Chapter 3:

Using Databases

2V. Kumar and W. Reinartz – Customer Relationship Management

Overview

Topics discussed:

Types of databases

Categorization based on information in the databases

Categorization based on the nature of the underlying marketing activities

Categorization based on the database technology

The benefits of marketing databases

The uses of marketing databases

3V. Kumar and W. Reinartz – Customer Relationship Management

Overview

Categorization

Based on their main business functions

Databases managing business operations

Databases supporting decision-making activities

Alternate categorization:

Information included in the databases

Nature of the underlying marketing activities

Database technology used

4V. Kumar and W. Reinartz – Customer Relationship Management

Customer

DatabaseProspect Database

Cluster

Database

Enhancement

Database

Categorization Based on Information in the Databases

5V. Kumar and W. Reinartz – Customer Relationship Management

Customer Database

Data from active and inactive customers

Information included in customer databases:

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

6V. Kumar and W. Reinartz – Customer Relationship Management

Customer Database (2)

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?

7V. Kumar and W. Reinartz – Customer Relationship Management

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 130 million companies in more

than 190 countries

InfoBase 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

8V. Kumar and W. Reinartz – Customer Relationship Management

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:

InfoBase List: Offers a collection of US consumer data available in one source for

list rentals covering 120 million households and 190 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

9V. Kumar and W. Reinartz – Customer Relationship Management

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

•5 clusters with the nation‘s most affluent social people

S1

(Elite Suburbs)

•Executives and professionals

U1

(Urban Uptown)

•3 clusters making the upper crust of America‘s second and satellite cities

C1

(City Society)

•Clusters comprise of multi-income families with school age kids and are headed by well-educated executives and professionals

T1

(Landed Gentry)

10V. Kumar and W. Reinartz – Customer Relationship Management

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: InfoBase Enhanced

InfoBase provides a large collection of U.S customer information like telephone &

address data, mailing lists including hotline files, e-mail data

InfoBase Enhanced provides the ability to append the latest demographics, socio-

economic and lifestyle data to your existing in-house customer database

11V. Kumar and W. Reinartz – Customer Relationship Management

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

Campaign 1 Database Campaign 2Customer List

Customer List

12V. Kumar and W. Reinartz – Customer Relationship Management

Categorization Based on The Nature of Underlying Marketing Activities (2)

Active Marketing Database

Strategic

Marketing Plan

Execution

Results

Data Updates

DatabaseMarketing Program

13V. Kumar and W. Reinartz – Customer Relationship Management

Categorization Based on Database Technology

Hierarchical database

Inverted database

Relational database

14V. Kumar and W. Reinartz – Customer Relationship Management

Hierarchical Database

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

Organized in a tree-like structure

Example of a custom mill business database:

15V. Kumar and W. Reinartz – Customer Relationship Management

Inverted Database & Relational Database

Inverted Database

Suited for direct marketing application

Has speed and flexibility to respond to unanticipated questions

Easy to add new elements, when updated information is acquired

Relational Database

Has the greatest flexibility

Users can create queries to extract and combine information

Examples of Relational Database:

Oracle, SQL Server, and Microsoft Access

16V. Kumar and W. Reinartz – Customer Relationship Management

Benefits of Marketing Databases

Ability to carry out profitable segmentation

Ability to retain customers and repeat business

Ability to spot potential profitable customers

17V. Kumar and W. Reinartz – Customer Relationship Management

Uses of Marketing Databases

Uses of Marketing

Database

Uses that directly

influence other

Business Operations

Uses that directly

influence Customer

Relationship

18V. Kumar and W. Reinartz – Customer Relationship Management

Uses of Marketing Databases (2)

Uses that directly influence Customer Relationship:

Identify and profile the best customers

Develop new customers

Deliver customized messages 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

19V. Kumar and W. Reinartz – Customer Relationship Management

Uses of Marketing Databases (3)

Uses that directly influence other business operations:

Evaluate and refine existing marketing practice

Maintain brand equity

Increase effectiveness of distribution channels

Conduct product and market research

Integrate the marketing program

Create a new valuable management resource

20V. Kumar and W. Reinartz – Customer Relationship Management

CRM at Work

Effective use of email marketing

Emails are the most financially efficient form of direct communication between firms and

customers

Most effective day of the week to communicate with potential customer:

B2C firms: Wednesday and Friday

B2B firms: Monday or Tuesday

American Express and Database Clustering

American Express clusters customers’ purchasing behavior data and provide upgrades or

cross-selling offers based on the customer’s change in cluster group

Accurate database clustering is important for marketers, as customer databases evolve

over time

Evolving and moving clustering system allows customers to move freely in and out of

clusters as is warranted by their purchase behavior

21V. Kumar and W. Reinartz – Customer Relationship Management

CRM at Work (2)

Enhancement Database

County drains, a drainage service company, has built its business around superior customer

service

Challenged to provide premium customer service, as its customer base was expanding

rapidly

Chose an adaptive database, GoldMine Premium Edition, which allowed County Drains to :

a) continue with it premium customer service and (b) proactively engage with customer to

provide more relevant services

Active Marketing Database

Harrah’s Casino constantly update its customer data through the customers’ use of its

loyalty card

The updated customer data allows Harrah’s to create a customized rewards system

Success of this program can be seen in Harrah’s expansion and profitability

In 2003, opened 26 new casinos and earned $4 million more than the prior year

22V. Kumar and W. Reinartz – Customer Relationship Management

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