Download Optimal Chapter 17 - Cal State LA

Optimal Database Marketing Drozdenko & Drake, 2002
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Chapter 8
Issues in the Marketing Environment
and Future Trends In Marketing
Databases
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Objectives
• To explore the global environment as it relates to
database marketing.
• To discuss the social, legal, political, and ethical
issues in database development, maintenance and
utilization.
• To review the evolution and trends in database
marketing.
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The Global Business Environment
• As markets become saturated in the U.S.,
organizations must evaluate markets in other
countries.
• Database marketers face unique challenges in
global markets. In particular, the legal, political,
and cultural environment in other countries may
differ drastically in the areas of consumer privacy.
In many cases the organization must radically
change the way they do business as they move
into other countries.
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Exhibit 17.1 Forces in the Global Environment
Culture
Political
Demographic
Legal
Psychographic
Social
Economic /
Infrastructure
Organization
Media
Competitive
Human
Resources
Technology
Natural Environment
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Analyzing the Environmental Forces
in the Global Market
• This becomes a complex process for most
organizations and much research is needed
to perform a good analysis.
• Similar to the process in the domestic
market, the organization should consider all
relevant environmental forces.
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Culture
• Culture includes values, customs, rituals, symbols,
roles, and other aspects of society that are
generally accepted by people in a country.
• The database marketer has to consider whether a
customer database is consistent with cultural
values, especially with regard to privacy.
• The marketer also should consider whether
shopping customs are currently consistent with
direct channels that database marketers utilize.
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Legal
• The legal environment includes the laws and legal
practices in a country. These laws may be at several
levels such as country-wide, state/regional,
municipal, and religious.
• Additionally, economic communities, such as the
European Union, have laws and regulations which
affect database marketing. (e.g., safe harbor)
• At a very basic level, the database marketer must
comply with all relevant laws. This often means
obtaining legal representation or consultation in the
country of concern.
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Legal…
• Additionally, the marketer must be aware of legal
processes and procedures, especially as they relate
to “gray” areas in the law. A foreign organization
may not have the same flexibility in legal
processes as would a domestic organization.
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Demographics
• Demographics include a number of variables that
we have discussed throughout this course, such as
gender, age, income, family status, residence, etc.
• As in the domestic market, the database marketer
has to determine the fit between a country’s
demographics and potential market offerings.
• The database marketer should be aware that nonsegmented demographics may be misleading. For
example, a country with a low median income
may have sizable affluent segments.
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Psychographics
• While culture refers to generally accepted values,
customs, rituals, norms, etc., psychographics refers to
activities, interests, and opinions of segments of a
country’s population.
• Psychographics may be more important than culture or
demographics in evaluating marketing potential. The
AIO of a segment of a society may be in conflict with
culture.
• For example, non-materialism may be a cultural
component of a country such as India, however, there
may be sizable segments of the population that are more
oriented to western consumerism and luxury products.
The database marketer should consider the potential of
these segments.
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Economic/Infrastructure
• The economic environment includes a
number of elements, including employment
levels, cost of living, exchange rates,
inflation, and poverty levels.
• The infrastructure component encompasses
communications and transportation.
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Political
• Forms of governments vary widely. In
particular, political instability can offer an
unknown element to the marketer.
• The legal and political environment are
interrelated. While certain practices may be
technically legal in a country, government
policies may make them impractical to
implement (e.g., obtaining appropriate permits).
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Human Resources
• Human Resources include employee
expertise, employee recruitment, and
employment policies.
• Database marketing requires technical and
marketing expertise. If these experts do not
exist in the country, the organizations must
consider alternatives such as employee
relocation, training, or running the operation
from another location.
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Technology
• The technological environment involves all aspects of
technology (hardware, software, communication links,
peripherals, etc.) related to database development and
maintenance.
• The cornerstone of Database Marketing is the
computerized database. If access to database
technology is limited within the country of concern,
then the organization will need to make adaptations.
Competent servicing, repair, and maintenance within
the country is necessary or adaptations are needed.
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Natural Environment
• While the natural environment has less impact on
businesses in developed countries, it may have a
significant impact on businesses in less developed
countries. Weather conditions, topography, pollution
levels, etc., may impact businesses.
• Technology may interact with the natural environment
and infrastructure. Sophisticated computer systems
often require controlled environments.
• If weather conditions are extreme the environmental
control systems must be reliable enough to avoid major
system failures.
• Additionally, media and distribution channels may be
susceptible to seasonal disruptions in a country.
