32792977-Summary-Strategic-Database-Marketing-Arthur-M-Hughes.pdf

8/13/2019 32792977-Summary-Strategic-Database-Marketing-Arthur-M-Hughes.pdf

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Summary

Strategic Database MarketingThe Masterplan for Starting and Managing aProfitable, Customer-Based Marketing Program

Arthur M. Hughes

ohn !i"it # Multis$ope

%ohn&multis$ope.nlMay '()(
mailto:[email protected]:[email protected]


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PA*T

)

+atabase MarketingAnd the eb


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ntrodu$tion

hat $ustomers ant $an be summari/ed in a fe general $on$epts0- *e$ognition- Ser"i$e

- Con"enien$e- Helpfulness- nformation- *e$ognition

There are to types of $ustomers0- Transa$tion buyers 1pri$e oriented2- *elationship buyers 1looking for a reliable supplier2

34ou $an not make money from transa$tion buyers, the money is in therelationship buyers5.

Basi$ information in the relational $ustomer database0- 6ame and address- 7-mail 8 Cookies that keep tra$k of their ebsite "isits- Complete pur$hase history- Customer ser"i$e $alls, $omplaints, returns, in9uiries- :utgoing marketing promotions and responses- *esults of $ustomer sur"eys- Household 1or business2 demographi$s

There are really to different kinds of databases0- Operational databases:*un by T 8 a$$ounting. ;sed to pro$ess

transa$tions and get out the monthly statements- Marketing databases:gets it data from the operational database,

but in$ludes more data.o Preferen$es and profiles

o Promotion and response history from marketing $ampaignso +ata from e


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What about CRM?3 C*M enthusiasts assumed that the C*M softare used ould build$ustomer loyalty and profits. n most bases that as a mistaken "ie.hat builds $ustomer loyalty and profits are $reati"e marketing strategies

using $ustomi/ed $ommuni$ations based on a database. Sophisti$atedsoftare is used, of $ourse, but the marketer, not the softare, does thethinking and de"elops the strategy5.

The fo$us of database marketing is the de"elopment and testing of "ariousmarketing strategies. The fo$us of C*M is automation of $ustomerrelationships.


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status level


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4our first step, as soon as you ha"e built a database, is to determine thelifetime "alue of your $ustomers. 4ou ill learn0

- The retention rate- The referral rate

- The spending rate- Ho $osts go don ith loyal $ustomers- Ho to $reate $ustomer segments- Ho the lifetime "alue "aries by segment- Ho to identify gold $ustomers and de"elop strategies to keep them

loyal- Ho to identify orthless $ustomers ho are losing your $ompany

money- Ho to modify $ustomer beha"ior ith re$ognition, relationships and

reards- Ho to determine the *: for your efforts

The 24 essential techniquesThe folloing is a list of ' essential te$hni9ues used in databasemarketing. After reading this book you ill be familiar ith and able to useall of these te$hni9ues0

). =T 1Customer lifetime "alue2'. *>M 1*e$en$y, >re9uen$y, Monetary Analysis2D. Customer $ommuni$ations. Appended data

E. Predi$ti"e modelsF. *elational databasesG. Caller +. eb sitesI. 7-mail)(. Tests and $ontrols)). =oyalty programs)'. Business ntelligen$e Softare)D. eb A$$ess). *ented =ists)E. Campaign management softare

)F. Address Corre$tion Ser"i$es)G. Profitability Analysis). Customer segmentation)I. Status le"els'(. Multi$hannel marketing'). Treating $ustomers differently''. 6e


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'. 3The ision Thing5

hat is database marketing, and ho does database marketing orkHo does it relate to the nternet This $hapter is aimed at anseringthese 9uestionsJ

- The Industrial Revolution:>or the first time in the history ofmankind, mass produ$tion, making e


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t is ell knon in retailing that 3buy one, get one free! out-pulls 50percent off!


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)riceand qualit$ha"e been the staples of marketing for years. Today,there is a ne dimension entering into $onsumer de$ision-making that isof e9ual importan$e. t is ti"e. People ha"e less and less time a"ailablefor shopping 1or for anything2.

hat e marketers are selling today, therefore, is more than the produ$t.t is the produ$t, plus the deli"ery method. The $on"enien$e and ser"i$e ispart of hat e are selling.

