New Web Site and Archive

The new Web site I mentioned the other day is now up and running at http://www.raabassociatesinc.com/. This turned out to be an interesting little science project. I had originally figured to go the usual route of hiring a Web developer, but realized while I was assessing tools for this blog and MPM Toolkit that I could easily build the site myself in Wordpress in a fraction of the time and nearly for free. Even more important, I can make changes at will. I also looked at the open source content management system Joomla, which would have given some additional capabilities. But Joomla had a steeper learning curve and didn't seem worth the bother, at least for now.

Part of the project was a new archive of my past articles, which is now technically its own Wordpress blog. The big advantage vs. our old archive is you now get a proper search function. Anybody interested in a trip down memory lane regarding marketing software is welcome to browse articles dating from 1993. I've always figured someone would write a doctoral thesis based on this stuff.

WiseGuys Gives Small Firms Powerful List Selection Software

Like a doctor specialized in “diseases of the rich”, I've been writing mostly about technologies for large organizations: specialized databases, enterprise marketing systems, advanced business intelligence platforms. But the majority of businesses have nowhere near the resources needed to manage such systems. They still need sophisticated applications, but in versions that can be installed and operated with a minimum of technical assistance.

WiseGuys from Desktop Marketing Solutions, Inc. (DMSI) is a good example of the breed. It is basically a system to help direct marketers select names for catalog mailings and email. But while simple query engines rely on the marketer to know whom to pick, WiseGuys provides substantial help with that decision. More to the point—and this the hallmark of a good small business product—it provides the refinements needed to make a system usable in the real world. In big enterprise products, these adjustments would be handled by technical staff through customization or configurations. In WiseGuys, marketers can control them directly.

Let’s start at the beginning. WiseGuys imports customer and transaction records from an external fulfillment system. During the import process, it does calculations including RFM (recency, frequency, monetary value) scoring, Lifetime Value, response attribution, promotion profitability, and cross-purchases ratios between product pairs. What’s important is that the system recognizes it can’t simply do those calculations on every record it gets. There will always be some customers, some products, some transactions, some campaigns or some date ranges that should be excluded for one reason or another. In fact, there will be different sets of exclusions for different purposes. WiseGuys handles this gracefully by letting users define multiple “setups” which define collections of records and the tasks that will apply to them. Thus, instead of one RFM score there might be several, each suited to a particular type of promotion or customer segment. These setups can be run once or refreshed automatically with each update.

The data import takes incremental changes in the source information – that is, new and updated customers and new transactions – rather than requiring a full reload. It identifies duplicate records, choosing the survivor based on recency, RFM score or presence of an email address as the user prefers. The system will combine the transaction history of the duplicates, but not move information from one customer record to another. This means that if the surviving record lacks information such as the email address or telephone number, it will not be copied from a duplicate record that does.

The matching process itself takes the simplistic approach of comparing the first few characters of the Zip Code, last name and street address. Although most modern systems are more sophisticated, DMSI says its method has proven adequate. One help is that the system can be integrated with AccuZip postal processing software to standardize addresses, which is critical to accurate character-based matching.

The matching process can also create an organization key to link individuals within a household or business. Selections can be limited to one person per organization. RFM scores can also be created for an organization by combining the transactions of its members.

As you’d expect, WiseGuys gives the user many options for how RFM is calculated. The basic calculation remains constant: the RFM score is the sum of scores for each of the three components. But the component scores can be based on user-specified ranges or on fixed divisions such as quintiles or quartiles. Users decide on the ranges separately for each component. They also specify the number of points assigned to each range. DMSI can calculate these values through a regression analysis based on reports extracted from the system.

Actual list selections can use RFM scores by themselves or in combination with other elements. Users can take all records above a specified score or take the highest-scoring records available to meet a specified quantity. Each selection can be assigned a catalog (campaign) code and source code and, optionally, a version code based on random splits for testing. The system can also flag customers in a control group that was selected for a promotion but withheld from the mailing. The same catalog code can be assigned to multiple selections for unified reporting. Unlike most marketing systems, WiseGuys does not maintain a separate campaign table with shared information such as costs and content details.

Once selections are complete, users can review the list of customers and their individual information, such as last response date and number of promotions in the past year. Users can remove individual records from the list before it is extracted. The list can be generated in formats for mail and email delivery. The system automatically creates a promotion history record for each selected customer.

