Database and Direct Response Marketing Personal Selling

1. Database andDirect Response MarketingPersonal Selling Chapter 11

2. Chapter Overview • Database marketing • Data mining & coding • Database-driven marketing • Customer relationship management • Personal Selling

3. Goal: Customer Loyalty • Recognition • Relationship • Rewards 3 Rs of creating customer loyalty and preference

4. Database Marketing Building a data warehouse Database coding and analysis Data mining Data-driven marketing programs Tasks:

5. 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

6. Building the Data Warehouse 2 Types: • Operational database • Customer transactions • Follows accounting rules • Marketing database • Current customer information • Former customer information • Prospect information

7. 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

8. 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

9. 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

10. Database Coding and Analysis • Personalized communications • Marketing campaigns • Lifetime value analysis • RFM analysis

11. Build profiles of customer groups. Prepare models for predicting future behaviors. Develop marketing communications Develop marketing programs Salespeople Qualify prospects Make personal sales calls Data Mining

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

13. Recency Frequency Monetary RFM Analysis Used to predict future customer behaviors Codes range from 555 to 111 11-13

14. 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

15. 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 11-15

16. RFM Analysis 1 2 3 4 5 Recency Frequency Monetary Increasing Lifetime Value

17. Database-Driven Customer Identification • Assign customer ID codes • Customer profile information • In-bound telemarketing • Trawling • Relocations, anniversaries, etc.

18. Data-DrivenMarketing Programs • Permission marketing • Frequency/loyalty programs • Customer relationship management

19. Permission Marketing • Backlash to spam, junk mail • Consumers give permission • Can be offered through • Internet • Telephone • Mail • Higher response rates

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

21. 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). 11-21

22. Reasons Customers Remain Loyal to a Permissions Relationship Interesting Content Account Status Updates Sweepstakes/Chance to Win Price Bargains Entertaining Source: Based on Joseph Gatt, “Most Consumers Have Reached Permission E-mail Threshold,” Direct Marketing (December 2003), 11-22

23. 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

24. Frequency Programs Objectives: • Maintain sales, margins, or profits. • Induce cross-selling to existing customers. • Differentiate a parity brand. • Preempt/match a competitor’s program or brand.

25. Customer Relationship Management (CRM) • Database technology • Customize products • Customize communications • Many CRM programs failed • Built on two primary metrics • Lifetime value • Share of customer

26. 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

27. 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

28. Direct Marketing Methods Direct mail E-mail Catalogs Direct Response Mass Media Alternative media Telemarketing

29. 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

30. Catalogs • Long life • Low-pressure sales tactics • First stage in buying cycle • Apply Database • Specialty/Targeted • “Catazines” • Business-to-business

31. Direct Response Media • Television • “But wait. . . . • Radio • Magazines • Newspapers

32. Internet • Direct response to ads • Cost-effective • Builds relationships • Personalization of communication • Customization of offer • Search engine ads

33. Alternative Media • Package insert programs (PIPs) • Ride-a-longs • Statement stuffers • Card packs

34. Telemarketing • Inbound telemarketing • Outbound telemarketing • Cold calling • Database • Prospects

35. Personal Selling • Face-to-face opportunity • Build relationships • Relationship selling • Create customer for life

36. Steps in the Selling Process • Generating leads • Qualifying prospect • Knowledge acquisition • Sales presentation • Handling objections • Sales closing • Follow-up

37. 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.