Transcript Lecture 1

Overview of Database Marketing
Historical Perspective
•
Mass Production, Mass Media and Mass Mkt
now replaced by
-a one-to-one economic system
The one-to-one future represents
- Customized production
- Individually addressable media
- 1:1 marketing
Primary premise: retaining a customer is easier
than acquiring a new one
Goal is Customer Share not Market share.
Acquisition vs Retention
• $100 spent on acquisition brings $50 in profits
• $100 spent on retention brings $150 in profits
(Paul Wang, Dbase Mkt expert)
• Most companies are spending 90% of mkt
dollars on acquisition
Acquisition vs Retention (contd)
• Why do companies spend more on acquisition
- Acquisition easier to measure
- Acquisition is easier to carry out
- Acquisition involves product managers,
retention involves segment managers
- Retention involves maintaining a database
- To measure retention, you must have a
test and control groups
What is Database Marketing?
• An information driven marketing process
made possible by database technology that
enables marketers to
develop, test, implement, measure and
modify
customized marketing programs and
strategies
What is required for Database
Marketing?
• Relevant data about customers and prospect
• Database tech to transform raw data into powerful and
accessible mkt info
• Statistical techniques to rank customers in terms of
their likeliness to
- respond to mkt communication
- buy products
- return products
- pay for products
- stay or leave
What is required for Database
Marketing
• Knowledge of economics of gathering,
manipulating, and analyzing data
• Creativity to capitalize on mkt opportunities
that emerge from above process to develop
- individual customer relationships
- build business
Premise of Database Marketing
• Not all customers are alike
• Gathering, maintaining, and analyzing
customer and prospect info allows marketers to
- identify key mkt segments
- optimize planning, pricing and promoting
- close deals satisfying both buyers and
sellers
How is it different than Direct
Marketing?
• Is broader than traditional Direct Mkt
• Direct mkt communication is through one
channel- mail
• Database mkt uses different channels of
communication such as TV, print etc to
- make a sale
- develop relationships with customers
Example: Health and Beauty Aids
• Database analysis reveals that
- best converters (people who repurchase)are
above certain age and income level
- basically middle aged affluent households
• How will you improve their mkt communication
based on this result?
Example: Health and Beauty Aids
• Some suggestions
- mail promotions to only middle age,
people living in affluent neighborhoods
• This could increase profits because it
reduces cost of mailing while improving
sales
Example: Package Goods
• Database analysis (segmentation) reveals that
- Purchase patterns and amount purchased
differ between clusters of consumers
- It relates to the attitudes the brand
represents and the customers’ lifestyles
• How will you customize their mkt
communication based on this result?
Example: Package Goods
• Some suggestions
- Combine your data with secondary data like
Nielsen Brand Development Index (BDI)
- In loyal mkts co-promote other products that
you manufacture with the primary brand
- In non-loyal mkts drop coupons or run
promotions to bring in new customers
What do these examples tell us?
• Info about customer purchases is as imp as
dollars obtained from selling goods
• Develop ongoing dialogues with customers thru
- In-package surveys
- Opinion polls
- Tracking studies
- Point of Sale (POS) programs
• These dialogues should reward customers for
- Repurchasing
- Referring new customers
How do customers benefit?
• Enables customers to
- register their preferences
- form perceptions about company’s brands
(both old and new)
- leverage more value for what they pay
Some representative strategiesLead Grading
• Grade prospects by
- willingness to buy
- ability to buy
- readiness to buy
• When combined with data about previous
customers, this helps in recommending the
right match
Some representative strategies:
Customized Targeting
• Reach customers with right product and
right offer at the right time (eg Music clubs
like BMG or Columbia)
• Customize offers based on member’s
previous selections, demographic and
lifestyle information
• Reduces attrition, improves sales
• Develops loyalty
Some representative strategies:
Foster New Services
• Help make it easy for customers to buy
more, and more often
• Use unique customer ID’s to avoid
redundant questions whenever customer
places and order
• Use customer purchase history to make
offers about related products
Some representative strategies:
Increase Customer Loyalty
• Establish two-way communications between
customers and company
• Majority of repeat business comes from a small
percentage of customers (called Relationship
Buyers as opposed to Transaction Buyers)
• Reward customers for purchasing from you again
and again
• Example: Continental One Pass, American
Advantage, MCI-Blockbuster
Some representative strategies:
Increase Customer Loyalty
• Transaction buyers/Disloyal customers could be
- Transient individuals
- Young people, rather than older people
- Single people, rather than married people
- Renters, rather than home owners
- People who respond to low-ball discount offers
- People who respond to temporary sales