Expecting a slow beginning, the Moylans decided to focus first on forecasting. An example: based on an analysis of 20% growth in sales of Adidas watches in 1995, the company's four buyers were able to build a month-by-month sales plan for 1996.
They were also able to confirm some of their suspicions. Take suede sneakers in 1995. Buyers had noticed a decrease in demand, in favor of more trendy running shoes. But an analysis using ProBit revealed that sales had dropped by half. Now the catalog shows only a few suede-shoe styles, instead of the page of options it had featured before. Perhaps best of all, Sports Endeavors has reduced total inventory by three-quarters and sales have jumped to $25 million. "We're now able to anticipate what customers want and give it to them," says Brendan.
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Pinpointing Prospects
Some businesses, such as Michael Hough's A/E/C Systems International, in Exton, Penn., use database marketing not so much to keep pace with current customers as to zero in on new ones. Hough's 16-year-old $4-million company runs computer-trade shows for the design and construction industries. Attracting attendees -- lots of them -- is its lifeblood. So Hough relies on database marketing to locate potential conference attendees and exhibitors -- primarily architects and engineers interested in computer equipment -- and to draw up promotions tailored to their interests.
Back in the early 1980s, Hough used an outside service bureau to do the computer work. The bureau maintained a list of 5,000 to 10,000 past and potential attendees, characterized by 13 attributes -- shows previously attended, for example, or primary areas of interest. Hough would draft letters aimed at customers in categories formed by combining different attributes -- for example, government engineers. Then he'd arrange for an outside mail house to send out mailings featuring sessions and materials relevant to customers' areas of expertise. "The engineers wouldn't know that the architects would be coming, too," says Hough.
Over the next 10 years, Hough made gradual changes. In 1985 he bought an IBM AT-class PC and a database-management system called dBase III, from Ashton-Tate. A couple of years later he replaced the dBase III with an early version of Fox Software's FoxPro and hired a consultant to bring the show in-house; in the process, he doubled the number of names and attributes on the list.
But then the recession of 1991 hit. Attendance at his trade shows plummeted 30%, and conference revenues dropped by half. Hough knew he had to do something fast to find customers more efficiently -- or watch his business wilt.
He turned to his database. He needed, he figured, to "slice it thinner" in order to aim his appeals more precisely. By doing that he'd also reduce the sheer number of mailings, hitting on only the prospects most likely to register.
Over the next year he refined and expanded his information base to develop more-precise promotions. Finally, in 1992 he shipped off just 25 finely tuned pitches to 500,000 potential attendees -- down a third from the year before. The cultivation of his database paid off: conference revenues rose 30%, to $300,000 (only part of Hough's total sales are derived from the conferences; the rest come from exhibitors), while promotional expenses decreased by a third.
Late last year Hough chucked the AT and shelled out $8,000 to upgrade to three 486 Windows-based machines and a faster, more powerful database-management program -- an updated version of FoxPro for Windows (now owned by Microsoft, 800-426-9400). Today his list has almost 50,000 names and 39 attributes. He uses it to send out 30 to 40 mailings, or 500,000 pieces a year. Thanks to his more systematic approach, promotional expenses continue to fall. And conference revenues continue to go up: last year they reached $600,000, and Hough expects them to top $750,000 this year. Most letters are processed by the outside mail house, which offers a discount on bulk mail of about 2¢ a piece. Hough gives the mail house a disk with names, addresses, and attributes, along with instructions about which attributes to combine and which letters to send to which combinations. "If we hadn't automated, attendance and revenues would have been dropping steadily," says Hough. "Instead, we're growing nicely and expect to continue to do so."
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Sharper Distribution
Lots of small businesses don't sell directly to their customers. But that doesn't mean they can't use database marketing to make sure their distributors target the right people. Integrating sales and distribution through technology, though, is no day in the park. Just ask Agustin Huneeus. In 1991 Huneeus, president of $25-million Franciscan Estates Inc., a winery in Rutherford, Calif., set out to track and organize his distribution system. Five years later, the overhaul is still a work in progress.
An unsettling observation sparked the project: Huneeus had noticed that when he went to a fancy restaurant to dine, he rarely found one of his wines on the wine list. "Where on earth is my product being sold?" he wondered. He took to calling the phenomenon "black-hole marketing." He was producing wines that seemed to disappear into space.
Taking control of the matter, however, was tough, given the nature of wine distribution. Like any winery, Franciscan legally couldn't sell directly to customers; it had to go through distributors. To control where his product went, Huneeus had to control 50 distributors: knowing which stores, restaurants, hotels, and nightclubs they were selling to; tracking those sales; and then, as Huneeus says, "offering them guidance on how best to change their strategies."
Thus was born an ambitious plan: Huneeus would push distributors to focus on "pillars," the 1,000 top-selling stores in the country, and "windows," the 1,000 highest-profile hotels and restaurants. To track those accounts, he would hire someone to develop a computerized system that included both a database and analytical software. His salespeople would use the system to analyze at which pillars and windows which wines were selling and pass the information on to the distributors. It was an indirect database-marketing system, one that would help distributors pinpoint the best customers and sell them the most appropriate wines.
To start, Huneeus asked his distributors to produce monthly reports on which wines were sold to which accounts. That was easier said than done. Getting the distributors' MIS people to write up reports in an agreed-on format was a major headache. Most of the distributors eventually started producing reports, but the reports differed wildly. Some included monthly data; others, everything sold that year. Most listed all accounts, not just pillars and windows.
