Page 166 - Marketing Management

CREATING LONG-TERM LOYALTY RELATIONSHIPS | CHAPTER 5 143

CREATING INSTITUTIONAL TIES The company may supply customers with special
equipment or computer links that help them manage orders, payroll, and inventory. Customers are
less inclined to switch to another supplier when it means high capital costs, high search costs, or
the loss of loyal-customer discounts. A good example is McKesson Corporation, a leading
pharmaceutical wholesaler, which invested millions of dollars in EDI (Electronic Data Interchange)
capabilities to help independent pharmacies manage inventory, order-entry processes, and shelf
space. Another example is Milliken & Company, which provides proprietary software programs,
marketing research, sales training, and sales leads to loyal customers.

Win-Backs
Regardless of how hard companies may try, some customers inevitably become inactive or drop
90
out. The challenge is to reactivate them through win-back strategies. It’s often easier to reattract
ex-customers (because the company knows their names and histories) than to find new ones. Exit
interviews and lost-customer surveys can uncover sources of dissatisfaction and help win back only
those with strong profit potential. 91

Customer Databases

and Database Marketing

92
Marketers must know their customers. And in order to know the customer, the company must
collect information and store it in a database from which to conduct database marketing. A
customer database is an organized collection of comprehensive information about individual cus-
tomers or prospects that is current, accessible, and actionable for lead generation, lead qualifica-
tion, sale of a product or service, or maintenance of customer relationships. Database marketing is
the process of building, maintaining, and using customer databases and other databases (products,
suppliers, resellers) to contact, transact, and build customer relationships.

Customer Databases
Many companies confuse a customer mailing list with a customer database. A customer mailing
list is simply a set of names, addresses, and telephone numbers. A customer database contains
much more information, accumulated through customer transactions, registration information,
telephone queries, cookies, and every customer contact.
Ideally, a customer database also contains the consumer’s past purchases, demographics
(age, income, family members, birthdays), psychographics (activities, interests, and opinions),
mediagraphics (preferred media), and other useful information. The catalog company
Fingerhut possesses some 1,400 pieces of information about each of the 30 million households
in its massive customer database.
Ideally, a business database contains business customers’ past purchases; past volumes, prices,
and profits; buyer team member names (and ages, birthdays, hobbies, and favorite foods); status of
current contracts; an estimate of the supplier’s share of the customer’s business; competitive sup-
pliers; assessment of competitive strengths and weaknesses in selling and servicing the account; and
relevant customer buying practices, patterns, and policies.
A Latin American unit of the Swiss pharmaceutical firm Novartis keeps data on 100,000 of
Argentina’s farmers, knows their crop protection chemical purchases, groups them by value, and
treats each group differently.

Data Warehouses and Data Mining

Savvy companies capture information every time a customer comes into contact with any of their
departments, whether it is a customer purchase, a customer-requested service call, an online query,
or a mail-in rebate card. 93 Banks and credit card companies, telephone companies, catalog mar-
keters, and many other companies have a great deal of information about their customers, includ-
ing not only addresses and phone numbers, but also transactions and enhanced data on age, family
size, income, and other demographic information.