Targeting Smarts = Sales Targeting Smarts = Sales SuccessSuccess

-or--or-

How targeting can get How targeting can get meme to to the table the table early in the gameearly in the game

Daniel G. WiestDaniel G. WiestPresident, Wiest & Associates Inc.President, Wiest & Associates Inc.

June 21, 2005June 21, 2005

Today’s agendaToday’s agenda

Targeting & Media PlanningTargeting & Media Planning Practical solutions with DataPractical solutions with Data LTV & RFM – how mail winsLTV & RFM – how mail wins Direct Mail as an integrated solutionDirect Mail as an integrated solution PrivacyPrivacy Using what’s in your databaseUsing what’s in your database B-to-B vs. B-to-CB-to-B vs. B-to-C Media ComparisonsMedia Comparisons MeasurementMeasurement

John WanamakerJohn Wanamaker

1838-19221838-1922 Developed the “department store”Developed the “department store” pioneered fixed prices and money-pioneered fixed prices and money-

back guarantees back guarantees reformed the U.S. postal system reformed the U.S. postal system

while serving as Postmaster while serving as Postmaster General (1889-93) in the General (1889-93) in the administration of President administration of President Benjamin Harrison Benjamin Harrison

John WanamakerJohn Wanamaker

"I know I waste half the "I know I waste half the money I spend on money I spend on advertising. The advertising. The problem is, I don't problem is, I don't know which half." know which half."

The solution isThe solution is

TargetingTargeting

When done properly, mail When done properly, mail wins hands downwins hands down

QualityQuality of the lead of the lead Mail Mail convertsconverts better better ProfitabilityProfitability of the customer of the customer Lifetime ValueLifetime Value Lower costLower cost to maintain that to maintain that

customercustomer

Now forget about us for a Now forget about us for a moment…moment…

What does your What does your customercustomer go go through when they’re deciding to through when they’re deciding to use Canada Post products?use Canada Post products?

Put yourself in your Put yourself in your customer’s media planning customer’s media planning shoesshoes

““Will this Will this targeting stuff targeting stuff really help me really help me in in mymy performance performance review at the review at the end of the end of the year?”year?”

What you’ll learn next:What you’ll learn next:

Your customer’s choicesYour customer’s choices How to ensure Canada Post How to ensure Canada Post

remainsremains a choice a choice

Your customer sees Canada Your customer sees Canada Post asPost as

Just one of Just one of manymany media choices media choices An additional expense that must An additional expense that must

continually be justifiedcontinually be justified Additional production, execution and Additional production, execution and

tracking overheadtracking overhead Often a tough Often a tough up-front up-front ROI performerROI performer Not yet coming to the table with Not yet coming to the table with

enough smarts about their business to enough smarts about their business to justify all thatjustify all that

Here’s what media planning Here’s what media planning to target effectively to target effectively reallyreally looks like…looks like…

Your can easily help your Your can easily help your customer see Canada Post customer see Canada Post as…as…

A necessary choice that can help A necessary choice that can help them reach their target customerthem reach their target customer

A marketing expense that can A marketing expense that can easily – and easily – and definitivelydefinitively – be – be trackedtracked

A medium that can help track and A medium that can help track and lift their lift their otherother media response media response

A stellar performer when judged by A stellar performer when judged by LTV: Lifetime ValueLTV: Lifetime Value

Some of the tools that will Some of the tools that will help you succeed include:help you succeed include:

Understand your customer’s Understand your customer’s targetingtargeting needs – needs – coldcold

Knowing how your products solve Knowing how your products solve those targeting needsthose targeting needs

Be a champion of tracking and Be a champion of tracking and analysisanalysis

Helping match Canada Post Helping match Canada Post products that will improve her products that will improve her performance reviewperformance review

Helping match Canada Post Helping match Canada Post products that will improve products that will improve herher performance review performance review

This is This is notnot about you about youThis is about what This is about what metrics, attributes, metrics, attributes, performance measures performance measures your customers is being your customers is being graded ongraded onAnd how you can help And how you can help herher meet those objectives meet those objectives

What might those What might those performance measures performance measures include?include?

Acquisition – I need to create more Acquisition – I need to create more customerscustomers

Retention – I need to keep my Retention – I need to keep my customers from disappearingcustomers from disappearing

Upsell – I need to sell more to my Upsell – I need to sell more to my existing customersexisting customers

Awareness – I need to make sure Awareness – I need to make sure my potential customer know about my potential customer know about meme

All of those measures can be All of those measures can be successful if you focus on:successful if you focus on:

TargetingTargeting MeasurementMeasurement ROIROI ……and you can win on and you can win on allall counts counts

A simple media planA simple media planMedia Quantity Cost/ Cost/

Production Media Total % # Resp. % # Conv. Per Cust. Total Per Cust. Total

RETENTION

Direct Mail House FileBest customers 5,000 $12,500 $0 $12,500 3.50% 175 $71.43 80.0% 140 $89.29 $200.00 $28,000 $110.71 $15,500Dormant customers 15,000 $22,500 $0 $22,500 1.10% 165 $136.36 75.0% 124 $181.82 $150.00 $18,563 ($31.82) ($3,938)Sub-Total 20,000 $35,000 $0 $35,000 1.70% 340 $102.94 77.6% 264 $132.70 $176.54 $46,563 $43.84 $11,563

ACQUISITION

Addressed MailResponse List A 10,000 $8,000 $960 $8,960 0.50% 50 $179.20 40.0% 20 $448.00 $75.00 $1,500 ($373.00) ($7,460)Response List B 10,000 $8,000 $960 $8,960 0.40% 40 $224.00 40.0% 16 $560.00 $75.00 $1,200 ($485.00) ($7,760)Compiled List 10,000 $8,000 $600 $8,600 0.15% 15 $573.33 30.0% 5 $1,911.11 $50.00 $225 ($1,861.11) ($8,375)Sub-Total 30,000 $24,000 $2,520 $26,520 0.35% 105 $252.57 38.6% 41 $654.81 $72.22 $2,925 ($582.59) ($23,595)

