David Raab Article Archive

Relationship Marketing for Retailers
David M. Raab
DM News
October, 1993

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The “old time corner storekeeper” is often touted as the model for quality customer relationships. But today’s small retailers have been among the slowest to adopt relationship marketing techniques.

The reason is that small businesses often lack the resources, expertise and spare time to develop effective relationship programs. Several software packages have been developed to help solve this problem.

Unlike standard retail software, which focuses on entering sales and managing inventory, these packages include strong functions for customer file building, direct mail and telemarketing. In this way, they resemble conventional mail order software. But mail order systems also include warehouse management, shipping and multi-level pricing features that are not needed by small retail and service businesses. Instead, retail systems put a premium on being quick and easy to use by clerks who may have little training, experience or supervision.

Power Retail (Software Packaging, Inc., 206-854-0801) is perhaps the most ambitious of these packages, because it attempts to both manage store operations and provide sophisticated relationship marketing. Originally developed in 1987 as an in-house solution for Scandia Down, the system now serves 48 installations, mostly small shops selling high-end apparel and other soft goods. A typical store would have between 5,000 and 20,000 customers on its list, use a single cash register, and process fewer than 100 sales per day.

Power Retail usually runs on PC-MOS, a multi-user, multi-tasking operating system, with a conventional 486 PC server and data entry through “dumb” terminals. Because the package is written in the Advanced Revelation programming/database language, it can also run on UNIX or Novell networks.

The system includes comprehensive order entry, inventory and accounting. Customer names are captured when an order is entered and automatically checked for duplicates. For each item in the order, the system automatically lists either the standard price or a special price active during a specified date range. Items are checked against inventory balances, although–since the goods are presumably in front of the clerk–the system makes it easy to override an “out of stock” message. Service items, such as alterations, repairs or warranties, are given special treatment: they are not kept in inventory; can have special notes attached for instructions, serial numbers or expiration dates; and are broken out separately in reports.

Each transaction is coded with the salesperson, advertisement, gift flag, new or repeat customer flag (for customers who decline to be added to the database), and the name of the person who referred the shopper to the store.

The system can apply a default sales tax rate or let the user select an alternate rate from a table, but cannot store the appropriate rate on a customer’s record. Shipping charges can be added to an invoice, but the system cannot calculate them. The system can do on-line credit card validations.

The inventory system stores detailed product information and can generate purchase orders based on minimum and target stock levels. It can record receipts against purchase orders and track inventory transfers, but lacks full-scale warehouse management features such as bin assignments and pick lists that combine multiple orders.

The accounting system maintains a general ledger and performs all functions except payroll.

But what really sets Power Retail apart is its marketing support. The system automatically classifies customers into a predefined set of “groups” that describe promotions sent and responses, purchase recency and value, sex, age and the quality of address and telephone information. The group codes are typically placed on records in an overnight processing run.

To build the list for a promotion, predefined group codes can be combined user-defined “filters”. Filters are based on specific purchases, promotions, phone calls, referrals, gifts, user-defined codes, Zip codes, or product class, group, style or vendor. Most filter categories can be limited by date range as well.

The group and filter selections are made through two fill-in-the-blank screens that allow the user to define nearly any imaginable group. Like the rest of the system’s character-based interface, this is easy to use and efficient, though not especially pretty. Selection logic cannot be saved for reuse, however.

Once a list is created, it can be assigned to a promotion, which will both generate labels and automatically add the promotion to the customers’ history records. If the number of mailing pieces is limited, the system can select the specified quantity according to a user-defined priority scheme.

Telemarketing promotions are built similarly, except that the system creates a call records instead of mailing labels. The system gathers basic performance statistics on each telemarketing campaign, including the number of records selected, total calls, successful contacts and total sales. There are no telemarketing scripts, but the user can set a callback date after a call or generate a mailing label for that particular record.

Perhaps the most important marketing feature of Power Retail is its ability to automatically generate labels for new customers, people who give referrals, birthday cards, people who buy certain products, and people who have not purchased within a user-defined interval. Once the user has set basic parameters, this provides an almost totally automated relationship marketing capability. Records will not be lost even if the process is run at irregular intervals. The system avoids duplicate labels within a category, but not across different categories.

