Drilling Down

Turning Customer Data into Profits

 with a Spreadsheet

Site and Book topic:

Maximizing marketing ROI with customer behavior analysis

Learn Do-It-Yourself Customer Analysis, Customer Modeling,
and High ROI Customer Marketing Techniques

What exactly will you learn in this book?  Glad you asked, and unlike most authors who tease and then don't deliver, I will tell you exactly what is in the book.  If for some reason you don't believe any of this, just check out my background and read the testimonials.

The new (July 2004) 356 page edition of the Drilling Down book includes an additional 100 pages of reader questions answered by the author on applying the techniques learned in the book to specific business situations.  The questions are organized into these categories:

Definitions and Background Information
Customer Loyalty and Retention
Customer Segmentation and LifeTime Value
Professional Services
Ad-Supported Content / Subscription Models
Online / Offline Retailing and Catalogs
Distribution / Operations / Channel Mgmt
The ROI of Online Branding Efforts

These reader questions cover a wide range of industries such as publishing, facilities management, hospitality, education, call centers, professional services, manufacturing, telecommunications, retail, travel, banking & finance, enterprise software, autos, conference management, casino, and utilities.

DRILLING DOWN BOOK OVERVIEW

Introduction

Chapter 1 Jonesin' for Some ROI
Chapter 2 Customer Profile or Customer Model?
Chapter 3 Data-Driven Marketing and Service Drivers
Chapter 4 Customer Marketing Basics
Chapter 5 Customer Marketing Strategy: The Friction Model

These five chapters provide a basic introduction to the idea of customer modeling. Customer profiles and models are compared (they are not the same, but can work together!), and the fundamental ideas behind predicting customer behavior and customer value management are explained.  These chapters lay the foundation for your three simple customer model toolkits.  Each toolkit has an explanation of how and why the model works, provides examples, and then shows you step by step how to use the model to increase your profits or reduce costs. 


Latency Metric Toolkit

Chapter 6 Trip Wire Marketing
Chapter 7 The Hair Salon Example
Chapter 8 The B2B Software Example
Chapter 9 Turning Latency Data into Profits

Latency is the very simplest customer behavior model there is, and is very intuitive. If you know who some of your best customers are and have thought to yourself, "Gee, it has been a while since best customer X has been in" you are thinking about Latency.  Your thought process is correct; but you have no method for determining when "been a while" means "they are not coming back," and you have no specific action plan to turn your thoughts into increased profits.  The Latency toolkit shows you how to measure Latency and set up "trip wires" that will tell you how to increase the profitability of your marketing or reduce costs.

Latency is often the preferred model to use in service-oriented businesses where there is a monthly billing arrangement or other "built-in reason" for repeat activity such as with utilities, insurance, telecommunications, and personal services such as hair salons.

Take the Latency Tutorial


Recency Metric Toolkit

Chapter 10 Predictive Marketing
Chapter 11 The Ad Spending Example
Chapter 12 Turning Recency Data into Profits
Chapter 13 The Online Retail Example

Recency is just a bit more complex than Latency, because it involves ranking customers against each other versus creating a simple "trip wire" for all of your customers.  The Recency approach creates a more finely tuned model, allowing you to segment and target customers with more accuracy and drive profits even higher than you can with Latency. The Recency Toolkit builds on your knowledge  of Latency and shows you how in some cases, using Latency and Recency together generates the highest increase in profits.

Recency is particularly effective in maximizing the margins of promotional programs, often making it the preferred model for retail oriented businesses, ad-supported web sites, and other businesses lacking "built-in reasons" for repeated customer activity over time.

Take the Recency Tutorial

RFM Scoring Toolkit

Chapter 14 Cash Flow Marketing
Chapter 15 A Tweak for Interactive Customers
Chapter 16 No Customer Database? 
How to Set Up a Spreadsheet to Score Customers
Chapter 17 How to Score Your Customers
Chapter 18 The Commerce and Content Examples: 
Turning Scoring Data into Profits
Chapter 19 Case Study: 
Non-Profit Scores 192% Increase in ROI using RFM Model

Predictive marketing is proactive, meaning you predict the likelihood of future events based on customer models, where each customer is given a "score."  These scores rank customers against each other for likelihood to respond, to defect from your business, to become a high value customer, and so forth.

