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Principles & Practices of Direct Marketing TYBMM SEM VI Revised syllabus 2016-17 Edition I By: Prof. Simmonelle Dsouza [email protected]

Prof. Simmonelle D’Souza

MODULE I Introduction to The Principles & Practice of Direct Marketing What is Marketing? The Chartered Institute of Marketing has defined Marketing as, “Marketing is the management process that identifies, anticipates and satisfies customer’s requirements profitably”. To choose, target and positioning the offers from customers Marketing plays an important role in day to day affairs of the organisations. The primary objective for marketing has been interacting with various customers and also to find out their view points about the particular product in the existing market. According to Kotler, 1980, “Marketing is the human activity directed at satisfying human needs and wants through an exchange process”. Marketing has also helped in creating the value for the customers in the market sector economy. Based on the view points for the product value and satisfaction customers are free to make their own choices. According to Kotler and Keller, 2009, “Marketing for customer value is the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value”. The difference carried out between the values which the customer gains from using a particular product and the owing the cost of that product is known as customer value. Customer value relates to the expectations of the customers for a product in the existing market.

Marketing is the management process which identifies, anticipates, and supplies customer requirements efficiently and profitably. In other words, it is the process of understanding, creating, and delivering profitable value to targeted customers better than the competition. According to Philip Kotler, Marketing is a social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.

Defining Direct Marketing Direct marketing is a system of marketing by which organizations directly communicate with the target customer/s to generate a response or transaction. This response may take the form of an inquiry, a purchase or even a vote.

Prof. Simmonelle D’Souza

“Direct Marketing is the total of activities by which the seller in effecting the exchange of goods and/or services with the buyer, directs efforts to target audience using one or more media(direct selling, direct mail, telemarketing, direct-action advertising, catalogue selling, cable TV selling, mobile marketing etc) for the purpose of soliciting a response by phone, mail or personal visit from a prospect or customer.” - Peter Bennet

 Direct Marketing involves all activities of marketing: Marketing Research, Segmentation, Target Marketing, Evaluation.  Direct Marketing is an interactive system of marketing which uses one or more media to affect the ‘measurable’ response or transaction at any level.  D.M. is used for Niche products, Service Products or Programs.  Traditionally Direct Marketing was performed using Catalogues, Direct mail, Telemarketing.

Strategies of Direct marketing Direct marketing uses a number of media and each medium performs specific functions. Generally, they follow

One-Step Approach- the medium is used directly to obtain an order. Goal is to generate immediate sale.

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Two-Step Approach- can involve the use of more than one medium. The first effort- to screen or qualify potential buyers. The second effort generates the response. Telemarketing + Direct Mail.

Basic Reasons for the Growth of Direct Marketing 1. Changing Market Place: Today markets across the globe have become volatile and hence direct marketing helps the business to stay connected with their customers to know about the latest trends. It also helps companies to gain a better knowledge of customer’s preferences, changing patterns etc. 2. 3.

Growth of delivery systems and media fragmentation. Affordable computing power & growth of databases (databases used for future purpose of marketing).

4. Changing Role of Direct Marketing & Business focus: 5. Building & maintaining customer relationship

Prof. Simmonelle D’Souza

6. To maximize sales 7. To maximize customer loyalty 8. Changing Cost Structures: 9. It is getting to be more expensive to use mass-media. 10. Advertising is done through’ line extensions- since advt. is above- the- line expenditure. 11. Increasing clutter in media. 12. Technological development: (Advances & Innovations) 13. Changes in the market place- B2B selling- it has increased or has seen tremendous growth. 14. The change place of market- e.g. home, office etc. 15. Alternative distribution channels. 16. Changing lifestyles and demographics. 17. Evolving economy and international competition.

MODULE II Basics of Direct & Interactive Marketing

“Direct marketing is an interactive system of marketing which uses one or more advertising media to effect a measurable response and/or transaction at any location.”

There are three key elements of this definition. They are as follows:  First, direct marketing is ‘interactive’ in that marketer and prospective customer engage in two-way communication. The response or non-response of the customer completes the communication loop in the direct marketing process. E.g. filling in the response coupon by the customer and mailing it. That is, direct marketing activities give the target market of the communication an opportunity to respond.  Second, all direct marketing activities are significantly more ‘measurable’ than traditional general advertising and sales promotion. A response or the lack of it can be associated with each direct mail piece, each catalog mailing, or each direct response television advertisement. Direct marketers use direct marketing databases

Prof. Simmonelle D’Souza

of stored purchase behavior and other information about individuals & households to analyze customer characteristics and plan new campaigns. These databases are the foundation of effective direct marketing.  Third, direct marketing activities can take place from any ‘location.’ Marketer can interact with the customer over phone, through mail, Internet, by fax.

WHY DIRECT MARKETING? The Need for Direct Marketing is due to the following: 1. The environment has become more complex. 2. Bargaining power of the consumer has increased. 3. Market has become more competitive. 4. Cost of marketing a product has increased. The retail shelf cost at outlets in major cities is costly. 5. Advertising budgets are high. 6. Less customer loyalty. 7. DM helps companies focus on their marketing efforts. 8. Consumer lifestyle has changed. Today, customers look out for convenience in shopping. Tele-shopping, home shopping, catalog marketing and online marketing cater to core customer value. 9. Globalization has facilitated the growth of direct marketing. 10. Niche markets with distinct preferences- DM 11. Technology has changed and enhanced the DM activity.

Competencies of Direct Marketing Direct marketers seek to persuade people to buy products or services, like other forms of promotion. Virtually, all of direct marketing’s special competencies derive from the fact that the communications are directed at specific individuals and not at mass markets via mass media. This includes the combination of advertising and selling into a single function, the prominence of customer service, the ability to precisely target individuals, and the ability to create personalized messages that call

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for immediate action. Finally, the results of direct marketing campaigns can be monitored and measured.  Combinations of Advertising & Selling: Direct marketers use paid messages in mass media to elicit a response from their prospective customer. In the process, the communication performs both an advertising and selling function without an intermediary. This makes it cost effective because it reduces intermediary mark ups to increase profits.  Customer Service: Customer service plays an important role in direct marketing. For most firms, customer loyalty is an important issue because companies make money from repetitive pattern of purchases rather than from just one sale. Customer service is important and encourages regular interactions between the direct marketer and the customer. A popular idea- Relationship Marketing.  Precision targeting: Direct marketing communications are frequently aimed at individuals. This is particularly true of direct-mail and telemarketing campaigns based on the use of segmented lists that come from information contained in databases. Targeted marketing reduces the waste that occurs in other forms of communications. 

Call for Immediate action: Direct marketing offers calls for specific and immediate action. The prospect is encouraged to place an order or request more information by calling a number or sending in a card.

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Personalization: In direct marketing communications, individual consumers are addressed by name. while business prospects should be addressed by name & title. Information from a database is used to produce a specific appeal based on consumer’s personal characteristics and/or past purchase behavior.

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Measurement: Direct marketing activities have an advantage since it facilitates performance tracking. Campaigns can be monitored to determine its success and precisely identifying what worked and what did not. This helps in the efficient allocation of marketing resources. Tracking performance allows direct marketers to analyze relationships between customer characteristics & buyer behavior in their database.

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Invisible strategies: Direct marketers have the advantage to conceal their strategies from their competitors or make it less visible since they are on a one-to-one communication with their customers.

Prof. Simmonelle D’Souza

Mass Marketing Vs One-to- One Marketing            

Average customer Customer anonymity Standard product Mass production Mass distribution Mass advertising Mass promotion One way communication Economies of scale Share of market All customers Customer attraction

Individual customer Customer profile Customized market offerings Customized production Individualized distribution Individualized messages Individualized incentives Two way communication Economies of scope Share of customers Profitable customers Customer retention

Benefits of Direct marketing 1. Saves time and is easily measurable. 2. Introduces a customer to a large variety of products at a time. 3. Comparative shopping is possible by browsing through mail order catalogues & online shopping. 4. Can order goods for ourselves & others also. 5. Sellers also benefit, they can personalize, customize messages. 6. Direct marketers can build a continuous relationship with each customer. E.g. Parents of newborn babies may receive periodic mailings on clothes, toys etc as the

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child grows. Nestle baby division builds a database continuously of new mothers and sends personalized packages of gifts and advice at the key stages in the baby’s life. 7. Direct marketing strategies can be timed to reach prospects at the right time and moments. Thus, DM receives a higher readership because it is sent to more interested prospects. 8. Direct marketing strategies & offer benefit the marketer 9. since it is less visible to the competitors. 10. Direct marketing helps in building effective long-term relationships with the customers and this helps in getting customers to stay loyal. 11. The measurable response to direct marketing campaigns help to decide the more profitable ones.

Prof. Simmonelle D’Souza

Decision Variables in Direct Marketing For Direct Marketing, the following variables are associated with making program decisions: 1. Offer 2. Creative 3. Media 4. Timing/sequencing 5. Customer service  Offer: The ‘Offer’ is the complete proposition made to a prospective customer by the firm selling the good or service. It includes the product or service, the positioning of the product or service in terms of needs or benefits, the price of the offering, any risk-reduction mechanisms such as money-back guarantee, or price refund or discounts available to the buyer.  Creative: The creative component includes the copy platform, graphic design elements, involvement techniques, and production considerations such as personalization.  Media: The media used by direct marketers include all those used by general marketers as well as direct mail, telephone, and online services. Direct- response print & TV advertising are particularly effective in generating responses to complex offers that contain items that can be displayed visually.  Timing/Sequencing: Timing & Sequencing of direct marketing communications determine whether the product or service is offered once or as a part of a campaign, that is, as one-shot message or as multiple messages. Also at issue is whether a campaign should be on intermittently (pulsing) or continuously, as well as how often should the communication be repeated.  Customer Service: Customer service is an important aspect of DM. It leads to strong customer franchise and loyalty. Satisfaction with service is a prime consideration in customers repurchase decisions. In fact, many direct marketers consider expenditures on customer service and loyalty as an investment. The types of customer service that build businesses include speedy and accurate order fulfillment; prompt and satisfactory handling of customer inquiries and complaints; and a guaranteed return policy (such as- ‘if damaged/defective, email us at or write to us at-----’ or ‘to provide you a worry free shopping experience, we offer you a No Questions Asked Return Policy, within 7 days…..’). Other important elements of customer service are toll-free telephone numbers, money-back guarantees, and the acceptance of credit cards.

