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Drilling Down Newsletter - November 2000

In this issue:

#  Must Read Customer Marketing Links

#  Jim Speaks: Thunder Lizard Web Marketing 2001

#  Print Drilling Down Book now available

#  Jim Reviews Two New Data-Driven Marketing Books:

     eloyalty - Ellen Reid Smith
     The Engaged Customer - Hans Peter Brondmo

#  Drilling Down Site: Practice What You Preach

#  Questions from fellow Drillers


Hi again Folks, Jim Novo here.  Let's do some Drillin'!

Customer Marketing Links

As most of you probably know, I scan 30 or so sites and about 70
or so print pubs for articles on data-based Internet marketing,
posting links to these articles on the site weekly:

These articles are selected primarily because they provide very
short-in-supply case studies, metrics, or process models for
relationship marketing, customer retention, or customer loyalty
marketing on the Web.

Here's the problem: Many of the best articles are from DM News,
the bible of offline direct marketing, and these articles are only
available for 30 days before they move into a "paid" archive, so
unless you check my fresh articles page at least once a month for
articles from DM News, you miss them or have to shell out
$25 / yr to them for access to the archives.

Several folks asked me to include links to the very best DM News
articles in the newsletter so they would be reminded and not miss
out.  Sounds good to me.  Here's the best of the best still
available free on the DM News site:

Note to website readers: The links in the following section will not be accessible unless you subscribe to the DM News archive.  To get these links via e-mail before they go to the paid archive, sign up for my newsletter.

* Sows Seeds of Success
November 21, 2000 DM News
Great example of using RFM and demographics combined to
produce very high ROI e-mail campaigns, as detailed in
the Drilling Down book.

* Successful E-Marketing Gets Personal
November 16, 2000 DM News
My opinion - 'Net marketers are spending too much time and effort on
working with demographics, and ignore a much more powerful tool -
simple customer behavior measurement.
I'm not the only one...

* Go Beyond Targeting Best Customers
November 14, 2000   DM News
Wow, an article about subsidy costs, not a widely covered but very
important topic for anyone concentrating their marketing efforts on
"best customers".  This is a critical read for those new to database
marketing or those who have been swept up in the "e-loyalty"
movement (more on this in the book review below).  Of course,
measuring and avoiding subsidy costs is an entire chapter
of the Drilling Down book!

* Wading Beyond the Click Stream
November 17, 2000 DM News
Good overview of customer behavior modeling including
my favorite approach - "tried and true" RFM.

There are others...I don't want to make the newsletter too long.  You
can check them out at:

By the way, I've also been asked to put past newsletters on the web
site.  This is, of course, a good idea and now that we've had two
newsletters since the launch letter, I'll be doing just that at:

Thunder Lizard Web Marketing 2001

Nick Usborne, the Chair for this conference, has invited yours truly
to address the attendees in Monterey, CA March 12-14, 2001.
Topic is "CRM Rules You Can Use".  From the speech description:

"Find out which data is the most important to profitability
and how to create action-oriented customer loyalty profiles for CRM.
Use these profiles to monitor the current and future health of your
business, and create high ROI marketing campaigns and site design
changes to attract and retain the most profitable customers."

Should be a ton of fun.  As you probably know, I believe most Internet
marketers are making two fatal mistakes:

1.  Paying too much attention to demographics and not enough to the
behavior of customers over time

2.  Grinding through a lot of meaningless and ineffective data to
micro-target before deploying more effective macro timing approaches
that can drive business profitability

The speech will focus on a very simple method for assessing the future
value of a customer, creating a simple customer "score" to rank this
future value, and then using these scores in a dozen ways to improve
profitability.  Essentially the topic of my book.

The Thunder Lizard crowd is more into hands-on than the other
conferences where everybody talks theory but nobody talks "how to".
Right up my alley.  If you're going to the show, make sure you say hi
at the conference, it would be great to meet some of you in person!

More info:

Print Drilling Down Book

Folks, many of you on the list have been waiting for word on
availability of the printed version of the Drilling Down book.  I'm
happy to say it's ready through Booklocker.  For those who haven't
been following this, the print book is being manufactured one at a
time through a new POD (Print on Demand) technology.  So much for
"being early"; there were a couple bumps in the road.  But it's ready
to roll, and if you are one of those who has been patiently waiting,
my apologies for the delay and thanks for hanging in there.  For
those who have already placed orders for the physical book, they
have shipped or will ship in the next day or so.  For more info, see:

New Data-Driven Marketing Book Reviews

One-to-one marketing, customer loyalty marketing, customer retention
marketing, permission marketing, and so forth are all pretty similar
from the perspective of using customer data to drive business
profitability.  You can name it anything you want and maybe change the
way it's delivered to the customer, but in the "back-end", where the
data analysis happens and the tactical ideas are derived, they're
pretty much all the same.  So I use the term "Data-Driven Marketing"
to cover them all in one swipe.  OK?

