All Circuits are Busy

As Garlow explains, CDW bases its marketing efforts primarily on how its customers performed a year earlier. “We track how customers migrate over their life cycle year after year,” he says. “We see how they're spending, whether that’s increasing or decreasing, and how that spending compares to the average customer.”

CDW also relies heavily on tracking customers’ purchase histories, paying close attention to product categories. “We track to see if they’re purchasing heavily in one category vs. another,” Garlow says. “From that, based on past analysis, we can make a determination of what that customer’s going to do in the future year. For example, customers may buy laptop PCs every year, and that’s all they purchase. Those customers aren’t going to be nearly as strong as those coming to us to buy their laptops, desktops, networking, software, telephony, etc.”

With this data, the company sets financial goals for each campaign. Using industry projections from consulting services such as Forrester, IDC and Gartner as a baseline, CDW sets financial objectives to outperform the market. Its traditional goal was to be 10 percent better than the market, but that was when it was a $2-billion- or $3-billion-a-year company. “Now that we’re closing in on $8 billion,” says Garlow, “it’s tougher” to set such a high threshold.

Still, if the industry is projected to grow 5 percent this year across CDW’s product categories, CDW believes it can grow at 8 percent to 10 percent. These projections take into account past run rates, as well as specific industry segments such as health care, education, government, etc. “Where we may say we’re going to see more growth in health care,” Garlow says, “state government budgets may be flat, so we wouldn’t expect to grow as much in this segment.”

Catalog at the Core
After the customer, segment and financial data has been reviewed, CDW chooses appropriate marketing channels. The catalog “remains a focal point in the execution stage of the closed-loop technique,” according to Garlow. “It’s possible we could survive without it, but we wouldn’t generate nearly the sales we do with it. It’s almost like asking, ‘Can you do away with your Web site?’”