Drilling Down

Drilling Down

by Jim Novo

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Product Details

ISBN-13: 9781591135197
Publisher: Booklocker.com, Inc.
Publication date: 06/18/2004
Edition description: New Edition
Pages: 356
Product dimensions: 0.79(w) x 8.50(h) x 5.50(d)

About the Author

Jim Novo is an interactive customer valuation, retention, loyalty, and defection expert with close to 20 years of experience generating exceptional returns on marketing program investments.  His professional career has been focused on introducing Data-Driven marketing to new industries.  In the 80's, cable television was the target and his groundbreaking programs were widely copied throughout the industry.  In the 90's, Jim revolutionized the TV Shopping industry by focusing resources on the customer instead of the products.  And for the 00's, the Internet lies squarely in Jim's sights.

At The Home Shopping Network, Jim Novo witnessed the entire business cycle of a hyper-growth interactive retailer.  After the land-grab customer acquisition phase, he directed the critical transition to customer retention and credit marketing activities across the television, catalog, and Internet divisions.  As Vice President of Programming & Marketing during the slowdown to the mature phase, Jim handled the integration of customer communications and marketing across all the distribution channels, creating a "cradle-to-grave" customer path from Television to Internet to Catalog.

These early interactive lessons are proving valuable to understanding visitor and customer behavior on the web.  Jim is recognized for developing the "Friction Model" of behavioral targeting to explain how interactivity and increasing levels of customer control in a business relationship affect customer behavior tracking and measurement, the design of customer retention programs, and the management of "potential customer value" - the future stream of profits expected to flow from a customer.

Jim is an MBA Graduate of Babson College, a school known for a focus on entrepreneurial activity.  He majored in Economics and Psychology as an undergraduate at Dartmouth College.  Jim is currently working with software and marketing companies to improve their products and practices in database marketing and on the Internet.

You can schedule workshops, seminars, and speaking engagements based on the techniques and methodology described in this book.  Jim will teach your marketing and / or IT staff the Drilling Down method using your own data.

 

Read an Excerpt


Jonesin' for Some ROI

It was a day just like any other day.  The Customer
Retention Clinic was open, yours truly at the helm.  Both
offline and online marketers trudged through, with the
same old issues.  One is drowning in data.  The other has
reports that provide no actionable information.  Still
others have fancy models and profiles, but don't know how
to use them to increase the profitability of the company.

I became aware of a fresh-faced marketer, waiting eagerly
in line.  Something seemed different about this one. 
Untouched by CRM.  Never been to a Business Intelligence
demo.  Ignores every e-mail plea to attend "educational"
webcasts from vendors.

"Your question?" I ask.

"Jim, how can I tell if a customer is still a customer?"
was the reply.

I stood there, floored by the question.  I knew this
marketer was special.  How elegant, I thought: the
summation of 20 years of my work in a single question.
Nobody had ever asked it before.  They always want to
know about the money, you know - how can I make more
money, show me the tricks.  Addicted to ROI.  They
start off innocently enough, probably with a
spreadsheet.  Then maybe a simple model or two.  Before
you know it they're into data mining.  But they don't
make any money for the company.  Devastating.

Then they show up at my Customer Retention Clinic,
looking for the magic bullet, the secret to ROI. 
But not this one.  No, this one was special.

"Why do you want to know?" I asked.

"Because I want to calculate our customer retention
rate and track it over time" was the answer.

"You can't put a retention rate in the bank, you know"
was my cynical answer.  "What you really need is a
formal, widely accepted definition of when a customer
is no longer a customer in your company.  Then you will
be able to get at your precious retention rate."

Silence from the fresh-faced one.  Then:

"In customer service, they say only 10% of customers
complain and tell us they will stop doing business with
the company.  They say this means customer satisfaction
is 90%.  Does that mean customer retention is 90% too?"

Well, it's all well and good to be fresh-faced, but now
we're getting into naive.  Still, I think, maybe there is
something here, something worth saving for the future of
customer marketing.

