Jhu Marketing Info Systems Powerpoint Revised Oct 29 2008

Where business is taught with humanity in mind.

JHU Marketing Information Systems

Instructor: Bruce GregoireDesktop Marketing SolutionsFalls Church [email protected]


Course Overview

• This course explores the intersection of modern marketing methods with the technologies that support them. It describes the world of Database Marketing, including the principles of marketing analytics, RFM (Recency, Frequency, and Monetary Value) analysis, customer lifetime value analysis, and data mining. It then goes on to show how these fundamental approaches are now strategically being employed, in various forms, to the interactive world of marketing. In many ways, however, the economics of these strategies in the e-world have changed dramatically, requiring re-thinking of their proper application.


Course Overview

• Finally, this course studies Customer Relationship Management (CRM), from three standpoints: strategic, operational, and analytical. This includes the supporting technologies that have allowed organizations to scale up relationship marketing, from the model of our great-grandfather’s corner grocery store to today’s global, integrated enterprise.


Session I: Direct Marketing

• Objectives: – Review of syllabus– Understand Direct Marketing fundamentals and approaches

(including direct mail). – Understand the Key Ideas of customer segmenting and profiling of

customers, for business and consumer markets.


Intro to Direct Marketing

• Definition of Direct Marketing: Bob Stone, Martin Baier, and Henry Hoke together once described direct marketing as... “an interactive system of marketing that uses one or more advertising media to effect a measurable response and/or transaction at any location, with this activity stored in a database.”

• Targeted, measurable, repeatable


Database Marketing Yesterday


Database Marketing Yesterday

• Expensive, large, slow, unwieldy mainframe programs

• $1 - $25 million software investment• 5 – 25 million records capacity• Turnaround in days• Mid 90’s-2002: evolution toward Customer

Relationship Management (CRM)


Database Marketing Today


Database Marketing Today

• Affordable, maintainable, flexible, scalable• Emphasis on “connections” and integration,

(multiple data sources, laptop synchronization), NOT “selections” of target audience


Database Marketing Tomorrow


Database Marketing Tomorrow

• Smaller, lightweight solutions• Surgical Targeting (One-to-One marketing)• Smart - Responsive to mid-course corrections

(e.g. customer buying patterns)• Emphasis on tools for “selections” of target

audience (e.g. RFM)


Intro to Direct Marketing

• For more definitions: All you need at http://www.knowthis.com

• Browse and bookmark this page!


Direct Mail

• Direct Mail characteristics– “Direct response”, not necessarily sales

(Permission marketing/Seth Godin)– Antithesis of Super Bowl ads– Consumer Direct Marketing driven by zip codes,

demographics, & buying patterns– Other DM characteristics (versus store sales)

include high margins, low shipping charges, low returns.


Direct Mail

• Direct Mail characteristics– B-B DM driven by SIC, firmagraphics , buying

patterns– Response Analysis

• a Numbers game – but watch out for averages (e.g need segments)

• Response analysis by list, source code most common


E-targeting

• e-Commerce, custom web pages facilitate “one-to-one” marketing (Lands End example)

• The economics of e-targeting are vastly different from the postal world.


Customer Relationships,retention rates

• Cost of Acquisition 3x-9x retention. Thus, you need Loyalty Programs!

• Sell new products/services to existing customers– Convenience stores, supermarkets

• Retention rates vary widely, by industry– Health Insurance – high retention– Telecom churn – low retention


Database Marketing

• Definition: Database Marketing is the fundamental approach for customer tracking, to drive loyalty programs.

• “Customer Tracking” includes, in descending priority:– Purchase history– Demographics (Firmagraphics for orgs)– Survey information.


