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8.5 Market Knowledge Systems Charting a Path toward Competitive Advantage

8.5.1 Internal Records Systems
8.5.2 Marketing Databases


Content


References

  1. ^ customer relationship management projects
  2. ^ examples of customer relationship projects
  3. ^ PSDA veterinary Charity - campaign management software
  4. ^ ING Bank Software
  5. ^ catalogue marketers
  6. ^ amazon cookies installed on personal computers
  7. ^ frequent flyer programme
  8. ^ Tesco loyalty cards
  9. ^ the cost of collecting data
  10. ^ economic benefits of using the data
  11. ^ ability to keep the data current
  12. ^ Examples of commercial marketing databases
  13. ^ data mining technolgy




Details


In the technology boom of the late 90’s, several companies launched extensive and expensive projects to help them better manage customer relationships through enhanced use of customer data.

Although several large-scale[1] customer relationship management (CRM) projects have failed to show an adequate return on investment, CRM has proved to be very successful in managing marketing campaigns. For a discussion of how one company has benefited from such tools, see Exhibit 8.6.

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[2] Examples of Customer relationship management (CRM) projects – a
campaign management success story

[3] Campaign Management Software allows marketers to design and execute marketing programs that allow them greater control, accountability, produce better results than in the past. A veterinary charity PDSA in the UK uses software to manage its database of 3.5 million supporters, its 11 million transactions and 22 million lines of previous mailing history. Because they are a charity, PDSA realizes that not every supporter wishes to be a permanently included in their database, and the system allows for this to be factored in. PDSA uses the database to effectively target customers for its mailshot campaigns and pulls in between £10 and £12 million in contributions per year.
[4] The European bank ING has used a Dutch software company to implement a CRM system that allowed it to identify its customers who never respond to mail shots, thereby reducing their mailings by 30 per cent or 46 million. Other vendors help companies pinpoint customers who are most likely to defect to competitors, thereby reducing customer churn.

Source: ‘Ringing the changes’, Precision Marketing, 20 September 2002; Michael Dempsey, ‘FT Report – FT-IT – Getting back to basics in battle to win customers’, Financial Times, 6 November 2002.





Many companies have become quite sophisticated about keeping track of their customers’ purchases using marketing databases.


[5] Catalogue marketers such as Lands’ End and L.L. Bean know who are their best customers and what categories they tend to buy.

Online marketers like[6] Amazon.com use ‘cookies,’ electronic signatures placed at a customer’s personal computer, so they not only keep track of what each customer has bought, but they also recognise the customer when he or she logs on to their site.

Airlines track members of their[7] frequent flyer programmes and target some with special promotions.

[8] Supermarket chain Tesco in the UK uses its loyalty cards to track and analyse customer buying patterns, and to offer customers coupons and incentives tailored to their buying behaviour.

Tesco uses their analysis in deciding product placement on shelves, managing coupon campaigns, and to tailor product portfolios to individual stores.[19]


Designing marketing databases that take effective advantage of customer data that companies are in a position to collect requires that several major issues be considered: [9] the cost of collecting the data, [10] the economic benefits of using the data,[11] the ability of the company to keep the data current in today’s mobile society, and the rapid advances in technology that permit the data to be used to maximum advantage.

Collecting information, then storing and maintaining it, always costs money. If a company wants to know more about the demographics and lifestyles of its best customers, in addition to their purchasing histories, it must obtain demographic and lifestyle data about them.

Doing so is more difficult than it sounds; most people are unwilling to spend much time filling out forms that ask nosy questions about education, income, whether they play tennis, and what kind of car they drive. The cost of collecting such information must be weighed against its value. What will be done with the information once it is in hand?

[12] Examples of commercial marketing databases

Various commercial marketing databases are available, with varying depth and quality of information. For example, the Polk Company (www.polk.com) sells data compiled from state driver’s license records in the United States, as well as a demographic and lifestyle database compiled from questionnaires returned with warranty cards for consumer durables such as toasters, stereos, and the like. Donnelley’s DQI database (www.Donnelley.com) covers more than 150 million individual US consumers and 90 million US households and includes more than 1600 demographic, lifestyle, purchasing power, and creditworthiness variables, among others. Claritas’ PRIZM service (Potential Rating Index for Zip Markets, www.claritas.com) classifies US consumers into one of 62 distinct demographic and behavioural clusters according to the Zip code and postal carrier route where they live. For the UK market, geo-demographic databases can be purchased from CACI,[20] known for its database called ACORN, and Experian,[21] which offers its MOSAIC database. These databases are useful tools for targeting consumers based on the area they live in. An important caveat for all geo-demographic databases, however, is that the accuracy of the data goes down as the granularity of the area increases, i.e., customers may share the same Zip code or postcode, but may belong to very disparate economic segments.


Virtually every credit-card issuer, magazine publisher, affinity group (e.g. United Airlines Mileage Plus members), and others who sell to or deal directly with consumers sell their customer databases. Marketers who consider buying lists or other services from any of these commercial database providers need to inquire exactly how and where the data are collected and when (Have 20 per cent of the people on the list moved?). They should also compare the costs of databases containing names about which more is known (higher cost, but of higher value to targeted marketers, since response rates will be higher for names chosen on the basis of more relevant information) to the extra value, compared to simpler compiled databases, such as those taken from telephone directories or automobile registrations. Marketers planning to build their own databases need also to consider several increasingly important ethical issues, as discussed in Ethical Perspective



Ethical Perspective 8.1


Ethical Issues in Database Marketing, Internet Marketing, and Marketing Research
New technologies relating to the gathering and use of information about consumers and their behaviour, interests, and intentions raise a host of legal and ethical questions.

