Customer Relationship Management

A Databased Approach

V. Kumar

Werner J. Reinartz

Instructor’s Presentation Slides

Chapter Seven

Using Databases

Topics Discussed

• Types of databases

• The Benefits of Marketing Databases

• The Uses of Marketing Databases

Types of Databases

Categorization:

• Based on their main business functions

– Databases managing business operations

– Databases supporting decision-making activities

Alternate categorization:

• According to the information included in the databases

• Based on the nature of the underlying marketing activities

• Based on the database technology used

Categorization Based on Information in the Databases

Types of databases:

• Customer database

• Prospect database

• Cluster database

• Enhancement database

Customer Database

• Data from active and inactive customers

• Basic information: name, address, zip code, and telephone number

• Demographic information: age, gender, marital status, education, number of people in household, income

• Psychographic information: values, activities, interests, preference

• Transaction history: frequency of purchase, amount of spending

• Other relevant information: inquiries and referrals, satisfaction, loyalty

Customer Database (contd.)

• Data from inactive customers:

– How long have the customers been inactive?

– How long have they been active?

– What was their purchasing pattern when they were active?

– How much did they spend?

– How were they initially acquired?

– Why are they inactive?

Examples for Customer Database

• D&B’s U.S Marketing File: Customer database comprising of

telemarketing, direct mail, competitor analysis and other types of data

pertaining to 18.5 million small, privately owned and large publicly owned

businesses

• InfoBaseR eProducts –from Acxiom provides the user companies with the

email addresses of their customers

– email marketing - most inexpensive profit-generating marketing tool

-- to augment companies’ direct mail or other channels

of communication with customers

Customer Database – CRM at Work:Email marketing at Blockbuster

• Email marketing :

– Targeted Personalized offers

– Reduced direct mail costs and therefore increased Net Marketing Contribution

– Additional customer touch point

– Larger number of customers visiting the company’s website

• Case: Email Marketing company Quris helped Blockbuster create its email newsletter

– Newsletter marketed Blockbuster’s new movies (on DVD/VHS) and games to its customers via email which also included a bar-coded coupon for customers to print and redeem

– Results: The total ROI for the program was 96% higher than the ROI for direct mail; for customers receiving electronic coupons, it was 144% higher

Prospect Database

• Non-customers that have profiles that are similar to the profiles of existing customers

• Segments prospects and positions the company’s differentiated products to the prospects’ specific needs

• Examples of some Prospect databases used in the industry:

– The InfoBaseR list: Offers a collection of US consumer data available in one

source for list rentals covering 111 million households and 176 million

individuals

– Harris Selectory Online: A prospect database from D&B which helps companies

find new customers allowing companies to:

• Qualify leads that they are developing

• Contact the decision-maker best suited to hear their sales pitch

• Research potential opportunities

Cluster Database

• Clusters defined based on geographic reference groups,

affinity groups, and lifestyle reference groups

• Depending on the membership of prospective customers to specific clusters, firms can customize their marketing communications

• Example: The Prizm database

– Segments every U.S neighborhood into 62 distinct areas

– Every Prizm database is categorized into groups with every group having clusters

• S1 (Elite Suburbs) –5 clusters with the nation’s most affluent social people

• U1 (Urban uptown) –clusters include a good number of executives and

professionals

• C1 (City Society) – 3 clusters making the upper crust of America’s ‘second’ and

‘satellite’ cities

• T1 (Landed Gentry) –clusters comprise of multi-income families having school

age kids and are headed by well-educated executives and professionals

CRM at Work: Globe and Mail - Example of cluster database

• Globe and Mail, Canadian national newspaper

– Created a marketing database of prospective subscribers

– Enhanced existing customer’s data with Canadian cluster codes and

demographic data, provided by Compusearch

– Using cluster data, targeted customers in the prospect database: sent

offers to prospective customers whose demographics matched that of

current customers

– Used a predictive dialing method that doubled their prospective customer contacts per hour

Enhancement Database

• Used to transfer additional information on customers and prospects

• An overlaying process is used that eliminates duplications

• Enhancements may include demographic and psychographic data, transaction

history, changes in address, changes in income levels, privacy status, new

product categories bought recently

• Example: InfoBaseR Enhanced – InfoBaseR provides a large collection of U.S customer information like telephone &

address data, mailing lists including hotline files, e-mail data

– The InfoBaseR Enhanced provides the ability to append the latest demographics,

socio-economic and lifestyle data to your existing in-house customer database

– A consumer goods company can use this data to better target their advertising and

marketing campaigns, expand brand reach, improve acquisition and retention rates,

increase profitability

Customer list

Categorization Based on The Nature of Underlying Marketing Activities

• Passive marketing database

– A mailing list that passively stores information about acquired customers

– Future marketing efforts target the same customers in the list

Campaign 1 Database Campaign 2

Customer list

Database Based on Nature of Underlying Marketing Activity (contd.)

• Active marketing database

Example: Travelers’ case

Retention program – Five ‘touches’ – Systematic and low-cost interactions

Result - increased retention rate; decreased defection by 5%

Database Strategic Marketing Plan

Marketing Programs

ExecutionData updates Results

Categorization Based on Database Technology

• Hierarchical database

• Inverted database

• Relational database

• All information pertaining to a customer will be in a master record

• Useful when the queries are standard and routine but high speed processing is required

• Preferred in the banking, airline and hotel industries

Hierarchical Database

Inverted Database

• Suited for direct marketing applications

• Has speed and flexibility to respond to unanticipated questions

• Easy to add new elements to an inverted database as and when updated information is acquired

• Has the greatest flexibility, but slower speed

• Examples are Databases like Oracle, SQL Server, and Microsoft Access

• Users can create queries to extract information from these tables and recombine it

Relational Database

Benefits of Marketing Databases

• The ability to carry out profitable segmentation

• Ability to retain customers and repeat business

• The ability to spot potentially profitable customers

Uses of Marketing Databases

Uses of Marketing Databases

Uses that directly influence other business operations

Uses that directly influence customer relationship

Uses of Marketing Databases

Uses that directly influence customer relationship:

• Identify and profile the best customers

• Develop new customers

• Deliver customized messages that are consistent with product/service usage

• Send follow-up messages to customers for post-purchase reinforcement

• Cross-sell products/services

• Ensure cost-effective communication with customers

• Improve promotion result by efficient targeting

• Personalize customer service

• Stealth communication with customers

Uses of Marketing Databases (contd.)

Uses that directly influence other business operations:

• Evaluate and refine existing marketing practices

• Maintain brand equity

• Increase effectiveness of distribution channels

• Conduct product and market research

• Integrate the marketing program

• Create a new valuable management resource

Summary

• Effective Database analysis is important for successful CRM

• Data from active and inactive customers are important to ensure efficient marketing function

• Marketing databases allow marketers to analyze customers and classify them into different groups to implement different marketing programs effectively

• Databases also enable marketers to determine critical factors influencing customer satisfaction and take measures to retain existing customers at lowest cost