building databases, selecting customers, and managing relationships chapter 2 copyright© 2010...

Building Databases, Selecting Customers, and Managing Relationships

Chapter 2

Copyright© 2010 Pearson Education, Inc. Publishing as Prentice Hall

Please Note:


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Customer Database Defined

A customer database is a list of customer names to which the marketer has added additional information in a systematic fashion.


A Customer Database is… The heart of all direct

and interactive marketing activities.

The key to developing strong customer relationships and retaining customers.


Primary Objectives of a Customer Database

1) To get to know customers better 2) To sell different products or services to

existing customers3) To introduce new products or services4) To distribute information about an

upcoming event or sale 5) To introduce new employees6) To keep customers satisfied and happy


Highly satisfied customers Tend to be more loyal customers Generate more profits over their

lifetime of patronage


The Reasons Why Loyal Customers Generate More Profits

1. Increase their spending over time2. Cost less to serve than new

customers3. Generate word-of-mouth

advertising or referrals4. Are less price sensitive than new

customers

Loyal Customers …


An Example of How Loyalty Programs Are Driven by Customer Databases

McDonald Garden Center Garden Rewards Program


Types of Source Data To Collect

To Build A Customer Database

Customer’s Name Address Telephone Number E-Mail Address Demographics Psychographics Past Purchases (Transaction Data)


Database RFM Analysis: Recency/Frequency/Monetary

Evaluates customers with respect to their transactions over time

*20 points per each variable

*weights will vary

*See example in text


Database Maintenance: Creating Match Codes

An abbreviated name/address record

Allows each record to be matched with other records

A match code is generated for each name on the list

Example Address Derived Match CodeAnn Stafford 82301SAF9330ALI8A3

9330 West Arlington RdAlexandria, VA 22301Copyright© 2010 Pearson Education,

Inc. Publishing as Prentice Hall

Database Maintenance: Merge/Purge

A process using match codes to identify and delete duplicate names and addresses

Keeps house lists from being duplicated Can remove names that requested no

solicitations Can identify “multibuyers”


The Need for Database Maintenance

Lists are perishable Constant control and maintenance

is required Includes identifying and eliminating

any duplicate records Three categories of database

maintenance activities are needed


3 Categories of Database Maintenance Activities

1. Change of address investigations

2. Nixie removal

3. Record status updates


Change of Address Should be requested through the

U.S. Postal Service (National Change of Address Service - NCOA)

Promotions that are mailed out to improper addresses may result in a financial lost


Nixie Removal

Defined – mail that has been returned by the

Postal Service because it is undeliverable as

addressed


Record Status Updates Transaction data Marital status Deaths


Database Security Information Privacy Proper Database Storage List Marking – “salting” or

“seeding” Direct Marketers must safeguard their

customer database and discourage theft.


Common Uses of a Customer Database

1. Profile Customers2. Retain Best Customers3. Thank Customers For Their Patronage4. Capitalize on Cross-Selling/Continuity Selling5. Develop A Customer Communication

Program6. Perform Marketing Research7. Generate New Customers8. Send Customized Offers …and MORE!!


Example of a Customized Offer


Performing Database Analytics Data Mining

Defined: The process of using statistical and mathematical techniques to extract customer information from the customer database to draw inferences about an individual customer’s needs and predict future behavior.

Online Analytical Processing (OLAP)Copyright© 2010 Pearson Education,

Inc. Publishing as Prentice Hall

What’s the Secret to Database Analytics?

1. Be able to identify their “most” and “least” valuable customers;

2. Clarify demographic and behavioral statistics that apply to each population.

For Marketers to…


Database Enhancement

Defined – Refers to adding and overlaying information to customer records to better understand and describe the customer


Reasons To Enhance a Database1. Learn more about the customer

2. Increase the effectiveness of future promotional activities targeted to current customers

3. To better prospect for new customers who are similar to current customers


Common Data Collected for Data Enhancement

External1. Geographic Address2. Telephone Number3. Gender of Head of Household4. Length of Residence5. Number of Adults at Residence6. Number of Children at

Residence7. Income8. Occupation9. Marital Status10. Make of Automobiles Owned

Internal1. Age2. Gender 3. Income4. Marital Status5. Family Composition6. Street Address7. E-Mail Address8. Length of Residence 9. Size of Household10. Type of Housing


Customer Relationship Management Defined: A business strategy designed

to identify and maximize customer value.

To identify “touch points” between the business (company) and its customers and prospective customers.

To target customer needs to maximize the customer’s experience and overall customer satisfaction.


Full-Circle Marketing (Kurt Ruf)

Full Circle MarketingMarketing in the New Economy

Central Marketing/

RelationshipDatabase Mail House

Tele-marketere-mail engineCRM

Data MiningData CleansingPostal ProcessingCampaign Mgmt.Database Mgmt.Data Analysis

Back office apps.

Front office apps.Internal/Web

e-mail

Fax

Phone

Direct Mail

Direct

Wireless

Channels

OLAP tools, report tools, data transfer

Client

Demographic DataLifestyle DataProspect ListsDemand DataOn-line/Off-line Data

External Data Providers

Customer

Client Interfaces

Research

Test

Plan

Validate


Customer Value Customers should be viewed as an

investment

Without customers there is no business

If a marketing effort results in the acquisition of new customers who will generate value over time the action is desirable


Customer Value Hierarchy


Lifetime Value of A Customer (LTV)

Calculated as the discounted stream of net revenues that a customer will generate over the period of his or her lifetime of patronage with a company.

The information needed to calculate LTV is derived from transactions recorded in a customer database.


One-on-One Personalization Micro-targeting – is one-on-one

personalized marketing based on advanced, precise psychographic and lifestyle data.


Partner Relationship Marketing(PRM)

Defined: Where companies work closel with partners in other companies or departments to generate greater value to customers.

Marketers cultivate relationships with prospective partners just as they do with prospective customers.


Case Study

Smithfield Foods


building databases, selecting customers, and managing relationships chapter 2 copyright© 2010...

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