These new technologies have the potential to harm individuals:

  • when such information is used without their knowledge and/or consent,
  • leading them to be excluded from or included inactivities in such a way that they are harmed economically, psychologically, or physically.


Examples include
  • the improper disclosure of a person’s credit rating,
  • denying medical insurance to an individual based on confidential information, and
  • a person’s being placed on target lists for direct mail and telemarketing.


The depth of privacy concerns varies from country to country, a critical issue for Internet marketers, given their global reach.

Ethical issues in marketing research stem, in large part, from the interaction between the researcher and respondents, clients, and the general public.

For instance, respondents should not be pressured to participate, should have the right to remain anonymous, and should not be deceived by fake sponsorship.

Client issues involve the confidentiality of the research findings and the obligation to strive to provide unbiased and honest results regardless of client expectations.

The public is very much involved when they are exposed to a sales solicitation disguised as a marketing research study or issuing from data obtained from ‘volunteer surveys’ using write-ins or call-ins.

In discussing the reliability of, and ethical issues involved with, marketing research studies, a Wall Street Journal article noted that many studies ‘are little more than vehicles for pitching a product or opinion.

An examination of hundreds of recent studies indicated that the business of research has become pervaded by bias and distortion.

More studies are being sponsored by companies or groups with a financial interest in the results. This too often leads to a bias in the way questions are asked.

Because of shortages in time and money, sample sizes are being reduced to the point that, when groups are further broken into subgroups, the margin of error becomes unacceptable – assuming a probability sample was used.

In addition to sample size, the way the sampling universe is defined can bias the results. Thus, in a Chrysler study showing that people preferred Chrysler’s cars to Toyota’s, a sample of only 100 respondents was used in each of two tests, and none owned a foreign car.

Thus, the respondents may well have been biased in favour of US cars.

In addition to the problems noted above, subjective sampling procedures are often used, data analysis may be flawed, or only the best conclusions are reported. Frequently researchers are hired whose views on the subject area being researched are known to be similar to those of the client.

In an attempt to regulate the marketing research industry, several codes of conduct and ethics have been developed.

For the United States, these include published codes by the American Marketing Association, the American Association for Public Opinion Research, the Marketing Research Association, and the Council of American Survey Research Organizations. In the UK, the Market Research Society has developed an ethical Code of Conduct that all members are required to adhere to. Similar organizations have developed localised guidelines in other countries. For one such listing or organizations on other countries, see the British Market Research Association website at //www.bmra.org.uk.//
Source: Paul N. Bloom, Robert Adler, and George R. Milne, ‘Identifying the Legal and Ethical Risks and Costs of Using New Information Technologies to Support Marketing Programs,’ in The Marketing Information Revolution, Robert C. Blattberg, Rashi Glazer, and John D. C. Little, eds. (Boston: Harvard Business School Press, 1994), p. 294; Cynthia Crossen, ‘Studies Galore Support Products and Positions, But Are They Reliable?The Wall Street Journal, November 14, 1991, pp. A1 and A8; and Thomas E. Weber, ’ Europe and US Reach Truce on Net Privacy, But What Comes Next? The Wall Street Journal, June 19, 2000, p. B1.



For firms with deep pockets, advances in computing power and database technology, including [13] new data-miningtechnology,[22] are permitting firms to combine databases from different sources to permit a more complete understanding of any member of the database. Keeping current with what is possible in database technology is important, as technological advances often make possible that which was only a dream a short time ago.









Tags
  1. client contact systems
  2. collector bias
  3. competitive advantage
  4. competitive intelligence
  5. computerised reorder system
  6. consumer behaviour
  7. data sources
  8. evidence based forecast
  9. experienced user
  10. internal records
  11. just in time
  12. logistical alliance
  13. market potential
  14. market segmentation
  15. market segments
  16. marketing program
  17. marketing research
  18. mass market
  19. mass market strategy
  20. michelin; us west;
  21. micro segmentation
  22. middleman
  23. modified rebuy
  24. multi-functional sales teams
  25. multilevel selling
  26. multiple buying
  27. multiple level relationships
  28. mutual trust
  29. narrow market segment
  30. narrow niche
  31. nationalisation of producers
  32. nerve center
  33. new task buy
  34. nine west group
  35. observation;direct observation' tanzania mobile;
  36. on-time delivery
  37. opportunity; research
  38. order handling
  39. organisation market
  40. organization marketing behaviour
  41. organizational behaviour
  42. organizational customers
  43. organizational demand
  44. organizational market
  45. organizational purchasing behaviour
  46. organizational purchasing process
  47. paperless exchange
  48. parity pricing
  49. personal selling
  50. personal use
  51. political risk
  52. potential market; penetrated market
  53. pre-delivery inspection
  54. pre-sale service
  55. prestige buyer
  56. pretender
  57. primary data
  58. procurement costs
  59. purchasing criteria
  60. qualitative data
  61. qualitative research
  62. quality assurance
  63. quality standards
  64. quantitative data
  65. quantitative research
  66. research objectives
  67. retention programme
  68. routine purchase
  69. sales forecast
  70. semantic differentiation scale
  71. sequence of information
  72. shared costs
  73. short term contracts
  74. social construction
  75. status oriented consumers
  76. stock availability
  77. straight rebuy
  78. supplier bargaining power
  79. supplier performance
  80. supplier reputation
  81. survey
  82. tabulation errors
  83. tanzania mobile
  84. target customers
  85. target market
  86. target marketing
  87. technical experts;
  88. test markets
  89. transaction cost
  90. trend forecasting
  91. trusting patron
  92. underlying consumer demand
  93. unethical demands
  94. unstated but implicit assumptions
  95. users
  96. value analysis
  97. value shopper
  98. vertical integration
  99. visceral thing that cannot be trained
  100. wild guess