UnaddressedTrading Area A 10,000 $3,000 $10,000 $13,000 0.50% 50 $260.00 40.0% 20 $650.00 $75.00 $1,500 ($575.00) ($11,500)Trading Area B 10,000 $3,000 $10,000 $13,000 0.40% 40 $325.00 40.0% 16 $812.50 $75.00 $1,200 ($737.50) ($11,800)Trading Area C 10,000 $3,000 $10,000 $13,000 0.40% 40 $325.00 30.0% 12 $812.50 $50.00 $600 ($1,033.33) ($12,400)Sub-Total 30,000 $9,000 $30,000 $39,000 0.43% 130 $300.00 36.9% 48 $812.50 $68.75 $3,300 ($743.75) ($35,700)

EmailList A 20,000 $2,000 $5,000 $7,000 0.30% 60 $116.67 50.0% 30 $233.33 $60.00 $1,800 ($173.33) ($5,200)List B 20,000 $2,000 $5,000 $7,000 0.20% 40 $175.00 50.0% 20 $350.00 $50.00 $1,000 ($300.00) ($6,000)Sub-Total 40,000 $4,000 $10,000 $14,000 0.25% 100 $140.00 30.0% 30 $466.67 $93.33 $2,800 ($373.33) ($11,200)

NewspapersNewspaper A - Insert 50,000 $5,000 $3,750 $8,750 0.50% 250 $35.00 40.0% 100 $87.50 $50.00 $5,000 ($37.50) ($3,750)Newspaper B - Insert 50,000 $5,000 $3,750 $8,750 0.40% 200 $43.75 30.0% 60 $145.83 $40.00 $2,400 ($105.83) ($6,350)Newspaper C - Insert 50,000 $5,000 $3,750 $8,750 0.40% 200 $43.75 30.0% 60 $145.83 $50.00 $3,000 ($95.83) ($5,750)

Revenue Net ValueCosts Proj. Response Conversion

For many in the room, those For many in the room, those plans are plans are muchmuch more more complicated…complicated…

Broadcast TelevisionBroadcast TelevisionCableCableRadioRadioNewspaperNewspaperInternetInternetSearch Engine Search Engine OptimizationOptimizationMagazineMagazineBannersBannerse-maile-mail

Paid Search Engine Paid Search Engine AdvertisingAdvertisingPoint of PurchasePoint of PurchaseCo-op advertisingCo-op advertisingPackage InsertsPackage InsertsOutdoorOutdoorCommunity Community NewspapersNewspapersOnline SponsorshipsOnline SponsorshipsMailMail……and and moremore

How can I be viewed as an How can I be viewed as an expert in such complex stuff?expert in such complex stuff?

Understand your customer’s decision-Understand your customer’s decision-making processmaking process

Understand where CPC fits within that Understand where CPC fits within that process, as well as other elements in process, as well as other elements in the planthe plan

Bring solutions to the tableBring solutions to the table Add valueAdd value Help Help herher get a better grade at the end get a better grade at the end

of the yearof the year

I love taking notes…

““Do you guys Do you guys have any idea have any idea how how toughtough it is it is for me to figure for me to figure out which media out which media to chose for my to chose for my target target audience?”audience?”

What you’ll learn next:What you’ll learn next:

How your customers targetHow your customers target What What reallyreally matters in targeting matters in targeting Where Canada Post excels in Where Canada Post excels in

targetingtargeting

Understanding the Target Market Understanding the Target Market

What do you know about :What do you know about :

Which media appeals most to target market?

When is target market most responsive time

& seasonality ?

How do they prefer to respond: mail, e-mail,

phone, etc.?

What is their

lifestyle?

Consider importance of graphic & verbal presentation of product

TARGET MARKET

Selecting Media for Direct Selecting Media for Direct Marketing Marketing

1. Be informed by

database information

2. Be informed by media providers,

research

3. Develop media test plan

4. Test media5. Use learning to refine media plan

6. Rollout

ACQUIRE, RETAIN, GROW, WIN BACK,

AWARENESS

Using response media to target Using response media to target effectivelyeffectively

Fax

CUSTOMER DATABASE

E-mailTelemarketing

DR TV DR RadioMagazines & Newspapers

DIRECT RESPONSE MASS MEDIA

DIRECT MARKETING 1-to-1 MEDIA

Addressed Mail

UnaddressedWeb

Focusing on the Target MarketFocusing on the Target Market

Target market includes people Target market includes people who:who:

– Already use your product/service: Already use your product/service: existing customersexisting customers

– People similar in profile to existing People similar in profile to existing customers: prospectscustomers: prospects

Focusing on the Target Focusing on the Target MarketMarket

Essential to understand target market Essential to understand target market in order to:in order to:– Successfully develop relevant messages and offersSuccessfully develop relevant messages and offers

– Generate an acceptable response Generate an acceptable response

– Effectively select mediaEffectively select media

Target market profiles, data collection Target market profiles, data collection and legalities of use vary according to and legalities of use vary according to whether they are:whether they are:– Business-to-business targetBusiness-to-business target

– Business-to-consumer targetBusiness-to-consumer target

Core Targeting VariablesCore Targeting Variables

GeographicGeographic

– e.g., province, city, postal codee.g., province, city, postal code

DemographicDemographic

– e.g., Age, sex, income, number of children, e.g., Age, sex, income, number of children, marital statusmarital status

PsychographicPsychographic

– e.g., Lifestyle, motivators, leisure pursuits, e.g., Lifestyle, motivators, leisure pursuits, life-stage needslife-stage needs

Sources of Targeting Sources of Targeting InformationInformation

Compiled Database

Responder Database

In-house Database

Ease of collection

Effectiveness

of Data

Easiest

Toughest

Most

Least

Targeting:Targeting:Effectiveness vs. ComplexityEffectiveness vs. Complexity

TargetingVariables

Geographic

Demographic

Psychographic

Ease of targeting

Effectiveness

of Targeting

Most

LeastEasiest

Toughest

Geopost™ is Geopost™ is getting theregetting there for for psychographic targetingpsychographic targeting

Dan – L7G 4S7• Married• Marketer• Daughter - 15• Cats• Jeep Grand Cherokee• Classical Music• Does OK

George – L7G 4S7• Married• Farmer• Son - 40• Cows• 87 Cadillac• Country• Filthy Rich

Known Psychographics on a house file still generally win the targeting game.

