Discussion and Critical Thinking,
Q1, Q2, Q3 pp. 77-78. Fill in the table and explain in writing (chapter 3).
1.
You
have been hired as the new marketing director for a shoe store chain with 34
outlets. Your first task is to develop data warehouse. The vice president does
not see the benefit of a warehouse and balks at the idea of spending $50,000 to
build it. Using Figure 3.1 explain the various functions of the data warehouse
and how it can benefit the shoe store chain.
One
of the most important reasons to build a quality data warehouse is the fact
that it helps the overall marketing management program. The company objectives
of identifying the customers and making sure these customers know the company
are achieved through utilizing data warehouse. The data is collected through
various channels, analyzed and used to achieve those objectives. Today, having
a strong online presence is equally or sometimes more important than a
traditional brick-and-mortar location. Our shoe company has a strong online
presence as well and has an online store.
According
to Figure 3.1 there are 7 clearly identified functions of a data warehouse:
1) Customer communication – This is the most important
function of the data warehouse. The information (names, last purchases, shoe
sizes, contact info to name a few) that could be stored in the data warehouse
will help the shoe company establish a closer relationship with the existing
and prospective customers. This function can help improve the existing customers’
loyalty and facilitate the return for the next purchase, or it can help build
the brand recognition and equity for the perspective customers. One way we
could utilize the information is through personalization. We could start by
sending personalized emails or newsletters with special offers or with new
products (shoes) availability. This provides a feeling that the company
personally values each customer.
2) Website operations – Even though we may have a
strong presence online through our official website, we need to concentrate
more on the database technology that could help our website become tailored to
each individual viewer or shopper. This is why this function is very important.
Such information can help the marketing program achieve better results and make
more sales as a result. For example, the information that is gathered from a
customer can be used when he/she logs back to their account. Specific offers
and information will be displayed for their convenience. For example, a
specific offer could be displayed, that our shoe company offers free shipping
for purchases over $100. This visual promotion will encourage the shopper
consider buying more.
3) Data-driven marketing programs –Data warehouse
helps create numerous marketing programs, which can target specific customers,
who tend to spend more or who only spend money on sales items. We also offer
sales events and to be able to target the specific customers with higher
purchasing power is a plus for the sales revenue in general. It also provides
a more targeted way of marketing our
products with a higher response levels than regular advertising.
4) Customer service operations – This is another
important function of data warehouse. Today customer service plays a crucial
role in developing positive relationship between a customer and a company. If
we build a data warehouse, we will have access to information when it is
needed. If there is a problem with the customer’s order or any other issue, the
moment they call the representative can be half way ready to address any
existing issues just by looking at the database. It can save time and therefore
cut down certain costs. Plus, this quicker response time provides better
overall customer service experience as well.
5) Customer information – This function helps cut down
on certain costs connected with the lack of important company or product
information that is posted on the website. With database all the frequently
utilized information could be posted on the website under certain tabs like
FAQ, Contact Us, Feedback, Directions and so forth. Here is the information
that could be posted that would benefit the shoe company:
o Hours
of operation for each location;
o The
brand names size charts;
o “How
To” section explaining how to care for the shoes with the products we offer
(shoe shines and more);
o Feedback
or Comments page that could be used to know what we are doing right or what
needs to be fixed;
o Access
to “My Account” where certain operations with the order could be done without
the need to call to the customer service representative.
6) Sales staff operations – This function saves a lot
of time for a company representative when the order is placed through a phone
call. The available information about the customer’s previous transactions and
contact information can help process the order faster and proceed to the next
customer. This shortens the waiting time on the phone for another customer.
7) Market planning – The last function of data
warehouse helps the marketing team ensure their marketing programs are
effective. Database allows analyzing the information much faster by creating
certain profiles of target markets, sales volumes of products during specific
time period, and more. This information generally helps organize and prepare
the stock. For, example, in our case, having 34 locations will not mean all of
them sell the same amount of shoes and shoe types at the same time period. In
order to improve the availability of the products that are desirable in
specific locations, database analysis could be used. For example, high heel
shoe varieties might be more numerous in the city location, while the variety
of the flats and sneakers in the suburban areas.
2.
Referring
back to Question 1, assume you have been granted permission to build the data
warehouse. For each of the following types of data, explain why they are
important, how they will be collected, and how they will be used.
