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Using Data to Revolutionize Marketing, Merchandising, and
Operations: A Case Study
Tim Blair, Executive Vice President & General Manager,
the Parable Group
Jim Wheaton, Co-Founder and Principal, Wheaton Group
This is an overview of a speech by the same name that was presented
at The 2004 DMA Annual Conference & Exhibition in New Orleans.
The speech describes work performed at The Parable Group, one of
Wheaton Group’s first clients.
An overview of The Parable Group work was also provided in “Database
Makeovers,” the cover story in the July 1, 2004 issue of Target
The Parable Group produces catalogs,
flyers, web sites and promotional kits for 242 locally owned and
independent Christian bookstores throughout the United States and
Canada. These bookstores have total sales of approximately $250
million a year, which makes the Parable Group (“Parable”)
one of the largest booksellers in the world.
In 1996, Parable’s client stores began transmitting customer
transaction data to its home office via multiple Point of Sale (“POS”)
systems. Because the client stores are independently owned and operated,
the quality of this data varies significantly. Parable has collaborated
with the POS vendors to ensure that the data is as accurate as possible.
Also, it has cleaned, updated and housed the data within a centralized
data repository, and transformed it into useable information.
Using the centralized data repository as a foundation, Parable
has developed the tools that are required by independent bookstores
to compete against the country’s largest retailers. These
formidable competitors include not only several large and aggressive
chains within the Christian Booksellers Association (“CBA”)
vertical market, but also general retailers such as Barnes &
Noble, Borders and Wal-Mart.
The tools that Parable provides
the independent bookstores reside upon the classic “three
legged stool” of retail: marketing, merchandising and operations.
Within each of these areas, Parable has been able to apply data-driven
technologies to create money-saving efficiencies for the independent
retailer. The following summarizes the data-driven initiatives corresponding
to each of the “three legs”:
In April 2000, Parable contracted with
Wheaton Group for a significant amount of CRM work. At that time,
an outside company maintained the database and performed the data
processing associated with the corresponding mailings; that is,
acted as its service bureau. However, it soon became clear
that the underlying data was in no condition to support the work
plan. As a result, the CRM project was put on hold, and Wheaton
Group and Parable refocused its efforts on fixing and enhancing
the source data.
Wheaton Group put together several memos laying out for senior
management what had to be done to support advanced database marketing.
The message was that Parable could achieve its goal, but not without
lots of hard work.
The first task was to review the database update process. Several
gross inefficiencies, going back several years, were detected. In
addition, a number of serious problems were discovered with the
structure of the database, the ways that mail processing was being
done, and with a prospecting model that had been built.
Eventually, Parable realized that, if CRM were going to be a core
competency, it needed to think about bringing the data work in-house.
It conferred with Wheaton Group, who counseled that this was a formidable
but achievable goal.
With the assistance of Wheaton Group, Parable successfully built
a centralized in-house data repository. The project was particularly
daunting for several reasons. First, many months were required to
identify and correct extensive problems with the historical data.
Also, the single repository had to reflect hundreds of different
stores and small store chains. Each of these has its own level of
sophistication, and has to be treated as a separate profit center.
For example, if a family has a relationship with three different
stores or store groups, the database and corresponding reports have
to reflect the three different customer relationships.
Upon completion of the centralized data repository, Wheaton Group
built a statistics-based predictive model to replace the existing
RFM cells. The model is a more sophisticated tool for determining
which customers to promote. (For details, see “Retelling the
Data Story,” Direct, April 1, 2002.) During the data discovery
phase of the model build, a number of additional problems with the
source data were identified and fixed.
The model allows customer names to be selected using eighteen
predictors that are derived from more than 300 data warehouse fields
or associated “calculated variables.” With transactional
data flowing to Parable’s home office on a weekly basis, the
client stores now know the ROI of advertising dollars spent with
Parable. This is something that no other marketing group within
the CBA vertical market can do. More recently, Wheaton Group has
constructed multiple models that further refine the predictive process.
Wheaton Group and Parable also collaborated in moving the mail
processing in-house from the third party service bureau. The two
companies evaluated several multiple mail processing software suites
before finally settling on FirstLogic’s PostWare.
To date, Parable’s in-house mailing team has processed many
millions of records, and has solved a number of quality issues that
existed with the former third party service bureau. As a result,
Parable’s independent bookseller clients are now able to market
to their customers more efficiently and effectively.
and Wheaton Group have also collaborated on the creation of specific
promotions and more targeted pieces. Throughout, the goal is always
to cost-effectively increase consumer awareness and contacts for
the client stores.
Utilizing the transaction data that
is housed within the centralized data repository, Parable has built
numerous tools to assist its member stores with inventory management.
Owners, managers and buyers are now able to go on-line and review
multiple reports that provide a national perspective on sales and
inventory trends. Also available on-line are product information,
purchase orders, promotional response analysis, in-depth marketing
information, and many other services. Store staffs now have the
ability to compare national data with their own numbers, either
on-line or downloaded into their POS systems.
As a result of the above, store staffs are able to create “never
out” lists and gain insight into missed opportunities relating
to products that are national top sellers. “Never out”
lists take several forms. Parable supplies core inventories, “80/20”
reports, and best seller reports that allow the stores to compare
their inventory in a particular category to a list of products that
have been derived from national sell-through data:
- Core inventories consist of all the products within a category
that should be carried by a store, based on need as well as sell-through
patterns. This includes books that are first in a series of books,
although that first book may not have made a best-seller list.
- “80/20” reports highlight the 20% of books within
a given category that are responsible for 80% of that category’s
Parable is also using the transaction data to help book and music
publishers understand sales trends, and report on the results of
promotional dollars invested in Parable’s marketing pieces.
This information can be accessed on-line at ParablePartners.com,
a password protected vendor-only site, or in hard-copy form. The
goal is to collaborate and share information with publishers on
how their product is faring in independent bookstores within the
Parable has several initiatives within
the operational area of Christian Retail. Working with wholesale
distributors of Christian product, Parable signed a deal with Checkpoint,
the security tag manufacturer, to tag outgoing product at wholesale
distribution centers. In this way, the product is ready for shelving
when it arrives at the stores, which saves time for the retailers.
Also, Parable has arranged for the provider of the security system
to allow retailers to acquire the system at no initial cost, and
pay for it over time via tag purchase. For those retailers with
high rates of internal shrinkage, this has been a very effective
Parable has worked hard to drive the entire CBA industry towards
overall best practices. Parable staff is represented on several
industry committees that are focused on multiple important initiatives;
for example, the creation of product coding standards, Electronic
Data Interchange, and a single product database. Overall, Parable
is committed to working with POS system providers to address the
needs of the independent stores; and always with an eye towards
new data-driven initiatives.
Tim Blair is Executive Vice President & General Manager
of the Parable Group. He oversees the Accounting, Production, Creative,
Human Resources, and Information and Marketing Strategy departments.
Tim is also responsible for operational vendor relations.
Jim Wheaton is a Principal at Wheaton Group, and can be reached
at 919-969-8859 or firstname.lastname@example.org. The firm specializes
in direct marketing consulting and data mining, data quality assessment
and assurance, and cost-effective data warehouses and marts.