Issue #30 – Tuesday, October 30, 2018
http://dennyhatch.blogspot.com/2018/10/30-how-database-analysis-saved-great_27.html
http://dennyhatch.blogspot.com/2018/10/30-how-database-analysis-saved-great_27.html
Posted by Denny Hatch
How Database Analysis Saved
The Great Dane’s Business
The Great Dane’s Business
In the 1970’s I wrote two novels. Movie rights were sold and I got a small pot of money. (No film was ever made, alas.) But Peggy and I splurged and bought a top-of-the-line Bang & Olufsen stereo rig like the Danish beauty you see above—big bucks in those days.
It was glorious to listen to as well as to look at. This model was on exhibit at the Museum of Modern Art. Every time we put on an LP or listed to FM radio, it was thrilling.
At the time I was 42. I probably mailed in a warranty card back in 1977. It was a period well before sophisticated analysis and modeling. B&O no doubt stuck my registration card in a shoebox that was consigned to a warehouse, whereupon they forgot about me.
What's more, B&O had no idea who I was, who was buying their products or how to reach their market.
What's more, B&O had no idea who I was, who was buying their products or how to reach their market.
Who Were Bang & Olufsen’s Customers?
In the early 1990s, Bang & Olufsen began an aggressive campaign to expand its share of the audiophile market.
At that time the company had 17 retail stores across the country. All B&O management had to go on was a little list of 32,000 buyers.
When building a business, it's a good idea to:
• Know who your customers are.
• Go where the folks with those demographics are.
Bang & Olufsen was operating on the assumption that its typical buyer was a single professional male between the ages of 25 and 30 with an average income of $50,000.
Wrong.
The First Sad-Sack Survey
In 1994, Bang & Olufsen decided to survey its customers to find out more about them. An outside research firm designed the survey on single sheet of paper with a business reply envelope and mailed it to the list.
Thanks to the incentive of a free CD for completing the survey, it generated a 20-percent response. It was learned that the typical buyer earned more like $70,000 than $50,000.
Still very wrong.
Turning to Direct Marketers for Answers
In 1997, Bang & Olufsen decided to get serious about developing a customer profile. Chicago-based agency Lighton Colman brought the database wizards at Metromail together with Bang & Olufsen.
Lighton Colman's John Tomkiw recommended INSOURCE—a co-branded product created by Metromail and Experian (née TRW).
INSOURCE contained more than 300 individual data elements on 95 percent of the 100 million households in the U.S.
When the Bang & Olufsen wee housefile was bumped up against INSOURCE, the results astounded the corporate executives. (I was not astounded.)
It turned out the typical customer was:
• A married professional male.
• Average age: 50-55.
• Homeowner with grown children.
• Making an average salary of $150,000+.
“The data were full of surprises. Our previous suppositions were demolished. Through the INSOURCE enhancement, our data was amplified to such an extent that we really came up with a profile that's pretty unique—and that we can take action on. The differences are not subtle.” —Keith Lennartson, B&O Communications Director.
The Survey Revolutionized B&O’s Marketing
Now, instead of blazing away with a shotgun, Bang & Olufsen was armed with a sniper’s rifle. Among the immediate changes instituted as a result of the INSOURCE connection:
Radical Media Repositioning
For years, B&O was blowing advertising dollars on media with the wrong readers. The old schedule included: The Robb Report, Where, Departures.
The new schedule: Cigar Aficionado, Worth, Conde Nast Traveler, Wine Spectator, Audio Visual Interiors, The Advocate, Saveur.
New Retail Opportunities
By running the INSOURCE customer model against its database and doing a ZIP Code analysis, Bang & Olufsen uncovered potentially profitable new sites for retail stores that were previously below the radar screen. Among them: Washington, D.C., North Carolina and Minneapolis/St. Paul. The next step: use GIS mapping software to more finely target its retail store locations.
What's to Be Learned?
What Bang & Olufsen discovered is what direct marketers had known for years: database analysis can yield information so basic and low-tech that it can change the fundamental model of the business.
Database Analysis vs. Surveys
Bang & Olufsen's first survey garnered a respectable 20-percent response—but it was way off. You would think that based on those results, a fairly accurate customer profile could be assembled.
Why the Survey Was Probably Flawed
Consumers in the upper income brackets are too busy to fill out a survey. Very likely, only 25 percent of those making $150,000 a year bothered to fill out the survey while only maybe five percent of those making $250,000 responded. The result: a skew that could have been very dangerous to the health of their business had they not connected with INSOURCE. For example, Peggy and I weren't making anywhere near the average $150,000+ per year back in 1977 when I filled out that survey.
The Eye-Popping Changes in the 21st Century
Bang & Olufsen is now in the world of teeny geeky goodies for pocket, purse and studio apartment…
… On up to obscenely high-end audio extravaganzas to bedazzle friends, family, business associates and neighbors:
A personal aside: Can you freakin' believe a tacky little 3-year guarantee on a $63,720.00 product? Oh, those sphincter-tight Danish bean counters!
And This!
Who buys this stuff?
It ain’t Country bumpkins who love beer, Big Macs and the hopeful resurgence of coal. Here’s B&O’s current footprint in the U.S.
13 B&O Dealerships Nationwide (plus Amazon, Best Buy, Crutchfield and others)
Here's B&O in the Rest of the World
How’s B&O Doin’?
2018 2017 2016 2015
Sales/Revenue $504.7 $452.4 $403.9 $359.2
(In millions)
Sales Growth 11.56% 12.02% 12.41% 8.63%
It’s amazing what basic direct marketing data analysis can do to (and for) a business model!
Takeaways to Consider
• Concentrate on your own core competency (e.g., making and selling high-end electronics) and spend money on outside professionals for their core competencies (e.g., database enhancement and analysis).
• "Fish where the fish are." —Macrae Ross
• "Fish where the fish are." —Macrae Ross
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