Output from this process, like all others, is limited to mailing labels since the system is not linked with a word processor. But a skilled user could create the labels as an ASCII file, which could become the input to a mail merge in an external word processing system.

Beyond its marketing and operations support, Power Retail offers extensive reports on sales by product, employee and customer, on inventory turns and on return on investment (based on a rolling average cost for each product). There is no built-in report writer, although users can access reporting tools within Advanced Revelation itself. The system allows users to schedule unattended batch processing, which can be controlled either locally or from a central office.

Power Retail is priced at $4,900 per store, plus $9,900 for the corporate hub, including training and help in setting up the communications linkages. Unlimited, toll-paid technical support costs $50 per month per store, and is available 8 a.m. to 6 p.m. Pacific time. The company also keeps a technician on call for emergencies outside of normal support hours.

Sales Edge (U.S. West Marketing Resources Group, Inc., 800-431-9000) is also aimed directly at helping small businesses to improve their relationship marketing. But instead of attempting to automate the marketing process, the system tries to give its users enough support that they can develop their own programs.

Sales Edge implements this philosophy by offering a combination of software plus unlimited telephone consulting, at a flat rate of $95 per month. The product was just introduced in May of 1993, but its developers say that prior testing and results from the 100 current installations indicate the approach is economical.

Sales Edge runs on a standard DOS PC, although the system has a graphical interface that is virtually identical with Microsoft Windows. The interface is extremely well thought-out, with context-sensitive help, an on-line glossary, and important functions available from multiple locations within the system.

While most installations have been single user systems, the software is Novell-compatible and can be run on a network for no extra fee except a network license for the Professional Write word processor. A typical client has fewer than 10,000 names on file, although the system can handle many more with its combination of C++ code and the Btrieve database engine.

Sales Edge lacks the inventory or accounting functions needed by a complete retail system. Perhaps because of this, most early customers have been service businesses with no physical inventory. The system can integrate with external inventory or accounting systems by exporting customer invoices and payment records.

Sales Edge does provide a full customer database, order entry, accounts receivable and marketing management. The order entry system lets the user check for duplicates, by automatically showing a list of the nearest matching records when a customer’s name is entered for a new transaction. The customer record can hold up to 42 user-definable fields, plus an unlimited number of user-defined interest codes. In addition, a customer can be assigned an unlimited number of “note” records, each with a topic, priority, follow-up date and time, phone number, and text comment. The combination of user-definable fields, interest codes and notes gives the system tremendous flexibility.

Entering an order involves creating an invoice with the customer’s name and choosing items from a product table. There is one price for each item, which the user can override if needed.

The system can accept, but not calculate, shipping charges. It will apply a default sales tax or let the user select an alternate rate. Customers cannot be linked with their correct tax rate.

In addition to standard invoices, the system can automatically create recurring bills–for example, the standard monthly fee for an alarm system. It also supports installment billing as well as partial payments against an open account balance. There is no on-line credit card processing.

To help novice marketers organize their marketing activities, Sales Edge provides an integrated project management system. This gives a task list based on the types of promotion (direct mail, space ad, broadcast, etc.), assigns the number of days needed for each task, and automatically builds a schedule based on the planned launch date.

As the project progresses, the user can enter completion dates, change the time allotted to each task and recalculate the schedule. Tasks that are part of Sales Edge (such as selecting names for a mailing list) can be executed from within the schedule screen.

The system also prepares a basic profitability analysis for each promotion, including promotion costs, sales (automatically posted from invoices), and a user-supplied average for the cost of goods. Users can see a “what if” analysis by changing key assumptions.

Names can be selected by using up to three different criteria drawn from anywhere in the system–customer record, notes, invoices, etc. Each criterion can be related to as many as twenty different specific values. This gives considerable power, although there are complex selections the system will not be able to perform.

Once defined, the combination of criteria and values–called a “profile”–can be saved for later use. A profile can be associated with a specific promotion and used to produce a telemarketing call list, mailing labels, envelopes, an ASCII file or personalized letters. When a promotion selection is made, the system automatically adds the appropriate note records to the customer files.

