Differential Marketing for Direct Mail Retention
Consider the behavior of catalog shoppers where expenditures are spread over multiple product categories for a select set of product items. As time goes by, customers will establish some form of a purchase footprint. The footprint will reveal certain tendencies that are characteristic of a customer's purchase activity.
The trick is to determine whether the purchase footprint has changed significantly. When a customer begins to stray from their footprint this could be a precursor of negative consequences. Differential marketing in this context might call for some type of marketing intervention to mitigate the impact of undesirable behavior.
Leveraging Peer Groups
It sounds relatively simple in practice but is it really? Using a differential marketing strategy requires that your customer database is in order and can provide timely and updated views of your customers that can be compared to prior snapshots in time.
When applying a differential marketing strategy to your customer retention mail plan, you need to take into consideration two primary dimensions:
- How does the customer's recent behavior differ compared to the transactional history? Have they recently purchased an item from a product category for the very first time? Was the total spend for their current transaction well above their historical average? Was the time gap between their current transaction and the most recent transaction significantly longer than expected? These factors can be quantified using metrics derived from the current transactional details compared to a summary of past transactional snapshots.
- What does the customer's peer group look like? A peer group is a collection of customers with similar demographic and lifestyle characteristics. Using Mosaic USA as an example, possible peer groups could include New Suburbia Families (young, affluent working couples with pre-school children concentrated in fast-growing, metro fringe communities) or Ethnic Urban Mix (ethnically diverse, young and middle-aged singles and families living in older inner-city neighborhoods).
Here is a scenario for implementing a differential marketing strategy that takes both of these dimensions in mind: