The impact of this Internet activity is shown in the chart
called "Program B."
Program B:
Internet-Enhanced Direct Mail Lead Generation
Cost for the research and 100,000 impressions (1 mo.):
$9,000. Total cost for the banner ad campaign: $11,500
Quantity mailed
Step 3:
Additional cost of Internet activities
(Banner ad, ad placement, Web Response Form) $ 13,500
Incorporate a special URL into the mailing piece
Joan adds a Web response path to her mailing piece; she
includes a special URL along with the phone and fax
numbers and the tear-off business reply card.
Total mailing cost
Total campaign cost
2.8% response
20,000 pieces
$ 60,000
$ 73,500
560 responses
(Response enhanced with the use of a Web URL in the
Step 4:
(Continued on page 6)
A Database Marketing Institute Publication
5
Copyright 1999 by MPI
Relationship Marketing Report
January 1999
(Relationship Management, continued from page 5)
mailing piece)
Additional response:
1. AnyNet home page banner ad
100 responses
2. Banner ad on commercial Web site
500 responses
program B, because then we would have to include the
cost of a direct mail follow-up campaign in program A to
keep things even. The e-mail follow-up campaign could
potentially add even more revenue at a very low incremental cost.
(100,000 impressions @ 2.5% click-through rate with 20%
of the click-throughs completing the form)
Impact of the Internet on Direct Mail Lead Generation:
Total responses
1,160 responses
Cost per response
$ 63.36
Qualified lead rate of 20%
232 qualified leads
With an additional $13,500, or a 22-1/2% increase in
the total budget, Joan almost DOUBLED the ROI of
the lead generation program, enhancing traditional
direct mail with the Internet!
Potential sales at $15,000 average sale $ 3,480,000
Sales close rate of 10%
23 sales
Projected Sales at 10% close rate
$ 345,000
Projected ROI
4.7 : 1
Analysis of Programs A and B
While this example is fictional, the statistics used in the two
accompanying charts are based on real-world experiences.
Here’s an analysis of programs A and B.
1. The mailing quantities are the same in both A and B. The
qualified lead rate (the percentage of leads considered to be
of high quality based on purchase time frame and budget
criteria set by AnyNet) is the same in both A and B, as is the
sales close rate (the percentage of qualified leads which are
ultimately converted to sales) and the average sale of
$15,000. With all the direct mail statistics held constant, we
can segregate the impact of Internet direct marketing.
2. The cost of program B is $73,500 vs. $60,000 for
program A. That’s $13,500, or 22-1/2% higher, than program A.
3. The number of responses is higher in program B than in
program A. That’s because Internet direct marketing increased the overall number of responses from 500 to 1,160
-- more than double the responses from mail alone.
4. Notice that the impact of this increase in responses cut
the cost per response almost in half from program A to
program B.
Because of the current economics of Internet usage, Internet direct marketing can be even more cost-effective than
traditional direct mail lead generation. There are no printing, mailing or postage costs. There is nothing to physically produce, so your production time line is compressed. Instead of waiting to print and mail something,
you can get on the ‘Net very fast, and make modifications
to programs just as fast. That means you can see the
results of your efforts very quickly.
While the Internet can be proven to enhance traditional
media used in your lead generation programs, it is probably premature to assume that the Internet can replace
direct mail or telemarketing entirely. Nevertheless, now is
the time to think about augmenting traditional lead generation media with the Internet -- because in the future,
Internet direct marketing may well become the predominant medium for lead generation and qualification.
Part 2 of this series will discuss using Internet events to
promote products and services.
Barry Silverstein is the author of the book, Business-toBusiness Internet Marketing, currently one of the Top 20
Internet Commerce best-sellers on Amazon.com. He is
president of Directech, Inc. (www.directech.com), an
award-winning, multimillion dollar, business-to-business
direct and interactive marketing agency based in Lexington, MA. Barry has twenty-five years of marketing communications and direct marketing experience. He
founded Directech in 1983.
