An ABC Introduction to Data Mining for Dollars: Slicing and Dicing Your In-House List for Profit (Part 1 of 2)

One of the best ways to build your online business is to build your list; that is, your “database” of potential subscribers, customers or prospects. This may not be as sexy as social marketing, as robust as mobile marketing or as challenging as search engine marketing … but it is a viable way to harness the power within your own “house file” to maximize your marketing ROI.

One of the best ways to build your online business is to build your list; that is, your “database” of potential subscribers, customers or prospects. This may not be as sexy as social marketing, as robust as mobile marketing or as challenging as search engine marketing … but it is a viable way to harness the power within your own “house file” to maximize your marketing ROI.

Today, I’ll show you how you can segment your database of names to boost sales, increase bonding and shorten conversion time. Data mining, list segmentation or strategic database marketing is basically the art of slicing and dicing your own in-house list of names for optimal performance. You do this to help increase the response of your promotional and conversion efforts.

You see, once you divide your list of names into smaller groups (known as segmentation), you can target your product offers and promotional messages to each of those groups. By customizing your marketing messages based on specific customer needs, you’ll be promoting products to people who are more likely to buy them. You increase your customers’ satisfaction rate as well as your potential conversion rates. And higher conversion rates mean more money for your company.

One data-mining model is the RFM method. It’s practiced by direct response marketers all over the world. “R” stands for Recency—how recently a customer has made a purchase. “F” stands for Frequency—how often the customer makes a purchase. And “M” stands for Monetary—how much the customer spends. Here’s how you can use the RFM method to help lift your sales.

Recency
Whether your house list is made up of people who signed up to receive your free e-zine or people who paid for a subscription, you can segment your database according to how long your subscribers have been with you. For instance, you can create categories such as: 0-6 months, 6-12 months, and 12-plus months. You would look at these groups as your hot subs (newest subscribers 0-3 months), warm subs (mid-point subscribers) and cool subs (those who have been subscribing to your e-zine the longest, 12-plus months).

Here’s one way you can put that data to use …

Let’s say some of your “cool subs” have lost their initial enthusiasm for your e-zine. You could cross-reference those names with their open rates. If most of these subscribers haven’t been opening your e-zine in six, nine or 12 months, you may consider sending them a special message asking to reengage them. These “inactive” subscribers are a great group on which to test new marketing approaches, new prices and new subject lines. Since this group is not responding to your current emails, why not use this as a platform to reengage AND test? Your “hot subs” are your newest, most enthusiastic subscribers. They are ripe to learn more about you, your products and your services. If you handle this group properly, you can cultivate them into cross-sell and up-sell customers.

For example, send your “hot subs” a special introductory series of emails (also known as auto responder series). This special series would encourage bonding and introduce readers to your e-zine’s contributors and overall philosophy. It could also tempt readers with specially priced offers. Sending an introductory series like this can not only increase the number of subscribers who convert to paying customers, it also increases their lifetime value (LTV)—the amount they spend with you over their lifetime as your customer. Hot Tip! Make sure to suppress the recipients of your auto responders from any promotional efforts until the series is complete to ensure more effective bonding.

If, instead of subscribers to a free e-zine, your house list is made up of people who paid for their subscription, the same segmentation process applies. You break your active subscribers into hot subs, warm subs and cool subs. You also break out “expires” (those who allowed their subscription to run out) and “cancels” (those who cancelled their subscription).

Cross-marketing to these lists is usually effective. The expires oftentimes simply forget to renew and need a reminder. And just because someone cancelled one subscription doesn’t mean they may not be ideal for another service or product that you provide. If they’re still willing to receive email messages from you, add these folks to your promotional lists. Once you’ve gotten these cancelled subscribes to open your messages, turning them into paying customers is just a matter of time. Most Internet marketers would have written these people off. So any revenue you get from them is ancillary.

Next time, I’ll go into Frequency and Monetary, the two other components of the RFM model. So stay tuned!

Author: Wendy Montes de Oca

Often referred to as the "marketing maven" by industry peers, Wendy Montes de Oca, MBA has nearly 20 years of experience in marketing, media, and publishing with expertise in multichannel, direct response, and Web marketing. Wendy has generated more than $150 million in total revenues for Fortune 500 companies, top publishers, consulting clients, and her own firm, Precision Marketing and Media, LLC. She is the creator of the groundbreaking SONAR Content Distribution Model and author of the best-selling book Content Is Cash: Leveraging Great Content and the Web for Increased Traffic, Sales, Leads and Buzz [Que Publishing, Paperback].

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