Junk that won't go to waste

When a company with which you have long since ceased to do business writes to thank you for your continued custom, you might well feel that the junk mail industry has hardly improved over the past decade.

However, the occasional misdirected offer notwithstanding, direct marketers now know much more about the people with whom they are seeking to communicate.

Much of this improvement can be attributed to the development, first, of geodemographics (based on census material) and, second, lifestyle databases. Now, according to one of the leaders in the growing field of database marketing, a new source of information is emerging: the combination of the first two with transactional information to create "biographics".

Les O'Reilly, chairman of The Database Group, sees this as a key marketing development. Those involved in financial services and retail - such as the likes of Marks and Spencer and now Tesco, which have feet in both camps - will gain from knowing not just about the social class and aspirations of existing and potential customers but also what they actually spend their money on.

The transactional data completes the biographics loop, says Mr O'Reilly, because it provides hard facts to set against desires and intentions. This sort of information has been used for a while, but mainly in the financial services area to predict risk. As Mr O'Reilly says, it can be put to more positive use: "No data is more powerful than that which actually tells you whom amongst your customers have bought which products, how well they have repaid them and how actively they use them."

But impressive as it is, this information alone will not identify the nature of a company's most profitable customers and enable the company to construct the most appropriate and appealing marketing messages. Nor will it help it to spot potential customers or to implement loyalty schemes.

It needs to be combined with the other information sources so a company can build a picture of the tastes, preferences and social characteristics of the various groups of profitable customers - hence the holistic approach of biographics.

Mr O'Reilly, whose company has carried out database marketing assignments for a number of well-known groups, believes three key factors are bringing transactional data to the fore.

First, third-party and customer information is much more widely available. Second, the increasing use of cards (whether loyalty or credit cards), combined with sophisticated point-of-sale equipment, is producing growing amounts of detailed information about individuals' shopping habits. Third, the cost of transferring, processing and analysing data is falling all the time.

The phenomenal success of the Tesco loyalty card in the months since it was launched shows what can be achieved. Last week's tentative move by the supermarket group into financial services had been predicted by some pundits as the logical next step.

This is because retail and financial services are becoming closely linked. Mr O'Reilly points out that retail behaviour is of huge interest to the financial services provider in building a profile of consumers and predicting their likely responsiveness to financial product offers.

He foresees the creation of consortia of retail and financial services groups combining to capture and pool transactional information on consumers to make the most of biographics.