"Are you saying the only defected customers are ones you
have documented?" I sneer.  "Ones who told you they will
never do business with you again?  Look, to me, a customer
is a person or company you sell stuff to, who pays you for
a product or service.  You have identified 10% who are not
going to buy from you anymore; they are definitely
defected customers."

"But the word "customer" implies some kind of "future
activity," doesn't it?  I mean, if you know they will never
buy from you again - as in the above complaint example -
you don't call them customers, so the opposite must be
true: to be a customer, there must be expectation they will
buy again.  If you know they will not buy again, they're
former customers, correct?"

"So the definition of a customer would be someone who:

1.  Purchased from you in the past, and
2.  Is expected to purchase in the future."

"Just because somebody bought from you in the past and
did not tell you they hate your guts now does not mean
they are still a customer.  A customer is somebody you
expect to transact with you in the future; otherwise
they are a former customer, by definition."

Not a bad sermon, I think.

"Wait a minute," says fresh-face, "what about customers
who purchased in the past that we have no expectations
for?  We don't have any idea whether they are likely to
buy or not, there is no "expectation."  What about them?"

Oh, so fresh-face is going to play tough with me, I think.
Probably an MBA.  Wait a minute; I have an MBA. 

Is it getting hot in here?! 

"Listen, you know the answer to that question, don't you?
Because you don't know crap about the people you sell to
and their likelihood to buy, you simply call them all
"customers."  You have no more reason to call them
customers than to call them former customers, but of
course, you "default" to calling them all customers. 
They didn't call up and tell you they are not customers,
so they are, right?  Is that what you are saying?" 

It is hot in here...phew.

I go on.  "What if they didn't tell you they hated your
guts, but they told 10 other people they would never
buy from you?  Are they still a customer?  Do you know
how many there are?  How many have had a bad product or
service experience and never said anything?  Is it 10%,
20%, 40% of your customers?"

No reply.  Floor staring from the face-man.  I have caused
hurt feelings.  But I have got to move on, there are all
these people waiting for their magic bullet, people needing
a customer marketing fix, they're jonesin' for some ROI...

"Look, I'm sorry" I say half-heartedly.  "Let's come at
this from a different direction that will perhaps be more
helpful.  Let's take all the customers who you think are
customers, and ask just one question - when was the last
time you had contact with these people?"

"For example, the last time you had any contact with a
customer was 3 years ago.   Are they still a customer? 
With no activity for 3 years?"

"Maybe" says fresh-face.

"OK, fine.  What about if the last contact with the
customer was 5 years ago?  Is this person or business
still a customer?"

"Maybe" is the reply.

"10 years ago?" I ask, sweating.

"Maybe."

That worked like gangbusters, I think.  No wonder nobody
knows how to sell more to current customers while reducing
costs.  All customers are customers for life - unless they
tell you they aren't anymore.  Sometimes it seems as if
today's marketing people have no sense of reality.  They
are thinking every person or business that ever transacted
with them is still a customer!

"All right, one more try," I say impatiently.

"Take two customers - the last contact with one was 10
years ago, the last contact with the other was 2 years ago.
Would you be willing to go out on a limb and say the
"customer" you last had contact with 2 years ago is more
likely to still be a customer than the customer you last
had contact with 10 years ago?"

"Yes," says the face.

"Finally," I gasp.

"And if the customer you last had contact with 2 years
ago is more likely to still be a customer than the customer
you last had contact with 10 years ago, is the customer you
last had contact with 2 years ago more likely to purchase
good or services from you today than the customer you last
had contact with 10 years ago?"

"Sure."

"More likely to purchase goods or services now, and in
the future, from you?" I wheeze expectantly.

"Yes" is the reply.

"So, let me get this straight - when comparing two
customers, the customer you have had contact with more
recently is more likely to purchase, relative to the
other customer?"