5. The dramatic increase in responses resulted in an equally
dramatic increase in qualified leads from program B, even
though the original mailing quantity was maintained. This
led to a corresponding increase in the number of sales and
in total sales revenue.
6. We did not include the e-mail follow-up campaign in
A Database Marketing Institute Publication
6
Copyright 1999 by MPI
Relationship Marketing Report
January 1999
(Method to the Madness, continued from page 1)
manager recommends a retention program. What should
the program include? What channels should you use?
Do you have the right software?
Product/Service/
Offer
Target Market
If you’re in senior management, chances are these scenarios are painfully familiar. Decisions like these are
crucial to your company’s success. Is there a method to
the madness?
TARGET
PROSPECT
The fact is, all marketing, sales, and customer service
efforts come down to three basic goals: Finding customers, keeping customers, and growing customers. The
advances in our industry have been incredible, but we’ve
lost our focus. To get the greatest value from our efforts, we need to simplify our thinking and go back to
the basics.
If you market products and services to businesses, ask
yourself the following questions:
1. What is your company’s best and highest use in the
marketplace? Are your products or services optimally bundled into a compelling offer?
2. Can you quickly identify the real pain that you resolve for customers and explain how your product or
service alleviates that pain?
3. Who are your very best customers? Even the most
sophisticated companies still define their best customers by such elementary criteria as SIC code,
sales volume, and number of employees. Targeted
marketing requires a deep understanding of customers and their needs, to be gained only if you’re
exceptionally close to customers. Have you asked
your best customers why they like you, why they
buy from you, and whether they’d refer you? Referrals are the only true measure of customer satisfaction.
Customer
Need/Application
Using Sales Funnels to Guide Your Efforts
Defining your target prospect is the first step. Using a series of scoring tools that strictly adhere to your target
prospect profile, you can create three sales funnels that
will organize and implement your plan for finding, keeping, and growing customers. All marketing, sales, and
customer service activities must be designed, justified,
and measured by their value to each funnel.
Finding Customers
The acquisition funnel (Figure 1) systematizes the activities needed to turn suspects into prospects, prospects into
qualified prospects, and qualified prospects into customers. Your goal of finding customers becomes the end
and your marketing the means to the end.
The Customer Acquisition Funnel
Funnel Stage
The Crucial Intersection
If you can answer these three questions, you can identify
the crucial intersection that should drive all your sales
and marketing efforts. It’s the point where your firm’s
best offer is of most value to a narrow slice of the market
because it resolves the greatest pain. The more precisely
you can define this intersection, the better you can pinpoint prospects. This should be the rallying point for all
your company’s marketing, sales, and customer service
activities.
Suspects
Prospects
Qualified Prospects
Developed
Closed
Figure 1
Continued on page 8
A Database Marketing Institute Publication
7
Copyright 1999 by MPI
Relationship Marketing Report
Method to the Madness, continued from page 7
Keeping Customers
The retention sales funnel (Figure 2) fulfills your goal of
keeping customers, by progressively moving one-time
buyers or ex-customers to the desired status of customers
who make multiple or sustained purchases. These are the
customers with the highest long-term value.
The Customer Retention Funnel
Funnel Stage
1X Buyer/Win back
Reordering Buyer
Customer
Figure 2
January 1999
This drives the creation, execution, and measurement of
all sales and marketing activities through the acquisition, retention, and development funnels and provides a
method to the madness.
On one hand, it’s remarkably simple. On the other
hand, your work has obviously just begun. Implementing and managing your business through this process
requires discipline and passion. But when you have
simple goals and clear ways to get there, the results are
worth it.
Andy Birol is president of PACER Associates, Inc., a
business-to-business consulting firm in Cleveland that
focuses on customer growth, retention, and development. A 20-year veteran of business-to-business marketing, Birol has served in senior marketing management positions for Fortune 500 and smaller companies
and holds an MBA from Northwestern University’s Kellogg School.
