BUS607: Data-Driven Decision-Making

7a. Differentiate between customer lifetime value (CLV) and customer relationship management (CRM)

• How does customer lifetime value differ from customer relationship management (CRM)?
• How is customer lifetime value used as a component of customer relationship management?
• What is the importance of customer lifetime value to customer relationship management?

Database marketing is a direct marketing technique that uses customer data to create direct communication.

Database marketing requires interaction with customers. This relationship is known as customer relationship management (CRM).

The lifetime value of a customer, also known as customer lifetime value (CLV), is the total amount of money a customer is expected to spend on a business' products or services during their lifetime. CLV is an important metric to measure customer relationship management (CRM). CLV reveals how well customers like your product or service. Decision-makers can make informed decisions and grow their business using CLV metrics.

CLV is an important component of CRM because it helps establish a value for each customer relationship. With this knowledge, the organization can determine where to invest its resources based on how valuable the customer is to the organization.

To review, see Customer Relationship Management and Customer Lifetime Value.

7b. Analyze how businesses use database marketing to improve CRM

• What are the top benefits associated with database marketing?
• How does customer relationship management (CRM) differ from database marketing?

Database marketing does more than build relationships with customers. It reduces marketing costs, increases profit margins, and improves product development. There are various customer database technologies utilized to build business-to-customer relationships.

The top benefits associated with database marketing include:

1. Improved customer understanding
2. Improved operational efficiency through expense reductions
3. Improved revenues through better performance
4. Greater visibility of business performance
5. Greater confidence and predictability

CRM is a customer-centric approach to business, which requires a deep understanding of the customers' needs and behavior. Database marketing is a subset of CRM that enables the CRM system to gather and analyze customer contacts through all business functional areas.

To review, see The 5 Money-Making Benefits of Database Marketing and Customer Relationship Management.

7c. Evaluate the practical factors of database marketing that contribute to understanding consumer wants and needs

• What are the differences between customer profiles, customer activity, and customer management?
• What are the top business strategies supported by a database marketing system?

A database marketing system contains detailed information about individual customers and their activities, which is essential to being able to foster a deeper relationship with them. These systems typically store three primary categories of information, which include customer profiles, customer activities/behavior, and customer management.

Customer profile data includes the customer's name, contact information, birthday, etc. Customer activity or behavior includes purchase history, such as what is purchased, how often purchases are made, and how much is being spent. Customer management enables the business to keep track of all of the customer contact points made through automated outreach programs, loyalty programs, and cross-marketing between physical and virtual stores.

The key strategies enabled by a database marketing system include lead generation, customer acquisition, customer retention, customer growth, customer referrals, and customer loyalty, which all support the CRM system. Thus, CRM technology establishes connections to customers through direct marketing, sales, customer service, and support.

To review, see Customer Database and The 5 Money-Making Benefits of Database Marketing.

Unit 7 Vocabulary

This vocabulary list includes the terms that you will need to know to successfully complete the final exam.

• customer activity
• customer-centric
• customer lifetime value
• customer management
• customer profile
• customer relationship management
• database marketing