Statistical Analysis for Direct Marketers--In Plain English.

The marriage between the marketer and data analyst results in the deployment of appropriate tools that will ensure adherence to effective strategies and more profitable response.

In today's fiercely competitive business environment, the ability to approach market testing effectively translates into a better understanding of an audience and their habits. Market testing also lays the groundwork to create marketing strategies for increased loyalty and profitability. However, many marketers, novice and veteran alike, face with trepidation the art and science of testing direct marketing applications. And many downplay the critical importance of the marriage between marketer and data analyst. It is this marriage that results in the deployment of appropriate tools that will ensure adherence to effective strategies, and more profitable response.

Most of us tend to approach customer data, and deriving customer knowledge from that data, with proper respect, followed by many questions. After all, understanding the "total customer" and leveraging the knowledge gained is key to implementing a successful customer relationship management (CRM) strategy. As marketers, we must embrace the value of knowing which of our customers are the most profitable (and which may be a drag on the bottom line). Fortunately, today's technology, and the professional expertise behind it, affords us many tools and techniques for analyzing data--many of which we'll discuss here--with the resulting output delivering a greatly enhanced understanding of customers.

* Starting With the Basics

There are numerous ways to segment customers. Simply defined, a customer segment is a subgroup that shares some general characteristics within an entire customer base. When segmenting customers, a marketer should attempt to find differentiated groups of homogeneous customers. It is the goal of segmentation to find non-arbitrary groups of customers whom one would or should intuitively treat differently--"loyal, established customers" and "new customers" are two suitable examples. …

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