PACER Associates
Professionals at Acquiring Customers and Enhancing
Retention, Inc.
Growing Customers
The development funnel (Figure 3) is used to grow customers. Here the goal is to move stable customers through
activities which convert them into up-sold/cross-sold customers and then to the status of advocate or champion.
5165 Ramblewood Court, Solon, OH 44139-6015
Phone: 440.349.1970 Fax: 440.349.0187
E-mail: [email protected]
Technologies for Complex Segmentation
by David M. Raab
The Customer Development Funnel
Funnel Stage
Customer
Cross-Sold Customer
Advocate
Figure 3
The results of these activities are obvious: a larger number
of customers with the highest value to your company. The
“graduates” of this three-funnel process are to be coveted
and honored with no costs spared.
This system simplifies all your marketing, sales, and customer service activities. By returning to the basics -- offer,
need, and target market -- you define your best prospects.
A Database Marketing Institute Publication
Today's state-of-the-art customer management involves
many long-term, multi-step campaigns, tailored to different customer segments and executed daily. Although the
concept is widely understood, it's still hard to find companies who are actually doing it. Among other things,
this means that the software offered for this task has not
necessarily been tested in full scale, high volume operations. In fact, given the haste with which most vendors
launch products, you can almost guarantee that most systems will have problems the first few times they try to do
this for real.
So just how do you design a system to handle really complicated, large scale contact management programs?
Vendors have taken widely different approaches—a
sparkling display of creativity unfettered by experience
(in the sense that when these systems were designed, no
(Continued on page 9)
8
Copyright 1999 by MPI
Relationship Marketing Report
January 1999
(Technologies for Complex Segmentation, continued from page 8)
one had run marketing programs on the scale now envisioned). Still, it's roughly possible to place their approaches on a continuum between two extremes.
The first extreme is to evaluate each customer once, running its data through a complicated selection tree to find
all the branches and outputs that apply. This approach has
the great merit of loading the customer's data one time
only, thereby minimizing the volume of data access—
which is often the greatest bottleneck in system performance. This is the oldest segmentation technique, one that
came quite naturally when records were stored on tapes
and necessarily read in sequence. Many early database
marketing systems, both on mainframe computers and
PC's, worked this way: all data relating to a customer was
physically stored together in a hierarchical data structure,
and selections were made by loading the block of data associated with a customer, processing it through all the segmentation rules, storing the results, and then reading the
next customer's data block and repeating the process. On
the big service bureau systems, dozens or even hundreds
of separate selections might be made simultaneously during one nightly pass of the file. This is still the approach
used by most large data vendors to fulfill their customers'
orders. Among modern database marketing systems, Decision Software Inc.'s TopDog uses the technique in almost
pure form, except that it first runs a relational database
query to pull together the necessary information from separate tables. TopDog then steps through the resulting file
one customer at a time, reading the data and executing the
actual selection logic outside of the relational database
itself. As an extra bonus, this lets TopDog use its own
logic to execute all those annoying functions—like random sampling and calculations within groups—that are
difficult or impossible within the standard relational
database query language, SQL.
Of course, relational database purists find the idea of
working outside SQL to be anathema. They occupy the
other extreme of the design continuum, where each segment is selected directly from the relational database with
its own SQL query. This approach has the virtue of consistency with other SQL-based systems, and, of more
practical importance, lets the system benefit from
performance-enhancing capabilities built into the relational database software and associated hardware. As a
result, users get on-line queries and fast execution of campaigns that involve small numbers of records, so long as
SQL can find them without having to read the entire
A Database Marketing Institute Publication
9
database. With a small number of unrelated selections,
using separate queries can be faster than running one big
sequential pass. But when segments are linked in a hierarchy—with one segment being the subset of another, either
due to a sequence over time or to splits based on customer
characteristics—selecting each segment with an independent query against the main database is horribly inefficient.
