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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]. 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