Electronic Marketing
NCDM Sunday December 5, 2004
8:30 a.m. - 11:15 a.m.
Gaylord Palms Orlando
Arthur Middleton Hughes
Vice President / Solutions Architect
KnowledgeBase Marketing, Inc.
What KnowledgeBase
Marketing Does
How a modern database
system works
Customer
Transactions
Marketing
Database
Inputs from Retail,
Phone, Web
Data Access
And Analysis
Software
Website
Marketing
Staff -Access
By Web
Appended
Data
Electronic Marketing



No longer a novelty
Everyone must do it
It is mainstream marketing
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
The web is the greatest direct
marketing vehicle ever
invented
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.
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.
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.
What do you need to have?

A search box
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 don’t now sell
What do you need to have?

A Search Engine Strategy
It is not hard to be on top
The DMI Website $90/Month
140 Published Articles
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.
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
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
Now, this is recognition!
Welcome Back, Arthur!
Immediate Feedback!
30 seconds later: Email
Transaction Message Rules
1. Avoid being mistaken for SPAM
2. Be a customer service representative
3. Prevent customers from telephoning
If you fail the first rule, you will fail the
other two.
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
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!
Let customers register without
hassle

New York Times used to require you to
register. It was a nuisance. They have
wised up
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?
Newsletters
Newsletters
Sent
Cost Each
Promotion Cost
Response Rate
Responses
Average Sale
Profit per sale
Profit from newsletter
Net Profit
12 per year
Annual Profit per name
Mail
200,000
$0.50
$100,000
2.00%
4,000
$100.00
$40.00
$160,000
$60,000
$240,000
$1.20
eMail
200,000
$0.04
$8,000
1.50%
3,000
$100.00
$40.00
$120,000
$112,000
$448,000
$2.24
Newsletters are skimmed






Due to SPAM, few read any newsletters
Most are deleted. The others are only
skimmed.
Newsletters must be:
Informative
Convenient
Timely
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?
Not a
useful
newsletter
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
What Harrah’s Casino Did




For years, Harrah’s 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.
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.
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.
Personalization


Link your database to your web site
Use it plus cookies to modify the
content of your website and newsletters
Hewlett Packard Personalizes





4.5 million HP e-newsletters sent out
per month.
Each personalized by recipient’s profile
Choose from hundreds of white papers
And 87 different HP product lines
Four marketing teams: consumer, small
business, public sector, enterprise
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
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
Boosting Attendance


Churchill Downs increased attendance
by 3% (over a control) by sending
emails
Retention rates up 8% over control
using dynamic emails
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
Viral
Marketing
Viral Email results in
more emails and
data capture
Susan: If you want to
have some friends
come to Hawaii with
you, list them here and
if they decide to go,
we will give each of you
a 10% discount on your
trips.
Arthur Hughes ahughes@computersrategy.com
Helena Errazuris micifuz2@aol.com
Dudley Foulke dudleyf@hotmail.com
Dear Helena: Rick and I are
going to Hawaii on August
7th. We thought it would be
great if you could come with
Us. We are staying at the
Maui Surfside which is a great
deal. To find out about it
Click here! Hope you can
Join us! Susan
Database
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
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
Web Focus Groups
What Works:
Email Marketing
Where else can you get these
results in 3 days?
Speech Email Follow Up Results on 3rd Day
Delivered
Viewed
Clicked
Do Not Mail
168
131
75
0
Download % Viewed % Clicked % Download
68
78%
45%
40%
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.
Club members conversion
80.5%
90.0%
Conversion to MultiBuyers after two years
80.0%
70.0%
60.0%
23.4%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Goal Club
Non Goal Club
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.
Winter Email Newsletter
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.
Winter Remail Email Newsletter
Results – Email & Catalog
vs 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%
Spring Email Newsletter
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 S&H plus sales
Conclusion on
Multi-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.
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
Web migration gains
Items per order
5.80
5.60
5.40
5.20
5.00
4.80
Average Order Size
4.60
4.40
Catalog Only
Move to Web
$90.00
$85.00
$80.00
$75.00
Catalog Only
Move to Web
Conclusion


Web migration is good for your
customers and good for you
Find a way to promote migration
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.
Digital Neighborhoods

You can get customers online behavior
appended to your database.
17 Digital Segments
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
How Amazon saves millions
How Fedex Saves Millions
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.
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 customer’s input.
Time required to improve web site: 14
months.
Cost of web improvement: $1.8 million
Dollar savings through
increased web use
$17,052,811
$18,000,000
Annual Dollar Savings
Through Personalization of
the Web
$16,000,000
$14,000,000
$10,315,500
$12,000,000
$10,000,000
$5,606,250
$8,000,000
$6,000,000
$4,000,000
$2,315,625
$2,000,000
$0
2001
2002
2003
2004
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
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.
The database must support
your website

That may mean updating every hour
Hourly Updating Records
Deceased
Screen
Reformat to
Standard
Address
Hygiene
CASS, DPV
DSF, NCOA
Data
Enhancement
Create Match
Key
Flip to the updated database
Activities:
Transactions
Survey Results
Responses
Promotions
Communications
New Addresses
New Customers
Outgoing Msg.
Emails
Phone
Marketing
Database
Trawling for
New Custs.
New Movers
Transactions
Responders
No activity
High Activity
Milestones
Events
Emails
Direct Mail
Personal Contact
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
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
Automated communication
Why customers like to use the
web
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.
Finding Hoover on the Web
Ordering a Micro-Filtration Bag
for my Hoover
Letting customers come behind
the counter
A Marriott Example
Let’s try it. Let Marriott plan a
meeting in Ft. Lauderdale
We want 3 rooms with 50
attendees, golf and pool
Here are the properties. Let’s
try the North Marriott
Here are the conference
rooms we need
Here is the hotel
And, here is the location.
Let’s make a reservation!
The Marriott Web Site:






1,800 Hotels $10 billion revenue
Marriott doesn’t own most of the hotels
Internet team began in 1997
More interactive, the more business
Meeting planners don’t need to visit the
sites. All they want is on the web.
Booking a room for a business traveler
is very fast
Dell Premier Pages
Dell Premier Pages…
Benefits of Premier Pages
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.
Premier Page History Reports
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.
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
America’s office supplies
Bring back the old corner
grocer:
Conclusion:
You 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.
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
Books by Arthur Hughes
From McGraw Hill. Order at
www.dbmarketing.com
Get slides: arthur.hughes@kbm1.com