Customer Relationship Management A Databased Approach

1. Customer Relationship ManagementA Databased Approach V. Kumar Werner J. Reinartz Instructor’s Presentation Slides

2. Chapter Seven Using Databases

3. Topics Discussed • Types of databases • The Benefits of Marketing Databases • The Uses of Marketing Databases

4. Types of Databases Categorization: • Based on their main business functions • Databases managing business operations • Databases supporting decision-making activities Alternate categorization: • According to the information included in the databases • Based on the nature of the underlying marketing activities • Based on the database technology used

5. Categorization Based on Information in the Databases Types of databases: • Customer database • Prospect database • Cluster database • Enhancement database

6. Customer Database • Data from active and inactive customers • Basic information: name, address, zip code, and telephone number • Demographic information: age, gender, marital status, education, number of people in household, income • Psychographic information: values, activities, interests, preference • Transaction history: frequency of purchase, amount of spending • Other relevant information: inquiries and referrals, satisfaction, loyalty

7. Customer Database (contd.) • Data from inactive customers: • How long have the customers been inactive? • How long have they been active? • What was their purchasing pattern when they were active? • How much did they spend? • How were they initially acquired? • Why are they inactive?

8. Examples for Customer Database • D&B’s U.S Marketing File: Customer database comprising of telemarketing, direct mail, competitor analysis and other types of data pertaining to 18.5 million small, privately owned and large publicly owned businesses • InfoBaseR eProducts –from Acxiom provides the user companies with the email addresses of their customers • email marketing - most inexpensive profit-generating marketing tool -- to augment companies’ direct mail or other channels of communication with customers

9. Customer Database – CRM at Work:Email marketing at Blockbuster • Email marketing : • Targeted Personalized offers • Reduced direct mail costs and therefore increased Net Marketing Contribution • Additional customer touch point • Larger number of customers visiting the company’s website • Case: Email Marketing company Quris helped Blockbuster create its email newsletter • Newsletter marketed Blockbuster’s new movies (on DVD/VHS) and games to its customers via email which also included a bar-coded coupon for customers to print and redeem • Results: The total ROI for the program was 96% higher than the ROI for direct mail; for customers receiving electronic coupons, it was 144% higher

10. Prospect Database • Non-customers that have profiles that are similar to the profiles of existing customers • Segments prospects and positions the company’s differentiated products to the prospects’ specific needs • Examples of some Prospect databases used in the industry: • The InfoBaseR list: Offers a collection of US consumer data available in one source for list rentals covering 111 million households and 176 million individuals • Harris Selectory Online: A prospect database from D&B which helps companies find new customers allowing companies to: • Qualify leads that they are developing • Contact the decision-maker best suited to hear their sales pitch • Research potential opportunities

11. Cluster Database • Clusters defined based on geographic reference groups, affinity groups, and lifestyle reference groups • Depending on the membership of prospective customers to specific clusters, firms can customize their marketing communications • Example: The Prizm database • Segments every U.S neighborhood into 62 distinct areas • Every Prizm database is categorized into groups with every group having clusters • S1 (Elite Suburbs) –5 clusters with the nation’s most affluent social people • U1 (Urban uptown) –clusters include a good number of executives and professionals • C1 (City Society) – 3 clusters making the upper crust of America’s ‘second’ and ‘satellite’ cities • T1 (Landed Gentry) –clusters comprise of multi-income families having school age kids and are headed by well-educated executives and professionals

12. CRM at Work: Globe and Mail - Example of cluster database • Globe and Mail, Canadian national newspaper • Created a marketing database of prospective subscribers • Enhanced existing customer’s data with Canadian cluster codes and demographic data, provided by Compusearch • Using cluster data, targeted customers in the prospect database: sent offers to prospective customers whose demographics matched that of current customers • Used a predictive dialing method that doubled their prospective customer contacts per hour

13. Enhancement Database • Used to transfer additional information on customers and prospects • An overlaying process is used that eliminates duplications • Enhancements may include demographic and psychographic data, transaction history, changes in address, changes in income levels, privacy status, new product categories bought recently • Example: InfoBaseR Enhanced • InfoBaseR provides a large collection of U.S customer information like telephone & address data, mailing lists including hotline files, e-mail data • The InfoBaseR Enhanced provides the ability to append the latest demographics, socio-economic and lifestyle data to your existing in-house customer database • A consumer goods company can use this data to better target their advertising and marketing campaigns, expand brand reach, improve acquisition and retention rates, increase profitability

14. Categorization Based on The Nature of Underlying Marketing Activities • Passive marketing database • A mailing list that passively stores information about acquired customers • Future marketing efforts target the same customers in the list Customer list Customer list

15. Database Based on Nature of Underlying Marketing Activity (contd.) • Active marketing database Example: Travelers’ case Retention program – Five ‘touches’ – Systematic and low-cost interactions Result - increased retention rate; decreased defection by 5% Database Strategic Marketing Plan Marketing Programs Execution Data updates Results

16. Categorization Based on Database Technology • Hierarchical database • Inverted database • Relational database

17. Hierarchical Database • All information pertaining to a customer will be in a master record • Useful when the queries are standard and routine but high speed processing is required • Preferred in the banking, airline and hotel industries

18. Inverted Database • Suited for direct marketing applications • Has speed and flexibility to respond to unanticipated questions • Easy to add new elements to an inverted database as and when updated information is acquired

19. Relational Database • Has the greatest flexibility, but slower speed • Examples are Databases like Oracle, SQL Server, and Microsoft Access • Users can create queries to extract information from these tables and recombine it

20. Benefits of Marketing Databases • The ability to carry out profitable segmentation • Ability to retain customers and repeat business • The ability to spot potentially profitable customers

21. Uses of Marketing Databases Uses of Marketing Databases Uses that directly influence customer relationship Uses that directly influence other business operations

22. Uses of Marketing Databases Uses that directly influence customer relationship: • Identify and profile the best customers • Develop new customers • Deliver customized messages that are consistent with product/service usage • Send follow-up messages to customers for post-purchase reinforcement • Cross-sell products/services • Ensure cost-effective communication with customers • Improve promotion result by efficient targeting • Personalize customer service • Stealth communication with customers

23. Uses of Marketing Databases (contd.) Uses that directly influence other business operations: • Evaluate and refine existing marketing practices • Maintain brand equity • Increase effectiveness of distribution channels • Conduct product and market research • Integrate the marketing program • Create a new valuable management resource

24. Summary • Effective Database analysis is important for successful CRM • Data from active and inactive customers are important to ensure efficient marketing function • Marketing databases allow marketers to analyze customers and classify them into different groups to implement different marketing programs effectively • Databases also enable marketers to determine critical factors influencing customer satisfaction and take measures to retain existing customers at lowest cost