Direct Marketing

Data and Information

Data are raw facts or observations typically about physical phenomenon or business
transactions.
More specifically data are objective measurements of the attributes (or characteristics) of
entities (such as people, places, things and events)
Example: A sale of automobile may generate a lot of data (like, the type of Vehicle, model,
price, date of purchase, buyer’s name / address, seller’s name / address etc).
The observed data is usually represented by symbols such as numbers, words, codes
(composed of a mixture of numerical and alphabetical and other characters). It could even
take other forms like voice, images, pictures, drawings, etc. If the observed / collected data
is converted into a useful and meaningful form, then it becomes Information. Data is usually
subjected to a value-added process called Data Processing OR Information Processing.
A DATABASE is an integral collection of logically related records or objects. It consolidates
records stored in various files into common pool of data records that provide data for several
users.
E.g.: The timetable for an entire school showing the details of classes, subjects, room,
teacher’s etc., a Personnel database consolidates data files like, Payroll files, Personnel
action files, employee skill files etc.

A Database Management System (DBMS) is a collection of interrelated data and a set of

programs to access those data. The collection of data usually referred to as the database,
containing information relevant to an enterprise. The primary goal of a DBMS is to provide a
way to store and retrieve database information that is both convenient and efficient.
Database systems are designed to manage large information with structure for storage of
information and mechanisms for the manipulation of information. Database systems must
ensure the safety of information stored.

Objectives of DBMS
DBMS as a system has been designed to serve the management of a business organization.
Its
objectives can be listed as follows.
1. Provide for mass storage of relevant data.
2. Make access to the data easier to the user.
3. Provide prompt response to the user’s request for data.
4. Allow for the modification of data in a consistent manner.
5. Eliminate or reduce the redundant data.
6. Allow multiple users to be active at a time.
7. Protect data from physical hardware failure and unauthorized access.

DATABASE SYSTEM APPLICATIONS

Databases are widely used in many applications, some applications are :
 Universities: For student information, course registrations, employee details and
grades.
 Banking: For account information, customer details, loans and banking transactions.
 Airlines/Trains/Buses: For reservations, scheduling information, etc.
 Telecommunication: For call details, generating the monthly bills, storing the network
information, and customer details etc..
 Sales: For customer, products and purchase details.
 Manufacturing: For management of supply chain, production of items in factories,
inventories and orders for items.
 Human resources: For employee’s details, salaries, Payroll taxes etc.
 Transactions: For generation of monthly statements.

Flat File
A flat file consists of only one file, with each entry in the form of a record containing all the
required data defined within it. You can imagine a flat file like a cabinet containing only one
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 Direct Marketing
folder which has many pages in it, each page containing all the information for that specific
entry. This type of arrangement makes it easy for the user to know where to find-requested
entries and all the data associated with them. As entire data is at one place, retrieval of data
is easy and fast. But the flat file suffers from the problem of data redundancy; this also leads
to wastage of storage space.
For example, assume there is an order processing application, where the data is maintained
in the form of a flat file, which includes customer name, customer address and customer
phone number. If this customer places orders for more than one item, then there could be
more than one entry depending on number of items ordered, in which case the information
about the customer may be repeated, which leads to redundancy as well as wastage of
storage space. In future if the customer address is to be changed, then we would need to
change in more than one place, this may lead to inconsistency of the data.

Disadvantages of File Oriented Approach

The file-oriented approach to information processing has for each application a separate
master file and its own set of other files. For example in COBOL we need to maintain
different files for inventory, purchase, sales, payroll, and financial accounting. If the data is
maintained like this sharing is not possible. One more major limitation of this approach is
programs and data becomes dependent. That is a program becomes dependent on the files
and the files become dependent upon the programs. File oriented approach to data
processing suffers from the following disadvantages:
Data redundancy and inconsistency: Same data is stored in many places, leading to
duplication of data. So data becomes redundant, and leads to wastage of storage space. This
redundancy may lead to data inconsistency, where various copies of the same data may no
longer agree.
Accessing data becomes difficult: Conventional file-processing environments do not allow
needed data to be retrieved in a convenient and efficient manner. More programs are to be
written to access data in various forms.
Data is isolated: Data are scattered in various files, and files may be in different formats,
new
application programs are to be written to access required data.
Integrity problems: It is difficult to enforce consistency constraints, when new constraints
are
added, by changing the application programs
Security problems: Difficult to enforce security constraints, in case of file-oriented
approach.
Unauthorized persons can easily access data stored in files.

