Optimal Database Marketing : Strategy, Development, and Data Mining

by Ronald G Drozdenko

• ISBN13: 9780761923572
• ISBN10: 0761923578
• Format: Hardcover
• Copyright: 2002-03-26
• Publisher: SAGE Publications, Inc

Summary

'This book is accessible and highly readable, with an uncomplicated writing style... in short this is a book that unravels the mysteries of a vital but "back room" activity' - International Journal of Market Research 'This book is well written with interesting examples and case studies that both illustrate complex techniques and tie the chapters together. The level of detail and treatment of statistical tools and methods provides both understanding and enough detail to begin to use them immediately to target marketing efforts efficiently and effectively. It is perfect for a course in database marketing or as a handy reference for those in the industry' - C. Samuel Craig, New York University, Stern School of Business 'This book should be studied by all who aspire to have a career in direct marketing. It provides a thorough overview of all essential aspects of using customer databases to improve direct marketing results. The material is presented in a style that renders even the technical subjects understandable to the novice direct marketer' - Kari Regan, Vice President, Database Marketing Services, The Reader's Digest Association 'Finally, practical information on database marketing that tackles this complex subject but makes it clear enough for the novice to understand. This book serves as more than a primer for any senior manager who needs to know the whole story. As one who has spent over 20 years of his career involved in publishing and database marketing, I have a real appreciation for how difficult it is to explain the finer points of this discipline, while keeping it understandable. This book does that admirably. Well done!' - Patrick E. Kenny, Executive Vice President, Qiosk.com 'This book is especially effective in describing the breadth and impact of the database marketing field. I highly recommend this book to anyone who has anything to do with database marketing! -- works in or with this dynamic area' - Naomi Bernstein, Vice President, BMG Direct This informative book looks at the long-term impact of database marketing techniques on the organization, customers, prospective customers, and society in general. Ron Drozdenko and Perry Drake help the reader gain a thorough understanding of how to properly establish and use databases in order to build strong relationships with customers. There is no other book on the market today that reveals this level of detail regarding database marketing applications - the how's, why's and when's. Appropriate for advanced undergraduate and graduate courses, the book moves from general concepts and examples of marketing databases to more specific data analysis techniques used to enhance the marketing process. This work: - Draws on numerous examples from real businesses - Includes applications to all direct marketing media including the Internet - Describes in step-by-step detail how databases are developed, maintain and mined - Considers both business and social issues of marketing databases - Contains a sample database allowing the reader to apply the mining techniques - Offers access to comprehensive package of academic support materials

Author Biography

Ronald G. Drozdenko, Ph.D., is Professor and Chair of the Marketing Department, Ancell School of Business, Western Connecticut State University Perry D. Drake has been involved in the direct marketing industry for nearly 15 years. He is currently the Vice President of Drake Direct

