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Database and Direct Response Marketing Personal Selling. Chapter 11. Chapter Overview. Database marketing Data mining & coding Database-driven marketing Customer relationship management Personal Selling. Goal: Customer Loyalty. Recognition Relationship Rewards.

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Presentation Transcript
chapter overview
Chapter Overview
  • Database marketing
  • Data mining & coding
  • Database-driven marketing
  • Customer relationship management
  • Personal Selling
goal customer loyalty
Goal: Customer Loyalty
  • Recognition
  • Relationship
  • Rewards

3 Rs of creating customer loyalty and preference

database marketing
Database Marketing

Building a data warehouse

Database coding and analysis

Data mining

Data-driven marketing programs



Establish one-to-one communications

  • “Mass Customization”
  • Enable Relationships
  • Repeat Business, Loyalty
  • Differentiate from Competition
  • Brand Parity Brand Equity

The “Why” of a Data Warehouse

building the data warehouse
Building the Data Warehouse

2 Types:

  • Operational database
    • Customer transactions
    • Follows accounting rules
  • Marketing database
    • Current customer information
    • Former customer information
    • Prospect information
the marketing data warehouse
The Marketing Data Warehouse
  • Customer names and addresses
      • Easiest part to obtain
      • 20% of Americans move each year
  • E-mail addresses & record of visits
  • to the firm’s Web site
      • Necessary identifiers
  • Identification yields customer history of transactions, interactions
the marketing data warehouse1
The Marketing Data Warehouse
  • Surveys identify customer preferences
  • Response history from marketing campaigns
  • Personal preference profile
  • Database coding through customer analyses
    • Customer information companies
    • Geocoding
purchase and communication histories
Purchase and CommunicationHistories
  • Detailed customer histories
  • Every interaction with the company
  • Determine future communications
  • Assist marketing team in evaluating
      • Customer’s lifetime value
      • Other customer metrics
database coding and analysis
Database Coding and Analysis
  • Personalized communications
  • Marketing campaigns
  • Lifetime value analysis
  • RFM analysis
data mining
Build profiles of customer groups.

Prepare models for predicting future behaviors.

Develop marketing communications

Develop marketing programs


Qualify prospects

Make personal sales calls

Data Mining
lifetime value analysis
Lifetime Value Analysis
  • Individual lifetime value
  • Customer segment lifetime value
  • Key figures
    • Revenue and costs
    • Retention rate
    • Visits or purchases per time period



RFM Analysis

Used to predict future customer behaviors

Codes range from 555 to 111



RFM Analysis

  • Recency
    • Divide database into 5 equal parts based on date of last purchase
    • Code 1 to 5 with 5 the last 20% to purchase
  • Frequency
    • Divide into 5 equal parts.
    • Code 1 to 5 with 5 the most frequent
  • Monetary
    • Divide into 5 equal parts
    • Code 1 to 5 with 5 the highest expenditures
Code of 235

2indicates has not made a recent purchase

3indicates has made an average number of purchases

5indicates 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



RFM Analysis

1 2 3 4 5




Increasing Lifetime Value

database driven customer identification
Database-Driven Customer Identification
  • Assign customer ID codes
  • Customer profile information
  • In-bound telemarketing
  • Trawling
    • Relocations, anniversaries, etc.
data driven marketing programs
Data-DrivenMarketing Programs
  • Permission marketing
  • Frequency/loyalty programs
  • Customer relationship management
permission marketing
Permission Marketing
  • Backlash to spam, junk mail
  • Consumers give permission
  • Can be offered through
    • Internet
    • Telephone
    • Mail
  • Higher response rates
permission marketing1
Permission Marketing


  • Obtain permission
  • Offer a curriculum over time.
  • Reinforce incentives to continue the relationship
  • Increase level of permission.
  • Leverage the permission to benefit both parties

Reasons Consumers Opt into an E-mail Permission Program

Sweepstakes/Chance to Win

Found Site Randomly

E-mail Req’d For Access

Already a Customer

Friend Recommended

Source: Based on Joseph Gatt, “Most Consumers Have Reached Permission E-mail Threshold,” Direct Marketing (December 2003).



Reasons Customers Remain Loyal to a Permissions Relationship

Interesting Content

Account Status Updates

Sweepstakes/Chance to Win

Price Bargains


Source: Based on Joseph Gatt, “Most Consumers Have Reached Permission E-mail Threshold,” Direct Marketing (December 2003),


frequency programs
Frequency Programs
  • Reward loyalty
  • Tie-in with Permission Marketing
  • Airlines and grocery stores
  • 2/3 of consumers belong
  • Average household in 14 programs
  • Actively participate in 6 programs
frequency programs1
Frequency Programs


  • Maintain sales, margins, or profits.
  • Induce cross-selling to existing customers.
  • Differentiate a parity brand.
  • Preempt/match a competitor’s program or brand.
customer relationship management crm
Customer Relationship Management (CRM)
  • Database technology
    • Customize products
    • Customize communications
  • Many CRM programs failed
  • Built on two primary metrics
    • Lifetime value
    • Share of customer
developing a crm program
Developing a CRM Program

Identify customers

Differentiate customers

Lifetime value

Share of customer

Interact with customers

Improve cost efficiencies

Enhance effectiveness

Customize goods and services

reasons crm programs fail
Reasons CRM Programs Fail

Roll out before organization design matches the CRM program

Tech-driven instead of customer-driven

Customers feel like they are being stalked instead of wooed

direct marketing methods
Direct Marketing Methods

Direct mail



Direct Response Mass Media

Alternative media


direct mail
Direct Mail
  • Most common form of direct marketing
  • Types of lists
    • Response list
    • Compiled list
  • Advantages
    • Targeted (consumer, b-to-b)
    • Measurable
  • Disadvantages
    • Clutter (just too much of it!)
    • Costs
  • Long life
  • Low-pressure sales tactics
  • First stage in buying cycle
  • Apply Database
  • Specialty/Targeted
    • “Catazines”
  • Business-to-business
direct response media
Direct Response Media
  • Television
    • “But wait. . . .
  • Radio
  • Magazines
  • Newspapers
  • Direct response to ads
  • Cost-effective
  • Builds relationships
  • Personalization of communication
  • Customization of offer
  • Search engine ads
alternative media
Alternative Media
  • Package insert programs (PIPs)
  • Ride-a-longs
  • Statement stuffers
  • Card packs
  • Inbound telemarketing
  • Outbound telemarketing
    • Cold calling
    • Database
    • Prospects
personal selling
Personal Selling
  • Face-to-face opportunity
  • Build relationships
  • Relationship selling
  • Create customer for life

Steps in the Selling Process

  • Generating leads
  • Qualifying prospect
  • Knowledge acquisition
  • Sales presentation
  • Handling objections
  • Sales closing
  • Follow-up

Know Your Customers

  • Understand the prospect’s business.
  • Know and understand the prospect’s customers.
  • Identify the prospect’s needs.
  • Evaluate risk factors and costs in switching vendors.
  • Identify the decision makers and influencers.