The real de$ision-making pro$ess re9uired for a pur$hase from the$ustomer@s point of "ie, looks something like this0

Custo"er &roit a (utility of product)N b (value of brand)# $ (moneycost)# d (time)

The numbers a, b, $, and d are eights hi$h "ary ith ea$h $ustomer.

3n the )IG(@s, a$ross the Te


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PA*T

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MarketingStrategy +e"elopment


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D. =ifetime alue # The Criterion of Strategy

3The only ay to gro a business is to get $ustomers to $ome ba$k formore and tell their friends5 # 7nterprise *ent-A-Car@s C7: Andy Taylor

(ieti"e valueis the net present "alue 16P2 of the profit that you illreali/e on the a"erage ne $ustomer during a gi"en number of years.

!"ample of a lifetime value table: Figure (-1 on page .

*le"ents o (ieti"e +alue:- /etention rate:is the single most important number in a lifetime

"alue table. t is a measure of $ustomer loyalty. *etention rate Year x Customers revious Year customers. 4ear < Customersrepresent those pre"ious years $ustomers ho are still buying in thelater year.

- 0isits per year- Spending per visit- 0ariable costs:the $ost of the produ$ts 8 ser"i$es pro"ided, plus

the "ariable administrati"e $osts su$h as $ustomer ser"i$e, debt$olle$tion, deli"eries, returns, $redits et$.

- c$uisition costs:add up all the money you spend on yourad"ertising and marketing efforts during the year 1eormula for dis$ount rate

+ 1) N 1"< #$22nhere %is the dis$ount rate, "the interest rate,#$the risk fa$tor and &the number of years you ha"e to ait. f youant to in$lude payment delays in the dis$ount rate, there is aformula for on page FG.

- Net present value profits:e9uals gross profits O dis$ount rate.- 3umulative N*0 profits:add together the 6P of all the profits in

the present year and ea$h pre"ious year.

The lifetime "alue is simply the Cumulati"e 6P profit in ea$h year,di"ided by the original group of $ustomers0 (T+ C;M 6P O a$9uired$ustomers.

3f you are selling softare the $ustomers are likely to tie up you $ustomerser"i$e lines during the first F( days until they learn ho your softare

orks. >or the ne


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A $ustomer relationship building strategy $an affe$t fi"e 1and only fi"e2basi$ things0

). *etention rate'. *eferralsD. n$reased sales

. *edu$ed dire$t $ostsE. *edu$ed marketing $osts

hat determines the retention rate

>a$tors that marketers $annot $ontrol0- The strength of the $ompetitor@s marketing strategy- The saturation of the market for their produ$t- Ma$roe$onomi$ e"ents

>a$tors that marketers $an $ontrol0- The type of $ustomer that you a$9uire in the first pla$e- The pri$e $harged for the produ$t- The efforts made to build a relationship ith the $ustomers- The ay you treat your $ustomers

3*esear$h shos that referred people are more loyal, ha"e a higherretention and spending rate than the a"erage ne a$9uisition5. n yourdatabase you put the + number of the referred person in the referrer@sre$ord, and "i$e "ersa. *esear$h shos that those ho refer other$ustomers are also better $ustomers. They are ad"o$ates. They spend

more and are more loyal.

hen a business is sold, goodill is often hat the buyers pay the mostfor. oodill is nothing other than the "alue of the $ustomer base that the$ompany has built up o"er the years, and $urrently is holding on to.

Compute lifetime "alue for ea$h of se"eral years, use the period of timethat makes the most sense to you based on your parti$ular produ$tsituation.

To determine the =T of a single $ustomer, you in$lude her in a "alid

segment or group? determine the =T of the group, and then attribute toher the =T of the group members.


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hat $an you do to in$rease your profits by in$reasing $ustomer lifetime"alue

). *etain e


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. +esigning a Su$$essful Customer Strategy

+i"iding $ustomers into =T segments0). 2old customers:your best $ustomers, (Q of re"enue. Spend

ser"i$e dollars here. n most $ases, do not market to your old

$ustomers. Pro"ide spe$ial ser"i$es for them.'. Move up:your best hope for ne $ustomers. Spend marketing

dollars here.(. Marketing opportunity 45

. Marketing opportunity 465E. 7osers:)Q of total re"enue. *ea$ti"ate or ar$hi"e

See figure -1 on page 81 for details.

