Chapter 11 Case Study LINCOLN MEDICAL SUPPLY Directions: Read the case study below and answer the discussion questions according to the concepts presented in Chapter 11. Upload your Word or PDF responses to the designated drop box. Sara Holmes has just taken on a unique dual role in her job at Lincoln Medical Supply. She was to be in charge of the marketing database for the company and also would serve as liaison with the advertising firm and marketing group that provided promotions for the organization. Sara was told her input would be heavily counted on to help with key decisions to build the size and scope of the company in the next several years. Lincoln Medical Supply was located in Lincoln, Nebraska. The company served both retail and business-to-business markets by selling and servicing various types of medical equipment, from items as basic as ankle braces to those as sophisticated as fetal monitors. The company had achieved a great deal of success simply through the sheer demand for various products, but the management team was concerned that no coherent marketing plan had ever been developed. Sara was told that the company had three basic customer groups: • Retail walk-in buyers • Physicians’ offices • Hospitals Retail customers purchased the lower cost, less intricate items, such as braces, bandages, and cold packs. Physicians bought more elaborate equipment and also provided referrals for patients. Hospitals ordered the big-ticket items. Each customer type generated a solid source of revenue for the organization. Sara’s first challenge was to develop a database for each type of customer. Her potential sources for retail customers were insurance forms (many filed for insurance to pay for the items involved) and sales ticket information requested from each person. Doctors’ offices could be sources of a great deal of information, but the company often had to ‘push’ the staff to provide statistics on numbers of patients, types of expenditures, and other key facts. Hospitals could be assessed through internal company reports and as well as by accessing data from external sources. Following the simple generation of data, Sara would need to decide if all this information should be compiled into one overall data warehouse, or if it should be separated by customer type. Clearly the needs of each group were different, and therefore it seemed plausible that the marketing tactics used for each customer type would also vary. At the same time, Sara wanted a consistent message sent out that Lincoln Medical Supply stood for consistent, high-quality, and excellent service advantages. She knew the name ‘Lincoln’ didn’t help because so many companies in the city also used the name (e.g., Lincoln Electric Supply, Lincoln Party Favors, and so forth). Sara held a meeting with the marketing team. The group told her the primary goal was to build greater brand equity in the name because a new medical supply house had just opened near one of Lincoln’s biggest hospitals. Next, the company’s leaders wanted to know how to get walk-in buyers to purchase more items and how to expand purchases from the other two segments of the business at the same time. The leaders discussed the use of catalogs and an internet site to widen the scope of product offerings. They also considered the possibility of opening satellite locations in Omaha (50 miles away), Grand Island (90 miles west), and North Platte (400 miles away). They wanted to develop an understanding of the type of individual who would venture into a medical supply store, what the person might buy, and what the person would not buy. They also needed to know if they were meeting the needs of physicians and hospitals. With all of these challenges in mind, Sara took a deep breath and started working. Discussion Questions 1. 2. 3. 4. Name the sources of internal and external data for all three types of customers. What types of data should Sara collect from each type of customer? How can Sara meet the goals imposed on her by the marketing group? What kinds of marketing programs could be developed from the data that Sara generates? Should the data be separated by customer type or combined into one major database? Why or why not? 5. Is Lincoln Medical Supply a candidate for a CRM program? Why or why not? Integrated Advertising, Promotion, and Marketing Communications Eighth Edition Chapter 11 Database Direct Response Marketing Personal Selling Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Chapter Objectives 1. What role does database marketing, including warehouse, data coding and analysis, and data mining, play in creating and enhancing relationships with customers? 2. How can database-driven marketing communication programs help personalize interactions with customers? 3. How do database-driven marketing programs create sales and build bonds with customers? 4. When should direct response marketing programs be used to supplement other methods of delivering messages and products to consumers? 5. What are the tasks involved in developing successful personal selling programs for consumers and businesses? 6. How should database marketing and personal selling programs be adapted to international settings? Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.1 Overview of Integrated Marketing Communications Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Sephora • Founded in France, 1970 • Cosmetics • Science of Sephora • Personalized database • Loyalty program — Industries with high repeat purchases — Higher margins — High level of competition Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Chapter Overview • Database marketing • Building a data warehouse • Database coding and analysis • Data mining • Database-driven marketing — Communications — Programs • Personal selling Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Database Marketing Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.2 Tasks in Database Marketing • Building a data warehouse • Database coding and analysis • Data mining • Data-driven marketing communications • Data-driven marketing programs Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Building a Data Warehouse • Operational database — Customer transactions — Follows accounting rules • Marketing database — Current customer information — Former customer information — Prospect information Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Marketing Database • Customer names and addresses • E-mail addresses • Record of visits to the firm’s website • Customer history • Customer survey results • Preferences and profiles • Marketing campaign results • Appended data • Coded data Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved E-Mail, Mobile, and Internet Data • Cost effective communications • Build relationships • Cookies — Store information — Personalize website — Customize content Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Purchase and Communication Histories • Detailed customer histories • Every interaction with the company • Determine future communications • Assist marketing team in evaluating — Customer’s lifetime value — Other customer metrics Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Customer Information Companies • Data research firms — — — — Knowledge Base Marketing Donnelly Dialog Claritas • Demographic data • Psychographic data • Online information + offline information — Acxiom — Datran Media Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Geocoding • Adding geographic codes • Plot on a map • Combine with demographic and lifestyle information • Identify clusters • CACI Coder/Plus Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Trade Area Draw Analysis Sample CACI Report for a Proposed Store Site Percentile # of Customers Distance # of Households Penetration Rate 25% 492 0.99 1,992 24.7% 50% 985 2.32 14,803 6.7% 75% 1,477 4.28 45,390 3.3% 90% 1,772 8.48 97,382 1.8% Source: Based on a customer profile presented to CACI, 50% of the firm’s target customers live within 2.32 miles of the proposed retail site. Of the 14,803 customers who live within 2.32 miles, only 985 (or 6.7%) are currently customers of this firm. Bonus Slide Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Database Coding and Analysis • Personalized communications • Marketing campaigns • Common forms of coding — Lifetime value analysis — Customer clusters Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Lifetime Value Analysis Represents the profit revenue of a customer throughout the lifetime of a relationship • Individual lifetime value • Customer segment lifetime value • Key figures — Revenue and costs — Retention rate — Visits or purchases per time period Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Customer Clusters • Group customers into clusters • Develop unique marketing programs for each cluster Increase advertising effectiveness Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Location Data Tracking • Mobile GPS technology • Track location • Combine with profile information • Target based on location • Hashed — anonymizing data Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Data Mining • Building profiles of customer groups • Preparing models that predict future purchase behavior • Examples — First Horizon — profiles best prospects — American Eagle — price markdowns — Staples — profiles of best customers Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.3 Purposes of Data Coding and Data Mining • Develop marketing communications • Develop marketing programs • For personal sales — Qualify prospects — Information for sales calls Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Database-Driven Marketing Communications • Identification codes • Customer profile information • In-bound telemarketing • Trawling Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.4 The Importance of the Internet in Customer Communications • Low cost • Available 24/7 • Metric analysis — If the message was read — Time it was read — How much time was spent • Customers can access additional information • Build a bond with customers Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Identification Codes • Log-in access to special pages • Cookies — Customized Web pages — Individual offers • Specialized communications • Communication chain with purchase Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Personalized Communications • Customer preferences • Customer information • Individualized messages • Personalized responses to inquiries • Birthday greetings — 74% were positive about company — 88% translated into stronger loyalty Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved In-Bound Telemarketing • Immediate knowledge of customer • Customer data immediately available • Personal interaction • Customer value and status • Recent purchases or interactions • Customer preferences and profile Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Trawling • Search for specific information • Some possible uses — Home Depot — individuals who moved — Anniversary of last (special) purchase — Individuals who have not made recent purchases — Individuals who have made recent purchases — Purchase of a specific item — then cross-sell Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Database-Driven Marketing Programs • Permission marketing • Frequency programs • Customer relationship management Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Permission Marketing • Backlash to spam, junk mail • Consumers give permission • Can be offered through — Internet — Telephone — Mail • Higher response rates Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.5 Steps in Building a Permission Marketing Program 1. Obtain permission 2. Offer a curriculum over time 3. Offer incentives to continue the relationship 4. Increase level of permission 5. Leverage the permission to benefit both parties Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Keys to Successful Permission Marketing • Ensure recipients have granted permission • Make e-mails relevant • Customize program by tracking member activity Empowerment Reciprocity Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.6 Reasons Consumers Opt into an E-mail Permission Program Source: Based on Joseph Gatt, ‘Most Consumers Have Reached Permission E-mail Threshold,’ Direct Marketing (December 2003), pp. 1-2. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.7 Reasons Customers Remain Loyal to a Permissions Relationship Source: Based on Joseph Gatt, ‘Most Consumers Have Reached Permission E-mail Threshold,’ Direct Marketing (December 2003), pp. 1-2. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Frequency Programs • Rewards loyalty • Encourages repeat purchases • Airlines and grocery stores • 2/3 of consumers belong • Average household in 14 programs • Actively participate in 6 programs Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.8 Benefits of Loyalty Programs Cited By Customers Source: Adapted from Mark Dolliver, ‘Gauging Customer Loyalty,’ Adweek, http://www.adweek.com/news/advertising-branding/consumers-feel-loyalty-programs-hold-little-value-107055, February 16, 2010. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.9 Frequency Program Goals • Maintain or increase sales, margins, or profits • Increase loyalty of existing customers • Preempt or match a competitor’s offer • Encourage cross-selling • Differentiate the brand • Discourage entry of a new brand Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Common Loyalty Program Pitfalls • Not up-selling and cross-selling • Program not a brand extension • Not building deeper customer relationships • Treating all customers the same • No differentiation • Not utilizing mobile platform • Blank perks • Difficult to use Based on Anna Koren, ‘How to Avoid the 10 Most Common Loyalty Program Pitfalls,’ Bonus https://www.quirks.com/articles/how-to-avoid-the-10-most-common-loyalty-program-pitfalls, Slide July 25, 2013. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Principles of Frequency Programs (1 of 2) • Design the program to enhance the value of the product • Calculate the full cost of the program • Design a program that maximizes the customer’s motivation to make the next purchase Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Principles of Frequency Programs (2 of 2) Frequent Diner Club Sent letter to 4,000 offering $5 discount on dinner • Average visits increased — From 25 to 42 during promotion — From 25 to 29 after promotion • Card holders’ visits increased • Incremental sales increased — $17,100 during promotion — $4,700 after promotion Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Customer Relationship Management • Database technology — Customize products — Customize communications • Built on two primary metrics — Lifetime value — Share of customer Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Direct Response Marketing • Direct Marketing Association — Prospecting à 60% — Customer retention à 40% • It works! • Customers respond — — — — Telephone E-mail Retail store PURL Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.10 Methods of Direct Marketing Source: Based on Richard H. Levy, ‘Prospects Look Good,’ Direct, Vol. 16 (December 1, 2004), pp. 1-5. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Direct Mail • Most common form of direct marketing • Quality depends on list • Internal lists • Types of commercial lists — Response list — Hot list — Compiled list • Typical response — less than 1% Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Catalogs • Long-term impact • Low-pressure sales tactics • Database • Specialty catalogs • Business-to-business Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Direct Response Mass Media • Television • Radio • Magazines • Newspapers Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Internet and E-mail • Direct response to ads • Cost effective • Builds relationships • Personalization of communication • Customization of offer • Search engine ads Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Direct Sales • Consumer direct sales • Host parties • Amway, Mary Kay, Avon • Mark Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Telemarketing • Inbound telemarketing — Cross-selling • Outbound telemarketing — Cold calling — Database — Prospects Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Personal Selling • Face-to-face opportunity • Build relationships — New customers — Current customers • Relationship selling • Create customer for life Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.11 Steps in the Selling Process • Generating leads • Qualifying prospects • Knowledge acquisition • Sales presentation • Handling objections • Sales closing • Follow-up Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.12 Types of Referrals Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Qualifying Prospects • Not all leads are viable • Not all leads are equal in value • Two dimensions — Potential income — Probability of acquiring • Categorize prospects Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Marketing Approaches Prospect Categories Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.13 Knowledge Acquisition Information • Understand the prospect’s business • Know and understand the prospect’s customers • Identify the prospect’s needs • Evaluate risk factors and costs in switching vendors • Identify the decision makers and influencers Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Sales Presentation • Stimulus-response • Need-satisfaction • Problem-solution • Mission-sharing Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.14 Handling Objections • Head-on method • Indirect method • Compensation method • ‘Feel, felt, found’ Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Figure 11.15 Methods of Closing Sales • Direct close • Trial close • Summarization close • Continuous ‘yes’ close • Assumptive close Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved International Implications • Differences in technology • Laws and regulations • Local customs • Infrastructure Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Blog Exercises • Database Marketing • Direct Response Marketing • Personal Selling Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved Copyright Copyright © 2018, 2016, 2014 Pearson Education, Inc. 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