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Mountains of Data
Online selling allows retailers to collect much more data than ever. In fact, one study determined that 68% of a catalog/web retailer’s customer data came from the 10% of shoppers who bought on the web.
At 50-plus years old,
direct merchant Fingerhut Co. has been around longer than most Internet
executives have been alive. The launch of Fingerhut.com in 1998 simply
added another channel to a successful catalog and telemarketing operation,
and more customer information to a database already so big it boggles
Every transaction, every promotion received and every payment made,
every bit of personal information volunteered, every questionnaire filled
out and more are in the database: a motherlode of customer intelligence.
And in fact, Fingerhut has long mined the data for marketing guidance,
developing a reputation as a savvy database marketer in its catalog and
telemarketing channels. But what about the Internet?
“It’s all about how we use our database to put in front of customers
offers that are going to appeal to them,” says Michael Sherman, president
of Fingerhut, a division of Federated Department Stores. “It’s been part
of our business from the beginning. Now we’re just doing it in another
Fingerhut estimates its database is as large as seven terabytes. How
big is seven terabytes? “I can put it this way,” says Randy Erdahl, Fingerhut’s
director of business intelligence. “We have 65 million customers who’ve
bought from us at one time or another over the years, with an average
3,000 data elements on each one.”
Like most retailers collecting data about their customers, Fingerhut
has known that collecting data is good; the question is, what do you do
with it once you have it? “In a new channel like e-commerce, there’s a
lot of data that we’re stockpiling but haven’t figured out how to utilize
yet,” Erdahl says. “The software data mining tools that allow you to search
and mine the data efficiently weren’t available until recently.”
But now they are. And this year, Fingerhut, with annual sales of more
than $1.5 billion, is migrating its legacy systems into the data warehouse
it started building in 1995. It expects within the year to
have full capability not only to do database marketing and queries for
decision support for its web channel, but also to build models, score
and select customers for and execute integrated marketing campaigns across
all sales channels.
with IBM’s horizontal marketing technology, it’s already stripped redundancy
from a cross-channel customer database grown so unwieldy that some customers
received as many as 60 catalogs a year. And it has segmented customer
groups most likely to respond to various promotions. This exercise in
database mining cut catalog mailings by 7% and added $3.5 million to the
bottom line in its first year of implementation, a combination of saved
costs and increased sales. Next up: applying those analytical capabilities
to cross sell and upsell to customer groups on the web, which the company
plans to do this year.
As Fingerhut goes, so goes e-retail. While some web merchants are out
ahead and others behind the curve, the trend is clear. Multichannel marketers
are getting a new stream of customer data from their web operations, and
they’re just beginning to turn it into web-based and integrated marketing
however, without some challenges. “The joke is that everyone says they
need data, but half the time they don’t do anything with it,” says Elaine
Rubin, chairman of e-retail trade association Shop.org. “It’s not that
they don’t want to, or that they don’t realize that knowledge is power.
Everybody plans to do something with the data, but it’s a matter
of priorities. A vast number of e-retailers have been given just enough
resources at this point to get their sites up and prove a business.”
Indeed, the challenge for many is not collecting data but figuring out
the best way to use it for marketing. “The issue is not the accumulation
of data,” says Robin Green, executive vice president of the ASP business
unit at Xchange Inc., a provider of analytic software. “Retailers have
for years amassed an enormous amount of customer information as transactional
data, product registration data, direct marketing data-reams of information.
We’re seeing now that many of those retailers have not found a way to
translate that information into their online channels. Their biggest challenge
now is to convert this offline asset-this customer database-into something
that’s useful for online purposes and keep all of the information integrated
and synchronized in real time.”
A bigger window
recently, retailers have been able to collect only purchasing data that
breaks down sales. But now, with the advent of the web and a whole new
generation of analytic technology, they have a potential window on a range
of customer behavior beyond buying that’s not trackable through other
channels. “If a retailer’s customer gets a catalog, he might spend a week
looking through it, circling items, showing them to other people. But
the retailer didn’t know that- all the retailer knew was what he bought,”
says Trevor Rubel, director of product strategy at Personify Inc., an
analytics software and services provider. “But online you can see what
they looked at, what they checked on the sizing charts or that they checked
the color availability.”
online merchants with access to the right analytics and the smarts to
use it, there’s gold to be mined in that data. Ofoto.com is an online
photography service offering digital and film processing, prints, private
online image storing and sharing and other services and products. The
Emervyville, Calif.-based company has been monitoring its visitor activity
with Personify profiling and analytic technology since it launched in
1999, and is already mining its 1-year-old database to segment customers
and support personalization efforts.
In a recent test, for example, Ofoto identified customers who had visited
frame and card product pages relating to babies, children, weddings or
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