Commentary & Analysis
Data Mining for Value
By Nancy Ingalls A number of companies have reaped returns as much as 1,
By WhatTheyThink Staff
Published: May 3, 2004
By Nancy Ingalls A number of companies have reaped returns as much as 1,000 times their initial investment on a single project leveraging data analysis and data mining. May 3, 2004 -- From the beginning of civilization savvy innkeepers, merchants and business owners have marketed their goods and services to consumers. From engraving the name of their establishments on centrally located stones in town square's to signage to mega-brands and global media campaigns, the basic goal of advertising has remained unchanged--to communicate a specific message to the right audience. Data Sense So, what does this mean to the print service provider? Well, it is no secret the three most complex marketing communications services--and the ones with the highest revenue potential--include: variable data one-to-one services, Internet web services, and document and content management. To be successful with these services, though, digital color printers have consistently been told they need to educate customers, advertising agencies, marketing firms and graphic designers to drive digital color print volumes. But this is hardly easy and is taking longer than most print providers would like. There are many reasons why transitioning the thinking of these groups is taking longer than expected. Let's address two primary deterrents facing printers: the inability to access viable data for targeted marketing campaigns and the relative lack of return on investment metrics for 1:1 marketing. Gartner predicts data mining will be one of the five hottest technologies in the early years of the new century. Ultimately, the effectiveness of any targeting strategy is determined by its ability to identify consumer interests accurately and match messages to those interests as precisely as possible. To begin, one must ensure the data available can be used as desired. Data mining assesses the value of the data and leverages that value as an asset. Once the data is mined, sophisticated data analysis tools can help hone in on a target market with focused messages that help drive response. Once the this is done you can produce effective one-to-one campaigns that provide ROI metrics you can use in the future. Reaping Returns Byte Magazine reported a number of companies have reaped returns as much as 1,000 times their initial investment on a single project leveraging data analysis and data mining. More and more companies are realizing the key to their success is with the massive amounts of customer data they have been collecting over the years. With the proliferation of data warehouses, this data can be mined to uncover the hidden jewels of knowledge. Simply put, data mining tools have become such a business necessity that an industry research firm Gartner predicts data mining will be one of the five hottest technologies in the early years of the new century. Reliable data is key to success Even as printers educate advertising and marketing agencies about the value of variable printing, the fact remains that recommending one-to-one marketing is risky for the agencies. They are squeezed from both ends. On one end, marketing budgets are continuously being scrutinized and challenged, pushing agencies to cut costs and keep customers in their 'comfort zone'--by producing the same old stuff. On the other end, advertisers recognize the potential value of one-to-one but have trouble selling it to their customers because response information is hard to find, tools to measure success are not readily available, and without the metrics, agencies struggle with how to justify the personalized communication, and effectively communicate the return on investment for their clients. And they don't want to risk losing the customer if the results are less than expected. Bad data can cost businesses as much as 10 to 20 percent of their total budget through lost or missed revenue. So, where is the common ground? How can the agency and the printer work together to provide their customer with a service and solution to tap into the “gold mine” of information. How can a digital print provider help shift the advertiser thinking and capitalize on the complex but high return services and still be successful? One answer is by assisting agencies with the data clean-up and analysis. By doing so, their customers' data comes to consist of reliable, usable information that can drive success of variable data one-to-one marketing solutions. Then the agencies have the tools and ammunition to help their customers build effective targeted communications and begin building the necessary metrics for supporting strategies. As customers clean up their data and identify their customers' behavioral patterns with the data, they can develop action plans for expanding their business and improve efficiencies. The revenue generated could be directly applied to change how the company communicates with its customers. Eureka! One-to-one personalized marketing campaigns are truly effective and now the thinking of the advertiser is converted. This surely seems way too easy. Right? Let's look a little deeper. Good Data, Bad Data OK, so lets talk data. Bad data can cost businesses as much as 10 to 20 percent of their total budget through lost or missed revenue. IT departments can loose as much as 50 percent of their budget on fixing errors caused by “bad” data. And you won't be able to deliver successful one-to-one programs if your customers' data is junk. What can you do to ensure you get the data you need? Relax. It only takes a lot of elbow grease, a range of metrics and vision. The objective of data mining is to extract valuable information from your customers data and discover the “hidden treasure"-- the valuable information that impacts changes in strategies that translate into a bottom line difference to your customer. Even some customer information is better than no customer information. But no matter how much is invested in IT, the different parts of most companies' customer databases don't communicate effectively with each other. So before one mines their data, it needs to be examined to determine how much clean-up and upgrading are necessary prior to mining. Analytics Once the data is cleaned, metrics can be applied. There are a wide range of metrics used to measure results: sales revenue, sales leads and direct mail piece response rates. The most effective metric that is rarely use--because it can be difficult to measure--is ROI. But if you can measure response to an offer in terms of revenue, sales, leads converted to sales, you begin to get a handle on the ROI of a one-to-one campaign. In doing so, be sure to compare response to previous efforts to highlight any differences. And use the cumulative knowledge to craft the next effort. Where to begin First and foremost, as you educate the agencies on the value of variable data printing, offer them a solution to solve their problems. If you do not have the data mining and analytical capabilities to support one-to-one jobs, leave data mining and data analysis up to the experts. Align yourself with a partner who specializes in data and can mine, design and provide a solution/service you can offer with the tools drive. Data experts can help, design and develop of analytical infrastructures to identify your customers or the advertisers most profitable customers and strategies to retain them. They can help your customers identify different customer behavioral patterns develop behavioral models and perform trade-off analysis to optimize their marketing and sales strategies use sophisticated statistical techniques for determining actionable patterns in your data In addition, they can offer marketing, sales and financial analyses, response modeling, formal, routine and periodic analyses, processing and reports. As you venture out to expand your opportunity, it is in your best interest to work with a data expert and help your clients determine if they are cleansing, mining and measuring their customer data. Guide them into using the information they have today. This will ultimately: Increase Sales Lower costs Revitalize life long customer relations Protect your customers database Increase customer satisfaction Uncover the value of individual customers with specific Industries Consolidate customer data into one clean, complete, reliable informational base Maximize return on investment supporting strategies Your goal is to maintain long-term customer relationships that inspire brand loyalty and to provide services and solutions that help everyone achieve success. To help yourself, help them squeeze every ounce of value out of their database which will drive new revenue streams and boost your bottom line. Please offer your feedback to Nancy. She can be reached at: email@example.com.