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