Premium Essay

Marketing Database Segmentation Importance

In: Business and Management

Submitted By Ezio
Words 444
Pages 2
1. What is the importance of segmentation to marketing, and how is it used in database marketing?
To execute different marketing actions and strategies, segmentation is a must. Especially in the increasingly divided market. One size fit all doesn’t work anymore. Without segmenting, marketing efforts would be completely lost and profit not maximized. Segmentation provides a road map for the marketer, to know exactly which product is most suitable for which segment of the market. Moreover, segmentation helps predict future behaviors and market trends.
In order to properly segment a market, information needs to be collected that represents the market to analyze their needs, wants, buying behaviors etc. This is where database marketing comes. Segmenting the customer database into submarkets allows for more effective marketing of products and services.

2. What variables might be used in database segmentation?
Industry category, Household size, Geographic location and Psychographics.

3. Describe how tabulation techniques are used to segment a database.
Based on historical information databases large samples are created. After that the samples data is divided in three ways based on an analysis of historical response data in conjunction with marketing assumptions. Recency of purchases, frequency of purchases and money spent are elements used to segment the data.

4. What is RFM and how is it used to segment a database? What are the limitations of formal RFM techniques?
RFM is a technique used to determine who the most profitable customers are. Who purchased recently, how much and when. It
RFM has limitations and may not produce a segmentation as good as other techniques. RFM does not take advantage of all variable customer data, and instead employs only RFM counter variables.
Large companies have so many more data variables available and so they can create...

Similar Documents

Premium Essay

Market Segmentation

...To reiterate, segmentation, like marketing itself, is all about the profitable satisfaction of...

Words: 3879 - Pages: 16

Premium Essay

Word of Mouth

...Following and implementing a market segmentation strategy allows the firm to increase its profitability, as suggested by the classic price discrimination model which provides the theoretical rationale for segmentation. Since the early 1960s, segmentation has been viewed as a key...

Words: 14313 - Pages: 58

Premium Essay

Market Segmentation

...To reiterate, segmentation, like marketing itself, is all about the profitable satisfaction of customers’ needs. It is designed to be a practical tool, balancing idealism against practicality and coming up with a solution that maximises profit. This means we have to be clever in targeting our offers at people who really do want them, need them and are willing...

Words: 4148 - Pages: 17

Premium Essay

Abb Electric Case

...MARKETING ENGINEERING FOR EXCEL • CASE • VERSION 2.0.3 Case ABB Electric Segmentation By Gary L. Lilien & Arvind Rangaswamy 1. Before beginning any case, students should familiarize themselves with the model being used. Marketing Engineering for Excel comes with tutorials that demonstrate the capability of each model. The tutorial can be found under each model within the ME►XL menu after starting Excel. These tutorials are designed to work with our OfficeStar examples which are located in the My Marketing Engineering directory, usually installed in My Documents during software installation. The data required for this case is located in the My Marketing Engineering directory (usually located within My Documents): ABB Electric Data (Customer Choice).xls 2. ABB Electric History In March 1970, ABB Electric was incorporated as a Wisconsin-chartered corporation with initial capital provided by ASEA-ABB Sweden and RTE Corporation. The new firm’s management was to operate independently of the parent company. The company mission was to design and manufacture a line of medium-sized power transformers to market in North America. The firm produced such electrical equipment as transformers, breakers, switchgears and relays used in distributing and transmitting electrical energy....

Words: 1843 - Pages: 8

Free Essay

Non-Profit Marketing

...| MARKETING FOR A NON-PROFIT ORGANIZATION By: Ahmed Alhalal, Charles Hazzard, Dreu dixon, Faisal Al Mubayedh, Kelly Walker April 11, 2013 Introduction to Engineering Management- 2111-001 MARKETING FOR A NON-PROFIT ORGANIZATION By: Ahmed Alhalal, Charles Hazzard, Dreu dixon, Faisal Al Mubayedh, Kelly Walker April 11, 2013 Introduction to Engineering Management- 2111-001 | EXECUTIVE SUMMARY At the start of this project, our team was given a special opportunity to develop a hands-on marketing project with a non-profit organization. This non-profit organization goes by the name of The Lightfactory, and is known as one of four museums of photography and film in the United States. The board of directors requested our team to develop an e-mail campaign strategy to improve membership and donor rates. However, as systems engineers, none of our team members had any prior knowledge of marketing or segmenting. Therefore our team was forced to do some extensive research on non-profit marketing, as well as database segmenting. The ideals and concepts learned throughout the research process were eventually used as a foundation for completing the project objectives proposed by the Lightfactory board of directors. Segmenting the database was a success and provided some key insights about the LightFactory’s customer base. Most of the customer’s in the database were segmented into three major populations: Big givers, Middle givers, and Low givers....

