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Fuel Marketing Effectiveness with Customer Analytics

Helping small and midsize businesses make smarter, faster marketing decisions

Fuel Marketing Effectiveness with Customer Analytics

Table of Contents
Executive Summary ........................................................................... 1 The Brave New World of Marketing ....................................................... 1 The Data Explosion ......................................................................... 1 The Rapid Power Shift to Customers .................................................. 2 What These Trends Mean for Marketers Like You .................................. 3 The Value of Customer Analytics .......................................................... 3 Selling Designer Clothes the Strategic Way.......................................... 4 Golfsmith Shoots Well Below Par with Help from SAS .......................... 5 SAS Business Analytics Lay Groundwork for Oberweis Success ............ 5 Moving Toward Analytically Driven Marketing ........................................ 6 Davenports Five-Stage Analytical Evolution Model ............................... 7 Enabling the Vision: SAS Solutions for Small and Midsize Business ........ 8 For More Information ........................................................................ 10 About SAS........................................................................................ 10

Fuel Marketing Effectiveness with Customer Analytics

Executive Summary
Satisfied, loyal customers are the lifeblood of small and midsize businesses. But as a marketer, how do you satisfy highly empowered customers who expect you to have a personalized dialogue with them, offering them only products and services that they want, through their preferred channels, precisely when they are ready to buy? While this question plagues marketing executives at all organizations, it is even more significant for marketing departments at small and midsize organizations due to their budget and human resource constraints. These marketing executives are facing an important moment in history a moment of great challenge and even greater opportunity. They have access to unprecedented amounts of customer data that could easily overwhelm them and paralyze decision making. But if harnessed properly, this data can turn into a gold mine of customer insight. The companies that will survive and even thrive in this fast-moving environment will be the ones that can quickly derive information from their customer data, and use it to align around their customers to build trust-based relationships with them. One thing is clear: given the scale and speed of the trends affecting marketing today, businesses that fail to strategically leverage analytically driven customer insight will gradually lose their competitive edge. This paper gives small and midsize business leaders and marketing executives an introduction to customer analytics and illustrates how applying analytics can help significantly improve marketing effectiveness while reducing costs. It explains not only why you need to shift to analytically driven marketing strategies and plans, but also what you need to develop and execute your plans.

The Brave New World of Marketing

Two dominant trends are transforming the way we market to our customers today: The incredible explosion of data, generated both inside and outside the organization. The shift in power from companies to consumers, driven by advancements in technology. Lets take a closer look at what these trends mean for your organization.

The Data Explosion

The world contains an unimaginably massive amount of digital data today and its increasing tenfold every 10 years.1 As data becomes more abundant, the

1 Data, Data Everywhere, The Economist (February 25, 2010). http://www.economist.com.

Fuel Marketing Effectiveness with Customer Analytics

challenge is not finding information; the challenge is quickly pinpointing the relevant bits needed to make informed, timely decisions. Many companies are jumping on the data bandwagon by collecting, storing and linking massive amounts of data including data on market trends, competitive activities, product directions, and above all, customers. More importantly, customers themselves are generating massive amounts of new digital information. It comes through postings on social media sites like Facebook and Twitter, the data exhaust created when they visit companies websites, click-through Web pages, product and service reviews on blogs, and much more. This kind of data is growing exponentially not only in size, but also in strategic value to marketers. The reason? For those who need to engage in a one-to-one manner with their customers, this data can provide a direct window into their wants, needs, preferences, interests and attitudes.

Harnessed properly, customer data

can provide marketers a direct window into their customers wants, needs, preferences, interests and attitudes.

