How Does Marketing Automation Work?
For the last few years, I have worked with a Sacramento-based tech support company that has a large database of past customer data. I taught myself data analytics and marketing automation by building a platform which uses marketing automation driven by data analyses and automatically sends out marketing material to customers. This immediately became a great source of passive income for me and the company. The project ended up with around 20 automatic daily emails and several old-fashioned direct mailers.
This post is part of my larger effort to explain how to build passive income sources in innovative technical ways. Check out this post for more detail about how and why I am doing this!
I started out by exploring what data was available. I got access to the database that their CRM was connected to, and started looking around.
You may have heard the saying, “Data is the new oil.” Data analytics requires large amounts of data to make effective analyses. I had around a hundred-thousand work orders to look at, with all the items sold, the dates and payments, and information about each customer.
I explored online to learn how I could leverage this data for marketing automation and what kinds of data analytics work was already done that I could build upon. I was surprised how hard it was to find good, free information on this topic. I found lots of sites that purported to have the answers, but they all wanted me to buy their E-Book or take a seminar.
By far my favorite resource I found was Wikipedia. Every teacher and armchair philosopher will rush to tell you Wikipedia is not a source. That said, it is a great way to explore connected topics, and find links to high-quality sources which are not trying to sell you things.
Wikipedia can be a better search engine than Google.
Define an Opportunity
Before I could improve things, I needed to understand them. First, I built a simple virtual machine that would let me run PHP scripts connected to the database. This meant I could quickly report on data in real time. But what data?
I started out by developing metrics around common data analytics problems I had seen online for basic business principles like churn and attrition. To the best of my knowledge, this was the first time anyone had attempted to measure these things at this company. I was surprised to learn that these numbers were very very high. More than half of all monthly customers churned, or never came back.
Improving this metric seemed like a great opportunity to focus on.
The next step was to understand what was different about customers who churned versus customers who returned. I developed a report which showed all the activity for a group of customers, and then compared this data for churned customers versus retained customers. When I compared the lists, I noticed one huge difference. Customers who bought products with lifespans were much more likely to return.
One product, antivirus software is licensed in one-year increments. So we know the date when customers would need to purchase a new one.
I compared the behavior of customers who had purchased this product, and found that they churned at a lower than average rate. I was on to something!
But how could I increase retention in this group?
The answer seemed simple, remind them to come back!
I have heard software engineering defined as the building of technical solutions to business problems. Now that I had defined an opportunity, it was time to build a solution.
I explored the best ways to leverage marketing automation to effectively convert customers. There is a lot of information online on this topic, but almost all of it is a sales pitch. Eventually, I landed on Drip Marketing
The concept is simple, send several emails to the same person over a period of time to encourage them to convert. (But stop if they do convert.) I came up with three weekly emails to send to people with expiring antivirus products. These emails contained progressively more urgent and intense language.
In this case, once the foundation was laid, the data analytics is happening automatically. The marketing automation side of the platform takes the data and turns it into content that is sent directly to the appropriate customer. These automatic emails are still going out daily after several years. They have grown to bring in over $10k/month in passive income for the company. I was able to negotiate a monthly percentage of that passive income for myself. Remember that these cost nothing to send, since all the work was done in a few hours, years ago.
This is a simple strategy that any competent software engineer can implement as long as there is data to query.
I expanded this tool to a platform that can be used to send emails based on any query. So now there are lots of other emails being sent out along with these. And this idea led me to build two other data analytics tools called Securities Science and RSI Alert which use similar methods to apply data analytics to public datasets and then send that data to marketing automation tools, hopefully for profit. :]
One of my favorite examples at the tech support company is an email that says, “We miss you, we’re thinking of you…” and automatically goes out to all churned customers every six months.
This platform also expanded into direct mail. Some customers prefer not to provide emails, but any mobile service company knows customers’ addresses. I started sending out postcards for similar lists where we did not have email addresses on file. These had a higher cost to send, but even with postage, we got a direct return of over 300% and the lifetime value of that customer who we had un-churned.