"I would think so" is the answer.

"What???" I gurgle, starting to lose my balance,
eyes becoming glassy...

"I mean yes, Jim..."

"Then, if I was to define a customer as someone who:

1.  Purchased from you in the past, and
2.  Is expected to purchase in the future,

you would say the customer you last had contact with 2 years
ago was more likely to still be a customer than the customer
 you last had contact with 10 years ago?  Would you say
that?" I ask breathlessly.

"Yes!" the face shouts triumphantly.  "I get it!"

"So for any two "customers," the one you had contact with
more recently, relative to the other, is more likely to
still be a customer and keep purchasing goods or services
from you, now and in the future?"

"Yes!!!" fresh-face screams.

"So as a marketing genius, you would then go out and
treat these two customers exactly the same, spend the
same amount of money marketing to them and servicing
them, even though one is more likely to still be a
customer and purchase than the other?" I scream back. 

The trap was set.

"Yes!!" face blurts out.  "That's what we do!  We
spend the same amount of money and resources on
every "customer," regardless of their likelihood to
 still even be a customer!"

"I know, your company and most other companies out
there.  The question is why do you do this, when
it is so darn easy to tell which customers are
more likely to purchase goods or services
relative to the others?"


And that, Dear Driller, is what this book is
about.  You are going to learn some very simple
techniques for tracking which customers are more
likely to purchase goods or services from you,
and then you will learn precisely what to do
with this information to increase your sales
while cutting your marketing costs.

Because I don't want to see you down at the
Clinic, the line is too long already.

First, we're going to talk a little bit about customer
models - what they are and are not.  Then we'll put a
little background in place so you understand the basic
objectives and strategy behind High ROI customer
data-driven marketing.  Next, we'll take a look at the
simplest model of all - Latency - because it is the most
intuitive model and often the easiest to implement for
those just getting started with customer behavior models.
Then it's on to the Recency and RFM models.  Often used in
tandem with the Latency model, Recency and RFM are
"smarter" than the Latency model but a bit less intuitive.

And finally, we'll jump into the whole Customer LifeCycle
marketing methodology and show you how to use what you will
know about simple customer models to really drive the
profitability of your customer marketing / retention / CRM
programs.  By understanding what the customer is likely to
do even before they do it, you can use your modeling
intelligence to craft the most profitable customer
marketing programs you probably have ever been a witness
to.  The Customer LifeCycle is the key to the fabled
"right message, to the right people, at the right time"
marketing kingdom.

By the end of this book, you should be able to very clearly
answer some basic marketing and service questions about
your customer base.  Questions you no doubt have asked many
times yourself, such as the following:

Who do I provide marketing or service programs to?  When?
How often?

Should I contact some customers more often than others?
(Yes, you definitely should.)

How much and what kind of incentives should I provide to
get a customer to do something I want them to?  Can I
predict which customers will be responsive to the
program?  (Yes, you can)

How can I tell when I'm losing a customer or when service
has failed?

How can I put a value on my different customers and the
business as a whole now, and project this value into
the future?

Is my business strong and healthy, or becoming weaker?

What can I expect in future sales from existing customers?


So what do you say, fellow Driller? 

Are you ready to cut that line at the Clinic?

 

Table of Contents

Preface
Introduction
About Jim Novo
Chapter 1 Jonesin' for Some ROI
Chapter 2 Customer Profile or Customer Model?
Chapter 3 Data-Driven Marketing and Service Drivers
Chapter 4 Customer Marketing Basics
Chapter 5 Customer Marketing Strategy: Friction Model

Latency Metric Toolkit

Chapter 6 Trip Wire Marketing
Chapter 7 The Hair Salon Example
Chapter 8 The B2B Software Example
Chapter 9 Turning Latency Data into Profits

Recency Metric Toolkit

Chapter 10 Predictive Marketing
Chapter 11 The Ad Spending Example
Chapter 12 Turning Recency Data into Profits
Chapter 13 The Online Retail Example