The Rapid Power Shift to Customers

Over the past few years, there has been a continuous power shift to customers. Comparison shopping sites such as Pricegrabber.com let buyers quickly search for lowest-cost vendors. Cameras in mobile phones can scan barcodes and allow users to comparison shop at local stores in seconds. Customers can even avoid communications they dont want to receive for example, by using digital video recorders and email spam filters to bypass commercials and other unwanted marketing communications. The advent of Web 2.0 technologies has greatly expanded their scope of influence, too. Now customers can influence tens of millions of people to buy from you or not by tweeting, blogging and writing online reviews of your products and services.2 Another manifestation of this power shift is that customers today expect personally relevant product and service information delivered to them in a timely fashion via their preferred channels as well as through interactive online relationships. Failure to do so frustrates them and can turn them away. Worse still, an inability to personalize communications can badly affect your business image. If you blindly push products and services on customers rather than giving them relevant information when they are receptive to considering offers and making purchasing decisions, they will consider you out of touch with their needs. To avoid making a bad impression, you need to manage the four Ps of marketing (product, price, promotion and place) on an individual, one-to-one level. And this demand for one-to-one interaction does not go away even after a sale is made. Todays customers expect that all future interactions such as handling a query, scheduling a repair or resolving a billing issue will also be handled in a customer-centric manner.

2 Nielsen Consumer Research. Nielsen Global Online Consumer Survey. April 2009.

http://blog.nielsen.com/nielsenwire/wp-content/uploads/2009/07/pr_ global-study_07709.pdf
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Fuel Marketing Effectiveness with Customer Analytics

What These Trends Mean for Marketers Like You

So, as a marketing executive of a small or midsize business, what does all of this mean to you? What youre witnessing is a breakdown of the traditional mass marketing model and the establishment of a revolutionary, customer-centric and highly personalized one-toone marketing model. Independent research has shown that only 10 to 15 percent of customers feel that the ads they see are relevant to their needs and wants; and even fewer find direct mail and email marketing relevant. More than three-quarters want companies to let them decide how they can be communicated with. And, when they do talk with companies, they want the dialogue to reflect all the things the company already knows about them. To accomplish this, you must be able to fully leverage your customer data. Rather than just continuing to market to customers in your old, routine way, you need to analyze your customer data to derive unique insights about them based on what they are buying and where they are buying, how they use your website, their social media interactions and more. Then, you must tailor all your interactions based on this insight. This involves: Accessing and integrating customer information such as demographic details and purchase history from various systems and sources across the organization to get a complete view of the customer. Analyzing this information to generate new, micro-level insights unique to your business. Using these insights to engage your customers in relevant and effective dialogues to create a differentiating customer experience that emphasizes building longterm relationships over individual transactions. Managing this process with key performance indicators (KPIs) to understand which of your marketing strategies and plans are most effective so you can improve how you engage with the customer.

The Value of Customer Analytics

A better marketing process and strategy that is powered by deep customer insight, not simply intuition, manifests the real value of customer analytics. When organizations are able to drive better decisions and adopt a customer-centric approach, real competitive advantage is gained. The impact of analytically driven marketing is not only more profitable or more loyal customers, but also an increased likelihood of turning these customers into advocates for your business through social media arguably one of the most effective marketing channels today.

Fuel Marketing Effectiveness with Customer Analytics

Many small and midsize businesses have already benefited from using SAS. Consider the experiences of three customers who used SAS to improve customer segmentation, run targeted marketing campaigns and optimize marketing promotions. For example, one online retailer gained tremendous returns by using SAS Analytics to derive customer insights from large amounts of data and then using that insight to create highly targeted marketing campaigns.

It is never too early to start with

analytics, even if you dont have full-blown capabilities right away. Simple segmentation based on one or two key variables, implemented at the right time, could go a long way in helping to move the business forward.
Tamara Gruzbarg, Senior Director of Analytics and Research, Gilt Groupe