Prof. Simmonelle D’Souza

Direct Marketing Advantages 

Selective Reach- DM reaches a large number of people, reduces waste coverage, and targets consumers with the highest potential.

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Segmentation Capabilities- Direct marketers maintain lists of recent product purchasers, car buyers, property buyers, bank-card holders, credit-card holders, cellular service users and so on. Segmentation is done through these lists on the basis of geographic area, occupation, demographics, psychographics. Marketers develop effective segmentation strategies.

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Frequency- Direct marketers build frequency levels through the medium /media used. Direct-response TV advertising is quite inexpensive. The frequency through direct mail is not easily accomplished.

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Flexibility- Direct marketing uses a variety of creative forms. A direct mail provides detailed information; direct-response TV advertising combines sound, sight and motion and allows product demonstration and so on.

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Timing- DM, unlike other media can be much more timely. For e.g. a direct mail can be put together very quickly and distributed to the target population.

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Personalization- Direct marketers can personalize the messages & offers most effectively.

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Costs- the CPM for direct mail is high but its ability to specifically target the audience eliminates any waste coverage and hence reduces the actual CPM. Cost per consumer purchase contributes to cost-effectiveness of direct-response advertising. The cost of media is low, and each sale generated is inexpensive.

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Measures the Effectiveness- Direct marketing program measures the effectiveness of the activity effectively. The feedback generated is immediate and accurate. This helps in the measurement of the DM activity.

Prof. Simmonelle D’Souza

Direct Marketing Disadvantages 

Junk Mail- Direct marketing suffers from poor image factors. Direct mail is often treated as junk mail. Direct-response ads on TV are often low-budget ads for low-priced products. This contributes to the image that something less than the best products are marketed although home shopping channels do promote some expensive products. Telemarketing and spam are irritating to many consumers thus lowering the image of the direct marketing industry.

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Accuracy- One of the advantages of DM is targeting specific, potential customers. But, the effectiveness depends on the accuracy of the lists used which is very often inaccurate. Lists must be continually updated. Selectivity decreases if lists are not kept current. Computerization has improved the currency of lists, yet the ability to generate lists remain a problem.

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Content Support- Direct-response advertising requires the creation of mood but it is limited to the surrounding program and/or editorial content. Direct mail, online services also unlikely to create a desirable mood.

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Rising Costs- The Rising costs of direct marketing program serves as a disadvantage to the marketer.

Prof. Simmonelle D’Souza

Limitations of Direct Marketing  Acquisition of data of individual customers may be difficult – Direct marketing is effective only when all information about the individual customer is available. It may be difficult to acquire this data, as people would be reluctant to part with personal information. 

The customers could be exposed to information overload – In today’s rich business and personal environment everyone is bombarded with all types of data. Daily people receive letters, voice mails, catalogues etc. Welcome and unwelcome information accosts the senses through the radio, television, telephone, books etc. Direct marketers are perceived to be contributing to this overload.

 Requires highly skilled staff to analyze each customer profile – In Direct marketing communications, individual customers should be addressed by name & title. Also information from database is used to produce specific appeal based on consumers personal characters &/or past purchase behavior. It is therefore important that the profile of each individual customer is accurately maintained. This would be possible only if the staff employed is highly competent to carry out this accurately. 

Customer Service rather than customer loyalty is more important in direct marketing

It is important to enter the data each time a transaction is made. The company can keep a track of :  How recently purchases have been made  How often are they made  What amounts of money are spent Tracking which products/services are used increases the ability to track the customer population & develop effective marketing strategies.

Prof. Simmonelle D’Souza

Objectives of Direct Marketing The main four objectives are as follows:    

Sale of products/Services Lead Generation- People who respond to DM or are interested. Lead Qualification- A prospect Establishing & Maintaining Customer Relations.

Direct Marketing- Direct contact with customers through emails, telephone, direct mail or Direct response using mass media such as TV, Internet.  Direct Mail- Fax mail. Email, Voice mail, Solo mails, Product catalogue/ brochures.  Direct-response TV & Radio- direct response; Infomercials, Space advertising-print, Specialty advertising in print; Binding cards ( Response cards- magazines), Specialty advertising in various media- coupons, samples etc. Now, for successful implementation of direct marketing program, a company needs to take a number of decisions. It is important to determine:  What the program’s objective will be  Which markets to target through the use of a list or a marketing database  What direct marketing strategies will be employed?  How must the effectiveness of the program be evaluated? Lastly, to determine the effectiveness of database, the database must be frequently updated. RFM Scoring method must be employed to databases. RFM- Reach, Frequency, Monetary transactions between the company and the customer.

Principles of Direct Marketing There are eight key principles of direct marketing & they are as follows: 1. Planning your marketing activity: All direct marketing should form part of a controlled marketing strategy, which has been produced as a result of market and competitor analysis and in relation to achievable objectives. 2. Targeting your customer: Customer information should be stored and capable of manipulation and retrieval from your customer database, to contact your existing customers. Analysis of this also helps you to identify characteristics of potential future customers. 3. Measuring your marketing activity: The results of direct marketing should be measured to tell you what works and what doesn't.

Prof. Simmonelle D’Souza

4. Tracking: This involves monitoring customers' responses over time, ideally for as long as your relationship with them lasts. This enables you to measure their value and understand how much of it is a result of how you marketed to them. 5. Customer behavior: Tracking the spending patterns and general behavior of your customer can help you establish which products are popular and which aren't. This can help you determine future products and strategy. 6. Future strategies: One aim of marketing is to maximize the value of your customers. So, the previous steps will ensure you have the information to plan effective and efficient marketing to achieve this aim. 7. Developing long-term loyalty: By targeting the right customers, offering them what they want and encouraging them to take more of your products, you will protect your customer database. Your customers will be more likely to stay with you for longer. 8. Encouraging profitable business growth: Increasing the number of loyal and valuable customers you have and limiting the number of customers with low value and/or high risk to achieve the profitable growth of business. This increases turnover and profit, which can be reinvested to ensure that service and product standards are maintained and ensure that your customers stay happy.

Elements of Direct Marketing Program The first step is to Establish your market objective: Secondly, Estimate the size of the market. There are two ways of doing it- understanding that an increased conception of existing users increased conception of the market. Evaluate the market place: 1. 2. 3. 4. 5. 6.

Business environment Competitive analysis- who are they? Entry barrier. Customer-market segments- SEC, demographics, psychographics, identifying TG. Product-use behavior- heavy & medium user. Product & market phase Evaluating past performance- % response rate, sales, no. of requests for information, no. of qualified leads, new customers acquired, lapsed customers, customer acquisition cost (ratio of marketing cost & customer acquired), Customer lifetime value evaluation 7. Developing a Communication Strategy 8. Identifying Target audience 9. Positioning of the brand 10. Key selling proposition (USP)

Prof. Simmonelle D’Souza

Types of Direct Marketing Direct marketing can be applied to all three key business sectors: • Business to consumers: • Business to intermediaries: • Business to business:

Approaches to Direct Marketing  Stand-Alone Direct Marketing This could be regarded as the “ultimate" Direct marketing approach. Organizations that employ this type of approach employ no other means to manage the relationship with their customers. Companies such as ‘First Direct’, ‘Direct Life insurance’ or Bazee.com fall under this category. Here the customers are directly recruited via direct response press advertising, direct mail or the internet. Thereafter, the relationship is managed using a combination of telephone, mail, e-mail etc.  Integrated Direct Marketing In this approach Direct Marketing is viewed as a part of an integrated marketing mix. Organizations such as 'Save the child', 'Readers Digest', ‘Pizza-Hut’ are seen to adopt this approach.  Peripheral Direct Marketing In this type of approach, Direct Marketing is employed as only an occasional, tactical marketing tool. Here direct marketing could be initiated as a short-term response to decreasing sales or competitive pressures. Hindustan Lever and many other FMCG companies adopt this form.

Prof. Simmonelle D’Souza

MODULE III Customer Relationship Management According to Dwyer et al, 1987 to maintain a long term customer value relationship, the main and the key ingredient is the commitment towards the kind work that is done in the organisation. Customers being more liable and committed towards their own work help to create value for their own suppliers. At the same point of time delivering value for the customers results in the connection with large business organisations that can upkeep their challenges towards their consumers.

(Source: http://www.power9.net/home/client.jsp)

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“Customer-centricity involves aligning organizational resources for effectively responding to the ever-changing needs of customers, while building mutually profitable relationships.” - Craig Bailey & Kurt Jensen To create value and delivering value to the customers Customer relationship management has played a crucial role in defining the value among the customers. According to Theodre Levitt, 1960 to maintain the relationship among the customers it is necessary for each and every marketing organisation in this economy to create and keep their customers fullest up to their expectations. The strategy of the business which involves in selecting and managing the relationships among the customers to create the value among the customers is known Customer Relationship Management. Drucker, 1985 has aimed towards the objective that the relationship with the customers for delivering the value has always proved beneficial for the assets of the business and these benefits have made the organisations work up to their capability and ability.

(Source: http://www.marketingmo.com/2create-tools-and-processes/how-to-select-crm-for-your-business/)

Prof. Simmonelle D’Souza

Looking at the figure above it is being understood that to create and deliver value among the customers Customer Relationship Management has the ability of creating common values in all the parties among the business organisations. Berry, 1983 defines CRM as, “attracting, maintaining and enhancing customer relationships in the multi service organisations”. In relation value creation and delivering value to customers CRM relates to join forces with the customers and their consumers such as the value of superiority is achieved by them.