Response attribution also occurs during the file update. The system first matches any source codes captured with the orders against the list of promotion source codes. If no source code is available, it applies the orders based on promotions received by the customer, using either the earliest (typically for direct mail) or latest (for email) promotion in a user-specified time window.

The response reports show detailed statistics by catalog, source and version codes, including mail date, mail quantity, responses, revenue, cost of goods, and derived measures such as profit per mail piece. Users can click on a row in the report and see the records of the individual responders as imported from the source systems. The system can also create response reports by RFM segment, which are extracted to calculate the RFM range scores. Other reports show Lifetime Value grouped by entry year, original source, customer status, business segment, time between first and most recent order, RFM scores, and other categories. The Lifetime Value figures only show cumulative past results (over a user-specified time frame): the system does not do LTV projections.

Cross sell reports show the percentage of customers who bought specific pairs of products. The system can use this to produce a customer list showing the three products each customer is most likely to purchase. DMSI says this has been used for email campaigns, particularly to sell consumables, with response rates as high as 7% to 30%. The system will generate a personalized URL that sends each customer to a custom Web site.

WiseGuys was introduced in 2003 and expanded steadily over the years. It runs on a Windows PC and uses the Microsoft Access database engine. A version based on SQL Server was added recently. The one-time license for the Access versions ranges from $1,990 to $3,990 depending on mail volume and fulfillment system (users of Dydacomp http://www.dydacomp.com Mail Order Manager get a discount). The SQL Server version costs $7,990. The system has about 50 clients.

OpenBI Finds Success with Open Source BI Software

I had an interesting conversation last week with Steve Miller and Rich Romanik of OpenBI a consultancy specializing in using open source products for business intelligence. It was particularly relevant because I’ve also been watching an IT Toolbox discussion of BI platform selection degenerate into a debate about whose software is cheaper. The connection, of course, is that nothing’s cheaper than open source, which is usually free (or, as the joke goes, very reasonable*) .

Indeed, if software cost were the only issue, then open source should already have taken over the world. One reason it hasn’t is that early versions of open source projects are often not as powerful or easy to use as commercial software. But this evolves over time, with each project obviously on its own schedule. Open source databases like MySQL, Ingres and PostgreSQL are now at or near parity with the major commercial products, except for some specialized applications. According to Miller, open source business intelligence tools including Pentaho and JasperSoft are now highly competitive as well. In fact, he said that they are actually more integrated than commercial products, which use separate systems for data extraction, transformation and loading (ETL), reporting, dashboards, rules, and so on. The open source BI tools offer these as services within a single platform.

My own assumption has been that the primary resistance to open source is based on the costs of retraining. Staff who are already familiar with existing solutions are reluctant to devalue their experience by bringing in something new, and managers are reluctant to pay the costs in training and lost productivity. Miller said that half the IT people he sees today are consultants, not employees, whom a company would simply replace with other consultants if it switched tools. It’s a good point, but I’m guessing the remaining employees are the ones making most of the selection decisions. Retraining them, not to mention end-users, is still an issue.

In other words, there still must be a compelling reason for a company will switch from commercial to open source products—or, indeed, from an incumbent to any other vendor. Since the majority of project costs come from labor, not software, the most likely advantage would be increased productivity. But Miller said productivity with open source BI tools is about the same as with commercial products: not any worse, now that the products have matured sufficiently, but also not significantly better. He said he has seen major productivity improvements recently, but these have come through “agile” development methods that change how people work, not the tools they use. (I don’t recall whether he used the term "agile".)

I did point out that certain products—QlikView being exhibit A—can offer meaningful productivity improvements over existing standard technologies. But I’m not sure he believed me.

Of course, agile methods can be applied with any tool, so the benefits from open source still come down to savings on software licenses. These can be substantial for a large company: a couple hundred dollars per seat becomes real money when thousands of users are involved. Still, even those costs can easily be outweighed by small changes in productivity: add a database administrator here and an extra cube designer there, and in no time you’ve spent more than you saved on software.

This circles right back to the quality issue. Miller argued that open source products improve faster than commercial systems, so eventually any productivity gaps will be eliminated or even reversed in open source’s favor. Since open source allows day-to-day users to work directly on the problems that are bothering them, it may in fact do better at making incremental productivity improvements than a top-down corporate development process. I'm less sure this applies to major as well as incremental innovations, but suppose examples of radical open source innovation could be found.