Selling Designer Clothes the Strategic Way

SAS Analytics helps Gilt Groupe thrive
Online retailer Gilt Groupe sells heavily discounted designer and luxury products to a members-only community through flash sales that typically last just 36 hours. The company, founded in 2007, now has almost 1.5 million customers a huge increase from its original 15,000-member email list. As the company added more members and new merchandise to its mix, managing all the customer data in disparate systems and formats became a huge challenge for marketing analysts, who still relied on manual SQL queries. It took them a long time to produce reports, and the company couldnt easily segment its customers. Getting answers to important questions usually meant making a separate query for each. Gilt Groupe recognized that it needed a better way to gather, analyze and report data so it could know customers more intimately and be able to customize marketing more effectively. We were able to get a deep understanding of our customer base through the profiling, segmentation [and] predictive analysis that we conduct with SAS Analytics, said Tamara Gruzbarg, Senior Director of Analytics and Research. With all of our data sources and marketing history, and SAS on top of it, we can dig deep into all of the behavioral patterns and understand the preferences of different customer segments. Among the successes Gilt Groupe has experienced from using SAS: 10 to 20 percent lift for customers browsing in new merchandise categories A who had not purchased in those categories. 100 percent lift (for the first three deciles) for women who shopped at the mens A site but had not yet purchased. 20 percent increase in new member conversion rates (customers who join but A havent purchased). It is never too early to start with analytics, even if you dont have full-blown capabilities right away, said Gruzbarg. Simple segmentation based on one or two key variables, implemented at the right time, could go a long way in helping to move the business forward.

Fuel Marketing Effectiveness with Customer Analytics

Another company found it could significantly reduce costs, speed processes and improve campaign response rates with SAS, rather than relying on a third-party company to manage its customer databases.

Golfsmith Shoots Well Below Par with Help from SAS

Golfsmith is one of the largest golf specialty retailers in the US, with 75 retail stores and a large Web and catalog following. Prior to using SAS, Golfsmith had hired a third-party company to manage its customer databases. But processes slowed to a crawl, and it took a long time for example, two or three months to identify campaign conversion matches. The company wanted to improve the response rate of marketing efforts, reduce costs and develop a stronger relationship with its customers. Golfsmith chose SAS Analytics so that it could better understand customers across all sales channels, segment them and increase mailing response rates. The results have been dramatic. Campaign results are now available in near-real time. Most importantly, the company increased direct mail response rates from 10 to 60 percent, decreased data merging costs by 50 percent and shaved 70 percent off the time it takes to prepare campaign results. With SAS, Golfsmith knows which of its customers are active or inactive, and which are motivated by sales or new offerings. Based on that information, it can develop targeted campaigns to meet each segments needs. According to Mu Hu, Director of Customer Relationship Management, Every month we learn from the past month so we can make quick decisions. A consumer goods company gained valuable insights about its customers preferences, and boosted sales through targeted promotions and campaigns, using SAS to analyze cross-channel data.

SAS Business Analytics Lay Groundwork for Oberweis Success

Oberweis Dairy is a 90-year-old business that has grown from a family-owned dairy farm to a major regional food manufacturer and retailer. Today, it has three business units: a home delivery network, dairy stores and a wholesale business. Each has different business models, customer databases and information systems. Oberweis wanted better visibility into inventory, product quality and the customer base across all channels so it could optimize performance for the company as a whole. To accomplish this goal, Oberweis brought SAS analytics into a decidedly old-fashioned business. Oberweis used SAS to help link its Moola customer loyalty card, representing in-store sales, with the home delivery customer database. Across channels, we
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Fuel Marketing Effectiveness with Customer Analytics

can now get a sense for what they purchase, how often they visit, what promotions they respond to or not, and how their behavior changes as they visit us in different locations, said Bruce Bedford, Vice President of Marketing Analytics and Consumer Insight for Oberweis Dairy. With an integrated view across channels, he said, we can now very easily see what happens in one channel and how it affects the other. That is a tremendous advantage to us as marketers and has really allowed us to understand how we can best serve our customers, and ultimately how we can optimize profitability in all channels, With SAS, Oberweis: ound that it could easily mine dairy store receipt data, match it against F loyalty card information and select the best candidates for home delivery sales campaigns. Learned that running specials on milk sold through grocery store chains doesnt cannibalize from dairy store or home delivery sales. In fact, a sevenfold increase in sales at grocery stores during a recent promotion helped introduce many new customers to the Oberweis brand. Quickly identified and corrected manufacturing glitches by mining customer complaint data. Gained valuable insights on what factors would improve customer satisfaction and retention. I think implementing SAS is a great way for a small company to become a large company, Bedford says. One of the most valuable assets of any company, large or small, is its data, but you have to analyze it. SAS is one of the best tools available to do that.