Features of CRM

Customer Relationship Management is a strategy which is customized by an organization to manage and administrate its customers and vendors in an efficient manner for achieving excellence in business. It is primarily entangled with following features: 1. Customer’s Needs- An organization can never assume what actually a customer needs. Hence it is extremely important to interview a customer about all the likes and dislikes so that the actual needs can be ascertained and prioritized. Without modulating the actual needs it is arduous to serve the customer effectively and maintain a long-term deal. 2. Customers Response- Customer response is the reaction by the organization to the queries and activities of the customer. Dealing with these queries intelligently is very important as small misunderstandings could convey unalike perceptions. Success totally depends on the understanding and interpreting these queries and then working out to provide the best solution. During this situation if the supplier wins to satisfy the customer by properly answering to his queries, he succeeds in explicating a professional and emotional relationship with him. Customer Satisfaction- Customer satisfaction is the measure of how the needs and responses are collaborated and delivered to excel customer expectation. In today’s competitive business marketplace, customer satisfaction is an important performance exponent and basic

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differentiator of business strategies. Hence, the more is customer satisfaction; more is the business and the bonding with customer. Customer Loyalty- Customer loyalty is the tendency of the customer to remain in business with a particular supplier and buy the products regularly. This is usually seen when a customer is very much satisfied by the supplier and re-visits the organization for business deals, or when he is tended towards re-buying a particular product or brand over times by that supplier. To continue the customer loyalty the most important aspect an organization should focus on is customer satisfaction. Hence, customer loyalty is an influencing aspect of CRM and is always crucial for business success. Customer Retention- Customer retention is a strategic process to keep or retain the existing customers and not letting them to diverge or defect to other suppliers or organization for business. Usually a loyal customer is tended towards sticking to a particular brand or product as far as his basic needs continue to be properly fulfilled. He does not opt for taking a risk in going for a new product. More is the possibility to retain customers the more is the probability of net growth of business. Customer Complaints- Always there exists a challenge for suppliers to deal with complaints raised by customers. Normally raising a complaint indicates the act of dissatisfaction of the customer. There can be several reasons for a customer to launch a complaint. A genuine reason can also exist due to which the customer is dissatisfied but sometimes complaints are launched due to some sort of misunderstanding in analyzing and interpreting the conditions of the deal provided by the supplier regarding any product or service. Handling these complaints to ultimate satisfaction of the customer is substantial for any organization and hence it is essential for them to have predefined set of process in CRM to deal with these complaints and efficiently resolve it in no time. Customer Service- In an organization Customer Service is the process of delivering information and services regarding all the products and brands. Customer satisfaction depends on quality of service provided to him by the supplier. The organization has not only to elaborate and clarify the details of the services to be provided to the customer but also to abide with the conditions as well. If the quality and trend of service go beyond customer’s expectation, the organization is supposed to have a good business with customers.

Prof. Simmonelle D’Souza

Let it be a newly brought up enterprise or an established organization the above aspects prove to be of prime importance in dealing with a genuine customer through a well-organized CRM system. 1. A CRM system consists of a historical view and analysis of all the acquired or to be acquired customers. This helps in reduced searching and correlating customers and to foresee customer needs effectively and increase business. 2. CRM contains each and every bit of details of a customer, hence it is very easy for track a customer accordingly and can be used to determine which customer can be profitable and which not. 3. In CRM system, customers are grouped according to different aspects according to the type of business they do or according to physical location and are allocated to different customer managers often called as account managers. This helps in focusing and concentrating on each and every customer separately. 4. A CRM system is not only used to deal with the existing customers but is also useful in acquiring new customers. The process first starts with identifying a customer and maintaining all the corresponding details into the CRM system which is also called an ‘Opportunity of Business’. The Sales and Field representatives then try getting business out of these customers by sophistically following up with them and converting them into a winning deal. All this is very easily and efficiently done by an integrated CRM system. 5. The strongest aspect of Customer Relationship Management is that it is very costeffective. The advantage of decently implemented CRM system is that there is very less need of paper and manual work which requires lesser staff to manage and lesser resources to deal with. The technologies used in implementing a CRM system are also very cheap and smooth as compared to the traditional way of business. 6. All the details in CRM system is kept centralized which is available anytime on fingertips. This reduces the process time and increases productivity.

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7. Efficiently dealing with all the customers and providing them what they actually need increases the customer satisfaction. This increases the chance of getting more business which ultimately enhances turnover and profit. 8. If the customer is satisfied they will always be loyal to you and will remain in business forever resulting in increasing customer base and ultimately enhancing net growth of business. In today’s commercial world, practice of dealing with existing customers and thriving business by getting more customers into loop is predominant and is mere a dilemma. Installing a CRM system can definitely improve the situation and help in challenging the new ways of marketing and business in an efficient manner. Hence in the era of business every organization should be recommended to have a full-fledged CRM system to cope up with all the business needs.

The use of Technology in CRM (Customer Relationship Management)

CRM or Customer Relationship Management is a system that caters to the management of a firm’s interactions with past, present, and future customers. The CRM software integrates the entire customer relationship cycle by automating sales, marketing, customer service, and technical support. CRM software is a solution that automates the disparate and discreet aspects of the customer relationship management lifecycle and integrates the range of functions that the organization has to actualize customer relationship management. Further, the CRM software manages the firm’s interactions with their clients throughout the entire lifecycle of customer management starting with cold calling and extending to customer acquisition, and customer retention among other elements. This research article critically analyzes the concept of CRM and CRM software from multiple perspectives. History of CRM

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The concept of CRM originated in the 1970s with the shift in emphasis among businesses from being product emphatic to customer emphatic. The foundation for the CRM paradigm was laid during the 1980s with the introduction of database marketing, and the creation of customer focus groups led to adoption of CRM by SMEs (Small and Medium Enterprises) CRM as a concept and trend became hugely popular in the 1990s as its use ensured that businesses could reap large benefits. The period covering the 1990s also witnessed a number of advances in the CRM systems. With the business world embracing the internet starting in the 1990s and the consumers taking to the web in a big way starting in 1995, the path was laid for the rollout of CRM to businesses and consumers. In the previous decade, the demand for CRM software turned into a frenzy with the information age in full swing during this time. In short, it can be said that starting from the 1970s and continuing to this day; CRM began to be adopted slowly and hesitantly by businesses which has now transformed itself into a must have software for any business.

Importance of Customer Relationship Management (CRM) Customer Relationship management is the strongest and the most efficient approach in maintaining and creating relationships with customers. Customer relationship management is not only pure business but also ideate strong personal bonding within people. Development of this type of bonding drives the business to new levels of success. Once this personal and emotional linkage is built, it is very easy for any organization to identify the actual needs of customer and help them to serve them in a better way. The significance of CRM is that it revolutionizes the customer relationship process by automating the customer life cycle and by integrating the entire customer management process. As has been discussed elsewhere, the use of IT and software to automate the customer relationship process as well as the improved customer management through a holistic approach instead of a piecemeal approach are what makes CRM especially significant. With the business world and the consumer base using IT widely, the significance of a CRM system cannot be overstated. Further, CRM yields exponential returns to the businesses as it ramps up the customer base quantitatively and introduces qualitative efficiencies into the customer relationship process. Prof. Simmonelle D’Souza

Advantages and Disadvantages of CRM Advantages of CRM: There are many benefits of implementing a CRM system, and these include better customer management, increased customer acquisition, efficient customer retention, and improved prospecting for new customers as well as reaching out to old customers for rejuvenating the relationship. The important point to note about a CRM system is that it introduces synergies across the customer relationship cycle leading to greater efficiency and productivity of the employees handling customer relationships. Further, since the CRM system automates the disparate customer management functions (sales, marketing, customer service, and technical support) along with integrating the entire customer relationship lifecycle, the returns from old, existing, and new customers are more. One of the main benefits of a CRM system is that it smoothens the customer retention process and leads to more returning customers, which is always a sign of a healthy and productive company. Next, the CRM system helps in complementing and supplementing the physical customer relationship effort and by automating customer touch points; it ensures that there are few errors or mistakes committed during the customer relationship management process. Finally, the enterprise-wide automation of all functions and processes that many organizations actualize help the CRM subsystem to provide decision makers with a bird’s eye view of the customer relationship process, empower, and enable them with more visibility over the process by giving them data and meaningful information.

Disadvantages of CRM: The main disadvantage with a CRM system is that it might result in redundancies being introduced into the customer management process because of duplication of effort and the double work associated with sales and marketing personnel unable to adjust to the automation.

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The next disadvantage is that the CRM system might result in more complexity, which if not managed properly can lead to chaos and a lack of planning for key activities in the sales and marketing lifecycle. Third, if the implementation and the subsequent user training have not been done properly, it might result in a workforce that is illiterate as far as the use of the CRM software is concerned. This might result in the workforce being unable to use the system effectively. Finally, the costs from the CRM implementation can sometimes exceed the benefits leading to losses for the firms.

What is Customer Relationship? In CRM the alphabet ‘R’ means relationship. But there is always an ambiguity to understand the actual meaning of this relationship. This relationship between supplier and customer is not a personal relationship or a one-time transaction relationship; for example buying a refrigerator from a consumer’s outlet would not be called as a relationship. Relationship between any two parties is actually the interaction or transaction done between the two over-times or consists of a continuous series of synergistic episode of interaction many a times. This relationship only exists when the two parties diverge from a state of autonomy to mutual or interdependent. Occasionally having a cup of tea from a café does not mean that there is a relationship. If the customer returns to the café and orders the same tea again because he likes the environment and taste or the method of making tea, more looks like a relationship. Relationship with customers can change from time to time because it is evolved under distinguished situations. Following are the stages from where the relationship with customers can evolve-

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Exploration- Exploration is the process when customer investigates or tests the supplier’s capabilities and performance or cross verifies the product’s or brand’s usefulness. If the test results fail to satisfy customer’s demands, the relationship can drastically come to an end.

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Awareness- Awareness is the process when the customer understands the motivational values of supplier or the products he sells.

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Expansion- Expansion is the process when the supplier wins customer’s faith and customer falls under huge interdependence of the supplier. This is time when there are more chances of business with that particular customer and expand business.

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Commitment- Commitment is a powerful stage when suppliers learn to adapting business rules and goal to excel.

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Dissolution- Dissolution is a stage when customer requirement suddenly changes and he looks for better perspectives. This sudden change is the end of relationship.

Relationship can come to an end due to many reasons like - customer is not satisfied with the services of supplier or customer diverges to other better brands and products. Suppliers can also prefer to break relationships due to customer failing to be a part to increase sales volume or when the suppliers are entangled with fraud cases. Broadly there can be two distinguished attributes of a developed relationship between supplier and customer: 1. Trust: Trust means confidence and security in any relationship and can be treated as the biggest investment in building long term relationships. Trust is developed between the two parties when they experience flawless and satisfied motives between each other. As a result of knowing more about each other, all the doubts and risks are minimized and leads to inevitably smooth business. Lack of trust on the other hand weakens the relationship foundation and chances of uncertainty and conflicts increases. 2. Commitment: Commitment is yet another milestone that should be achieved to set a long term mutual relationship. Commitment can only be attained when there is mutual trust and the two parties share each other’s values. In a committed relationship both suppliers and customers strive to uphold the relationship and

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never want to exit which in turn results in building the relationship stronger and sharper. There is, in fact, huge cost which is incurred in switching from committed relationships of one supplier and build new relationships with other suppliers from scratch. Relationship is always mutual or reciprocal so it is important for both supplier and customers to stick to common guideline to attain better relationship among each other. There is lot of involvement of cost, efforts and time in striving developed relationships between the two parties but the outcome is always inevitable.

