Case Study: Database Marketing

Company: $1.8 billion hardware/software company focused on consumer retail sales

Situation: Iomega had just begun to turn the company around under the leadership of CEO Kim Edwards. With in-depth market research and product development Iomega invented the Zip Drive, which brought affordable removable storage to an entire new segment of buyers. Under the new business model, removable drives would be more affordable (”the razor”) and gross margin would be made up with the removable storage disks (”the blades”). Unfortunately, Iomega was ill-prepared for the success of the Zip Drive. While much research was done identifying the potential Zip Drive buyer, very little insight was available to determine which of those customer segments would supply the back-end disk revenue on which the company’s business model was based. In addition, the company’s database was still a reflection of its old business model with the Bernoulli drives - there were only 3,000 total customer records and response rates on registration cards were in the low teens. Adding to the challenge was the fact that there was no customer database or registration process internationally.

Solution: Turn the company’s customer base into a true company asset and profit stream. This was accomplished by building a world class database marketing team, hiring the best agencies and following a five-stage attack plan:

• Communicate the Promise: Clearly identify costs associated with building a worldwide database and justify that investment to the Executive Staff and Board of Directors. Identify stakeholders within each department who would benefit from a robust database of customers.
• Build the Base: Increase registration rates to more than 50% through enhanced registration methods and segmented offers. Supplement registration sources with tradeshow and sales leads, separating the customer base into both consumer and business segments.
• Increase the “Tie Rate”: Establish Customer Lifetime Value for customers based on the number of disks they purchased for each drive (tie rate) and implement frequency and loyalty programs to boost the disk revenue.
• Mine the Gold: Utilize the database as the source of customer insight for a number of divisions within Iomega, including: Product Marketing, Customer Service, and Marketing Communications. Perform extensive database analysis to supplement primary and secondary research.
• Prove the Promise: Reach profitability in 18 months through a number of revenue sources, including: 1) Increase in disk consumption due to database/direct marketing efforts; 2) List Broker Fees; 3) Alliance Partner Co-Op Fees.

Within two years, the customer database had turned into a true profit center. Customer registration rates were among the highest in the industry - over 70%. The database grew from 3,000 to more than 2 million. Customer frequency and loyalty programs driven through the channel helped to increase the “tie rate” by 15%.