With an integrated view across

channels we can now very easily see what happens in one channel and how it affects the other. That is a tremendous advantage to us as marketers and has really allowed us to understand how we can best serve our customers, and ultimately how we can optimize profitability in all channels.
Bruce Bedford, Vice President of Marketing Analytics and Consumer Insight, Oberweis Dairy

Moving Toward Analytically Driven Marketing

Are you convinced about the value of marketing analytics but wondering how you can evolve your organization to be more analytically driven? Are you concerned that your budget and IT constraints will prevent you from taking advantage of customer data and analytics to drive fact-based marketing decisions? You are not alone. Most companies both big and small, regardless of what resources are available to them are far from strategic users of their customer data. In fact, Tom Davenport, co-author of Competing on Analytics, places all organizations in one of five stages of analytical evolution. The majority of companies fall in stages one through three. That means they are either analytically impaired, employ localized analytics, or at the most, have analytical inspirations. Only a few companies have achieved the distinction of being an analytical company, and even fewer are considered analytically competitive.

Fuel Marketing Effectiveness with Customer Analytics

Davenports Five-Stage Analytical Evolution Model 3

Stage 1: Analytically impaired. The organization lacks one or several of the prerequisites for serious analytical work, such as data, analytical skills or senior management interest. Stage 2: Localized analytics. There are pockets of analytical activity within the organization, but they are not coordinated or focused on strategic targets. tage 3: Analytical aspirations. The organization envisions a more analytical S future, has established analytical capabilities, and has a few significant initiatives under way, but progress is slow often because some critical factor has been too difficult to implement. tage 4: Analytical companies. The organization has the human and technological S resources it needs, and it applies analytics regularly and realizes benefits across the business. But its strategic focus is not grounded in analytics, and it hasnt turned analytics to competitive advantage. tage 5: Analytical competitors. The organization routinely uses analytics as S a distinctive business capability. It takes an organizationwide approach, has committed and involved leadership, and has achieved large-scale results. It portrays itself both internally and externally as an analytical competitor. To get started on your analytical journey, first you have to identify where you stand in terms of your analytic quotient. Once you have done that, focus on building a solid foundation of analytics within your marketing function by taking the following steps: 1. Get executive commitment. Nothing starts an organization on a new journey like senior executive support, so get someone in the leadership to support your cause. If senior management understands the value of customer analytics, you will be more likely to succeed at promoting its use across the organization. 2. Build an analytical culture. Show the value of customer analytics to your marketing peers and other decision makers, especially those who still rely on past experiences and instinct. Share with them a few quick wins, or stories of marketing successes. Use simple examples so that they can better understand the impact analytics can make on marketing decisions. Help them see how analytically driven customer insight enables an organization to achieve its strategic marketing goals, and why its so important to make analytical usage more pervasive within your organization. 3. Get the right tools. Small and midsize businesses like yours have few IT resources and limited in-house analytical talent to consistently derive customer insights from your data. Adding to the problem, most available solutions are either too simplistic or too complex to suit your needs. Most offer very limited, standard capabilities like Excel, OLAP drill-down and simple query and reporting. Others are meant for larger

Davenport, Tom and Harris, Jeanne. Competing on Analytics. March 2007.

Fuel Marketing Effectiveness with Customer Analytics

enterprises that have big pools of analytical talent with advanced programming skills. To truly achieve systemic use of analytically driven customer insight within your marketing organization, you need easy-to-use, affordable and above all integrated technology solutions for managing and analyzing data. These types of solutions can provide self-sufficiency to your business users and reduce their dependence on IT.

Enabling the Vision: SAS Solutions for Small and Midsize Business
As empowered customers increasingly influence the four Ps of marketing, your role as a marketer must evolve accordingly. Its important to obtain and use customer knowledge so you can design meaningful interactions with them. You also need to measure and report results from marketing activities and campaigns so you can continuously improve and maximize marketing performance. A technology framework that supports you in controlling marketing outcomes and optimizing marketing spending should enable the: Collection of detailed customer profile and behavior data. Analysis that turns this customer data into unique customer insight. Ability to use this insight to personalize and improve customer interactions across channels. SAS solutions for small and midsize business provide an integrated technology framework specifically designed for organizations seeking an affordable solution thats easy to deploy and use. The solutions include core capabilities in data management, analytics and reporting. With these capabilities, you can access and integrate customer data from disparate internal and external systems. Then, you can build a closed-loop marketing process to deploy customer-centric business strategies. A large proportion of the customer data you need resides in unstructured formats such as emails, complaint letters, audio recordings from call centers, and product or servicerelated comments on social media sites like Facebook and Twitter. Unfortunately, most of this data is ignored during analysis because companies are unable to convert these conversations into reliable, structured formats. Data management tools from SAS enable you to mine this textual data so that you can leverage the information buried within with assurance that the information is accurate and complete. Built-in data quality capabilities enable you to eliminate duplicate records and assign missing values so that you will be able to achieve a complete, trustworthy view of each customer. From simplistic query/reporting and OLAP drill-down to more advanced data mining, forecasting and optimization, SAS provides small and midsize businesses with one of the most comprehensive sets of analytical techniques available. With SAS solutions, you can segment customers based on their profitability, risk potential, age,
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Fuel Marketing Effectiveness with Customer Analytics

income and other demographic variables to target them with more relevant, effective messages. You can also predict their future behavior. For example, you can calculate their propensity to buy certain products and services by doing a life-stage analysis to determine when and in which order they are likely to purchase a product. As a result, youll be able to target them with right offers at the right times. Plus, you can model various scenarios based on customer preferences, purchase history, price sensitivities, etc., to determine how changes in your marketing strategies, pricing and promotion plans will affect future demand and profitability. You can use this knowledge to optimize your customer interactions and improve your marketing investments. Through a complete portfolio of reporting tools that includes dashboards, Webbased reports and portals, robust visualization abilities and integration with a familiar Microsoft Office interface SAS solutions help you interactively monitor and track the performance of your campaigns and other marketing activities. With SAS, you can avoid the need to pore over large spreadsheets or static reports. Instead, you can use automated alerts to inform relevant individuals or groups if a campaign is not performing as planned, and take corrective actions early on to improve and optimize the performance of your marketing dollars. As Figure 1 shows, powering your business by the right technologies and marketing best practices from SAS enables you to develop a business model that aligns your organization and the delivery of its products and services around the customers who represent your best opportunities for profitable, long-term growth. Using SAS solutions also positions you to take advantage of two market-changing trends the explosion of data and the emergence of highly empowered customers.

Figure 1: SAS supports a closed-loop, customer-centric business model.

Fuel Marketing Effectiveness with Customer Analytics

For More Information

To learn more about how SAS can help you evolve into a highly effective competitor through the strategic use of analytically driven customer insight, visit www.sas.com/ software/smb. View white papers, success stories and other resources to learn how companies like yours are already using SAS to improve their marketing effectiveness.

About SAS
SAS is the leader in business analytics software and services, and the largest independent vendor in the business intelligence market. Through innovative solutions, SAS helps customers at more than 50,000 sites improve performance and deliver value by making better decisions faster. Since 1976 SAS has been giving customers around the world THE POWER TO KNOW.

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