Session I: Takeaways

• All about targeting: offer, message• Focus on Retention, Retention, Retention• Buying history trumps survey info and

demographics• Tracking w/Source code is key


Session II: Strategic DB Marketing

• Review of Session I• Counter examples from readings• Lifetime Value Analysis • Customer segmenting/profiling • RFM Analysis • Data-driven marketing communications• Lab – Begin Project #1: Analysis of RFM data


Counter Examples

• Disloyal customers” Hughes P 15:• “Freq. Flyer loyalty” P. 72: loyalty is not equal

to popularity (NWA)• “Recent buyers tend to place large orders,

have higher response rates, buy more per order” P. 106

• The Universal Caveat: “It Depends!”


Lifetime Value Analysis



• “The present value of the profit that you will realize on the average new customer during a given number of years” - A. Hughes

• More of an art than a science • Risk factor: variables change, e.g. changes in

product offerings, competition.



• Risk factor: variables change, e.g. changes in product offerings, competition.

• Life Cycle Example: Training classes, retention thru series of 7 classes

• Hughes P. 45 Lifetime Value table



• Direct marketing approaches (versus interactive) achieve higher Customer Lifetime Value – with a caveat!

• Higher LTV depends on 3 variables:- If Retention rate goes up, LTV goes up- If Variable costs goes down, LTV goes up- If Acquisition costs go down, LTV goes up



• Retention Rate: the single most important variable for marketers

• Think of Retention Rate as a measure of “Customer Loyalty”

• Once again, think “Repeat Customers”• Most important marketing function: “Win

back lapsed customers”



• Lifetime Value spreadsheet: substitute your own organization’s numbers

• Small Group discussion: How to provide addl. Products/services that will enhance customer loyalty in your organization.


Customer Segmenting/Profiling

• Segment by spending: Bronze, Silver, Gold – A. Hughes

• Profile by demographics/zip code: “Birds of a feather flock together”

• Demo: www.Claritas.com Click “Free Stuff” – then “You are where you live”

• You don’t need to sell something! (advance to the next stage)


RFM Analysis: Overview

• Used to find “Likely Responders”• All customers are not alike – score them!• RFM based on human behavior• The 80-20 rule: 80% of response comes from

20% of customers• Demo of Mail Order Manager (MOM)


Lab: RFM Analysis

• Begin Project #1: Analysis of RFM sample data


Session II Takeaways

• Lifetime Value Analysis is the single best measure of customer loyalty – and marketing effectiveness.

• All customers and prospects are not alike. Don’t treat them as such

• RFM helps to score your customers into segments


Session III: Strategic DB Marketing

• Review of Session II• Counter examples from readings• Apply RFM models to a set of data• Use marketing data to drive customer communications.• Understand the concept of relational databases• Lab – Continue Project #1: Analysis of RFM data


Session III

• Review of Session II– Lifetime Value Analysis: Used for? risk factors?– Customer segmenting/profiling: why?– RFM: Why R-F-M? Used for?


Session III. Counter Examples

• “A good model takes a week or two to run”, thus RFM is better


RFM Approaches

• Definition: RFM (Recency, Frequency and Monetary value) – a customer scoring system

• A study of Human Behavior: “What have you done for me lately?”

• All customers are not alike – score them• Used to find “Most Likely to Respond” (may

overlap “best customers”)


RFM Approaches

• Hard coding versus exact quintiles – ease of use/understanding versus accuracy– Recency– Frequency– Monetary Value


RFM Approaches

• Can be done as “Site RFM” or “Household RFM”. Individual transactions are aggregated at a business/household site location (e.g. Dell).

• Must be calculated as a snapshot in time, before a campaign


RFM Approaches

• RFM Approach #1 - Hard coding– Generally easier to implement– Easier to understand enterprise-wide– Mail Order Manager demo– RFM scores displayed, justify discounts to insure

continued loyalty


RFM Approaches

• RFM Approach #2: Exact Quintiles– Preferred by Arthur Hughes– Equal mail counts in each cell– Harder to understand, but...– Easier for statistical testing– WiseGuys demo


