Magazine article Marketing

Modelling a Perfect Profile

Magazine article Marketing

Modelling a Perfect Profile

Article excerpt

As a direct marketer, it is very reassuring to find myself in the new age of targeted or one-to-one marketing -- where organisations are becoming far more responsive to the concepts of recruiting and retaining quality customers in a more targeted manner.

One-to-one marketers must strike a balance between recruitment cost and customer value. Any fool can recruit bad customers who are happy to take up your offer and then leave. The smart approach is to learn from your existing quality customers and find out if they share any common characteristics which can be used to select prospects for future direct marketing.

Taking this approach will ensure you maximise the chances of recruiting customers who will not leave, will repay their recruitment costs quickly and who have, most importantly, an above-average chance of being profitable to your organisation. Nothing is new in life -- this is really an application of the Pareto Principle or 80/20 rule.

The key to profiling in this way is to analyse as many of your customer characteristics as possible, to ensure you really do find those characteristics which define quality customers. At SJA Direct, we use our Customer Base Analysis product, which is based on developing a list of characteristics of existing customers.

This is obtained by combining existing data held by the client -- such as company size, trading history and so on -- and external information which can be bought in. We use computers to analyse this data, using a combination of techniques designed to give us a much deeper understanding of what characteristics tend to be associated with profitable behaviour.

It must be stressed that such analysis cannot be done using off-the-shelf solutions, because no two companies are the same in terms of how they approach the market or in their cost structures and ability to generate profits.

We use regression analysis which, essentially, compares every characteristic against another to determine its overall ranking in contribution towards profitable behaviour. Ultimately, we are able to determine which particular traits we should select if we wish to target prospects with a significantly greater chance of behaving in the same way as the best performing customers. …

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