5 Ways to Boost ROI Using Customer Data

Marc Solomon  |  Chief Strategist

January 12, 2015
 

You’ve undoubtedly been hearing a lot of hype about “Big Data” and “Analytics.” But what do these buzzwords really mean, and what can you actually do with them that will have a real business impact?

Data alone isn’t useful, and it has the potential to be distracting or even misleading. And analytics are only helpful if they’re focused on finding actionable insights — in other words, providing information that helps you make smarter decisions about your marketing, sales and general business efforts.

Here are five specific ways you can leverage analytics to turn your customer data into better business results and increase the ROI of your marketing and sales investments.

1. Target the right customers

You don’t have unlimited resources for marketing and sales, so it’s critical to focus your spend and time on the customers that will generate the most value for you — those that you are most likely to retain and grow. When developing a targeting plan, it’s typically important to consider the customer’s current value (how much revenue/profit are you getting from the customer?) in addition to the customer’s potential value (how much revenue/profit could you get from the customer?).

There are a variety of analytic techniques to identify the right audience, depending on the depth of data that you have and the state of your current marketing efforts. If you’re just getting started with customer analytics or you have limited data, then a relatively simple segmentation may be the best way to carve out the right audience. On the other hand, if you’re already doing some basic targeting and you have a rich set of customer data, then you may want to build predictive models to further enhance your targeting.

2. Acquire new high-value customers

You can typically leverage an analysis of your current customers to help identify the best acquisition prospects to pursue. A better understanding of your existing customers can go a long way to determining which type of prospects are most likely to be interested in your products and become valuable customers. A segmentation or predictive model will help you focus your acquisition marketing efforts where they will be most effective. One of the key issues to consider is which metrics are most important in assessing the success of acquisition campaigns. This is discussed in more detail here → Value Models vs. Response Models.

3. Provide relevant offers and messaging to each customer

Once you’ve determined the right audience for your marketing or sales efforts, you’ll want to decide which offers and messaging to put in front of each customer. Retaining, growing, or acquiring a customer hinges on providing something relevant and compelling to that specific customer.

You can develop customer-level segmentations and models based not only on what a customer has purchased historically, but also on predictions of what that customer is likely to buy in the future. With the combination of customer transaction data and customer attributes, you can infer what a customer may buy in the future based on the purchase patterns of similar customers.

The good news is that today’s marketing technology makes it relatively easy and affordable to provide dynamic customized offers to each customer — you don’t need to stick to a single offer or message based on lowest common denominators.

4. Optimize frequency of communication

Frequency is another key aspect of your marketing strategy that has a big impact on your effectiveness and ROI. If you don’t reach out to customers enough, you may find you’re not in their consideration set. On the other hand, you may be pouring money down the drain if you’re mailing, calling or visiting customers too often. To further complicate matters, it’s unlikely that there is a single magic number when considering the “right” number of contacts per customer. A better strategy likely involves different frequencies for different customers.

A simple way to start is to use what your segmentations or models have told you about customer value. Customers with higher value and potential likely warrant frequent outreach, while it may make more sense to connect with lower-potential customers less frequently.

To truly optimize frequency, you can set up randomized tests to provide some customers with more/less frequent communications. You can then compare the results and costs between the different groups to see which level of frequency is more cost-effective.

5. Focus marketing spend in the right channels

Optimizing spend across channels is difficult, especially if your marketing mix spans across digital, direct and mass media channels. However, with the right processes and systems in place, you can measure (or at least reasonably estimate) the cost-effectiveness of each channel and see where you’re getting the most bang for your buck.

You should also consider running tests with a modified marketing mix across regions or time, so you can measure the marginal impact of shifting spend across channels. The key thing to consider is that you really care about the incremental sales being generated by each channel or campaign. This concept is discussed in more depth in a white paper → Incrementality.

These opportunities to use customer data transcend specific marketing or sales channels. Whether your business is driven primarily by direct mail, digital marketing, or a national sales force, analytics can help you focus your attention and spend on the right audiences and optimize your marketing and sales programs.

Hopefully this blog gave you a helpful idea or two. If you’re not sure what your next step should be or what makes the most sense for your business, give us a call to discuss the possibilities.


Marc Solomon |  Chief Strategist
Marc, who holds an MBA from the Stanford Graduate School of Business, has leveraged analytics to drive results for Fortune 500 companies for more than 20 years. As chief strategist, Marc uses his keen understanding of key market trends and insight into target audience behaviors and attitudes to provide strategic recommendations to our clients.

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