Need for Relationship with Customers

Building relationship with customers in current market trends is the most important aspect that an organization should focus on. Distinction and eminence are now most sustainable and affirm for which developing good relationship with customers is must. Some of the substantial outcomes of building a quality relationship is explained below by which need of relationship with customer are insight: 1. Better Customer perceptiveness- As the customer lengthens to deal with a supplier, the supplier tends to explicate a better insight of customer’s needs and expectations. By this a high level of relationship can be developed between them. This will result in selling more products and retain the business with the customers which finally will lead to profitable business. 2. Lead to Customer Satisfaction- Customer satisfaction is the measure of how the needs and responses are collaborated and delivered to excel customer expectation. It can only be attained if the customer has an overall good relationship with the supplier. In today’s competitive business marketplace, customer satisfaction is an important performance exponent and basic differentiator of business strategies. Hence, the more is customer satisfaction; more is the business and the bonding with customer.

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3. Lead to Customer Loyalty- Customer loyalty is the tendency of the customer to remain in business with a particular supplier and buy the products regularly. This is usually seen when a customer is very much satisfied by the supplier and re-visits the organization for business deals, or when he is tended towards re-buying a particular product or brand over times by that supplier. To continue the customer loyalty the most important aspect an organization should focus on is customer satisfaction, hence it can be said that customer loyalty is also an outcome of good relationship. 4. Lead to Customer Retention- Customer retention is a strategic process to keep or retain the existing customers and not letting them to diverge or defect to other suppliers or organization for business and this only possible when there is a quality relationship between customer and supplier. Usually a loyal customer is tended towards sticking to a particular brand or product as far as his basic needs continue to be properly fulfilled. He does not opt for taking a risk in going for a new product. More is the possibility to retain customers the more is the probability of net growth of business. 5. Chances of getting referrals- It is always a cost-free advocacy by customers to provide referrals to supplier when they feel satisfied and encouraged and when they have a healthy relationship with customers. These referrals or customer’s reference of other customers acts like a piece of cake for suppliers as there is no cost and struggle involved in this. This could be treated as the best outcome of quality relationship what a supplier can think of. 6. Growth in revenue- When suppliers have healthy relationship with customers the revenue of the organization always increases as customers tend to buy more and more. There is possibility that a satisfied customer seek to buy special category of related products apart from the regular ones from that particular supplier. For instance if a satisfied and loyal customer has a home insurance from an insurance company then there are positive chances that he could also insure his property and car also if he is fully satisfied with the services of that insurance company. This will definitely result in growth of business. 7. Cost to serve is low- Cost to serve existing satisfied customers is always very less for the supplier as they know and understand customers. Customers never come back

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with complaints and queries because they know the actual business flow and completely rely on the relationship with supplier. By the above substantial outcomes it is prominent that creating and maintaining relationship with customer is always a key to success.

Different Types of Customers Customers play the most significant part in business. In fact the customer is the actual boss in a deal and is responsible for the actually profit for the organization. Customer is the one who uses the products and services and judges the quality of those products and services. Hence it’s important for an organization to retain customers or make new customers and flourish business. To manage customers, organizations should follow some sort of approaches like segmentation or division of customers into groups because each customer has to be considered valuable and profitable. Customers can be of following types: 1. Loyal Customers- These types of customers are less in numbers but promote more sales and profit as compared to other customers as these are the ones which are completely satisfied. These customers revisit the organization over times hence it is crucial to interact and keep in touch with them on a regular basis and invest much time and effort with them. Loyal customers want individual attention and that demands polite and respectful responses from supplier. 2. Discount Customers- Discount customers are also frequent visitors but they are only a part of business when offered with discounts on regular products and brands or they buy only low cost products. More is the discount the more they tend towards buying. These customers are mostly related to small industries or the industries that focus on low or marginal investments on products. Focus on these types of customers is also important as they also promote distinguished part of profit into business.

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3. Impulsive Customers- These customers are difficult to convince as they want to do the business in urge or caprice. They don’t have any specific item into their product list but urge to buy what they find good and productive at that point of time. Handling these customers is a challenge as they are not particularly looking for a product and want the supplier to display all the useful products they have in their tally in front of them so that they can buy what they like from that display. If impulsive customers are treated accordingly then there is high probability that these customers could be a responsible for high percentage of selling. 4. Need Based Customers- These customers are product specific and only tend to buy items only to which they are habitual or have a specific need for them. These are frequent customers but do not become a part of buying most of the times so it is difficult to satisfy them. These customers should be handled positively by showing them ways and reasons to switch to other similar products and brands and initiating them to buy these. These customers could possibly be lost if not tackled efficiently with positive interaction. 5. Wandering Customers- These are the least profitable customers as sometimes they themselves are not sure what to buy. These customers are normally new in industry and most of the times visit suppliers only for confirming their needs on products. They investigate features of most prominent products in the market but do not buy any of those or show least interest in buying. To grab such customers they should be properly informed about the various positive features of the products so that they develop a sense of interest. An organization should always focus on loyal customers and should expand or multiply the product range to leverage impulsive customers. For other types of customers strategies should be renovated and enhanced for turning out these customers to satisfy their needs and modify these types of customers to let them fall under loyal and impulsive category.

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MODULE IV IMC (Integrated Marketing Communication)  Review of Marketing Plan- Objectives, role of advertising & promotions, Competitive analysis, assess environmental influences.  Analysis of Promotional Program SituationInternal Analysis Promotional dept. orgzn.

External Analysis Consumer behavior analysis

Firm’s ability to implement

Market segmentation &

promotional program

target marketing

Agency evaluation &

Market positioning

selection Review of previous program results

     

Analysis of Communication Process: Analyze receiver’s response process Analyze source, message, channel factors Establish communication goals & objectives Budget Determination Develop IMC Program- Set objectives, determine budget, develop medium/media  Integrate & Implement Marketing Communication  Monitor, Evaluate & Control IMC Program

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The Role of Direct Marketing in the IMC Program  Advertising & Marketing IMC considers all sources of brand or company contact that a customer/prospect has with a product/service. It is a way to coordinate and manage the marketing communications program to ensure that they give customers a consistent message about the company and/or its brands. Consumers’ perceptions- a synthesis of the bundle of messages they receive- media advertisements, price, package design, direct marketing efforts, publicity, sales promotion, websites, POP displays & the store itself. IMC is a centralized messaging function.  The Promotional Mix consists of:  Advertising  Direct Marketing  Internet Marketing/ Interactive Marketing  Sales Promotion  Publicity/ Public Relations  Personal Selling  Combining Direct marketing with Advertising: Direct Marketing is a form of advertising through mail, print or TV- Direct response ad.  Combining Direct Marketing with Internet/Interactive: Direct marketing makes use of online promotions through websites, interactive CDs/DVDs/kiosks to seek a response or complete a sale. Online catalogues promote the product/service to elicit a response.  Combining Direct Marketing with Public Relations/ Publicity: Public relations activities and Publicity oriented activities employ direct marketing & direct response techniques.  Combining Direct Marketing with Personal Selling:

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Telemarketing & direct selling is an aspect of Personal selling. In multi-stage selling, direct mailers are used to invite prospects or after direct selling efforts, direct mailers are sent as a follow-up & reminder.  Combining Direct Marketing with Sales Promotion: Direct mailers inform a prospect of sales promotion events/activities or invites a prospect by way of contests & prizes & gifts as incentives. In sales promotion implementation, direct marketing tools are employed to inform customers.

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MODULE V Economics of Direct Marketing in relation with customer Life time value (LTV) Economics of Direct Marketing Introduction: • They say it takes money to make money, and this is something all companies understand when it comes to advertising costs. If consumers don't know what you have to offer, you'll waste a lot of time sitting around waiting for the phone to ring. There are many ways to market your product and service offering, each with its own fees, development cycle and other considerations. • Direct-mail marketing has stood the test of time to remain one of the most cost-effective advertising techniques today. Like all forms of advertising, direct-mail marketing has certain fees involved. Unlike many forms of marketing, direct-mail marketing allows you to create highly targeted campaigns that can yield a great rate of return

What exactly would u spend on ? • The key is in understanding and properly applying the economics of direct-mail marketing. • There are many ways to spend money on a direct-marketing campaign. These include your mailing list, copywriting fees, designer fees, printing, mail services and postage. Conversely, there's only one way to make

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money: Turn your list of prospects into a list of customers. Naturally, the bottom line when it comes to direct-mail marketing is running a campaign that makes more money than it spends. • For new businesses, it can be difficult to estimate the rate of return. Since you don't have previous campaigns to use as a measuring stick, you'll have to rely on estimates when budgeting. So how do you calculate your return on investment? • Here's the formula: • (Number of Mailed Pieces x Response Rate x Conversion Rate x Average Sales Price) - Campaign Cost)/Campaign Cost = ROI • So what does all this mean? Here's the breakdown: • Number of Mailed Pieces = How many mailers your are sending out? • Response Rate = The percentage of people who respond to the mailers • Conversion Rate = The percentage of people who make a purchase, based on the Response Rate and not the Number of Mailed Pieces • Average Sales Price = How much, on average, each customer spends as a result of the campaign • Campaign Cost = The total spent to develop and deliver your campaign, including your mailing list, special offers, printing, mailing services, postage, design and copywriting • ROI = Return on Investment (your percentage of return)

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• Let's say, for instance, you're marketing a new widget that you sell for $100. You decide you want to send a postcard direct mailer and purchase a targeted consumer mailing list for $500. Next, you hire a copywriter and a designer at $300 apiece. Finally, you order 10,000 pieces printed, addressed and mailed for $3,500. Your total Campaign Cost is $4,300. Now, let's say you get a Response Rate of 2 percent and a Conversion Rate of 50 percent. Let's calculate the ROI: • (10,000 x .02 x .50 x $100) - $4,300)/$4,300 = 132 percent

• These are just estimates, however, and reflect good campaigns, but you need to come up with estimates without any previous campaigns to base them off of. If you're a new business, it's also difficult to tell whether you have a good campaign or bad campaign. The best way to do this is to test your campaigns against small segments of your target audience and measure the responses. Try tweaking the offer, the copy, or even your mailing list and launch several small test campaigns at once to see which performs the best. Once you've found a direct-mail campaign that yields consistent ROI, stick with it and launch it on a large scale to realize the true potential of highly targeted direct-mail marketing. Key Terms: 1) Cost per Mailed Piece (CPMP) - Let’s look at some of the solicitation costs (cost per piece mailed) involved in direct marketing. •

Your cost per piece mailed includes postage, mailing lists, printing, and assembling the packages in a lettershop.

