Data Mining: A Strategic Plan

There is great advice out there about the how-to of data mining. But there is precious little about the why-do.

DMers often launch a campaign under tight deadlines and fail to think through how they’ll use customer data to support it or measure the results. In effect, they create more work and risk for themselves.

If only they focused on strategy as much as they do on tactics. All would be well.

Where to start?

First, the marketer should streamline the preparatory work for each campaign by building a consistent method for identifying opportunities within the customer base.

This builds efficiencies into the marketing process and helps deliver relevant and consistent customer experience across multiple channels, thereby improving marketing efficiency and effectiveness.

The tools for tactical data mining are widely available and generally reliable, making it easy to apply them to one-off efforts. But there is no software package to guide marketers through the strategic approach; they have to step back and do the thinking themselves or engage a partner who can help guide them through the process.

What follows are the six stages in the hierarchy of data analytics, and the value of each to a well-rounded strategic approach:

Data access: This is the foundation on which marketers build by collecting all pertinent information about customers, including name, address, demographic data, history of transactions, product and service purchases, and responses to past campaigns. Every business should earmark the appropriate resources to ensure this data is as accurate and up-to-date as possible.

Reporting/profiling: Key performance indicators are developed and applied to track the performance of customer relationship management (CRM) initiatives over time and across customer segments. Here, marketers can also track client migrations across various segments, compare responders versus non-responders, and gauge campaign response over time.

Current value: The underlying premise for CRM is that not all customers provide equal value to an organization. Therefore, the first step for any CRM initiative is to measure customers by their value to the organization.

For example, 20% of clients might account for 80% of a company’s business, and would be worth a lot of the marketer’s time and money. Another 30% might be designated as moderately valuable, but having the potential to move up into the top 20%; they’d require a different kind of pitch.

The last 50% could account for just 5% of the company’s business; they are less committed, motivated largely by price, and require still another approach (or, maybe, none at all).

Segmentation: In this stage, marketers identify prospects who share similar characteristics – who, therefore, belong to one of several specific segments.

This provides the opportunity to focus on the highest-value segments and acquire new customers who match the segments identified as most desirable. As well, sales pitches can be custom-tailored to suit each segment using what is known about those segments. Customers can be segmented using many criteria.

But segments should focus on identifying customers with similar product and service needs as implied through neighborhood socio-demographic characteristics, life stage, usage behavior, or needs and attitudes as identified by market research.

Predictive analytics: Use this to predict each customer’s likelihood to initiate a particular activity in future based on their unique characteristics and past behavior.

The benefits represent a “win-win” for the organization and its customers, with marketing ROI rising, and customers receiving more relevant offers – the principle of “right message to the right customer.” Predictive models are developed to assist marketing at all stages of the customer lifecycle, including acquisition, cross-sell and up-sell, retention, and re-activation.

Potential value: This is assessed by combining each customer’s current value with their potential to buy more in the future. As with current value, potential value creates an even clearer way to identify the most valuable customers, the ones worth keeping.

It also helps to identify those less valuable customers with potential for entering the most-valuable category, and those low-value clients on whom it may not be necessary to spend as much.

Database marketing strategic framework: Using these six stages, marketers can develop a database-marketing strategic framework that differentiates customers based on the value they currently contribute to an organization, their product and service needs, and their potential future value.

Each segment so identified should be assigned its own distinct marketing objectives. And it is crucial that these distinct objectives are understood across all channels of an organization, including marketing, sales, customer service, and operations, so that all can work in support of them.

Additionally, a strategic approach to database marketing can facilitate consistent communications to the customer across multiple channels, including Print, Web, e-mail, POS and others.

During a campaign, and at the end, it is crucial to have key performance indicators to measure and track results in a segment-specific way. What are the criteria for success?

What will the organization regard as a minimum ROI? These indicators will be invaluable in planning subsequent campaigns, but they have to be developed in advance.

Finally, it is essential to devise ways to capture all of the data, both raw and processed, which went into a campaign and emerged from it. As with the performance indicators, this data is essential for crafting subsequent campaigns; rather than starting from scratch with each campaign.

Rick Brough is director of consulting services for Toronto-based Transcontinental Database Marketing.

