Torque

The Driving Seat

05 August 2008

 

I recently read about a great principle in reference to knowledge management:

hindsight + insight = foresight. In my view, the principle is also applicable to customer databases as they are themselves a source of ‘knowledge’ that need to be managed. Knowledge is power. But all too often this knowledge lies dormant, untapped and unexploited.

 

The first barrier for any marketer keen to exploit this knowledge is to extract information. In my experience, generally all the important information exists somewhere, it is just not easy to get. The problem is that data exists in the context of the purpose it has been built which is often for operational or accounting purposes. This type of data infrastructure needs adapting for marketing purposes, primarily to enable the data world to be viewed in terms of the customer. E.g. not just the number of products sold each day, but the number of products sold each day by each customer. In turn this creates the ability to identify some of the basics e.g. when they last purchased (recency), their purchase cycles (frequency) and their revenue (value).

 

Once the ability to extract information is achieved the next challenge is to extract the knowledge from the information. To build knowledge, a distinction must be made between quantity and quality of information. Marketers are facing a surge of information which I believe is part of a growing trend towards database marketing. This has also been further boosted by the increased use of digital channels taking us further down the road to the ultimate goal of ‘customer information on tap’.

 

The challenge is not to get drowned in this information. Take ‘marketing dashboards’ - designed to visually display the key indicators for the marketer to monitor. Whether the dashboard is for a marketing campaign or more strategic issue for something like churn, the principle is the same: Simplicity.

A car dashboard has the essential details visually represented and the ability to attract attention when required. A high temperature guage allows you to be proactive and stop the car before the car stops you. Equally the petrol guage warns you when you’re running dangerously low with a stand out signal or sound – which I often still ignore! The dashboard isn’t overloaded with less important info: tyre pressures, recline angle of passenger seat etc etc. The focus is (and should be) on the essentials.

 

This is true for marketing dashboards and indeed database marketing as a whole. Focus on the essentials first and then evolve. The 80:20 rule of pareto is a common theme observed in analysis of customer data, and I also think is applicable to database marketing strategies themselves. The principle acknowledges that a disproportionate amount of gain (e.g. 80% revenue, profit etc) is often generated from a small proportion of customers (20%). I believe this is true for the actual inputs and outputs from database marketing strategies. A disproportionate gain (profit from understanding) can be achieved from a given level of input, simply by focusing on the essentials first. Getting the database management and analysis basics right will give you a significant amount of gain. Thereafter, additional inputs such as including additional data in the database and adopting test and learn campaign strategies will all achieve extra gains, but these will be disproportionately small compared to the gain from the basic inputs. So to minimise resource inputs and maximise gain, focus on the database marketing essentials first; the quick wins.

 

And so back to the wholly grail of knowledge management and how it could be applied to database marketing: hindsight + insight = foresight. Once you have the ability to extract the information from the database, and maintain focus on the essentials, marketers will be in a good position to clearly see and understand:

• The hindsight – data analysis which identifies and monitors past behaviour to understand the ‘who’, ‘what’, ’when’ and ’where’.
• The insight – data analysis which adds a layer of understanding by profiling and segmenting the customers to help you understand the ‘why’.
• The foresight – data analysis based on the hindsight and insight, which predicts the future I.e. ‘who’ will do ‘what’ next, and ‘when’.

The marketer must then strategise ‘how’ they will influence the ‘future’. And this is where the final (and very big) piece of the database marketing jigsaw fits in; combine all this understanding with the ability to target tailored, messages direct to the customer, and then you really are in business.

 

NL

 

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