Database systems versus file systems

The file processing system is supported by a conventional operating system. The system
stores
permanent records in various files, and it needs different application programs to extract
records from, and add records to, the appropriate files.
For example consider saving bank enterprise. It keeps information about all customers and
savings accounts. To allow users to manipulate the information, the system has a number of
application programs that manipulate the files, including
* A program to debit or credit an account
* A program to add a new account
* A program to find the balance of an account
* A program to generate monthly statements
System programmers wrote these application programs to meet the needs of the bank.
Now, if the saving bank decides to offer checking account, the bank creates new permanent
files that contain information about all the checking account maintained in the bank, and it
may have to write new application programs to deal with situations that do not arise in
saving accounts. Thus as time goes by, the system acquires more files and more application
programs.
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Keeping organizational information in a file processing system has a number of major
disadvantages.
1 Data redundancy and inconsistency: Different programmers create the files and
application programs, the various files are likely to have different formats and the program
may be written in several programming languages. The same information may be duplicated
in several files.
2 Difficulty in accessing data: The conventional file processing system does not allow
needed data to be retrieved in a convenient and efficient manner. More responsive data-
retrieval systems are required for general use.
3 Data isolation: The data are stored in various files, and files may be in different
formats,
writing new application programs to retrieve the appropriate data may become difficult.
4 Integrity problems: The data value stored in the database must satisfy certain types of
consistency constraints. For example, the balance of a bank account may never fall below
a prescribed amount (e.g. Rs. 500). Later, when new constraints are added, it is difficult to
change the programs to enforce them. The problem is compounded when constraints involve
several data items from different files.
5 Atomicity problem: In many applications, it is crucial that, if a failure occurs (computer
system or any other electronic devices), the data be restored to the consistent state that
existed prior to the failure.
6 Security problem: Not every user of the database system should be able to access all
the
data. For example, in a banking system, payroll personnel need to see only that part of the
database that has information about the various bank employees. They do not need access
to information about customer accounts. But, since application programs are added to the
system in an ad hoc manner, enforcing such security constraints is difficult.
These difficulties, among others, prompted the development of database systems.

Data Warehouse
The use of computers for data storage and manipulating is a fairly old phenomenon. In fact,
one of the main reasons for the popularity of computers is their ability to store and provide
data accurately over long periods of time. Of late, computers are also being used for decision
making. The main use of historical data is to provide trends, so that future sequences can be
predicted. This task can also be done by the computers which have sufficient capabilities in
terms of hardware and software. Once this aspect was explored, it was possible to make use
of computers as a “storehouse” or “warehouse” of data. As the name suggests, huge
volumes of data are collected from different sources and are stored in a manner that is
congenial for retrieval. This is the basic concept of data ware housing.
By definition, data ware house stores huge volumes of data which pertains to various
locations and times. The most primary task of the ware house manager is to properly “label”
them and be “able” to provide them on demand. Of course, at the next level, it becomes
desirable that the manager is able to do some amount of scanning, filtering etc., so that the
user can ask for data that satisfies specific questions – like the number of blue colored shirts
sold in a particular location last summer – and get the data. Most database management
systems also provide queries to do this job, but a ware house will have to cater to much
larger and rather adhoc type of data.
Data ware houses store huge volumes of data – like the store house of a huge business
organization. There is a need for smaller “retail” shops – which can provide more frequently
used data, without going back to the store house. This is the concept of “data marts”.
The data in a ware house is not static – It keeps changing. There is a need to order and
maintain the data. Data warehouses are not just large databases. They are complex
environments that integrate many technologies. They are not static, but will be continuously
changing both content wise and structure wise. Thus, there is a constant need for
maintenance and management. Since huge amounts of time, money and efforts are involved
in the development of data warehouses, sophisticated management tools are always justified
in the case of data warehouses.
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Although data warehouses vary in overall design, majority of them are subject oriented,
meaning that the stored information is connected to objects or events that occur in reality.
The word data warehouse was first developed by Bill Inmon in the early 1990s. He referred
to it as being an integrated collection of information that could help companies and
organizations make better decisions.
To be effective, a data warehouse had to be integrated, subject oriented, non-volatile, and
time variant. Being subject oriented means that the data will provide information about a
specific subject rather than the information about the functions of a company. Because a
data warehouse is subject oriented, it will allow you to analyze information that is connected
to a specific subject. Being integrated means that the data that is collected within the data
warehouse can come from different sources, but can be combined into one unit that is
relevant and logical. Having a time-variant means that all the information within the data
warehouse can be found with a given period of time.

