Market Insights
What's in a Name? Part One: The Customer
Chuck Romans, MDR’s Leader of Product Development — Friday, April 22, 2011
What's in a name? That which we call a rose
by any other name would smell as sweet.
Romeo and Juliet (II, ii, 1- 2)
I’m no playwright, but when it comes to marketing, I have to disagree with Juliet in William Shakespeare’s famous play. Whether it is a direct mail or email marketing campaign or a direct sales initiative, the name is more important than any other data element. Read on to learn more about why having the “right” educator name can be the sweetest rose in your marketing plan.
For businesses to retain and grown their customer base, the primary audience in your marketing communications must include both customer names and prospect names. Creating the right universe of customers and prospect names – those with the greatest potential to respond – requires detailed research and data analysis. Each of these universes has their own unique values and challenges. Customer names represent the present and pay the bills, while prospect names represent the growth and the future of the business.
The customer is always #1, but not always the same.
As most all marketers experience, customers drive the majority of the opens, click throughs, direct response and orders for your campaigns. They know your brand, products and service, so they are the easiest to sell. Typically customer names outperform prospect names by a factor of 3x to 5x and sometimes even better. While all customers are important to your business, not all are equal – an axiom often repeated, but rarely heeded. Many marketers simply include every customer in every email and direct mail campaign because, after all, customer names perform much better than prospect names.
However that is not always the best or most profitable decision. There are segments that outperform and are extremely profitable. There are also other segments that underperform to such a degree that they are unprofitable and are a drag on the customer return on investment which I call CROI. There are number of ways to rank customers to identify the profitable names and isolate those that are not profitable so they can be eliminated.
Ranking Customers
There are a number of ways to rank the value of customer names such as recency of purchase, amount purchased, frequency of purchase, and the lifetime value. Some marketers use a combination of these metrics such as RFM (recency, frequency and monetary) to score customer name value. However the single most important factor in determining response is recency. Your direct mail promotions or email messages are much more likely to get through to recent customers who have purchased – which could be in the last few months or in the last school year.
For email campaigns, the most likely to respond are those who opened a previous email. Those that opened or clicked through your message are by far the hottest segment that you can target with another email, catalog or telephone call. However, strike while the contact is hot – the longer that you wait to reach this group of names, the lower the response rate.
In the education market, some products may only be purchased once a year. Even if that is the case it does not mean you should wait a year to promote your products after a purchase. Recent buyers should be included in all future marketing efforts. After all you want them to be thinking of you during the next purchase cycle.
To include, or not to include - that is the question.
As previously noted, not all customer names offer the same potential or opportunity. In fact, there are segments of the customer file that are absolutely unprofitable and should not be included in marketing efforts. The question is when should customer names be excluded? Is it after 24 months, 36 months, or 48 months of inactivity? The answer is a when segment becomes unprofitable. In many markets this metric is fairly easy to determine and apply. Not so in education. Names in customer files of education marketers are often not direct users or buyers. The names can be influencers or those that make purchasing recommendations but do not show up on purchase orders.
One way to remove unprofitable segments is to remove names when they are no longer at the institution. Once an educator leaves the school or district their email becomes undeliverable and you need to rely on reaching their replacement through a prospecting campaign. Sure brochures and catalogs will be forwarded but only for a short time and postcard will have an even shorter life. So finding those new potential buyers as quickly as possible will help ensure your products stay in that classroom or school.
The number of names no longer at the institution on customer files is typically 10%-15% for the average file of 36-48 month customers. Mailings this segment of names represents significant investment that is not returning any value and is unprofitable. Plus, this is also likely to be the fastest growing segment of the customer file. The MDR educator database is experiencing more and more volatility as educator turnover increases in our current constrained budget environment. This school year more than 965,000 names have been deleted from MDR’s K-12 school database through the end of March. In addition nearly 1,200 schools have closed during the same time period. That is a lot of change, and if you are mailing to these inactive contacts and buildings, you are automatically reducing your CROI.
Hello – are you there?
Another factor weighing on the success of your customer names is the increase in the number of educators changing jobs. This year alone 1.7 million educators have had a job change. Knowing and reacting to this information is critical for many marketers – you don’t want to be sending your targeted information to a science teacher who is now teaching health. And, if a former 3rd grade teacher now teaches the 5 th grade you need to be sure that they get the right offer in order to close your sale.
Back to Basics – Back to School
So how can you manage all of this volatility and improve the effectiveness of your customer names? The best way is a comprehensive over haul of the customer file each summer before the back to school marketing program. This will go a long way to keeping up with the changes and identifying unprofitable segments. Some of the critical components to include in an annual customer name clean-up and enhancement program include:
- Identifying closed schools and removing from your marketing efforts.
- Flagging educators that are no longer at the school . The best practice is to continue to mail all names that ordered , responded, asked for literature or samples, clicked through, or opened an email in the previous school year even if they have been flagged as no longer at the school. Their mail will likely be passed on for a while and their email may be forwarded as well. However, stop marketing to those that have not responded in any way for over 12-18 months and are flagged as no longer at the school.
- Updating and Adding Missing Email Addresses: The email address is the most volatile data point on a customer name. MDR has removed or updated nearly 1.8 million addresses in K-12 schools just this school year alone. Given the value of email marketing to customers it is a good idea to add an email address to names with missing emails or on any names that had a soft or hard bounce in a recent email campaigns.
- Update the Job Title and School Grade Range : In addition to the 1.7 million educators with a job change there were 5,725 or 6% of schools had a grade range change in the 2010-11 school year. So, if targeting to a specific grade level is part of your marketing strategy be sure to update this information.
- Update the District Alignment: In the 2010-2011 school year over 2,000 public schools underwent district re-alignment. Understanding the school hierarchy can be important for some education marketers. If that is the case be sure to update this at least once a year.
A relatively small investment in an annual customer name hygiene program can pay big dividends in increased revenue and reduced expenses.
So is a rose simply a rose? I will leave that to others to answer. However I know that there is more to a name then meets the eye. In the coming school year keep in mind that all customer names are important but not necessarily have equal potential. Next month I will cover how to target the best and most profitable prospect names.
This article is also posted on MDR's new blog, MDR Forum (http://mdrforum.wordpress.com). Take a look, make a comment!
Stay tuned for Part 2 of Chuck’s “What’s in a Name?” series in June to hear what he has to say about the value of prospects names in growing your business.
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Chuck has over 25 years of database marketing experience in the education marketplace, and is currently MDR’s Vice President of Product Development. He has been responsible for planning and development of MDR’s comprehensive product suite, including list solutions, e-marketing solutions, and sales solutions. During his tenure at MDR, Chuck has launched many innovative and leading-edge products, including Education MarketView, Buyers at School response files, the Educators at Home database, and industry-leading analytical products, including development of sophisticated predictive indicators using database mining and modeling techniques. Chuck’s experience in customer database management has proved valuable in assisting many education marketers in leveraging their customer information to develop marketing strategies for increased profitability.
Prior to joining MDR, Chuck managed direct marketing initiatives at McGraw-Hill’s American School Publishers, the Random House School Division, and Educational Dimensions Group a leading instructional video publisher. Chuck announced his plans to retire from MDR effective May 15, 2011, but will continue to work with MDR customers in a consultant role.
Interested in cleaning up your files to get ready for the fall? Contact your MDR sales rep at 800-333-8804.
