Cleaning Your Customer File…The Springboard to Increasing ROI

By Chuck Romans, MDR Vice President, Products and Services

Spring cleaning…these are two words that are synonymous with the season. When it comes to your business, make sure you apply this time-honored practice to your customer file. Spring is an excellent time to tackle enhancing your most valuable asset as you prepare for the new school year (no, it’s not too early to do that!). Your customer database is the best sales tool you have, so keeping it in perfect running order helps you generate higher response rates, decrease mail waste, increase revenue, and save money.

First, we need to lay the ground rules for the education market. Given the methodical and extended purchasing cycles in many districts, being overly aggressive and removing the names of those customers from your files who have not purchased in the past 12 to 18 months is not recommended. After in-depth testing, we have seen that the 13- to 24-month buyer category was the second best-performing segment. (Buyers in the 1- to 12-month category were first.)

So when is the appropriate cutoff? There is no magical time frame that fits all markets and products. However, there is a pragmatic answer—remove names or at least stop mailing them when they become unprofitable. Customers will outperform prospects 5 to 1 or sometimes greater—but not all customers are equal. The best way to decide the cutoff date is to track results by the customer’s last activity segments. For example, consider tracking response rates, sales, and revenue per thousand by logical customer segments such as 12 months, 13 to 18 months, 19 to 24 months, 24 to 36 months, and 36+ month categories. Once the cost of marketing exceeds the results, it becomes clear when to stop or reduce touches to this segment.

With that said, there are other factors that determine the probability that a customer will buy again. There is not much debate that recency is the most predictive factor in determining the likelihood of response. However, frequency is also a highly predictive factor that is often overlooked by education marketers. Conventional direct marketing wisdom says that a customer has a greater propensity to buy again if they have purchased more than once. If a customer’s last transaction was longer than 18 months ago but has purchased at least twice, they can be a better prospect than someone who only purchased once eight months ago. In fact, it can be easier to get a customer to purchase a third time than to get a customer who has bought only once to become a repeat buyer.

There are other ways to improve customer file performance in addition to a database rule, such as a 18-month cutoff.

Changes in the Education Market Landscape

Today’s education market is forever changing and at an increasing rate. Here are some facts:
 

• More than 900 schools and districts closed or merged in each of the past two school years 

• Over 550,000 teachers were new to their schools this past school year
• The annual teacher turnover rate is approximately 19%
• 12% of teachers change their job assignments annually
• 4,900 schools change their grade span annually

Shifts in the marketplace cause customer databases to go stale if they are not updated and refreshed periodically. For example, in a customer file containing three years’ worth of transactions, there will be 20% or more chance that the educators are no longer at the institution.

Database marketing techniques can cost effectively identify the closed schools and educators who have left the institution. Closed institutions on a customer file are generally a small segment, but if a customer file is mailed 10 to 20 times over a period of 24 months, a significant amount of marketing resources are being wasted—money that could be used more effectively.

It’s All About the List

The quality of the mailing list is the single, most important factor that affects the response rate. To achieve success, promotions must be targeted to the right audience, and they must reach their intended recipients. With the customer list, quality of data is also of the utmost importance. The delivery of a promotion depends on accurate names and addresses. If an educator has recently left the institution, it is highly likely that the promotion piece will be forwarded to the new person. However, if a person has not been at the institution for six months or longer, the forwarding rate decreases dramatically.

An education marketer can divide the customer file into three segments based upon:

• Educators still present at the institution
• Those who have left the institution
• Educators who cannot be validated

As expected, the “educators still present” at the institution is the best-performing segment by far. Typically, there is a response rate on the “no longer at the institution” segment because of the pass-along factor, but the response rate is so low that it makes this a very unprofitable segment. Again, reallocation of those marketing dollars to profitable areas is the goal.

It is a proven fact that a well-maintained customer file will perform much better than one that has not been fine-tuned. With the only constant in the education market being change, cleaning your customer database this spring is not just worth your time and effort—it is the one activity that will pay off in profits all year long.