What Do They Buy?
Leveraging cooperative databases and the power of transactional data
By Steve Tinlin
During a presentation I gave at this year's Direct Marketing Association Conference & Exhibition with Sharon Langston of IBM, I had the opportunity to poll a room full of direct marketers about their current business headaches and challenges. An overwhelming theme arose: B-to-B marketers are suffering from a limited source of prospecting names.
As many as 80 percent of B-to-B direct marketers don't put their list on the market; response rates are declining; and the state of the economy has been reducing prospect sources and universes. Compounding these challenges is the fact that many mailers are finding it difficult to get good response from firmographic data.
Traditional B-to-B list selects typically include firmographic data such as employee size and SIC code. While this targeting method has proven successful for many mailers, it doesn't take advantage of actual buying behavior like a transactional database does. After all, employee size does not tell you about the vitality of a company, and the industry classifications tell you nothing about the purchasing activity of a prospect.
So, with these challenges, how can savvy B-to-B marketers positively impact their return on investment and get the most out of every marketing dollar? Leveraging transactional data is one step in the right direction. Transactional databases track the actual purchase history of buyers across many businesses to give marketers a clearer picture of customer behavior.
A transactional database tracks all purchases recorded, as well as the amount and date of expenditure. This is a key advantage of transactional data: It details exactly what B-to-B decision-makers have spent, as opposed to what they say they've spent or estimating spending ability based on firmographics. And it details this information at an individual level so that as a person changes organizations, you continue to leverage his or her purchasing history to make decisions.
Cooperative databases take this concept one step further. These databases contain names, addresses and transactional history from potentially hundreds of companies participating in the co-op. Cooperative databases can provide comprehensive purchase history about a company's prospects. Rather than just knowing what a customer bought from you, a co-op gives insight into every purchase a business contact makes from the cooperative's members.
While most customer databases show an average of almost two transactions per individual, some cooperative databases contain an average of 16 transactions per individual.
Making the Data Work
How do you maximize this additional data? Modeling becomes a key part of the process; you need to quickly and accurately sift through high-volume data sets with complex interactions. Modeling gives you a way to use what you
learn from your client's purchasing behavior to leverage your existing housefile and prospect lists.
A recent analysis of a sampling of B-to-B mailers analyzed different model types and data sources to identify which combinations of data and modeling worked best. Results showed that statistical models created from transactional data consistently outperformed—by 40 percent to 50 percent—straight list selects that were based on firmographic variables of SIC and employee size.
Another advantage of using a transactional database for prospecting is that it can help to identify direct marketing responders. There is no value in identifying a large purchaser in your category and mailing that prospect if the person only responds to direct sales calls. A transactional database allows marketers to identify purchasers who are proven responders to direct marketing, thereby optimizing the effectiveness of their marketing spend.
In addition to using transactional data to help find new customers, modeling your customer database using transactional data also adds valuable information to existing customer information. It can give you a more complete picture of a buyer's purchase behavior across multiple businesses, categories and channels.
For instance, two customers may look exactly the same at a business site. A profile of their previous purchases within your database might reveal that they are employed in an affluent business ZIP code, are first-time customers and spent $200 on office supplies from your catalog two weeks ago.
But add transactional data from a co-op database to your records, and you might learn that one of the customers purchased $2,000 in office supplies from various catalog, online and retail merchants. This contact also purchased $600 in gifts during that timeframe, and in the past 12 months has purchased $800 in ad specialty and $6,000 in computing equipment. The other customer, meanwhile, has only spent that $200 in the past 12 months. This data gives the marketer a more complete view of the customer or prospect to better assess propensity to purchase; it helps determine what offers to send to whom and how frequently to mail.
Not only will a transactional cooperative database give you a powerful analysis tool to acquire new customers, it will provide you with the ability to better retain existing customers and optimize third-party lists.
Getting involved in a cooperative database is easy. Most alliances allow you to test names by adding them to your mailing, or even to work with the alliance at the planning stage of your next mailing. Once you see the results of the mailings, the decision to join full time is usually an easy one!
Steve Tinlin is vice president of the Business-to-Business Alliance at Abacus, a division of DoubleClick Inc. He can be reached at email@example.com.