Database Marketing Course

Professor Raj Sethuraman

Discussion Topics for First Session What is Database Marketing? Why Database Marketing? Basics of Database Marketing (DBM) Applications of DBM Syllabus

What is Database Marketing? Compare and Contrast Traditional Data Analysis Data Mining Database Marketing

Similarities and Differences

Criteria Data analysis objectives Apriori Theory Size of typical database Analytical tools Traditional Data Analysis* Data Mining* Database Marketing may or may not be clearly stated may exist typically large advanced

generally clearly not clearly stated stated often exists small-moderate relatively less advanced (traditional) usually not there large advanced (newer) high

CRM orientation not necessary

generally high but not necessary

*as viewed by marketers

Some Definitions of Database Marketing

AMA definition: An approach by which computer database technologies are harnessed to design, create, and manage customer data lists containing information about each customer's characteristics and history of interactions with the company. The lists are used as needed for locating, selecting, targeting, servicing, and establishing relationships with customers in order to enhance the long-term value of these customers to the company. Another definition Database marketing is a systematic approach to the gathering, consolidation, and processing of consumer data (both for customers and potential customers) that is maintained in a company's databases. Although databases have been used for customer data in traditional marketing for a long time, the database marketing approach is differentiated by the fact that much more consumer data is maintained, and that the data is processed and used in new and more sophisticated ways.

Some Definitions of Database Marketing

Third definition: Database marketing is a way of organizing a companys customer and prospect data so that it can be used more effectively in a direct marketing effort. It is a way of organizing the whole marketing process. Database marketing allows you to choose what to market to whom and when based on the sum total of your knowledge and experience with a customer or prospect. Fourth definition Database marketing is the technique of gathering all the information available about your customer, leads, and prospects into a central database and using that information to drive all your marketing efforts. The information is stored in a marketing database and can be used at both the strategic and tactical levels to drive targeted marketing efforts.

Why Database Marketing?

Informational Reasons Availability of abundance data Permission to collect them Technological Reasons Technology to collect and warehouse data Technology and computing power available to analyze them Availability of commercial software, some of which are even user friendly (e.g. XL miner, SAS enterprise miner) Commercial Reason Interest in generating intelligence to remain competitive main market share Drive to be efficient

How

Database Marketing (DBM) and Customer Relationship Management (CRM)

In order to form a learning relationship with its customers, an enterprise (firm) must be able to:
1.

Notice what its customers are doing

2.

Remember what it and its customers have done

over time Learn from what it has remembered Act On what it has learned to make customers more profitable

3. 4.

How

Based on Transaction Data

How

Customer Relationship Management (CRM)

A More Inclusive Definition of Database Marketing Database marketing is a systematic approach to the gathering, consolidation, and processing of marketing databases to learn more about customers and competitors, select target markets, compare customers' value to the company, provide more specialized offerings, as well as make other marketing and strategic decisions.

Database Marketing System

Memory
Data Other Data

Intelligence

Output

Customer Data

Data
Warehousing

Database

Data Analytic Tools/Software

Marketing Decisions

Transaction Data

Customer Activity Database

Data
Demographics Direct marketing

Techniques

Output/Application

Subscription Data
Activity Data

Frequency, Cross-Tab Correlation Logistic regression Decision Tree Survival/Churn Analysis

Prospecting

Exit Data

Customer retention

Promotions Data

Customer loyalty

Customer Activity Database - 2

Data
Demographics Segmentation

Techniques

Output/Application

Subscription Data
Activity Data

Frequency, Cross-Tab Correlation Algorithms for minimizing distance traveled / maximizing sales potential

Store Location

Location data

Store Promotion

Distance Data

Geodemographic Database
Data
Zip codes

Techniques

Clusters

Output/Application
Segmentation

Demographics

Cluster Analysis

Distinct
Clusters used for
Advertising/Promotion Targeting

Purchase

Reading habits

Vacationing

Supermarket Database
Data Techniques Output/Application

Demographics

Stocking/Inventory control

Logistic regression
Aggregate Purchase Data

Simultaneous system Cluster analysis

Advertising

Panel Purchase Data

Market basket analysis

Shelf placement

Querying
Pricing/coupons

Retail Environment

Database Marketing Industry (CRM only)

(Based on Forrester Report)

Total DBM spending estimated at $2.5 Billion Expected growth rate, next three years: 10%25% Major players and market share: Acxiom (about 30%), Harte-Hanks (10%), Experian and Epsilon (over 5%), Merkle (under 5%), All others (40%)

Objectives of the DBM Course

To enable students to Appreciate and understand the scope of database marketing Learn some common data mining techniques Implement some of those techniques using commercially available software such as SAS Interpret the output from the analysis Apply those techniques to some real-world marketing situations and facilitate marketing decisions.