Sometimes Rlosers@ ha"e temporary reasons hy they are not profitable0- They may a$tually be doing a lot of business ith $ompetitors- They may be small, but fast groing businesses- They are buying the rong produ$ts from you- They are true losers, transa$tion buyers ho only buy hen you are

on sale. i"e them your $ompetitor@s numberJ

Strategy de"elopment steps0). ,rou&your $ustomers into profitability, demographi$ or beha"ioral

segments'. +etermine the (T+ o each seg"entD. +etermine hether you $an "odi$ their behaviorto make them

more profitable. )ut $oursel in the shoesof the members of the segmentsE. Develo& a listof possible ser"i$es, benefits, reards, premiums or

relationshipsF. Put those $hanged beha"iors and their $osts into a lieti"e value

tableG. Run little teststo make sure you are right.

hat is rong ith dis$ounts as an indu$ement for ne $ustomers0- t brings in the rong kind of $ustomers 1transa$tion based2- t sends the rong message 1pri$e based, not "alue based

- t $osts a lot of money


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Some basi$s of a relational database0). -ields are the smallest stru$ture 1the atom2 of a database 1e.g. last

name2.'. Tablesare groups of fields. A table alays represents a single

spe$ifi$ sub%e$t that $an be an ob%e$t 1e.g. $ustomers2 or an e"ent

1e.g. orders2.D. .e$s are spe$ial fields used to uni9uely identify a re$ord ithin a

table. 7"ery table $ontains a primary key field and may ha"e one ormore foreign key fields 1primary fields from other tables2.

. Records are the stru$tures in a table that represent uni9ueinstan$es of the sub%e$t of the table.

E. Relationshi&s are $onne$tions established beteen pairs of tables.F. 'usiness rules are $entral to marketing use of a relational

database. They are built into a relational database stru$ture.Business rules $an di$tate not only the $orre$tness of data, but they$an also permit marketers to $reate e"ent dri"en $ommuni$ations.

G. ! vie# is really a "irtual table. t usually $ontains data from manytables arranged like a report or a s$reen shot. S$reen "ies areoften $alled dashboards.


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E. Building Profits ith *e$en$y, >re9uen$y, Monetary Analysis

3+ire$t marketers ha"e been using *e$en$y, >re9uen$y and Monetary1*>M2 analysis to predi$t $ustomer beha"ior for more than E( years. t isone of the most poerful te$hni9ues a"ailable to a database marketer5.

There are to types of fa$ts that you $an learn about $ustomers0 ho theyare 1demographi$s2 and hat they do 1beha"ior2. A$$urate beha"iorpredi$tions are important for making profitable marketing de$isions. Thebest predi$tor of future beha"ior is past beha"ior. *>M is pure beha"ior.

Recenc$:to $ode your $ustomer base for re$en$y, you need to store one"ital pie$e of information in e"ery $ustomer@s database re$ord0 the mostre$ent pur$hase data. Then you di"ide the databse into fi"e eM is *>M instead of >*M or >M*. 4ou putthe most predi$ti"e first.

The )@s on a fre9uen$y graph respond better than you ould suppose,be$ause they $ontain of a lot of re$ent 1ne2 buyers. A $ustomer ho %ust%oined you yesterday is your most re$ent buyer. f you loest 9uintile onfre9uen$y is not higher than the trend, then you probably ha"e donesomething rong.

Monetar$:same methods as abo"e, but no di"ide the same people bytheir monetary spending. +i"ide by the total amount spent on ourprodu$ts or ser"i$es in total, by month, year or in some other ay.

Monetary $oding is far less predi$ti"e of beha"ior than either re$en$y orfre9uen$y.


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The million-dollar $ustomer ould be less likely to Ropen the en"elope@be$ause he is on e"erybody@s list. But the thousand-dollar $ustomer hoopens up ill ha"e to think it o"er to spend 1or get permission2. Themonetary graph is a $ombination of to opposite human emotions0

illingness to open the en"elope and ability to pay.

)utting it all together:hen the $oding pro$ess is finished, e"ery $ustomer should ha"e in his orher database re$ords three single digits. :ne for re$en$y, one forfre9uen$y and one for monetary. 7"ery $ustomer is a EEE, EE, EED, don to ))). There are )'E *>M Cell Codes in all. hen you dopromotions to your $ustomers, therefore, you keep tra$k of the *>M $ell$ode that ea$h is o$$upying.

Selecting a /th:Sele$t a test group using an &th. An &th is a test group that is an eor einally, ea$h of these 'E groupsis sorted again by monetary, ith )'E *>M $ells resulting.