Whatever. At the moment, it seems the case for open source BI is strong but not overwhelming. In other words, a certain leap of faith is still required. Miller said most of OpenBI’s business has come from companies where other types of open source systems have already been adopted successfully. These firms have gotten over their initial resistance and found that the quality is acceptable. The price is certainly right.
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* (Guy to girl: “Are you free on Saturday night?” Girl to guy: “No, but I’m reasonable”. Extra points to whoever lists the most ways that is politically incorrect.)

Making Some Changes

Maybe it's that spring has finally arrived, but, for whatever reason, I have several changes to announce.

- Most obviously, I've changed the look of this blog itself. Partly it's because I was tired of the old look, but mostly it's to allow me to take advantage of new capabilities now provided by Blogger. The most interesting is a new polling feature. You'll see the first poll at the right.

- I've also started a new blog "MPM Toolkit" at http://mpmtoolkit.blogspot.com/. In this case, MPM stands for Marketing Performance Measurement. This has a been a topic of growing professional interest to me; in fact, I have a book due out on the topic this fall (knock wood). I felt the subject was different enough from what I've been writing about here to justify a blog of its own. Trying to keep the brand messages clear, as it were.

- I have resumed working under the Raab Associates Inc. umbrella, and am now a consultant rather than partner with Client X Client. This has more to do with accounting than anything else. It does, however, force me to revisit my portion of the Raab Associates Web site, which has not been updated since the (Bill) Clinton Administration. I'll probably set up a new separate site fairly soon.

Sorry to bore you with personal details. I'll make a more substantive post tomorrow.

Bah, Humbug: Let's Not Forget the True Meaning of On-Demand

I was skeptical the other day about the significance of on-demand business intelligence. I still am. But I’ve also been thinking about the related notion of on-demand predictive modeling. True on-demand modeling – which to me means the client sends a pile of data and gets back a scored customer or prospect list – faces the same obstacle as on-demand BI: the need for careful data preparation. Any modeler will tell you that fully automated systems make errors that would be obvious to a knowledgeable human. Call it the Sorcerer’s Apprentice effect.

Indeed, if you Google “on demand predictive model”, you will find just a handful of vendors, including CopperKey, Genalytics and Angoss. None of these provides the generic “data in, scores out” service I have in mind. There are, however, some intriguing similarities among them. Both CopperKey and Genalytics match the input data against national consumer and business databases. Both Angoss and CopperKey offer scoring plug-ins to Salesforce.com. Both Genalytics and Angoss will also build custom models using human experts.

I’ll infer from this that the state of the art simply does not support unsupervised development of generic predictive models. Either you need human supervision, or you need standardized inputs (e.g., Salesforce.com data), or you must supplement the data with known variables (e.g. third-party databases).

Still, I wonder if there is an opportunity. I was playing around recently with a very simple, very robust scoring method a statistician showed me more than twenty years ago. (Sum of Z-scores on binary variables, if you care.) This did a reasonably good job of predicting product ownership in my test data. More to the point, the combined modeling-and-scoring process needed just a couple dozen lines of code in QlikView. It might have been a bit harder in other systems, given how powerful QlikView is. But it’s really quite simple regardless.

The only requirements are that the input contains a single record for each customer and that all variables are coded as 1 or 0. Within those constraints, any kind of inputs are usable and any kind of outcome can be predicted. The output is a score that ranks the records by their likelihood of meeting the target condition.

Now, I’m fully aware that better models can be produced with more data preparation and human experts. But there must be many situations where an approximate ranking would be useful if it could be produced in minutes with no prior investment for a couple hundred dollars. That's exactly what this approach makes possible: since the process is fully automated, the incremental cost is basically zero. Pricing would only need to cover overhead, marketing and customer support.

The closest analogy I can think of among existing products are on-demand customer data integration sites. These also take customer lists submitted over the Internet and automatically return enhanced versions – in their case, IDs that link duplicates, postal coding, and sometimes third-party demograhpics and other information. Come to think of it, similar services perform on-line credit checks. Those have proven to be viable businesses, so the fundamental idea is not crazy.

Whether on-demand generic scoring is also viable, I can’t really say. It’s not a business I am likely to pursue. But I think it illustrates that on-demand systems can provide value by letting customers do things with no prior setup. Many software-as-a-service vendors stress other advantages: lower cost of ownership, lack of capital investment, easy remote access, openness to external integration, and so on. These are all important in particular situations. But I’d also like to see vendors explore the niches where “no prior setup and no setup cost” offers the greatest value of all.

illuminate Systems' iLuminate May Be the Most Flexible Analytical Database Ever

OK, I freely admit I’m fascinated by offbeat database engines. Maybe there is a support group for this. In any event, the highlight of my brief visit to the DAMA International Symposium and Wilshire Meta-Data Conference conference last month was a presentation by Joe Foley of illuminate Solutions , which marked the U.S. launch of his company’s iLuminate analytical database.

