Good direct marketing is all about information. The more you know about your customers and prospects, the more accurately you can target them. So far, so obvious. But how do marketers get this information within the sort of timeframes that enable them to react quickly and create or tweak campaigns based on their customer's buying behaviour or other relevant factors?
A good customer database is, of course, an essential first step. But for any well-targeted direct marketing campaign, the best database in the world is only as good as the marketer's ability to interrogate it, segment it and identify the people who should receive the next piece of communication.
Increasingly, marketers are turning to desktop analytical tools to help them mine their customer data to reach the warmest prospects for any given offer. With these tools, the days of putting a query into a busy IT department and waiting days or weeks for an answer are long gone.
If a marketer wants to know how many of the 500,000 people on their database earn more than £40,000 a year, they simply query the database on their own PC via a simple user interface and get the answer in a matter of seconds. If they want to know where these people live, they can raise another query and, again within seconds, produce a map showing the geographic breakdown of these high earners.
In fact, once the marketer has isolated the group they are interested in, they can keep on drilling down, digging deeper, and slicing and dicing the customer details however they want until they end up with a highly-targeted group that looks, on paper, perfect for the next mailing.
If this sounds like a bit of a trial-and-error approach, that's because to a certain extent, it is. The speed with which these systems can interrogate the database and turn round the answers means that the marketer can literally fish around the data, looking for trends and correlations until they hit on something interesting. They may go down a few blind alleys along the way, but the beauty of it is that the marketer can simply follow their train of thought to see where it leads, knowing that if they do draw a blank, they'll have wasted very little time doing so. They could potentially unearth something of real value to the business.
"These systems give the marketer the ability to wade into large volumes of transactional and customer data and interrogate it extremely quickly," says Simon Lawrence, joint managing director of data consultancy Information Arts, which rents out a number of these tools to its clients. "These marketers are typically unsophisticated in terms of analytical techniques, yet they can ask questions of the software without any specialist training and even without knowing precisely what it is they're trying to find out."
It's the ability to carry out this 'train-of-thought' analysis, plus the speed with which the results are returned, that gives these systems their appeal. And there's no shortage of systems to choose from, many of which go beyond mere segmentation and data mining.
The Royal Mail's Data Realiser, for example, is strong on address management and suppression, and can also append data with lifestyle and demographic information from other data sources. There are also campaign management tools, including an element of data segmentation and analysis as part of the package.
Others, such as Daybook's Daybook Enterprise, are enterprise-wide solutions that include data management and analysis as one small part of a much bigger whole.
But for pure segmentation and data mining, probably the best known solutions are Alterian, from the company of the same name, and Viper from SmartFocus.
Alterian's solution consists of two core modules that are part of any implementation. Alterian Analysis Engine is a column-based analytic technology, while Alterian DDV is a data discovery and visualisation tool used to carry out the analysis and visualise the results. Optional modules are available for predictive modelling, reporting and campaign management.
According to Alterian vice president of marketing Denise Senter-Loyola, demand for the software is being fuelled by the need for marketers to be more precise with their information and to make their marketing spend go further.
"If you were doing this stuff via the IT department, you'd have to outline all your requirements in advance, and then when you get the results back, it just spawns more questions," she says. "The danger is that you get into a vicious cycle where it takes weeks to get the answers that Alterian can get you in 20 minutes."
And Bill Mooney, sales director of GB Group, which recently launched GB Wisdom for Retail, an Alterian-based solution for the retail sector, points out: "Once people understand the power and flexibility of these tools, they come up with whole new ways of considering how to segment their database."
GB Wisdom for Retail builds on the Alterian technology with analysis and functionality designed with retail operations in mind. So in addition to routine database segmentation, it can reveal, for instance, what else shoppers who bought one product had in their basket. If this reveals that shoppers who bought a certain style of jeans also purchased a certain pair of boots or a certain top at the same time, the retailer might want to run a promotion linking the two items.
At SmartFocus, sales director Jonothon Butters says competitive activity is another key driver for this type of system.
"There are something in the region of 3,500 credit cards available now in the UK," he explains. "The depth companies have to go to, to win, train and retain customers, is incredible, so marketers need any tool they can get that will help them understand their customers better and therefore make them more money."
And SmartFocus marketing director Emma Chablo points out that the software is now working its way down to mid-tier companies.
