April 30, 2001, 12:00 AM

Mountains of Data

(Page 2 of 3)

pets. The theory was that this group would be more inclined to respond

to a particular e-mail promotion than customers who didn’t visit these

pages. E-mailed to both groups, the promotion generated five times more

orders and 10 times more dollars in the targeted than in the control group.

 

 

The virtual vineyard Wine.com is another Personify client, one of its

earliest. The site was built to appeal to enthusiasts already equipped

with a fair knowledge of wine. Analysis showed that the site did attract

that customer segment and that they used features such as complex tasting

charts that rated wines on multiple scales. But it also showed a customer

segment that marketers hadn’t anticipated. Wine novices were visiting

the site and accessing features that defined terms and suggested basic

food/wine pairings.

 

After segmenting out food shoppers, gift shoppers, and “drop-ins” who

left the site after a few clicks, Personify’s analysis categorized a solid

18% of visitors as wine enthusiasts and 6% as wine novices. But when further

analysis compared these behavioral categories to shopping carts, it revealed

that 86% of total sales from all segments were from the wine novices,

one of the smaller customer segments. “They decided to use the information

to market different messages to different groups,” says Rubel. “To this

day, if you look at wine.com advertising online or off, you see messages

like ‘wine shouldn’t be that hard,’ or ‘wine for the rest of us.’”

 

With new analytics technology, the possibilities for slicing, dicing

and cooking up marketing programs out of customer data are seemingly endless.

Check out how many of your customers who bought the black sweater also

looked at but didn’t buy the gray pants, for instance, and target those

shoppers with an e-mail offer of 25% off gray pants. That’s not to say,

though, that hypersegmentation is the best marketing use of customer data,

or that it’s even practical for every e-retailer or product category.

 

 

 

Starting at

$500,000

 

For

one thing, it can be expensive. Developing later and even more sophisticated

generations of software, Personify, for example, now counts a number of

Fortune 500 companies among its clients-it’s currently scaling up an analytics

program big enough to handle customer data at L.L. Bean, for example.

And it’s charging prices to match. Software starts at about $325,000 and

a company may spend another $50,000 to $100,000 to deploy and integrate

it. “A large multichannel retailer will spend about half a million with

us on consulting support services, deployment and integration costs,”

says Rubel. Personify also offers analytics as a hosted application, with

a one-time upfront fee of about $250,000 and an annual hosting fee of

$60,000.

 

 

Another barrier is that supersegmenting customer data to drive highly

personalized marketing adds layers of complexity to marketing and IT operations

that can be difficult to manage. Amazon.com wowed the rest of e-retail

a few years ago when it applied collaborative filtering technology to

drive product recommendations to individual shoppers. But what might make

sense for books and CDs doesn’t necessarily make sense in other product

categories. Take apparel; to be specific, the classic, casual apparel

that’s the mainstay at Eddie Bauer. Though Eddie Bauer’s offering includes

a selection of trendier clothing and accessories, the customer’s choice

is often much simpler: it’s khakis with pleats or without. When the assortment

is basic, attempting to segment customers into multiple layers based on

product preferences is less apt to pay off, believes Michael Boyd, director

of customer relationship management for Eddie Bauer.

 

“Every time you slice the pie into smaller pieces, you have less and

less difference between the customers who end up in the different segments,”

says Boyd. “Our experience tells us that if you take a pool of customers

and segment them into two groups by whatever most differentiates them,

and talk to the two groups differently, you’re going to get a better return

on investment for that activity than you’ll get on any subsequent breaks.”

 

 

 

Different

strokes

 

For

now, drawing customer groups broadly is affording retailers a balance

between true one-to-one marketing, e-marketing’s much-discussed but little-seen

Holy Grail, and a one-size-fits all approach that doesn’t segment at all.

CDNow is developing profiles of six customer segments characterized by

such parameters as volume of past purchases and whether they’re new to

the site. The segmentation will be used to develop different approaches

online, says Amy Belew, vice president of customer service and operations.

“We might tell a customer with a long wish list that there’s a sale coming

up,” she said. “Or you might not want an e-mail from a high-volume customer

to have to wait long in a queue of e-mails from other customers.”

 

 

Eddie Bauer has for now segmented its customers into two groups, but

not, as is frequently the case, based on what they buy. Rather, it bases

the segmentation on how customers shop-whether they are convenience buyers

or like to take the time to assemble an outfit (see box).

 

But Eddie Bauer-or any retailer-can’t market to the segments without

the systems to make that marketing possible. And so Eddie Bauer has been

focusing on creating the single view of a customer. “For us, back end

integration has been a higher priority than sending out targeted emails

in the near term,” Boyd says. “The email marketing tactic is new enough

that most of us are still building infrastructure that lets us integrate

those contacts with the rest of our contacts. Ultimately the big win is

having the single view of all outbound communications to the customer

and being able to manage those centrally.”

 

 

Is it really

new?

 

Eddie

Bauer’s choice between wanting to do the marketing and making sure it

has the appropriate technology, techniques and systems in place illustrates

the dilemma that faces e-retailers as each new wave of technology hits:

is it really a leap, or merely a fancy new package for just good merchandising

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