RFM Approaches

• RFM Approach #3: Raw values (not scores)– Most commonly used– Easiest to calculate– Think “Buckets” for scoring, as in “0-3 mos, 4-6

mos” etc.– Often results in uneven mail counts in certain

segments. The risk is results not statistically valid


Data Driven Marketing Communications

• Frequent Flyer programs• Multi-step programs (e.g. Sales Force leads) –

timing is everything• One-to-one Marketing: Peppers & Rogers


Relational Database Concepts

• Relationships– Parent-Child:

• One-to-one (e.g. Cust-to-state)• One-to-many (Cust-to-orders)

• Data Dictionary:– Field length (zip+4 = 10)– Field type (character)– Validation rules (nnnnn-nnnn)


Relational Database Benefits

• Access is relational. Excel is flat file. • Minimizes redundant data (e.g. name, addr.

changes) vs. flat file• Faster access time• Flexibility in data format• Facilitates “Integrated DB”: One source (thus,

one place to look for data – no “silos”)


Lab: RFM Project #1

• Continue Project #1: Analysis of RFM data• Continue Cloned customer analysis

– Make a list of the 5-2-2 customers (in Excel)– How do they differ from non 5-2-2 customers?

• Buying habits? Demographics/Firmagraphics? • Geography? Job Titles?

• Develop a strategy on how to “clone” them


Lab: RFM Project #1

• Continue customer segmenting analysis– Make a list of the 5-1-1 customers (in Excel)– Develop a strategy on how to elevate them from

“silver” to “Gold” status

• Deliverables: All of the above


Session III: Takeaways

• All customers and prospects are not alike. Don’t treat them as such

• RFM helps to score your customers into segments• Relational marketing databases have distinct

advantages over flat file approaches• Lots of marketing database resources are available

for further study


Session IVStrategic Database Marketing

• Guest Speaker• Essential components of a Marketing DB• Know where to find marketing database

resources • Evaluate three alternative approaches • Lab - Complete Project #1: Analysis of RFM

data


Session IVStrategic Database Marketing

• Understand the essential components that qualify a marketing database to be used properly.


Eight keys to an Authentic DB Marketing System

• 1. Matchback Response Reporting - by customer ID- by name/org, or Pass along within Org- Testing supported with “HoldBack”

• 2. Two Source codes supported.• 3. Marketing Analytics supported

– Attrition/Retention reporting– Customer LTV reporting



• 4. Ease of use - Uses point and click queries. Used by marketers &

execs, not techies. - Installs in days, not months/years

• 5. Proper relational structure- Do not use consumer application for B-B environment



• 6. Prospect import supported- Usually lacking in Acctg systems.

• 7. Ease of Integration- e.g. Web shopping cart for orders- Outlook for contacts

• 8. All basic marketing fields in place- Job title- No email flag


Marketing Database Resources

• Data Resources– List Brokers (B-B and consumer)

• Compiled lists (e.g. trade show attendees)• Response lists (e.g. buyers)

– B-B: InfoUSA, Dun & Bradstreet– Online sources (e.g. Zapdata.com)– Co-op databases (Abacus)



• Software Resources– Service Bureaus (outsourcing)

• Pros – lots of tech support avail.• Cons – may be more costly, slower to respond

– Varied Sources – Axciom to Merkle



• Software Resources continued– In-house Software Package

• Pros – customized to your specific needs, more control, more timely

• Cons – requires dedicated tech support

– Hybrid approaches (Salesforce.com, etc) should be considered.



– Guru: David Raab – publishes software reviews on DM Database packages http://customerexperiencematrix.blogspot.com/

– Guru: Rich Baan – publishes reviews on Sales & Mark. Systems www.sellmorenow.com

– Guru:Kevin Hillstrom – Data mining. www.MineThatData.com

– Guru: Liz Murphy – non-profit Interactive Marketing [email protected]



– Organizations: DMA, DMAW– Conferences: NCDM twice/year– Publications: DM News/Database Mark.,

MultiChannel Merchant magazine



• Blogging guru: Debbie Weil – [email protected]

• Marketing ROI: Steiner Marketing - www.steinermarketing.com/calc_roi.htm


Lab – RFM Analysis

• Complete Project #1: Analysis of RFM data


Session IV Takeaways

• Not all software applications truly qualify as a “Marketing Database”. Study the contenders from the pretenders.

