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Optimal Database Marketing Drozdenko & Drake, 2002
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Chapter 2
Databases in the Marketing
Planning Process and the
Organization
Optimal Database Marketing Drozdenko & Drake, 2002
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Chapter Objectives
• To further explore basic concepts and
applications of marketing databases.
• To examine the process for evaluating the
feasibility of using databases in the
marketing plan.
• To demonstrate the utility of the database as
a strategic integrating element of an
organization.
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Review of Marketing Databases
• A Marketing Database is a file containing
information about customers or potential
customers that enhances marketing functions.
• The goal in establishing the database is to allow
customer information to be accessed and
manipulated rapidly and accurately in order to
meet customer needs and organizational
objectives.
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Examples of Databases
• A very simple database may be the customer information
retained in the memory of a street vendor.
• He knows the first name of a customer, how she takes her
coffee, and how much cream cheese to put on her raisin
bagel.
• Retaining this information helps him serve his customers
more personally and quickly so that they can get to work on
time.
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Examples of Databases
•Problems arise with a mental database
when the customer base increases.
•With thousands of customers and many
customer characteristics, it becomes
impossible to hold their characteristics in
memory.
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Storing Customer Information
•Merchants have always retained
information about customers. Without a
:computer, information about customers
could be stored in:
• Memory
• Index Cards
• Rolodex
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Storing Customer Information
•Many hair styling organizations now have
computerized databases of customers.
•A hairstylist may record customer names,
addresses, phone numbers, appointment
dates,
coloring and treatment formulations, and hair
care product purchases
•This information makes the organization
more responsive to the needs of individual
customers.
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Hypothetical Database of a
Shoe Reseller (25,000 names)
NAME
ADDRESS
LAST PURCHASE
AMOUNT
P. James
4 Oak Lane
Pappagallo-162
129.50
K. Lang
7 Maple St.
Easy Spirit-200
68.90
T. Clark
3 Pine Drive
MootsieTootsie-87
48.88
• Many other data fields and variables could be
added to this database such e-mail addresses,
phone numbers and a complete history of
purchases.
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More Complex Databases May
Contain Information on…
Customer Demographics
• gender
• age
• income
• family characteristics
• occupation, etc.
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More Complex Databases May
Contain Information on…
Customer Psychographics
• activities
• interests
• opinions
• hobbies
• recreational activities
• political and social opinions
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More Complex Databases May
Contain Information on…
Customer Purchase Behavior
• previous purchases by product
category
• payment history
• purchase frequency
• purchase amount
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Customer Databases versus
Other Marketing Databases
• In this book we are primarily concerned with
databases that contain information on individual
customers. That is, the customer database allows
us to reach customers directly.
• Prospecting databases also contain data
on individuals, but these individuals are not
customers. When individuals from the
prospecting database respond to an offer,
their names are moved to the customer
database.
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How Marketing Databases Fit into
the Marketing Planning Process
• Many organizations develop some type of
marketing plan as a means of reaching
organizational objectives and satisfying
customers.
• It is important to consider how marketing
databases may fit into the planning process.
• The plan allows for a systematic evaluation of
the utility of the database for reaching
organizational objectives.
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Some Advantages of Strategic Planning
• Points to potential and existing problems,
opportunities, threats in the market environment
• Defines organizational strengths and weakness
• Plots the acquisition and use of resources
• Details methods to obtain goals and objectives
• Assists in implementation of strategies
• Regulates growth
• Establishes roles and functions of departments and
individuals
• Makes better use of resources
• Establishes tasks and timing
• Helps achieve personal goals of individual
employees
• Stimulates thinking and communication within the
organization
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Comments on Strategic Planning
• Argument against strategic planning
for entrepreneurs and businesses in
the “new economy.”
• Strategic thinking versus the planning
document.
• Focus on a direction for the
organization rather than “hit or miss.”
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Levels Of Planning
Corporate
Divisional
Functional (Marketing)
Operating Level
(Sales, Advertising, Distribution, etc.)