Despite the drawbacks of independent SQL queries, they
are used by most of today's leading campaign management
tools including Exchange Application's ValEx, Prime
Vantage and Recognition Systems Inc.'s Ideas Solution.
None relies on SQL exclusively, since tasks like sampling
must still be handled externally. These systems also can
all flag a set of records and select against that set in a subsequent segment—thus limiting the SQL query to a small
universe rather than the entire database. This saves much
effort, but introduces its own drawbacks: flagging must be
specified manually, the flagged sets take time to build and
space to store, and each segment still generates the overhead of a separate SQL query. In reality, vendors tend to
rely on other methods—including parallel processing,
powerful hardware, and splits made outside of the actual
campaign selection—to get the throughput they need.
Even then, it is not unusual to hear of large systems that
need 10 or 12 hours to finish each nightly run.
A less critical problem with independent queries is the
need to write increasingly complex queries to execute a
multi-level selection. That is, each query must contain
SQL code to exclude records selected in other segments,
or to include only records belonging to its "parent".
Recognition Systems and Prime Response generate much
of this code automatically, limiting the burden on the user
and the potential for error. Exchange Applications relies
more on limiting the complexity of the campaigns themselves—allowing only one level of segments defined by
SQL queries, plus a separate level of splits. While this
does impose some limits on the user, Exchange would
probably argue that they can still accomplish pretty much
whatever they might want.
Other vendors have taken an approach between the two
extremes. Paragren Technologies extracts the required
data from the underlying relational database, using special
techniques that let it execute a single pass no matter how
complicated the original selection. The data is placed in a
flat file, where the user can then sort and segment records
without requerying the main database. Marketing Synergy
(Continued on page 10)
Copyright 1999 by MPI
Relationship Marketing Report
(Technologies for Complex Segmentation, continued from page 9)
accepts separate SQL queries for each segment but then
evaluates them together, running them in the appropriate
sequence and automatically excluding records in prior segments from later segments. Marketing Synergy also can
build a separate, non-relational database using bit-based
indexes, and query against that instead of the relational
database.
Whatever a vendor's current approach to segmentation, it
will be challenged as nightly updates are replaced by online interactions. Most current systems do not provide a
real-time solution: instead, they generally produce a static
file of current and planned messages for each customer,
which is read by online systems as transactions progress.
The messages are typically updated as part of nightly or
weekly batch process, although sometimes the interval is
shorter. Still, even updating every few minutes is not the
same as reacting to a transaction as it happens—say, deciding what supplemental product to offer in conjunction with
a new purchase. This requires that the system actually accept new inputs, make a decision, and feed back the result.
The flow of such a decision-making process looks a lot like
a conventional, branching campaign tree. Since one record
at a time is run through the system, the underlying technology is probably closer to the old-style sequential access
than to multiple independent SQL queries. But while the
old sequential products executed the entire tree from start
to finish, an interactive system will start and stop within
the tree as the transaction progresses. So even vendors using the sequential approach will need to make adjustments.
One intriguing question is whether vendors who develop
single-record processing for interactive applications will
later change their batch processes to use the same technique. So far, the vendors who started with batch selects
and added interactive applications—Recognition Systems
and Paragren—appear to have kept the two processes separate. On the other hand, systems that started with an interactive focus, like "marketing automation" vendors Rubric
and MarketFirst, appear to use the same technology for
both. While the scalability of the "marketing automation"
systems is even less tested than scalability of conventional
campaign managers, it does seem likely that most vendors
will eventually use a single method for batch and interactive processes.
So what does all this mean for marketers? First, if your
daily campaigns have more than a hundred segments, you
need to take a close look at the technical details of how a
A Database Marketing Institute Publication
January 1999
proposed campaign manager would run them. Second, if
you want to mix batch and interactive campaigns, you'd
best wait until the vendors figure out how to do it—and
even then, be ready to do some careful testing to make
sure you know what you're really getting.