There is softare that $an help that is $alled *>M for indos. 4ou $andonload it for free from .dbmarketing.$om

n $onsumable produ$ts, re$ent buyers not only ha"e higher responserates, but also tend to buy more per order and higher pri$ed options.

R-M or '2'
http://www.dbmarketing.com/http://www.dbmarketing.com/


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There are some limits for B'B files in using *>M- 23 cells are too "an$ or a s"all ile:the solution is to bring

don the $ells 1e.g. E re$en$y < ' fre9uen$y < ' monetary '($ells2

- R-M does not beat a sales visit: use *>M for the $ustomers that

are not being $alled on by the sales for$e


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When not to use R-M?- f you use it all the time, some $ustomers ill ne"er hear of you- f you use it all the time, more responsi"e $ustomers may suffer from

Rfile fatigue@- >igure something out for the less responsi"e $ustomers. Birthday

and holiday $ards are useful, thank you $ards are alays in season.

When should $ou use R-M?- ntrodu$tion of ne produ$ts- +uring budget season

-! about R-M:

1. ;o< big do /FM test cells +ave to be to be accurate=Minimum *>M Test Cell Si/e O B7

'. >+y use $uintiles for /FM cells= >+y not deciles=:nly for "ery large files, but test get "ery e+y do rollouts not do as


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F. Communi$ating ith $ustomers

People $all it database marketing, but the $entral idea is $ustomer$ommuni$ations. To pro"e that $ommuni$ations ork,you absolutelymust 'ave a control group.

hy is the eb important- t@s $heaper- t@s 'OG- t ne"er puts $ustomers on hold- 4ou kno ho read your message- t enables $ustomers to find out information themsel"es- t $an build a bound ith $ustomers- t $an e


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G. Customer *etention and =oyalty

3The first step in loyalty-based business system is finding and a$9uiringthe right $ustomers. think loyalty is something like a su$$essful

marriage5.

=oyal $ustomers0). Ha"e higher retention rates'. Ha"e higher spending ratesD. Ha"e higher referral rates. Ha"e a higher lifetime "alueE. Be less e


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=oyalty-based $ompanies should remember three rules of thumb0% So"e custo"ers are inherentl$ &redictable and lo$al, no

matter hat $ompany they are doing business ith. The simplyprefer stable, long-term relationships.

2% So"e custo"ers are "ore &roitable than others%They spend

more money, pay their bills more promptly, and re9uire less ser"i$e.6% So"e custo"ers #ill ind $our &roducts and services "ore

valuablethan those of the $ompetition. 6o $ompany $an be allthings to all people. 4our parti$ular strengths ill simply fit betterith $ertain $ustomer@s needs and opportunities.

Satisfa$tion s$ores may be orthless as a means of measuring $ustomerloyalty. n the automobile industry, Ameri$an $ars typi$ally ha"esatisfa$tion s$ores in the I( per$ent, but the repur$hase rates ho"eraround DE per$ent. *epur$hase is the best indi$ator of loyalty.

etting $ustomers to be loyal0- We can treat lo$al custo"ers better%

o Spe$ial $ustomer ser"i$e lines, ebsites or phone

numberso Create ad"isory panels made up of the best $ustomerso Ha"e spe$ial member only nightso Ha"e spe$ial seminars or reportso Host an annual retreat at a resort for the C7:@s of the best

$ustomers- We can re#ard lo$alt$ith points or benefits

- We can var$ our custo"er acquisition "ethodsto attra$t good$ustomers and a"oid the bad ones.

nter"ieing the defe$tors0Probably the most important name on your $ustomer database are thoseof the people ho ha"e re$ently deserted your. These people are "aluable.They pro"ide important $lues as to hat you are doing right and rong.4ou should set up an ongoing program to inter"ie them to determinehy they left.


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. Customer Segmentation

3Today e ha"e thousands or e"en millions of $ustomers. To mange theme $annot $reate a million different marketing programs. e $reate a fesegments, and $reate a marketing program for ea$h segment5.