• Lots of marketing database resources are available for further study


Session VInternet Marketing

• Evolution• Trends 2001-2005• Trends 2006+• Search Engine Marketing (SEM)• Search Engine Optimization (SEO)• Web-based communication tools• Small Group discussion: What are the pros and cons

of using e-communications in your organization?


Session VInternet Marketing

• Internet Marketing evolution– Began as “new kid on the block”

• Discussion of the dot com era• Eyeballs, first movers, no ROI

– Evolved by using principles of Direct Marketing• Review definition of Direct Marketing• Present an offer, track responses• Call to action/urgency• Targeting still evolving


Internet Marketing

• Strategic Drivers of the Internet Economy– Which are accelerating?– Which are decelerating?

• Speed Bumps of the Internet Economy– SPAM– Privacy issues– Trust


Internet Marketing: Trends 2001-2005

• Search engines wisely used as “problem solver”, not just “finder”– Case Study of PhD chemists

• More partnering of "clicks" with "bricks" organizations – eBags.com


Internet Marketing: Trends 2006+

• Web 2.0: Social Networking +– Linked-In– Facebook

• P&G: Branding in a “Let Go” world - consumers want to be more involved (self expression, YouTube)

• “Consumers own our brands”



• Perception: Company brand is not what the Company says it is – it’s what Google says it is.

• The Long Tail (80-20 rule): Amazon- "We sold more books today that didn't sell at all yesterday than we sold today of all the books that did sell yesterday”.– Translation: “what have you bought from me

lately?”


The Long Tail (80-20 rule)

source: Wikipedia



• “Neo-tribes”: aggregating folks by who they want to belong to (e.g. Harley riders), not who they are.

• Web: telling a story is increasingly more powerful than making a statement– Best Buy: reversal of fortune



• Next generation likes pictures more than words.

• Customer Reviews – drive traffic to your web site– Review need both pros and cons to stay credible


Internet Marketing: Surveys show...

• Men: respond if you show product comparisons (e.g. autos)

• Women: respond to building communities (e.g. MADD)

• Youth: respond if you make a game out of communication

• For B-B: Senior staff now routinely read their own email!


Internet Marketing:Multi-Channel complexity

• "Half the money I spend on advertising is wasted; the trouble is, I don't know which half" John Wannamaker, 20th Century Dept. Store magnate

• ROI on marketing dollars – very difficult– Response Reporting: which promotion gets credit

for the response?

• Direct mail and e-marketing work together– Yahoo, Google use DM to drive traffic


Internet Marketing: Communications

• Email: When building relationships, “Don’t over water your plant”.

• Value diminishes as popularity increases: “It’s so crowded no one goes there anymore”

– Y. Berra

• Demo of Constant Contact


Internet Marketing: Search Engines

• Search Engine Optimization (SEO)– Natural (or “organic”) search algorithms– All about outguessing the Google algorithm– Position originally determined by links to your site.

• Search Engine Marketing (SEM)– Pay per click advertising

• Google Adwords Example



• Search Engine Resources:– Online: www.SearchEngineWatch– Consultant: Alan Rimm-Kaufman:

www.RimmKaufman.com


Internet Marketing:Group Discussion

• Small Group discussion: What are the pros and cons of using e-communications in your organization? – Shelf life: will your message stay “top of mind”?– Timeliness: how quickly does your message

change?– ROI: how can you measure impact?– Clutter: are you breaking through?


Internet Marketing:Exec level Resources

• Internet Retail mag, conference, and online: [email protected]

• Multi Channel Merchant http://multichannelmerchant.com/


Session V Takeaways

• Trust is the biggest issue facing e-marketers• Multi-channel marketing with e-marketing:

– Greater potential for success– Greater challenges (especially ROI)

• Search engine optimization (SEO) can be critical to your success.