One of the best advantages to using a data warehouse is that users will be able to access a
large amount of information. This information can be used to solve a large number of
problems, and it can also be used to increase the profits of a company. Not only are users
able to have access to a large amount of information, but this data is also consistent. It is
relevant and organized in an efficient manner. While it will assist a company in increasing its
profits, the cost of computing will greatly be reduced. One powerful feature of data
warehouses is that data from different locations can be combined in one location.

However there are a number of disadvantages. Before data can be stored within the
warehouse, it must be cleaned, loaded, or extracted. This is a process that can take a long
period of time. There may also be issues with compatibility. For example, a new transaction
system may not work with systems that are already being used. Users who will be working
with the data warehouse must be trained to use it. If they are not trained properly, they may
choose not to work within the data warehouse. If the data warehouse can be accessed via
the internet, this could lead to a large number of security problems.

Another problem with the data warehouse is that it is difficult to maintain. Any organization
that is considering using a data warehouse must decide if the benefits outweigh the costs.
Once you have paid for the data warehouse, you will still need to pay for the cost of
maintenance over time. The costs involved with this must always be taken into
consideration.

How Does a Data Warehouse Differ From a Database

There are a number of fundamental differences which separate a data warehouse from a
database. The biggest difference between the two is that most databases place an emphasis
on a single application, and this application will generally be one that is based on
transactions. If the data is analyzed, it will be done within a single domain. Some of the
separate units that may be comprised within a database include payroll or inventory. Each
system will place an emphasis on one subject, and it will not deal with other areas. In
contrast, data warehouses deal with multiple domains simultaneously. Because it deals with
multiple subject areas, the data warehouse finds connections between them. This allows the
data warehouse to show how the company is performing as a whole, rather than in individual
areas. Another powerful aspect of data warehouses is their ability to support the analysis of
trends. They are not volatile, and the information stored in them doesn't change as much as
it would in a common database.

Data mining involves the use of sophisticated data analysis tools to discover previously
unknown, valid patterns and relationships in large data sets. These tools can include
statistical models, mathematical algorithms, and machine learning methods. Consequently,
data mining consists of more than collecting and managing data, it also includes analysis and
prediction.

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Data mining can be performed on data represented in quantitative, textual, or multimedia
forms. Data mining applications can use a variety of parameters to examine the data. They
include association (patterns where one event is connected to another event, such as
purchasing a pen and purchasing paper), sequence or path analysis (patterns where one
event leads to another event, such as the birth of a child and purchasing diapers),
classification (identification of new patterns, such as coincidences between different item
purchases), clustering (finding and visually documenting groups of previously unknown facts,
such as geographic location and brand preferences), and forecasting (discovering patterns
from which one can make reasonable predictions regarding future activities, such as the
prediction that people who join an athletic club may take exercise classes).

Data Mining Uses

Data mining is used for a variety of purposes in both the private and public sectors.
Industries such as banking, insurance, medicine, and retailing commonly use data mining to
reduce costs, enhance research, and increase sales. For example, the insurance and banking
industries use data mining applications to detect fraud and assist in risk assessment (e.g.,
credit scoring). Using customer data collected over several years, companies can develop
models that predict whether a customer is a good credit risk, or whether an accident claim
may be fraudulent and should be investigated more closely. The medical community
sometimes uses data mining to help predict the effectiveness of a procedure or medicine.
Pharmaceutical firms use data mining of chemical compounds and genetic material to help
guide research on new treatments for diseases. Retailers can use information collected
through affinity programs (e.g., shoppers’ club cards, frequent flyer points, contests) to
assess the effectiveness of product selection and placement decisions, coupon offers, and
which products are often purchased together. Companies such as telephone service
providers and music clubs can use data mining to create a “churn analysis,” to assess which
customers are likely to remain as subscribers and which ones are likely to switch to a
competitor.

