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October 9, 2003 Database Marketing: A New Beginning Houston DMA Arthur Middleton Hughes Director, Database Marketing Strategy Doubleclick Data Management Solutions ahughes@doubleclick.net
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What we at DoubleClick do Design, build and maintain marketing databases Do merge purge, clean and manage data Provide millions of new customers to catalogers, through the Abacus Alliance Provide DARTmail to send your emails Provide strategic advice on how to profit from your database
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The value of long term customers Buy more per year Buy higher priced options Buy more often Are less price sensitive Are less costly to serve Are more loyal Have a higher lifetime value
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Retention is the way to measure loyalty
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Retention pays better than acquisition
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Two Kinds of Database People Constructors People who build databases Merge/Purge, Hardware, Software Creators People who understand strategy Build loyalty and repeat sales You need both kinds!
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Manufacturer of building products Catalog sent to 45,000 contractors Previous policy: wait for the orders Test: pick 1,200 customers, split into test of 600 and control of 600 Two person pilot program build relationship with test customers to see the results Credit: Hunter Business Direct What proves that relationship building works?
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Change in the number of orders after 6 months
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Change in the Average Order Size
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Total revenue gain: $2.6 million dollars over six months
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This stuff works! Building a relationship with customers can be highly profitable Using a database to recreate the old family grocer is a winning strategy Business to business relationship marketing is the way to go
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How a modern customer database works Marketing Database Data Access And Analysis Software Customer Purchases Marketing Staff Transactions from Retail, Phone, Web Promotions
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What doesn’t work: Treating all customers alike This 28% lost 22% of the bank’s profits! Bank Customers by Profitability
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GOLD Spend Service Dollars Here Spend Marketing Dollars Here Reactivate or Archive Your Best Customers - 80% of Revenue Your Best Hope for New Gold Customers Move Up 1% of Total Revenue These may be losers Marketing to Customer Segments
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If you are not an airline, what can you do for gold customers? Cataloger selected 4,000 gold customers. Sent a free gift and a letter (with a catalog) to 2,000. Sent only the catalog to the other 2,000. Result: sales 20% higher to those who got the free gift. Gift: a discontinued item which was left over and could not be sold.
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Retail Sales Database Marketing Example Video rental company sent 170,000 email newsletters about movies every two weeks to those who asked for them They kept an identical group of 16,000 as a control who got no newsletters. After six months, those who got the newsletters spent 28% more than those who did not. Building a relationship with customers can be very profitable.
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Telecommunications Company DBM Example Cell phone company spent $7.38 per customer per year on retention messages. Despite this, attrition was high. Built a customer database. Determined Lifetime Value of each customer Used a model to predict attrition Developed a Risk Revenue Matrix
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Focus on the right segments
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Results of focus on priorities A and B Reduced cost per customer per year from $7.38 to $1.38 Reduced the attrition rate by 1.3% (millions of dollars saved per year) Increased by 5% the average phone usage by those contacted
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Cataloger Database Marketing Example Cataloger sends millions of catalogs per year. Collected emails from those who used the web Conducted a test: 20,000 got emails along with the catalogs in three mailings in 2003 20,000 (who had also bought on the web) got no emails, just the catalogs. Those who got the emails bought 18% more than those who did not.
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One of three emails they sent
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Insurance Database Marketing Example Property and Casualty insurance company mailed 1.2 million households per month Based on database of 9 million households Developed a model to determine return on promotion, based on demographics and credit scores. Use of the model increased profit by 96%
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How the model increased sales and profits.
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Examples of Profitable Strategies Newsletters Surveys and Responses Loyalty Programs Customer and Technical Services Friendly, interesting interactive web site Event Driven Communications
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Event driven communication: Dear Mr. Hughes: I would like to remind you that your wife Helena’s birthday is coming up in two weeks on November 5th. We have the perfect gift for her in stock. As you know, she loves Liz Claiborne clothing. We have an absolutely beautiful new suit in blue, her favorite color, in a fourteen, her size, priced at $232.00. If you like, I can gift wrap the suit at no extra charge and deliver it to you next week, so that you will have it in plenty of time for her birthday. Or, I can put it aside so you can come in to pick it up. Please call me at (703) 754-4470 to let me know which you’d prefer. Sincerely yours, Robin Baumgartner Robin Baumgartner, Store Manager Ridgeway Fashions Leesburg, VA 22069
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Sending an email
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Where else can you get these results in 3 days?
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Summary: What you should do right now Build a database with transactions and promo history Use it to analyze your customers and create personalized communications Put yourself in your customer’s shoes: say “Why would I want to be on that database?” Constantly test new strategies Use test and controls groups to prove that your strategies are working
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Books by Arthur Hughes From McGraw Hill. Order at www.dbmarketing.com
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