1. Customer Relationship
Management
A Databased Approach
V. Kumar
Werner J. Reinartz
Instructor’s Presentation Slides
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2. Chapter Seven
Using Databases
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3. Topics Discussed
• Types of databases
• The Benefits of Marketing Databases
• The Uses of Marketing Databases
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4. 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
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5. Categorization Based on
Information in the Databases
Types of databases:
• Customer database
• Prospect database
• Cluster database
• Enhancement database
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6. 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
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7. 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?
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8. 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
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9. 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
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10. 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
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11. 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
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12. 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
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13. 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,
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14. 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
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15. Database Based on Nature of Underlying
Marketing Activity (contd.)
• Active marketing database
Database Strategic Marketing
Marketing Plan 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%
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16. Categorization Based on Database Technology
• Hierarchical database
• Inverted database
• Relational database
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17. 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
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18. 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
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19. 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
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20. 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
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21. Uses of Marketing Databases
Uses of Marketing Databases
Uses that directly influence Uses that directly influence
customer relationship other business operations
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22. 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
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23. 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
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24. 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
www.drvkumar.com Copyright Dr. V. Kumar,