Table of Contents

Preface	xv
Supplemental Material	xvii
Acknowledgments	xix
Foreword	xxi
Introduction to Database Marketing Concepts	1	(20)
What Is a Marketing Database?	3	(1)
Trends Leading to the Use of Databases in Marketing	4	(9)
Market Segmentation	5	(1)
Emphasis on Service and CRM	6	(1)
Changes in Media	7	(1)
Changes in Distribution Structure and Power	8	(1)
Lifestyle and Demographic Trends	9	(1)
Accountability for Marketing Actions	10	(1)
Integration of Business Functions	11	(1)
Technological Advances	11	(1)
More Informed Customers	12	(1)
Database Marketing Versus Aggregate Marketing	13	(5)
Advantages of Database Marketing	15	(1)
Disadvantages of Database Marketing	16	(1)
Cost Issues	16	(1)
Global Markets	17	(1)
Competition From Traditional Retailer	17	(1)
Negative Perceptions	18	(1)
Framework for This Book	18	(1)
Chapter Summary	19	(1)
Review Questions	19	(2)
Stategic Database Development in the Marketing Planning Process	21	(18)
Computerized Databases	23	(1)
Customer Databases Versus Other Marketing Databases	24	(1)
The Need for Strategic Planning	25	(1)
Developing a Systematic Plan for Using Marketing Databases	26	(1)
The Marketing Planning Process and Database Implementation	27	(9)
Situational Analysis	28	(1)
Establishing Marketing Objectives	29	(1)
Strategy Development	30	(2)
Strategy Development, Targeting, and Product Positioning	32	(1)
Marketing Programs	33	(1)
Distribution	34	(1)
Promotion	34	(1)
Price	35	(1)
Product	35	(1)
Monitor and Control	36	(1)
Databases and the Planning Process	36	(1)
Chapter Summary	37	(1)
Review Questions	38	(1)
Defining Customer Data Requirements	39	(16)
Data Needs Determination	40	(1)
Fulfillment, Marketing, and Prospecting Databases	41	(1)
Data Residing on the Marketing Database	41	(8)
Internal or House Data	41	(2)
Fulfillment Data	43	(1)
Marketing Data	43	(1)
Customer Contact Data	44	(1)
External or Enhancement Data	45	(1)
Compiled List Data	45	(2)
Census Data	47	(2)
Modeled Data	49	(1)
Lists Versus Data	49	(2)
Applying and Using Enhancement Data	51	(2)
Chapter Summary	53	(1)
Review Questions	53	(2)
Database Maintenance and Coding	55	(20)
Standard Database Maintenance Routines	56	(12)
Deduping the Customer File	57	(1)
Householding the Customer File	58	(1)
Purging Old Customer Records	59	(1)
Changing Contact Information	59	(2)
Standardizing Addresses	61	(1)
Removing Names From Databases at Consumer Request	61	(1)
Identifying Customers With Match Coding	62	(2)
Merge/Purge Processing	64	(1)
Coding Source and Promotional Offers	65	(1)
Salting Files and Decoy Records	66	(1)
Identifying Credit Risks and Frauds	67	(1)
Field Updating Rules	67	(1)
Reporting Summary/Aggregate-Level Information	68	(2)
Database Storage and Security	70	(2)
Database Maintenance Schedules	72	(1)
Some Technical Aspects of Database Maintenance	73	(1)
Chapter Summary	73	(1)
Review Questions	73	(2)
Basic Database Technology, Organizational Considerations, and Database Planning	75	(20)
Computer Hardware and Software	77	(6)
Database Hardware	78	(1)
Midrange Computers	79	(1)
PCs	79	(1)
Hardware Decision Factors	80	(1)
Database Software	80	(3)
Database System Organization	83	(2)
Structured Databases	83	(2)
Relational Databases	85	(1)
Comparison of Structured and Relational Databases	85	(1)
Structured Query Language (SQL) and Data Analysis	85	(1)
Organizational Considerations in Technical Database Design	86	(2)
Outsourcing: The Process to Select a Database Provider	88	(3)
Phases of Database Development	91	(1)
Comments on Technological Development of the Database	92	(1)
Chapter Summary	93	(1)
Review Questions	93	(2)
The Analysis Sample	95	(8)
How We Sample	96	(1)
Representative Samples	96	(1)
Random Samples	97	(1)
