Despite what IT experts might wish, the collection of data for email marketing is not an end in itself. It has a function and must be used in order to get something from it. Whilst the investment in processing the data can be, and should be, fairly low, any cost is too expensive if you do not get a decent return on investment. ROI is the guiding light.
The fundamental parameters are:
- How often they purchase,
- How much they have paid,
- How recent was their last purchase, and
- What they have bought
- Each individual heading can be productive when used in isolation but it is in combination that you get real returns.
One way to extract essential information is to divide each of the first three (we’ll address the product later) into, for example, four parts although in practice you might, depending on product, go for more. Taking ‘how often’, the intent should be to more or less divide the customers into three equal parts, say one purchase a week, one a month and one a quarter. The final division is no data. You then do the same for value and repetition.
You score each individual part from 3 to 0, the last being for no data. Each customer will have a score of from 0 to 9.
This is a somewhat crude exercise and you might feel a scale with five, six or considerably more headings would suit your particular type and size of business, but this provides an understandable introduction to the system.
The actual product or products the customer has bought from you is the final classification. This requires a great deal of care in how the customers are differentiated.
A company selling leisure items which parents might use as well as children could find it useful to differentiate between target ages. It could be that Christmas is more important in sales for those aimed at children and for adults a snowboard might be expected to have a shorter annual sales period than cameras.
The hierarchy of customers provides a reliable method of assessing their value for email marketing. It also gives an early warning of possible problems and in the same way highlights those whom a little investment might give an excellent ROI. The only question is what you should do with this information.
Looked at in its crudest way, it is apparent that those scoring 9 might be the ones who will give excellent ROI. They should be cultivated, encouraged and rewarded. Research has shown that those buying expensive items and frequently have a high loyalty.
This cultivation could take the form of being sent special offers, lower than the norm. Pestering with untargeted email marketing should be avoided. It is all too easy to click the opt-out if they feel they are being taken for granted.
Further, and as importantly, any fall from their lofty position needs to be identified and addressed. And with a degree of urgency.