Capítulo 11 Clow y Baack

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall

11-1

11 Chapter Eleven

Database and

Direct Response Marketing

Copyright © 2010 Pearson Education, Inc. publishing as Prentice Hall 11-2

Levi Strauss • 1853, Bavarian immigrant

• Four principles • Empathy

• Originality

• Integrity

• Courage

• Primary brands • Levi’s, Dockers, Levi Strauss Signature

• Dominant brand brand erosion

• Database marketing program

• 100,000 consumers - questionnaire

• Five target groups – promotions offered

• Online shoppers – fashion messages

11


Database and


11 • Database marketing

• Building a data warehouse

• Database coding and analysis

• Data mining

• Database-driven marketing

• Communications

• Programs

• Customer relationship management

• Direct response marketing

Chapter Overview


Developing Loyal Customers

The 3 R’s

• Recognition

• Relationship

• Rewards


Database Marketing

Database

Analytics

Direct Response

Marketing

Database

Identifying customers Building relationships

Data-Driven

Communications

Data-Driven

Programs


Tasks in Database Marketing

F I G U R E 1 1 . 2

• Building a data warehouse

• Database coding and analysis

• Data mining

• Data-driven marketing

communications

• Data-driven marketing programs


Building the Data

Warehouse

• Operational database

• Customer transactions

• Follows accounting rules

• Marketing database

• Current customer information

• Former customer information

• Prospect information


Marketing Data Warehouse

• Customer names and addresses

• E-mail addresses

• Record of visits to the firm’s Web site

• History of every purchase transaction

• History of customer interactions

• Inquiries

• Complaints

• Returns


Marketing Data Warehouse (continued)

• Customer survey results

• Preferences and profiles supplied by the customer

• Response history from marketing campaigns

• Appended data

• Demographic and psychographic data

(Knowledge Base Marketing or Claritas)

• Geocoding

(CACI Coder Plus)

• Database coding through customer analyses

• Lifetime value

• Customer segment cluster

• RFM (recency, frequency, monetary) analysis


Trade Area Draw Analysis Sample CACI Report for a Proposed Store Site

25% 492 0.99 1,992 24.7%

50% 985 2.32 14,803 6.7%

75% 1,477 4.28 45,390 3.3%

90% 1,772 8.48 97,382 1.8%

99% 1,949 27.92 3,064,490 0.1%

Percentile # of Customers Distance # of Households Penetration Rate

Based on a customer profile presented to CACI, 50% of the firm’s target

customers live within 2.32 miles of the proposed retail site. Of the 14,803

customers who live within 2.32 miles, only 985 (or 6.7%) are currently

customers of this firm.


• Personalized communications

• Marketing campaigns

• Common forms of coding • Lifetime value analysis

• RFM analysis

Database Coding and Analysis


• Individual lifetime value

• Customer segment lifetime value

• Key figures • Revenue and costs

• Retention rate

• Visits or purchases per time period

Lifetime Value Analysis

Represents the profit revenue of a customer

throughout the lifetime of the relationship


Lifetime Value for Lilly Fashions

F I G U R E 1 1 . 3

Year 1 Year 2 Year 3

Customers 3,200 1,600 960

Retention rate 50% 60% 70%

Visits/Year 4 5 6

Sales/Visit $78.00 $94.00 $110.00

Total Revenue $998,400 $752,000 $633,600

Variable costs % 60% 60% 60%

Variable costs $ $599,040 $451,200 $380,160

Acquisition costs ($72) $230,400

Database costs ($3) $9,600 $4,800 $2,880

Total costs $839,040 $456,000 $383,040

Gross Profit $159,360 $296,000 $250,560

Cumulative Gross Profit $159,360 $455,360 $705,920

Lifetime Value/customer $49.80 $142.30 $220.60


• Recency

• Frequency

• Monetary

RFM Analysis

Used to predict future customer behaviors.


• Recency

• Divide database into 5 equal parts based on date of last

purchase.

• Code 5 to 1 with 5 the last 20% to purchase.

• Frequency

• Divide into 5 equal parts.

• Code 5 to 1 with 5 being the most frequent

• Monetary

• Divide into 5 equal parts

• Code 5 to 1 with 5 being the highest expenditures

• Codes range from 555 to 111.

RFM Analysis Procedure


• Code of 235

• 2 indicates has not made a recent purchase

• 3 indicates has made an average number of purchases

• 5 indicates the total monetary value of the purchases

were among the top 20% of the firm’s customers

• Recency has most impact on future purchases

• Frequency has second most impact

• Monetary has least impact

RFM Analysis Results


Data Mining

• Building profiles of customer groups

• Preparing models that predict future

purchase behavior

• Examples

• First Horizon – profiles best prospects

• American Eagle – price markdowns

• Goody’s – shopper baskets

• Staples – profiles of best customers


Executives from

Unica, a maker of

marketing automation

software, discuss the

importance and use of

data mining and

management.

Click picture to view video.


Data Mining and Data Coding

• Marketing communications

• Marketing programs Drives


Why the Internet is Important in Customer Communications

F I G U R E 1 1 . 4

• Low cost

• Available 24/7.

• Metric analysis

• If the message was read

• Time it was read

• How much time was spent

• Customers access to additional information

• Build a bond with customers.


Why build a data warehouse?

Why code data?

Why mine the data?