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•

If you mail using bulk rate, your postage cost will be between 17¢ and 24¢ per piece mailed. Why the wide range? Because these rates are determined by how much sorting you do. And that is partly determined by how many pieces you mail. The larger your mailing, the more you can sort.

•

Printing a direct mail package will cost anywhere between 20¢ and $1 or more per piece, with a typical package coming in around 40¢ when you print 25,000 pieces. If you print smaller quantities, your cost per piece goes way up.

•

Mailing lists will cost anywhere from 8¢ to 25¢ per name. These are lists of people with specialized interests. The best lists are subscribers to specialized magazines or newsletters, as well as people who have bought merchandise by mail. These people are called "direct mail responsive," since we know they are willing to buy products sold through the mail. 2) Cost per acquisition (CPA), also known as pay per acquisition (PPA) and cost per conversion, is an online advertising pricing model where the advertiser pays for each specified acquisition - for example, an impression, click, form submit (e.g., contact request, newsletter sign up, registration etc.), double opt-in or sale. Direct response advertisers consider CPA the optimal way to buy online advertising, as an advertiser only pays for the ad when the desired acquisition has occurred. The desired acquisition to be performed is determined by the advertiser. Radio and TV stations also sometimes offer unsold inventory on a cost per acquisition basis, but this form of

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advertising is most often referred to as "per inquiry". Although less common, print media will also sometimes be sold on a CPA basis.

3) Response Rate: The direct mail response rate is one of the most common questions we get from clients interested in trying direct mail. Understandably, it is critical to your initial planning and expectations. But you need to be realistic. Mostly importantly, you need to be aware that the answer will vary with different direct marketing objectives.

How do you measure response? The response rate is the simplest, most common form of measuring the results of a direct mail program. The response rate reflects the percentage of people who respond to a mailing. To determine your response rate, you simply count up the number of responses the mailing generates, then divide by the quantity mailed. For example: 100 responses divided by 5,000 pieces mailed = 2% response rate.

4) Call to Action (CTA) : In marketing, a call to action (CTA) is an instruction to the audience to provoke an immediate response, usually using an imperative verb such as "call now", "find out more" or "visit a store today".

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5) Click Through rate- Clickthrough rate (CTR): Definition A ratio showing how often people who see your ad end up clicking it. CTR can be used to gauge how well your keywords and ads are performing. CTR is the number of clicks that your ad receives divided by the number of times your ad is shown: clicks ÷ impressions = CTR. For example, if you had 5 clicks and 1000 impressions, then your CTR would be 0.5%. Each of your ads and keywords have their own CTRs that you can see listed in your account. A high CTR is a good indication that users find your ads helpful and relevant. CTR also contributes to your keyword's expected CTR (a component of Quality Score), which can affect your costs and ad position. Note that a good CTR is relative to what you're advertising and on which networks. You can use CTR to gauge which ads and keywords are successful for you and which need to be improved. The more your keywords and ads relate

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to each other and to your business, the more likely a user is to click on your ad after searching on your keyword phrase

what is Customer Life time Value? LTV CLV (Customer Lifetime Value) is a prediction of all the value a business will derive from their entire relationship with a customer. Because we don't know how long each relationship will be, we make a good estimate and state CLV as a periodic value — that is, we usually say “this customer's 12-month (or 24-month, etc) CLV is $x”. Taking CLV into account can shift how you think about customer acquisition. Rather than thinking about how you can acquire a lot of customers and how cheaply you can do so, CLV helps you think about how to optimize your acquisition spending for maximum value rather than minimum cost.

What are its uses? Customer lifetime value has intuitive appeal as a marketing concept, because in theory it represents exactly how much each customer is worth in monetary terms, and therefore exactly how much a marketing department should be willing to spend to acquire each customer, especially in direct response marketing. Lifetime value is typically used to judge the appropriateness of the costs of acquisition of a customer. For example, if a new customer costs $50 Prof. Simmonelle D’Souza

to acquire (COCA, or cost of customer acquisition), and their lifetime value is $60, then the customer is judged to be profitable, and acquisition of additional similar customers is acceptable. Additionally, CLV is used to calculate customer equity.

What are its Advantages? Advantages of CLV: 

management of customer relationship as an asset



monitoring the impact of management strategies and marketing investments on the value of customer assets, e.g.: marketing mix simulators can use a multi-year CLV model to show the true value (versus acquisition cost) of an additional customer, reduced churn rate, product up-sell



determination of the optimal level of investments in marketing and sales activities

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encourages marketers to focus on the long-term value of customers instead of investing resources in acquiring "cheap" customers with low total revenue value

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implementation of sensitivity analysis in order to determinate getting impact by spending extra money on each customer

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optimal allocation of limited resources for ongoing marketing activities in order to achieve a maximum return

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

a good basis for selecting customers and for decision making regarding customer specific communication strategies



a natural decision criterion to use in automation of customer relationship management systems



measurement of customer loyalty (proportion of purchase, probability of purchase and repurchase, purchase frequency and sequence etc.)

• Customer lifetime value is a measure of customer profitability over time • CLV can be defined as “a measure of a customer’s aggregate profit to the firm over the total time that the customer deals with the firm” • CLV is calculated as a single dollar number, which summarizes the net profit/loss position of the customer’s total relationship with the firm • It is calculated on per customer basis, but is more usually determined for an the average customer within a particular market segment

Benefits of using LTV?

Regardless of its potential challenges, customer lifetime value (CLV) is a powerful tool and a very important marketing metric – sometimes referred to as “the golden metric”. In particular it helps the marketer to:

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

Measure and demonstrate the bottom-line financial impact of marketing activities,



Clearly align marketing programs with financial objectives and targets,



Focus on marketing from an marketing ROI perspective by determining the optimal balance between acquisition, share-of-customer, and enhanced loyalty objectives,

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Scenario test a range of possible strategic marketing directions,

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Determine the impact of internal marketing programs, as well as competitive and environmental factors on long-term customer profitability,



The stress testing of various marketing goals and environmental impacts,



Balance the competing needs of short-term profitability and longer term goals,



Understand the bottom-line profit contribution of different customer segments,

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

Demonstrate a long-term financial return for a range of marketing investments and



As demonstrated in the diagram, the effective management of the customer relationship will result in enhanced profitability over time.

Factors affecting LTV? Increased loyalty can generally be achieved by: 

Development of new products that meet changing needs of customers



Providing good levels of customer service

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Having a complaints analysis and recovery systems in place

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Maintaining good value for money – being considerate in pricing strategies

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Building a strong brand

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Being perceived as a good corporate citizen



Building customer relationships

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Providing financial incentives for loyalty – such as loyalty/frequent buyer programs

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Adding switching barriers

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MODULE VI Data Base Management System

What is Database? Database marketing is a form of direct marketing that uses databases of customers to generate targeted lists for direct marketing communications. Such databases include customers’ names and addresses, phone numbers, e-mails, purchase histories, information requests, and any other data that can be legally and accurately collected Information for these databases might be obtained through application forms for free products, credit applications, contest entry forms, product warranty cards, and subscriptions to product newsletters. Using our opening example, a database at a technology store might well be able to produce a list of customers who had purchased similar products and might be interested in a new promotion. These databases, once built, allow businesses to identify and contact customers with a relevant marketing communication.

The three main stages of effective database marketing • Data collection – relates to the aggregation of accurate and relevant data about both existing and potential customers, and then ensuring the data is made available in such a way as it available for use by the company’s marketers in their related activities.

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• Turning data into knowledge – requires analysing the data so that it becomes data which can be used in effective marketing and communications. For many businesses this involves using the information to segment existing and potential customers so that targeted and appropriate marketing message can be created for existing and potential customers. • Developing and evolving business strategies – involves using the data and the knowledge within a database for shaping the strategy of the business. For example, modifying company communications, the allocation of resources, pricing and other concerns that will aid longterm profit in line with the information gathered.

Importance of Database Marketing? Database marketing has become extremely pervasive, as database technology has emerged and improved. Often referred to as customer relationship management, or CRM, database marketing is the use of databases to gather and analyse customer data for delivery of targeted marketing campaigns. 1) Targeted Marketing: A primary benefit of database marketing is that it allows companies to use business intelligence to make decisions about who their top customers are and what they have in common. This makes the common marketing process of marketing segmentation more accurate. Companies analyze the database to find out what traits are shared by customers who buy certain types of products or services. This

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enables the business to target those customers with more relevant offers. 2) Improved Customer Relationships: In selling and service situations, database marketing is used to enhance the quality of your relationships with key customers. Salespeople monitor buying activity and meeting notes from all prospecting and sales activities. This allows for better maintenance of customer relationships and more add-on sales potential. From a service standpoint, company service employees can better serve each individual customer when they have data on the customer's history with the company. Again, this also allows for service calls to become add-on sales opportunities once the service issue is resolved.

Sources of E-data and what are its uses? Benefits of Database marketing

Database marketing begins with… data. The more useful data available, the more effective the campaign. Such data comes from a number of sources. Many businesses collect data as part of a typical business transaction. For example, since finance and insurance companies already must collect name, address, and other information for a sale, it takes little extra effort to retain this information in a database. Online retailers can also easily collect such information, as

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well as purchase histories; offline retailers may use club-card systems to accomplish the same thing. Additional data comes in from customer service, which can keep a record of all their customer communications. Meanwhile, marketing and sales leads create additional customer records.

