Title: Database and Direct Response Marketing
1Database and Direct Response Marketing
2Chapter Overview
- Database marketing
- Building a data warehouse
- Data mining coding
- Database-driven marketing
- Communications
- Programs
- Customer relationship management
- Direct response marketing
3Goal Customer Loyalty
- Recognition
- Relationship
- Rewards
3 Rs of creating customer loyalty and preference
4Database Marketing
Tasks
- Building a data warehouse
- Database coding and analysis
- Data mining
- Data-driven marketing communications
- Data-driven marketing programs
5The Why of a Data Warehouse
11-5
6Building the Data Warehouse
2 Types
- Operational database
- Customer transactions
- Follows accounting rules
- Marketing database
- Current customer information
- Former customer information
- Prospect information
7The Marketing Data Warehouse
- Customer names and addresses
- E-mail addresses
- Record of visits to the firms Web site
- History of transactions, interactions
- Survey results
- Preferences supplied by the customer
- Response history from marketing campaigns
- Database coding through customer analyses
8Database Coding and Analysis
- Personalized communications
- Marketing campaigns
- Lifetime value analysis
- RFM analysis
9Lifetime Value Analysis
- Individual lifetime value
- Customer segment lifetime value
- Key figures
- Revenue and costs
- Retention rate
- Visits or purchases per time period
10RFM Analysis
- Recency
- Frequency
- Monetary
Used to predict future customer behaviors
Codes range from 555 to 111
11-10
11RFM Analysis
- Recency
- Divide database into 5 equal parts based on date
of last purchase - Code 5 to 1 with 5 the last 20 to purchase
- Frequency
- Divide into 5 equal parts.
- Code 5 to 1 with 5 the most frequent
- Monetary
- Divide into 5 equal parts
- Code 5 to 1 with 5 the highest expenditures
12RFM Analysis
- Code of 235
- 2 indicates has not made a recent purchase
- 3 indicates has made an average number of
purchases - 5 indicates the total monetary value of the
purchases were among the top 20 of the firms
customers - Recency has most impact on future purchases
- Frequency has second most impact
- Monetary has least impact
11-12
13Data Mining
- Build profiles of customer groups.
- Prepare models for predicting future behaviors.
14InternetImportant in Customer Comunications
- Low cost
- Available 24/7
- Metric analysis
- If and when the message was read
- How much time was spent
- Customers access to additional information
- Build a bond with customers
15Data-DrivenMarketing Programs
- Permission marketing
- Frequency/loyalty programs
- Customer relationship management
16Permission Marketing
Steps
- Obtain permission
- Offer a curriculum over time.
- Reinforce incentives to continue the relationship
- Increase level of permission.
- Leverage the permission to benefit both parties
17Permission Marketing
Keys to Success
- Ensure recipients have granted permission
- Make e-mails relevant
- Customize program
- Track member activity
- Reciprocity
18Reasons Consumers Opt into an E-mail Permission
Program
Sweepstakes/Chance to Win
Found Site Randomly
E-mail Reqd For Access
Already a Customer
Friend Recommended
Source Based on Joseph Gatt, Most Consumers
Have Reached Permission E-mail Threshold, Direct
Marketing (December 2003).
11-18
19Reasons Customers Remain Loyal to a Permissions
Relationship
Interesting Content
Account Status Updates
Sweepstakes/Chance to Win
Price Bargains
Entertaining
Source Based on Joseph Gatt, Most Consumers
Have Reached Permission E-mail Threshold, Direct
Marketing (December 2003),
11-19
20Frequency Programs
Objectives
- Maintain sales, margins, or profits.
- Increase customer loyalty.
- Induce cross-selling to existing customers.
- Differentiate a parity brand.
- Preempt the entry of a new brand.
- Preempt/match a competitors program.
21Principle in BuildingFrequency Programs
- Design the program to enhance the value of the
product. - Calculate the full cost of the program.
- Design a program that maximizes the customers
motivation.
22Customer Relationship Management (CRM)
- Database technology
- Customize products
- Customize communications
- Many CRM programs failed
- Built on two primary metrics
- Lifetime value
- Share of customer
23Developing a CRM Program
- Identify customers
- Differentiate customers
- Lifetime value
- Share of customer
- Interact with customers
- Improve cost efficiencies
- Enhance effectiveness
- Customize goods and services
24Reasons CRM Programs Fail
- Implementation before customer strategy
- Roll out before organization design matches the
CRM program - Tech-driven instead of customer-driven
- Customers feel like they are being stalked
instead of wooed
25Direct Response Marketing
- Direct Marketing Association
- Prospecting ? 60
- Customer retention ? 40
- Dell Computers
- Catalog
- TV and radio ads
- FSI inserts
- Web site
26Direct Marketing Methods
- Direct mail
- E-mail
- Catalogs
- Direct Response Media
- Alternative media
- Telemarketing
27Direct Mail
- Most common form of direct marketing
- Types of lists
- Response list
- Compiled list
- Advantages
- Targeted (consumer, b-to-b)
- Measurable
- Disadvantages
- Clutter (just too much of it!)
- Costs
28Catalogs
- Long life
- Low-pressure sales tactics
- First stage in buying cycle
- Apply Database
- Specialty/Targeted
- Business-to-business
29Direct Response Media
- Television
- Radio
- Magazines
- Newspapers
30Internet
- Direct response to ads
- Cost-effective (?)
- Builds relationships
- Personalization of communication
- Customization of offer
- Search engine ads
31Alternative Media
- Package insert programs (PIPs)
- Ride-a-longs
- Statement stuffers
- Card packs
32Telemarketing
- Inbound telemarketing
- Cross-selling
- Outbound telemarketing
- Cold calling
- Database
- Prospects
33International Implications
- Differences in technology
- Laws and regulations
- Local customs
- Infrastructure