barcode printer in vb.net Results after Using Cluster Selection in Software

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Table 13-3 Results after Using Cluster Selection
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Selected direct mail Clusters with over 20% penetration Clusters with 5 to 19% penetration Clusters with less than 5% penetration Total customers Cluster coding Total costs 950,000 200,000 50,000 1,200,000 1,200,000 1,200,000 Cost $484,500 $102,000 $25,500 $612,000 $144,000 $756,000 Sales 32,300 4,200 400 36,900 36,900 Rate 3.4% 2.1% 0.8% Cost per sale $15.00 $24.29 $63.75 $16.59 $20.49
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You are still mailing 1.2 million pieces, and you are spending about $100,000 more than before, as your costs include $144,000 for selecting prospects by cluster. Even so, your cost per sale is down by $9, and you have gained 15,000 more customers on the same 1.2 million mailing. This shows the value of cluster coding, if it works for you. Why did you do any mailing to clusters where your penetration was less than 20 percent That is a good question. Self-preservation is the answer. As database marketers, we always have to justify what we do to management, which questions everything. Why did you spend this $144,000 your managers will ask. Because I knew from previous tests that cluster coding would work, you answer. Then why did you mail to prospects in the lower-performing clusters they will ask. You reply, Because you would never have believed me if I hadn t tested some of these lower-performing clusters. Now you do.
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Prospect LTV
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When you do acquisition, you want to know the LTV of the prospects that you are trying to acquire. But how can you know anything about them, since they have never bought anything from you Many companies have been quite successful at this kind of analysis. First, you develop the LTV of your existing customers. Segment them by demographics, and develop the LTV of each group. Next, you append the same demographics to your list of prospects. Experian, Donnelly, Acxiom, and other companies will be delighted to append demographics (age, income, presence of children, home value, ethnicity, years at present address some 200 different pieces of data) to your prospect le. They will even nd prospects for you that have the demographics that you are looking for. Then you make the assumption that prospects that look just like your best customers will behave like your best customers and will have a similar LTV. Armed with this prospect le, your next step is to test your marketing skills. Can you develop the right approach through mass marketing ads, letters, phone calls, or emails to win a signi cant number of these prospects as customers The nal step will be to determine whether
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Table 13-4 Selling to Segments
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Customer 3-year LTV Group Group Group Group Total A B C D $865 $522 $217 $ 14 Matching prospects mailed 400,211 200,011 50,034 50,055 700,311 Mailing cost $244,129 $122,007 $ 30,521 $ 30,534 $427,190 Sales to prospects 6,804 5,800 1,601 1,802 16,007 Prospect response rate 1.70% 2.90% 3.20% 3.60% 2.29% Cost per sale $35.88 $21.03 $19.06 $16.94 $26.69
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these prospect look-alikes really do act like the customers that they were modeled after. When your tests are completed, do a direct-mail or email marketing promotion. You can create a table for prospects that looks like Table 13-4. To create this table, you divided your customer base into four segments based on lifetime value. You determined the demographics of these four segments: income, age, presence of children, home value, and other criteria. Using these criteria, you rented prospect names that matched the pro le of each segment, and you did a mailing to them. Your results were interesting. The prospects that matched your best customers with the highest lifetime value had the lowest response rate. Why should that be It is not at all unusual. Banks, for example, nd that their best customers are the least responsive. Rich people get more mail than poor people. They throw it away. In some cases, poor people are more likely to respond. You have to decide whether you want responses (acquired customers) or valuable long-term customers. Group D is very interesting. It is costing you $17 to acquire customers who are worth $14. That does not make much sense. However, that is what most companies are doing because they have not read this book and they have not done the analysis. There is also another reason why most companies are acquiring worthless customers: They are set up for acquisition. They have a sales vice president who is compensated on the basis of the number of customers acquired. He does not get blamed if these customers are worthless. It s marketing s job to make money with these customers. I just nd em and rope em in, and I do a great job of it, he says. Is this true in your company Of course it is, unless you have determined the lifetime value of your customers,
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