Sample Usage	97	(1)
Creation of the Analysis Sample	98	(2)
Methods of Saving Point-in-Time Sample Data	100	(1)
Analysis and Validation Samples	101	(1)
Application of Analysis Findings	101	(1)
Chapter Summary	101	(1)
Review Questions	102	(1)
Analyzing and Manipulating Customer Data	103	(26)
Getting to Know Your Data	104	(1)
The Analysis	105	(14)
Univariate Tabulations	106	(5)
Cross-Tabulations	111	(2)
Logic Counter Variables	113	(3)
Ratio Variables	116	(1)
Longitudinal Variables	117	(2)
Time Alignment of Key Events	119	(1)
Reducing the Amount of Customer Data to a Manageable Set via Correlation Analysis	120	(3)
Statistical Background---Correlation Analysis	123	(4)
Chapter Summary	127	(1)
Review Questions	128	(1)
Notes	128	(1)
Segmenting the Customer Database	129	(40)
Defining Your Segmentation Objective	130	(4)
Segmentation Schemes	134	(4)
Segmentation for Promotional Product Offerings	134	(1)
Corporate-Level Segmentation	134	(1)
Product Line-Specific Segmentation	135	(1)
Segmentation for Life-Stage Marketing and Research	136	(2)
Segmentation Techniques	138	(25)
Univariate and Cross-Tabulation Analysis	138	(7)
Formal RFM Analysis	145	(3)
CHAID Analysis	148	(5)
Factor and Cluster Analysis	153	(1)
Factor Analysis	153	(5)
Cluster Analysis	158	(5)
Issues to Consider Regarding Segmentation Implementation	163	(3)
Promotional Intensity	163	(1)
Too Many Products	164	(1)
Cannibalism	164	(1)
Overgeneralization	165	(1)
Ethical and Public Policy Issues	165	(1)
Chapter Summary	166	(1)
Review Questions	166	(1)
Note	167	(2)
An Introduction to Simple Linear Regression Modeling	169	(12)
The Simple Linear Regression Model	170	(4)
The Coefficient of Determination	174	(2)
Statistical Background---Simple Linear Regression Analysis	176	(3)
Chapter Summary	179	(1)
Review Questions	179	(2)
Multiple Regression Modeling	181	(36)
Defining Your Marketing Objective	182	(2)
Preparing the Data to Build the Multiple Regression Model	184	(3)
The Multiple Regression Model	187	(1)
Model Interpretation	187	(5)
Assumptions of the Model	192	(1)
Multicollinearity	192	(1)
Other Properties	193	(1)
A Note on Modeling Binary Response Data	193	(1)
Regression Diagnostics	194	(5)
Examining the Model for Indications of Multicollinearity	195	(2)
Examining the Model for Variable Significance	197	(2)
Multiple ``Logistic'' Regression Models	199	(1)
Sample composition	200	(1)
Outside List Modeling Options	201	(4)
Response Models	202	(1)
Clone or Best Customer Models	202	(3)
Stepwise Regression Models	205	(1)
Neural Networks	206	(1)
Data Mining, Tools, and Software	207	(6)
Ensuring That Your Model Holds Up in Rollout	213	(2)
Chapter Summary	215	(1)
Review Questions	215	(1)
Notes	216	(1)
Gains Charts and Expected Profit Calculations	217	(18)
The Response Gains Chart	218	(5)
Options When Lacking Validation Samples	223	(3)
Historical Gains Falloff Chart	223	(2)
Bootstrapping	225	(1)
Expected Profit Calculations	226	(5)
Reconciling Gains	231	(2)
Chapter Summary	233	(1)
Review Questions	233	(2)
Strategic Reporting and Analysis	235	(16)
Key Active Customer Counts	236	(2)
List Vitality Customer Statistics	238	(1)
Key List Segment Counts and Statistics	238	(1)
Calculating LTV	239	(9)
LTV Methodologies	240	(1)
LTV Profiles	241	(2)
Actual and Aggregate LTV Calculations	243	(1)
Calculating the Discount Rate and NPV	244	(3)
Sample Types Used in LTV Calculations	247	(1)
Forecasting LTV	248	(1)
Impact Studies	248	(1)
Monitoring Promotional Intensity	249	(1)
Chapter Summary	250	(1)
Review Questions	250	(1)
Assessing Marketing Test Results	251	(36)
Confidence Interval Calculations	252	(16)
Confidence Interval Estimation for a Sample Mean	253	(3)
Confidence Interval Estimation for a Sample Proportion	256	(2)
