Escape Information Poverty
Too many times I’ve heard marketers complain that “I’m data rich but information poor.” They’ve got transaction data, clickstream data, survey data, demographic data, you name it. There’s no doubt they have many data points for each of their customers.
Despite these troves of data, the most common direct marketing campaigns are what we call “spray and pray,” a ‘one size fits all’ approach where all recipients get the same message. This approach ignores the wealth of available data.
Sometimes sending the same message to all customers is appropriate: “Free shipping this week” is a typical example. Most times, however, such static messages dramatically underperform compared to more relevant, individualized ones.
Marketers realize this and want to use their data to improve marketing results. They often don’t know how to do it, so they lament about being ‘information poor.’ Frequently their first problem is not even knowing the right questions to ask, rather than not having the information that answers the questions.
The right questions
The first step on the road out of information poverty is discovering the right questions to ask.
There are two types: questions about how your company is performing and questions about your customers. In our experience, when marketers complain about information poverty, they are mostly thinking about the first type of question — how much revenue did the new campaign deliver? What is our retention rate? And so on.
While useful, these questions are not the best way to understand a company. Instead of asking about retention rate, marketers should be comparing the number of new customers to the number of customers becoming inactive — is my bucket leaking or filling? In addition to total revenue, they need to know what fractions come from existing customers compared to revenue from new customers. Answers to these questions give a much clearer picture of where the business is headed, but they are still focused on company performance, not on customers.
The best approach
The uncommon approach to information wealth, in fact the fast lane to get there, is asking the second type of question. For each customer, individually, when are they likely to make another purchase? What products are they likely to buy? Which customers are at risk of defecting to a competitor?
The key question is, what products are individual customers likely to buy that they have never before purchased? This is called ‘cross-sell’ and it’s hard, but doing it effectively expands your share of wallet, increases retention, and builds customer loyalty. It’s the best way to grow revenue and grow a business. All the answers to the first type of question will not be as valuable to your company as a successful cross-sell campaign.
So our advice to marketers complaining about too much data and not enough information is to dig into the data that is most predictive of future behavior, your transaction data. It’s a gold mine you already own. Use it to learn what each customer is ready to buy. Use that learning in individualized, highly relevant marketing campaigns. You’ll be too busy counting the money coming in to worry about being information poor.