Database-Driven Communications

• Identification codes

• Customer IDs/passwords

• Personalized greetings

• After-sale communications

• Customer profile information

• In-bound telemarketing

• Trawling


Gold

Silver

Bronze

Mass Customers

Losers

Lif

eti

me V

alu

e

Segmenting Customers by Lifetime Value

F I G U R E 1 1 . 5


Database-Driven

Marketing Programs

• Permission marketing

• Frequency/loyalty programs

• Customer relationship

management


• Obtain permission

• Offer a curriculum over time

• Reinforce incentives to continue the relationship

• Increase level of permission

• Leverage the permission to benefit both parties

Source: Based on Seth Godin, “Permission Marketing: The Way to Make Advertising Work Again, Direct

Marketing, (May 1999), Vol. 62, No. 1, pp. 41-43.

Steps in Building a Permission Marketing Program

F I G U R E 1 1 . 6


Successful Permission Marketing

• Ensure recipients have granted permission

• Make e-mails relevant

• Customize program by tracking member activity

Empowerment

Reciprocity


Reasons Consumers Opt into an E-mail Permission Program

F I G U R E 1 1 . 7

24%

40%

38%

37%

41%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Friend recommended

Already customer

E-mail required to

access content

Found site randomly

Sweepstakes or

chance to win

Percent of Respondents

Source: Based on Joseph Gatt, “Most Consumers Have Reached Permission E-mail Threshold,” Direct

Marketing (December 2003), pp. 1-2.


Reasons Customers Remain Loyal to a Permissions Relationship

F I G U R E 1 1 . 8

27%

34%

34%

35%

36%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Entertaining

Price bargains

Contests and

sweepstakes

Account status updates

Interesting content

Percent of Respondents

Source: Based on Joseph Gatt, “Most Consumers Have Reached Permission E-mail Threshold,” Direct

Marketing (December 2003), pp. 1-2.


• Maintain sales, margins, or profits

• Increase loyalty of existing customers

• Induce cross-selling to existing customers

• Differentiate a parity brand

• Preempt the entry of a new brand

• Preempt or match a competitor’s program

Source: Grahame R. Dowling and Mark Uncles, “Do Customer Loyalty Programs Really Work?” Sloan

Management Review, (Summer 1997), Vol. 38, No. 4, pp. 71-82.

Frequency Program Objectives

F I G U R E 1 1 . 9


Goals of Frequency Programs

• Develop customer loyalty

• Matching or preempting the competition

• Target higher income households

• Incomes of $125,000 plus - 92% enrolled

• Incomes below $125,000 – 51% enrolled


Principles

Frequency Programs

• Design the program to enhance the value of the product.

• Calculate the full cost of the program.

• Design a program that maximizes the customer’s motivation

to make the next purchase.

• Average visits increased

• From 25 to 42 during promotion

• From 25 to 29 after promotion

• Card holders visits increased

• Incremental sales increased

•$17,100 during promotion

•$4,700 after promotion

Sent letter to 4,000 offering $5 discount on dinner.


Customer Relationship

Management

• Database technology

• Customize products

• Customize communications

• Many CRM programs failed

• Built on two primary metrics

• Lifetime value

• Share of customer


Customer Relationship Management Steps to Develop

• Identify the company’s customers

• Differentiate customers in terms of needs and value

• Lifetime value


• Interact with customers

• Improve cost efficiency

• Enhance effectiveness of interaction

• Customize goods or services


Share of a Customer

• Company A - $ 27,000

• Company B - $ 18,000

• Company C - $ 15,000

• Total expenditures -$60,000.


• Company A 45%

• Company B 30%

• Company C 25%


Customer Relationship Management Reasons for Failure

• Implemented before a solid customer strategy is created

• Rolling out a CRM program before changing the organization to

match the CRM program

• Becoming technology driven rather than customer driven

• Customers feel like they are being stalked instead of being wooed



• Direct Marketing Association

• Prospecting 60%

• Customer retention 40%

• Dell Computers

• Catalog

• TV and radio ads

• FSI ads

• Web site


Methods of Direct Marketing

F I G U R E 1 1 . 1 0

24%

16%

46%

55%

17%

22%

29%

8%

10%

21%

24%

16%

73%

77%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Outbound telemarketing

Inbound telemarketing

E-mail to prospects

E-mail to customers

Search engine optimization

Search engine marketing

Direct response-Internet

Direct response-TV

Direct response-radio

Direct response-promotions

Catalogs

Statement stuffers

Direct mail to prospects

Direct mail to customers

% of Companies Using Particular DM Methodology

Source: Based on Richard H. Levy, “Prospects Look Good,” Direct, Vol. 16 (December 1, 2004), pp. 1-5.


Direct Mail • Most common form of direct marketing

• Types of lists

• Response list

• Compiled list

• Advantages

• Target mailings (consumer, b-to-b)

• Measurable

• Driver of online sales

• Disadvantages

• Clutter

• Costs

• Digital direct-to-press


Catalogs

• Long-term impact

• Low-pressure sales tactics

• First stage in buying cycle

• Database

• Specialty catalogs

• Business-to-business


Direct Response Media

• Television

• Radio

• Magazines

• Newspapers


Internet • Direct response to ads

• Cost-effective

• Builds relationships

• Personalization of communication

• Customization of offer

• Search engine ads


Alternative Media

• Package insert programs (PIPs)

• Ride-a-longs

• Statement stuffers

• Card packs


Telemarketing

• Inbound telemarketing

• Cross-selling

• Outbound telemarketing

• Cold calling

• Database

• Prospects


International Implications

• Differences in technology

• Laws and regulations

• Local customs

• Infrastructure