Individual Personnel
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Marketing Planning Starts with the
Corporate Strategic Plan
• Prior to developing the marketing plan,
marketing must review the company’s …
• mission
• objectives
• strategies
• resources, etc.
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Marketing Planning Starts with
the Corporate Strategic Plan
• If databases are being considered as a
component of the marketing plan, it is
necessary to review the corporate plan.
• The marketing manager needs to know if the
introduction or expansion of a marketing
database is consistent with the corporate plan.
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For example…
• Does the company have the resources to support
a database system?
• Are the financial objectives of the organization
compatible with developing a customer database
that will take 5 years before returns on
investments are realized?
• Is the corporate strategy of diversification
consistent with the expansion of the current
customer database?
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Steps in the Marketing
Planning Process
•
•
•
•
•
Perform Situational Analysis
Specify Objectives
Develop Strategies
Implement Tactics (Programs)
Monitor and Control
Note: Marketing planning is a continual
process which requires constant review.
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The Marketing Planning Process:
Situational Analysis
Situational Analysis includes analysis of …
• General environmental factors: global, cultural,
economic, legal, political, social, demographic,
technological, and so on
• Internal resources: technology, human resources,
marketing, production, etc.
• Present and future markets: evolving and established
segments
• Target market characteristics: demographics,
psychographics, purchase patterns
• Competitors’ characteristics: direct and indirect
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The Marketing Planning
Process: Situational Analysis
The strengths, weaknesses, opportunities
and threats of the organization are
evaluated within the context of the
environment.
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The Marketing Planning
Process: Situational Analysis
By examining each variable of the
situational analysis, we can begin to
access the feasibility of developing the
database within our organizational
objectives.
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The Marketing Planning
Process: Situational Analysis
For example, growing competition at the retail
level may be affecting growth in a product
category. An analysis of the competition and the
purchasing habits of our target market may point
to an opportunity for using direct channels of
promotion and distribution.
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Establishing Marketing Objectives
• After performing a situational analysis, an
organization has the necessary information to
establish marketing objectives.
• General marketing objectives can reflect sales
volume, profitability, and market share.
• Objectives are quantitative and time-specified.
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Establishing Marketing Objectives
• An example of a marketing
objective might be:
Increase in sales volume by 10%
in the next year
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Establishing Marketing Objectives
• Quantification of objectives is necessary for
evaluation and control. How can you track
your success on an objective of “increasing
sales”? Is a 1% increase over 5 years
sufficient?
• The advantage of implementing databases is
that they allow clear, quantitative, and
continual tracking of objectives.
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The Marketing Planning Process:
Strategy Development
• Strategy is the longer-term direction to influence
customers and achieve marketing objectives. It
involves developing products to meet customer needs
and positioning products (i.e., communicating about
benefits) to target segments.
• The situational analysis provides a guide to strategy
development. Market segments, potential targets,
competition, internal resources, etc. are considered
when developing strategies.
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The Marketing Planning Process:
Strategy Development
• General strategies in marketing include
marketing penetration, market
development, product development, and
diversification.
• The next slides show the relationships
between markets, products and strategies.
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Product/Market Strategy Grid
Existing
Markets
Existing Products
New Products
Market Penetration
Product
Development
New
Market Development
Markets
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Diversification
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Relating Strategy to
Database Implementation
The marketing manager should evaluate how the
database may assist in the strategy.
• Market Penetration
• Market Development
• Product Development
• Diversification
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Market Penetration Strategy
• Involves increasing product use for existing
customers or non-customers with similar
profiles.
• Products are not modified with market
penetration strategy.
• A database may assist in reaching existing
customers in a more efficient and effective
manner or in modeling current customers in
order to find new ones.
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Market Development Strategy
• Existing products are offered to new markets.
• For example, a producer of an industrial cleaner
that primarily sells to manufacturing
organizations, could acquire lists of customers
in other industries (e.g., health care,
hospitality).
• The list could be the foundation for a customer
contact database.
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Product Development Strategy
• The database can help in product
development through the use of systematic
testing paradigms.
• Discovering that current customers have
certain hobbies or are involved in certain
activities may provide clues for product
development.
• Potential product offerings can be evaluated
through “hypothetical” offerings.