David M. Raab is a consultant specializing in marketing
database systems and analysis. He can be reached at
[email protected]. An archive of previous articles in this
and other publications is available at
www.raabassociates.com.
The Power of Interactive Voice Response
for Marketers
by Arthur M. Hughes
The long distance industry has been plagued with
“slamming” lately. This is the practice in which a customer is switched from one long distance carrier to another without his knowledge or consent. Many times, one
gullible person in a household will succumb to a telemarketer’s blandishments without telling the others about it.
Weeks later when the family gets their first bill from the
new provider, no one, including the gullible person, remembers that they agreed to it. The practice has become
so widespread that the federal government now requires
some third party verification that the customer actually
agreed to the switch.
Third party verification is expensive. After you have
agreed to change your service, someone else talks to you
and gets you to repeat your agreement. Two agents talking on the phone to one consumer makes for an expensive verification method.
Price Interactive, in Reston, Virginia, has come up with
an innovative solution to the problem which cuts the
costs by about 70%. While the consumer is on the phone,
after agreeing to the offer, the agent routes the customer
to an interactive verification process which asks the customer four questions, recording the answers. These
recordings become a permanent record and verification
of the switch. There is no need for a second agent, nor
for transcription of the data. The records can be retrieved
instantly by punching the switching consumer’s local
(Continued on page 11)
10
Copyright 1999 by MPI
Relationship Marketing Report
January 1999
(Interactive Voice Response, continued from page 10)
telephone number into the system.
I tried their system myself. It works. Readers can do the
same. Just call (888) 691-2364 and you can record your
voice switching to a sample long distance carrier. You enter your name, your telephone number, your date of birth,
and you answer a couple of questions. Then call (888)
691-2371 and hear your own voice agreeing to the switch.
The system is sophisticated, in that it interprets the customers spoken words. If the customer says “no” in answer
to a question, the system gives the caller a second chance
to answer the question in a re-phrased manner. If the person then says “yes” the response to the second attempt is
recorded as the final response.
This is the second innovation from Price in the last year.
Last year, I wrote an article, “On the phone! Your check is
in the mail” in which I described a system developed by
Accelerated Payment Systems (APS) for taking personal
checks, rather than credit card numbers, over the phone. I
got more calls from that one article than I did from the
dozen others I wrote in the past twelve months. Price was
one of those who called me, and subsequently entered into
a partnership with Richard Florito, President of APS, in
which it is possible for customers to pay their outstanding
obligations, interactively by check over the phone. Here is
how it works.
Their current contract is with Baltimore Gas and Electric.
When a customer is overdue on their utility bill, they get
an automated phone call letting them know that their utility service will be cut off unless they make a payment by a
certain date. The call invites the customer to make an immediate payment by check. To avoid the cutoff, the customer enters the amount and the numbers from the bottom
of one of his personal checks by punching his telephone
keypad. The money is automatically transferred from his
bank account to the utility, and the bill is paid. A paper
check is drafted which he receives in his monthly statement from the bank.
Some customers like this service so well that they asked
whether they might not pay all of their utility bills the
same way, even when they are not delinquent. It is just a
local phone call. No need to find a stamp and go to a mail
box. The utility gets their money sooner. It is a win-win
situation for everyone, including Price Interactive.
rect marketing industry. At first, companies were hesitant
to outsource their telemarketing. Now everyone does it.
Then they hesitated about using IVR. When they discovered that not only does it save money, but that their customers prefer it over waiting for a live operator, many
companies are jumping on the band wagon. A few examples:
♦ In 1997, Sprint outsourced their in-house residential
customer service calls to an IVR system. Set up in 90
days, the new system increased the number of automated calls handled by 100%, generating annualized
savings to Sprint of $5 million. The system answered
12 million Sprint calls in 1997.
