Download DATABASE MARKETING is the process of creating information

DATABASE MARKETING is the process of creating information records about
individual customer’s orders and inquiries, which are used to analyze patterns for more
effective targeting of product or service offerings.
Massive databases with billions of pieces of information can be processed in minutes to
determine which customers among thousands or millions should get particular messages
in endless, unique sequences of contacts over days, weeks, or years.
The information stored in databases is used to: promote the benefits of brand loyalty to
customers at risk from competition; to identify which customers are most likely to buy
new products and services; and to support low-cost alternatives to traditional sales
methods.
A database can be subdivided into segments such as recent customers, customers who
have not purchased in the last year or two, and customers who have spent a lot of money
over a certain period of time.
When enough information is known about current customers, a firm can identify the
prospects most likely to become customers. So marketing efforts can be targeted directly
to those prospects with the highest probability of responding to an offer by placing an
order.
Uses of databases
1. Selection of market segments - demographics, geographic location, previous purchase
behavior, and likelihood of placing an order. Benefit of increased productivity and lower
costs.
2. Repeat purchases - sometimes repeat purchases are generated through frequent
communications.
3. Cross selling - when a firm owns several businesses that share a common database they
can enjoy greater sales and lower operating costs. Time Warner book companies sell to
the Time Warner magazine company customers.
4. Competitive Superiority - better marketing, better merchandising/service offerings and
better strategic decision making.
Terminology
RFM - Recency, Frequency, and Monetary values define a firms best customers, those
who are likely to purchase again because they have bought most recently, bought most
frequently or have spent the most money.
Strengths of Database Marketing
1. It is measurable. Responses to campaigns are measured, enabling firms to identify the
effectiveness of different approaches.
2. It is testable. Firms can test the effectiveness of different elements of their approach the product, the communications medium, the offer, the target market etc.
3. It is selective. Firms can focus campaigns accurately, because they communicate with
specific customers.
4. It is personal. Firms can communicate to each customer, by including details relevant
to them and not to others.
5. It is flexible. Firms can time their campaigns to have their effect exactly when they
want.
Weaknesses of Database Marketing
1. It is expensive to create and manage a database
2. It is difficult and time-consuming to keep customer and prospect records up-to-date
PRIVACY ISSUES
In the past, privacy rights were mostly preserved because of the high cost of managing
the volume of information necessary to violate them. Information technology has
increased the ability of firms to share and exchange data with third-party sources.
Most personal information is obtained from secondary sources, where information is
accessible without the individuals knowledge. Much data sold or rented by database
publishers is derived from government records, public firms and non profit organizations.
The evolution of information technology can attack a person’s psychological sense of
security by violating a person’s right to choose the time and place of social interaction.
Current federal law - CAN-SPAM - requires permission to send email
Do not call registry for telemarketers
LIST SELECTION
A list - is a collection of names and addresses of prospects and customers who could be
the target of an offer to purchase a product or service. The list/lists a firm selects for its
direct marketing effort is the single most important factor in determining the success or
failure of any direct marketing campaign.
Types of lists
Response list - contains information such as names and addresses of particular consumers
or businesses that have specific product purchase histories based on responding to directresponse offers.
House List - existing customers - these lists have the highest responsiveness to an offer
because they have responded in the past and therefore are the most valuable lists to a
direct marketer.
Purchased Response list - a list of customers from another firm.
Response lists are available from list owners, list managers and list brokers.
List owner - a firm that makes its customers list available to the commercial list-rental
marketplace.
List manager - manage and market the list owners list for a fee.
List broker - a third-party agent who rents mailing lists - the broker works primarily for
the list user.
For response lists, three key factors determine usage success: RFM
Things to ask before purchasing a list:
1. Who else has used it?
2. Were their offers similar to mine and what was the response?
3. Were their results favorable?
4. How clean is the list?
Compiled lists - are put together from numerous sources such as telephone books,
directories, voter lists, subscriber lists, census bureau data, etc. These lists do not
necessarily include mail-order buyers.
Business compiled lists - business directories, yellow pages, Standard Industrial
Classification (SIC) codes, etc.
Advantages - saturate a specific demographic and or/geographic segment.
Disadvantages - names do not necessarily include mail order responsive customers.
Difficult to keep names and addresses current because so many U.S. Citizens move every
year.
Frequently lists will be combined.
Merge-Purge - merging lists together then purging duplicate names and addresses. This
saves money so a firm doesn’t spend postage on duplicate names and improves company
image.
List Rental Agreements - usually only for an agreed to number of uses.
Frequently a firm must get approval for what it is going to mail. To ensure the list is not
used more than the agreed to time, list monitors insert phony names (called seed names)
and addresses into their lists so mailings can be monitored.
List segmentation - decide to mail to only a portion of the list instead of the whole list.
Segment criteria:
1. Demographics - age, income, etc
2. Psychographics - lifestyle characteristics
3. Mail - order characteristics - RFM
4. Physical Characteristics - of the list itself, size of names, deliverability, format, etc.
Statistical Techniques are used to determine purchase probability and predict segment
response rates.