A colleague and I had a very interesting discussion today over lunch.  I was arguing for the importance of industry in guiding the type of business questions you ask and hence the type of analyses you perform.  He believes that industry or vertical does not matter. 

My professional experience tells me otherwise.  Currently two of my clients have very different challenges.  One is a retailer trying to drive a repeat visit among its customer base.   Given the volume of customers they have and the average basket size, increasing the number of repeat visits can greatly impact revenue.  The other client is a software maker that sells to large manufacturers.  Identifying the right customer who would be interested in their product is key.  They have a much higher price point and much longer buying cycle than the retailer.  For them, understanding lead generation and lead conversion is vital in order to make their sales process more efficient.

However, there was on thing we could agree upon.  It all comes down to giving the right person the right message at the right time.

My clients often know who their best customers are.  Typically the best are the top 20% of customers that generate 80% of the profits.  These are the customers you most want to retain.  The question becomes who are the customers that you should try to migrate into your best customer segment?  Figuring out who are the next best requires research into their behaviors, demographics or firmographics, and attitudes. 

 Segmentation is one way to separate your customer base into differentiated groups against which relevant marketing communicationsand strategies can be developed and executed.  There are many different types of segmentation and techniques including cluster analysis, RFM and CHAID.

Regardless of what method you choose, bear in mind that a good segmentation scheme is often a result of art and science.  Segments should make sense intuitively and, if they are data driven, should be sound statistically.  In my next post I will describe clustering and how that is used for segmentation.

I recently received a mailing from the deCordova Sculpture Park and Museum, formerly known as the DeCordova Museum and Sculpture Park. 

I was puzzled by the name change.  In this case, why would you essentially just reorder the words in the name?  Yes, the sculpture park is beautiful and unique in the metro Boston area.  It is well worth a visit I might add.  However, the museum is excellent as well.  There was a fascinating exhibition called Drawn to Detail which I saw last fall. 

Perhaps, the ICA in Boston is cornering the contemporary art museum “market”, with the recent Shephard Fairey show and before that an Anish Kapoor exhibition.   It also has received a lot of attention for its new building and new location on the waterfront in Boston.  The deCordova’s name change might be a bid to distinguish itself from the ICA.  If that is the case, I am not convinced that re-branding is the answer.  But if you are going to re-brand, at least be consistent. 

The website uses the new name at the top on the right…

The top of the deCordova home page

 and then uses the old name under the History and Mission title.

Bottom of deCordova home page

Thursday’s Wall Street Journal had a quote from Carol Bartz, the CEO of Yahoo, “Are we leading up to “I’m both too old and too stupid to know what the Internet is’?”  Her remark was in response to a question about her experience but it made me think about a potential generational gap in Internet usage. 

At a book club meeting almost a year ago, several members asked for a description of Twitter, as if it was a foreign country or new-fangled religion they had heard about.  One member provided an excellent summary based on his usage of the site but several were left trying to get their heads around why anyone in their right mind would use Twitter.   Once again Twitter came up during a recent book club meeting.  No one new had tried out the service in the 10 months since our last discussion.  It made me wonder if the technological gap is not just rich versus poor but also young versus old.  As the remark by Carol Bartz indicates, there is a general perception that the Internet is a young person’s game.  High profile anecdotes have reinforced that assumption.  According to a July 2008 Frank Rich Op Ed piece in the New York Times, John McCain doesn’t know how to use a computer.

For marketers, this represents a challenge and an opportunity.  To me, it is further proof that we need to develop integrated campaigns with both online and offline channels for outbound communication and inbound response.  You cannot assume that everyone will be on the Internet 24/7.  Broadcast media, print ads, direct mail, etc. can play an important role in reaching an older audience that may not be on the Internet as frequently and they reinforce your message to those who are active on the Internet.  A recent report found that displaying a URL within a  Yellow Pages print ad drove an increase in online leads.  Of course, you should measure the interaction of online and offline behavior to see what drives the most responses and to optimize future campaigns.

Modeling is a powerful tool that is worth considering when determining how best to spend your marketing dollar.  At its simplest, modeling looks for patterns in data to predict future behavior.  That data could be past behavior.  If someone bought diapers last week, it is very likely they will buy them again this week.  It could also include demographics such as age and gender or, in a B2B context firmographics, the number of employees and annual sales volume.  Attitudinal information, such as willingness to purchase a product, could also be used in a model.  The power of modeling comes from the fact that it weighs all of the factors and results in a unique algorithm that predicts future behavior.  Instead of the usual “spray and pray” approach, modeling enables you to focus your dollars where they will have the most effect.

Two articles in the Wall Street Journal last week offered real life examples of how models can solve business problems.  I have seen clients use attrition models and proportional hazard models to determine which customers are likely to leave.  Google is building an attrition model to identify which of its employees are most likely to leave the company for another opportunity.  Presumably Google will target those employees most likely to leave and be able to retain valuable talent that might otherwise walk out the door.

Chrysler’s digital agency has designed a media modeling system according to the Wall Street Journal.  It sounds like a marketing mix model and is being used to allocate Chrysler’s marketing dollars.  At a basic level, this model tells Chrysler how much money needs to be spent on marketing to drive a certain number of vehicle sales based on the web traffic generated.  By monitoring online activity and tying it to their marketing campaigns, Chrysler has determined how many web visits translate into sales.  The media modeling system, including enhancements based on the ongoing performance of television advertisements, has helped Chrysler determine how to structure their marketing campaign and tweak marketing in real time to drive results.

These two examples may not fit your exact situation but they highlight the power and value of modeling.

Last night I saw an episode of an upcoming cable television show in my local movie theater.  The lead character is played by an actress I have enjoyed in movies in the past so I thought I would go to the screening despite being the wrong “demographic”.   I do not have cable and average less than 5 hours of television a week.   When I want to watch cable, I go to the gym! 

The television show was disappointing and slightly disturbing.  The experience itself was wholely unsatisfying.  Once the episode aired, the lights came on and that was it.  No one wanted to know what the assembled audience thought.  There was no mechanism to provide feedback.  I was left wondering why the cable channel bothered.  If this wasn’t an opportunity for market research, perhaps it was part of a viral campaign?  If so, it worked.  I have told two friends how terribly disappointing and unfunny I found the show to be. 

I have since read that an integrated campaign to introduce the show included more than just screening episodes of the show at movie theaters in major markets.  The first episode is available on websites like YouTube and on some mobile phones.  Since I went to a screening, I am surprised that I needed to find this out using Google.  While I applaud the use of multiple channels and delivery devices, more integration could have been done.  Why not let the audience at the movie theater know about additional ways to view the first episode?  Why not enable viewers to take an on-line test to determine which personality featured in the show best fits them?  At a minimum the channel could have informed the audience at the screening I attended when the first episode would air.