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Oct 11, 2012
Case Study

Database Marketing: Hearst increases direct mail response 25%, creates 200% ROI

SUMMARY: Database management is important for efficient marketing practices once your customer base reaches a certain size. Hearst Magazines definitely fits that bill with a reach of 87 million adults. The issue was an error-filled and unwieldy database for marketing to that audience.

This case study covers the process Hearst utilized to take control of, and rebuild, the marketing database, and how those steps led to a 200% ROI, 25% lift in direct mail response, and an 8% reduction in database records.
by David Kirkpatrick, Senior Reporter

CHALLENGE

Unless your company is a store front with an almost exclusively walk-in customer base, or your digital marketing efforts are easily maintained without the aid of software tools, your database is a key marketing asset.

And the larger the company, the more important that asset becomes. An unruly database can undermine marketing efforts, but maybe more importantly, it can cost you money.

Hearst Magazines was founded in 1904 and is the largest U.S. publisher of monthly magazines. Its publications reach 87 million adults with its 20 titles and 300 global editions The company has a database that corresponds to the size of its customer base.

Hearst faced the same challenge that affects the entire publishing industry – the definition of "magazine" is no longer exclusive to a print publication. Magazines are read in print, but they are also consumed on the Internet, on e-readers and on mobile devices such as smartphones and tablets.

All these different ways the same consumer was interacting with the company began affecting the quality of the database at Hearst.

Charlie Swift, Vice President of Marketing Analysis and Operations, Hearst Magazines, said, "(We had) to do a better job of integrating our information across our various platforms, channels and titles."

He continued, "We have multiple magazines and with each of these magazines we communicated with our customers in multiple channels, and we wanted to bring all that information together and have that 360-degree customer view."

Read on to find out how Hearst reduced its database by 8%, increased direct mail response 25%, and achieved a 200% return on investment.

CAMPAIGN

Swift stated the primary goal of the effort was consolidating its database information to tie multiple marketing channels to individual customers.

The secondary goal was using this consolidation to more efficiently communicate with Hearst customers, improve direct marketing efforts, and eliminate redundancy in marketing communications to its customers.

Step #1. Identify the problem

"We became aware of the fact that we were communicating to people in multiple places, and there was redundancy in what we were doing," said Swift. "We realized we were also cannibalizing our existing business."

One issue is Hearst would receive orders from one person through multiple channels because the different marketing efforts did not communicate across channels.

For example, someone might receive an email seeking a subscription to "magazine X," and also receive a direct mail piece requesting that same subscription action for "magazine X." If the recipient responded positively to both offers, the order would show up twice.

The end result was a large amount of duplication in marketing efforts at Hearst with multiple marketing channels sending duplicate offers, and at times processing duplicate orders when the offer was successful.

Step #2. Interview industry peers to uncover a solution to the problem

To seek out industry best practices on handling the multi-channel duplication issue, Hearst conducted interviews with people in the publishing world. It was actually during this process where Swift became introduced to Hearst and ended up becoming a team member.

The interview process also made it clear to the team that solving the issue would require finding a database vendor.

Several elements factored into choosing the vendor:
  • Experience in the direct marketing space

  • Cost of the solution

  • Future flexibility and scalability

  • How the vendor matched up with in-house capabilities

"The question with the selection was more around understanding the capability (of the vendor) and actually taking advantage of this new capability," said Swift.

He continued, "We do have large database capabilities internally, but what we didn’t have was the expertise in the direct market space."

Answering this problem led to a different way of approaching the database at Hearst.

Swift explained, "(The vendor’s) expertise is much more in the fulfillment and customer service aspect, as opposed to marketing. That was our biggest challenge – how do we (combine an) operations database to our marketing database?"

Step #3. Conduct internal interviews to define the new database

Swift said after identifying the problem and getting a solution in place by choosing a database vendor, because the process was going to involve rebuilding how Hearst handled its database the team decided to get input from others in the company.

The question was: What would you like to see if we were to build a more efficient, customer-centric/customer-oriented marketing database?

This internal interview process lasted a couple of months and involved sessions with units throughout the company.

Swift said these sessions provided many ideas on how to build the new database. With those points in hand, the team then prioritized them and also determined which ideas were feasible to actually implement.