• e-communication can be timely, inexpensive, and targeted, with measurable response.


Session VIInternet Marketing

• Review of Session V• Discussion/presentation of e-communication

strategies• SEM continued: Google Adwords• Special topics: extra credit• Small Group exercise: Search engine

keywords. • Preview of mid-term exam


Internet Marketinge-communications

• Small Group discussion: What are the pros and cons of using e-communications in your organization?

• Find your business model (Roberts Chapter 3)– What e-communication works for your model?


Search Engine Marketing (SEM)

• Google adwords demo• Pay-per-Click (SEM) advantages

– Pay only for 5% click thrus, not 99% throw-aways– Fake it 'til you make it: no expensive storefront needed– Timing is everything: buyers search when they are ready

to buy (not when you are ready to sell to them).– Measurable response– The world is your oyster



• Pay per click strategies– Ad copy is important– Bid to find the “Sweet Spot” in positioning (usually

3rd)


Internet MarketingSpecial Topics

• Student Reports on…– Best Buy– HTTPs/Secure Site– Google Analytics– Google Android– Webinars


Internet MarketingSpecial Topics

• Future topics…– New business models enabled?– Green marketing: how to measure e-marketing

tradeoffs with postal?– Yahoo: will it survive? By changing how?– Ethics of differentiating offers:

• See “The Numerati”

– Other topics???


Search Engine Marketing

• Small Group exercise: What search engine keywords best represent your products/services?

• Use “Google keyword tool”. – Alias’– Slang (“junk mail”)


Session VI

• Preview of mid-term exam– Database structure

• Fields, Records, etc.

– Lifetime value• Variables

– RFM• Why do it?, methods,

– Source codes– Database marketing: in-house vs. outsourcing


Session VIIInteractive Marketing

• Mid Term Exam• Review of Exam• Special topics: extra credit

– Webinars– Google Android– Ethics of discounts– Others…



• Discussion of Final Project and Presentation -- ROI calculation

• Review of Interactive Marketing text• Mid term course evaluation



• Outline for Final Project Research Paper– Recommendations for Operational Improvements

• Acquisition strategies• Retention strategies

– ROI: very important (prefer 12 month payback)– Pre and Post Lifetime Value calculations– Schedule for implementation (prefer Q1 2009)– Resources required

• Budget, Tech staff requirement, etc.• Training required


Session VIII

• Guest Speaker


Session IXIntroduction to CRM

• Guest Speaker: Jeffrey Hellman• Special topics: extra credit

– Google Checkout– Green marketing– Catalog Choice

• CRM topics• CRM video – Martha Rogers



• Model is your grandfather’s corner grocery• Contrast with DB Marketing: Connections, not

Selections• Where does “Marketing” fit?



• CRM video: Differentiating your customers – Martha Rogers- One-to-One Marketing


CRMSession X

• Review of Session IX: Intro to CRM• Special topics: extra credit

– Green marketing– Catalog Choice

• Case studies: Market Basket Analysis• CRM video – Martha Rogers• Lab – Final project outline


CRMSession X

• Special topics: extra credit– Green marketing/Catalog Choice

• Case study: Market Basket Analysis– Amazon model: do it yourself data mining– Permutation and combinations: endless– Eyeball data mining: Beatles versus Led Zeppelin– Step 1: Correlation analysis– Step 2: One-to-One eMarketing


CRMSession X

• Market Basket Analysis (continued)– PURL site: “Personal URL”– Create web and print campaign. – Static versus dynamic recommendations. – http://www.suppliesguys.com/DianaLee-08840– Follow-up with Response Analysis: 30% response– One-to-One web marketing


CRMSession X

• CRM Video 2: Differentiating your Customers • Lab: Final Project outline

– Outline in syllabus– Don’t forget ROI– Expand on topics from other classes

• Customer Portfolio matrix p. 109• Activity-based costing (ABC) p. 93• SWOT analysis p.121

Education

Jhu Marketing Info Systems Powerpoint Revised Oct 29 2008