House list: always there for House list: always there for targetingtargeting

If maintained properlyIf maintained properly If thoughtfully populatedIf thoughtfully populated If analyzed for the most relevant If analyzed for the most relevant

variablesvariables If response is trackedIf response is tracked

Where Canada Post can win:Where Canada Post can win:

Move from unaddressed to Move from unaddressed to addressedaddressed

Requires a move up the targeting Requires a move up the targeting ladderladder

Demographics are a start, but…Demographics are a start, but… Stretch for those Stretch for those psychographicpsychographic

variables that satisfy your variables that satisfy your customer’s target audiencecustomer’s target audience

WorksheetQuestions

A 1 & 7

““I don’t really I don’t really collectcollect any any customer customer information. information. How can How can Canada Post Canada Post possibly target possibly target anything for anything for meme?”?”

What you’ll learn next:What you’ll learn next:

How to succeed – even when How to succeed – even when they’re not much data to work they’re not much data to work withwith

Positioning yourself as a strategic Positioning yourself as a strategic partnerpartner

If they do If they do – or –– or – will have a will have a customer file…customer file…

They They areare already already collecting collecting informationinformationYou have a place to You have a place to start developing start developing targetingtargetingYou have a place to You have a place to start knocking out start knocking out your media your media competitioncompetition

Let’s start with a real CPC Let’s start with a real CPC exampleexample

It’s a not-for profit Have responder history CPC’s task: find them more of

their best customers

Donor DescriptionDonor Description Renewals in Renewals in 20042004

LapsedLapsed

Year 1Year 1

LapsedLapsed

Year 2Year 2

LapsedLapsed

Year 3Year 3

TotalTotal

Number of DonorsNumber of Donors 3,4643,464 851851 1,4451,445 1,9981,998 7,7587,758

% of Total Donor List% of Total Donor List 45%45% 11%11% 19%19% 25%25% 100%100%

Donation Dollars Donation Dollars $ 334,311$ 334,311

Lost Donations $ Lost Donations $ $ 57,189$ 57,189 $105,310$105,310 $133,241$133,241 $295,740$295,740

Average DonationAverage Donation $ 96.51$ 96.51 $67.20$67.20 $72.88$72.88 $66.69$66.69

• 45% of the total donor list is considered active because they gave in 2004

• Lost revenue from lapsed donors is almost equal to annual donation for 2004

A look at renewals and lapsed donors at the end of 2004

Total Active Donors End of 2003Total Active Donors End of 2003 3,5033,503

Total Active Donors End of 2004Total Active Donors End of 2004 34643464

Subtract: New acquisitions in 2004Subtract: New acquisitions in 2004 270270

: Reactivations in 2004: Reactivations in 2004 403403

SubtotalSubtotal 673673 673673

Number of 2003 Donors Renewing in 2004Number of 2003 Donors Renewing in 2004 27912791 27912791

Number of 2003 Active Donors Lost in 2004Number of 2003 Active Donors Lost in 2004 712712

• Same donor renewal rate 2003/2004 (2791/3503) = 80.0% vs 67% in 2003

• This means 20% of donors giving in 2003 did not renew in 2004

Donors Lapsed From 2003 to 2004

Donor Segment DescriptionDonor Segment Description # Donors# Donors

2003 Active Donors Lost in 20042003 Active Donors Lost in 2004 712712

New Acquisitions and ReactivationsNew Acquisitions and Reactivations 673673

Net Change To Donor Active Donor Base SizeNet Change To Donor Active Donor Base Size -39-39

Change in Donor Base Size from 2003 to 2004

• The active donor base declined in size by 39 donors going forward from 2003 to 2004.

Year EndingYear Ending

Year BeginningYear Beginning

Of CampaignsOf Campaigns

Beginning Year DonorsBeginning Year Donors

vs Ending Year Donorsvs Ending Year Donors

Decrease in Active Decrease in Active Donor Base Size Donor Base Size

Year to YearYear to Year

% Decrease in % Decrease in Donor Base SizeDonor Base Size

2001 to 20022001 to 2002 (4975 – 4700)(4975 – 4700) -275-275 -5.5%-5.5%

2002 to 20032002 to 2003 4700 – 4226)4700 – 4226) -474-474 -10.1%-10.1%

2003 to 20042003 to 2004 (4226 – 3503)(4226 – 3503) -723-723 -17.1%-17.1%

2004 to 20052004 to 2005 (3503 – 3464)(3503 – 3464) -39-39 -1.1%-1.1%

2005 - 20062005 - 2006 (3464 - (3464 -

Change in Donor Base Size of Previous Years

• There is a significant change in donor base erosion from 2001 to 2004.

New Donor AcquisitionsTable of Performance For Top 12 FSA’s In Winnipeg

FSA Active 04 $RenewalTotal

Donors% Active P ratio Total HH

R3P 258 26970 400 65% 6.9% 5792R3N 202 26573 373 54% 6.4% 5859R3M 282 30523 505 56% 4.9% 10317R3K 120 10421 222 54% 4.4% 5101R3R 188 19270 372 51% 3.8% 9759R3J 260 24493 477 55% 3.8% 12599R3L 176 16655 351 50% 3.2% 10943R2J 145 15529 303 48% 3.2% 9531R2V 182 11928 390 47% 3.1% 12710R3T 257 28763 517 50% 3.0% 17229R2N 95 8042 236 40% 2.8% 8287R2G 182 16888 377 48% 2.7% 13797

FSA Total 2347 236055 4523 51% 3.7% 121924

City Total 3340 319776 7401 45.1% 2.8% 262635Ratios 70% 74% 61% 13% 28.5% 46%

P ratio: Penetration ratio = number of donors within an FSA divided by total households in an FSA.

Active %: active ratio is the percentage of all donors within an FSA that made a donation 2004.

