Take an “Outside-In” View When Utilizing Transactional Data

About the Author

Bill Schneider, senior director of Solutions Support and Analytical Consulting services at Experian Marketing Services, challenges marketers to take an “outside-in” approach to understanding their customer’s spending behavior to improve marketing acquisition strategies. Schneider has over 25 years of experience in the database and direct marketing industries. He has worked with clients from various industries including retail, financial services, sports and recreation, telecommunications, hospitality, and non-profit organizations.

Take an “Outside-In” View When Utilizing Transactional Data

When I visit my favorite supermarket I buy a lot of fish, especially salmon. But I don’t buy much meat. That means I must prefer surf over turf. Or does it? What my grocer doesn’t know is that I have a favorite butcher shop where I buy the majority of my red meat, especially filet mignon. Now here’s the rub. The supermarket keeps sending me special offers for seafood. That seems to make sense. From tracking my purchase transactions, they know I buy a boatload of fish. But what they really should be doing is luring me in with offers for fresh meat. Simply put, there’s way more profit to be made by capturing a greater share of my meat expenditures than there is in selling me more fish.

For many years now marketers have been relying on transactional data for understanding the purchase behaviors of their customers. The tried and true benefits of RFM marketing have been with us for as long as marketers have collected and stored purchase data inside of vast customer databases. This information gives marketers a window into the past, present, and likely future purchase characteristics of a large segment of their customers.

But what is generally lacking is information regarding a customer’s external expenditures. These are purchase behaviors that are hidden from view because they occur at the store down the street or at some other competitor. For instance, a retailer of women’s apparel might have a good idea of the total spend within the past 12 months for a large portion of its customers. But what does this cumulative purchase amount represent as a share of the customer’s total wallet for women’s apparel? And what is the customer’s upside potential for sales of women’s shoes?

Too many marketers use transactional data with an “inside-out” approach. That means they study their own internal transactional information and then push out offers based on inferences about the likely future behaviors of their customers. The problem is that this approach only addresses one side of the transactional story. In my supermarket example, the grocer is blind to my purchase behaviors outside the walls of his store. By using an “outside-in” approach instead, the marketer can begin to leverage knowledge regarding my external purchase behaviors (the other side of the transactional story) and then pull me back in with offers designed to capture a greater share of my category expenditures.

An “outside-in” strategy is now possible using new spending estimates available on ConsumerView℠. Historical spending data gives marketers greater visibility into customer behavior by appending spend indices based on actual transaction data. The spend indices allow marketers to view customers’ likelihood to spend based on age, gender and Zip+4 across more than 50 industry and lifestyle categories.

Analysis of internal transactions (looking from the “inside-out”) combined with spending insights (looking from the “outside-in”) provides marketers with a more complete and balanced view of how their customers are behaving. To put improve your customer retention and acquisition marketing campaigns, and to learn more about the benefits of spending data on ConsumerView, contact your local Experian sales representative or call 1 800 850 4389.

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