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Does Customer Database Benefit Retail Marketing?

How you measure your success defines your strategy and vision of the work. If your goal is higher sales, of course you can boost them, but how? If your goal is more customers, you may get them but they may not be profitable. Why? Well, most of the retailers have the notion that sales and discounts are the road to success, but they fail to realise that they may actually be the road to ruin. Today’s retailer finds it difficult to both acquire and retain customers.

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The expanding technologies, an unstable economy and the growing competition-all bring dramatic changes to the way consumer behave and shop. Therefore, an effective way to retain your customers is by creating a database and following the basic principles of database marketing. The strategy not only helps to uncover new sales opportunities but help to zero in on the lucrative market segment and generate profitable business.

The biggest advantage with your customer database is to promote merchandise to specific consumers for additional sales opportunities. The database pinpoints the right customers towards a premium or deluxe products. And thus, you can market to them differently from those customers who are not interested to spend much. Now if you think it will only help you to enhance the profit, you are wrong. Besides the profit, it will actually reduce your overall marketing expense.

Probably your next question is how would you create this customer lifetime value?

Ask your customers to provide you data and create a database complete with purchase history. If you wish to keep a track of their spending, you can record their credit cards or get your customers use a plastic member card.

Once you have the record, use the data to segment your customers by profitability.

When you actually implement the above mentioned strategies, you may discover that 20% of your customers are giving you 80% of your profits. But this is not your major lookout. Of course provide them special services and attention but your aim should be to target those customers who give you an average profit. They are more likely to join the previous 20% customers only if you encourage them. Remember, a cordial relationship with the customer only works, when the customers benefits from the relationship. Therefore, the retailing trick is to provide such services to the customers that will modify their behaviour in profitable ways. And the trick lies in acquiring the right customer database.

A data analyst’s extracts data required for analysing the customer behaviour. The database comes from the following sources:

Customer master file:

The file contains a list of customer’s name, address, phone number, email, transaction data and store shopped

Transaction file:

Analysts link the transaction file to the customer file to understand how frequently a customer shop, how much they spend in total, what channel and shipping method they use

Transaction detail:

With the transaction detail, the analysts can see what specifically is being purchased, how much is spent on a particular item, whether the shopper has used coupons and the overall margin

Contact history:

The analysts see how frequent, by what channels and with which offers the customers are contacted by the retailer. This determines the impact on purchases

Product hierarchy:

The collected data now enable the analysts to roll up the purchase detail information to the departmental level to see the overall purchasing pattern.

Now the real work begins. The data is put into a logical structure with an initial investigation to ensure the integrity of the data. Such a systematic approach improves targeting. The retailers find an insight into what to market and to whom and when. The retailers have two groups of people- one segment will never see again and the other one will shop with the retailer again. The data analysis helps to determine which customers have the potential to actually spend.

In a nutshell, customer database reveals the following:

How much does a customer spend?

How often does a customer shop?

What is the retention rate over time?

What is the average time between the purchases?

How profitable are the high-spending customers?

Jeremy Gomes is a senior media analyst (both Online and Print) working in a market research company. He also takes part in the development of audience measurement and multimedia monitoring tools. He takes inspirations from Kantar Media UK while doing his research work.

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