Criteria used for analyzing donor base:

12 34

5

67

8

9

10

11

12

Their top 12 FSA’s in Winnipeg

FSA/walk Active 04 $RenewalTotal

Donors% Active P ratio Total HH

R3P 552 41 2524 53 77% 20.7% 256R3P 563 23 1824 34 68% 19.0% 179R3P 557 28 4276 38 74% 14.5% 262R3P 560 48 4989 70 69% 11.3% 617R3P 562 21 3297 23 91% 10.6% 217R3P 558 4 350 9 44% 8.6% 105R3P 556 5 495 16 31% 6.2% 259R3P 566 26 2876 43 60% 5.9% 725R3P 564 26 2588 35 74% 5.1% 680R3P 554 7 650 15 47% 4.7% 322

Total 229 23869 336 68% 9.3% 3622

FSA Total 258 26970 400 65% 7.0% 5792

City Total 3340 319776 7401 45.1% 2.8% 262635

A look at the top Postal Walks in R3P

Postal Walks With Highest Affinity For Donations

addressedunaddressed

Sample List of Postal Walks To Target With Addressed Mail

FSA/walk Active 04 $RenewalTotal

DonorsActive Pratio Total HH

R3C 1 12 1770 42 28.6% 24.3% 173R3P 552 41 2524 53 77.4% 20.7% 256R3P 563 23 1824 34 67.6% 19.0% 179R3P 557 28 4276 38 73.7% 14.5% 262R3R 623 37 4782 57 64.9% 12.8% 445R3N 540 13 1330 27 48.1% 12.2% 222R3N 542 23 4589 40 57.5% 11.5% 348R3P 560 48 4989 70 68.6% 11.3% 617R3M 518 57 6699 77 74.0% 11.3% 679R3P 562 21 3297 23 91.3% 10.6% 217R3N 543 14 3113 33 42.4% 9.8% 336R3T 658 15 2212 26 57.7% 8.9% 292R3N 541 12 2762 26 46.2% 8.8% 294R2N 762 34 2472 55 61.8% 8.8% 626R3M 504 25 2420 37 67.6% 8.7% 425R3P 558 4 350 9 44.4% 8.6% 105R3M 503 17 1323 36 47.2% 8.5% 426R3M 519 50 6262 66 75.8% 8.4% 787R2G 820 17 2791 23 73.9% 8.4% 275R3M 501 10 1083 17 58.8% 8.3% 205R3L 17 9 870 19 47.4% 8.3% 230R2M 758 6 705 7 85.7% 8.2% 85R3J 468 27 2049 36 75.0% 8.0% 450R3N 547 14 1121 29 48.3% 7.9% 365R3M 505 11 2140 25 44.0% 7.3% 341R2J 969 10 1890 25 40.0% 7.3% 341R3N 548 14 1763 29 48.3% 7.1% 408R3R 609 9 703 15 60.0% 7.1% 212R3T 683 8 855 19 42.1% 7.0% 271R3M 522 8 389 18 44.4% 7.0% 258Total 617 73353 1011 61.0% 10.0% 10130

New Acquisitions Recommendations

Addressed:

• Create a targeted list based on performance criteria of penetration active giving ratios (10,000)

Unaddressed:

• Use the above criteria to target specific postal walks for unaddressed direct mail.

• Quantity not to exceed 150,000 pieces in total.

• Two drop dates for unaddressed – dates to be determined.

The lessonThe lesson

With With simplesimple information from a information from a customer’s file, we can be customer’s file, we can be brilliantbrilliant

It includes unaddressed as well as It includes unaddressed as well as addressedaddressed

It positions us as a strategic partnerIt positions us as a strategic partner It gets us to the planning table It gets us to the planning table

earlierearlier The results keep us coming backThe results keep us coming back

WorksheetQuestions

B 1 - 4

““My creative people My creative people – and most – and most consumers – consumers – consider mail to be consider mail to be junk. I already have junk. I already have all the tire-kickers I all the tire-kickers I need. What I need. What I reallyreally need is need is qualityquality customers.”customers.”

What you’ll learn next:What you’ll learn next:

How you measure a quality How you measure a quality customercustomer

What measures your clients useWhat measures your clients use Where Canada Post kicks the Where Canada Post kicks the

pants off the competitionpants off the competition

Artsy is one thing, but we’re Artsy is one thing, but we’re going…going…

Up-front response is just one Up-front response is just one measuremeasure

Mail can do great for immediate Mail can do great for immediate revenuerevenue

Where mail Where mail reallyreally excels is over excels is over the lifetime value of the customerthe lifetime value of the customer

The quality of those customers is The quality of those customers is far superior to other mediafar superior to other media

Mail customers = more $s for Mail customers = more $s for youryour customer customer

Your mission, should you Your mission, should you decide to accept it:decide to accept it:

Help your customer justify the Help your customer justify the expenditure:expenditure:

to their VP Marketingto their VP Marketing ……as as wellwell as to their CEO & CFO as to their CEO & CFO ……help your customers sell help your customers sell youyou

Mail kicks the pants off other Mail kicks the pants off other media when it comes to LTVmedia when it comes to LTV

What customers are measuringWhat customers are measuring

Front-end/short-termFront-end/short-term Measurement of a Measurement of a

campaign’s results just campaign’s results just following the time of following the time of initial sale or contactinitial sale or contact

Response ratesResponse rates

Back-end/long-termBack-end/long-term Measurement of a Measurement of a

customer/inquirer’s customer/inquirer’s performance (value) performance (value) after the initial sale or after the initial sale or contactcontact

ConversionsConversions Repeat purchaseRepeat purchase Lifetime Value (LTV)Lifetime Value (LTV)

Why LTV? You’re no longer just Why LTV? You’re no longer just selling to marketing & selling to marketing & advertising. You’re selling to advertising. You’re selling to the bean counters.the bean counters.

You don’t need to be math You don’t need to be math expert. The concepts are expert. The concepts are straightforward.straightforward.

Yah, kids. The ideas

ain’t so tough!

