Schooling ‘Curmudgeon’ Denny Hatch on ‘New-School’ Marketing

Figure 1. Comparison of forecasted Likely Buyer Score with purchasing behavior

Figure 2. Upsell purchase correlations

[Editor’s Note: It’s not often we get an offer to “school” Denny Hatch. So we took a long, hard look at Mark Klein’s article before agreeing to run it. Upon review, we think he makes some legitimate points about what may really differentiate the “old school” and “new school” of direct marketing. What do you think? Is Klein “schooling” old school marketers? Or is he just using new words for the same tried and true “old rules” of direct marketing?]
Even old-school curmudgeons want to make their marketing communications relevant. They just don’t know the best way to do it.

Target Marketing’s Denny Hatch argued eloquently for the old-school approach in his recent column. Hatch is a smart and experienced direct marketer who is still relying on demographics and behavioral data, which he describes as “Hobbies and interests such as pets in the house, history of travel, etc.” Under the heading “Direct Marketing 101″ he says to make a relevant offer, an organization needs demographic and psychographic information. Do this, says Hatch, and “You’ll generate some revenue.” He’s right, but it won’t be nearly as much revenue as you’ll receive if you use transaction data and individualized marketing.

The Holy Grail for marketers has always been individualized marketing, where each person receives a unique message/offer tailored to his or her own needs and wants. This means if your company sends 5 million emails, each email is different and includes offers appropriate to the recipient. Most companies still don’t realize this is now feasible, practical and relatively easy, so instead they may send just one, or if they are sophisticated, perhaps 10 different messages to their 5 million customers.

New-School vs. Old-School Marketing
Good old-school marketing is based on demographics, psychographics and segmentation. Logistic regression is often used to determine the segments. The approach is to look at a set of variables related to buyers of a specific product (where they live, what are their interests, etc.) to find a group of other customers in the population who might buy that product. It’s a product-centric approach, and the associated metrics are those that typically measure what happened in the past. Relevance hopefully comes from considering those demographics and hobbies.

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Comments
  • Denny Hatch

    Hey Mark,

    I do not disagree with anything you say. However, this line says it all: "Using transaction data is key. Companies already own this trove; they don’t need to go outside to buy it."

    My answer to the first sentence is duh.

    My answer to ╲they donâ•˙t need to go outside to buy it╡ is just plain nuts.

    When youâ•˙re a start-up, you donâ•˙t have a list of customers with buying data.

    Under your model, nobody should start a business.

    Even with a data-rich database of customers, outside prospecting is essential. In the old days (as I recall) consumer lists go out of date at the rate 25% a year. People die, move, get married, get sick, lose their jobs, etc.

    In the business arena, lists go out of date at the rate of 50% a year.

    (Next time you have the microphone at a trade show, take a quick poll. Ask the attendees: ╲How many people in this room have a business card today thatâ•˙s different from your business card a year ago? Half the hands in the room will go up.)

    Smart marketers spend at least 15% of their marketing budget on testing new lists and new offers in order to grow their business.

    Marketers who only mail to their own list of customers╉and fail to prospect╉are like the mythical oozlum bird, (or oooh bird or zuni bird). It flies in ever decreasing circles until it flies up its own cloaca.

    An invitation . . .
    Everybody is invited to read the first three chapters of my just published book FREE. No cost, no risk, no obligation. The title: "Write Everything Right!" http://bookstore.napco.com/book/WriteEverythingRightSample.pdf

    Denny Hatch
    dennyhatch@yahoo.com
    215-627-9103 (rings on my desk)

  • Peter Rosenwald

    As a fellow curmudgeon of Denny’s and something of a marketing metrics freak, I’m delighted with the publication of this ‘New School’ approach albeit I share the view that there is not a lot that is new here.

    Using transactional data has always been a critical element of developing the proper content and offer mix and segmentation. Certainly, the tools to do this and the sophistication with which they are used grow by the hour.

    However, you fail to mention the need for generating a profitable return on this data and analysis investment. It may get you a better result, sell more of what you have to offer, but the key question must be: is this result better on a bottom line basis that one driven by more ‘old school’ methodologies.

    And Denny’s comment that your model only deals with your own customers is right on.