Segment strategy $on$epts0). Segment definition'. Segment strategy de"elopmentD. Segment analysis 8 $ampaign infrastru$ture plan. mplementation a$tion plan

An ideal segment is one hi$h0- Has definable $hara$teristi$s- s large enough- Has members ho $an be moti"ated- Makes effi$ient use of a"ailable data- Can be measured in performan$e 1ith $ontrol groups2- ustifies an organi/ation de"oted to it 1someone in the $ompany ho

ons the segment2

+efining the segments re9uires0- Insight:de"elop hypotheses about ea$h possible segment- !nal$tics:statisti$al analysis hi$h supports or re%e$ts ea$h

hypothesis- !necdotes:su$$ess or failure stories, they offer a $lue hat does O

does not ork

Strategy0- Co""unicationsto the segment- Re#ardsdesigned to modify the beha"ior- Controls to measure the su$$ess of the strategy- A budgetfor implementation of the strategy- S&eciic goalsand metri$s for the engagement- !n organi7ationthat a$$epts responsibility for the segment

A$tion plan0

- *oadmap- Budget- Standard appli$ation of the segmentation- *esponsibilities for the segment- Spe$ifi$ goals ith milestones

3+e"elopment of segments begins ith the dreaming up op segmenthypothesis # think that a segment e


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you start mapping the $ontent, the offers, the $hannel and the $onta$tstrategy ith that segment.

The strategy for ea$h segment should in"ol"e0- Targeted $ommuni$ations to the segment

- ;sing the $hannel that ords best for ea$h $ustomer

f your program is not orking, it may be be$ause your are not offering the$orre$t reards.2reat e"ample at t+e end of page 1?? & beginning of page 1?8.hat this means is that your segments should refle$t the lifestyle andattitudes of the people you are dealing ith, at their parti$ular life stage.

Status le"els and segments0Segments are different from status le"els. 4ou $an look at a segment as amarketer, trying to build loyalty and repeat sales, 4ou $an look at a statusle"el as a $ustomer trying to earn re$ognition, in$reased status and perks.

ood 9uestions to ask hen doing segmentation0- ho are my best $ustomers- hat per$entage of sales do they generate- Ho big is their budget and my Rshare of allet@- hat are their $hara$teristi$s- hen and hat do they buy in our $ategory- ho buys full pri$es "ersus on dis$ount only

- hen and hat do they buy from the $ompetition

>i"e steps to $reate a segment0- +etermine the beha"ior that dri"es ea$h segment- dentify naturally o$$urring $lusters of $ustomers ea$h ith a uni9ue

buying pattern- 7nhan$e these $lusters ith lifestyle data and demographi$s- Condu$t an in-depth sur"ey of ea$h $luster for $ompetiti"e

information and attitudes- 7merge ith an multi-dimensional pi$ture of ea$h segment

Appending data to your segments0- Claritas1.$laritas.$om2 ith its P*M 67 system has

de"eloped $onsumer segments $ontaining FF $lusters organi/ed into) groups sin$e )IG. Ser"i$e bureaus like !noledgeBaseMarketing, 7


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o Presen$eo *elationshipo Transa$tion

The higher the $onsumers s$ored on ea$h of these three fa$tors, themore in"ol"ed they ere online. The system segmented $onsumers

into )G $lusters using three age groups a$ross three ma%or e-in"ol"ement le"els. See figure -I on page )GE for more detailsJJJ

uadrant anal$sis:one of the most poerful 1and simple2 te$hni9ues oflooking at $ustomers is 9uadrant analysis. Pi$k to des$ribing fa$tors onthe a


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I. Ho Predi$ti"e Modeling Boost *esponse

ith a good predi$ti"e model you $an determine0- hi$h $ustomers and prospe$ts are likely to buy, and hi$h are

unlikely to buy

- hi$h $ustomers are in danger of lea"ing you, and hi$h are morelikely to stay

- hi$h produ$ts they are more likely to buy

The ideas behind database marketing predi$ti"e models rest on somesimple prin$iples0

- Prospe$ts and $ustomers in many segments rea$t in predi$tableays.

- Clues to e


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independent "ariables are the beha"ior and appended data listedabo"e. hen the model is run, it applies eights or le"els ofimportan$e to ea$h of the independent "ariables. A "ariableimportan$e is a number that indi$ates ho important 1eighty2 isea$h "ariable in predi$ting the desired result 1they bought the

produ$t2.For an e"ample of t+e outcome see Figure C-( on page 19.

G. Deter"ine the #eights or each variableCon$entrate on using in the model those independent "ariables thatha"e a high eight in determining the out$ome. Build your modelbased on the fi"e or si< "ariables that pro"ide the greatestpredi$ti"e poer.

9% Develo& an algorith"n the $ase of a statisti$al model in marketing, the algorithm usuallyin$ludes the $omputer $ode that $reates a s$ore for ea$h $ustomeror prospe$t re$ord. The s$ores may "ary from IE per$ent $ertain tobuy the produ$t don to E per$ent.

