Lifetime Value In new format

1
Electronic Marketing
NCDM Sunday December 5, 2004 830 a.m. - 1115
a.m. Gaylord Palms Orlando
Arthur Middleton Hughes Vice President /
Solutions Architect KnowledgeBase Marketing, Inc.
2
What KnowledgeBase Marketing Does
3
How a modern database system works
Appended Data
Website
4
Electronic Marketing

• No longer a novelty
• Everyone must do it
• It is mainstream marketing

5
Where is your web shop?

• In should not be a separate department or in IT.
• It should be part of marketing or customer
  service
• Because it is the basis for electronic marketing

6
The web is the greatest direct marketing vehicle
ever invented
7
Web sales are not great

• By 2007, sales will be 2.9 of retail
• Add travel and that is 4.4
• Growing by 26 per year, but it started from
  nothing.

8
Why is the web important?

• Affluent people Those with incomes of 100K or
  more access web daily
• Purchasing research all affluent buyers
  research the web before they buy anything major
  houses, PCs, vacations, cars
• Reviews Movies, restaurants, theatre
• Most of this does not show up as web sales.

9
An Information Medium

• So the internet is not a sales medium
• It is a research and info medium
• It is not yet a great advertising medium like TV
  or Radio or Print
• People who are on the internet already have in
  mind what they want.
• They use Google to find it.

10
What do you need to have?

• A search box

11
Most search boxes are inadequate

• Keep track of what people enter in the box.
• Update your database constantly to keep up with
  your customers
• Make it easy to find what you have.
• And, perhaps, add stuff that they want and you
  dont now sell

12
What do you need to have?

• A Search Engine Strategy

13
It is not hard to be on top
14
The DMI Website 90/Month
15
140 Published Articles
16
How Google Does it

• The Spider visits millions of web sites,
  follows links within the site, stores them
• The Index copy of all pages found by the
  Spider.
• The Search Engine sifts through the Index to
  find matches to your query, and ranks them.

17
Shopping Cart

• You must have one, even if you do not sell on
  line.
• Provide white papers
• Provide catalogs
• Provide articles
• Goal find out who people are, and communicate
  with them

18
On Line Etiquette

• Screen Thank you for your order
• Email Thank you for your order
• Your order was shipped Track
• Did your order arrive OK?
• Corner grocer used to do this
• Before the web, we could not afford it

19
Now, this is recognition! Welcome Back, Arthur!
20
Immediate Feedback!
21
30 seconds later Email
22
Transaction Message Rules

• Avoid being mistaken for SPAM
• Be a customer service representative
• Prevent customers from telephoning
• If you fail the first rule, you will fail the
  other two.

23
How do you know you need these messages?

• Set up a control group of customers that do not
  get the messages.
• Compare their retention and sales rate with
  customers that get the messages
• Figure out the boost to Lifetime Value

24
Provide what the customers want

• 2002 Hewlett Packard site did not have toner for
  their LaserJet 4 Printers.
• Today HP site has supplies for all HP products.
  They have learned!

25
Let customers register without hassle

• New York Times used to require you to register.
  It was a nuisance. They have wised up

26
Provide Live Help

• Once a novelty. Now essential.
• Live text. One agent handles 4 or more
• Which company has life help?
• Microsoft?
• IBM?
• HP?
• Chrysler?

27
Newsletters
28
Newsletters are skimmed

• Due to SPAM, few read any newsletters
• Most are deleted. The others are only skimmed.
• Newsletters must be
• Informative
• Convenient
• Timely

29
What people look for in newsletters

• Prices and Sales
• Personal Interests and Hobbies
• Events, deadlines, dates.
• Relevance in the past is not enough.How relevant
  is your newsletter today?

30
Not a useful news-letter
31
How to use electronic marketing

• Insist on capturing emails.
• Build and maintain a database of customers, past
  customers, and prospects
• Make the web very, very easy to use.
• Use web communications to build loyalty and
  repeat sales

32
What Harrahs Casino Did

• For years, Harrahs sent regular mail to woo
  customers with cheap hotel rooms
• Then it linked the database to the web allowing
  customers to book hotel rooms at a discount,
  capturing emails.
• Sept 11, 2001 occupancy fell by 25
• Massive emails with bargain offers raised it to
  100 by Sept. 20.

33
What Bank of America Did

• Was spending 100 million annually on paperwork
  for retirement program enrollment. Changes took
  months.
• Moved all programs to the web.
• Saving about 50 million annually.
• Most processes now take only a few minutes
  instead of months.

