As we discussed last month, sometimes a firm's business dynamics are so straightforward that very successful statistics-based predictive models can be built off just a handful of simple RFM-type variables. Nevertheless, it is always important for companies to capture and maintain the atomic-level detail that is a key characteristic of Best-Practices Marketing Database ContentSM. The following are just some of the many ways that atomic-level detail can be leveraged:
The creation of homogeneous customer groups; that is, where every customer within a given group has at least one thing in common. Homogeneous groups, because they are very interpretable, provide the foundation for highly-targeted specialty marketing programs. Often, excellent results can be achieved by crossing categories of previously-purchased merchandise with overlay demographics such as age, estimated income, marital status and presence of children. The statistical tool of choice to create the groups will be either cluster or tree analysis, depending on the goals of the project.
The establishment of merchandise commonality ; that is, identifying merchandise that tends to get purchased together. The resulting merchandise groups assist with promotional content tailoring such as selective binding, differential ink jetting, and one-to-one email messaging. They also inform product placement decisions within e-commerce sites and brick-and-mortar stores, and provide the foundation for strategic line extensions. Product affinity analysis is the technique of choice for establishing commonality across transactions, while market basket analysis identifies commonality within transactions.
Other forms of merchandise-driven data mining; for example, product-specific predictive models and product progression ("next most likely purchase") analysis.
Data-driven operational CRM. Here, relevant customer and prospect information is packaged for access at touch-points such as call centers and e-commerce sites; for example, the content-tailoring of phone scripts and Web pages to drive up-sell and cross-sell efforts.
Marketing Action/Reaction Systems ("MARS"); that is, automatic triggers that generate tailored promotions whenever customers display predefined behaviors. These behaviors can be both positive and negative; for example, good customers who have lost "velocity" over time. MARS can also be employed to support rapid responses to competitive developments.