♦ Sallie Mae, the nation’s largest student loan provider
needed an immediate automated program to answer,
capture and transcribe thousands of daily calls in response to a national TV ad campaign. The system was
fully operational in six days. All records were transcribed within 24 hours of receipt.
♦ Eli Lilly, a global research-based pharmaceutical corporation set up a national locator program to direct
callers to the nearest mental health screening center,
handling a minimum of 20,000 calls per day. The system determines the location by both ANI calling number capture and manually entered zip codes. The system has been in operation for the past two years, handling 50,000 calls per month.
♦ Mobil Oil set up an automated national employment
pre-screening test, enabling prospective employees to
access a single, universal, toll-free number. The system lowered processing costs for Mobil by 75% when
compared to Mobil’s previous live operator system.
Arthur Hughes is Executive Vice President of ACS, Inc. of
Reston, Virginia, a database marketing company. He is
the author of The Complete Database Marketer (McGraw
Hill 1996). You can reach him at [email protected]
or at (703) 742-9798. Price Interactive can be reached at
(800) 341 7800.
These innovations are reminders of how rapidly interactive voice response (IVR) is becoming common in the di-
A Database Marketing Institute Publication
11
Copyright 1999 by MPI
Article ID
RMR077
RMR078
RMR079
RMR080
RMR081
RMR082
RMR084
RMR085
RMR086
RMR087
RMR089
RMR090
RMR091
RMR092
RMR093
RMR094
RMR095
RMR096
RMR097
RMR098
RMR099
RMR100
RMR101
RMR102
RMR103
RMR104
RMR105
RMR106
RMR107
RMR108
RMR109
RMR110
RMR111
RMR112
RMR113
RMR114
RMR115
RMR116
RMR117
RMR118
RMR119
RMR120
RMR121
RMR122
RMR123
RMR124
RMR125
RMR126
RMR127
RMR128
RMR129
RMR130
RMR131
RMR132
Title
Building a Customer Value Index
LTV Index: A Method for Getting a Quick Read on Lifetime Value
How to Increase Profits from a Customer Promotion
Loyalty Marketing: Choosing the Right Program
Delta Launches Sky Privileges Plus
Comparing Apples to Oranges: Database Marketing vs. Relationship Marketing
To Make More Money, Reduce Your Client List
How Independent Booksellers Can Thrive in the One-to-One Era
Shoe Dog: The Consumer's Best Friend
Smart Customers, Smart Companies
Outsourcing Marketing Functions
Retail Loyalty Programs
Case Study: Dayton's Regards
How to Define Your Measurable Competitive Advantage
The Web - 5 Do's and Don'ts
Strengthening the Supply Chain at Fruit of the Loom
Role of Technology in Relationship Marketing
Technology Drives the Way We Do Business: In the Interactive Age, Companies Compete in a
New Dimension
The Customer is Always Right - But Are They Always Worth It?
The Role of Interactive Marketing On-Line
Software Review: Technology for Interactive Relationship Marketing
The Cracker Barrel Neighborhood
Service Marketing Redesigned - Six Steps to Improved Customer Acquisition and Retention
Why Customers Leave, and What You Can Do About It
Bud Rewards
Technology for Relationship Marketing Cont.
Direct Mail vs. Outbound Telemarketing: Which is Best?
A One to One Relationship with Hundreds of Thousands
Just What the Heck is Relationship Marketing?
Software Review: Accessing External Data
Database Marketing for Wholesalers
Database Marketing in Britain: A Success Story
How Modern Database Marketing Builds Member Contributions
Show Me The Money!