  • Andy W

    You make a huge assumption that a business has the customer data in the detail required to do the analysis you describe! You even admit to this in the very last line of your column:

    "and you need to describe or profile customers based on customer-level analytics"

    Of course I have transaction data. But my customer is data is limited. We sell to businesses. How exactly do you propose I get individualized customer data on every one of our customers that would provide enough detail to individually market to each one. Fill out a huge profile when they sign up. Give me a break. These ar ebusy people who just want to buy something and get out. At best I get names and addresses and if I am lucky a title and business. Oft time the buyer in a business isn’t even the person who needs the product! Solve that little riddle. The person who needs and wants my product gives me exactly no data on themselves. I have grewat data on the person in the purchasing department.

    I;m sure whatever you do works great for your business b/c somehow you are able to collect all the data you describe above. You live in a magical perfect world my friend. Absent that I have to use the old school segmentation I have tied to each transaction and be there when they are ready to purchase. I eagerly await your awesome future. I just don’t think it is as close here down on the ground as you make it out to be. Absent that I have to fall back on 50-70 years of old school marketing techniques that digital marketers are "rediscovering" every day. Like segment individually by probabilities of purchase propensities. That sounds an awful lot like segmenting by demographic and phsychographic behavior 😉

  • Rainmaker Marketing Strategies

    … I picture these new skool katz going haywire over Nana (who’s sitting on a clear 2.1 milli by the way), gets in the gifting spirit.

    I take it her "purchases" will be indicative of thing$ to come huh?.

    I’m siding with the Interest crowd. There’s just more depth there.

    Chris

  • carlheintz

    Whoa, Mark…..
    What you say is probably true… but impractical for most small marketers. Denny’s approach works. It may not be as elegant, but it’s FAR more practical. The problem is that smaller marketers are not privy to the kind of data the "big boys" have. In a perfect world, we’d all opt to use predictive data, and in fact, we’d have a app that would read the consumer’s mind, and message back to us what they were thinking so we could place the offer in front of them at the ideal time. Smaller businesses don’t have that instant data. We will make a mess of it trying to implement your predictive approach. Denny’s approach has the appeal of (1) it works, (2) it’s practical to implement and (3) it is relatively inexpensive. It meets all the requirements of the fundamental small business credo: KISS ( keep it simple and systematized).

  • Jerry Butterbaugh

    Just read the article and agree with the assessment based upon what I get both throught the mail-box and the e-mail. Many ‘old school’ mailers run with the run with the good copy, hooks, and controls and still miss me for a future purchase. Examples would include recent mailings from Bass Pro Shop and others who are sending event oriented mailings (which is good if you are nearby) but for me 75 miles away don’t make a lot of sense.

    While Wal*Mart (Including Sam’s) send me e-mails of interesting items based upon recent purchases. Obviously using modern technology to zero in on my real interests.

    Has this been done before. Yes, it was done in the past by carriage class department stores that kept track of their customers on index cards. The point is that a lot of the ‘good’ direct mail techniques are not as effective as they should be . . perhaps because they are often electronic they are relatively inexpensive to execute. However being mis-targeted continually by a barage of poorly aimed direct mail soon aggravates me and probably others, then the direct mailer becomes an annoyance (like Bass Pro Shop).

  • StephanieSAM

    I love this debate, thank you Denny, Mark and Target Marketing editors. I think the two "schools" of thought actually agree on the principles around personalization, segmentation and data governance – which is a good thing. The "old" techniques of direct marketing still apply – we just get to use new data (agreeably more timely) data sets, at scale and with significant new predictive and analytic-based response times. The technology, automation and scale of data is what makes it "new" – but the techniques, the respect of consumer choice and notice and the importance of intelligence-driven strategy remain the same. I think the jury is still out on whether transaction/behavior data always trumps "real people" data of the old school. Both are pretty important. Thanks for starting this debate!

    Stephanie Miller (@stephanieSAM)
    SVP, DMA

  • Thomas (Tom) Smith, III

    Mark’s points are certainly valid; however, the number of firms with the vision, software, or the analytics professionals to do this kind of work are few and far between.

    As a marketing executive who has been using regression analysis to prove points to clients for 30 years and been doing marketing automation for five years, I’m not finding anyone who appreciates how this knowledge translates to analyzing their data or has a desire to do more sophisticated automated, targeted, revenue marketing.