How your customers calculate How your customers calculate LTVLTV

EXAMPLE

1000 customers over a 5 year period

Average income per customer = $50.00 per year

Average retention = 70% per annum of customers

Lifetime value calculated at 5 years

How your customers calculate How your customers calculate LTVLTV

YEAR 1 2 3 4 5

Unit sales p.a. 1.0 0.7 0.49 0.34 0.24

Direct revenue $50.00 $35.00 $24.50 $17.15 $12.00

Indirect revenue $6.00 $30.00 $21.00 $14.70 $10.20

Direct costs $24.00 $16.80 $11.76 $8.24 $5.60

Indirect costs $3.00 $2.10 $1.48 $1.02 $0.72

Net revenue $29.00 $46.10 $32.26 $22.59 $15.88

Net present value p.a. (10%)

$29.00 $41.90 $26.66 $16.97 $10.84

Total lifetime value (sum of NPV’s) = $125.37

If you’re not 100% If you’re not 100% comfortable with the math, comfortable with the math, here’s what you here’s what you reallyreally need need to know…to know… What What lookedlooked like a $29 customer like a $29 customer

on day one, is on day one, is actuallyactually a $125 a $125 customercustomer

Other media simply don’t match Other media simply don’t match that $125 customer that that $125 customer that mailmail creates creates on the back endon the back end

The important takeaways for The important takeaways for Canada PostCanada Post

Mail Mail rulesrules when you look at the when you look at the LTV in customers it brings inLTV in customers it brings in

It beats broadcast, magazines, It beats broadcast, magazines, newspapersnewspapers

It produces much more revenue It produces much more revenue over the long haul over the long haul

Worksheet Question A 2.b)

““What kind of What kind of information information should I be should I be collecting collecting up up frontfront to to target target better?”better?”

What you’ll learn next:What you’ll learn next:

Helping your customers collect Helping your customers collect the right informationthe right information

How to become a smarter direct How to become a smarter direct marketer – through simple marketer – through simple observationobservation

What information can What information can youyou be be helping your customers helping your customers collect:collect:

To better target future effortsTo better target future efforts To better forecast responseTo better forecast response To better predict how valuable a To better predict how valuable a

customer will becustomer will be To control costs, forecast To control costs, forecast

revenue, and control bad debtrevenue, and control bad debt

Columbia HouseColumbia House

Zero personalizationZero personalization

Standard packageStandard package

It varies, but you can Learn It varies, but you can Learn from the Mastersfrom the Masters

Become an astute observer of Become an astute observer of what other marketers are doing what other marketers are doing to targetto target

What pieces of information What pieces of information they’re collectingthey’re collecting

Direct Marketing rule of “twice or Direct Marketing rule of “twice or more”more”

Don’t navel gaze…

““I’m a marketing I’m a marketing person -- person -- notnot a a database database person. This person. This targeting stuff is targeting stuff is just one more just one more thing I don’t thing I don’t have time to have time to handle in my handle in my busy day.”busy day.”

What you’ll learn next:What you’ll learn next:

Where the most important Where the most important information is foundinformation is found

A tool to guide youA tool to guide you

If you’re just starting out If you’re just starting out with your customers, take with your customers, take baby steps.baby steps.

To borrow To borrow from our from our friends at friends at Capital One:Capital One:

““What’s in What’s in youryour database?”database?”

Targeting begins at homeTargeting begins at home

Your best source of targeting Your best source of targeting intelligence is current customersintelligence is current customers

You can’t help them target You can’t help them target intelligently unless you know the intelligently unless you know the factsfacts

How many of you:How many of you:

Have seen your client’s data dictionaryHave seen your client’s data dictionary Know what fields are populatedKnow what fields are populated Know what are the key factors that Know what are the key factors that

influence their selects and performance influence their selects and performance metricsmetrics

Know what their ideal customer looks Know what their ideal customer looks likelike

Know how they use this for targeting in Know how they use this for targeting in selecting their other mediaselecting their other media

Don’t need to be expert in Don’t need to be expert in the concepts, but…the concepts, but…

Need to understand the basicsNeed to understand the basics Need to know that that your Need to know that that your

customers are using them to customers are using them to make decisionsmake decisions

If they’re not, you can be a hero If they’re not, you can be a hero for introducing them to this for introducing them to this marketing smartsmarketing smarts

How this applies to CPC:How this applies to CPC:

The higher up you are on The higher up you are on data richness, the further data richness, the further up the addressed ladder up the addressed ladder you areyou are

““I have 50,000 I have 50,000 names in my names in my database. I database. I only have only have enough enough budget to mail budget to mail 10,000. 10,000. Which Which ones do I ones do I mail?”mail?”

What you’ll learn next:What you’ll learn next:

RFM – the grand-daddy of data RFM – the grand-daddy of data forecastingforecasting

The one factor that has the The one factor that has the biggest impactbiggest impact

Insist on measurementInsist on measurement

Be the leader of other media in Be the leader of other media in tracking and analysistracking and analysis

Push for promo codesPush for promo codes Be confident to collect dataBe confident to collect data Make sure they’re capturing and Make sure they’re capturing and

using the informationusing the information

Because if you’re targeting Because if you’re targeting effectively:effectively:

Direct Mail is the winner in Direct Mail is the winner in the targeting & Lifetime the targeting & Lifetime Value raceValue race

Better quality customerBetter quality customer It’s a considered purchaseIt’s a considered purchase Greater RevenueGreater Revenue Higher LTVHigher LTV ROI winnerROI winner

What information matters What information matters Most in a database?Most in a database?

The one Minute The one Minute Manager intro to RFM Manager intro to RFM

analysisanalysis

One way to go: One way to go: RFMRFM Analysis Analysis

Three principle measures of previous Three principle measures of previous buyingbuying

– RRECENCY: latest purchase or activity record – ECENCY: latest purchase or activity record – the most predictivethe most predictive

– FFREQUENCY: Indicates number of purchases REQUENCY: Indicates number of purchases made within a timeframemade within a timeframe

– MMONETARY: Total expenditure by customer ONETARY: Total expenditure by customer within same ‘frequency’ time framewithin same ‘frequency’ time frame

Assumptions and Applications of Assumptions and Applications of Recency, Frequency and Recency, Frequency and MonetaryMonetary

FACTORFACTOR ASSUMPTIONSASSUMPTIONS APPLICATION APPLICATION (by priority)

RECENCY• More recent clients more likely to buy again. Lifestyle changed for people buying long ago; readiness to purchase again

• Select contacts by most recent purchase date

• Contact each client near end of usage cycle

FREQUENCY• Repeat purchases

• Like your product

• Communicate frequently with client

MONETARY• Clients who spend a lot of money may do so again. Include clients who do large one off

• Purchase under special circumstances

• Analyse purchase pattern and needs

• Consider special promotions

THE MOST VALUABLE CUSTOMERS ARE THOSE WHO SCORE HIGH ON THE MOST VALUABLE CUSTOMERS ARE THOSE WHO SCORE HIGH ON ALL THREE CRITERIAALL THREE CRITERIA

Don’t get scared!Don’t get scared!

2 minutes, and you’ll uncover the 2 minutes, and you’ll uncover the 2 relevant figures in the following 2 relevant figures in the following RFM analysisRFM analysis

Recency, Frequency, and Monetary Values (RFM) Recency of transaction: 20 points if within past 3 months

10 points if within past 6 months 5 points if within past 9 months 3 points if within past 12 months 1 point if within past 24 months

Frequency of transaction: Number of purchases within 24 months x 4 points each (Maximum = 20 points) Monetary value of transaction: Dollar volume of purchases within 24 months x 10% (Maximum = 20 points) Weighting assumption: Recency = 5

Frequency = 3 Monetary = 2

Customer Purchase Recency (months)

Assigned Points

(x5) Weight Points

Frequency Assigned

Points

(x3) Weight Points

Monetary Assigned

Points

(x2) Weight Points

Total Weight Points

Cumulative Points

A A A

B

C C C C

1 2 3 1 1 2 3 4

1 2 3

12 3 6

12 24

20 20 20 3

20 10 3 1

100 100 100

15

100 50 15 5

1 1 1

2

1 1 2 1

4 4 4 8 4 4 8 4

12 12 12

24

12 12 24 12

$ 30 100

50

500

100 60 70 20

3 10 5

20

10 6 7 2

6 20 10

40

20 12 14 4

118 57 27

79

132 74 53 21

118 250 372

79

132 206 259 280

RFM: selecting your best targets

And there are easier starts, And there are easier starts, if RFM gives you the shakesif RFM gives you the shakes

Decile RankingDecile Ranking Sort database in 10 equal Sort database in 10 equal

segments in descending order – segments in descending order – “best” to “worst”“best” to “worst”

Start with the top 10% and work Start with the top 10% and work your way downyour way down

History also repeats itselfHistory also repeats itself

7:1 principle7:1 principle Cheaper to keep existing Cheaper to keep existing

customer than find new onecustomer than find new one Segment by previous buying Segment by previous buying

behaviourbehaviour Predicts future behaviourPredicts future behaviour

Targeting approaches within Targeting approaches within a house filea house file

80 / 20 rule80 / 20 rule Decile RankingDecile Ranking RFMRFM Predictive ModelingPredictive Modeling

The big lesson on targeting The big lesson on targeting and analysis:and analysis:

Know what your Know what your customer is being graded customer is being graded on and…on and… YouYou can help set the can help set the rules against which the rules against which the competitioncompetition will be judged will be judged

WorksheetQuestion# A 5 & 6

““E-mail and E-mail and online is online is working great working great for me – and for me – and it’s growing. it’s growing. I don’t need I don’t need high CPM mail high CPM mail any more.”any more.”

What you’ll learn next:What you’ll learn next:

Defending your turf against e-Defending your turf against e-mailmail

How direct mail actually makes e-How direct mail actually makes e-mail work hardermail work harder

Mail is still criticalMail is still critical

……and it will be in and it will be in allall our lifetimes our lifetimes Lead roleLead role Support roleSupport role Integrated roleIntegrated role However… However… shiftingshifting reliance on reliance on

mailmail Especially apparent in youthEspecially apparent in youth

Important functions of mail Important functions of mail in targeting: in targeting:

Creates lift in responseCreates lift in response Extends response curvesExtends response curves Creates a response in cases Creates a response in cases

where other media simply fall where other media simply fall shortshort

Multi channel targeting works Multi channel targeting works harder and harder and differentdifferent – than – than customers thinkcustomers think

How is this relevant to How is this relevant to Canada Post?Canada Post?

The lift was created by the emailThe lift was created by the email But the responses were still But the responses were still

resulting from the mailresulting from the mail Even though they were ordering Even though they were ordering

via phone or Internet…via phone or Internet… The promo code was from the The promo code was from the

mailmail piece piece

Lesson: Lesson: YouYou have the choice have the choice as to how customers view as to how customers view youyou

As a targeting expertAs a targeting expert As a business partnerAs a business partner As an advisorAs an advisor As a solutions providerAs a solutions provider As a results generatorAs a results generator

WorksheetQuestion

#A 8

““I want to I want to collect data on collect data on my customer. my customer. What can I What can I legally collect? legally collect? What should I What should I ethically ethically collect?collect?””

What you’ll learn next:What you’ll learn next:

The basics of privacy legislationThe basics of privacy legislation Why Why everyevery client needs to know it client needs to know it

PIPEDAPIPEDA

Personal Information Personal Information Protection and Electronic Protection and Electronic Documents ActDocuments Act

Consumers Consumers areare willing to willing to shareshare

• Majority of consumers are “privacy Majority of consumers are “privacy pragmatists” (63%)pragmatists” (63%)

• ……although concerned about privacyalthough concerned about privacy• … … they are prepared to provide they are prepared to provide

information in exchange for offers of information in exchange for offers of value from companies who treat value from companies who treat their information with caretheir information with care

Source: 2002 Harris PollSource: 2002 Harris Poll

Privacy is on consumers’ Privacy is on consumers’ radarradar

Perceived risk of privacy violation determined Perceived risk of privacy violation determined via channel:via channel:– Telephone/e-mail highest, fax lowestTelephone/e-mail highest, fax lowest

Increasingly taking steps to protect privacy:Increasingly taking steps to protect privacy:– Falsifying informationFalsifying information– Getting off marketing listsGetting off marketing lists– Selective disclosure of personal informationSelective disclosure of personal information

But…consumers But…consumers wantwant to hear from to hear from the companies they trust!the companies they trust!