- Customer data – This information is very important
for the database because it contains valuable information that could be
utilized for marketing programs for existing and potential customers. Customer
data includes names, addresses, telephone numbers, emails and other relevant
information. This data will be provided to our company voluntarily by the
customers through the following steps:
o Through
official website, where a customer can submit email to receive special offers;
o At
the 34 locations at the point of sale at the cashier;
o Online
and in store through filling out a form to receive a rewards card.
This data will be
used for various purposes. For example, personalization could be implemented
while shopping on the website. Special offers and sales events information will
be sent out to the specific target market. Newsletters about the company events
will be generated and sent to enhance brand awareness and recognition.
- Transaction data – This data includes customer
transactions like purchases and returns, interactions with the company like
customer service call, and other related data. It is very important because it
tracks down all the activities that could be analyzed later on to improve
company’s business (products, shipping service, customer service and more). The
data will be collected through several channels:
o Website
purchases;
o Customer
service call;
o Online
customer service forms;
o Website
cookies that provide info about what products were viewed, how long each page
was viewed and so on;
This type of data
will be used to mainly follow up with the customers by generating emails or
customer representative phone call (if customer specified phone as the
preferred method of contact). In addition, customer service department can
utilize the data to efficiently deal with any related issued with products.
- Appended data – This data is usually collected
through a third party. We may not be able to always collect all the necessary
data, therefore we could utilize services from some of the well-known
independent marketing firms. This data is important as it provides the ability
to target specific segments according to demographic and psychographic
characteristics. For example, marketing campaign can be tailored according to
gender, income or special hobbies to raise the possibility of a response. The
shoe company can also target certain customers through direct mail campaign,
who otherwise do not have access to online offers and sales event information.
This is possible because of the geocoding feature of such data.
- Analytical data – Analytical data consists of the
statistics and facts that were generated through examination of all the
available data. This data is very important for various marketing purposes. For
example, customer quantities could be looked at through the prism of marketing
dollars spent on acquiring them. It could be collected through:
o Lifetime value analysis;
o RFM Analysis (recency, frequency, and monetary);
- In
the case of our shoe company, such data could be used for making sure the
marketing budget is spent on raising revenues and lifetime values. In addition,
Lifetime value analysis can help our sales or customer service representative
see the relationship the customer has with the store and make certain decisions
just by knowing that information. Through RFM analysis our shoe company can
tailor its advertising program to specific groups that would account for the
largest number of customers in the system. In addition, the emails with offers
could be sent out to those with higher recency numbers, as they are believed to
buy again sooner than others.
3.
You
are employed by a national airline and have been assigned to collect and
interpret data using a lifetime value analysis procedures. Using information
collected from a loyalty program, the average lifetime value of business people
who sign up for the frequency program is $5,000. After a further analysis, three categories
emerged:
1)
Light
users with lifetime values of $3,000 or less (33%)
2)
Moderate
users with lifetime values of $3,000 to $5,500 (57%)
3)
Heavy
users with lifetime values of $5,500 or more (10%)
a.
Which group of users
deserves the most attention from the marketing department? Why does it have
more potential than the others?
b.
What type of
marketing or communication programs would you design for each of the three
lifetime value group?
a.
Ideally, the group that deserves most attention
from marketing department is the heavy users with lifetime values of $5,000 or
more. These are the customers that would receive the best treatment if for any
reason they are not satisfied with the service when dealing with the company.
This group is very important because it generates profit of $5,500 and up for
the company. However, this group only account for 10%. Therefore, it is
important to pay attention to the moderate users as well because they account
for 57% of all users. Since this is a high percentage number, then marketing
team could increase efforts on trying to increase their lifetime values, which
would move them to the preferred group of high users.
b.
For all three users groups, the marketing
communication program would be aimed at retention. It is clear from the
lifetime value numbers why it is important to retain existing customers. Light
users could be gone if they are not provided with incentives, and moderate or
high users could slowly move toward light users if nothing is done. So programs
like frequent flyer can help the customer build up their equity and fly more.
Light users would be targeted through special advertising campaign that would
encourage people to start traveling by air with this specific company through
direct communication, database warehouse utilization and special sales programs
that could facilitate the need to travel. If the company considers to let the
light users go and concentrate on the other two more important groups, then they
could simply stop or lower the amount of marketing dollars spend on this group.
For moderate users, an email or a direct mail would be sent after 3 months to
encourage using the same airline. A survey with a follow up to enhance further
experience. For high users, customer service would be enhanced so that these
customers will not even think of changing the airline in case any problem
occurs.
Please Note! All of the work posted in my blog is my personal insight into problem solving and answering questions. It is subjective opinions based on scholarly readings. The information may have some errors. I am not a professor.
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