Category: Data Marketing

Using the power of computing to draw a straighter line between a business and its customers, to the benefit of each

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Winning by the numbers: In praise of Moneyball and data analytics

moneyball-book-coverFive years ago the book Moneyball was going around the office of respond360, which is the CRM arm of BVK. The book fueled my love affair with data-driven marketing. In reviewing the book this morning, I realize how relevant its lessons have become in our economic downturn.

Wikipedia describes the account of the Oakland A’s unprecedented success on a shoestring budget this way:

Statistics such as stolen bases, runs batted in, and batting average, typically used to gauge players, are relics of a 19th-century view of the game and the statistics that were available at the time.

The book argues that the Oakland A’s front office took advantage of more empirical gauges of player performance to field a team that could compete successfully against richer competitors in Major League Baseball.

Rigorous statistical analysis had demonstrated that on base percentage and slugging percentage are better indicators of offensive success, and the A’s became convinced that these qualities were cheaper to obtain on the open market than more historically valued qualities such as speed and contact. These observations often flew in the face of conventional baseball wisdom and the beliefs of many baseball scouts and executives.

By re-evaluating the strategies that produce wins on the field, the 2002 Athletics, with approximately $41 million in salary, are competitive with larger market teams … who spend over $100 million in payroll. Because of the team’s smaller revenues, Oakland is forced to find players undervalued by the market, and their system for finding value in undervalued players has proven itself thus far.

I found the book inspiring then, and I find it even more exciting today. In spite of my general lack of enthusiasm for the sport of baseball, I found it the best business book of 2003.

Reading Digital Tea Leaves

The author argues that most teams still rely on the black art of talent scouting. Wizened, tobacco-spewing scouts  watch a young athletes play and proclaim him either unfit or “slugger material.” Does this sound like the seat-of-the-pants metrics that marketing has traditionally used to evaluate markets, products and campaigns?

Back when I read it, I was thrilled to imagine new ways to read a different sort of tea leaves — namely, the ones found in market and customer databases. What I’ve learned since is that once you start looking at data in a new way, you can find breakthrough insights.

You really can.

Although I don’t think he’s a marketer, here’s what “Ryan,” in his GoodReads review of the book, wrote:

Awesome – story of how the Oakland A’s built a great baseball team on one of the league’s smallest budgets by using innovative statistical analysis to identify undervalued players. I think that’s pretty neat.

I couldn’t have put it better. Pretty neat indeed.

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Focus on customers to survive in this economic downturn

Gartner Research recently posted six strategic customer-focused areas for survival in this economic downturn. In a nutshell they focus on automating your way through these hard times. Each of the six acknowledge there will be many growth opportunities arising from the dramatic changes taking place right now.

The challenge their report emphasizes: To find customer- and sales-focuses areas to cut costs and reinvest wisely.

Of the six, three are revenue-generating. Here they are, with a brief explanation of why they were included and what sort of immediate ROI might be expected:

1. Customer Retention Management

Gartner contends that holding onto customers who have a high value — or the promise of high value — is “Essential in difficult economic times.” The firm recommends calculating customer profitability / value and creating retention programs customized to each segment’s needs.

Common sense, right? But the vast majority of businesses are still light years away from calculating customer value — let alone devising ways to retain them!

It was Peppers and Rodgers, of The One-To-One Future fame, who most famously wrote about a business’s #1 asset as being its customers. That book was written in the early 1990s, yet the  systematic protection and “mining” of valued customers is still rare — so rare, in fact, that it still inspires whole books about those who dare to do it  well. (I’m thinking here of the book describing the astounding success of Harrah’s).

Gartner projects that in 2009, “Companies that develop effective retention management processes will reduce churn of profitable customers by at least 10 percent within six months.”

That’s a substantial bump. If your best customers follow the 80 / 20 Rule (that 20% of customers account for 80% of your profits), then this 10% reduction in churn of those best customers will mean — assuming every other rate is unchanged — an 8% increase in gross profits. That’s not chump change.

One proviso: By gross profits, I mean the money you get to keep after you’ve set up your retention methodology. These efforts aren’t free. But if you approach the process prudently, you’ll be gleaning far more profits from your existing customers, and feeling less strain to replace “churned” customers via ever-more-expensive acquisition tactics.

2. Lead Management

Speaking of customer acquisition, Gartner next recommends that marketing departments become more involved in the lead management process. By doing so, “Companies can improve lead quality and ensure higher conversion rates.” How do they define this expanded role? Here are two examples:

  1. Leveraging marketing insights — They advise using marketing data that the sales function may not be privy to augment leads before their sent through the sales pipeline
  2. Leveraging content — Helping the sales force use product information that’s already available to identify prospect needs early, and improve the impact of each sales contact

Companies that automate lead management processes this year will increase revenue by another 10% — all, “Within six to nine months, despite the uncertain economy,” reports Gartner.

3. Online Marketing

Interactive marketing isn’t a panacea. But it is a more cost-effective — and measurable — way to reach customers than traditional techniques. Here, Gartner claims that companies who, “Identify and prioritize three to four online marketing initiatives and measure marketing ROI,” will drive another 10% increase in revenue within six months.

I would be more skeptical of this projection if I haven’t seen it at work personally. Online business-building efforts have a surprisingly fast break-even when they’re done carefully. I see this payback being even greater today than a year ago, in a more hyper-competitive marketplace.

By that I mean we’ll soon be seeing an environment where only the fittest survive. The battle for limited business will shake things out quickly. That means very shortly, those who aggressively reach out for new business will find fewer hands fighting to grab it.

But that comes at some risk. More customer-focused investments need to be made starting today.

