1. Building Databases, Selecting Customers, and Managing Relationships
Chapter 2
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Please Note:
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3. Opening Vignette Tidewater Exterminating
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4. Customer Database Defined
A customer database is a list of customer names to which the marketer has added additional information in a systematic fashion.
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5. A Customer Database is…
The heart of all direct and interactive marketing activities.
The key to developing strong customer relationships and retaining customers.
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6. Primary Objectives of a Customer Database
To get to know customers better
To sell different products or services to existing customers
To introduce new products or services
To distribute information about an upcoming event or sale
To introduce new employees
To keep customers satisfied and happy
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7. Highly satisfied customers
Tend to be more loyal customers
Generate more profits over their lifetime of patronage
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8. The Reasons Why Loyal Customers Generate More Profits
Increase their spending over time
Cost less to serve than new customers
Generate word-of-mouth advertising or referrals
Are less price sensitive than new customers
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9. An Example of How Loyalty Programs Are Driven by Customer Databases
McDonald Garden Center Garden Rewards Program
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10. Types of Source Data To Collect To Build A Customer Database
Customer’s Name
Address
Telephone Number
Address
Demographics
Psychographics
Past Purchases (Transaction Data)
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11. Database RFM Analysis: Recency/Frequency/Monetary
Evaluates customers with respect to their transactions over time
*20 points per each variable
*weights will vary
*See example in text
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12. Database Maintenance: Creating Match Codes
An abbreviated name/address record
Allows each record to be matched with other records
A match code is generated for each name on the list
Example Address Derived Match Code
Ann Stafford SAF9330ALI8A3
9330 West Arlington Rd
Alexandria, VA 22301
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13. Database Maintenance: Merge/Purge
A process using match codes to identify and delete duplicate names and addresses
Keeps house lists from being duplicated
Can remove names that requested no solicitations
Can identify “multibuyers”
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14. The Need for Database Maintenance
Lists are perishable
Constant control and maintenance is required
Includes identifying and eliminating any duplicate records
Three categories of database maintenance activities are needed
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15. 3 Categories of Database Maintenance Activities
1. Change of address investigations
2. Nixie removal
3. Record status updates
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Change of Address
Should be requested through the U.S. Postal Service (National Change of Address Service - NCOA)
Promotions that are mailed out to improper addresses may result in a financial lost
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Nixie Removal
Defined – mail that has been returned by the
Postal Service because it is undeliverable as
addressed
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Record Status Updates
Transaction data
Marital status
Deaths
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Database Security
Information Privacy
Proper Database Storage
List Marking – “salting” or “seeding”
Direct Marketers must safeguard their customer database and discourage theft.
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20. Common Uses of a Customer Database
Profile Customers
Retain Best Customers
Thank Customers For Their Patronage
Capitalize on Cross-Selling/Continuity Selling
Develop A Customer Communication Program
Perform Marketing Research
Generate New Customers
Send Customized Offers
…and MORE!!
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21. Example of a Customized Offer
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22. Performing Database Analytics
Data Mining
Defined: The process of using statistical and mathematical techniques to extract customer information from the customer database to draw inferences about an individual customer’s needs and predict future behavior.
Online Analytical Processing (OLAP)
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23. What’s the Secret to Database Analytics?
For Marketers to…
Be able to identify their “most” and “least” valuable customers;
Clarify demographic and behavioral statistics that apply to each population.
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Database Enhancement
Defined – Refers to adding and overlaying information to customer records to better understand and describe the customer
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25. Reasons To Enhance a Database
1. Learn more about the customer
2. Increase the effectiveness of future promotional activities targeted to current customers
3. To better prospect for new customers who are similar to current customers
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26. Common Data Collected for Data Enhancement
External
Geographic Address
Telephone Number
Gender of Head of Household
Length of Residence
Number of Adults at Residence
Number of Children at Residence
Income
Occupation
Marital Status
Make of Automobiles Owned
Internal
Age
Gender
Income
Marital Status
Family Composition
Street Address
Address
Length of Residence
Size of Household
Type of Housing
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27. Customer Relationship Management
Defined: A business strategy designed to identify and maximize customer value.
To identify “touch points” between the business (company) and its customers and prospective customers.
To target customer needs to maximize the customer’s experience and overall customer satisfaction.
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28. Full-Circle Marketing (Kurt Ruf)
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Customer Value
Customers should be viewed as an investment
Without customers there is no business
If a marketing effort results in the acquisition of new customers who will generate value over time the action is desirable
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30. Customer Value Hierarchy
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31. Lifetime Value of A Customer (LTV)
Calculated as the discounted stream of net revenues that a customer will generate over the period of his or her lifetime of patronage with a company.
The information needed to calculate LTV is derived from transactions recorded in a customer database.
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32. One-on-One Personalization
Micro-targeting – is one-on-one personalized marketing based on advanced, precise psychographic and lifestyle data.
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33. Partner Relationship Marketing (PRM)
Defined: Where companies work closel with partners in other companies or departments to generate greater value to customers.
Marketers cultivate relationships with prospective partners just as they do with prospective customers.
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Case Study
Smithfield Foods
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