Don't get nervous about the word "model"; it's not some kind of black box thing you can't understand.  If you can use a spreadsheet (or write some simple code), you can create these customer scores using a model called RFM.   Why are scores important?  Three reasons:

• RFM Scores tell you which customers are drifting away, getting ready to leave you, and determine whether it will be profitable for you to act to try and keep the customer
  

• RFM Scores tell you what best customers like and what they don't like
  

• RFM Scores tell you how to make more money by allocating resources where you will drive the most profitable activity 

More Details On RFM

Advanced Data-Driven Marketing Toolkit

Chapter 20 Customer Characteristics & Multiple Scores 
Chapter 21 Customer LifeCycles: Scores Over Time
Chapter 22 Customer LifeCycle Grids: 
High Performance Behavior-based Modeling
Chapter 23 Straight Talk on LifeTime Value (LTV)
Chapter 24 LTV, I'd Like to Introduce You to the CFO

Learn how to use multiple behavior rankings together with demographics to rank the ability of ads, products, services, and content to generate the most profitable customers. Combine RFM with Latency to produce an incredibly powerful customer value management tool - Customer LifeCycle Grids. The Grids are visual maps of customer retention and defection you can use as the "master plan" for managing your entire customer marketing effort.  Spot high ROI customer groups coming in the front of the business and plan ahead for multi-step defection campaigns at the back of the business with counts of customers in the various stages of defection - track, manage, and profit from the Customer LifeCycle.

More Details on the Customer LifeCycle


Reader Questions Answered

Chapter 25 Fellow Drillers at Work

• Definitions and Background Information

• Customer Loyalty and Retention

• Customer Segmentation and LifeTime Value

• Professional Services

• Ad-Supported Content / Subscription Models

• Online / Offline Retailing and Catalogs

• Distribution / Operations / Channel Management

• The ROI of Online Branding Efforts 

Jim invites owners of the book to e-mail specific questions on using the customer models and techniques in Drilling Down.  These questions have been organized into the functional categories above, and cover a wide range of industries such as publishing, facilities management, hospitality, education, call centers, professional services, manufacturing, telecommunications, retail, travel, banking & finance, enterprise software, automobiles, conference management, casino, and utilities.

Predicting Campaign ROI

Chapter 26 Predicting Campaign ROI: Set Up
Chapter 27 Predicting Campaign ROI: The Model
Chapter 28 Predicting Campaign ROI: Fine Tuning
Chapter 29 Expense and Revenue You May Not be Capturing: 
Subsidy Costs and Halo Effects
Chapter 30 Some Final Thoughts: Seasonality, CRM, Behavioral Inertia, Data-Driven Program Outlines

Those interested in nailing the topic of ROI right between the eyes will learn how to use your scoring techniques to optimize every customer campaign to generate the most acceptable mix of sales and profits, and predict the ROI of a promotion before you even send it out! 

Plus, learn how to find the "missing profits" in every campaign, the profits you can't measure by just looking at response alone. Your campaigns are more profitable than you think! Learn how to measure the profits generated by customers who don't use your campaign tracking device, and the profitability of customer campaigns with no response tracking device at all - a "must have" for service-oriented initiatives like thank you programs and VIP benefit programs for best customers.

This section also contains additional information applicable in special situations such as seasonal effects on modeling, tweaking your timing on campaigns, and modeling for rules-based CRM. Also provided is an overview of and comparison between the different mainstream data-driven marketing program approaches - Database Marketing, Frequency Marketing, Relationship Marketing, Loyalty Marketing, Permission Marketing, and One-to-One Marketing.

There's more! Automate the basic customer scoring process on large groups of customers. Use the software included free with the complete edition of the book.  Windows OS and MS Access and Excel required to run the Drilling Down software application. 

What would you like to do now?

Get the book with Free customer scoring software at:

Learn Customer Marketing Models and Metrics (site article list)

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