Relationship Marketing Technology: Past, Present & Future
The Ecstasy and The Agony: The Birth and Death of a Successful Database Marketing Program
Boosting Retention Through Targeted Communications
How Telemarketing and Database Marketing Work Together
Going to Five Dials
Building a Business Customer Loyalty Program
Profound Relationships fo Mutual Trust and Respect in Twenty Minutes
How to Profit from Investing in Customer Relationships
Handling the Keys to the Customer
Why Databases Fail: Nine Deadly Mistakes that Can Doom Your Database Project
How to Achieve Double-Digit Response in the New Year
Measuring the Value of Your Website
Partial Solutions for Relationship Management
Making Loyalty Programs More Rewarding
Target Potential Analysis
The Money Trap
Business-to-Business Internet Marketing
A Method to the Madness for Business-to-Business Companies
The Power of Interactive Voice Response for Marketers
Technologies for Complex Segmentation
Author
Alan Weber
Thayer Allison
Arthur Hughes
Kurt Johnson
Dennis Duffy
Sandra Gudat
Don Peppers
Martha Rogers
Stacey Riordan
Don Peppers & Martha Rogers
Amanda Weathersby
Dennis Duffy
Sandra Gudat
Bob Marsh
Robert McKim
Martha Rogers
Robert McKim
Don Peppers & Martha Rogers
Issue
Vol 2 Iss 1
Vol 2 Iss 1
Vol 2 Iss 2
Vol 2 Iss 2
Vol 2 Iss 2
Vol 2 Iss 2
Vol 2 Iss 1
Vol 2 Iss 1
Vol 2 Iss 1
Vol 2 Iss 1
Vol 2 Iss 3
Vol 2 Iss 3
Vol 2 Iss 3
Vol 2 Iss 3
Vol 2 Iss 3
Vol 2 Iss 1
Vol 2 Iss 4
Vol 2 Iss 4
Lynette Ryals
Robert McKim
David Raab
Dennis Duffy
Paul Diesel
Arthur Hughes
Dennis Duffy
David Raab
Arthur Hughes
Arthur Hughes
Cathy Allington
David Raab
Matt Stevens
Arthur Hughes
Arthur Hughes & Tom Halatyn
Robert McKim
David Raab
Arthur Hughes
Vol 2 Iss 5
Vol 2 Iss 5
Vol 2 Iss 5
Vol 2 Iss 5
Vol 2 Iss 6
Vol 2 Iss 6
Vol 2 Iss 6
Vol 2 Iss 6
Vol 2 Iss 6
Vol 2 Iss 7
Vol 2 Iss 7
Vol 2 Iss 7
Vol 2 Iss 7
Vol 2 Iss 7
Vol 2 Iss 8
Vol 2 Iss 8
Vol 2 Iss 8
Vol 2 Iss 8
Arthur Hughes
Evelyn Schlaphoff
Arthur Hughes
Arthur Hughes
Jacques Werth
Arthur Hughes
Hans Peter Brondmo
Arthur Hughes
Ernan Roman
Brett Knobloch
David Raab
Kurt Johnson
Arthur Hughes
Don Peppers & Martha Rogers
Barry Silverstein
Andy Birol
Arthur Hughes
David Raab
Vol 2 Iss 9
Vol 2 Iss 9
Vol 2 Iss 9
Vol 2 Iss 9
Vol 2 Iss 10
Vol 2 Iss 10
Vol 2 Iss 10
Special Report
Vol 2 Iss 11
Vol 2 Iss 11
Vol 2 Iss 11
Vol 2 Iss 11
Vol 2 Iss 11
Vol 2 Iss 12
Vol 2 Iss 12
Vol 2 Iss 12
Vol 2 Iss 12
Vol 2 Iss 12
To order copies of articles call (888) 219-4648, or email your request to [email protected]. You can receive the
articles in print via standard mail for $15 per article or in Acrobat format by email for $10 per article.
Relationship Marketing Report
Published monthly by Marketing Publishers Inc. & The Database Marketing Institute
US $220 per year in the US and Canada. All other international orders add $30.
Publisher
Contributing Editor
Jon Lowder
Arthur Hughes
PO Box 573
Occoquan VA 22125
Phone 703-494-1914 • Fax 703-494-3422
Reproduction in part or whole prohibited by law. Additional copies available for reduced prices. Inqure for multi-copy rates.