The system tracks basic telemarketing campaign statistics, such as the number of calls made and completed, and summarizes them in the promotion analysis. A telemarketer can toggle between the call list and full detail of the current customer record. The system also has a simple “scripting” ability to create a list of topics with associated text messages. These are not sequential, branching scripts, but offer easy access to important information. Telemarketers can also produce a personalized letter by selecting from a list of existing letters. This can be printed immediately or held in a queue until the end of the day.

Sales Edge has several built-in reports, including sales by day, product, employee, promotion and customer group, as well as customer account balances and billing information. A simple report writer lets the user pick fields totalling 132 characters per record, with user-specified subtotals and page breaks. These reports can be printed or exported as ASCII files. A report format can be associated with a profile, to simplify repetitive reporting.

Support hours are 7:30 a.m. to 5:30 p.m. Mountain time. The software without consulting can be purchased for $395, and a demo version is free.

PURSUIT (Information Management Consultants, 402-592-4544) originated about five years ago as an account management system with special focus on serving computer dealers and resellers. The system now has several modules, including inventory, service and quotation management. It lacks the accounting required to be a complete business system, but is a plausible alternative for retailers with specialized needs.

PURSUIT is written in DataFlex, a database/programming language that can run on DOS, PC networks or UNIX systems. Most installations are single-user systems managing a few thousand customer records and under 100 transactions per day; however, the largest site is a PC direct marketer with 100 users and a 300,000 customer file. There are about 10,000 registered users.

PURSUIT is the only one of these systems that is explicitly built to handle business marketing: that is, one company/account record with multiple associated individuals. For each individual, the system stores separate name, address and phone numbers, as well as up to ten “type” codes. Company records can be coded with fifteen user-defined fields, plus unlimited numbers of profile, campaign and product entries.

PURSUIT uses its quotation system for order entry. Each item can have up to seven prices, related to the account type on the company record; these can be manually overridden. The system does not flag out-of-stock items when they are selected, but the user can examine inventory levels by pressing a few buttons.

The system maintains a file of sales tax districts, and assigns a code with a tax rate to combinations of districts (e.g., state plus city tax). The proper code is stored on the each customer record, so the assignment must only be made once. But PURSUIT cannot calculate shipping charges, produce a UPS manifest or do on-line credit card validation.

The system distinguishes materials from service items, supports multi-item kits, and stores minimum and target stock levels for each inventory item. Although PURSUIT will not use the stock levels to generate suggested purchase orders, it does store a location code for each item and can track the cost of inventory using LIFO, FIFO or pooled methods.

Because service is an important component of many PURSUIT users’ businesses, a separate module is available that logs each call, generates a work ticket, and tracks the detailed information including the reason for the call, who worked on it, status and disposition. This module can also be linked to the inventory system, so that parts used in repair work are automatically deducted from inventory balances.

PURSUIT’s marketing capabilities revolve around the “AutoPilot”, which lets the user assign a group of records to a sequence of actions, and will then automatically execute those actions on a fixed schedule.

AutoPilot can select on nearly all company-level data, including campaigns, product purchases and profile information. The system uses a point-and-shoot interface to select fields and then define specific values to include or exclude. This will meet most marketing requirements, although a very complex segmentation might take several passes to complete.

A sequence of AutoPilot actions can include mailings, phone contacts and file updates (for example, setting a flag to indicate that a collection sequence is complete). AutoPilot is also used to create one-time mailing or telemarketing campaigns. When the system executes an assigned action, it can create mailing labels, personalized letters, ASCII files or callback records, and will simultaneously update the promotion history.

PURSUIT lacks some marketing analysis features. For example, it does not explicitly assign callback records to specific telemarketing campaigns or track the results of direct mail promotions. However, each order can be assigned a source code, so the user could develop basic reports without too much difficulty. The system uses DataFlex’s menu-driven, multi-file Query generator to extract such information.

PURSUIT does not have true scripting capabilities, although the user can create text records organized by topic and subtopic to store general information. Other topic/subtopic records can be linked to specific accounts.

A single user version of PURSUIT costs $595. The quotation and service modules also cost $595 each, while the inventory module costs $995. No demonstration version is available, although the software comes with a 30 day money back guarantee. Toll-paid technical support is available from 8 a.m. to 5 p.m. Central time.

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David M. Raab is a Principal at Raab Associates Inc., a consultancy specializing in marketing technology and analytics. He can be reached at draab@raabassociates.com.