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Figure 11-3
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I looked up my most recent book, Strategic Database Marketing, 2nd edition, on the Amazon.com site. In addition to the price and a picture of the cover, there was a summary of the book, 43 sample pages that visitors could read and print, nine reviews of the book, and a Sales Rank Number: 5744. Amazon ranks the sales of all books daily, from 1 to 1,000,000 or more. In addition, Amazon reported that my book was selling very well to employees of NCR, the makers of Teradata computers. What bookstore could possibly provide such interesting and valuable information Set up reports so that you can know on a daily, weekly, and monthly basis which customers are visiting your sites, what they do there, and what they buy there. Design the reports so that your customers can see them as well, print them on their PC printers, or download them into their own reporting systems. Once you have a system set up, how do you get customers to use it After all, most of them are happy calling your operators on a toll-free line and wasting your money. Why would they change Why would they go to the Web to get information or to order from you People do what is in their own best interest, not what is in your best interest. You have to give them some kind of incentive. What are the ways of doing this For business-to-business operations, work with the purchasing of cer at each customer site. Offer these purchasing of cers a deal that they cannot refuse: If they will persuade their employees to use the site, you will give the company a volume price break.
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Provide monthly reports to the purchasing of cer telling her what her employees are buying. Put the purchasing of cers on an advisory panel. Invite them to come to Hawaii with you once a year to discuss business. You gure it out. There is some good way to make it worth their while. If your site is for consumers, you have to come up with relevant incentives. The way to start is to gure what you get out of the system and share some of the proceeds with your customers. When the site is ready, you will need to send an email to all your customers like the ones that Boeing uses: To provide more value and better service to our customers, we have developed a way to use the sophisticated technology of the World Wide Web to give customers direct access to our extensive part information and ordering system. You can now order parts and view part information through a new World Wide Web site called the Boeing Part Analysis & Requirement Tracking (PART) Page How do you justify such a system to your management The software costs are not trivial. Let s try some numbers. What would it cost to let your customers come behind the counter Table 11-1 gives some sample one-time costs. This assumes that your products, services, and technical data are already in electronic form. If they are, $400,000 should enable you to set up a Web microsite to which customers with an ID and password could come to see your products and place orders. The reporting software would provide Web reports to the customers. Promotion is the money needed to let customers know about the system so that they will Table 11-1 One-Time Costs
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Web access software Reporting software Promotion Total $400,000 $ 20,000 $ 30,000 $450,000
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use it. If we amortize the cost of the new system over 3 years and add in the operating costs, the results look something like Table 11-2. Let s suppose that you have a business-to-business company with several thousand customers but that you apply the costs of the new system only to your best 1000 customers. We will charge the total cost of the system against these best customers, even though many others will probably use it. Table 11-3 gives the base lifetime value of these 1000 customers before we introduce the new system. On average, each of these 1000 best customers spends $28,000 per year with you. It costs $400 to acquire each of these customers, and you are spending $50 per year on marketing costs to maintain relationships with them. After 3 years, the LTV is over $16,000. If the new system is successful, it will create two changes in customer behavior. Those who adopt the new system will be more loyal. The retention rate will rise from 70 percent to 75 percent. In addition, Table 11-2 Yearly Costs
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Costs Site maintenance Amortization of one-time cost System management Total Month $ 4,000 $12,500 $ 6,000 $22,500 Year $ 48,000 $150,000 $ 72,000 $270,000
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