Data mining has many and varied fields of application some of which are listed below:
Retail / Marketing
Identify buying patterns from customers
Find associations among customer demographic characteristics
Predict response to mailing campaigns
Market basket analysis
Banking
Detect patterns of fraudulent credit card use
Identify ‘loyal’ customers
Predict customers likely to change their credit card affiliation
Determine credit card spending by customer groups
Find hidden correlations between different financial indicators
Identify stock trading rules from historical market data
Insurance and Health Care
Claims analysis - which medical procedures are claimed together
Predict which customers will buy new policies
Identify behaviour patterns of risky customers
Identify fraudulent behaviour
Transportation
Determine the distribution schedules among outlets
Analyze loading patterns
Medicine
Characterize patient behaviour to predict office visits
Identify successful medical therapies for different illnesses

Limitations of Data Mining

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While data mining products can be very powerful tools, they are not self sufficient
applications. To be successful, data mining requires skilled technical and analytical specialists
who can structure the analysis and interpret the output that is created. Consequently, the
limitations of data mining are primarily data or personnel related, rather than technology-
related.
Although data mining can help reveal patterns and relationships, it does not tell the user the
value or significance of these patterns. These types of determinations must be made by the
user. Similarly, the validity of the patterns discovered is dependent on how they compare to
“real world” circumstances. Another limitation of data mining is that while it can identify
connections between behaviors and/or variables, it does not necessarily identify a causal
relationship. For example, an application may identify that a pattern of behavior, such as the
propensity to purchase airline tickets just shortly before the flight is scheduled to depart, is
related to characteristics such as income, level of education, and Internet use. However, that
does not necessarily indicate that the ticket purchasing behavior is caused by one or more of
these variables. In fact, the individual’s behavior could be affected by some additional
variable(s) such as occupation (the need to make trips on short notice), family status (a sick
relative needing care), or a hobby (taking advantage of last minute discounts to visit new
destinations).

Customer Loyalty:
When established organizations with a defined customer base consider moving to the
Internet, they face several challenges. Main among these are-
 Getting the customer to its web site
 Getting the customer to buy from its web site
 Getting the customer to come back and buy from its web site
Most organizations venturing into e-business have focused their marketing efforts on driving
traffic to their web sites. They have not, however, spent resources to ensure that once
visitor traffic arrives at the web site, it actually goes on to make a purchase. Even fewer
have made an effort to ensure that those visitors that turn into paying customers come back
and make more purchases.
Customers that buy more over a period have a high lifetime value and can sustain the
organization. It is in this context that loyalty programs help. A systematic and well-planned
loyalty program ensures that customers that buy once come back and buy again. This means
a continued contribution to long-term revenues. E.g., a customer on a frequent flier
programme will use the same airline if it is known that there is the possibility of upgrades or
free flights based on air miles accrued.
If an organization offers a loyalty programme and the competitors do not, there is a high
probability that customers prefer the organization offering the loyalty programme and not
the competition.
The reward for continuously delighting customers is loyal customers. Web sites which
command loyalty do the right things as opposed to just doing things right. Their service
levels and performance are nothing short of excellent. These we sites have the power to
draw customers to themselves not once but time and again.
A study reveals that it costs five to ten times as much to obtain a new customer than it does
to retain one.
The tools and techniques for providing customer service, customer satisfaction and customer
delight – whether online or offline- must work in harmony before the concept of loyalty can
come into effect.
Advantages of having loyal customers-
1. They do not require the same marketing efforts as new or occasional customers, i.e.
less expenses on direct marketing or promotions.
2. Compared to occasional customers, loyal customers purchase more often, i.e. more
revenue to the organization in the long run.
3. Loyal customers tend to be less price sensitive.
4. They are likely to recommend their supplier to other potential buyers.
5. Likely to tolerate complaints and irritations better than occasional customers.
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Loyalty on the Internet is a fast moving target. Online customers tend to be fickle and have
restless fingers. Such customers may be loyal to a search engine or a specific portal from
where they can access free services but in terms of B2B purchases they are likely to be
choosy and on the lookout for the best value. Many customers may be attracted to a specific
business deal or sale. New business propositions and offers constantly tempt them and even
the most loyal of customers can be lured away. The loss of customers on the Internet can
take place at very frequent intervals if not carefully monitored.