(Yes, the company name is “illuminate” and the product is “iLuminate”. And if you look inside the HTML tag, you’ll see the Internet domain is “i-lluminate.com”. Marketing genius or marketing madness? You decide.)

illuminate calls iLuminate a “correlation database”, a term they apparently invented to distinguish it from everything else. It does appear to be unique, although somewhat similar to other products I’ve seen over the years: Digital Archaeology (now deceased), Omnidex and even QlikView come to mind. Like iLuminate, these systems store links among data values rather than conventional database tables or columnar structures. iLuminate is the purest expression I’ve seen of this approach: it literally stores each value once, regardless of how many tables, columns or rows contain it in the source data. Indexes and algorithms capture the context of each original occurrence so the system can recreate the original records when necessary.

The company is rather vague on the details, perhaps on purpose. They do state that each value is tied to a conventional b-tree index that makes it easily and quickly accessible. What I imagine—and let me stress I may have this wrong—is that each value is then itself tied to a hierarchical list of the tables, columns and rows in which it appears. There would be a count associated with each level, so a query that asked how many times a value appears in each table would simply look at the pre-calculated value counts; a query of how many times the value appeared in a particular column could look down one level to get the column counts. A query that needed to know about individual rows would retrieve the row numbers. A query that involved multiple values would retrieve multiple sets of row numbers and compare them: so, say, a query looking for state = “NY” and eye color = “blue” might find that “NY” appears in the state column for records 3, 21 and 42, while “blue” appears in the eye color for records 5, 21 and 56. It would then return row=21 as the only intersection of the two sets. Another set of indexes would make it simple to retrieve the other components of row 21.

Whether or not that’s what actually happens under the hood, this does illustrate the main advantages of iLuminate. Specifically, it can import data in any structure and access it without formal database design; it can identify instances of the same value across different tables or columns; it can provide instant table and column level value distributions; and it can execute incremental queries against a previously selected set of records. The company also claims high speed and terabyte scalability, although some qualification is needed: initial results from a query appear very quickly, but calculations involving a large result set must wait for the system to assemble and process the full set of data. Foley also said that although the system has been tested with a terabyte of data, the largest production implementation is a much less impressive 50 gigabytes. Still, the largest production row count is 200 million rows – nothing to sneeze at.

The system avoids some of the pitfalls that sometimes trap analytical databases: load times are comparable to load times for comparable relational databases (once you include time for indexing, etc.); total storage (including the indexes, which take up most of the space) is about the same as relational source data; and users can write queries in standard SQL via ODBC. This final point is particularly important, because many past analytical systems were not SQL-compatible. This deterred many potential buyers. The new crop of analytical database vendors has learned this lesson: nearly all of the new analytical systems are SQL-accessible. Just to be clear, iLuminate is not an in-memory database, although it will make intelligent use of what memory is available, often loading the data values and b-tree indexes into memory when possible.

Still, at least from my perspective, the most important feature of iLuminate is its ability to work with any structure of input data—including structures that SQL would handle poorly or not at all. This is where users gain huge time savings, because they need not predict the queries they will write and then design a data structure to support them. In this regard, the system is even more flexible than QlikView, which it in many ways resembles: while QlikView links tables with fixed keys during the data load, iLuminate does not. Instead, like a regular SQL system, iLuminate can apply different relationships to one set of data by defining the relationships within different queries. (On the other hand, QlikView’s powerful scripting language allows much more data manipulation during the load process.)

Part of the reason I mention QlikView is that iLuminate itself uses QlikView as a front-end tool under the label of iAnalyze. This extracts data from iLuminate using ODBC and then loads it into QlikView. Naturally, the data structure at that point must include fixed relationships. In addition to QlikView, iAnalyze also includes integrated mapping. A separate illuminate product, called iCorrelated, allows ad hoc, incremental queries directly against iLuminate and takes full advantage of its special capabilities.

illuminate, which is based in Spain, has been in business for nearly three years. It has more than 40 iLuminate installations, mostly in Europe. Pricing is based on several factors but the entry cost is very reasonable: somewhere in the $80,000 to $100,000 range, including iAnalyze. As part of its U.S. launch, the company is offering no-cost proof of concept projects to qualified customers.