Words: 4447 - Pages: 18

Premium Essay

Stpx

...Why Segmentation? Introduction and Definition When it comes to marketing strategies, most people spontaneously think about the 4P (Product, Price, Place, Promotion) – maybe extended by three more Ps for marketing services (People, Processes, Physical Evidence). Market segmentation and the identification of target markets, however, are an important element of each marketing strategy. They are the basis for determining any particular marketing mix. Literature suggests the following steps: Adapted from Kotler and Doyle The importance of market segmentation results from the fact that the buyers of a product or a service are no homogenous group. Actually, every buyer has individual needs, preferences, resources and behaviors. Since it is virtually impossible to cater for every customer’s individual characteristics, marketers group customers to market segments by variables they have in common. These common characteristics allow developing a standardized marketing mix for all customers in this segment. Definition: Market segmentation is the segmentation of markets into homogenous groups of customers, each of them reacting differently to promotion, communication, pricing and other variables of the marketing mix. Market segments should be formed in that way that differences between buyers within each segment are as small as possible. Thus, every segment can be addressed with an individually targeted marketing mix....

Words: 1483 - Pages: 6

Premium Essay

Choice Modeling

...Choice Modeling: Marketing Engineering Technical Note 1 Table of Contents Introduction Description of the Multinomial Logit (MNL) Model Properties of the MNL Model S-shaped response function Inverted “U” Marginal response Elasticity of response Proportional Draw Logit Model Estimation via Maximum Likelihood Using Logit Models for Customer Targeting Using Logit Models for Customer Segmentation Determining the number of latent segments in MNL models Summary References Introduction Firms today have access to increasing amounts of market response data at the level of individual customers, including data from scanner panels, direct marketing efforts, online retailing, loyalty programs, and the like. These data include both the marketing effort directed at a customer (e.g., price discount, or specific email sent to that customer) and the associated specific behaviors (e.g., purchase, customer support) of that customer. Consequently, there is also increasing interest among marketers in developing and using response models specified at the individual level. Analyses of individual-level data are useful for firms even for making decisions about aggregate marketing actions, such as TV advertising. After all, markets are composed of individuals, and acknowledging This technical note is a supplement to the materials in Chapter 1,2, and 7 of Principles of Marketing Engineering, by Gary L. Lilien, Arvind Rangaswamy, and Arnaud De Bruyn (2007). © (All rights reserved) Gary L....

Words: 4630 - Pages: 19

Premium Essay

Why Segmentation

...-1- Why Segmentation? Introduction and Definition When it comes to marketing strategies, most people spontaneously think about the 4P (Product, Price, Place, Promotion) – maybe extended by three more Ps for marketing services (People, Processes, Physical Evidence). Market segmentation and the identification of target markets, however, are an important element of each marketing strategy. They are the basis for determining any particular marketing mix. Literature suggests the following steps: Market Segmentation 1. Identification of customers‘ needs and market segments 2. Develop profiles of resulting market segments Positioning 5. Identification of differential advantages in each segment 6. Development and selection of positioning concepts Identification of Target Markets 3. Evaluation of attracti vity of each segment 4. Selection of target segments Marketing Planning 7. Development of a marketing mix for each segment according to the chosen position Adapted from Kotler and Doyle The importance of market segmentation results from the fact that the buyers of a product or a service are no homogenous group. Actually, every buyer has individual needs, preferences, resources and behaviors. Since it is virtually impossible to cater for every customer’s individual characteristics, marketers group customers to market segments by variables they have in common. These common characteristics allow developing a standardized marketing mix for all customers in this segment....

Words: 1726 - Pages: 7

Premium Essay

Marketing

...Publishing as Prentice Hall 8 Core Concepts Needs, wants, and demands Target markets, positioning, segmentation Offerings and brands Value and satisfaction Marketing channels Supply chain Competition Marketing environment Marketing planning Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 9 Types of Needs...

Words: 5376 - Pages: 22

Free Essay

Management Information System

...* Understand the importance of standards (protocols) * What problems are and tasks are involved in networks and why are standards important for networks to run? Computers and applications of different kinds need to use the same network. Packets could get altered/lost/out of sequence. Many computers send packets simultaneously. There are lots of different destinations, routes, and sometimes some of them ‘close down’. * Bandwidth Bandwidth is transmission capacity of a computer or communications channel, measured in bits per second (bps). * TCP/IP protocol and layered standards of the Internet * Application layer, network layer (TCP/IP) Applications layer (e.g. HTTP, FTP) specifies how application programs communicate. Network layer (e.g. TCP/IP) consists of transport layer and internet layer. Transport layer (TCP) breaks, reassembles messages into packets. Internet layer (IP) specifies the address a packet is headed to. * Internet addressing and architecture: means to finding stuff * Describe the major parts of a URL and implications of URLs and domain names URL (Uniform Resource Locator) is means of identifying files on the web. “Application transfer protocol://host name.domain name.top-level domain/path/file” Domain name is the unique name assigned to an IP address. * Describe how DNS works DNS is a distributed database of...