Strategies and tactics for ensuring customer loyalty-

1) Customer Relationship Management (CRM)
2) Loyalty Programmes
3) Customer Lock-in
4) Build Trust
5) Free products and services

1) Customer Relationship Management- Loyalty can be achieved by implementing

relationship marketing as well as customer delight programmes. Both these can be
programmed and delivered via the web site and e-mail using CRM software. CRM
programmes are typically based on software, which may or may not be integrated with an
organizations web site.
CRM is the process of targeting, acquiring, transacting, servicing, retaining and building
long-term relationships with customers. CRM is a business strategy that goes beyond
increasing transaction volume. Its objectives are to increase profitability, revenue, and
customer satisfaction.
CRM is a strategy that
 Manages customers over their lifetime by improving marketing and service functions
 Strengthens bonds with the customer
 Helps to maximize the value and profitability of each relationship.
 Helps improve loyalty and thereby lower customer acquisition costs
CRM is a cyclic activity that requires continuous iteration of the following tasks to achieve the
desired goals:
 Customer Identification
 Customer Differentiation
 Customer Interaction
 Customization / Personalization
Cost goals of CRM:
 Increase revenue growth through customer satisfaction
 Reduce costs of sales and distribution
 Minimize customer support costs

CRM is in use within the service industry. Industries such as banks, airlines, retailers,
healthcare, insurance, hospitality, consumer durables and telecom are some of the main
users. In each of these cases the CRM software is designed for managing relationship with a
large number of customers keeping in mind the diverse range of products and services.
In the case of hotels, cellular companies and banks, customers are known to contact them
using several channels such as call center, web sites and emails. CRM helps integrate
customer data across channels – keeping track of which customer said what, whether there
was a transaction or not and through which channel.
The CRM process begins by converting customer profiles into data. This includes data such
as names, contacts, purchase preferences and purchase history. There must also be data on
customer interactions, customer visits and customer complaints as and when they occur. It
is only when such data is made available, consolidated and manipulated, can the
organization unravel what the customer really wants.
The data is analyzed by data mining techniques to identify hidden links and patterns in
customer behavior. The CRM software is capable of analyzing customer data in great depth.
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It can determine which customers have the highest lifetime value, what their preferences are
and how they might react to price changes. It can identify and evaluate relationships and
help the organization refine its marketing, customer service and retention strategies. The
software can also provide answers to queries based on which channel is the most productive.
It can also be programmed to up-sell, offering a better quality product and also cross-sell,
which is offer another complementary product.

Advantages of CRM:
i) Enhanced Relationships-
By using CRM software, organizations can mange thousands, even millions of
customer relationships. This enables companies to manage and improve a number of
relationships.
ii) Increase loyalty-
One of the most important reasons for implementing CRM solutions is to convert
occasional customers into regular customers. Regular and loyal customers tend to buy
more and have a significant impact on the organization’s economic viability.
iii) Enhanced Revenue / Profitability-
A CRM programme can enhance the top line and the bottom line. Top line refers to
revenue generation while the bottom line refers to profitability. The segmentation of
customers and targeted marketing practices as well as improved service delivery
methods help in raising the top line. The use of customization and personalization
marketing techniques for high-value customers leads to improving the bottom line.
Customers who are loyal help in improving both the top line and the bottom line.

Applications of CRM:
CRM is a sophisticated software engine capable of delivering the following three main types
of solutions that meet the requirements of marketing, sales and service on the Internet.
Leading providers of CRM software such as Oracle and Siebel would typically offer the
following features:
(i) Automated Customer Service and Support:
Traditionally, non-automated, customer care and customer service programmes are
prone to errors, failures and inconsistencies. CRM can automate and streamline
activities at each of these stages.
The CRM software can ensure that all pre-sales, service during a sale, and after sales
initiatives are performed consistently and seamlessly across channels. This means that
the CRM software has to be concurrently deployed across channels such as telephone,
call center, field sales, after sales functions, the web site and email.
The CRM software can also deliver self-service features via the web site. It enables
customers to voice questions or problems, search for answers or get the system to
predict solutions.
(ii) Automated Marketing:
An online marketing campaign can be effectively monitored and controlled via the CRM
software. The marketing campaign could include aspects such as banner advertising,
online promotions and email marketing. The software could effectively coordinate and
dispense all these. CRM can also create personalized marketing messages and offers.
Loyalty programmes can also be managed by the CRM programme.
CRM can also be used for response management. A marketing campaign may
generate volumes of data from customer contact (which may be in response to
traditional advertising, banner ads, emails and online registrations). Gathering and
analyzing data of this volume is tedious, but the CRM software can be programmed to
consolidate and analyze a continuous flow of data. In this way leads can be identified
much faster and appropriate response delivered. The marketing campaign can also be
refined mid-course, if necessary.
(iii) Sales Force Automation:
The popularity of laptop computers has led to an increase in the use of SFA
applications. Mobile sales personnel who have laptops loaded with the SFA module and
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mobile Internet access can keep in regular contact with their head office. The laptop is
connected to the mobile phone via a special cable with a built-in modem. Using these
facility sales personnel can receive regular updates from the head office. The head
office can in turn monitor the progress of the sales personnel on the field.
The SFA module is a part of the CRM software suite and provides a basis for remote
employees to be up-to-date on their customers and the market. The concept is
particularly suited to the sale of high value products and services such as financial
services, computer hardware and software, healthcare equipment and real estate.
A typical SFA module may have many of the following features-
 Lead management / prospect gathering- search for new customers and leads
 Contact management- customer database with customer details and other relevant
attachments
 Account management- details of key personnel, locations, company details, products
and purchase history
 Opportunity (lead) management- value of a prospective order, the order details, its
closing date, competitors, list of other orders won and lost and any other orders in the
pipeline
 Pipeline management- process from opening a prospective order, preparation of
quotation and order closure
 Presentations- creating quick presentations and support sales negotiations
SFA is very important in terms of internal communications and reporting. It is also
important in case a key salesperson were to suddenly leave the organization, retrieval of
key customer data and details of current clients being followed up, can be done without
much effort.

2) Loyalty Programmes- These can be used in isolation, as part of an online marketing

campaign or can be integrated within a CRM programme.
a) Own Account / Home Page- Many leading corporate web sites such as those belonging
to IBM, Dell, GE offer customers their own web pages that lets them state their terms
and preferences so that the supplier can provide a more focused service. This aspect
creates a feeling of belonging and being part of a bigger community.
b) Frequent Buyer programmes- All leading international as well as domestic airlines offer
frequent flier programmes. Credit card companies similarly offer bonus points (rewards)
based on purchase value that can be redeemed for other goods and services. Retailers
and hotels offer special incentives to encourage repeat visits and purchases. In the retail
world, encouraging customer loyalty has taken the form of privilege cards. This concept
can be applied to online purchases made by customers.
c) Special promotional offers- ‘Buy 2 get 1 free’ offers are for low-value consumer goods
being promoted to customers. Other types of promotions are by credit card companies
that often make unique offers, which cannot be purchased elsewhere. These apply to
holidays, special deals with manufacturers of unique products or for dining at exclusive
restaurants or shopping at select retail outlets.
Organizations can use the web site to transmit special offers to high value B2B
customers that can be only for online customers. In doing so, the organization will not
only encourage regular online customers, but also appeal to offline customers.

3) Customer Lock-in – This concept is based on the principle of creating an evolutionary

and highly robust relationship between the organization and its customers. ‘Lock-in’ refers to
the creation of a deliberate environment where the organization provides a product or
service that has such intense appeal and attraction that customers have little choice but to
accept and use it.
Methods by which organizations can achieve customer lock-in are
a. Product lock-in: The leading operating system used by millions of computers
around the world is Microsoft Windows. It has created a very effective control
mechanism over customers. If a competitor launches an alternative, there are
substantial costs involved. Since much of the software in use today is also
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designed around Windows, Microsoft knows that its customers have little choice
but to accept its products.
b. Relationship lock-in: Organizations exhibit lock-in on the basis of relationships
with advertising firms, law firms and accountancy firms, with sub-contractors.
In each case, the quality and strength of lock-in depends on the length and
intensity of the relationship. Once a service provider is familiar with needs and
demands of the organization, the convenience and familiarity factors increase.
c. Discount lock-in: A long-term discount can be a powerful lock-in device. E.g.
Core sector industries could provide manufacturing industries with heavy long-
term discounts for the supply of raw materials. Hotels often negotiate heavily
for discounted room rates for airlines and their cabin crew based on long-term
occupancy.
d. Internet lock-in: The information provided by a customer about him/her on a
web site registration form can be used to provide customized and personalized
content, features and services. Once the customer has taken the effort of
providing detailed information about him / herself and the web site responds by
delivering valued personalized services, the customer is likely to remain with
the organization and not leave for a competitor.