RFM Scoring Toolkit

Chapter 14 Cash Flow Marketing
Chapter 15 A Tweak for Interactive Customers
Chapter 16 No Customer Database?  How to Set Up a Spreadsheet to Score Customers
Chapter 17 How to Score Your Customers
Chapter 18 The Commerce and Content Examples: Turning Scoring Data into Profits
Chapter 19 Case Study: Non-Profit Scores 192% Increase in ROI using RFM Model

Advanced Data-Driven Marketing Toolkit

Chapter 20 Using Customer Characteristics & Multiple Scores
Chapter 21 Customer LifeCycles: Tracking Scores Over Time
Chapter 22 Customer LifeCycle Grids: High Performance Behavior-based Modeling
Chapter 23 Straight Talk on LifeTime Value
Chapter 24 Lifetime Value, I'd Like to Introduce You to the CFO
Chapter 25 Fellow Drillers at Work
 Definitions and Background Information
 Customer Loyalty and Retention
 Customer Segmentation and LifeTime Value
 Professional Services
 Ad-Supported Content / Subscription Models
 Online / Offline Retailing and Catalogs
 Distribution / Operations / Channel Management
 The ROI of Online Branding Efforts
Chapter 26 Predicting Campaign ROI: Set Up
Chapter 27 Predicting Campaign ROI: The Model
Chapter 28 Predicting Campaign ROI: Fine Tuning
Chapter 29 Expense and Revenue You May Not be Capturing: Subsidy Costs and Halo Effects
Chapter 30 Some Final Thoughts: Seasonality, CRM, Behavioral Inertia, Data-Driven Program Outlines
APPENDIX: Software Download and ReadMe

Introduction

Drowning in data but have no information?  Confused by ROI, LTV, RFM and all the rest of the alphabet soup involved in using customer data to increase profits?  You know you should be "Drilling Down" and creating "customer profiles," but how is it done?   Drill how deep, and look for what?

Drilling Down pulls back the curtain on the "how" of Data-Driven marketing and service concepts, the enabling knowledge behind CRM, database marketing, frequency marketing, loyalty marketing, relationship marketing, 1-to-1 marketing, permission marketing, and so forth.  Learn the basic techniques of Data-Driven marketing / service and you will know how to use your data to attack any of these approaches, while customizing them for your business.

You will learn the hands-on fundamentals of teasing out and evolving the essentials of highly profitable marketing and service programs using customer data, without using fancy hardware or software.  Do it yourself with a spreadsheet!  Drilling Down is not another "consultant fluff book," where the promise to deliver actionable ideas is not kept.  You will get the whole "how do I actually do it" story in this book.

The book puts forth an easy to follow real world framework for designing your own marketing and service programs using customer data.  The core ideas are based on a process and techniques proven under circumstances where there was no previous history to follow for guidance, and require no specialized skills other than knowledge of your business.  This framework allows those with little customer data experience to create a structure for marketing and service decision-making.  Instead of going about business in a haphazard way, always wondering,  "Who should I pay attention to?  When should I pay attention to them?  How should I design the program?" the reader will be able to make these marketing and service decisions based on the customer data they have on hand.

If you work in a larger company trying to figure out the mysteries of CRM (to CRM, or not - that is the question) following the Drilling Down method "pre-CRM" will allow you to uncover the potential benefits and ROI traps in your customer data before installing CRM.  Learn how your customer base responds to database marketing and service techniques and use this experience to evaluate the features of analytical - marketing CRM packages and their potential ROI.

Drilling Down explains why Data-Driven marketing and service programs work, and shows you how to develop them step-by-step.  You can learn at your own pace and implement simple techniques right away, then graduate to increasingly complex approaches as you experience the results.  To top it all off, the book provides descriptions of advanced testing ideas discovered only through years of research in database marketing and customer behavior, with a special focus on interactive customers and their special quirks.

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