Treating consumers as individuals

Think small.That might well become the motto of database marketers as the industry says goodbye to an era of indiscriminate, poorly targeted 'junk mail,' and moves toward a time when it is able to send select groups of consumers the right...

Think small.

That might well become the motto of database marketers as the industry says goodbye to an era of indiscriminate, poorly targeted ‘junk mail,’ and moves toward a time when it is able to send select groups of consumers the right information about the right product or service at the right time.

For no matter what the purpose of a database marketing campaign – whether it is to sell more product, increase consumer loyalty, or improve customer service – its success relies more and more on treating consumers as individuals.

Predictive modelling

Sharon Oatway, general manager of direct response at the Canadian Imperial Bank of Commerce, says two years ago the bank began using a sophisticated database marketing tool called predictive modelling to retain customers who were thinking of moving their business to another financial institution.

For each model, Toronto-based database marketing firm Spectrum Decision Sciences correlates up to 150 pieces of information on individual cibc clients to determine whether they are high risk or solid.

Oatway says each client is ‘scored’ using variables such as timely payment of their credit card bill, consolidation of loan payments, or the transfer of small amounts of rsp funds to other institutions, to predict whether the customer is planning on making a move.

Those clients who score poorly are singled out for an aggressive, highly targeted communications campaign.

Personal contact

‘It could mean personal contact at the branch level,’ Oatway says. ‘It could be a direct mail offer.

‘In the case of mortgages, we produce a comprehensive newsletter outlining the benefits of a cibc mortgage,’ she says.

‘In other cases, we offer better rates to higher risk accounts than to the general population.’

‘Predictive modelling allows us to focus our promotional spending more effectively.’

Traditionally, the bank might have mailed out 100,000 pieces per campaign and got a 1.5% response (or 1,500 responses).

8% response

Oatway says now it is mailing 30,000 pieces and getting an 8% response (or 2,400 responses), a vastly improved response rate for less than one-third the postage.

And while the number of the cibc’s direct mail programs has increased, the overall quantity of mail has been reduced, she says.

‘We’re dealing with the specific behavior of individuals,’ Oatway says.

‘Profiling [a more generalized research method] assumes I’m the same as my neighbor, when in fact I’m quite different,’ she says.

‘With predictive modelling, every customer gets a different score. And when you have that individual behavioral information, you can be much more targeted.


‘Our whole strategy is based on making sure that when we communicate with a customer, it is appropriate. It’s critical when you look at the junk mail and privacy issue [direct marketers] are facing at the moment.’

Oatway says the average cost of a cibc predictive model runs between $30,000 and $40,000, adding it is well worth the price when research has shown it is five or six times more expensive to attract new clients than to keep existing ones.

Robert Humphrey, president of upscale menswear retailer Harry Rosen, says his company has been practising some form of relationship marketing since its inception in 1954.

Back then, it was a manual system, but the principle has remained the same – to record a customer’s size and style preferences to help him select merchandise that complements his wardrobe.


Three years ago, the company made the move to a computerized database with purchase information captured at the point-of-sale. Each time a client makes a purchase, his file is updated.

The database has been used to support insurance claims by customers whose merchandise was stolen or destroyed. It has also been used by gift-givers to ensure they are not duplicating an item the client already has. But most often, the database is used by sales staff to identify prospects.

‘If we have a shipment of J.P. Tilford suits, our sales associates can go to the computer and pull up J.P. Tilford customers,’ Humphrey says.

‘Whatever the merchandise event is, whether it’s a sale, product or size, the sales associate can identify customers for those products and contact them,’ he says, noting 30% to 35% of the company’s business is generated in this manner.

‘At times, you find that a customer may not respond to a phone call, and we have to recognize that. But generally, most of our customers are pleased that we follow up.’

The company encourages busy clients to book an appointment so sales staff can pre-select merchandise that meets the client’s needs and reflects his preferences.

Grown and prospered

‘We have grown and prospered over the years by listening to our customers,’ Humphrey says. ‘The database allows us to listen to them in a more specific manner, without interrogating them on the sales floor.’

He says the company complements its in-store database marketing efforts with the Harry Rosen Report on Menswear, a semi-annual direct mail piece sent to everyone on whom the company maintains a file.

He says the fall report will be mailed to more than 250,000 clients.

As well, Humphrey expects the retailer will be doing more frequent, targetted mailings within the next 12-24 months.

Maintaining a relationship can work well when a company knows who its customers are. But in some cases, establishing their identity is the biggest obstacle.

Greg Olson, direct marketing manager for Apple, says the computer manufacturer faces a real challenge trying to reach the 30% of Canadian small businesses that have yet to computerize.

‘For many people, a computer purchase is a particularly intimidating exercise,’ Olson says.

The company produced In Business with Macintosh, a video that includes case studies of three small businesses that were using the computer, followed by demonstrations of some of the more popular software.

That was the easy part. The challenge was to distribute it to the right people, specifically people in the communications industry (advertising agencies and graphics arts businesses), architecture, engineering and construction firms, the real estate industry and general small business.