CANADA’S PRIVACY LAWCANADA’S PRIVACY LAW

Based on the principle of consentBased on the principle of consent

Gives individuals ability to control the Gives individuals ability to control the collection, use and disclosure of their collection, use and disclosure of their personal information personal information

Not channel specificNot channel specific

Key to success: Key to success: – Effective management of customer expectationsEffective management of customer expectations– transparencytransparency

THE 10 PRINCIPLESTHE 10 PRINCIPLES

AccountabilityAccountability

Identify the Identify the purposepurpose

Obtain consentObtain consent

Limit collectionLimit collection

Limit use, Limit use, disclosure and disclosure and retentionretention

AccuracyAccuracy Appropriate Appropriate

safeguardssafeguards OpennessOpenness Individual accessIndividual access Responsive to Responsive to

compliance compliance challengeschallenges

THE PRIVACY “GLOSSARY”THE PRIVACY “GLOSSARY”

Personal informationPersonal information

Knowledge and Consent Knowledge and Consent

Reasonable PersonReasonable Person

Sensitive vs. Non-sensitive dataSensitive vs. Non-sensitive data

THE PRIVACY “GLOSSARY”THE PRIVACY “GLOSSARY”

Personal informationPersonal information

““Information about an identifiable individual, but does not Information about an identifiable individual, but does not include the name, title or business address or telephone include the name, title or business address or telephone number of an employee of an organization.”number of an employee of an organization.”

This includes information in any form, such as: This includes information in any form, such as: – age, name, e-mail address, ID numbers, income, ethnic age, name, e-mail address, ID numbers, income, ethnic

origin, or blood type origin, or blood type – opinions, evaluations, comments, social status, or opinions, evaluations, comments, social status, or

disciplinary actions disciplinary actions

****Important exemption for business information – although e-mail Important exemption for business information – although e-mail address is questionable. Be careful when you go beyond that.address is questionable. Be careful when you go beyond that.

THE PRIVACY “GLOSSARY”THE PRIVACY “GLOSSARY”

Knowledge and Consent Knowledge and Consent

Implied (for Implied (for existingexisting customers) customers)- - renewals, active relationshiprenewals, active relationship

Opt-out (to disclose Opt-out (to disclose non-sensitivenon-sensitive information) information)-- opportunity to say no to rental/exchange opportunity to say no to rental/exchange

Express or positive Express or positive - sensitivesensitive data, financial records or new use data, financial records or new use- disclosure of e-mail addressdisclosure of e-mail address

THE PRIVACY “GLOSSARY”THE PRIVACY “GLOSSARY”

Reasonable PersonReasonable Person

Collection, use and disclosure of information should be limited to Collection, use and disclosure of information should be limited to those for purposes that a "reasonable person" would consider those for purposes that a "reasonable person" would consider appropriate in the circumstances. appropriate in the circumstances.

What does this Mean?What does this Mean?

Would a customer renting a movie from a video store consider it Would a customer renting a movie from a video store consider it reasonable to be required to provide a telephone number? An reasonable to be required to provide a telephone number? An address? A Social Insurance Number? address? A Social Insurance Number?

Would a customer paying cash for a product or service consider it Would a customer paying cash for a product or service consider it reasonable to be asked for a name, address and phone number?reasonable to be asked for a name, address and phone number?

Would someone surfing a Web site expect their information to be Would someone surfing a Web site expect their information to be collected without their knowledge and consent?collected without their knowledge and consent?

Federal Privacy ActFederal Privacy Act

Up for mandatory review in 2006Up for mandatory review in 2006 Negotiations start this yearNegotiations start this year Big danger: loss of opt-out consentBig danger: loss of opt-out consent They’re pushing for a higher They’re pushing for a higher

standard of opt-instandard of opt-in Threat: naming of namesThreat: naming of names Current: finding (vs. ruling) doesn’t Current: finding (vs. ruling) doesn’t

name companyname company

Your customers will be able Your customers will be able to rely less on Telemarketingto rely less on Telemarketing

This is Business to Consumer…This is Business to Consumer… US Federal no-call list decimated US Federal no-call list decimated

poolpool 85+ million and counting85+ million and counting 5 year effective registration5 year effective registration Canadian legislation imminentCanadian legislation imminent

Canada: do-not-callCanada: do-not-call

Legislation introduced in the House of Legislation introduced in the House of Commons in DecemberCommons in December

Debated on February 7Debated on February 7thth: all party : all party supportsupport

We’re looking for BtoB exemption / We’re looking for BtoB exemption / established relationshipestablished relationship

FTC affords it in the USFTC affords it in the US We appear this Spring in front of a We appear this Spring in front of a

Federal CommitteeFederal Committee 18 months implementation?18 months implementation?

Upcoming opportunityUpcoming opportunity

Keep PIPEDA in the forefront Keep PIPEDA in the forefront as a strategic initiative, not as a strategic initiative, not just an impedimentjust an impediment

Any customers relying on Any customers relying on outbound telemarketing now?outbound telemarketing now?

FOR MORE INFOFOR MORE INFO

CMACMA www.the-cma.orgwww.the-cma.org

Office of the Federal Privacy CommissionerOffice of the Federal Privacy Commissionerwww.privcom.gc.cawww.privcom.gc.ca

Information and Privacy Commissioner of OntarioInformation and Privacy Commissioner of Ontariowww.ipc.on.cawww.ipc.on.ca

Industry CanadaIndustry Canadahttp://e-com.ic.gc.cahttp://e-com.ic.gc.ca

PIPEDA…I need ya…

““Is Business Is Business to Business to Business targeting the targeting the same as same as Business to Business to Consumer?”Consumer?”

What you’ll learn next:What you’ll learn next:

Business-to-Business vs. Business-to-Business vs. Business-to-ConsumerBusiness-to-Consumer

What’s differentWhat’s different What’s the sameWhat’s the same

Classic Targeting Model: Classic Targeting Model: Business to Consumer Business to Consumer MarketMarket

INITIATOR: Person who first thinks of buying the INITIATOR: Person who first thinks of buying the service or productservice or product

INFLUENCER: Person who can influence the final INFLUENCER: Person who can influence the final decisiondecision

DECIDER: Person who makes part or all of the DECIDER: Person who makes part or all of the buying decisionbuying decision

BUYER: Person who makes the purchaseBUYER: Person who makes the purchase

USER: Person who “USER: Person who “CONSUMESCONSUMES” the purchase” the purchase

One or more people can double up on more One or more people can double up on more than one role at any given timethan one role at any given time..

Classic Targeting Model: Classic Targeting Model: Business to Business MarketBusiness to Business Market USER: Organization members who use product or service. USER: Organization members who use product or service.

Often initiators of the purchase.Often initiators of the purchase.

INFLUENCERS: Effect buying decision. Help define INFLUENCERS: Effect buying decision. Help define specifications. Technical staff are particularly important specifications. Technical staff are particularly important influencers.influencers.

