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  • 1. Customer Relationship Management A Databased Approach V. Kumar Werner J. Reinartz Instructor’s Presentation Slides
  • 2. Chapter Seven Using Databases
  • 3. Topics Discussed
    • Types of databases
    • The Benefits of Marketing Databases
    • The Uses of Marketing Databases
  • 4. Types of Databases
    • Categorization:
    • Based on their main business functions
      • Databases managing business operations
      • Databases supporting decision-making activities
    • Alternate categorization:
    • According to the information included in the databases
    • Based on the nature of the underlying marketing activities
    • Based on the database technology used
  • 5. Categorization Based on Information in the Databases
    • Types of databases:
    • Customer database
    • Prospect database
    • Cluster database
    • Enhancement database
  • 6. Customer Database
    • Data from active and inactive customers
    • Basic information: name, address, zip code, and telephone number
    • Demographic information: age, gender, marital status, education, number of people in household, income
    • Psychographic information: values, activities, interests, preference
    • Transaction history: frequency of purchase, amount of spending
    • Other relevant information: inquiries and referrals, satisfaction, loyalty
  • 7. Customer Database (contd.)
    • Data from inactive customers:
      • How long have the customers been inactive?
      • How long have they been active?
      • What was their purchasing pattern when they were active?
      • How much did they spend?
      • How were they initially acquired?
      • Why are they inactive?
  • 8. Examples for Customer Database
    • D&B’s U.S Marketing File: Customer database comprising of telemarketing, direct mail, competitor analysis and other types of data pertaining to 18.5 million small, privately owned and large publicly owned businesses
    • InfoBaseR eProducts –from Acxiom provides the user companies with the email addresses of their customers
      • email marketing - most inexpensive profit-generating marketing tool
            • -- to augment companies’ direct mail or other channels
            • of communication with customers
  • 9. Customer Database – CRM at Work: Email marketing at Blockbuster
    • Email marketing :
      • Targeted Personalized offers
      • Reduced direct mail costs and therefore increased Net Marketing Contribution
      • Additional customer touch point
      • Larger number of customers visiting the company’s website
    • Case: Email Marketing company Quris helped Blockbuster create its email newsletter
      • Newsletter marketed Blockbuster’s new movies (on DVD/VHS) and games to its customers via email which also included a bar-coded coupon for customers to print and redeem
      • Results: The total ROI for the program was 96% higher than the ROI for direct mail; for customers receiving electronic coupons, it was 144% higher
  • 10. Prospect Database
    • Non-customers that have profiles that are similar to the profiles of existing customers
    • Segments prospects and positions the company’s differentiated products to the prospects’ specific needs
    • Examples of some Prospect databases used in the industry:
      • The InfoBaseR list: Offers a collection of US consumer data available in one source for list rentals covering 111 million households and 176 million individuals
      • Harris Selectory Online: A prospect database from D&B which helps companies find new customers allowing companies to:
        • Qualify leads that they are developing
        • Contact the decision-maker best suited to hear their sales pitch
        • Research potential opportunities
  • 11. Cluster Database
    • Clusters defined based on geographic reference groups,
    • affinity groups, and lifestyle reference groups
    • Depending on the membership of prospective customers to specific clusters, firms can customize their marketing communications
    • Example: The Prizm database
      • Segments every U.S neighborhood into 62 distinct areas
      • Every Prizm database is categorized into groups with every group having clusters
        • S1 (Elite Suburbs) –5 clusters with the nation’s most affluent social people
        • U1 (Urban uptown) –clusters include a good number of executives and professionals
        • C1 (City Society) – 3 clusters making the upper crust of America’s ‘second’ and ‘satellite’ cities
        • T1 (Landed Gentry) –clusters comprise of multi-income families having school age kids and are headed by well-educated executives and professionals
  • 12. CRM at Work: Globe and Mail - Example of cluster database
    • Globe and Mail, Canadian national newspaper
      • Created a marketing database of prospective subscribers
      • Enhanced existing customer’s data with Canadian cluster codes and demographic data, provided by Compusearch
      • Using cluster data, targeted customers in the prospect database: sent offers to prospective customers whose demographics matched that of current customers
      • Used a predictive dialing method that doubled their prospective customer contacts per hour
  • 13. Enhancement Database
    • Used to transfer additional information on customers and prospects
    • An overlaying process is used that eliminates duplications
    • Enhancements may include demographic and psychographic data, transaction history, changes in address, changes in income levels, privacy status, new product categories bought recently
    • Example: InfoBaseR Enhanced
      • InfoBaseR provides a large collection of U.S customer information like telephone & address data, mailing lists including hotline files, e-mail data
      • The InfoBaseR Enhanced provides the ability to append the latest demographics, socio-economic and lifestyle data to your existing in-house customer database
      • A consumer goods company can use this data to better target their advertising and marketing campaigns, expand brand reach, improve acquisition and retention rates, increase profitability
  • 14. Categorization Based on The Nature of Underlying Marketing Activities
    • Passive marketing database
      • A mailing list that passively stores information about acquired customers
      • Future marketing efforts target the same customers in the list
    Customer list Customer list Campaign 1 Database Campaign 2
  • 15. Database Based on Nature of Underlying Marketing Activity (contd.)
    • Active marketing database
    • Example: Travelers’ case
    • Retention program – Five ‘touches’ – Systematic and low-cost interactions
    • Result - increased retention rate; decreased defection by 5%
    Database Strategic Marketing Plan Marketing Programs Execution Data updates Results
  • 16. Categorization Based on Database Technology
    • Hierarchical database
    • Inverted database
    • Relational database
  • 17.
    • All information pertaining to a customer will be in a master record
    • Useful when the queries are standard and routine but high speed processing is required
    • Preferred in the banking, airline and hotel industries
    Hierarchical Database
  • 18. Inverted Database
    • Suited for direct marketing applications
    • Has speed and flexibility to respond to unanticipated questions
    • Easy to add new elements to an inverted database as and when updated information is acquired
  • 19.
    • Has the greatest flexibility, but slower speed
    • Examples are Databases like Oracle, SQL Server, and Microsoft Access
    • Users can create queries to extract information from these tables and recombine it
    Relational Database
  • 20. Benefits of Marketing Databases
    • The ability to carry out profitable segmentation
    • Ability to retain customers and repeat business
    • The ability to spot potentially profitable customers
  • 21. Uses of Marketing Databases Uses of Marketing Databases Uses that directly influence other business operations Uses that directly influence customer relationship
  • 22. Uses of Marketing Databases
    • Uses that directly influence customer relationship:
    • Identify and profile the best customers
    • Develop new customers
    • Deliver customized messages that are consistent with product/service usage
    • Send follow-up messages to customers for post-purchase reinforcement
    • Cross-sell products/services
    • Ensure cost-effective communication with customers
    • Improve promotion result by efficient targeting
    • Personalize customer service
    • Stealth communication with customers
  • 23. Uses of Marketing Databases (contd.)
    • Uses that directly influence other business operations:
    • Evaluate and refine existing marketing practices
    • Maintain brand equity
    • Increase effectiveness of distribution channels
    • Conduct product and market research
    • Integrate the marketing program
    • Create a new valuable management resource
  • 24. Summary
    • Effective Database analysis is important for successful CRM
    • Data from active and inactive customers are important to ensure efficient marketing function
    • Marketing databases allow marketers to analyze customers and classify them into different groups to implement different marketing programs effectively
    • Databases also enable marketers to determine critical factors influencing customer satisfaction and take measures to retain existing customers at lowest cost