News
 It’s
All About Listening to Your Customer (Data)
By Mark Kolier, president of
CGSM Inc.
Data analysis and personalized recommendations in
print and on the Web can generate more sales from
your existing customers.
According to a recent article on VentureBeat, an
online venture capital news site, Amazon.com
attributes 35% of its product sales to
recommendations. While that may be quite a number to
fathom, even small businesses can take advantage of
the technology and tools used by an 800-pound
gorilla like Amazon. It's not as difficult or
expensive as you might think. Data-driven marketing
applications are now practical, affordable and
something you must consider as part of your
marketing mix.
What does your customer data say? In order to create
personalized recommendations and maximize the value
of your current customers, you must perform a
thorough analysis of your existing database.
Organize and review your current customer list and
perform additional analysis to predict customer
tendencies in terms of clusters, and other data
modeled groupings. This will help you to determine
the type of message or offer to send to each group
based on their past behavior. Then you're ready to
leverage your data and analysis in order to move
your best customers to higher purchase levels. This
might take the form of making a specific set of
cross-sell or up-sell recommendations to individual
sets or clusters of customers.
If your current customer files are not in the
condition necessary to take advantage of some of
these types of analyses, make it a priority to clean
up your data so you can maximize your ability to
harvest your own greatest asset.
What about recommendation systems? The idea is that
customers are not all the same so why would you
treat them that way? Amazon was the first to really
utilize the, “Customers who purchased this also were
interested in the following items,” technique. But
you can use the same approach (and even improve on
it, as Amazon clearly does not always get it right)
for your own Web site.
In the movie rental arena, Netflix, Blockbuster and
FamilyVideo.com have used recommendation systems
successfully, and Netflix is even running a $1
million contest offering programmers the chance to
beat the current Netflix system by more than 10% and
win the big prize. They are doing this because a
better system will drive incremental sales well
above $1 million over the life of its
implementation.
Personalized recommendation systems can cost well
over $100,000 for companies with a large number of
product offerings. But for companies with a smaller
amount of products, costs can be less than $50,000
for set-up, and monthly maintenance charges can be
tied to performance.
An added benefit is that creating a truly personal
shopping experience for your customers engenders
increased customer loyalty. Even though its
suggestions may not always be on the mark, we return
to Amazon again and again when looking for items for
ourselves and gifts for friends and relatives. The
friendly service seems to know us — it certainly
recognizes us — and it appears to have been waiting
patiently for our return. Why not create a
“My-store,” “wish-list,” e-mail alert, or an
intelligent search function on your site and make
your customers' shopping experience truly unique?
Today's shoppers want to feel that they are in
control of their shopping “experience” and affording
them choices to make (but not too many) is a key to
success.
So whether it is in print, on your Web site, or
both, data-driven applications offer your precious
customers new products, destinations and experiences
— and provide you with stronger income
opportunities.
---Source: DM
News May 28, 2008 newsletter (www.dmnews.com). Mark
Koiler is president of CGSM Inc. Reach him at markk@cgsm.com.
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