BUYERS: Formally authorized to select purchase and BUYERS: Formally authorized to select purchase and negotiate terms. May help influence but play major role in negotiate terms. May help influence but play major role in selection of and negotiation with vendors.selection of and negotiation with vendors.

DECIDERS: Have formal or informal power to approve final DECIDERS: Have formal or informal power to approve final supplierssuppliers

GATEKEEPERS: Have power to filter information going to key GATEKEEPERS: Have power to filter information going to key personnel e.g. VPs, Executive Assistant, etc.personnel e.g. VPs, Executive Assistant, etc.

Consumer vs. Business To Consumer vs. Business To Business Direct MarketingBusiness Direct Marketing

Consumer Direct MarketingConsumer Direct Marketing

Individuals frequently buy for Individuals frequently buy for themselvesthemselves

Buying decision involves Buying decision involves relatively few others relatively few others

Single buyer groupsSingle buyer groups

Informal buying processInformal buying process

Transaction-basedTransaction-based

Average order size is relatively Average order size is relatively smallsmall

Lifetime value is relatively lowLifetime value is relatively low

Easy to reach individualsEasy to reach individuals

Large target market universeLarge target market universe

Transactional focusedTransactional focused

Business To Business Direct Business To Business Direct MarketingMarketing

Individuals buy on behalf of Individuals buy on behalf of organizationorganization

Decisions frequently involve Decisions frequently involve multiple individualsmultiple individuals

Multiple buyer groupsMultiple buyer groups Formal and informal buying processFormal and informal buying process Relationship basedRelationship based Average order size tends to be Average order size tends to be

largelarge Lifetime value can be very largeLifetime value can be very large Difficult to reach individualsDifficult to reach individuals Small target market universeSmall target market universe Relationship process Relationship process

focusedfocused

How this impacts CPCHow this impacts CPC

To target properly:To target properly: Often multiple targets within the Often multiple targets within the

same householdsame household Often multiple targets within the Often multiple targets within the

same companysame company All determined by the customer’s All determined by the customer’s

objectivesobjectives

““How does How does CPC Lifetime CPC Lifetime Value – Value – LTVLTV – – stack up stack up against against otherother media?”media?”

What you’ll learn next:What you’ll learn next:

How Canada Post compares to How Canada Post compares to other media choicesother media choices

Where Canada Post wins – and Where Canada Post wins – and wins wins bigbig

Acquisition example: where CPC Acquisition example: where CPC standsstands

MediaMedia Time to Time to MarketMarket

ContacContact Costt Cost

ROIROI LTVLTV

MailMail mediummedium Med / Med / highhigh

Med / Med / HighHigh

OutstandinOutstandingg

PrintPrint slowslow lowlow medmed mediummedium

NewspapNewspaperer

fastfast lowlow medmed mediummedium

BroadcasBroadcastt

Med /Med /

slowslowlowlow medmed lowlow

E-MailE-Mail fastfast low / low / medmed

low / low / mediummedium

Low / MedLow / Med

WebWeb mediummedium low / low / medmed

low /low /

highhighLow / MedLow / Med

Parting ShotsParting Shots

Get yourself to the table as early Get yourself to the table as early in the planning process as in the planning process as possiblepossible

Help establish the importance of Help establish the importance of metrics in places where CPC can metrics in places where CPC can win: LTV & ROIwin: LTV & ROI

Mail beats other media with Mail beats other media with customer value over the long haulcustomer value over the long haul

Parting ShotsParting Shots

Mail works better when integratedMail works better when integrated Make sure you track – it’s often Make sure you track – it’s often

the the mailmail that’s responsible for the that’s responsible for the lift in responselift in response

The more data you have, the The more data you have, the more you can upsell CPC more you can upsell CPC solutionssolutions

Parting ShotsParting Shots

It doesn’t take much data to win.It doesn’t take much data to win. Ask for help before you need it.Ask for help before you need it. How? Just keep your antennas up How? Just keep your antennas up

– always be on the lookout for – always be on the lookout for data-rich opportunities. Mail data-rich opportunities. Mail wins.wins.

Parting ShotsParting Shots

Know your customer’s target Know your customer’s target better than she does. You can better than she does. You can always use it to your targeting always use it to your targeting advantage.advantage.

Know what’s in the database.Know what’s in the database. Know what factors in that Know what factors in that

database matter most.database matter most. RFM. You can bank on it.RFM. You can bank on it.

Targeting Smarts = Sales Targeting Smarts = Sales SuccessSuccess

-or--or-

How targeting can get How targeting can get meme to to the table the table early in the gameearly in the game

Daniel G. WiestDaniel G. WiestPresident, Wiest & Associates Inc.President, Wiest & Associates Inc.

June 21, 2005June 21, 2005

““Does Does Canada Post Canada Post fit in with the fit in with the customer customer lifecycle lifecycle anyplace ?”anyplace ?”

What you’ll learn next:What you’ll learn next:

Lifecycle marketingLifecycle marketing Where Canada Post products fit inWhere Canada Post products fit in

Making Media Choices: Making Media Choices: Targeting The Customer Targeting The Customer LifecycleLifecycle

AwarenessAwareness ConsiderationConsideration EducationEducation PurchasePurchase

ExperienceExperienceRepurchase/retentionRepurchase/retention

Brand Advertising / PRBrand Advertising / PR

Direct Media / MailDirect Media / Mail

CRMCRM

Direct Media / MailDirect Media / Mail

AddressedAddressed

UnaddressedUnaddressed

Classifying your Target Classifying your Target Market According to Market According to LifecycleLifecycle

ADVOCATE

CLIENTS

CUSTOMERS

PROSPECTS

SUSPECTS

AddressedAddressed

UnaddressedUnaddressed

Direct ResponseDirect Response

Every medium is uniqueEvery medium is uniqueEach has its own strengths and Each has its own strengths and weaknessesweaknesses

Each has its own selling toolsEach has its own selling toolsDirect Marketing has borrowed Direct Marketing has borrowed from the toolbox of from the toolbox of traditional/general advertisingtraditional/general advertising

Other Factors Affecting Response Other Factors Affecting Response

SeasonalitySeasonality–Q1/Q3 typically generate higher Q1/Q3 typically generate higher responseresponse

QuestionA 8

WorksheetQuestion

#A6