Direct marketing agency Wunderman Worldwide was brought in to co-ordinate a multi-faceted campaign which included three print ads placed in 18 publications and three direct mail pieces sent to prospects derived from 19 different mailing lists.

As well, the video was cellophane-wrapped with the March 1992 issue of Profit magazine and placed on newsstands in the Metro Toronto area.

Response card

Both the print ads and the direct mail pieces included a direct response card and an 800 number inviting prospects to send away for the free video.

Among other things, respondents were asked to specify the number of employees, how they planned to use the computer, and the approximate timing of their purchase decision.

‘Our intent was to build a database of small businesses who had expressed a predisposition to Apple Macintosh personal computers and gather qualifying information that would allow us to talk to them in a more focussed, smarter way in the future,’ Olson says.

Based on their responses to the questionnaire, prospects were categorized as cold, warm or hot leads with the names of the latter forwarded directly to Apple dealers.


Although he would not specify numbers, Olson says the campaign was successful and overachieved its objective by 35%.

Having signed up more than one million members since its launch March 30, the term ‘think small’ does not appear to apply to Air Miles, the reward program that allows consumers to collect free air travel miles by shopping for a wide variety of goods and services.

But the program does allow its sponsors (at last count 19, representing 27 retail businesses) the chance to target specific segments of its customer base, says Joanna Fuke, director of consumer marketing with Loyalty Management Group, the company that runs the Air Miles program and owns the rights to its database.

Account summary

Every two months, Air Miles collectors receive an account summary that breaks down the total miles collected by transaction.

It shows visits to specific sponsors, the date posted, and the number of miles generated per visit.

Offered to members as a benefit (Fuke says Air Miles collectors want to see more than just a lump sum total), the information recorded on the summary statement also enables Loyalty Management Group to track the shopping habits and preferences of individual consumers.

‘We would know, for example, that you have purchased at Food City, purchased at Holt Renfrew and rented a car from Tilden Interrent,’ Fuke says.

‘Given that you’ve rented a car, we probably wouldn’t send you information on Goodyear Tire, but we might send you a CP Hotel offer,’ she says.

‘If you’ve shopped for food, we might send you information on First Choice, assuming you do more in-home entertaining than out-of-home entertaining.’

Sponsors who know the demographic profile of their clients can ask Air Miles to single out like-minded prospects that do not currently use their service.

Fuke says that while Loyalty Management does not share the information in its database, it will include a sponsor’s offer with the summary statement, provided it enables the consumer to generate more air miles.

Zellers’ Club Z, the granddaddy of loyalty-based database marketing programs in Canada with six million members, is still fine-tuning its operation, six years after its inception, says program director Douglas Ajram.

Zellers divides Club Z members into three groups – regular customers, senior citizens and best customers, those who spend more than $5,000 a year with the department store.

Each group receives four targetted mailings annually. As well, the company runs an auto club for Club Z gold card members.

‘Right now, we’re still macro [marketing,]‘ Ajram says. ‘We want to direct-market specific items at a much higher level.’

Like the Harry Rosen program, Club Z keeps detailed records of its members’ purchases.

That information is then used to generate additional sales in-store by encouraging manufacturers to provide incentives to Club Z members.

‘If someone buys diapers, we can be pretty sure they have a baby,’ Ajram says. ‘We can then approach [baby food manufacturer] Gerber and ask them to provide those members with a coupon.’

Even if the product is not sold by Zellers, the company and its customers can still come out ahead.

This fall, auto club members will receive a $30 coupon redeemable on a brake job at Midas Muffler.

Ajram says the coupon provides members added value, while Club Z charges the manufacturer a commission, competitive with that of list-brokers.

Allan Schlar, managing partner of demand and electronic banking marketing at Royal Trust, says his company capitalized on its established relationship with its clients by enlisting them to lure their friends and relatives away from the competition.

Launched in April, the Royal Trust Alliance program was communicated through newspaper advertising, transit shelters and in-branch merchandising, but relied heavily on word-of-mouth from clients who were already on its mailing list.

The Alliance program allows clients to group together up to 20 personal saving and chequing accounts, with interest paid on the total balance of all the accounts.


Schlar says clients who transferred their accounts from other financial institutions were then given invitations to distribute to friends, colleagues and family members.

One client opened 11 accounts for her grandchildren, another invited his law partners to join, still another invited unit owners in his condominium complex.

‘Word-of-mouth works,’ Schlar says.

Once a new client has joined an Alliance, Royal Trust uses the opportunity to cross-sell them additional products.

‘The information goes into our database and enables us to see opportunities for other products we can sell these customers,’ Schlar says.

‘If their balance is over a certain level, we could advise the client they might be better off with some of the money invested in a Guaranteed Investment Certificate, or we could follow up with a targetted mailing to clients who do not already hold an rsp with us,’ he says.

‘Database marketing is the way of marketing in the ’90s.’

‘It’s a way of using the demographic and client information to provide the best products and advice to customers in a targetted, focussed way, so the company can maximize its advertising and promotion spending, while at the same time delivering to the customer’s needs,’ Schlar says.