34
What Ryder System Did

• 5.3 Billion company, terrible web site
• 10 clicks to track a shipment. No search
  mechanism.
• Revised site. Now each shipment is only one click
  away. Super fast searches.
• Result many new customers who need to track
  their shipments every day.

35
Personalization

• Link your database to your web site
• Use it plus cookies to modify the content of your
  website and newsletters

36
Hewlett Packard Personalizes

• 4.5 million HP e-newsletters sent out per month.
• Each personalized by recipients profile
• Choose from hundreds of white papers
• And 87 different HP product lines
• Four marketing teams consumer, small business,
  public sector, enterprise

37
Does personalization pay off?

• HP proved with control groups that they got 3 to
  10 times higher response rates with
  personalization than their previous newsletter of
  the month

38
Emails for Cross Sales

• Airways Communication ran a personalized email
  campaign for First Annuity to 400 Annuity Brokers
  using ExactTarget programs
• Investment 8,000
• In 60 days the campaign produced 1,000,000 sales
  from nine new contracts
• Program now used by Sun Life and National Western
  Life

39
Boosting Attendance

• Churchill Downs increased attendance by 3 (over
  a control) by sending emails
• Retention rates up 8 over control using dynamic
  emails

40
Contacting Agents

• Kestler Financial Group contacts 5,500
  independent insurance agents
• New emails offer personalized help to agents in
  attracting business
• Results Open rates 50 click through up to 24
• Monthly sales increase 5.5 million

41
Viral Marketing
42
HP On Line Survey

• Hewlett Packard tested an on line survey to
  promote their network printers.
• Direct mail drove responders to a web site that
  contained the survey. Responders received 10 in
  Pizza Hut coupons.
• The survey provided a special HP offer for
  network printing solutions, product links, and
  e-subscription information.

Competitive Advantage Through Advanced Technology
43
(No Transcript)
44
Universal Music eMarketing Campaign

• UMG tested an e-marketing strategy to increase
  record sales of a new album release for Lucinda
  Williams
• The campaign delivered more than a 960 increase
  to the Lucinda Williams fan base
• Reached nearly 200,000 fans and prospects with
  email communications
• Won DMA Gold Echo Award in 2002

45
(No Transcript)
46
Web Focus Groups
47
What WorksEmail Marketing
48
Where else can you get these results in 3 days?
49
Get customers to join a club

• A company sold sporting goods created a member
  club.
• When DB was built they learned that
• Club members bought 11 times more than non club
  members.
• In two years, 81 of club members became
  multi-buyers.

50
Club members conversion
51
Email Marketing Test

• Objective understand incremental sales from
  catalog plus emails
• Method Send three different catalogs to test and
  control group with and without emails.
• Measure increased sales and reduced costs from
  use of emails.

52
Winter Email Newsletter
53
How the test was conducted

• Randomly selected 2 panels of 20,000
• All purchased on line before 2003
• All received 3 catalogs Winter, Winter Remail
  and Spring.
• Second panel also received three email
  newsletters two after the catalog arrived, one
  during the catalog mailing.

54
Winter Remail Email Newsletter
55
Results Email Catalogvs Catalog Only

• Email group had total increase in sales of 18
  over catalog only.
• Email increased number orders by 6
• Average order size increased by 11.8
• Variable operating cost per order decreased by
  44 for online orders.
• Emails increased promo cost by 11.2

56
Spring Email Newsletter
57
Total contribution increase

• Increase in sales and decrease in operating
  expense resulted in
• Increase in total contribution by 43
• Increased contribution per order increased by 35
• Response rate increased by 5.9

Contribution includes income from SH plus sales
58
Conclusion onMulti-Channel Marketing

• Increased sales from the catalogs
• Increased average order size
• Decreased variable operating expense
• Increased total contribution
• Email to those who furnish opt-in address is a
  powerful marketing tool.

59
Web Migration

• Regular catalog customers are gradually migrating
  to using the web.
• What happens when they do?
• Average order size goes up
• Items per order goes up
• Cost per order comes down

60
Web migration gains
61
Conclusion

• Web migration is good for your customers and good
  for you
• Find a way to promote migration

62
Retailer Example

• Video retailer sent email newsletters to 170,000
  customers for 6 months.
• Control group of 14,000 got no emails
• Retail sales to test group was 28 more than to
  those without emails.

