Saturday, October 27, 2018

#30 How Database Analysis Saved the Great Dane's Business

Issue #30 – Tuesday, October 30, 2018

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


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.

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 Trumpy 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


316 Dedicated B&O Dealerships—Iceland, UK, Europe, Turkey, Saudi Arabia 

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

###

Word count: 996

  


At age 15, Denny Hatch—as a lowly apprentice—wrote his first news release for a Connecticut summer theater. To his astonishment it ran verbatim in The Middletown Press. He was instantly hooked on writing. After a two-year stint in the U.S. Army (1958-60), Denny had nine jobs in his first 12 years in business. He was fired from five of them and went on to save two businesses and start three others. One of his businesses—WHO’S MAILING WHAT! newsletter and archive service founded in 1984—revolutionized the science of how to measure the success of competitors’ direct mail. In the past 55 years he has been a book club director, magazine publisher, advertising copywriter/designer, editor, journalist and marketing consultant. He is the author of four published novels and seven books on business and marketing.


CONTACT

Note to Readers:  
May I send you an alert when each new blog is posted? If so, kindly give me the okay by sending your First Name, Last Name and e-mail to dennyhatch@yahoo.com. I guarantee your personal information will not be shared with anyone at any time for any reason. I look forward to being in touch!

Invitation to Marketers and Direct Marketers: Guest Blog Posts Are Welcome. 
If you have a marketing story to tell, case history, concept to propose or a memoir, give a shout. I’ll get right back to you. I am: dennyhatch@yahoo.com
 
You Are Invited to Join the Discussion!

Tuesday, October 23, 2018

#29 Ads in Unexpected (and Logical!) Places


Issue #29 Tuesday, October 23, 2018 
http://dennyhatch.blogspot.com/2018/10/29-ads-in-unexpected-and-logical-places_23.html  

Posted by Denny Hatch

Ads in Unexpected (and Logical!) Places


It’s a Guy Thing.
Half of all men ages 51-60 suffer from enlarged prostates. At age eighty and above, 90% of men have enlarged prostates. —health24

You’ve seen TV commercials for Flomax that depict middle-aged and older men forced to dash off to the loo.

Why TV Advertising Can Be the Greatest Rip-Off
Take the Flomax ads—such as the one above.

The benchmark cost of a broadcast TV spot in primetime is $22/M to reach 1,000 viewers—or 2.2¢ per person.

Half of viewers are women. So a Flomax commercial costs 4.4¢ to reach a man.

Plus… during commercial breaks half the older men who would respond to a Flomax ad are likely in the bathroom. So let’s say the actual cost to reach the target is 6¢.

Using TV, the actual cost to home in on a true Flomax prospect is probably 3x the rate card!

Okay, maybe the ads register with wives who are influencers, so the cpm is not quite as high.

But the arithmetic of TV advertising gets worse.

Much, much worse!

The Rule of 7
“The Rule of 7 is a marketing principle that states that your prospects need to come across your offer at least seven times before they really notice it and start to take action.”  —John Stevens

Thus seven TV exposures cost 42¢.


But wait… to guarantee 7 TV exposures to the same guy means the commercial has to run 20+ times. So Flomax will spend $1.20 to get one prospect to suggest to his doctor that maybe he should try Flomax.

A Personal Aside
Recently my doctor prescribed Flomax. I went to my pharmacy to pick up the prescription and got 90 capsules of tamsulosin—the generic version of Flomax. My cost: Roughly $28.00

All pharmacies have a sign that says under Pennsylvania state law, they can substitute the generic version of a drug unless the doctor says it must be the original.

I asked the pharmacist how much real Flomax would cost, and he said around $200.

Talk About a Screw-up!
Think of it! The German pharmaceutical company Boehringer Ingelheim spends $8.40 to get a guy’s doctor to prescribe Flomax— which results in the sale of a generic version made by somebody else!



I am a direct mail veteran of 55 years who knows marketing arithmetic down to a gnat’s eyebrow.

Quite simply this may be the most cockamamie, money-losing business model I have ever seen!

Alternative Marketing
Several years ago at a Philadelphia restaurant I went to the men’s room.

Staring back at me was the poster you see below.  Next to it was a plastic rack of take-one brochures.

Go Where Your Prospects Go


Unexpected High-Tech Ad Venues

  
What Uroxatral Did Right 
• The message was precisely in the right place—at eye level.

• This is a good deal for the restaurant—advertising revenue from a private area that does not interfere with the ambiance of the eatery.

• Marvelously efficient. Unlike direct mail or television—where the message goes out to everybody—only men with that problem will pocket a flyer. Young men and boys will leave the brochure in situ for the next guy.

• What’s more, there’s no “Take-One” flyer with a TV ad to remind you of the opportunity. Broadcast ads are all about “recall” and “memory.”

If you see an ad on TV that is immediately followed by the dog vomiting in your wife's handbag, the ad is forgotten.

• Uroxatral made a good offer—TWO WEEKS FREE TRIAL!

What Uroxatral Did Wrong
• The take-one brochure was flat, boring, technical—what you’d find in a doctor’s office.

• The take-one made no mention of the TWO WEEKS FREE TRIAL! on the wall poster.

• I had to search all over the take-one for the 800-number and Web site. I finally found these buried amid blocks of sans serif mouse type.

• No call to action. No reason to act. The guy would not remember the free offer and discard the piece.

Takeaways to Consider
• “Fish where the fish are.” —MacRae Ross

• "Always make an offer."
—Elsworth Howell, Founder & CEO, Howell Book House

• “Make it easy to order.” —Elsworth Howell

• “The order mechanism should be so simple an idiot can understand it.” 
—Malcolm Decker, Freelancer

• Can you get your product or service directly in front of the prospect by short-circuiting the system à la Uroxatral?

###

Word Count: 725

At age 15, Denny Hatch—as a lowly apprentice—
wrote his first news release for a Connecticut 
summer theater. To his astonishment it ran 
verbatim in The Middletown Press. He was 
instantly hooked on writing After a two-year 
stint in the U.S. Army (1958-60), Denny
had nine jobs in his first 12 years in business. 
He was fired from five of them and went on to
save two businesses and start three others. 
One of his businesses—WHO’S MAILING WHAT! 
newsletter and archive service founded in 1984—
revolutionized the science of how to measure the 
success of competitors’ direct mail. In the past 55 
years he has been a book club director, magazine
publisher, advertising copywriter/designer, editor,
journalist and marketing consultant. He is the author 
of four published novels and seven books on business 
and marketing.

CONTACT
215-644-9526


Note to Readers:  
May I send you an alert when each new blog is posted? If so, kindly give me the okay by sending your First Name, Last Name and e-mail to dennyhatch@yahoo.com. I guarantee your personal information will not be shared with anyone at any time for any reason. I look forward to being in touch!

Invitation to Marketers and Direct Marketers: Guest blog posts are welcome. 
If you have a marketing story to tell, case history, concept to propose or a memoir, give a shout. I’ll get right back to you. I am: dennyhatch@yahoo.com

You Are Invited to Join the Discussion!