Chapter 11 Case StudyLINCOLN 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
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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?
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Figure 11.1 Overview of Integrated
Marketing Communications
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Sephora
• Founded in France, 1970
• Cosmetics
• Science of Sephora
• Personalized database
• Loyalty program
– Industries with high repeat
purchases
– Higher margins
– High level of competition
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Chapter Overview
• Database marketing
• Building a data warehouse
• Database coding and analysis
• Data mining
• Database-driven marketing
– Communications
– Programs
• Personal selling
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Database Marketing
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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
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Building a Data Warehouse
• Operational database
– Customer transactions
– Follows accounting rules
• Marketing database
– Current customer information
– Former customer information
– Prospect information
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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
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E-Mail, Mobile, and Internet Data
• Cost effective communications
• Build relationships
• Cookies
– Store information
– Personalize website
– Customize content
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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
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Customer Information Companies
• Data research firms
–
–
–
–
Knowledge Base Marketing
Donnelly
Dialog
Claritas
• Demographic data
• Psychographic data
• Online information + offline information
– Acxiom
– Datran Media
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Geocoding
• Adding geographic codes
• Plot on a map
• Combine with demographic and lifestyle information
• Identify clusters
• CACI Coder/Plus
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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
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Database Coding and Analysis
• Personalized communications
• Marketing campaigns
• Common forms of coding
– Lifetime value analysis
– Customer clusters
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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
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Customer Clusters
• Group customers into
clusters
• Develop unique marketing
programs for each cluster
Increase advertising
effectiveness
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Location Data Tracking
• Mobile GPS technology
• Track location
• Combine with profile
information
• Target based on location
• Hashed – anonymizing
data
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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
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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
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Database-Driven Marketing
Communications
• Identification codes
• Customer profile information
• In-bound telemarketing
• Trawling
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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
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Identification Codes
• Log-in access to special pages
• Cookies
– Customized Web pages
– Individual offers
• Specialized communications
• Communication chain with purchase
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Personalized Communications
• Customer preferences
• Customer information
• Individualized messages
• Personalized responses to
inquiries
• Birthday greetings
– 74% were positive about
company
– 88% translated into stronger
loyalty
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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
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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
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Database-Driven
Marketing Programs
• Permission marketing
• Frequency programs
• Customer relationship management
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Permission Marketing
• Backlash to spam, junk mail
• Consumers give permission
• Can be offered through
– Internet
– Telephone
– Mail
• Higher response rates
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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
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Keys to Successful Permission
Marketing
• Ensure recipients have
granted permission
• Make e-mails relevant
• Customize program by
tracking member activity
Empowerment
Reciprocity
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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.
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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.
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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
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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.
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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
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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.
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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
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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
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Customer Relationship
Management
• Database technology
– Customize products
– Customize communications
• Built on two primary metrics
– Lifetime value
– Share of customer
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Direct Response Marketing
• Direct Marketing Association
– Prospecting à 60%
– Customer retention à 40%
• It works!
• Customers respond
–
–
–
–
Telephone
E-mail
Retail store
PURL
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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.
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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%
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Catalogs
• Long-term impact
• Low-pressure sales tactics
• Database
• Specialty catalogs
• Business-to-business
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Direct Response Mass Media
• Television
• Radio
• Magazines
• Newspapers
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Internet and E-mail
• Direct response to ads
• Cost effective
• Builds relationships
• Personalization of communication
• Customization of offer
• Search engine ads
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Direct Sales
• Consumer direct sales
• Host parties
• Amway, Mary Kay,
Avon
• Mark
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Telemarketing
• Inbound telemarketing
– Cross-selling
• Outbound telemarketing
– Cold calling
– Database
– Prospects
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Personal Selling
• Face-to-face opportunity
• Build relationships
– New customers
– Current customers
• Relationship selling
• Create customer for life
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Figure 11.11 Steps in the Selling
Process
• Generating leads
• Qualifying prospects
• Knowledge acquisition
• Sales presentation
• Handling objections
• Sales closing
• Follow-up
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Figure 11.12 Types of Referrals
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Qualifying Prospects
• Not all leads are viable
• Not all leads are equal in value
• Two dimensions
– Potential income
– Probability of acquiring
• Categorize prospects
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Marketing Approaches
Prospect Categories
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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
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Sales Presentation
• Stimulus-response
• Need-satisfaction
• Problem-solution
• Mission-sharing
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Figure 11.14 Handling Objections
• Head-on method
• Indirect method
• Compensation method
• “Feel, felt, found”
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Figure 11.15 Methods of Closing
Sales
• Direct close
• Trial close
• Summarization close
• Continuous “yes” close
• Assumptive close
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International Implications
• Differences in technology
• Laws and regulations
• Local customs
• Infrastructure
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Blog Exercises
• Database Marketing
• Direct Response Marketing
• Personal Selling
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Copyright
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