building databases, selecting customers, and managing relationships chapter 2 copyright© 2010...
TRANSCRIPT
Building Databases, Selecting Customers, and Managing Relationships
Chapter 2
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Please Note:
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Opening Vignette
Tidewater Exterminati
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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.
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A Customer Database is… The heart of all direct
and interactive marketing activities.
The key to developing strong customer relationships and retaining customers.
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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
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Highly satisfied customers Tend to be more loyal customers Generate more profits over their
lifetime of patronage
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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 …
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An Example of How Loyalty Programs Are Driven by Customer Databases
McDonald Garden Center Garden Rewards Program
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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)
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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
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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”
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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
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3 Categories of Database Maintenance Activities
1. Change of address investigations
2. Nixie removal
3. Record status updates
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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
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Nixie Removal
Defined – mail that has been returned by the
Postal Service because it is undeliverable as
addressed
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Record Status Updates Transaction data Marital status Deaths
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Database Security Information Privacy Proper Database Storage List Marking – “salting” or
“seeding” Direct Marketers must safeguard their
customer database and discourage theft.
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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!!
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Example of a Customized Offer
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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…
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Database Enhancement
Defined – Refers to adding and overlaying information to customer records to better understand and describe the customer
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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
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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
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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.
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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
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
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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
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Customer Value Hierarchy
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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.
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One-on-One Personalization Micro-targeting – is one-on-one
personalized marketing based on advanced, precise psychographic and lifestyle data.
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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.
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Case Study
Smithfield Foods
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