While data on existing customers can be collected through transactions, data on prospects is largely obtained (purchased) from third parties. Different countries have various laws controlling what information can and cannot be sold, often restricting it to name, address, telephone number, and perhaps some demographics. Many businesses will readily sell this information to marketers; others may have privacy agreements with their customers that prevent them from doing so. Occasionally, transaction histories may also be sold. When Borders bookstores went out of business, the company sold customer records to Barnes and Noble, which was then able to market directly to Borders’

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former customers (for example, by offering Barnes and Noble member cards to those who had previously purchases Borders cards). In addition to third parties, prospect data can also be obtained through sweepstakes, on-line registrations, and other methods. Larger companies will often manage all the data they collect from varying sources through a data warehouse. The warehouse receives diverse data sets from different departments and companies, integrates it into one mega-database (often several terabytes in size), and then parses it back out into smaller databases used for various functions. The use of a data warehouse allows a business to process much greater amounts of data—and again, the more data available, the more opportunities for finding groups of customers that will respond to a customized message. At this point the real work of database marketing is done. Database analysts develop programs for filtering and mining the data for actionable information. They may segment customers based upon a number of different demographic and behaviour factors. For example, they might use RFM analysis—segmenting groups by how recent, frequent, or how much monetary value customers’ purchases are. They may also use statistical models, such as logistic regression, to predict future behaviour and create customer lists. In addition to direct marketing, database information can also be used in some systems to pull up customer information while interacting with the customer (known as real-time business intelligence), which allows for greater personalization. Additionally, databases fuel Customer

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Relationship Management (CRM) systems, which use the information to present personalized offerings of products and services.

Managing Internal & External Data There are two sources of information from where data for marketing research can be obtained. (A) Internal Sources: These refer to the sources of information within the organisation. In certain cases internal sources are indispensable without which the researcher cannot obtain desired results. Internal sources include accounting information (Trading Profit & Loss A/c and Balance Sheets of different years), salesmen’s reports, statistics in relation to advertisement expenditure, transportation costs etc. Information from internal sources is easily available and no financial burden is involved in gathering the information. (B) External Sources: In order to study marketing problems in detail the need of external sources of marketing research arises. External sources are of immense importance and utility in case where research needs detailed and thorough investigation. External sources data can be divided with two categories (a) Primary data (b) Secondary data.

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Primary Data: This refers to the information collected by the researcher from original sources. It is not a published data; it has to be gathered by the researcher himself by tapping various resources. Primary data is usually collected for specific purposes. Secondary Data: Secondary data is already existing which has been collected and published by some individuals or institutions. This data is available at a very low cost and it requires lesser time to collect it. (a) Periodicals and Newspapers: Business magazines and journals published periodically contain data which is very useful for marketing research; Newspapers such as Economic Times and Financial Express also contain data regarding business trends and market reports. Important trade journals are Industrial Times, Commerce, Capital, Market, Indian Finance, Business India, Business World and others. (b) Govt. Publications and Reports: There are innumerable publications brought by Central and State Govts, which contain valuable data for conducting marketing research. Census reports of the Government of India, Publications of Planning Commission; periodical publication such as Indian Review, various markets bulletins. Reserve Bank of India bulletin, publication of the Statistical Departments of various State Govts., supply valuable information extensively used in marketing research. Prof. Simmonelle D’Souza

(c) Trade Associations: Various trade associations like Chambers of Commerce, Export Promotion Council etc, publish useful data which is of immense help to the res warmer. (d) Published Surveys of Markets: This is another useful source of supplying secondary data. Market surveys and reports are important instruments in the hands of researcher for conducting marketing research. These are published by business houses or independent research organisations. These pertain to specific lines of products. (e) Foreign Govts, And International Agencies: Publications of foreign Govts, with regard to trade and other important aspects of economy of respective countries and information published by UNO, ILO, IBRD (International Bank for Reconstruction and Development) serve useful purpose in making comparison of Indian conditions prevailing in other countries of the world. (f) Other Sources: Besides the above-mentioned sources of marketing research, there are many other sources of supplying secondary data e.g., colleges and universities stock exchanges and commodity exchanges, specialised libraries’, internal sources such as sales and purchase records, salesman, reports, sales orders, customer complaints and records of other companies. The secondary data collected from above mentioned sources suffer from certain limitations. The basis undertaken by different agencies for Prof. Simmonelle D’Souza

collecting data may not be comparable. In other words, uniform basis may not be adopted for data collection. The data may be based on incomplete records under secondary source; data is collected for purposes other than marketing research.

Advantages & Disadvantages of Database?

Objectives of Strategies The benefits of database marketing • Improved profitability – database marketing allows a businesses to segment and target its marketing efforts in a cost-effective manner, whilst improving efficiency and profit margins. • Increase sales – effective database marketing creates more sales by providing information that allows companies to identify and exploit new market opportunities, as well as attracting new customers. • Improves marketing communications – accurate data increases the quality level of communications with customers’ existing and potential, allowing a company to massively improve its chances of building lasting customer relationships. • Improve product development – with the successful implementation of a customer database, a business will be able to gather regular and upto-date information that can be used as market research to identify where improvements can be made and where customer needs are not Prof. Simmonelle D’Souza

being met. This information can then be used in product development through by integrating conclusions derived from the research into the design of a new product. Creating a Direct Marketing budget and how do we apply it? Examples of when and how it’s used The information collated and stored on customer databases is used in a vast majority of ways. Here are four of the most common: • Calculating customer lifetime value (CLTV) – is a prediction model used in marketing that can estimate what the lifetime relationship of an individual customer will be worth to a business. The accuracy of this model and the calculations involved have become a lot more accurate as the methods involved in database marketing have improved. • Recency, Frequency, Monetary Analysis (RFM) – a marketing technique that is used to calculate the best customers of a business based on a triumvirate of factors; how recently a customer made a purchase, how frequent they purchase and how much they spend. The theory that drives the technique’s use is the marketing paradigm that 80% of your business comes from 20% of your customers. This allows the efforts of the direct marketers to be specifically targeted to the best 20% of customers. Again, like CLTV, the accuracy of this technique has improved as database marketing has. • Customer communications – an example of how database marketing improves customer communications include using information to personalise correspondence, making it easier to build up a rapport and, therefore, increase loyalty, customer retention and sales. Email, despite

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the perceptions of spam, has become an essential ancillary weapon in the toolkit of the database marketer, providing the means with which to instantly communicate with customers. • Analytical Software – increasingly businesses need to monitor their customers’ behaviour across an ever more varied number of retail channels, including websites, mobile apps and social media. Analytical software that is combined with their database can be used to synthesise this information more easily and produce instant reports that help define a company’s marketing strategies. • Loyalty programs – database marketing makes it possible for companies to launch loyalty programmes, as they can store data about their sales history. This allows companies to engage with and reward loyal customers which, in turn, can encourage customers to choose one business over another.

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MODULE I Direct Marketing Market Analysis Introduction: What is a Direct Marketing List?

Direct marketing success is dependent on the selection of your marketing lists – names and addresses, phone numbers or email addresses of people to whom advertisers will send a direct solicitation. But the list isn’t just the way you reach your market; it is the market! If you cannot identify and rent appropriate lists, your chances of success are poor. Except for your offer (the product and its price), list selection is the most important factor in determining direct marketing response. Outstanding copy and design, for example, might pull double the response of a poorly conceived mailing piece. But a good list can out-pull a weak list by a ratio of 10:1 (a difference, for example, of a 1 percent response or a 10 percent response!). Approximately 40,000 different lists are available for rental, representing a combined database of some one billion names. There are few persons in the United States whose names are not on at least one of those mailing lists.

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Types of List: The basic categories of available lists include: House list – an in-house list usually contains customers, people who have bought from you; and prospects, people who have inquired but not bought. House lists are best because they frequently pull double or more the response of even the best-performing rented lists. Compiled lists – these lists are of people or businesses compiled from published sources, such as industry directories and the Yellow Pages. Compiled lists frequently provide the best means of reaching large groups of specific audiences. For example, you can rent compiled lists of all attorneys in New York City or all radiologists in the United States. For mail order offers, however, compiled lists generally do not pull as well as response lists. Response lists – these are lists of proven direct mail buyers. Mail order offers usually get the best return through mailings to response lists of buyers who have purchased a product similar to yours and in the same price range. For example, a $10 book on small business success is likely to sell best to test lists of people who have bought similar books in the $8 to $15 price range. Attendee/membership/seminar lists – these lists contain individuals who have attended a specific trade show or industry event, belonged to an industry association or paid for seminar participation. Since relatively

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costly trade show attendance, memberships, and seminars are usually sold through direct mail, excellent results are possible from such lists. Subscription lists – these are some of the best and largest lists on the market. Two types of subscription lists exist: controlled circulation and paid circulation. With controlled circulation, the readers receive the magazine free, provided they can prove to the publisher that they fall into a certain professional category (for example, to receive a free computer magazine, the reader must work in the data processing department at a firm of a certain minimum size). Proof is accomplished by completing a subscription request form or “qualification card.” With paid circulation, the reader pays for a subscription and is not required to provide additional data other than name and address. Each type has its pros and cons. For mail order promotions, paid subscriber lists may be the better choice, because those on the list have purchased a product (the magazine) through the mail. However, controlled circulation lists offer the advantage of greater selectability. Because the subscribers have given a lot of information about themselves, you can select portions of the list according to certain characteristics, which might include job title, job function, size of company, or even the types of products purchased. Donor lists – used primarily by fund raisers, these lists contain the names of people who have contributed money to charities and nonprofit organizations. Credit card holder lists – these names are useful because the prospects can respond to your offer using a credit card. Also, credit card holders

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are somewhat “upscale” (demonstrated by the fact that they earn enough money to qualify for a credit card). Merged database lists – this type of list simplifies selection because merging lists eliminates duplicate names and offers the remaining names as a single master unduplicated list. Such databases allow list users to reach a large portion of a specific market without having to track down obscure, hard-to-find, or poorly managed lists.

List Vendors / from where do you get a list?: List Vendors Lists are usually rented for onetime usage. If you want to do a second mailing, you must rent the list again. The names and addresses of people who respond to your original mailing, however, become your property and can be added to your own in-house list. Lists are generally available from three sources: the list owner, a list manager, or a list broker. A fourth source, of course, is to compile your own lists from appropriate publications. List owners Marketers and private organizations can rent their own in-house mailing lists. If you wanted to rent a list of people who attended, say, the Chemical Exposition, you could call the show sponsor and see if the list is available. List managers

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Because the administrative details of list rentals are time-consuming, many list owners hire outside firms, called list managers, to manage and market their lists for them. If a list is handled by a list management firm, you would rent it from that firm rather than the owner. Also, list managers aggressively promote their lists (to generate commissions from rentals), and many of the ads featuring lists are placed by list management firms. List brokers A list broker is a third-party agent that acts as a liaison between the list owner or manager and the list user. Unlike list managers who work primarily for the list owner, list brokers work primarily for you, the list user. Also, while managers may have a vested interest in promoting their own lists, brokers can be more objective in their recommendations. Since all brokers have access to the same lists, they differ by the service, advice, expertise, and recommendations they offer clients. We estimate that approximately 80 percent of all list rentals are made through brokers.

