Customer Relationship Management A Databased Approach

V. Kumar Werner J. Reinartz Instructors Presentation Slides

Chapter Seven

Using Databases

Topics Discussed
Types of databases The Benefits of Marketing Databases The Uses of Marketing Databases

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?

Prospect Database

Non-customers that have profiles that are similar to the profiles of existing customers Segments prospects and positions the companys 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 nations 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 Americas 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

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

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

Customer list

Customer list

Campaign 1

Database

Campaign 2

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

Active marketing database

Database

Strategic Marketing Plan

Marketing Programs

Data updates

Results

Execution

Example: Travelers case Retention program Five touches Systematic and low-cost interactions Result - increased retention rate; decreased defection by 5%

Categorization Based on Database Technology

Hierarchical database

Inverted database

Relational database

Hierarchical 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

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

Relational Database
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

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 customer relationship

Uses that directly influence other business operations

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