4) Build Trust – Brands are built on the basis of trust levels. The stronger the brand, the
more it is trusted and the more goodwill it commands. In the online world however trust
takes a different form. People are generally suspicious of the Internet and rarely trust web
sites. Some of the leading web sites may be looked at with awe and amazement but not
necessarily with faith and conviction. This is because a web site does not have a human face.
E-Commerce firms should clearly define the company’s privacy policy, and make sure it is
strictly enforced. They can reassure customers by using a safe and encrypted payment
process for transactions.
Maintaining the balance between privacy and personalization increase the comfort level of
customers. If customers require personal assistance, or feel the need to exchange or return
a purchase, the same should be provided for to gain trust. In many cases, people are more
likely to buy from a site if they know a live person can be contacted.

5) Free Products and services – Apart from free information and knowledge on the
Internet, there is free email, free software, free education and free sample products.
The rationale behind free services (that bear a cost to the service provider) is to lure
browsers to visit the suppliers’ web site. The sequence is
Browser -> Visitor -> User -> paying customer
The concept of ‘free’ can work for B2B organizations as well. A service industry has more
choices on what and how to give items away than a manufacturing one. Manufacturing
organizations have limitations as their products cannot be digitized and given away.
Example of free service: The HDFC Bank targeted train passengers in Mumbai for its e-Age
Savings Account. Passengers were asked to submit their personal details on a form. In
return for the information they were eligible to win prizes such as a free 50-hour Internet
connection or other consolation prizes such as T-shirts and pens.

Other Marketing Techniques:

Cross-selling and Up-selling:

Cross selling works on the principle whereby the seller tries to sell a newer product while
serving the customer. Take the example of a customer who has already paid a deposit for a
car and visits the showroom to take delivery of the vehicle. Since the dealer also sells car
accessories, he tries to persuade the customer to customize the new car by buying extra
fittings such as sun film, stereo and sear covers. This is known as cross selling.
In a similar environment, up selling refers to the dealer attempting to sell an AC car in place
of a customer preference for a non-AC one. Up selling is based on the principle of the seller

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offering a better model or higher specification product than what the buyer originally
intended to purchase.
The advantages of cross-selling and up-selling are-
a) They create awareness about the products and services, which an organization
offers. Many customers are not aware of the entire range of products and services
offered by a large organization. Banks for instance continually introduce newer
savings plans and advise customers of the same. Electronic goods dealers often try
to convince customers to purchase a higher-end model of a product, which means
a higher profit margin for the dealer.
b) Cross selling and up selling allow organizations to sell more. For example, if a
customer just bought a new shirt, then the web site vendor could provide an image
of a matching tie or some such accessory and offer it at a special price. If a
customer purchases a camera online, the vendor could offer a tripod or lens filters
at discounted prices. In the case of machinery or factory equipment, a web site
vendor could offer discounts on spares or extended warranties.
On the Internet, cross selling and up selling techniques work similarly except that they are
supported by technology. Amazon.com uses these techniques extensively whereby at the
point of purchase of a given book it recommends other books by the same author or books
on the same subject by other authors. For cross selling and up selling to work, the use of
personalization programmes and collaborative filtering systems would be needed.