Market segmentation: Profiling Your Target Market A key component of successful direct mail strategy is generating a profile of your target market or “ideal customer,” then selecting lists of people who most closely fit this profile.

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The following selection factors, available on many lists, should be: Geographic Most lists can be segmented by location: state, SCF, zip code, county, and metropolitan area. (NOTE: SCF refers to Sectional Center Facility. All zip codes included under a given SCF share the same first three digits.) If you are planning a mailing designed to get business people to attend a conference in New York City, you might mail only to executives located within a 100-mile radius of midtown Manhattan. Demographic Some lists provide quantitative characteristics of a given population: age, sex, income level, wealth, race, and other vital statistics of a personal nature. A great many mailing lists, for instance, allow selection by sex (male or female).

Psychographic This segmentation refers to the psychological makeup of your target audience and is more difficult to identify. A mailer sponsoring a seminar on “How to Become a Published Author,” for example, might mail seminar invitations to members of the AARP (American Association for Retired Persons) on the assumption that many retirees are looking for something to occupy their time and might consider writing for publication. The premise is unproven, however, and a test mailing to this list might fail to generate sufficient response. A better choice might be the Writer’s Digest

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subscription list, where people have indicated their interest in writing by buying a magazine on the subject. Buying Patterns Three important selection criteria for mail order buyers are frequency (how often they buy through the mail), recency (the date of their last purchase), and amount (how much they spent). Many list descriptions provide a dollar amount for “average order,” representing the average amount spent by people on the list. Experience proves that buyers who buy often and spend more are better prospects than those who buy infrequently and spend less. Also, contrary to what might seem logical, those persons most likely to respond to a new mail order offer are those who have recently responded to a previous mail order offer! This is why “hot lines” – the segment of a list comprised of the most recent buyers – are priced higher than the rest of the list.

How to Evaluate Lists and List Recommendations Although the list supplier can make recommendations, only you can be responsible for making the final decision concerning which lists to test. You can make a better choice by taking the time to study the broker’s list recommendations. Information about a list is traditionally provided in a format known as a “data card.” This document (sometimes an 81/2-by-11-inch sheet of paper or a computer printout) contains basic information on the list. For each list, you should look for:

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List size Lists range in size from less than 2,000 names to one million names or more. The traditional approach to direct marketing is to test a small portion of the list, then mail to a larger portion if the test is successful. For this reason, some direct marketers avoid small lists because the opportunity to expand after a successful test is limited by the total number of names available. On the other hand, to the direct marketer seeking unusual or hard-to-find prospects, such small specialized lists may be the only means of reaching certain markets. Cost per thousand Prices for postal lists typically range from $50 to $85 per thousand names, with specialized lists going for $125 to $175 per thousand and more. Be wary of firms offering so-called “bargain lists” selling for $5, $10, or even $25 per thousand; often these are absolutely worthless. Phone numbers cost between $50-$100 more per thousand and business email lists average $400 per thousand including transmission. List description Each data card contains a paragraph or two about the background of the list: its source, history, a profile of the type of buyers it represents, and a description of the product they bought, the publication they subscribe to, or the seminar they attended. Read the description to get a “feel” for the market represented by the list. Average size of order Given as a dollar amount, this represents the average size of the mailorder purchase made by the buyers on the list. Average size of order is a Prof. Simmonelle D’Souza

good indication of whether people on this list might be willing to pay your price.

Percentage of list that is direct mail-generated You will often see the phrase, “95% direct mail-generated” or “100% direct mail-generated.” This indicates the percentage of the names on the list obtained through response to direct mail. Higher percentages are better because direct mail-generated prospects and customers are more likely to respond to direct mail than people who became prospects or customers through over avenues. (Surveys indicate that as many as one third of Americans do not respond to direct mail solicitations.) Hot line This is a segment of the list that represents “hot” customers who have recently made a mail-order purchase – usually within the last 30 to 90 days (the more recent, the better). Hot lines typically rent for $10-$15 more per thousand than the rest of the list. Active versus inactive, buyer versus prospect Customer lists almost always pull better than prospect lists. If you’re thinking of testing a list of newsletter subscribers, for example, rent the list of current (active) subscribers rather than the list of former (inactive) subscribers whose subscriptions have expired. When renting a list from a mail order catalog company, obtain the names of people who have actually bought from the catalog, not those who merely requested a free catalog but did not buy. Prof. Simmonelle D’Souza

List usage report Try to get the list supplier to tell you how well the list pulled for other people who rented it – especially those with offers similar to yours. This information probably won’t appear on the data card, but it may be contained in a separate List Usage Report available from the broker. List usage reports usually show rental activity by tests (initial mailings) and continuations (rental of additional names following a successful test). If a high percentage of the mailers who tested are also listed under continuations, they are getting test results profitable enough to warrant continued use of the list – a good sign.

Selections available The data card indicates the selection criteria by which the list can be segmented. In general, the more selections, the better, because selectability allows you to mail only to those people who are closest to your target profile. Frequency of updating Question the list’s cleanliness, that is, are the names current and is the list frequently updated? Many list suppliers guarantee their lists to be clean and will refund postage costs on pieces returned (called nixes) in excess of some certain small percentage. Because approximately one fifth of the population moves every year, compiled and prospect lists get dated quickly. As a rule, a list should be updated (meaning that names no longer current are removed) at least once a year. Prof. Simmonelle D’Souza

Testing Lists In testing, a mail piece is sent to a small portion of several lists to determine which lists generate the best response. What’s a good response? It depends on your goals. Eugene Schwartz, author of “Mail Order” (Boardroom Books), considers a mailing successful if it generates profits 30 percent in excess of the cost of the mailing. Some mailers, however, require a greater profit while others are content to break even on an initial mailing just to add hot customer names to their house list. If test results show that a list works for your offer, then immediately mail the same package to a larger chunk of the list. This process of expansion is called roll-out. If a test mailing fails to pull the desired result, the list is considered a “dud” and no additional names are mailed. How many names must you mail to generate a meaningful test result? Table 1 provides a method for determining the number of pieces you should test. The two key elements are confidence level and percent decline. The mailer wants to know, with a certain degree of confidence, that the response rate won’t decline more than a certain percentage when mailings are expanded. (http://www.reachmarketing.com/choosing-effective-lists/)

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Direct Marketing Case Study *This is one way of solving the case study. You may create one of your's too! If you look at the previous board papers, you will find the four pointers on the basis of which you have to answer the case study (for a direct marketing plan for a product/service) viz, Product Offering, Lead Generation, Database Development, and Methodology/Channels Used. 1.

Product/Service Offering

2.

Lead Generation

3.

Lead Qualification

4.

Database Development And Management

5.

Methodology And Approach

6.

Channels/Tools

I have listed more than the normal four pointers so that we are more adept at attempting and describing our solutions in a more structured format. You can use this or you can use the 4 pointers usually given in the examination. How do we solve/write/explain each point? Simple efforts, this case study should be a cakewalk. Let’s take it point by point. Product Offering: Please be as detailed yet logical as possible. Let’s say, this is your playground for product/service offering development and description. Include as many characteristics, features, variations, and so on but make sure you use pointers and then describe them. The more better the product offering development/description, the better it is for you guys to solve the CS. Include the price, and the place, if applicable and possible. This takes care of your 3 Ps of traditional marketing.

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Segmentation: Refer the segmentation unit of the notes and describe your TG in brief here. This is your platform for delving further into meaningful lead gen. Include this point before Lead Gen even if it not asked cuz you anyways will have to write it to tell us the lead gen sources, how, what, and why. Moving on to Lead Gen: From segmentation (which should be crisp and brief), you guys can now talk about lead gen sources, how you will do it. As discussed in class, there can be multiple ways to generate leads. There is no hard and fast rule that there is only one way to do lead gen. Depending on the product/service, write as many ways you think you can generate leads (in points again with description). Lead Qualification : From above, write how you will qualify to better filter your leads. Method and reasons. What, how and why! Database Development and Management: Include the four points as below; 1.

Manage the data source

2.

Manage the data entry

3.

Manage the database

4.

Manage the application

Refer Unit 06 Database Marketing And Management for detailed note on each. Write in brief using all the points explaining in the context of the question asked. Methodology And Approach: Describe the approach that you are going to use – Stand alone, Integrated, and/or Peripheral. What, how, and why! Under Unit 01 Direct Marketing – An Introduction, you will find the method to achieve your objectives via One-stage selling, Continuity relationship, and/or Multiple-stage selling. Analyze your product/service offering and write your methodology accordingly. These ways to achieve your objectives can also be used at lead gen level where you can use one-stage, dual-stage, or multi-stage selling eg: Lead gen for a magazine to get database for future use (one-stage), lead gen to get database of

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subscribers and offering them subscription at the same time (dual), similarly, multi-stage, if it fits into your strategy. Channels/Tools: This is your last P from the 4 Ps. Write all the knowledge that you got while doing your group project in terms of the channels/tools used. Use multiple/varied tools depending on your offering. Describe each tool in brief - “what, how, and why?” No creatives guys. No budget/costing! You may add these and other things that you have done as part of your group project ONLY if you have extra time left. Make sure you do not spend more than required time on the CS. Do not get carried away! Finally, remember, “What, how, and why?” That’s your cue to solve each point in the Case study.