% Score the validation grou&%f the algorithm de"eloped for the test group is going to be useful inpredi$ting, it should $orre$tly identify most of the people in the"alidation group ho bought 1ith a high s$ore2 and those ho didnot buy 1ith a lo s$ore2. f the algorithm does $orre$tly s$ore the"alidation group, then you ha"e a su$$essful model, hi$h $an beused to predi$t $ustomer response in your ne


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3The poer of prior beha"ior is one reason hy it is important in building amarketing database that you keep n your database as mu$h of the$ustomer transa$tion and promotion history as possible5.

3Banks ha"e a lot of data about their $ustomers. They $an use their

database to e


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)(. Customer a$9uisition

3hat is the best ay to a$9uire $ustomers That is a tri$k 9uestion,be$ause there is no best ay. Ho do you kno $hi$k is best 4ou trye"erything, and see hat orks best5.

1o# direct "ail acquisition #orks4ou begin ith a list. There are more than (,((( different lists of$onsumers and businesses a"ailable for rent for dire$t mail a$9uisition 1inthe ;S2. 4ou $an e


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- Alays identify yourself $learly in the address line- Pro"ide a physi$al address, a ;*= and a phone number- 7


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)). Strategy erifi$ation0 Testing and $ontrol groups

3The holy grail of dire$t marketing is the single-"ariable test. 4ou antonly one thing to $hange in ea$h test. f you@re going to test pri$e, thenyou test to pa$kages that are the same in all respe$ts eM $ells and there ill be positi"e effe$ts longafter the promotion ill be o"er. ood testing programs ill follo the testand $ontrol groups for the folloing )' months to determine the residualeffe$ts of the test. n some $ases the residual effe$ts $an be e"e moreimportant than the initial response to the promotion. =ifetime "alue, ratherthan the immediate short-term payoff, should be the real goal ofmarketing database strategy.

Control grou& si7eHo big should a test or a $ontrol file be 7a$h group must be big enoughso that you $an anti$ipate a minimum of E(( responses from the

promoted group. f you anti$ipate a to per$ent response rate, then yourtest group must ha"e at least 'E,((( people in it.

;sing hal lie in testsf you sent out a promotion, it may take many eeks before all theresponses ha"e $ome in. That is hy half-life analysis is useful. 4ou shouldre$ord e"ery day ho many responses ha"e $ome in that day., both thenumber of responses, the 9uantity sold and the amount of moneyre$ei"ed. =et us say that you get ',((( orders from a promotion in total. fyou re$ord your sales daily, you ill find that there is one day on hi$h the

),(((th

order is re$ei"ed. Hat is your half-life day. >ree softare a"ailablefrom the +atabase Marketing nstitute 1*>M for indos2 enables you to


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do half-life analysis 1.dbmarketing.$om2

)'. nternet Marketing

3To use the nternet to generate leads for agents, you data strategiesmust fo$us on 9ualifying the leads generated, so that agents $an handlethe in$reased "olumes. f you $an impro"e the $on"ersion rates ithdemographi$s, it@s orth any amount of money5.

:n the hole, the aggregate eb sales numbers are still small. So hy isthe eb important as a marketing $hannel0

- ffluent people:eb shopping people ha"e higher in$omes- *urc+asing researc+:many eb users do their pur$hasing

resear$h before they go out and buy- /evie


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ith the $ompany et$.7a$h hit during traling has a programmed marketing response. These areautomated $ommuni$ations.

Nice case study about tra


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Ho to respond to $ommuni$ations :n$e you are set up to sendautomated $ommuni$ations, you also ha"e to be prepared to respond tothem. There are to things that you $an, and should do to prepare for$ustomer response0

- ;se a "icro site

- Install an e0"ail res&onse s$ste":you $an get help from$ompanies like .e-mailtopia.$om

This $hapter as not "ery interesting. t shos the author has a little bitla$k in knoledge about modern nternet marketing.
http://www.e-mailtopia.com/http://www.e-mailtopia.com/


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PA*T

D

Profitingby 7


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)D. *etailing and Pa$kaged oods

Ho to a$ti"ate $ustomers for retailers0- Create intera$ti"e ebsites

- *egister $ustomer@s $redit $ards- =earn more through sur"eys and append data- Targeted solo mailing offers- >ollo up ith personal ser"i$e- !eep tra$k of important data 1birthday, anni"ersary2- ;nderstand the geo-demographi$ of the store trading area better- Profile $ustomers into profit groups- 7M2- Migration analysis 1by *>M $ells2- Tra$king $ustomers- 7arly arning system 1performan$e by media2- Payment method analysis- Half-life analysis

3e are no longer trying to take $ustomers aay from our ma%or$ompetitors. :ur fo$us is to make money ho are already shopping at us5.

