USING THE CUSTOMER DATABASE
In general, companies can use their database in five ways:
1. To identify prospects. Many companies generate sales leads by advertising their product or service. The ads generally contain a response feature, such as a business reply card or toll-free phone number. The database is built from these responses. The company sorts through the database to identify the best prospects, then contacts them by mail, phone or personal call in an attempt to convert them into customers.
2. To decide which customers should receive a particular offer. Companies are interested in selling, up-selling, and cross-selling their products and services. Companies set up criteria describing the ideal target customer for a particular offer. Then they search their customer database for those who most closely resemble the ideal type. By noting response rates, a company can improve its targeting precision over time. Following a sale, it can set up an automatic sequence of activities: One week later, send a thank-you note; five weeks later, send a new offer; ten weeks later (if customer has not responded), phone the customer and offer a special discount.
3. To deepen loyalty. Companies can build interest and enthusiasm by remembering customer preferences; by sending appropriate gifts, discount coupons and interesting reading material.
4. To reactivate customer purchase. Companies can install automatic mailing programs (automatic marketing) that send out birthday or anniversary cards. Christmas shopping Reminders, or off-seasons promotions. The database can help the company make attractive or timely offers.
5. To avoid serious customer mistakes. A major bank confessed to a number of mistakes that it had made by not using its customer database well. In one case, the bank charged a customer a penalty for late payment on his mortgage, failing to note that he headed a company that was a major depositor in this bank. He quit the bank. In a second case, two different staff members of the bank phoned the same mortgage customer offerings a home equity loan at different prices. Neither knew that the other had made the call. In a third case, bank gave a premium customer only standard service in another country.
A few case incidents are given below,
Twice a year â€œQwestâ€? sifts through its customer list looking for customers that have the potential to be more profitable. The companyâ€™s database contains as many as 200 observations about each customerâ€™s calling pattern. By looking at demographic profiles, plus the mix of local versus long-distance calls or whether a consumer has voice mail, Qwest can estimate potential spending. Next, the company determines how much of the customerâ€™s likely telecom budget is already coming its way. Armed with that knowledge, Qwest sets itâ€™s cut- off point for how much to spend on marketing to this customer.
Royal Caribbean uses its databases to offer spur-of-the-moment cruise packages to fill all the berths on its ships. It focuses on retired people and single people because they are more able to make quick commitments. Fewer empty berths mean maximized profits for the cruise line.
FingerHut. The skillful use of database marketing and relationship building has made catalog house Fingerhut one of the nationâ€™s largest direct-mail marketers. Not only is its database full of demographic details such as age, marital status, and number of children, but it also tracks customersâ€™ hobbies, interests, and birthdays. Fingerhut tailors mil offers based on what each customer is likely to buy. Fingerhut stays in continuous touch with customers through regular and special promotions, such as annual sweepstakes, free gifts, and deferred billing. Now the company has applied its database marketing to its Web sites.
Mars is a market leader not only in candy, but also in pet food. In Germany, Mars has compiled the names of virtually every cat-owning family by contacting veterinarians and by advertising a free booklet titled â€œHow to Take Care of Your Cat.â€? Those who request the booklet fill out a questionnaire, so Mars knows the catâ€™s name, age, and birthday. Mars now sends a birthday card to each cat each year, along with a new-cat-food sample or money â€“saving coupons for Mars brands.
American Express. It is no wonder that, at its secret location in Phoenix, security guards watch over American Expressâ€™s 500 billion bytes of data on how its customers have used the companyâ€™s 35 million green, gold, and platinum charge cards. Amex uses the database to include precisely targeted offers in its monthly mailing of millions of customer bills.