David Shepard Associates Blog

Statistics & Modeling For Direct Marketers 
  12/11/08 New York, NY
  01/27/09 Costa Mesa, CA
  03/18/09 New York, NY
  04/28/09 Washington, DC

In this edition of the David Shepard Associates Newsletter we highlight four of the more timely issues in our industry.
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As most direct marketers know, ZIP Code models are not new, but given this current economy this proven practice of targeting to improve results has taken on new importance. It is time to reconsider if the zip code modeling and screening techniques you are using are giving you optimal performance.  

Recently, I’ve had a number of discussions with other direct marketers who called after reading the Wall Street Journal’s article on how direct marketers like Williams-Sonoma, LL Bean, and Neiman Marcus have found new ways to use ZIP Code data to screen mailing lists and cut costs.
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In today’s tough economic times, marketers are continually searching for ways to gain efficiencies and improve return on investments.  Dramatic improvements in predictive models are possible through identifying variables that may not only work differently for different segments, but might only be relevant to certain segments, and not to others.

A while back, we wrote an article that dealt with the possibility, actually the probability, that different segments of your customer file may behave differently with regard to their relationships with well known key predictor variables such as Recency, Frequency, Monetary Value and various measures of Product Purchase data.
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Everyone agrees that optimal Data Driven Marketing involves promoting the right product with the right offer to the right person at the right time. Everyone also acknowledges that this is easier said than done.  Paying attention to seven critical factors will drive your success.

The concept of selecting the proper product to promote using the best channel makes considerably more sense to me than traditional product centric approaches which may degenerate into the senior product marketing manager getting access to the best customers.

That said, the way in which the optimization software is being marketed to marketing management, appears to dismiss some of the major factors that must be addressed in order to make its use successful. This paper is intended to identify these complicating factors so that they as they surface marketeers are at least aware of them and can work on solutions to address them.
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At the DMA conference, the long standing debate over hosted (service bureau) vs. in-house marketing databases will continue.  In our experience, there is no one right answer.  Each organization must consider the issues of costs, speed, development, equipment and specialty software.

Which is cheaper?

Some claim outside service bureaus. There is the age-old argument of mark-up versus leverage. Some say if you do it in-house, you can avoid the mark-up of everything that is done by the service bureau. That is true to some degree. The other argument is that the service bureau can leverage equipment and resources across multiple clients. That is also true to some degree. It all comes down to:

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