3e are $on$entrating on our top customers, not our top merc+andise.

t is more profitable that ay5.

*eason for failure0- Aimidity:top management is not $ommitted- *uny re


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- 4ou $an build a ebsite- 4ou $an set up a $lub 16intendo $ase2

Affinity groups !imberly Clark $ase 1pregnant mothers2

3f you feel that am arning you to go sloly and $arefully before you

rush into database marketing for pa$kaged goods, you ha"e gotten themessage5.


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). Building *etention and =oyalty in Business Customers

3There are many produ$ts and ser"i$es here database marketing haslimited "alue. n business-to-business marketing, hoe"er, relationshipbuilding a$ti"ities al


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e. Company poli$yf. Pre"ious e


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)E. >inan$ial Ser"i$es

>inan$ial ser"i$es offer one of the most profitable appli$ations fordatabase marketing. This is so be$ause finan$ial institutions0

- Ha"e a lot of useful information about their $ustomers

- Can a$$urately determine the profitability of ea$h $ustomer- Are usually important to their $ustomers@ li"es- Ha"e many opportunities to intera$t ith their $ustomers during the

a"erage month

To build a marketing database, most banks had to start by attempting to$onsolidate all their $ustomers@ a$$ounts into a single Marketing Customernformation >ile 1MC>2. To impro"e sales and retention, they ha"e tobe$ome a total finan$ial solution, looking at $ustomers and households,instead of indi"idual produ$t oners. Banks ha"e dis$o"ered that there isa $lear relationship beteen the number of bank produ$ts oned by a$ustomer and the $ustomer@s retention rate. See figure 1-1 on page(1.

Steps in $reating profitable relationships ith $ustomers0- +e"elop an a$$urate and $redible system fordeter"ining the

&roitabilit$of ea$h $ustomer on a periodi$ basis- +e"elop seg"entation sche"esthat di"ide $ustomers into useful

and a$tionable segments- Develo& and i"&le"ent tactics, hi$h are used to modify the

beha"ior of employees and $ustomers to in$rease sales, impro"e

retention, loer $osts and impro"e profits.

ital $on$epts for understanding profitability0- 3ost of funds0 the amount of interest e


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stream of net in$ome after the $ost of $apital, dis$ounted at the$orporate hurdle 1re9uired rate of return in a dis$ounted $ash floanalysis2

- )otential &roitabilit$:probability of pur$hase 1other produ$ts2 ail

Mistake : (ack o "arketing strateg$Somehere in your plan there must be a pra$ti$al program for using thenames, hi$h a$$omplishes a definiti"e ob%e$ti"e.

4ou ill need0- Some benefit that the $ustomer ill gain by being on the database- A $ontrol group that does not get spe$ial attention so you $an

measure- A a$hie"able numeri$ goal- A series of pra$ti$al steps, hi$h modify beha"ior of $ustomers- A segmentation system that separates profitable from unprofitable

$ustomers- A long-range 1three year2 plan ith a budget

4ou ill need both $onstru$ters and $reators. A constructoris someoneho is interested in building a database? a creatoris someone hofigures out ho to make money ith the database.

A simple re$ipe for database marketing strategy0). +e$ide hat you ant your $ustomers to do'. hen you ha"e defined your goal, 9uantify itD. +etermine ho you are going to modify the $ustomers $urrent

beha"ior. +etermine ho mu$h you are prepared to spend on a$hie"ing your

goal

Mistake 2: ocus on &rice instead o service3+atabases are built on relationships. :n$e you begin talking dis$ount, itsends the rong message. A dis$ount is hat e"eryone else offers.+is$ounts do not build loyalty5.

So hat is rong ith dis$ounts- A dis$ount erodes your margin- A dis$ount tells $ustomers that your produ$t is o"erpri$ed- A dis$ount makes people think about ho mu$h they are paying

instead of ho mu$h they are getting- Any $ompetitor $an mat$h your dis$ount

Solid relationships built through database marketing are immune todis$ounts. 4ou $ustomers prefer you be$ause you are an old friend hore$ogni/es them, ho pro"ides personal ser"i$es and deli"ers a ell-knon 9uality produ$t.

