Revelations Through Data Mining (1,141 words)

By Scott Shrake

How housefile analysis helps The Parable Group's Christian booksellers use catalogs

to drive retail sales

It was one of those "Aha!" moments, says Jim Seybert, vice president of marketing for The Parable Group, a company that 330 independent Christian booksellers nationwide turn to for catalog and retail marketing expertise. Seybert continues: "An early eye opener for me about the power of housefile analysis came several years ago when the folks at KnowledgeBase Marketing [then known as Dynamic Marketing] gave us some lifestyle summaries of who our stores' customers are and what they look like."

Among the findings was information that altered and will continue to shape Parable's merchandising and marketing efforts. For instance, Parable's customers are nearly three-and-a-half times as likely as the general population index to have children present in the home and more than two-and-a-half times as likely to have four or more children. As a result, says Seybert, "We looked at that and at the product mix in our catalogs and stores and realized that there was a huge opportunity to add more children's products to our catalogs. We grew that from a few pages to a complete 24-page catalog-within-a-catalog, bound into our larger books." The end result is soaring kids' product retail sales.

Learning About Its Customers

Describing early responses to the housefile analysis, Seybert says, "It was like an amazing revelation to us when we got to looking at these people against the general population."

Actually, Seybert admits, "You would think we'd already know some of this because it seems like it should be obvious." Unfortunately, Parable and its member stores didn't know much more than the fact that its retail buyers were typically 18- to 45-year-old Christian females. What else could be learned from looking deeper into its customer file? Here's a look at the average Parable Group store customer compared to average Americans:

• They tend to own their own homes and live in them longer.

• They are much more likely than the general population index to have five or more people in a household.

• Families are more than twice as likely to be comprised of father, mother and children.

• Parable Group customers are more likely to be mail order shoppers.

"Another example of what the housefile data showed us was the fact that we index fairly high on do-it-yourselfers," Seybert adds. "We tweaked the catalog creative to show more images of the family working together, for instance, Mom showing the daughter how to cook. And it may seem cliché, but it worked."

Where the Data Came From

Much like other co-operative databases, The Parable Group database is created by members who share customer data at the transaction level. The retailers sign a database contract with the company to create catalogs and free-standing inserts (FSIs), as well as to handle some back-end operations. Parable makes its money off co-op dollars and some service charges.

To build the database, they glean data at the point of sale in each store. The database is built around three main POS systems, according to Tim Blair, vice president of operations for Parable, which is based in San Luis Obispo, CA. "A transfer process sends us the files from the disparate systems weekly from 200-plus stores, including transaction data at the SKU-level and retail price level. We transfer this to KnowledgeBase Marketing in Houston." The database is housed and serviced by KnowledgeBase, which also provides proximity/propensity models to aid in new customer acquisition. Parable has been a KnowledgeBase client since 1997.

Says Blair, "KnowledgeBase does a build every two months of the entire file of 3.9 million households and ties this to customer history. When they do the build, they also add demographic data from the Polk Co. file and the KnowledgeBase AmeriLink file; at this time we do NCOA to clean the list."

Explains KnowledgeBase Vice President of Sales Dan Wells, "This process synchronizes fields and aggregates the data for future mining."

Next, says Blair, "A transfer file comes back. We tie that to our Parable Member Net network, which shows the retailers what's selling."

Merchandising and Marketing

What is done with all of this information? Two things. First, on the retail side, Blair explains, the Member Net site is a tool Parable members can access at any time to get instant updates and state-of-the-art analysis. "That way they don't need to wait two months to find out about the best sellers in their stores." Member Net uses Active Server Page (ASP) technology that stores information, such as product prices or availability, in a central database and makes any changes in the data instantaneously.

Second, the database information is used to direct catalog and other marketing efforts. Parable will mail 37 million pieces a year as part of a total of 22 promotions—about half catalogs and half FSIs —on behalf of its retail members, Blair says. "We print the retail stores' names on each catalog [with just a cover plate change], and we put a blurb in the book describing who The Parable Group is," he says.

While no 800 numbers are used in the catalogs and no direct orders are accepted, Parable does track response to its catalogs. "We can track the effectiveness of the catalog promotions by the individual customer (by using a code) if they come into the store, or frequently coupons are used," Blair explains. On the back end, Parable also conducts promotional response analysis for its stores.

The Parable Group's catalogs and mailings have been purely retail traffic builders in the past. But now, a Web component is starting to build direct sales.

Using a concept similar to the way it gives retailers the chance to market through catalogs without much up-front investment, Parable created a private label Web site program last year. By managing development, fulfillment and all other operations aspects centrally, Parable hands owners a powerful tool; retailers simply choose one of 12 pre-designed templates, provide their URL to Parable and approve sample pages. The set up cost is $495. Local domain names are encouraged.

"For many of our stores, this marks their first venture into Internet retailing," says Blair. "Only about a third have pre-established Web sites and for them this is a way to expand on what they have." With regard to online e-commerce sales, they share revenue with local stores at 20 percent of gross margin.

Seybert says that from a marketing perspective, it's seamless to the customer. "A customer buys and it looks like she bought from the Web site of a local Christian bookseller."

The plan is to integrate all of these channels into one. "A customer should be able to look in a catalog, go online to place an order and return it to the store if need be, as well as the other way around," he says.