    This may be a function of Fortune 1000 companies who can afford seven-figure analytics software? I look forward to seeing others’ perspective on this topic.

  • Howard Schneider

    I’m no newbie, and Mark is right. But let me point out that the use of transactional data is not, strictly speaking, some recent innovation. (And I’m not sure why it is news to an old pro like Denny Hatch.) IN the loyalty marketing space, we’ve been using transactional data since the ’80s.

  • tony the pitiful copywriter

    I agree that there are merely a few shades of difference between what is considered old school and new school.

    They’re based on listening to your customer’s actions. No need for a show of hands, but how many of us have had to suffer through meetings where someone on the direct marketing team was just "sure" they knew how an offer was going perform in a test? Or worse, make profound changes to a control without a back test?

    Mark’s ideas are testable. Not cheap, but testable.

  • Fanter

    Call me a curmudgeon — there is nothing new here. In the 90s as casino marketers I was using "transactional" data (player ratings based on points earned on the casino floor) to "segment" players and generate "individual marketing", By tracking "visits" to our property you could easily understand a given player’s pattern of play and know easily when to push for a next visit. This insanely old school combo of personalized mail merged letters and follow up phone calls from a hosting department had been around long before I arrived on the scene. In fact, I was the second generation of casino marketers to use this "old school" technique before the cards, the pit bosses used to take notes. Sorry. but for me, this is the just knowing your customer 101 … Sitting in an office running reports is fine, but for most small to mid size … nothing beats knowing – truly knowing – your customers – understanding what makes them tick and addressing those buttons in your marketing pieces to trigger a sale as well as anticipate what they will love and provide it to them . All the reports in the world will never give your marketing the same edge or depth as understanding who is buying from you and more importantly WHY. People are so much more than algorithms …

  • Barry Dennis

    Rule # 1: Know Your Customer.
    Rule # 2: Repeat Rule # 1.
    You offer transactional analysis as a "better" solution, and it may well be. But you offer no proof other than the results. What about CPO (it should be lower using your methods), Lifetime Analysis correlation (definitely shorter these days) to establish credibility. All I’m Saying is that there is more to the analysis of data-and databases-than the "STATS.." I did my first transaction analysis in 1977 when I used my list fulfillment company to run an analysis of additional purchases by the same customer, and compared what they purchased to their original purchase, and the timing thereof. What I learned caused me to offer the first "add-on’ marketing program in our mail order industry, as well as design an add-on marketing program that established a methodology for guiding customers through the initial sale process. It also allowed me to analyze purchases of the add-on products as independent transactions, and establish a time schedule for sending new catalogs oriented towards repeat purchases of often-used products. I agree that transactional analysis may-MAY-point to betters offers, timing, and total sales.
    I don’t agree that "knowing your customer" doesn’t come first. And by the way, if the transaction being analyzed is not YOUR SALE, then that’s a sale lost to someone else.

  • Max

    If good data is available I use it, but it often isn’t as clear cut as you make it sound. I would assume you are referencing specific kinds of retail consumers, but you know what assume means. Unfortunately, your article is too general. Transactional data also isn’t new school. My grandfather, rest his soul, used transactional data at his speak easy.

  • Another Curmudgeon

    "These results depend on using transaction data for individualized analysis, and on making relevant offers to individual customers based on that analysis" if you get the information from your own databases it is based on YOUR interactions with consumers vs buy it from somewhere so its a much broader statistical pool.

    New Marketing? BAH! This is Denny’s comments gussied up in whhiz-kid-speak. Seems he is more relevant + 50 years experience vs. New Marketing Johnny-Come-Lately.

    For me, I’d put my money on tried and true. Score me for Denny.

  • Rainmaker Marketing Strategies

    Big data can tell you the

    Who – What – When – Where- How regarding transaction…but can never, ever, NOT EVER tell you the most important of them all… the

    Why!

    Until you equip Big Blue with the capabilities to "think", you’ll just have to settle for a good ole fashion noggin to figure that one out.

    Chris

    P.S.
    How would Big Blue factor in external factors that impact transaction? Like Geo-political events, Polar Vortexes and what-nots?