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Database and Direct Response Marketing

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Record of visits to the firm's Web site. History of transactions, ... Price Bargains. Entertaining. Account Status Updates. Frequency Programs. 11-20 ... – PowerPoint PPT presentation

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Title: Database and Direct Response Marketing


1
Database and Direct Response Marketing
  • Chapter 11

2
Chapter Overview
  • Database marketing
  • Building a data warehouse
  • Data mining coding
  • Database-driven marketing
  • Communications
  • Programs
  • Customer relationship management
  • Direct response marketing

3
Goal Customer Loyalty
  • Recognition
  • Relationship
  • Rewards

3 Rs of creating customer loyalty and preference
4
Database Marketing
Tasks
  • Building a data warehouse
  • Database coding and analysis
  • Data mining
  • Data-driven marketing communications
  • Data-driven marketing programs

5
The Why of a Data Warehouse
11-5
6
Building the Data Warehouse
2 Types
  • Operational database
  • Customer transactions
  • Follows accounting rules
  • Marketing database
  • Current customer information
  • Former customer information
  • Prospect information

7
The 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

8
Database Coding and Analysis
  • Personalized communications
  • Marketing campaigns
  • Lifetime value analysis
  • RFM analysis

9
Lifetime Value Analysis
  • Individual lifetime value
  • Customer segment lifetime value
  • Key figures
  • Revenue and costs
  • Retention rate
  • Visits or purchases per time period

10
RFM Analysis
  • Recency
  • Frequency
  • Monetary

Used to predict future customer behaviors
Codes range from 555 to 111
11-10
11
RFM 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

12
RFM 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
13
Data Mining
  • Build profiles of customer groups.
  • Prepare models for predicting future behaviors.

14
InternetImportant 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

15
Data-DrivenMarketing Programs
  • Permission marketing
  • Frequency/loyalty programs
  • Customer relationship management

16
Permission 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

17
Permission Marketing
Keys to Success
  • Ensure recipients have granted permission
  • Make e-mails relevant
  • Customize program
  • Track member activity
  • Reciprocity

18
Reasons 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
19
Reasons 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
20
Frequency 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.

21
Principle 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.

22
Customer Relationship Management (CRM)
  • Database technology
  • Customize products
  • Customize communications
  • Many CRM programs failed
  • Built on two primary metrics
  • Lifetime value
  • Share of customer

23
Developing a CRM Program
  • Identify customers
  • Differentiate customers
  • Lifetime value
  • Share of customer
  • Interact with customers
  • Improve cost efficiencies
  • Enhance effectiveness
  • Customize goods and services

24
Reasons 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

25
Direct Response Marketing
  • Direct Marketing Association
  • Prospecting ? 60
  • Customer retention ? 40
  • Dell Computers
  • Catalog
  • TV and radio ads
  • FSI inserts
  • Web site

26
Direct Marketing Methods
  • Direct mail
  • E-mail
  • Catalogs
  • Direct Response Media
  • Alternative media
  • Telemarketing

27
Direct 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

28
Catalogs
  • Long life
  • Low-pressure sales tactics
  • First stage in buying cycle
  • Apply Database
  • Specialty/Targeted
  • Business-to-business

29
Direct Response Media
  • Television
  • Radio
  • Magazines
  • Newspapers

30
Internet
  • Direct response to ads
  • Cost-effective (?)
  • Builds relationships
  • Personalization of communication
  • Customization of offer
  • Search engine ads

31
Alternative Media
  • Package insert programs (PIPs)
  • Ride-a-longs
  • Statement stuffers
  • Card packs

32
Telemarketing
  • Inbound telemarketing
  • Cross-selling
  • Outbound telemarketing
  • Cold calling
  • Database
  • Prospects

33
International Implications
  • Differences in technology
  • Laws and regulations
  • Local customs
  • Infrastructure
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