Transcript Welcome to Database Marketing Course MKTG 6229

Database Marketing Course –
Professor Raj Sethuraman
Discussion Topics for First Session
• What is Database Marketing?
• Why Database Marketing?
• Basics of Database Marketing (DBM)
• Applications of DBM
• Syllabus
What is Database Marketing?
Compare and Contrast
• Traditional Data Analysis
• Data Mining
• Database Marketing
Similarities and Differences
Criteria
Traditional Data
Analysis*
Data Mining*
Database
Marketing
Data analysis
objectives
generally clearly not clearly
stated
stated
may or may not
be clearly
stated
Apriori Theory
often exists
usually not
there
may exist
Size of typical
database
small-moderate
large
typically large
Analytical tools
relatively less
advanced
(traditional)
advanced
(newer)
advanced
high
generally high
but not
necessary
CRM orientation not necessary
*as viewed by marketers
Some Definitions of Database Marketing
AMA definition:
An approach by which computer database technologies are harnessed
to design, create, and manage customer data lists containing information
about each customer's characteristics and history of interactions with
the company. The lists are used as needed for locating, selecting,
targeting, servicing, and establishing relationships with customers
in order to enhance the long-term value of these customers
to the company.
Another definition
Database marketing is a systematic approach to the gathering,
consolidation, and processing of consumer data (both for customers
and potential customers) that is maintained in a company's databases.
Although databases have been used for customer data in traditional
marketing for a long time, the database marketing approach is
differentiated by the fact that much more consumer data is maintained,
and that the data is processed and used in new and more
sophisticated ways.
Some Definitions of Database Marketing
Third definition:
Database marketing is a way of organizing a company’s customer and
prospect data so that it can be used more effectively in a direct marketing
effort. It is a way of organizing the whole marketing process.
Database marketing allows you to choose what to market to whom and
when based on the sum total of your knowledge and experience
with a customer or prospect.
Fourth definition
Database marketing is the technique of gathering all the information
available about your customer, leads, and prospects into a central
database and using that information to drive all your marketing efforts.
The information is stored in a marketing database and can be used
at both the strategic and tactical levels to drive targeted marketing efforts.
Why Database Marketing?
Informational Reasons
• Availability of abundance data
• Permission to collect them
Technological Reasons
• Technology to collect and warehouse data
• Technology and computing power available to analyze them
• Availability of commercial software, some of which are even
“user friendly” (e.g. XL miner, SAS enterprise miner)
Commercial Reason
• Interest in generating intelligence to remain competitive main
market share
• Drive to be efficient
How
Database Marketing (DBM) and
Customer Relationship Management (CRM)
In order to form a learning relationship with its
customers, an enterprise (firm) must be able to:
1.
Notice – what its customers are doing
2.
Remember – what it and its customers have done
over time
3.
Learn – from what it has remembered
4.
Act On – what it has learned to make customers
more profitable
How
Based on “Transaction” Data
How
Customer Relationship Management (CRM)
A More Inclusive Definition of Database Marketing
Database marketing is a systematic approach to the
gathering, consolidation, and processing of
marketing databases to learn more about customers
and competitors, select target markets, compare
customers' value to the company, provide more
specialized offerings, as well as make other
marketing and strategic decisions.
Database Marketing System
Memory
Intelligence
Output
Data
Other
Data
Customer
Data
Transaction
Data
Data
Warehousing
Database
Data Analytic
Tools/Software
Marketing
Decisions
Customer Activity Database
Data
Techniques
Output/Application
Demographics
Direct marketing
Subscription
Data
Activity Data
Exit Data
Promotions
Data
Frequency, Cross-Tab
Correlation
Logistic regression
Decision Tree
Survival/Churn Analysis
Prospecting
Customer retention
Customer loyalty
Customer Activity Database - 2
Data
Techniques
Output/Application
Demographics
Segmentation
Subscription
Data
Activity Data
Location data
Distance Data
Frequency, Cross-Tab
Correlation
Algorithms for minimizing
distance traveled /
maximizing sales potential
Store Location
Store Promotion
Geodemographic Database
Data
Techniques
Clusters
Zip codes
Demographics
Purchase
Output/Application
Segmentation
Cluster
Distinct
Analysis
Clusters
Targeting
used for
Advertising/Promotion
Reading habits
Vacationing
Supermarket Database
Data
Techniques
Demographics
Output/Application
Stocking/Inventory
control
Logistic regression
Aggregate
Purchase Data
Simultaneous system
Advertising
Cluster analysis
Panel
Purchase Data
Retail
Environment
Market basket analysis
Shelf placement
Querying
Pricing/coupons
Database Marketing Industry (CRM only)
(Based on Forrester Report)
• Total DBM spending estimated at $2.5 Billion
• Expected growth rate, next three years: 10%25%
• Major players and market share: Acxiom
(about 30%), Harte-Hanks (10%), Experian
and Epsilon (over 5%), Merkle (under 5%), All
others (40%)
Objectives of the DBM Course
To enable students to
• Appreciate and understand the scope of database marketing
• Learn some common data mining techniques
• Implement some of those techniques using commercially
available software such as SAS
• Interpret the output from the analysis
• Apply those techniques to some real-world marketing situations
and facilitate marketing decisions.