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