Confidence Interval Estimation for the Difference Between Two Sample Means	258	(2)
Confidence Interval Estimation for the Difference Between Two Sample Proportions	260	(3)
Setting the Confidence Level	263	(1)
Single Sample Measures	264	(1)
Difference Between Two Sample Measures	264	(2)
Making a Business Decision Based on the Confidence Interval	266	(1)
Single Sample Measures	266	(1)
Difference Between Two Sample Measures	267	(1)
Hypothesis Tests for Significance	268	(13)
Establishing the Hypothesis	269	(1)
Setting the Error Rate of the Hypothesis Test	269	(1)
Establishing the Direction of the Hypothesis Test	270	(1)
Hypothesis Test for the Difference Between Two SampleMeans	270	(5)
Hypothesis Test for the Difference Between Two Sample Proportions	275	(4)
Setting the Confidence Level of Hypothesis Tests for Significance	279	(1)
Making a Business Decision Based on Hypothesis Tests for Significance	279	(1)
P Value of the Hypothesis Test for Significance	279	(1)
Conducting Hypothesis Tests for Significance Using Confidence Intervals	280	(1)
Gross Versus Net	281	(1)
Multiple Comparisons	281	(1)
Calculating Breakeven	282	(2)
Response Rate Required to Break Even	283	(1)
Increase in Response Rate Required to Break Even	283	(1)
Facts Regarding Confidence Intervals and Hypothesis Test Results	284	(1)
Marketing Test Analysis Software	285	(1)
Chapter Summary	285	(1)
Review Questions	286	(1)
Planning and Designing Marketing Tests	287	(22)
Marketing Test Design Considerations	288	(6)
For Mailers, Include the Control Package in the Test Plan	288	(1)
Reverse Test Package Changes	288	(1)
Test One Change at a Time	289	(1)
Test for Only Meaningful Package Element Interactions	290	(1)
Define the Universe for Testing Carefully	291	(1)
Outside List Test Design Considerations	292	(2)
Sample Size Considerations	294	(10)
Sample Size Determination for a Sample Mean	295	(3)
Sample Size Determination for a Sample Proportion	298	(3)
Sample Size Determination for the Difference Between Two Sample Proportions	301	(3)
Marketing Test Planning Software	304	(1)
Alternative Testing Approaches for Small Direct Marketers	304	(4)
Chapter Summary	308	(1)
Review Questions	308	(1)
Marketing Databases and the Internet	309	(18)
Database Integration	310	(2)
Growth in Internet commerce	312	(2)
The Internet Versus Other Database Marketing Media	314	(3)
Limitations of Internet Marketing	317	(2)
Personalization: The Great Promise of the Internet	319	(5)
E-Mail Marketing	321	(1)
E-Mail Applications	321	(1)
E-Mail Formats	322	(2)
Chapter Summary	324	(1)
Review Questions	325	(2)
Analyzing and Targeting Online Customers	327	(22)
Data Collected via the Internet	327	(5)
Registration Data	328	(2)
Behavior Data	330	(2)
Source Data	332	(1)
Understanding Internet Users and Online Buyers	332	(2)
Web Site Reporting	334	(3)
Driving Customers to Your Web Site	337	(4)
Targeting Online Customers	341	(4)
Conducting Marketing Tests in the E-Commerce World	345	(3)
Banner Ads	345	(2)
E-Mail	347	(1)
Chapter Summary	348	(1)
Review Questions	348	(1)
Issues in the Marketing Environment and Future Trends in Marketing Databases	349	(20)
The Global Business Environment	351	(6)
Social Concerns and Ethics in Database Marketing	357	(5)
Industry Organizations	360	(2)
Evolution and Trends in Database Marketing	362	(4)
Consumer Databases and the Internet	362	(2)
B-to-B Databases	364	(1)
Not-for-Profit Databases	364	(1)
Retailer Databases	365	(1)
Service Organization Databases	365	(1)
Chapter Summary	366	(1)
Review Questions	366	(3)
Glossary	369	(12)
Additional Readings in Database and Direct Marketing	381	(2)
References	383	(4)
Name Index	387	(2)
Subject Index	389	(8)
About the Authors	397