Overview of Database Marketing

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Overview of Database Marketing
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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
• - 11 marketing
• Primary premise retaining a customer is easier
  than acquiring a new one
• Goal is Customer Share not Market share.

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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

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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

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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

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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

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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

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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

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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

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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?

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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

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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?

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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

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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

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How do customers benefit?

• Enables customers to
• - register their preferences
• - form perceptions about companys brands
  (both old and new)
• - leverage more value for what they pay

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Some representative strategies-Lead 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

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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 members previous
  selections, demographic and lifestyle information
• Reduces attrition, improves sales
• Develops loyalty

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Some representative strategies Foster New
Services

• Help make it easy for customers to buy more, and
  more often
• Use unique customer IDs to avoid redundant
  questions whenever customer places and order
• Use customer purchase history to make offers
  about related products

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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

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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

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