Database and Direct Response Marketing Chapter 11 Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter Objectives How can a marketing team match a database program with an IMC program? What is meant by “database-driven marketing communications?” Name the ways a company’s database can be used to create permission marketing, frequency marketing, and customer relationship management programs. Which direct response marketing programs are most effective and least effective? Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Levi-Strauss 1853, Bavarian immigrant Four principles Empathy Originality Integrity Courage Primary brands: Levi’s, Dockers, Levi Strauss Signature Brand erosion Database marketing program Five target groups – promotions offered Online shoppers – fashion messages Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Chapter Overview Database marketing Building a data warehouse Database coding and analysis Data mining Database-driven marketing Communications Programs Customer relationship management Direct response marketing Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Developing Loyal Customers Recognition Relationship Rewards Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Database Marketing Database Identify customers Build relationships Database analytics Data-driven programs Data-driven communications Direct response marketing Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Tasks in Database Marketing Building a data warehouse Database coding and analysis Data mining Data-driven marketing communications Data-driven marketing programs Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Building the Data Warehouse Operational database Customer transactions Follows accounting rules Marketing database Current customer information Former customer information Prospect information Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

The Marketing Data Warehouse Customer names and addresses E-mail addresses Record of visits to the firm’s Web site History of every purchase transaction History of customer interactions Customer survey results Preferences and profiles supplied by the customer Response history from marketing campaigns Appended data Database coding through customer analyses Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Database Coding and Analysis Personalized communications Marketing campaigns Common forms of coding Lifetime value analysis RFM analysis Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Lifetime Value Analysis Individual lifetime value Customer segment lifetime value Key figures Revenue and costs Retention rate Visits or purchases per time period Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall 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 being the most frequent Monetary Divide into 5 equal parts Code 5 to 1 with 5 being the highest expenditures Codes range from 555 to 111. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Data Mining Build profiles of customer groups. Prepare models for predicting future behaviors. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Internet Communications Low cost Available 24/7. Metric analysis If the message was read Time it was read How much time was spent Customers access to additional information Build a bond with customers. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Data-Driven Communications Identification codes Customer IDs/passwords Personalized greetings After-sale communications Customer profile information In-bound telemarketing Trawling Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Data-Driven Marketing Programs Permission marketing Frequency/loyalty programs Customer relationship management Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Steps in Permission Marketing Obtain permission Offer a curriculum over time. Reinforce incentives to continue the relationship. Increase level of permission. Leverage the permission to benefit both parties. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Successful Permission Marketing Ensure recipients have granted permission Make e-mails relevant Customize program Track member activity Empowerment Reciprocity Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Frequency Programs Objectives Maintain sales, margins, or profits. Increase loyalty of existing customers. Induce cross-selling to existing customers. Differentiate a parity brand. Preempt the entry of a new brand. Preempt or match a competitor’s program. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Principle in Building Frequency Programs Design the program to enhance the value of the product. Calculate the full cost of the program. Design a program that maximizes the customer’s motivation. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Customer Relationship Management (CRM) Database technology Customize products Customize communications Many CRM programs failed Built on two primary metrics Lifetime value Share of customer Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

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. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Reasons CRM Programs Fail Implementation before customer strategy. Rolling out the CRM program before changing the organization to match the CRM program. Technology-driven instead of customer-driven. Customers feel like they are being stalked instead of wooed. Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Direct Response Marketing Direct Marketing Association Prospecting  60% Customer retention  40% Dell Computers Catalog TV and radio ads FSI inserts Web site Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Methods of Direct Marketing Direct mail E-mail Catalogs Direct response promotions Alternative media Telemarketing Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Direct Mail Most common form of direct marketing Types of lists Response list Compiled list Advantages Target mailings (consumer, b-to-b) Measurable Driver of online sales Disadvantages Clutter Costs Digital direct-to-press Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Catalogs Long-term impact Low-pressure sales tactics First stage in buying cycle Database Specialty catalogs Business-to-business Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Direct Response Media Television Radio Magazines Newspapers Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Internet Direct response to ads Cost-effective Builds relationships Personalization of communication Customization of offer Search engine ads Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Alternative Media Package insert programs (PIPs) Ride-a-longs Statement stuffers Card packs Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall Telemarketing Inbound telemarketing Cross-selling Outbound telemarketing Cold calling Database Prospects Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

International Implications Differences in technology Laws and regulations Local customs Infrastructure Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall