- Why would a customer database be so useful for the companies described in this case? What would happen if these companies had not kept their customer data in databases?
Each of the companies described in the case study has employed the huge amounts of data contained in their databases and the power of modern software to increase their customer base and profit margin. It would have been impossible to reach any meaningful conclusions about customer preferences without the historical data already collected by each of these companies.
Forbes used the SAP business objects software to analyze its data and produce better predictions about visitor behavior. The results enabled the company’s advertisers to target individual customers. Without the historical data already gathered, Forbes would have only a tiny sample to use in predicting the subscriber behavior. The results obtained would not be a true reflection of the habits of its subscribers. This would mean less faith by advertisers and consequently less business.
Monster.com used UNICA enterprise management tool to analyze their data. The data contained includes the date of the campaign, the recipients, the respondents and those who ignored the message. This information represents the past behaviors of the advertisers, which is likely to continue in the future. Without this database, Monster.com would have been unable to group their customers in segments, and importance to the business.
Diapers.com had databases, which contain the behaviors of mothers and the likely expenditure of each customer over his lifetime. It also has the locations of potential customers and product preferences. Without the data, the company could not predict the future earnings from each customer. They would also not be able to segment the customers into segments for targeted advertising.
Target, a discount retail group, has amassed sizeable information about its customers. This information includes each customer’s unique Guest ID and visits to its website. It also includes the customer’s personal details including location, family size, relationship status, age, and internet habits. When combined with the customer’s financial data, the information helps to get more people to shop for specific products from their stores. Without the database, the group would not have been able to create profiles for each customer. It would not also have a pregnancy prediction score which helps to advertise to expectant women and new mothers.
- How did better data management and analytics improve each company’s business performance? Give examples of two decisions improved by mining these customer databases.
The companies in the case study were able to analyze their databases using software to help the management in tactical decision-making.
Forbes used a detailed database and SAP business objects to enhance their prediction of customer behavior. This improved their understanding of each subscriber. With this information, Forbes is able to guide advertisers on how best to reach a certain target segment. For example, subscriber in Europe may receive different adverts from subscribers in the USA when they visit the same page on the Forbes website. Data analytics also helped Forbes increase their publication by better marketing.
The results of data analysis on Monster.com database helped them to send personalized emails to employers. This increased their business performance by convincing new employers to advertise on their website. One of the decisions improved by the data analysis is the grouping employers in terms of prospective profitability. The top prospects become the targets of gifts and direct mail promotions. This is depending on their firm’s size, industry, and location. In addition, Monster.com is able to contact new potential customers through social sites by using information collected from the analysis.
The analysis of the database of Diapers.com helped them to improve their business performance by calculating how much income can be gained from each new customer and so the amount of money that should be used to acquire that customer. The first decision improved by the data analysis was the concentration of return customers instead of one-off sales. This helped to improve their incomes. The marketing budget of each customer is also computable for each customer from the historical purchases and product choices.
Target used analysis of data to improve its performance by studying the habits of its customers, which decide the products the customers will most likely buy. The analysis helped the decision-making by creating the pregnancy prediction scores. These scored helped the company in marketing baby products to expectant women and new mothers. It can also increase the sales of a particular product to a particular customer by studying their incomes and age information.
- Are there any ethical issues raised by mining customer databases? Explain your answer.
Privacy is the major concerns of most customers whose data gathered by companies. Most of the firms gather the personal information without the individual’s consent. This leads to trust issues where the citizens feel that the big firms are spying on them. They also have no say in how the holders of the information use it. This is because the holders can analyze or even sell the information as they please.
Data mining may also lead to discriminatory practices. The data gathered may lead to denying of services to particular people because of their ethnicity or incomes. This is unfair as the analysis is not 100 percent accurate.
Data mining may lead to unfair competition. The analysis of databases is only possible by those firms, which can afford the expensive software and the databases design and management fees. Outsourcing the services is also expensive and out of reach for small and medium enterprises.
References
Quigley, M. (2008). Encyclopedia of Information Ethics and Security. Hershey: Information Science Reference.
Wang, J. (2003). Data Mining: Opportunities and Challenges. Hershey: Idea Group Publishing.