Direct Marketing LTV Sum Solution Note: The only formula you have to remember is lifetime value of a customer (LTV)! In the sum, you would be given several sources of a firm’s income and expenses all mixed up - for a certain number of years. Remember to always write the first year mentioned in the sum as the ZEROTH (0th) YEAR AND NOT THE FIRST YEAR. For example, if you have years from 2000-04, then 2000 will be the zeroth year and 2001 will be the first year and so on. Before starting the sum, make two columns ‘Income’ and ‘Expenses’ and list out the names of the incomes and expenses under each of them. Step 1 –You have to club them together, first the income (say under column A) and then the expenses (say under column B), then subtract the total of B from that of A. That gives you your total contribution [C] for each year: Total contribution (yearly) = Total income – Total expenses Prof. Simmonelle D’Souza

Step 2 – Take the decimal form of the interest rate, like 10% is 10/100 and therefore 0.1. Then add 1 to it (1+0.1=1.1) Raise that to the power of each year (starting from zero). In the above example, 2000 (year zero) =1.10=1 (the result of any number to the power of zero is 1) 2001 (first year) =1.11=1.1 2002 (second year) =1.12=1.1x1.1=1.21 2003 (third year) =1.13=1.1x1.1x1.1=1.331 or 1.33 2004 (fourth year) =1.14=1.4641 or 1.46 Round off the results to two decimal points, like 1.331=1.33. Find this for each year. Step 3 – Using the values you just found, apply the formula and get the LTV LTV= Ci /(1+d)n Where Ci is the contribution for that particular year, i is the number of years, d is the discount/interest rate or the cost of capital incurred by the company. Basically you have to take the contribution for that year, and divide it by the corresponding figure for that year which you found in step 2. That will give you the lifetime value for that particular year. So if your contribution for year zero (2000) is Rs 5,000, and in step 2 you found the figure for year 2000 to be 1, then the lifetime value for year 2000 will be 5000/1=Rs. 5,000 Step 3 – Add the LTV values of all years and you will find the total customer lifetime value. Example: Given:On 31st March

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2004

2005

2006

2007

2008

Sales

---

15,000

27,000

35,000

50,000

The rate of interest being paid by the company on loans is 10% Solution: Life Time Value=LTV= Ci / (1+d)n where Ci=net contribution for the year i i=number of years of an existing customer or an expected customer D=discount rate, interest rate, cost of capital Here; D=10% - Given Decimal form of the interest rate = 10% is 10/100 = 0.1

On march 31st

LTV= Y0 + Y1 + Y2 + Y3 + Y4 Prof. Simmonelle D’Souza

2004

2005

2006

2007

2008

= -4000/(1+0.1)0 + 9000/(1+0.1)1 + 20000/(1+0.1)2 + 24000/(1+0.1)3 + 39000/(1+0.1)4 = -4000 + 9000/1.1 + 20000/1.21 + 24000/1.33 + 39000/1.46 = -4000 + 8181.81 + 16528.92 + 18045.11 + 26712.32 = 65468.16

…………………………………………………………………………………………………………………………… …………………

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Importance of principles & practices of Direct marketing: o

Definition and importance of direct marketing

o

Economics of direct marketing

o

Increasingly important role in IMC mix

o

Understanding the DM business

o

o



Database marketing



Relationship marketing



Interactive marketing



How does marketing vary from other form of marketing?



Strengths of direct marketing



Weakness of direct marketing



Stand-alone marketing channel or part of a multi-media strategy



Relationship to the total marketing mix

Direct marketing strategies 

Customer level databases and lists and how they are used to profile, segment and prospect (for new) customers



Sources and uses of/for ‘electronic’ data



Database marketing on the internet



Setting up a database for database marketing



Steps in developing a database



Managing the database



Creating for DM making the message personnel

Direct marketing concepts 

Lifetime value of the customer (LVC)



List selection, prospecting

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o

o

o



Market segmentation



Mail order, lead generation, circulation, relationship/loyalty programs, store traffic/site traffic generations



Fund raising, pre-selling (cross selling as well as selling-up) and post selling

Various direct marketing methods and media 

Person to person selling



Group selling



Direct mail



Direct response television



Direct response print advertising



Catalogs



Internet



Telemarketing



Inserts



Videos



E-mail



Trade shows



How traditional media support direct marketing efforts



Public relations

Future of direct marketing 

Global direct marketing: the current state and future



Barriers preventing more extensive use of database marketing, ethical in DM

Consumer’s relationship management 

The importance of CRM



Studying the customer mix and managing the key customers

Prof. Simmonelle D’Souza

Key Terms and Concepts: 1) LTV. Customer Lifetime Value can be calculated in any industry, business to business or business to consumer. It is used to direct marketing strategy. In the early days of database marketing few knew how to calculate it or how to use it. Today it is widely practiced. It is powerful and it works. 2) RFM (Recency, Frequency, Monetary Analysis) is a highly successful way of predicting which customers will respond to promotions. It has been around for fifty years, but even today many marketers do not understand it or use it properly. It is a versatile tool that has helped to make database marketing successful. 3) Customer Communications. Personalized customer communications, based on data in a database, can be shown (using tests and controls) to increase customer retention, loyalty, cross sales, up sales and referrals. They are effective and they work. They are the principal reason why you build a marketing database. 4) Appended Data. It is possible today to append data to any name and address file to learn age, income, home value, home ownership, presence of children, length of residence, and about forty other valuable pieces of information about any household. This information can be used to create customer segments, and guide strategy designed to create powerful customer

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communications. Similar information can be appended to business to business files: SIC code, number of employees and annual sales. 5) Predictive Models. Using appended demographic and behavioral data, it is possible to create models that predict, accurately, which customers are most likely to defect, and which customers are most likely to respond to new initiatives. Modeling, combined with customer communications, can be very powerful technique that can increase response and reduce your attrition rate. 6) Relational Databases. Putting customer databases in a relational form makes it possible to store an unlimited amount of information about any customer or prospect, and retrieve it in an instant in a hundred different ways. Relational databases are essential to modern database marketing. Marketers need to understand the principles involved. 7) Caller ID. Set up originally as a call routing device, Caller ID linked to a customer marketing database permits customer service to get a customer’s complete record up on the screen before taking a call. As a result, the CSR can speak to the customer as if she knew her, bonding with her and building close rapport. This helps deliver on the promise of database marketing. 8) Websites. The web has revolutionized database marketing. A modern website, with cookies can do almost everything that a live operator can do, and much more, showing and enabling customers to print pictures of the product, maps, instructions, background information and details. Web sites are not wonderful at selling. They are a tremendous research tool and customer bonding and ordering tool. No database marketer can be really successful without a personalized website with cookies.

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9) Email. Despite the SPAM, emails have emerged as a powerful database marketing tool. The ability to contact customers immediately “Your product was shipped today. Here is the tracking number…” makes for vastly improved customer relationships leading to retention and increased sales. 10) Tests and Controls. Since 1980 marketers were sending out direct mail, and measuring the response to each campaign. Today, we can use our database to measure much more. Setting aside customers in a control group, we can measure with pin point accuracy the short and long term effect of any marketing initiative. 11) Loyalty Programs. Most customers are delighted to participate in well designed loyalty programs. Airlines have been outstandingly successful in these programs. Their use has spread to supermarkets, hotels, retail stores, and a variety of industries. They are part of the mix of retention building services that database marketing has made possible. 12) Analytical Software. It used to be that after a campaign, you got canned printed reports showing what happened. Today, marketers have very sophisticated analytical software linked to their database so that each analyst can do any type of standard or ad hoc report before, during and after a campaign, with the results printed on his PC printer. We have “hands on” marketing which has made database marketing very powerful. 13) Web Access to the database. Today the marketing database is in a relational format on a server which is accessed online over the web by anyone in the company, from any location. Instead of a couple of analysts working with the data, it is available to management, sales, customer service, marketing, and market research. Web access has made marketing databases a useful tool throughout the enterprise. Prof. Simmonelle D’Souza

14) Rented Lists. In the past, most companies kept their customer lists strictly private. Today, most lists are shared, exchanged or rented. As a result there are more than 40,000 lists on the market, including data on more than 240 million American consumers and millions of businesses. Sharing of lists created the catalog industry, and has spurred the growth of hundreds of other direct response industries. 15) Campaign Management Software. Direct marketing campaigns used to be generated by memoranda to a service bureau: “Select these groups, divide them into these segments with these codes, and fax me the counts”. The process of getting the mail out the door took three to six weeks. Today, marketers have campaign management software linked to their database so that they can do the planning and the actual selections themselves in an afternoon. It cuts weeks off of the direct mail time, resulting in higher response rates. 16) Address Hygiene. Modern service bureaus can take any large or small file of customers or prospects, reformat them to a common format, correct the addresses to USPS standards, consolidate the duplicates, apply National Change of Address (to determine the new address if people have moved) and get the records ready for mailing or storage in your marketing database in one or two days after receipt of the data. This service has made modern database marketing possible. 17) Profitability Analysis. We used to know that some customers were more profitable to us than others, but it was hard to measure. Today banks, supermarkets, insurance firms, business to business enterprises, and many others can compute the monthly profitability of each customer. They have

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discovered that many customers are unprofitable. As a result they have changed their marketing and pricing strategy to increase their profits. 18) Customer Segmentation. There used to be so few customers that sales and marketers could keep needed information about them in their heads. Today, companies have many more customers – some in the millions. A database is needed to store the information. To develop marketing strategies for all these customers, you have to divide them into segments usually based on demographics and behavior. Success comes from creating useful segments, and developing customer marketing strategies for each segment. 19) Multi-channel marketing. Customers buy through multiple channels: retail, catalog, and web. We have learned that multi-channel customers buy more than single channel buyers. To be successful, you need a database that provides a 360 degree picture of your customer, coupled with strategies that recognize and communicate personally with the customer when she shows up in any of the three channels. 20) Treating customers differently. All businesses have Gold customers – a small percentage that provides 80% of your revenue and profit. With a marketing database, you can identify these Gold customers. Then you develop programs designed to retain them. You use resources that you could not afford to spend on all of your customers. Profits come from working to retain the best, and encouraging others to move up to higher status levels. 21) Next Best Product. The database is used to determine what customers in each segment normally buy. From this, you can determine anomalies: customers who are not buying what the others are buying (usually because they are buying this product from somewhere else). This is their Next Best

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Product. The NBP is put into the customer database record and used by customer service and sales in with customers. It can be a powerful tool. 22) Penetration Analysis. Using a database and on line analytical software, marketers can do their own penetration analysis. What percent of sales do we have in each zip code, or SIC code, or income level, or age group? This is a versatile tool that can help you to locate retail stores, place advertising, and direct your sales force. 23) Cluster Coding. Claritas and others have divided US (and Canadian) consumers into 66 different clusters with catchy names and similar spending habits. In many industries, using clusters with penetration analysis can help you identify who is buying your products, and who isn’t. It can be a creative tool to use in improving your marketing and sales. 24) Status Levels. The airlines started it: Platinum, Gold, and Silver. It has spread to other industries. Customers now understand their status, and work to move up to a higher level. Companies provide special benefits, rewards and services for higher status customers. In a democracy, it is an egalitarian method of customer differentiation which assists in building customer loyalty and company profits.

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