1 Chapter- 3

2 The Impact of Database Customer centric approach - A highly personal approach Marketing databases are essential to the marketing process. We focus in this chapter on marketing data base support marketing business process Marketing databases are important to organizations that can no longer personally know their customers.

3 Databases provide customer information necessary to support decisions in Marketing Program. There is no standard or right procedure for developing a marketing database. Databases can be created using off-the- shelf solutions. but they must be configured and integrated into the system of users. e.g.: Client Server networks, PC’s etc.,

4 What is a Database? A Database is a list. A card catalog could be considered a simple database sorted in Alphabetical order Alphabetical order Index by last name and Index by last name and Randomly accessed Randomly accessed There are two kinds of databases Flat File:is stored in one sequential order,each customer record must kept in the same format number, last name Flat File:is stored in one sequential order,each customer record must kept in the same format number, last name A flat file is useful for storing promotion activities for later analysis A flat file is useful for storing promotion activities for later analysis Relational: when the files put into linked tables (tables put into rows,and columns, like spread sheet) and placed within larger database structure. Relational: when the files put into linked tables (tables put into rows,and columns, like spread sheet) and placed within larger database structure.

5 Sources of Information Many kinds of data are stored on a Marketing database. For companies selling direct, the most useful information is For companies selling direct, the most useful information is 1. Historical Purchase Data 2. The First date and Subsequent dates of activity 3. The Dollar amounts of each purchase 4. The Products Purchased (Regency, Frequency, Monetary and Type) Data about customers and their transactions must be kept up-to-date

Database Marketing and Customer Relationships The first sale to a newly acquired customer is but a forerunner of additional sales to that customer in the future Additional sales are key to the customer relationship marketing process

7 When customers perpetuate (sustain) such relationships, they expect in return to receive 1. Quality 2. Value and 3. Service Organizations,in turn, seek customer loyalty in the hope of cementing the relationship so that customers keep coming back. The power of the Marketing Database makes all of this, and more,possible.

8 As noted by David Ogilvy, as few as 10 percent of an organization's customers contribute 90 percent of its profits. A second group of core customers, with average profitability, make up the largest group of customers. A second group of core customers, with average profitability, make up the largest group of customers. A Final group of marginal buyers, often infrequent or high maintenance customers, usually provide little or no profit.

9 9 Profits M H M L L H 90% 10% Profits

10 Customer Relationships and Lifetime Value(LTV) Direct marketers truly appreciate LTV when they engage in both continuity selling and cross – selling, and when they develop a database of customers. The LTV approach, too, is ideally suited to determining the market value of an enterprise in case an acquisition or a sale is contemplated. determining the market value of an enterprise in case an acquisition or a sale is contemplated. Since such an asset valuation of a database reflects anticipated future performance, it can be a better gauge of value than the commonly used multiples of sales or profits.

11 Accessing Data Through Data Warehouses and Data Marts The Legacy Systems are often added at different times, created on different hardware platforms and run software optimized for the purpose of the system. Legacy System contain information that maybe important for marketing.This information is not easily accessible. Information from multiple systems simply multiplies the problem. Solution to this problem is the Data Warehouse – A storage facility that takes data from a number of transaction systems and brings it together into essential repository.

12 The job of the Data Warehouse is to create a set of standardized fields for all of the different data elements in the various Legacy Systems. Data Warehouses can make it easier to query and report data from multiple transaction processing systems and external data sources. A Data Warehouse is not easy or flexible to use for heavy data processing or modeling.

13 A Better solution is to extract information from the Data Warehouse and put into a Data Mart. A Data Mart is a data based system designed for a smaller number of users with more specialized data uses. There is a great demand for specialist who are trained in Database design Database design Execution Execution Analysis and Analysis and Who can work with marketing departments Who can work with marketing departments

14 Data Mining is a process for discovering patterns and trends in large database sets to find useful decision making information. There are a number of Data Mining tools and techniques. Four of the most common tools are a) Cluster Analysis b) Daisy (Data Analysis Interactively Graphical Analysis) c) Market Basket Analysis and d) Neural Networks

15 Global Databases Building a global database involves a host of considerations: Large name fields Large name fields Additional character sets Additional character sets Address coding variations Address coding variations International mail codes International mail codes Privacy laws that vary from country to country Privacy laws that vary from country to country