Words: 2137 - Pages: 9

Premium Essay

Organizational Behaviour

...HBR Article: Diamonds in the Data Mine March 31, 2010 By Gary Loveman This is a pretty nice and short yet highly effective article that outlines the importance of providing an exceptional customer service in today’s service industry, especially in the gaming industry as it is the case of Harrah’s Entertainment casino. Actually, from its inception, Harrah’s former CEO Phil Satre had instituted this policy of “changing Harrah’s from an operations-driven company that viewed each casino as a stand-alone business into a marketing-driven company that built customer loyalty to all Harrah’s properties”. In doing so, Satre asked Gary Loveman to head a strategy to affect this change in all Harrah’s organizations, and so Loveman did follow through on this task. He effectively focused on delivering customer service and on understanding and marketing effectively to the customer. This is the secret to Harrah’s success, which allows him and Harrah’s to maintain loyalty from its customers based on the database they had collected over the years, as they were able to identify their customers’ needs and wants as well as to have good reward and incentive programs in place to recognize their clientele according to the time and money they spend gambling over their facilities. Yet, for their workforce, Harrah’s instituted a bonus system tied to job satisfaction. “Rewards hinge on everyone’s performance at a casino- and on customer satisfaction, not a property’s financial performance”.    ...

Words: 1771 - Pages: 8

Premium Essay

Rural Marketing

...RURAL DEVELOPMENT MARKETING & DIRECT MARKETING MODULE NOTES Code | 50121621 A | Course | Rural and Development Marketing | Topic | Division | | | What are rural markets? Is there a uniform identity? Global trends impacting rural behavior (only India)- WTO, technology and social behavior | Nikita Naina Kumar | | | India's rural communities- disparities, segmentation and social factors | Trishla Jhaveri | | | Media penetration, impact and costs in rural India | Shayan Roy | | | Psychographics, demographics and societal impact on the rural consumer | | | | Profiling the rural male consumer | | | | Profiling the rural female consumer | | | | The rural business model- distribution, pricing, packaging, promotion- in rural markets | | | | Branding and brand management in rural India | | What is Rural Marketing? Rural Marketing is defined as any marketing activity in which the one dominant participant is from a rural area. This implies that rural marketing consists of marketing of inputs (products or services) to the rural as well as marketing of outputs from the rural markets to other geographical areas. Rural markets have emerged as an important growth engine in the Indian consumption story. With about 70 per cent of the Indian population residing in the hinterlands, rural markets seem to be a significant opportunity for business conglomerates. ...

Words: 11589 - Pages: 47

Premium Essay

Market Segmentation

...Here, strategies, goals, and expectations for the company and marketing team specifically are established. The second step determining consumer needs and wants. This step is not just a step of segmentation, but is often the first research done generally when introducing a new company, product, or program. It questions what consumers need (either generally or specific to existing products). New technology,...

Words: 1183 - Pages: 5

Premium Essay

Imc Notes 1

...* Strength of Advertising: * Stimulate demand | * Reminds and reinforce | * Introduce product and brands * Create brand image | * Communicate function/benefits of product | * Provide information * Persuade | * Build awareness of products and brands | * Can reach large audiences | | * Importance of Advertising: * Assist in communication, persuasion and interaction. * Helps to establish brand equity. * Used to build brand image/identity. Consumer Push and Pull Marketplace * Advertising has changed due to shifting media preferences & expenditure and the changing advertising agency structure. It has turned from a linear marketer controlled process into an interaction. * Strategies for consumer power online: * Control over relationship * Information as power * Aggregation * Participation * Push and Pull Model: * Push – “Taking the product to the consumer” * Pull – “Getting the consumer to come to you” New Rules of Engagement with Consumers New Rules of Engagement with Consumers Integrated Marketing Communication * Old Definition: A concept of marketing communications planning, that recognises the added value of a comprehensive plan, that evaluates the strategic roles of a variety of communication....

Words: 482 - Pages: 2

Premium Essay

Conbehavior

...Define market segmentation. 5. What is role theory, and how does it help us to understand consumer behavior? 6. What do we mean by an exchange? 7. Why is it important for businesses to learn about their heavy users? 8. What is database marketing? Give an example of a company that uses this technique. 9. What is popular culture, and how does this concept relate to marketing and consumer behavior? 10. The chapter states that “people often buy products not for what they do, but for what they mean.” Explain the meaning of this statement and provide an example. 11. Describe two types of relationships a consumer can have with a product. 12. What is meant by the term “global consumer culture”? 13. What is the difference between B2B and B2C e-commerce? 14. The economics of information perspective argues that advertising is important. Why? 15. Provide two examples of important legislation that relates to American consumers. 16. Define social marketing and give an example of this technique. 17. Define consumer addiction and give two examples. 18. What is an example of a consumed consumer? 19. What is shrinkage, and why is it a problem? 20. Define anticonsumption, and provide two examples of it. 21. Name two different disciplines that study consumer behavior. How would their approaches to the same issue differ? 22....

Words: 1605 - Pages: 7