63
Digital Neighborhoods

• You can get customers online behavior appended to
  your database.

64
17 Digital Segments
65
Letting customers into your warehouse

• Use the web to let them rummage through your
  files and records
• You can save money, and increase customer loyalty
  and participation

66
How Amazon saves millions
67
How Fedex Saves Millions
68
Time Share Company

• Receives 7.5 million phone calls per year at 500
  person call center
• Cost per call is 6.50 or 48 million per year.
  Web transactions cost 0.10
• 6 of transactions now go through the web site.
• Proposal improve the web site so more calls can
  go there.

69
Method Personalization

• For the web to replace a live operator, it must
  be as good as a live operator.
• Personalization, and intelligent response to the
  customers input.
• Time required to improve web site 14 months.
• Cost of web improvement 1.8 million

70
Dollar savings through increased web use
71
How the savings can be achieved

• Make the web experience so rewarding that
  customers will prefer it to a phone Call. Make
  users empowered by functions available to them.
• As soon as the enhanced web functionality is up
  and running, run programs to drive customers to
  the web sites

72
How to measure web success

• Get a base line for existing transactions
• Determine the cost of each transaction
• After transactions begin to shift to the web,
  determine how many have shifted
• Measure your savings.

73
The database must support your website

• That may mean updating every hour

74
Hourly Updating Records
75
Flip to the updated database
76
(No Transcript)
77
Trawling the database for events

• Transactions and sales
• Survey Results
• Responses to Promotions
• Changes of Address
• New Customers
• Cancellations, returns, credit problems

• Outgoing promotions
• Telemarketing results
• Web site activities
• Emails
• Direct mail
• Inbound phone calls
• Birthdays

78
Automated Communications to a customer who

• Is about to have a birthday or anniversary
• Had an unusually large transaction
• Reached a milestone with the company
• Has a problem that should be addressed
• Should be offered a next best product

• Should be thanked for what she has done
• Should be reminded of an upcoming birthday of a
  friend or relative
• Should be offered a loan
• Has just moved to a new home
• Has just gotten married

79
Automated communication
80
Why customers like to use the web
81
Why customers like it My vacuum cleaner problem

• We have a Hoover with a MicroFiltration Bag.
• We wasted an afternoon going to six (yes six)
  stores looking for new bags. No luck.
• So we tried the internet.

82
Finding Hoover on the Web
83
Ordering a Micro-Filtration Bag for my Hoover
84
Letting customers come behind the counter

• A Marriott Example

85
Lets try it. Let Marriott plan a meeting in Ft.
Lauderdale
86
We want 3 rooms with 50 attendees, golf and pool
87
Here are the properties. Lets try the North
Marriott
88
Here are the conference rooms we need
89
Here is the hotel
90
And, here is the location. Lets make a
reservation!
91
The Marriott Web Site

• 1,800 Hotels 10 billion revenue
• Marriott doesnt own most of the hotels
• Internet team began in 1997
• More interactive, the more business
• Meeting planners dont need to visit the sites.
  All they want is on the web.
• Booking a room for a business traveler is very
  fast

92
Dell Premier Pages
93
Dell Premier Pages
94
Benefits of Premier Pages
95
Dell Premier Pages

• 70 business, 30 consumer on web
• Premier pages one page per company
• Builds brand loyalty
• Reduces phone calls
• Takes only 30 minutes to create a new Premier
  Page for a new customer.

96
Premier Page History Reports
97
Dell sales follow up

• IS director checked networking equipment on Dell
  site. Did not buy.
• Next week got Dell salesman call to help with
  networking purchases
• Customers like it.

98
Office Depot Premier Pages

• Office Depot Online discovered on line customers
  spend 33 more than catalog customers
• Using a premier page system, Office Depot Online
  provided 85 of Bank of Americas office supplies

99
Bring back the old corner grocer
100
ConclusionYou can do this!

• Invite your best customers into your company.
• Let them rummage through your warehouse.
• Let them look up technical data themselves
• Make them a part of your company. You will have
  them for life.

101
How to use electronic marketing

• Capture emails. Have a great website.
• Provide incentives to use your website.
• Update your database often.
• Link it to the website.
• Personalize your website and your email
  communications.
• Use control groups. Measure effectiveness

102
Books by Arthur Hughes
From McGraw Hill. Order at www.dbmarketing.com
Get slides arthur.hughes_at_kbm1.
com