Database Marketing
Definition: Database marketing is the analysis and use of customer databases to aid in the direct marketing of products.
One of the biggest challenges any sales enterprise faces is in finding potential
customers for their products. Billions are spent each year in product marketing,
though much of this expenditure is wasted through the use of inaccurate data and
bad marketing decisions
Applications of Database Marketing
In an effort to more effectively target potential customers, many enterprises use
database marketing to build models of their target demographic group, track down
these groups and focus their advertising budgets on them in the hope that it will
result in an improved return on investment (ROI) from their advertising spend.
Data Sources
At its most basic level, database marketing is the
analysis of databases holding
information about previous or potential customers. These databases usually consist
of basic personal details of customers along with details of their past transactions.
The information is either gathered from internal sales data or bought in from other organisations.
Business to Consumer (B2C)
 Consumer information is gathered by enterprises in a number of ways, many of which
consumers remain oblivious to (see
CRM). These methods can range from requesting that the
consumer fill in and return a warranty card to running promotional contests and sweepstakes.
Ideally, enterprises prefer to gather as much information as possible about potential
customers, so they will employ
any available methods to milk consumers for personal data.
The more information contained within a database, the more accurate
the results of its analysis.
Business to Business (B2B)
B2B data is usually much more limited than consumer information, but it can also be easier to
procure. Enterprises hoping to target businesses can simply get in touch personally or gather
publicly available information about them. However, since B2B databases will usually only
contain a few hundred or thousand pieces of information at most (compared to potentially
millions of pieces in a consumer database) it is more difficult to build a targeted marketing plan.
Data Analysis
Once a consumer or business database has been compiled it can then be broken down and
analysed to produce valuable marketing information. If the database is extremely limited this
analysis can be performed manually, but most consumer databases will contain so much data that
specialised software tools are necessary to generate useful results.
Predictive analytics software allows data analysers to construct high quality predictive
models of customer behaviour. By studying the past purchases of consumers it can be possible to
predict broad trends in their purchasing habits, resulting in a somewhat accurate prediction of
their future purchasing (though, of course, it is impossible to make 100% accurate predictions in this area).
Using these trends it is possible to further refine the information by grouping individuals
according to any other personal data held on file about them (such as income, age, gender, etc.). This
grouping results in a targeted mailing list of potential customers, each of whom share a set of
desired characteristics.
Marketing
Once the raw data has been analysed and a mailing list produced there is simply the
matter of contacting the potential customers with targeted advertising.
Traditionally, database marketing results in the mailing of advertisements (what many people
would call ‘junk mail’). The development of technology, however, has enabled enterprises to
contact potential customers much more quickly than through the mail.
While a great many enterprises still use the postal service to generate leads, modern
marketing methods also involve the use of e-mail and SMS messages to potential customers. As
well as being less expensive than traditional mail shots, electronic messages come with the
additional benefit that recipients can respond instantly, either by following a link in an
email or opting-in through an SMS or
asking
for a callback.
Future of database marketing
The development of the Internet has offered enterprises a highly effective way to gather
customer information. Internet users are now perfectly comfortable with completing
electronic
forms for everything from online purchasing to setting up e-mail accounts, so the amount of
consumer information available has increased greatly.
At present, we are seeing the development of a new form of database advertising. Online
advertisers now use surfing habits as a method of directing advertising towards Internet
users. Search engines such as Google serve ads according to users' keyword searches, while
vendors such as Amazon use details of previous transactions to build a list of user-targeted
recommendations. We can expect this trend to continue until all online activities are tracked
for marketing purposes.
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