by Kurt Thearling
Published on hr.com, May 2001
How Marketing Has Changed
In recent years, the job of a marketing manager has radically changed. Instead of interacting with large numbers of customers simultaneously (consider billboards or magazine advertisements), the new role of marketing is to interact with individual customers, focusing on the specific needs of that customer. This involves identifying and understanding unique customer patterns as well as the creation of customized offers for small groups of customers that correspond to those patterns. For example, a pattern might be that 64% of people buying a baby stroller are expecting their first child (since people typically re-use a stroller for subsequent children). A marketing manger could use this pattern to identify new parents before the birth of a child, providing a marketing opportunity for other products (e.g., diapers, baby food, etc.).
As a result of the complex interactions that are now possible, the function of marketing is increasingly becoming tied to technology, ranging from databases to campaign management software to complex data mining algorithms.
What is Campaign Management?
Campaign management software applications allow marketing users to segment groups of customers (and prospective customers) into smaller groups and then specify the interaction that should take place with those individuals. For example, consider a marketing manager for a cellular phone company that is focusing on customer retention. There might be a large number of reasons that a customer chooses to leave their cellular provider, and the marketing manager is responsible for identifying ways to reduce this problem. One group of customers might be leaving because they are experiencing technical problems (e.g., frequent dropped calls) while another group might be leaving because the plan they are signed up for does not match their current calling patterns (e.g., a local calling plan with a large number of national calls).
A user of the campaign management software would define these segments by selecting customers in the database that have these characteristics. For the customers with technical problems, the marketer could create a customer segment that selects those customers who have had more than five dropped calls within the same month. The information that drives these selections is contained in a customer data warehouse, a database that is used to collect information about customer characteristics and activities. In the case of dropped calls, the customer service call-center would enter information in the database when a customer called to complain (even better would be an automated system that identified dropped calls and automatically added them to the database without a customer complaining).
Once this segment is defined, it needs to be associated with offers that will be communicated to the customers in order to improve retention. In the case of customers with technical problems, the offer might be a rebate of one month's charges and a promise to improve service quality. This offer could be communicated by a call from customer service or via a piece of direct mail (email might be a third option, if the customer's email address is available). The campaign management application would take the segment and split it into two groups, half receiving a phone call and the other half receiving a piece of direct mail (which half a customer fall into would be a random selection).
In addition, the marketing person might want to try out a slight alternative, offering a rebate of one-half of the most recent bill. The idea being that the less expensive offer might be more cost effective. Data will be collected and a statistical analysis done at a later date in order to evaluate the difference between the two offers. This test offer would then further segment each of the two existing segments (phone call, direct mail) into to additional groups, with most (say 90%) receiving the full-month rebate while a smaller group (10%) receiving a half-month rebate.
Once the definition of the segmentation is complete and the marketing manager is satisfied with the campaign, it still needs to be executed. This would be handled by a scheduler that executes the campaign at regular intervals (e.g., monthly). Upon execution of the campaign, the segments associated with the phone call would be passed to the call-center software system, which would queue up the customers who are supposed to receive the offer along with the specifics of the script that the operator is supposed to use (full or half month rebate). The direct mail segments would likely be handled differently, possibly by using an external vendor (a "mail shop") that would take a list of customers and produce the actual envelopes that would be mailed. In this case, the campaign management system would generate a file listing each of the customers, including their address and offer type.
This process of creating segments, associating them with offers, and executing campaigns would be repeated for each possible segment that a marketing manager might think of (some companies define thousands of possible segments for their customers). Collisions between segments are handled by the campaign management software, either by excluding customers from segments (based on a set of rules) or by allowing the overlap. Over time the effectiveness of the segments are evaluated, with refinements incorporated continuously (this kind of marketing is sometimes referred to as "continuous customer management").
Difference From Traditional Market Segmentation
Market segmentation has long been a staple of marketing departments. Traditionally only a few broad segments would be defined (e.g. older users, expert users) based on overall demographic information (often purchased from third-party data vendors). Now, with so much data being collected internally, it is possible to define many more segments at a finer and finer level of granularity. In addition, it is now possible to define the segments based on their actual interaction with the company (rather than general demographic information) and to automate different responses to each segment.
What HR Needs to Know
Your marketing department will care about campaign management and you need to
be familiar with their main business issues. Marketing's skill in campaign
management could someday be applied to how HR responds to its customers: the
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