Feeding in raw data to get useful knowledge out

Published on 14/02/2002 00:00

WHEN building up a detailed picture of potential customers, companies often need to supplement their records with external information.

The limits of a company’s own internal resources are most obvious at both the prospect stage, where the company by definition has no transaction history with the customer to draw on, and at the first contact between the customer and the company.

As Chris Slater, director of information resources at Experian observes, the whole point of external information feeds (ie information that can be "read" automatically by the user organisation’s own systems) is to add predictability to the picture the company is building up of its prospects and customers.

"Marketing today is ultimately about pursuing the segment of one. The Holy Grail of marketing is that you know everyone so intimately that you market to them perfectly - and the difficulty is doing all this within the confines of compliance with the Data Protection Act," he says. One of the benefits of buying an external feed is that it is the feed provider’s responsibility to ensure that the information has been gathered in accordance with the DPA, and that its use by the client organisation is a sanctioned use.

Demographic data in the form of feeds provided by specialist third party providers has a huge role to play in Customer Relationship Management, and there have been very significant strides made in the methods used to classify and segment this data.

Slater points out that the classic early method of handling demographic data divided the UK into six equal "pots" by region. User organisations tended to target their potential customers by regional sales teams . The subsequent generation abandoned regionalism in favour of clustering techniques which said more about the potential of each target cluster. This had 52 segments, with each pot containing around 2 per cent of the UK population, giving a much finer honed target.

"Known as mosaic clustering, this is still pretty much the de facto standard for marketing feeds for the UK today. You pick out your "high spending greys" [pensioners], or your "pebble dash Utopias" and market to them, as the Conservatives famously attempted at the last election," Slater comments.

However, in today’s world of highly-targeted CRM systems, even these clusters are too large, he argues. Experian has brought out a product called "pixel" which segments the UK population into 6,400 separate categories. Combining the pixel scheme with the mosaic scheme gives a company the opportunity to fine-tune its direct marketing effort by picking just one from a total of 325,000 different permutations.

Slater argues that there is little point in going beyond this level as the statistical relevance of the sample breaks down, and you are left with unpredictable behaviour - which is no use to marketeers.

User organisations also have a rich choice of on-line credit scoring services, financial pricing information feeds, news and meteorological feeds. They can also supplement their internal information with a local or global geographic mapping service.