Life and Death in the Tar Pit

It’s appropriate that on this, the 200th birthday of Charles Darwin, we take a moment to ask ourselves how we are going to ensure that our businesses are not one of the losers in this heated battle for survival. Gartner’s report highlights constructive areas for the investment of scarce marketing dollars to ensure we come out winners in our category.

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Thrive in this down market by finding and catering to social customers

Database marketing consultant Kevin Hillstrom has done impressive work in helping retailers trace their customers across sales channels, using Multichannel Forensics (Note: this link is to a PDF file). Now he’s helping clients — and blog readers like me — to find creative ways to re-segment customer files based on responsiveness in a Web 2.0 world.

NOTE: Click for larger image

In his post, Kevin lists five segments of customers. Three are familiar: Organic (those customers who are your without a traceable stimulus, such as advertising), Advertising (they’ve purchased because of a non-discount-related ad) and Begging (you’ve given them discounts and other strong incentives).

Two are new to the Web 2.0 world, and thinking about them is a valuable exercise. They are Algorithmic and Social customers. Here is his description:

Then we have customers who use algorithms to purchase. Yup, these are the customers who use tools like paid search to purchase merchandise. These customers are different. They don’t always respond to future advertising, and when they do respond, they combine advertising and algorithms to make decisions. This is where your Net Google Score comes into play. Catalog brands really struggle with algorithm customers, and online marketers struggle with e-mail marketing programs for algorithm customers.

Increasingly, we find ourselves managing social customers. If you’re Crutchfield, you have customers who buy merchandise, customers who write reviews, and customers who are referred from blogs to your site. The latter two groups represent “social customers”. Social customers are different than are typical catalog customers, and are different than typical e-commerce customers.

These two segments describe a type of purchasing behavior that is brand new. Especially the Social customers.

Hillstrom goes on to say this about Social customers:

Catalogers are way behind the curve when it comes to managing social customers. In fact, almost everybody is behind the curve regarding social customers. Hint: Social customers don’t necessarily embrace catalogs, and sometimes get really angry when [you fill their] mailbox.

Smart catalog marketers are hyper-sensitive to the nature of their customer conversations. Even if you’re not in the catalog retail business, you should be too.

Here are two examples:

  1. When people arrive at your site from an organic search, greet them with the phrase they searched for (when it is a relevant phrase) and offer several links that can help them better find what they’re seeking. Then trace them to a conversion and compare to a control that receives no greeting.
  2. When people arrive from a social site, watch where they go within your site. For statistically significant instances (lots of page views, subscriptions to e-newsletters, etc.), consider making a friendly, overt presence on that social network (remember these 11 magic words when posting any social media comments).

Other ideas will come to you when you realize the obvious: The source of a customer changes that customer’s future buying behavior.

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Obama to revive fireside chats for a Web 2.0 world

Today Change.gov announced that President-elect Obama will likely be giving weekly YouTube speeches, similar to the weekly radio White House addresses of the recent past, and, more tellingly, the radio-based fireside chats that FDR used so effectively to inform and comfort Depression Era listeners.



In the early summer, during Online Community Month, I discussed how Senator Obama’s campaigning style differed significantly from other candidates, including Hillary Clinton. Others have termed this new approach networked leadership.

Today’s announcement appears to be another example of how our president-elect is leveraging new technology to organize, and, well, lead.

It gives me hope.

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Expanded Facebook Lexicon helps marketers understand user zeitgeist

In the early days of radio journalism, reporters would conduct “man on the street interviews,” to get the opinion of “John Q Public.” The news-gathering ritual has extended into television reporting today. The technique makes for interesting coverage of a topic, but opinions recorded are hardly the unvarnished truth. When presented a microphone, all but the most incautious of us edit out statements to fit what he’d like the world to think of us.

If it were possible, a more accurate accounting of public zeitgeist might be to eavesdrop on a roomful of friends, discussing and arguing about the topic at hand. Listen in on enough rooms and you might be able to get a better feel for public sentiment.

That’s the concept behind Facebook’s Lexicon. This (currently) free feature allows marketers and others to slice and dice Facebook members’ comments on their friends’ Walls. Currently this new Lexicon version is limited to a list of roughly 20 terms. There are plans to open this up shortly.

An earlier Lexicon version showed relative volume of terms over time, but not actual numbers. This made any sort of statistical inferences impossible. The newer release shows the actual numbers, as well as these enhancements:

  • Demographics by gender and age
  • Geographic breakdowns down to state level. You can even compare breakdowns between two terms on the same map.
  • Sentiment over time, although Facebook hasn’t stated how it determines this.
  • Associations: Terms frequently mentioned alongside a given term.

Below is an example of terms associated with mentions of “Palin,” over the last two weeks. Significantly, it was within this period that Saturday Night Live (SNL) presented a much-talked-about skit, where Tina Fey played Sarah Palin at a press conference, standing beside Amy Poehler as a disgruntaled Hillary Clinton. The topic was sexism in the presidential race.

In the Associations graphic, the bottom dimension is gender, with the terms farthest to the right being used by more men than women. The graphic (which can be expanded by clicking on the image) shows that more women than men commented on Facebook walls during that time period with statements containing SNL, Tina Fey and skit (when also using the word Palin).

The caption at the bottom of the graphic helps you understand what you’re looking at:

The Y axis is the average age and the X axis is the average gender of users who posted the association. For example, a bubble up and to the left means that the association is more prevalent among older and more female users. A bubble down and to the right means that the association is more prevalent among younger and more male users. The size of the bubble indicates the number of times the word appeared alongside the topic in the given time window.

Explore Lexicon for yourself. And if you’re curious what all of the comments were about, check out the skit: