Unit-II

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Customer Database

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customer database is typically designed with one record per customer.  It may contain all the sales and/or activity records for every customer.  Customer database contains the identifying information that can be linked to other database such as a transaction database to obtain a current snapshot of a customer¶s performance. 
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Key elements in a typical customer database 
Customer

ID: A unique numeric or alphanumeric code that identifies the customer throughout his/her entire lifecycle.

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 Example:

Credit card banks assign a new account number when a card is lost or stolen. The customer ID allows each account number to be linked to the unique customer , thereby preserving the entire customer history. It is essential in any database to effectively link and tract the behavior of and actions taken on an individual customer
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ID: A unique numeric or alphanumeric code that identifies the household of the customer through his/her entire lifecycle .  Household 6 .  This identifier is useful in some industries where more than one member of a household share products or services.

 Customer name: the name of the person or business .  Account 7 .  One customer have several account number.  It is usually broken down into multiple fields: last name. middle name or initial. first name.number: A unique numeric or alphanumeric code that relates to a particular product or service.

 Address: 8 . city etc. street. additional fields that contain former address are useful for tracking and matching customer to other files. apartment number.the street address.  With population mobility about 10% year. typically broken into components such as number.

this information may be stored in a aeparate database with a customer and the 9 household identifier . Phone number: current and former number for home and work  Demographics: charatcteristics such as gemnder. aage and income may be stored for proiling and odeling  Products or services: the number of products and the product details are extensive.

 There could be numerous ³offer detail´ fields in a customer record. each representing an offer for an additional product or services. distribution channel and any other details of an offer.details: the data. type of offer. creative.  Offer 10 . source code. pricing.  Most companies look for opportunities to cross sell and up sell their current customer.

11 .  It is often the richest and most predictive information.Transaction database  The transaction database contain records of customer activity.  The transaction database can take on various forms depending on the type of business.  It must be summarized and aggregated to a customer.

 Example :Credit card transaction database  Phone number  Offer detail 12 . Customer ID  Account Number: that realtes to a particular product or service  Sales Activity: the amount of the transaction.  Date of activity: date the transaction occurred.

 Predictive data: Includes any demographic. etc. best offer(unique to product or service). psychographic or behavioral data  Offer 13 .summary: date of first offer(for each offer type ).

 The tapes are usually shipped to a processor for mailing or a telemarketing shop for phone offers.  Solicitation 14 .Solicitation Mail and Phone tapes tapes are created from either a customer database or a prospect list to provide pertinent information for a campaign.

or prospect ID: it can be used to match to the customer or prospect database  Predictive data: purchased from an outside list company for the purpose of building a model.  Customer 15 .

Customer Profile Analysis 16 .

percent single. marital status(percent married.)  And average length of residence are typically included in a profile analysis 17  An .  Demographics such as average age.  It involves measuring common characteristics within a population of interest. gender(percent male).  Some of the benefits include improved targeting and product development.  Profile analysis is an excellent way to get to know your customers or prospects. etc.in-depth knowledge of your customers and prospects is essential to stay competitive in today¶s marketplace.

 Profiles are most useful when used within segment of the population of interest. 18 . Other measures may be more business specific.  Others may cover a fixed time period and measure average dollars sales. such as age of customer relationship or average risk level. average number of sales or average net profits.

 But before targeting models are developed. it is important to get a good understanding of your current customer base.  Profile analysis is an effective technique for learning about your customers.Segmentation  Targeting models are designed to improve the efficiency of actions based on marketing and/or risk. 19 .

 Example: a retail business divides its customer base into segments that describe their buying behaviour in realtion to their total buying behaviour at all retail stores.  This is ofetn called ³share of wallet´ analysis 20 A .common use of segmentation analysis is to segment customers by profitability and market potential.  Through this a retailer ca assess which customer have the most potential.

profile analysis performed on al loan or credit card portfolio might be segmented into a two-dimensional matrix of risk and balances.  This would provide a visual tool for assessing the different segments of the customer database for possible marketing and/or risk actions. A 21 .

This concept is required when a company plans to bulid longterm relationship with its customers.   22 .Lifetime value of Customer The lifetime value calculation looks at the customers from the point of view of their lifetime revenue or profit contribution to a firm.

 Sales of additional product and services during that time  Referral generated by the customer over the lifetime .The lifetime value of a customer depends on:  The length of an average µlifetime¶  The avg revenues generated per revelant time period over the lifetime.

value refers to µlifetime profitability¶ when cost data is a readily available.  Acquisition Cost  Base Profit  Profit from Revenue Growth  Cost Saving  Referrals  Price premium  Lifetime .

Segmenting by Customer Profitability 25 .

companies should seek to cultivate µstickability¶ by shifting their attention to customer retention as opposed to acquisition. 26 .Profit comes from Loyal customers  If you¶re still convinced that acquisition is a more lucrative strategy for any organization than focusing on the loyal customer.  The consultancy bain & company estimates that increasing retention rates by just 5% can potentially increase profits by 25%.  80/20 rule in marketing.  To protect their single most important asset.

of business transactions. .and the more they can use that information when they are communicating with them.  The more knowledge that companies can acquire about their current customers.  Imagine it as the difference between o onenight stand and loving relationship.Profit=Loyal Customers  The best strategy that marketing investors can abopt is to focus on building relationships with their customers rather than on counting the no.the more likelihood they have of buliding a relationship 27 that will last.

so loyalty is all about creating such a strong sense of ³pull´ towards a particular product that customers don¶t even reconsider or question their choice.Customer satisfaction=customer retention  More than 40% of product/service constantly vie for our attention. 28 .  Smart marketing investors know that their most loyal customers should always receive preferential treatment because they offer much higher returns.

 Segmentations such as these provide useful guides that extend beyond demographics and can help influence new product development. a bread company uses descriptors such as µhealth vigilantes¶ to describe the customer segments it want to attract. packaging and communication.  For instance. 29 .Segmenting by customer profitability  Marketers commonly segment their consumers into behavioral or attitudinal groups built from segmentation studies.

 One advantage of segmentation is that it not only allows profitable customers to be indentified and targeted. marketing investors need to per form exactly the same task by segmenting their customers in terms of their profitability. but it also allows companies to see which customers are more trouble than are worth 30 .Identifying unprofitable customers  Just as stock market investors weed out the underperforming investments in their portfolios.

 Unprofitable customers are bad news. They don¶t generate any profit for the company and they drain resources. 31 . sapping the workforce precious time and energy.

 Splitting up your consumer base into µloyal¶ and µnew¶ limits how far you can go based 32 on that information.Segmenting by Customer Profitability  Fred reichheld(2001) sys that one reason why companies have become so obsessed with acquiring customers as opposed to retaining them is because acquisition is much easier to measure. .  It is worht investing in segmentation tools that divide up your customers according to their profitability.

reducing servicing and acquisition costs for unprofitability customers  Adding and enhancing value for more profitable ones.  Segment 33 .based on customer profitability.  This insight enables them to improve the customization of the service available with the intention of providing better customer satisfaction and responsiveness. you can allocate your resources accordingly.

margin or length of tenure as your metric.  Once ranked prioritize your highest-value customers and invest in them. 34 .  Use sales volume.The 3Rs: Three steps to segmenting by customer profitability  Ranking: create a scale of 1 to 10 where you can rank your entire customer base in terms of their profitability. but your rankling will ideally be based on profitability of costs allocated to customers versus revenue gained from them.

 This information will help inform and influence your marketing communications strategy 35 . Develop segment profiles that note purchasing patterns. media habits and demographics.

 There are first-class. Relevance  Target different ranks with the most appropriate offers.2. business. premiumeconomy and economy customers and each segment has different priorities: for some it¶s comfort and for others it¶s getting the 36 cheapest possible seat. .  Think of the different types of customer on the same jumbo jet heading for the same destination on the same plane.

 You 37 .  Forrester Research reveals that only 43 percent of 60 global companies offer better service to profitable customers. so there is a lot of scope for improvement.need to cultivate a similar approach when you create customer offerings. if you are going to increase the likelihood of surpassing your customers expectations and retaining them for future business.

 Do they join up via the internet. develop an understanding of the different ways in which your customers are acquired. Reshape  Based on the information that you accumulate about your customers. through existing customers or via telemarketing?  How does it differ according to their profile? 38 .3.

 This deliver much more efficient and productive communication.  More data and a more insightful understanding will gently steer your business towards attracting µlove¶ µems¶ rather than µkill yous¶  Armed 39 . you can ensure that you invest more heavily in marketing that delivers high-profit customers as well as reducing or even stopping those executions that don¶t.with this information.

40 .Maximizing customer profitability There are 10 steps to maximizing customer profitability. This can mean creating a club that offers high-value customers certain benefits and that reinforces the brand¶s appeal. according to blattberg and deighton(1996):  Invest in high-value customers first  Transform product management into customer management.

 Use customer-value statement reports to find out whether marketing is building or eroding the customer base.  Consider 41 .  Track customer equity gains and losses against marketing programmes.increasing customer equity through additional sales and cross-selling.  Reduce acquisition costs. If you can acquire customers in a more cost-efficient way. the long-term pay-off from those customers improves.

Has anything in their circumstances changed that might make them less inclined to purchase from your product portfolio?  Consider separating acquisition and retention marketing strategies. Relate branding to customer equity  Monitor the retainability of your customers. 42 .

43 . both current and potential: A multiplicity of these customers gives rise to variety of influences. Each customers has needs that must first be determined and then addressed in planning a product.Identify the Customer Three categories of customers  External Customers. depending on whether the customer is economically powerful and on its technological sophistication.

 Suppliers as customers: Suppliers should be viewed as extensions of internal customer departments such as manufacturing. Internal customer: these customers include all functions affected by the product at both the managerial and workforce levels. 44 .

Customer Behavior  Customer needs are the basic physiological and psychological requirements and desires for survival and well being. 45 . He identifies a hierarchy of such needs as physiological.H. A. Maslow is a primary source of information on both physiological and psychological needs. ego and selffulfillment. safety. social.

 The expectation level of quality represents the minimum or must be attributes. better performance leads to greater satisfaction but usually in small increments.expectation are the anticipated characteristics and performance of the goods or service.  At the unitary (or desired) level.  Kano and Gitlow(1995) suggest that three level of customer expectation are related to product attributes. 46  Customer .

 Discovering and understanding customer needs and expectations is necessary in defining specific product attributes for market research and product development. . For the attractive(or surprising)level better performance results in delighted customers because the attributes or the level of performance are a pleasant surprise to the customers.  Customer satisfaction is the degree to which the customer believes that the expectations are met 47 or exceeded by the benefits received.

expectation has a strong influence on satisfaction. and even a minor inconvenience will result in low satisfaction.  For Example: customer staying at a luxury hotel expects perfection.  Customer 48 . but if customers get a reasonable night¶s sleep. they will have high satisfaction because their expectation is low. A budget hotel can have poor features.

Perception occurs after a customer selects. But other factors influence perception.  Customer perceptions are heavily based on previous experience.perception is the impression made by the product. organizes and interprets information on the product. at the point of purchase.  Customer 49 . and after the purchase. and these factors can occur before the purchase.

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