http://multichannelmerchant.com/crosschannel/lists/data_mining_plan_0225/

Beware This Pesky Practice

This article was first sent to Fools as part of our 'The Good, The Bad and The Ugly' email series.
The latest 'ugly' in our 'The Good, The Bad and The Ugly' series is the widespread practice of financial cross-selling.
Essentially, this is when an institution you already use (like a bank or building society) tries to sell you one or more of its other products, such as a credit card or loan.
They try it in person, over the phone or in the post - and often, they don't quite hit the nail on the head...
Here's what happened to me a couple of days ago, when I was posting some parcels at the Post Office. The conversation went something like this:
Me: "I'm posting a few things I've sold on eBay..."
Counter assistant: "Ooh yes - why's that?"
Me: (sheepish grin) "I'm trying to clear my last credit card so I can cut it up!"
Counter assistant: "That's nice... can I interest you in a Post Office credit card?"
This assistant was friendly, patient and helpful.
But she was also clearly under pressure to push that darn card - despite the fact it was completely the wrong product for me.
Almost everyone I know has had similar things happen to them. A friend of mine is regularly pestered by her high street bank, which phones her up with eager requests to 'review her account'.
These 'reviews' quickly turn into enthusiastic offers of more loans, more credit cards and so on.
Such cross-selling 'campaigns' seem to hit me in waves. Whenever I called my bank last year (for example, to cancel a direct debit), I usually spent the last few seconds of the call fending off fervent attempts to sell me a mortgage.
Which was annoying - as I had expressed no interest in buying a house, and had neither the means nor the inclination to do so.
Another friend, who works for a bank, explained that a sellers' 'league table' was pinned up on the wall, with all the glory, shame and financial bonuses that involved.
So what do the banks say?
One press officer at a big bank told me that his employer recommends products that are suitable for you, based on the individual financial profile it has built up.
For example, if your credit rating has recently improved, you could be eligible for some new products.
However, at its worst, I think cross-selling is unethical. In the current economic climate, financial providers are keen to emphasise the importance they place on more responsible borrowing and lending.
But when you're pounced on several times a month by employees waving inappropriate financial products - you begin to wonder just where all this 'responsible lending' is.
Of course, cross-selling is one reason high street branches remain as profitable as they do.
It would be much cheaper for providers to transact most business online, or on the phone - but then you wouldn't get the face-to-face encouragement to buy that dratted PPI...
Anyway, here at The Fool we recommend that you shop around for every financial product you need.
If it turns out two of your best products are with the same provider - then great.
But as I pointed out in Why You Should Cheat On Your Bank, loyalty to a single institution doesn't always make financial sense.
And anyway, pesky, persistent selling techniques undermine my sense of loyalty pretty quickly.
If you really are looking for a credit card, try our credit card comparison centre to get the right one for you.

What you need to be a Business Intelligence Consultant ??

I read this article recently here the author Reinald Bormann from Harvey jones system gives and insight about the BI Consultant
Most recruiters daily face the sad reality that there is a serious skills shortage in the local IT industry.
The business intelligence (BI) market is not exempt. With BI going from strength to strength since 2003, market-savvy IT professionals are trying to enter this lucrative market, with many cross-skilling on multiple BI platforms or products.
One of the changes afoot in the market is that companies no longer simply deliver a BI solution and then leave clients to their own devices.more often than not, client/consultant relationships extend well beyond delivering the initial project.
Successful BI consultants must be well-rounded people with solid project experience, preferably across various market sectors.
Successful BI consultants should excel in the following four areas:
* Technical ability* Interpersonal skills* Project experience and* Market knowledge
Technical ability
BI projects are being completed quicker today than they were three years ago, with the result that top BI consultants can work on multiple projects each year.
Properly applying the latest technology should always be a BI consultant's highest priority and, with so many technical components to these solutions, specialising in at least one component is beneficial.
While core skills allow consultants to work on projects other than BI, they should always strive to improve their abilities on other components.
Interpersonal skills
All projects involve interaction between BI consultants, fellow team members and clients. Interpersonal communication is a vital skill that each BI consultant must master.
The wealth of knowledge contained in BI consultants' heads is not easily transferred. Effective use of communication skills allows them to share knowledge across the team.
Successful BI consultants also act as mentors and guide internal IT teams through the uncharted waters of their first BI projects. It is BI consultants' role to point clients toward good resources, books and conferences for further education.
Project experience
IT consulting is always evolving. Because project rotation is generally more frequent than in the past, BI consultants must quickly understand new businesses in order to deliver solutions on time and within budget. Getting to grips with unfamiliar businesses is always difficult, but is also very rewarding.
Successful BI consultants leverage their technical capabilities to re-use certain components developed on previous projects.
Essentially, project experience breeds problem identification and reinforces the use of best practice and methodology.
Market knowledge
Just as consultants become comfortable, a new product or toolset emerges, which nine times out of 10 changes the way they deliver. This is not necessarily a bad thing, as successful BI consultants usually make market changes work for them by aligning their technical skills in the new direction.
The release of Microsoft Performance Point Server (PPS) at the end of the year is a very good case in point; most BI organisations are uncertain of the true impact PPS will have in the market, so having skilled BI consultants at hand when the product is released could ensure a significant market share of new BI solutions on PPS.
It should be every BI consultant's goal to be as active as possible in the community. That means attending seminars and Webcasts, taking part in BI forums or using other knowledge-sharing channels.
Conclusion
In today's challenging and demanding BI market, successful BI consultants must be well-rounded and experienced people, able to adapt quickly to various business environments, continuously share knowledge internally and externally, understand future BI market trends and, most importantly, be very sound technically.
If you are lucky enough to have such a person in your employ or can find one, hang on to them tightly with both hands as they are worth their weight in gold.
By Reinald Bormann, BI consultant at Harvey Jones Systems