"eloyalty - How to Keep Customers Coming Back to Your Website" by
Ellen Reid Smith is a good read for those who are pondering a rewards
based loyalty program.  The book tries to take a broad swing at
implementing Data-Driven marketing techniques (you don't need points
to drive customer retention) but I'm not sure it's a real value
outside of the point-specific program area.  Her basic philosophy is
to concentrate on best customers and optimize everything for them.
This is fine, as long as you understand the financial dynamics of
promoting to best customers and how to avoid driving subsidy cost
- the cost of promoting to a person who would have purchased or
visited anyway.  These costs can kill you and are the primary
reason why best customer programs fail.  Not mentioned in the book.

It's light on implementation details (as many of these books are) but
it does provide excellent overall strategic direction, detailing the
multitude of planning issues and potential pitfalls of point programs.

It's a great "roadmap" type of book.  As the developer / financial
modeler of a few point programs myself (including the CBS/SportsLine
program she praises), I can tell you first hand - if you are thinking
of doing a points-based program, make sure you read this book first.
You will save yourself some pain - guaranteed.  But you will also have
to hire someone with hands-on experience to develop the real tricky
parts.  She's probably a good choice, judging by the book.

"The Engaged Customer - Email Strategies for Creating Profitable
Customer Relationships" by Hans Peter Brondmo is a must-read book.
Very skillful presentation of the big picture surrounding Data-Driven
marketing methods, and the application of e-mail in particular.  As I
did in the Drilling Down book, he has taken the best of what offline
Data-Driven marketing has to offer and "onlined it", even down to
making similar changes in the RFM scoring that drives most customer
valuation and loyalty models.  A very detailed presentation of all the
issues, including profiles of hardware and software vendors, that a
large company would need to know to implement a world class customer
retention e-mail program based on proven methods.

If you're a small biz and have read my book, there may not be much
value in the Brondmo book for you, since he doesn't get into the
"how to" of scoring customers by future value and using these scores
to create high ROI campaigns and web sites.  But using these
techniques is his message, and if you are a midsize to large
business and need firepower to convince people to take this route,
his book will be invaluable, as it contains real-world "big business"
case studies, planning guides, resource lists, and everything else
you need to get started.  Read his book first, then give mine to the
people who will have to "do the work".

Drilling Down Site

I don't want to run on too long here.  I put the DM News article links
and the book reviews in this month because they're time sensitive, but
they've added a lot of content, so I'm cutting these last two sections
a little short.....I don't want to overstay your welcome.

Last month I told you the percentage of visitors who bought a book at
the Drilling Down site was improving rapidly and promised to let you
in on how I was making this happen.  I said the secret to keeping
customers is getting the right ones in the first place.

I'm a direct marketer in a very small niche (at this time), so search
engine rankings are incredibly important because there really isn't a
good place to advertise to folks like you using banners or
newsletters - it would be very inefficient.  The good news:  You tend
to use very specific terms when you search for information.  The bad
news?  The search engines have started to rely more heavily on how
many sites are linked to yours to determine site rankings.

As a new site on a niche topic, it's very tough to get these links
going.  So I just went out and bought high rankings through the
pay-for-performance engines, Sprinks (,
and the new self-service advertising program on Google.

I'm here to tell you this stuff works, and now that these links are
being distributed in many of the other engines, the reach is growing.
And, about 2/3 of my search terms cost only 1 cent per click, so the
cost is minimal.  What's the real story behind the pay-for-performance
search engines, how did I go about figuring out the keywords, pricing,
and copy, and how does setting it all up work?  I will devote a large
part of next month's newsletter to this subject.

Note: If you'd like to see how this works, go to HotBot:

search on "lifetime value", and look for the Featured Links near the
top of the page.  I realize some people are not fond of paid links
as users of search engines in principal.  I'm fond of anything that
drives high Returns on Investment for marketing dollars spent.

Questions from fellow Drillers

One quick question from the small business side this month, from a
person trying to decide if they can use the Drilling Down method.

Q:  Jim, I've got a bunch of transaction records in an Excel
spreadsheet and in separate files, but I don't have a customer
"database".  How do you create a customer database, and what special
software do I need to use your method?

A:  You don't really need "database software" or a formalized
"database" for that matter to use the Drilling Down method.  The book
explains how to use an Excel spreadsheet to score customers using the
MAX and SUM functions, plus a little Data Sort and plain old Copy and
Paste.  That's all there is to it.

That said, if you have MS Access, the software that comes with the
book actually creates a "customer database" in Access from all your
separate transaction records, and then creates the customer valuation
and loyalty scores for you.  You could then import other information
into this database (like answers to survey questions) and have
yourself a pretty slick little platform for high ROI customer
marketing, especially if you know how to drive page content
with a scripting language.

But you don't need to go there to use the Drilling Down method.


That's it for this month's edition of the Drilling Down newsletter.
If you like the newsletter, please forward it to a friend; the
subscription is free!  Subscription instructions below.

Any comments on the newsletter (it is too long, too short, prefer
articles included in newsletter to a  website link, etc.) please send
them right along to me.  And don't forget, keep sending your customer
Valuation, Retention, Loyalty, and Defection questions to me.

'Til next time, keep Drilling Down!

Jim Novo

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