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Database Marketing CourseProfessor Raj Sethuraman
Discussion Topics for First Session
What is Database Marketing?
Why Database Marketing?
Basics of Database Marketing (DBM)
Applications of DBM
Syllabus
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What is Database Marketing?
Compare and Contrast
Traditional Data Analysis
Data Mining
Database Marketing
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Similarities and Differences
CriteriaTraditional Data
Analysis* Data Mining*DatabaseMarketing
Data analysisobjectives
generally clearlystated
not clearlystated
may or may notbe clearlystated
Apriori Theory often exists usually notthere
may exist
Size of typicaldatabase
small-moderate large typically large
Analytical tools relatively less
advanced(traditional)
advanced
(newer)
advanced
CRM orientation not necessary high generally highbut notnecessary
*as viewed by marketers
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Some Definitions of Database Marketing
AMA definition:An approach by which computer database technologies are harnessedto design, create, and manage customer data lists containing informationabout each customer's characteristics and history of interactions withthe company. The lists are used as needed for locating, selecting,targeting, servicing, and establishing relationships with customers
in order to enhance the long-term value of these customersto the company.
Another definitionDatabase marketing is a systematic approach to the gathering,consolidation, and processing of consumer data (both for customers
and potential customers) that is maintained in a company's databases.Although databases have been used for customer data in traditionalmarketing for a long time, the database marketing approach isdifferentiated by the fact that much more consumer data is maintained,and that the data is processed and used in new and more
sophisticated ways.
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Some Definitions of Database Marketing
Third definition:Database marketing is a way of organizing a companys customer and
prospect data so that it can be used more effectively in a direct marketingeffort. It is a way of organizing the whole marketing process.Database marketing allows you to choose what to market to whom and
when based on the sum total of your knowledge and experiencewith a customer or prospect.
Fourth definitionDatabase marketing is the technique of gathering all the information
available about your customer, leads, and prospects into a centraldatabase and using that information to drive all your marketing efforts.The information is stored in a marketing database and can be usedat both the strategic and tactical levels to drive targeted marketing efforts.
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Why Database Marketing?
Informational Reasons
Availability of abundance data
Permission to collect them
Technological Reasons
Technology to collect and warehouse data
Technology and computing power available to analyze them
Availability of commercial software, some of which are even
user friendly (e.g. XL miner, SAS enterprise miner)
Commercial Reason Interest in generating intelligence to remain competitive main
market share
Drive to be efficient
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Database Marketing (DBM) and
Customer Relationship Management (CRM)
1. Notice what its customers are doing
2. Remember what it and its customers have done
over time
3. Learn from what it has remembered
4. Act On what it has learned to make customers
more profitable
How
In order to form a learning relationship with itscustomers, an enterprise (firm) must be able to:
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Based on Transaction Data
How
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Customer Relationship Management (CRM)
How
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A More Inclusive Definition of Database Marketing
Database marketing is a systematic approach to thegathering, consolidation, and processing ofmarketing databases to learn more about customersand competitors, select target markets, comparecustomers' value to the company, provide morespecialized offerings, as well as make othermarketing and strategic decisions.
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Database Marketing System
Memory Intelligence Output
Data AnalyticTools/Software
MarketingDecisions
Data
TransactionData
CustomerData
Other
Data
DataWarehousing
Database
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Customer Activity Database
Data Techniques Output/Application
Frequency, Cross-Tab
CorrelationLogistic regression
Decision Tree
Survival/Churn Analysis
Demographics
Subscription
Data
Direct marketing
Prospecting
Customer retention
Customer loyalty
Exit Data
PromotionsData
Activity Data
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Customer Activity Database - 2
Data Techniques Output/Application
Frequency, Cross-Tab
CorrelationAlgorithms for minimizing
distance traveled /
maximizing sales potential
Demographics
Subscription
Data
Segmentation
Store Location
Store PromotionLocation data
Distance Data
Activity Data
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Geodemographic Database
Data Techniques Output/Application
Segmentation
Targeting
Advertising/Promotion
Clusters
Demographics
Purchase
Reading habits
Vacationing
Zip codes
Cluster
Analysis
Distinct
Clusters
used for
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Supermarket Database
Data Techniques Output/Application
Logistic regression
Simultaneous system
Cluster analysis
Market basket analysis
Querying
Stocking/Inventorycontrol
Advertising
Shelf placement
Pricing/couponsRetailEnvironment
PanelPurchase Data
AggregatePurchase Data
Demographics
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Database Marketing Industry (CRM only)
(Based on Forrester Report)
Total DBM spending estimated at $2.5 Billion
Expected growth rate, next three years: 10%-
25%
Major players and market share: Acxiom
(about 30%), Harte-Hanks (10%), Experian
and Epsilon (over 5%), Merkle (under 5%), All
others (40%)
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Objectives of the DBM Course
To enable students to
Appreciate and understand the scope of database marketing
Learn some common data mining techniques
Implement some of those techniques using commerciallyavailable software such as SAS
Interpret the output from the analysis
Apply those techniques to some real-world marketing situations
and facilitate marketing decisions.