database marketing

Quick Reference

A form of targeted marketing that makes use of customer data captured through customer transactions and communications. This data may be used independently or in conjunction with outside data to guide targeted customer prospecting, customer retention, promotions, and other marketing efforts. For example, a database may have a collection of available information on past and current customers together with future prospects, structured to allow for implementation of effective marketing strategies. Consumer goods and services companies as well as political parties and organizations use these widely for various campaigns.

Database marketing began in the mid-1980s as computers and software became quite sophisticated and economical. It was possible to store information about customers, and use the information to build lasting relationships with them. As a result, it was possible to increase sales and profits by: analysing customer buying behaviour; promoting cross sales, repeat sales and upgrades; computing customer lifetime value and using it in strategy evaluation; creating referrals and customer loyalty.

analysing customer buying behaviour;

promoting cross sales, repeat sales and upgrades;

computing customer lifetime value and using it in strategy evaluation;

creating referrals and customer loyalty.

Database marketing progressed in sophistication and applications throughout the 1990s to become one-to-one, or customized marketing. Toll-free numbers with customer service agents advanced. Customer service agents began using computers to obtain the information asked for by customers from the database. They read the answers off the screen over the phone to the customers. Then they typed into the customer database what happened and what was discussed during the call. It was a big advance on previous customer service, but customers started to complain that the service sounded wooden and robotic. In practice and in reality very few companies ever achieved effective one-to-one marketing. To devise a different marketing strategy for each person who would be treated as a ‘market of one’ was really beyond the capability of any but the most sophisticated marketers with the most advanced systems. The advent of the Internet, however, transformed and evolved the pursuit of highly customized marketing and the databases that supported these activities. It took several years before most marketers realized the potential of the Internet, but when they did they saw that the Internet had created a huge and inexhaustible database marketing system with worldwide ubiquity and scope. Using the Internet, it became possible to do things that were only dreamed about in the early database marketing days, for example:1 Focusing on new prospects;2 Evaluating new prospects;3 Cross-selling related products;4 Launching new products to potential prospects;5 Identifying new distribution channels;6 Building customer loyalty;7 Generating enquiries and follow-up sales;8 Targeting niche markets.

1 Focusing on new prospects;

2 Evaluating new prospects;

3 Cross-selling related products;

4 Launching new products to potential prospects;

5 Identifying new distribution channels;

6 Building customer loyalty;

7 Generating enquiries and follow-up sales;

8 Targeting niche markets.

With the Web, the approach to customer service is now about empowering the customer with self service. Companies are giving customers web access to the same screens that the customer service agents see. Customers are now enabled to do their own searches and get their own answers. Customers can now get much more information over the Web than they could ever get from a live operator with a computer. Companies now put page after page of technical data, product specifications, descriptions, services, special offers, and details on their websites with adequate indexing so that any customer or prospect can get all the information they want or need. This is valuable to the customer and the company for the following reasons: There is no long-distance call to pay for. There is no Customer Service Agent to pay for (an Internet enquiry costs a bank only 10% of the processing cost for a customer service agent to handle the call ‘live’). The system is open for business 24 hours a day. The company can track what information people want and who wants it. Once the system is set up, the variable costs are almost nothing.


Subjects: Marketing.

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