"If you look at the top 100 data-rich organisations, you'll find that most are using marketing analytical software," she says. "But now we're seeing mid-tier companies adopting it too, companies such as Direct Wines, Royal Mint and Carphone Warehouse, companies that revolve around customer data."
Tracking customer behaviour
Holiday camp Butlins is another company benefiting from using analytical software. Database marketing manager Richard Dannan has been using the Viper system for two years to analyse customer behaviour.
"The software enables us to look at booking and brochure request histories and start tying the two together," he explains. "If brochure requests came from a new household, we can find out if that household booked, which offer they took, which resort they went to, what type of accommodation they chose, how many mailings we sent before they rebooked.
"Before we started using Viper, we used to try to interrogate the database to the same degree, but some of the answers we get in 20 minutes could take us two days on a database using Sequel code."
Dannan is clearly enthusiastic about the software, but he also sounds a note of caution. These are powerful tools, but to get the most out of them, you need to know what you're doing.
"When you look at tools like the one we use, it's all drag and drop and it's brilliant," says Dannan. "It's a major plus point, but it's also one of the system's biggest drawbacks. If you don't understand how the information knits together, you can get caught out.
"These are very powerful and capable tools, but there still needs to be an underlying understanding of the data below to carry out some of the more complicated analysis," he adds. "Once you get under the skin and start asking difficult questions, you need someone who understands data."
It's a problem also identified by Darren Gregory, senior technical consultant at direct marketing services company Vertis.
He's all in favour of marketers being empowered to interrogate their own data to plan mailing campaigns, but when it comes to the more sophisticated predictive modelling work, such as calculating prospects' propensity to buy a given product, Gregory argues that there's often still a role for the data bureau.
"Most marketers are more interested in marketing than in the intricacies of the data mining," he says. "There's still a place for the bureau to do the number-crunching and the deep analysis. IT departments at some companies may be geared up to do this, but many aren't - and that's where we come in."
Even Alterian acknowledges the potential for users of these systems to become bamboozled by the sheer breadth and depth of analysis they facilitate.
"Often we find that marketers have been so focused on creative or functional execution that they aren't sure where to start in terms of the questions they should ask of their database," says Senter-Loyola.
To combat this problem, Alterian is building a standard set of reports into the next version of its software, due in the spring.
This will put some standard and universally useful metrics, such as customer profitability, on a pull-down menu, with a software Wizard to take the user through the query to produce a customer-profitability report based on the available customer data.
But while some may not know where to start, it seems more likely, given the speed and breadth of these tools, that the problem for most marketers will be knowing when to stop.
As Vicky Larkins, general manager of Astron, a partner of AIMS-Software, which provides marketing automation software, points out: "These tools free up marketers' time and let them get back to pure marketing. When you send queries into IT, it's like putting them into a black hole - you don't know what you'll get back. But these tools bring you close to your data and by doing so, they bring you closer to your customers."
THUS BRINGS IN VIPER TO SPEED UP MARKETING DATABASE
In 2001, telecoms company Thus called in database marketing consultant Information Arts to rebuild its customer database, bringing several billing databases together to create one marketing database that Thus could use for direct mail and telemarketing campaigns.
But even with all the data in one place, querying the data wasn't as simple as it could have been. First, Thus's queries had to be accommodated within Information Arts's workstack, and second, when Thus direct marketing manager Des Lynch got the results of his queries back, it wasn't always what he had expected. This sometimes led him to raise further queries on the data, all of which took more time.
In the spring of this year, Thus began using SmartFocus's Viper software, accessing the Information Arts-hosted database via a secure website. The difference it has made, according to Lynch, has been remarkable.
"I can access my database at any time of the day or night, and run queries in seconds, which would have taken a week before," he says. "It's much easier to do the analysis and to pick lists for campaigns. If I change my mind about anything, I can slice and dice the data to my heart's content." Viper, says Lynch, has helped reduce the size of mailings thanks to greater precision in the targeting. It has also enabled him to identify where there's a greater propensity to buy one product, such as web hosting, based on ownership of another, such as an ADSL line, in specific market sectors. Even the way the analysis is presented helps him make the business case, he says.
"It's very easy, for example, to produce Venn diagrams that senior management can look at and grasp straight away," says Lynch. "There are so many things we can do now that we just couldn't do before."