The result of the entire process was then taken to the database vendor and the database development phase began.

Step #4. Get early "wins" in the development phase

"In the process, we identified that the need to get some early wins was important," explained Swift. "Where we could do that was eliminating some of the duplication we were seeing on our website."

This duplication was the same offer being presented to someone who was an existing customer.

Removing this duplication included two elements:
  • Collapsing each customer to a "single view"

  • Connect customers to the website registration

This process was conducted over the first six months of the database development phase.

Three months later Hearst rolled out the second phase of eliminating duplication – direct mail capability. Specifically, making sure multiple pieces of direct mail were not going out to the same recipient.

Step #5. Improve targeted marketing

With the new database in place, Hearst had a new view of its customers and a new process of bringing in data from multiple sources on those customers and then evaluating that data. This aspect of the new database was part of collapsing each customer into a single view.

Swift said this new way of viewing each customer allowed Hearst to efficiently target marketing materials, and the team tested this targeting with its direct mail over the next six months.

Direct mail was chosen because it is Hearst’s largest customer acquisition engine, and also its largest cost component. Swift explained the idea was to make direct mail more efficient, grow t their targeted marketing capabilities, and then extend those insights to other channels.

Previously, targeted marketing was accomplished by the team selecting an audience based on attributes such as:
  • Age

  • Income

  • Marital status

  • Geography

But the old database did not have clean data and included many errors.

The revamped and cleaned-up database allowed the team to identify higher-performing segments, and even get more granular in the data to find people within those segments that represented the best and worst performance against the average.

The team built models that would uncover those high-performing people within the larger targeted segments.

Swift said one early test was trying out the marketing team selection process against the new database model.

The result of this test was a 25 percent lift in response rate for the modeled campaign over the older selection process.

Swift stated, "One of the powerful things that we are doing right now with the database is we are actually scoring every month, every individual in our database to find what is the likelihood that they would subscribe to each one of our magazines."

Step #6. Refine the process to improve efficiency

Taking the insights from the direct mail tests, Swift said the email channel became more efficient through targeted marketing.

The entire process led to collecting more customer information on the website, and then allowing this new data to inform more of the decision making at a high level on database building and targeted marketing.

The next stage of refinement was in-house reporting and database management. This involved creating new reporting tools and campaign management.

Swift said the idea behind adding a campaign management tool to the new database was to manage the entire process more efficiently by becoming more "real-time" and flexible to marketplace changes.



RESULTS

Swift said there was one major key performance indicators for this effort -- response rate for campaigns.

"In the magazine world our effective goal is not necessarily to sell more, but to sell to a number," he explained. "I have a commitment to my advertiser to have ‘x’ number of people reading each magazine, so my job from the marketing perspective is to get that number of readers as efficiently as I possibly can."

The metrics from this effort include:
  • 25% increase in direct mail response rate

  • 8% reduction in customer database records

  • 200% return on investment over three years

Swift said that direct mail had the most impact on the results.

"I got [a] lift [from] the Web, and I got lifts in email, but the cost to execute the overall channels is so much smaller than the physical cost of direct mail," he explained. "Ultimately direct mail was the biggest driver of the benefit from economic return."

Swift added that his key takeaway from the effort was any project can be overwhelming with possibilities, and tackling email and website marketing was enticing, but understanding that direct mail was Hearst’s "bread and butter" and making direct mail the focus of the initial stages of the process was getting that real economic return to build on.

This created acceptance in the organization and allowed Swift to essentially self-fund the subsequent additions in capability and functionality with the new database.

Sources

Hearst Magazines

Acxiom -- Hearst Magazine’s database vendor

Related Resources

CRM and the Marketing Database: Data hygiene, behavioral analysis and more

4 Steps to Building a Qualitative Market Research Database That Works Better

How to Refine Your Database: 4 Important Variables to Track for Ultimate Segmentation Strategy

Database Marketing: Is Someone Examining You Right Now?

How Morgan Stanley Uses Database Marketing Tactics to Avoid the Customer Attrition Death Spiral


Comments about this Case Study

Oct 11, 2012 - Carl Street of Carl Street Productions & Programming says:
Excellent article. In the rush to grow databases the qualitative aspect is often orphaned. Any good gardner can tell you that weeding and pruning are as important as planting. Carl Street



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