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Media
• List acquisition is critical to direct marketing.
• Even if a country has an adequate mail or
phone system, it may not be possible to
acquire good lists.
• Other media have to be evaluated in terms of
appropriateness for target groups in other
countries.
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Social Concerns and Ethics in
Database Marketing
• Marketers have to consider more than the
potential profitability when developing,
maintaining, and utilizing databases.
• The next slides present a basic outline for
examining social and ethical issues.
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Ethical
Social
Political
Legal / Regulatory
Exhibit 17.2 Areas of Concern for Database Marketers
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Legal / Regulatory Environment
• A review process should be in place to determine
whether state or federal laws potentially may be
violated through database activities.
• To determine compliance, the organization needs to
consider several areas such as methods of data
collection, database maintenance, security, and offer
copy.
• Due to the complexity of legal issues, most
organizations seek professional assistance. Larger
organizations will maintain a compliance person or
legal department that routinely reviews programs.
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Political
• Some marketing database actions are legal, but may
trigger a political response. If there is sufficient
pressure from public interest groups, politicians may
consider introducing legislation.
• Therefore, organizations should monitor their
actions in light of the current and emerging political
environment.
• In the US, partly due to the political influence of
business, industry self-regulation is often a first step.
When this fails, there is a call for legislation.
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Political…
• For example, Internet marketers are currently under
political scrutiny in the areas of data security and
data acquisition practices, especially in the area of
collecting data from children. Government agencies
and public interest groups have voiced doubts about
the industry’s ability to self-regulate this area.
• It is to the advantage of organizations in an industry
to resolve these issues prior to the enactment of
potentially more restrictive legislation.
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Social
• Some database actions will not elicit strong political
response, but may elicit negative reactions from
segments of society. These groups may not be able to
enact legislative changes; however, their responses
should still be evaluated.
• For example, targeting (or specifically excluding)
certain nationality, religious, or ethnic groups may
elicit responses such as press releases or boycotts. In
some cases, these groups may contact politicians or
attorneys.
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Ethical
• Even if actions are unlikely to elicit negative
legal, political, or social response, are they in
the best interests of individual consumers and
of society as a whole?
• Ethical issues are often the most difficult ones
for organizations to deal with, because they
may be in conflict with profit motives and
may have little potential for severe negative
consequences.
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Application of Ethics
• Some magazine publishers will send a mailing to
customers that implies that the consumer should
renew her subscription now. Unless the customer
carefully reads the material she/he may not
recognize that there are several months left on the
subscription.
• Testing could determine the best time in the
subscription cycle to send the mailing.
• The organization benefits by earning interest on the
early renewals. While many consumers are misled,
an individual’s financial loss is minor. Should a
company use this method?
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Another Example
• A not-for-profit organization tests the response from a
new campaign and determines that contributions rise
significantly if a “survey” instrument is included as
part of the offer.
• The “survey” instruments are intentionally designed
to bias response toward a contribution. The
“surveys” have no real scientific value, even though
the organization gives the consumer the impression
that their “opinion is important.”
• What are the potential negative implications of the
method?
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Industry Organizations
Organizations such as the Direct Marketing Association play an
important role in the industry.
• Represents the interests of industry members to the public and
to governmental agencies. A key goal is to promote selfregulation through the establishment of guidelines for accepted
practices.
• Promotes education in the industry by sponsoring conferences
and workshops. The Direct Marketing Educational Foundation
specifically services college students and professors.
• Conducts research on the state of the industry.
• Acts as an intermediary for the collection of names of
consumers who do not wish to be contacted by direct
marketers.
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The DMA’s Privacy Promise (see Exhibit
17.3) was developed as a means to
promote the adherence of members to
certain privacy practices and applies to
both consumer marketers and suppliers.
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Evolution and Trends in Database Marketing
• Consumer Databases and the Internet
- Customer initiated databases
- Database integration across media
• B-to-B Databases
- Rapid growth
- Basis for Customer Relationship Management
• Not-for-Profit Databases
- Developing good database techniques with limited budgets
• Retailer Databases
- Properly utilizing the enormous databases
• Service Organization Databases
- Improving customer relationships
- Utilizing qualitative data
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Review Questions
1. Why are organizations moving into global markets?
2. Discuss the variables that database marketers have
to consider in the global environment.
3. With regard to ethics and public perceptions, what
are the internal and external influencing groups?
4. What is an industry organization, and what are their
primary goals?
5. What are some of the current public policy concerns
of database marketing organizations?
6. Discuss some of the future trends that will affect
database marketing.
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