Interactive Marketing

Lecture 3 - Customer Database – Construction,

Maintenance and Usage

Dr. CAN PAMİR

Dr. Can Pamir Interactive Marketing

 Customer Databases

• Customer Databases are at the very core of direct and interactive

marketing.

• Customer Databases are the lists that identify prospects as well as

customers who have something in common.

• Databases are perishable as the information in the lists may become

perishable.

• Basically there are three types of lists in customer databeses:

1. House List: List that is produced by the company itself through
referrals, inside company information, etc.
2. Response List: House List of other organizations.
3. Compiled Lists: Lists generated by third party or market
research companies.

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 Cusutomer Databeses

Customer Database
• Data from all (active, inactive, prospects,tc.) 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

• 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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 Rationale for Using Customer Database

Know and understand clients better  Stronger interaction with

the clients

Stronger interaction with the clients  Stronger the relationship

with the clients

Stronger the relationship with the clients  More satisfied and

happy clients

More satisfied and happy clients  Higher client loyalty

Higher client loyalty  Higher sales

Higher sales  Higher profits.

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 Types of Databases

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 Categorization Based on Information in the Databases

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

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

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

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Categorization Based on The Nature of Underlying Marketing Activities

Passive Databases
• A mailing list that passively stores information about acquired customers
• Future marketing efforts target the same customers in the list

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Categorization Based on The Nature of Underlying Marketing Activities

Active Databases

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 Categorization Based on Database Technology

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

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

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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 Benefits of Marketing Database

• 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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 Database Development

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 Maintenance of Databases

• Databases are perishable commodity and needs constant oversight

and maintenance.

Database maintenance requires:

• identifying and eliminating duplicate records;
• keeping the relevant information and eliminating the irrelevant ones,
• keeping the data updated.

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 General Uses of Marketing Database

Dr. Can Pamir Interactive Marketing

 General Uses of Marketing Database

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

Dr. Can Pamir Interactive Marketing

 General Uses of Marketing Database

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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 Specific Uses of Databases

1. Stealth Marketing

• Customer databases enables marketers to communicate with small

market segments or individual customers without communicating
with other customers.

• This kind of communication secrecy is called stealth marketing.

• It enables direct marketers to extend different types of offers to

individual customers on the basis of their customer information.

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 Specific Uses of Customer Databases
2. Profiling
•An intuitive approach to customer selection is to assume that the most
profitable customers share common characteristics (i.e., profitable customers
are similar to one-another).
•Based on this assumption the company should try to target customers with
similar profiles to the currently most profitable ones.

Example
Consider the case of a bank which wants to acquire new, profitable
customers. Profiling consists of identifying profitable customers in the bank’s
current mass-market segment and then to target similar profiles in the
prospect pool.

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 Specific Uses of Databases

3. Retaining the best customers

•Customer databases provide both numeric and non-numeric information
about the clients.
•Numeric information enables the marketer to calculate the value of each
customer to the company which enhances the customer value
management.
•Customer value management rests on the idea of allocating resources
differently to different customers.
•The basis of this differential resource allocation is the economic value of
the customer to the firm.
•Thus, before one can start to manage customers, one must have a
thorough understanding of how to compute the value contribution each
customer makes to a firm.
•Various metrics have been developed that help us to achieve this.
•All these metrics can be calculated by customer information stored in the
customer databases.
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 Specific Uses of Databases

4. Thank Customers for their Patronage: Reward the Loyal Customers

•All costumers deserve to be recognized and thanked fro the purchases they
have made form the organizations.

•Even though many different methods can used the best structured way to
thank customer is to develop loyalty programs.

•Customer Loyalty Programs are marketing programs sponsored by an

organization or company to encounter repeat purchase through program
enrollment processes and the distribution of awards and/or benefits.

Organizations offer loyalty programs to;

•strengthen customer relations;
•get additional information directly from the customer;
•expand the information in the customer database;
•Organize campaigns based on the information given by the customer.
•Examples: Miles & Smiles, Hipo, Zubizu, Money Card, etc.
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 Specific Uses of Databases

5. Capitalize on Cross-Selling and Continuity Selling Opportunities

•Cross-selling refers to selling your current customers products and services

that are related or unrelated the products and services they currently
purchase from your organization.

•By analyzing the products and services your customers have bought form
you can identify and capitalize on numerous cross-selling activities.

•Continuity selling which is also called “club offer” refers to the purchase of
the clients on a regular basis.

•Though data analysis, marketers can create subscribers or members who

buy on regular basis.

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 Specific Uses of Databases

6. Develop a Customer Communication Program

•Unlike general advertising, a customer database, also enables customized

marketing communications to occur between the company and its customers
without the competition knowing.

•A personalized marketing communication implies a two way

communication and enables marketer have feedback directly from the
customers which can be used to further develop and improve their products
and services.

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 Specific Uses of Databases

7. Perform Marketing Research

•The database is natural area for interactive marketers to conduct research

to better understand the client needs.

•Marketing research gathers, classifies, and analyze information about the

customers

•Through data mining the interactive marketers can come up with better
products or services or marketing mixes.

•The research can be problem-specific (e.g. to understand why he complaints

are increasing) or purpose-specific (e.g. whether to introduce a new product
into the market).

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 Specific Uses of Databases

8. Send Customized Offers

•Since database are used to better understand the needs of the clients, the
marketers can develop marketing mixes and make offers that will be
customized according to the needs of the clients.

•Powered by development of digital systems, customization of marketing

mixes can be done more easily.

•This is an example of shift from exclusivity to inclusivity dur to power of

internet and digitalization.

Dr. Can Pamir Interactive Marketing

 Interactive Marketing

Lecture 3 - Customer Database – Construction,

Maintenance and Usage

Dr. CAN PAMİR

Dr. Can Pamir Interactive Marketing