Customization:
The appeal of the Internet is such that it not only allows products and services to be made of
interest to a mass audience but also to individuals. Interactive technologies can be extended
to enable the organization to provide customers with an individual web site experience. The
concept of customization helps enhance the visitor-supplier relationship by creating a level of
familiarity between the two. In short, customization enhances a web site’s appeal by
enriching the browsing experience.
Some portals allow visitors to change colors, content, and layout of the pages, filter out
unnecessary content. Some corporate web sites use customization to feature named
greetings for their customers, and place product and services information or content as per
their interests pre-selected by them.
Other examples of how organizations use the technique of customization:
The Interactive Custom Clothes Company via their web site www.ic3d.com lets customers
design their own clothes. The web site www.reflect.com lets women order cosmetics that
match their needs and preferences. The web site of the diamond conglomerate DeBeers at
www.debeers.com lets customers design their style of rings. In India, Mahindra and
Mahindra at www.mahindra.com was one of the first Indian manufacturers to provide the
facility of customization for online sales of its Quadra Jeep. The facility allows customers to
specify the colours, specifications and other options such as alloy wheels, bull bars and other
gadgets before placing their order.

Personalization:
Where customization ends, personalization takes over. It is the art of making customers feel
special and unique. It is the art of remembering who the customers are when they visit a
web site. It can be used to heighten the customer service and satisfaction experience. It
means offering select customers an enhanced form of attention or service – something that
they value and perceive that the organization has taken extra care to provide.
Personalization techniques work on the basis of raising the web site comfort levels by
creating a sense of familiarity and belonging. Organizations like IBM and Dell provide
customers with several tailor made features from their web sites. A user logging on is taken
to his / her own private page that is designed and structured according to the user’s needs.
Only products / product range that the customer is interested in is displayed. Even
production and delivery schedules can be tailored to suit customer needs. When it comes to
placing the order, the web site enables the order placement forms to be pre-entered with
customer details such as shipping address, payment details, thereby cutting down on
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 Direct Marketing
transaction processing time. Relevant promotional offers are flashed while the customer is
browsing his / her private pages.

Personalization Vs Customization:
There is a thin line between customization and personalization. While customization means
sending a random individualized email with the customer name, personalization techniques
involve the use of deliberate and individualized email with the customer’s name with the
knowledge that the email will be relevant. Personalization can also generate dynamic content
(in real time). Unlike customization, personalization will require more investment in software
and back-end process integration.

Clickstream Analysis:
Web site visitor’s clickstream is a source of personalization. The term clickstream refers to
the sequence of mouse clicks by a web site visitor. Each click makes an impression / hit
which can be seen by the web site’s administrator. The term clickstream analysis refers to
the identification of the path a user takes on the web site.
The web site administrator can track the visitor as he/she sees the different pages, images
and sections. On the basis of such movements, the web site administrator can determine
which products or services the visitor is interested in. When the visitor returns later, the web
site recognizes the visitor by his/her cookies and the administrator flashes an appropriate
marketing message or opens a pop-up message box to the visitor.

Real-Time Profiling:
Also known as tracking user clickstream in real-time, allows marketers to profile and make
instantaneous and automatic adjustments to site promotional offers and web pages.
Customer profiling uses data warehouse information to help marketers understand the
characteristics and behaviour of specific target groups. The targeting can be done online
inexpensively via email and customized web pages. E.g. Consumers visiting Greatcoffee.com
are greeted with personalized web content on their first visit. The site uses real-time profiling
to match a database of anonymous cookie files. The firm’s e-commerce targeting service
purchased more than 20 million anonymous cookie files with demographic and geographic
data from firms such as Dell (all personal information is removed first). The matching of the
user data, IP address and other easily obtainable information with the database shows the
geographic location of the user that can be used to give a personalized message or ad that
takes only a few seconds.

Recommendation Systems (Collaborative Filtering):

An extension of the clickstream analysis principle is to create a personalized marketing
message to visitors based on their purchase patterns. This is also known as collaborative
filtering. The concept is based on the principle that people looking for information and
products on the Internet should be able to make use of what others have already found and
evaluated.
For example, a visitor at a web site wishes to select a product from several different options.
A web site that offers collaborative filtering will have prerecorded preferences of its previous
visitors and customers. It has access to a database where it has registered the opinions and
feedback of different sets of customers on its products and services. When a new visitor
enquires about a particular product or service, the web site refers to its database of previous
customer data and ‘recommends’ a suitable product or service to the visitor. The whole
process is based on identifying relevant patterns, trends, preferences and behaviour data
and then sharing that information.

Prof Manjari