Mistake 6: getting the econo"ics #rong3=ife is too short to spend it $orresponding ith the makers of all the

produ$ts and ser"i$es that e use e"ery day. :n the other hand, if you sellautomobiles, rental $ars, insuran$e, poer tools, "a$ation $ruises,


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softare or $omputers, your $ustomer list $ould be turned into a "aluabledatabase5.

Big-ti$ket items, repeat sales items, $ross-brand possibilities0 these arethe lifeblood of marketing databases.

Tips for getting the e$onomi$s0- Test first- Compute the $osts- ork out lifetime "alue- !no your market

Mistake 4: ailure to link $our database to the #eb*ules for eb su$$ess0

- The eb should not be the only $hannel- Companies ith established business $an in$rease their business

ith eb $onta$ts and sales- Colle$ting e-mails ith permission to use them is one of the most

"aluable a$ti"ities- eb response is so mu$h less eeb againD

Mistake 3: building the database in0househy this is a mistake0

- >e $omputer systems are built for marketing- n-house MS staff seldom ha"e the spe$iali/ed softare and

e


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- roup $ustomers into segments- +e"elop strategies for ea$h segment- =ook at $ompensation system that permits you to $arry them out- Change your organi/ation and $ompensation system to assure that

you be$ome $ustomer $entri$


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Mistake =: ailure to use tests and controlst $ould be that business during a spe$ifi$ 9uarter is don e"eryhere.Those ho ere e


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)G. +atabase types that su$$eed

There are really to separate 1but related2 forms of database marketing0a. *elationship building ith $urrent $ustomersb. Marketing to prospe$ts sele$ted by de"eloping profiles of the most

profitable $ustomers

*5a"&les #here relationshi& "arketing #orks i done correctl$>igure )G-) on page D, ith eigure )G-' on page D, ith e


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). Choosing Business Partners

hat fun$tions $an you outsour$e- Strategy de"elopment- +esigning and building the database

- Customer ser"i$e and $ommuni$ations- Telesales- Building a ebsite- Maintaining a database and ebsite- >ulfillment

hy ould you outsour$e- !"perience:the mistakes they made in the past ill not be

repeated- !"pertise:some $ompanies ha"e a$hie"ed uni9ue knoledge of

parti$ular fields- Speed- !conomy- !ntrepreneurs+ip:for eP if there as not some

problem to be sol"ed- Solution:hat do you think the outsiders $an do to help i"e your

ideal anser- 2oal:a one-paragraph statement- Strategy:the big pi$ture and ho this pro%e$t fits into it- 3ustomers- Si%e of t+e


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*ules of the *>P0- +ue date- Uuestions 1here and ho to ask2- +igital submission 1alloed or not2- here to send

- 7P

- ullibility


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)I. +atabase Marketing and the nternal Struggle for Poer

3n our business, you ha"e to ha"e a $hampion at the top, or there ill beno database marketing program. This is the story of $orporate Ameri$a.4ou lose your $hampion, you lose your program5.

1Case0 :MC, manufa$turer of the ohnson 8 7"inrude outboard motors2

+atabase marketing $annot pro"e itself unless it re$ei"es0- 7nough funding o"er a three-year period- =aun$h of a group of relationship-building programs- The establishment of $ontrol groups- The measurement of =T $hange during the three years

To ays database marketers $an get the resour$es0- 7du$ating top management- +emonstrating results through su$$essful e: $an look at a balan$e sheet and an in$ome statement anddetermine a profitable dire$tion for $ompany a$ti"ity, so $an an alertmarketer look at the information stored in a $ustomer database, and learnof profitable marketing opportunities. Su$h knoledge in the hands of askillful marketer is market poer5.

Steps to knoledge0- Build a $ustomer marketing database ith $omplete pur$hase

history and demographi$s

- +e"elop an a$ti"e marketing program- Build a ebsite that in"ol"es the $ustomers- +etermine =T- ;se the database and the ebsite to analy/e marketing a$ti"ities- ;se the knoledge to obtain suffi$ient resour$es

Modern database marketing uses e"erything that e kno0 strategy,organi/ation, use of *>M, use of the eb and personali/ation to re$reatethe old family gro$er. f you $an $reate a $hart like this for your $ompany,you ill be a database hero and a su$$ess at our ork.

ood lu$kJ

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