• More about testing later.
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Diversification
• Diversification occurs when organizations move
into new markets with new products.
• Diversification strategy is usually the riskiest,
because the organization is moving away from
both markets and products they know.
• For example, an organization that sells
commercial ovens may be interested in developing
products for the home gourmet kitchen. A
database of potential customers could be
developed based on variables such as
subscriptions to gourmet magazines and recent
home purchases.
• Database methods could reduce diversification
risk by using a direct distribution channel and
testing the new products on a selected list of
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Optimal Database Marketing Drozdenko & Drake, 2002
potential customers.
Strategy Development, Targeting
and Positioning
• Strategy also has to developed at the level of the target
market. After the market is segmented a target group is
selected.
• Positioning a product relates to how the target group
perceives the product and its benefits relative to
competitors.
• The desired characteristics are incorporate into the
product
• A database can help expedite the segmentation process
and specify the needs of customer for positioning.
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The Marketing Planning
Process: Marketing Tactics
• Marketing tactics (also called marketing programs) are
the specific means to implement the marketing
strategy.
• Each relevant element of the marketing mix
(promotion, price, distribution, product) should be
considered.
• For example, a market penetration strategy may be
implemented by increasing distribution or promotion
to the existing target market.
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The Marketing Planning Process
Marketing Tactics
Distribution
• Target new customers by mailing to lists of
potential customers who do not currently have
easy access to your existing retail channel.
• A database system can also be used to
track the performance of channel
members through incentive programs.
• The distribution program should include how
the lists will be accessed and a plan for testing
the lists.
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The Marketing Planning Process
Marketing Tactics
Promotion
• Develop a relevant mail communication
based on the benefits this target group is
seeking.
• For example, this new segment may be more
responsive to the durability of your product as
compared to the fashion orientation of your
current customers.
• The database might provide a more
personalize message to an under-served
segment.
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The Marketing Planning Process
Marketing Tactics
Price
• Pricing levels for this new segment
could be systematically tested.
• Because of the establishment of a direct
distribution channel, the marketer may
have more pricing flexibility for this
segment
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The Marketing Planning Process
Marketing Tactics
Monitor and Control
• Marketers must constantly monitor marketing
programs. Performance is compared to
objectives. If performance does not reach
objectives at specific milestones, the program
or strategy may need to be modified.
• Performance deficits may occur due to
improper analysis, over-optimistic objectives,
inappropriate strategy, or poor implementation.
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The Marketing Planning Process
Marketing Tactics
Monitor and Control
•Database marketers can track performance
rapidly and accurately. This allows a quicker
response to problems. Additional, testing of
programs can be more extensive and less
expensive relative to mass marketing through
retail channels.
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Databases and the Planning Process
• Ideally, the possibilities of database
development or expansion should be
considered at all levels of the planning
process.
• However, some organizations are not
strategically oriented.
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Databases and the Planning Process
• A database may be developed to solve an
immediate tactical problem without much
consideration of longer term strategies or
objectives.
• For example, a database may be developed
to support a specific promotional campaign
for product introduction. The re-use of the
database after the promotion is not
anticipated.
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Databases Are Best Utilized
For the Long-term
• While the temporary use of a database may
help achieve some short-term objectives,
the real power of databases are in their
ability to track and evaluate customers over
the long-term.
• Databases can help develop relationships
between the customer and marketer by
making the marketer aware of changing
needs.
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Databases Are Best Utilized For the
Long-term
• From a performance perspective, databases
can be used to evaluate marketing programs
over time and determine the lifetime value
(LTV) of the customer to the organization.
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Review Questions
1. What is the primary purpose of a marketing
database?
2. What is the difference between a customer
database and other types of marketing
databases?
3. Why is it important to examine the marketing
environment and organizational resources before
proceeding to develop a marketing database?
4. How are database marketing strategies different
from marketing programs?
5. What advantages do databases provide to
marketers for implementing marketing programs?
6. Provide an example of how tactical database
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implementation
different
from strategic
Optimal Database
Marketing Drozdenko & is
Drake,
2002