Overview of Database Marketing

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 - 1:1 marketing Primary premise: retaining a customer is easier than acquiring a new one Goal is Customer Share not Market share.

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

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

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

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

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

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

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

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?

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

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?

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

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

How do customers benefit? Enables customers to - register their preferences - form perceptions about company’s brands (both old and new) - leverage more value for what they pay

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

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 member’s previous selections, demographic and lifestyle information Reduces attrition, improves sales Develops loyalty

Some representative strategies: Foster New Services Help make it easy for customers to buy more, and more often Use unique customer ID’s to avoid redundant questions whenever customer places and order Use customer purchase history to make offers about related products

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

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