7 & 8 database marketing

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By :

Prof. Amit Kumar

04/15/23

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“A major change that is reshaping the face of selling is the growth of direct marketing. This session explores the major changes that are taking place, the key tools that can be used and how the direct marketing process can be effectively managed. It begins by explaining the meaning of direct marketing before discussing the use of database marketing. The management of direct marketing activities will then be explored, including setting objectives, targeting, achieving customer retention and creating action plans”.

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Importance of this course

Direct Marketing Contemporary Direct Marketing

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Contents

• Reasons for the Growth of Direct Marketing

• How Direct Marketing Can Change Markets?

• What is Database Marketing

• Importance of Database Marketing?

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Direct Marketing Database Marketing

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Once upon a time there were people who knew exactly how to do marketing. They worked at

Procter & Gamble. Then along came the silicon chip and the old certainties vanished.

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Research findings….

• In 2005, the Marketing Council surveyed 373 senior UK marketers. They were asked which firms they rated highest for their historical importance in marketing.

• The top four were:– Proctor & Gamble

– Unilever

– Coca Cola

– Mars

• The list suggests the packaged goods boys and girls know how to do marketing stuff, especially those with an American accent, and the rest of us better copy them.

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Research findings….Things have changed now

• The same respondents were asked who they rated for their present-day importance. The four companies mentioned most often were:– Virgin

– British Airways

– Tesco

– Direct Line

• They…all deal direct with the public, at least in their main businesses. Respondents clearly recognized these companies as innovators, not as the master of a formulaic system of marketing. All four had found ways to reward customers for their business.

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Research findings….ICE Age

• Every ten years 100 times as much information cab ne compressed onto a disk and the amount of information that can be transmitted rises equally dramatically.

• The implications of this are immense. It becomes feasible to know as much about every single customer as….............But how should we use all this information?

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Big question in marketing today is not ‘Who will buy this new product?’ nor even ‘Where is there a gap in the

widgets market?’. It is ‘What will our customers want to buy from us next?’

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Reason for the Growth of Direct Marketing

Smith outlines five factors that have fuelled the rise in direct

marketing activity:

1. Market fragmentation

2. Computer technology

3. The list explosion

4. Sophisticated analytical techniques

5. Co-ordinated marketing system

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1. Market Fragmentation

The trend towards market fragmentation has limited the application of mass marketing techniques. As market segments develop, the capacity of direct marketing techniques to target distinct consumer groups is of increasing importance.

Changes in the market place- B2B selling- it has increased or has seen tremendous growth.

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2. Computer technology

The rise in accessibility of computer technology and increasing sophistication of software, allowing the generation of personalized letters and messages, has eased the task of direct marketing.

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3. The list explosion

The increased supply of lists and their diversity (e.g. 25,000 Rolls Royce owners, 12000 Audi’s direct marketing list, 10,oo Range Rover lists) has provided the raw data for direct marketing activities.

Affordable computing power & growth of databases (databases used for future purpose of marketing).

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4. Sophisticated analytical techniques

By using geodemographic analysis, household can be classified into neighborhood type (e.g. ‘modern private housing, young families’ or ‘private flats, single people’). These in turn can be cross-referenced with product usage, media usage and lifestyle statements.

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5. Co-ordinated marketing system

The High cost of personal selling have led many companies to take advantage of DM techniques as direct response advertising / telemarketing, to make the sales-force more cost effective.

For example, a coupon response advertisement or direct mail may generate leads that can be screened by outbound telemarketing, or inbound telemarketing can provide the mechanism for accommodating enquiries stimulated by other DM activities.

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How direct marketing can change markets?

The three classic cases of how direct marketing can transform markets are Dell Computers, First

Direct’s entry into banking and Direct Line’s move into insurance.

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• Dell computers was founded in 1984 by Michael Dell in the USA. His conception was to challenge existing players in the computers market by establishing a direct marketing operation that would allow customer to dial Dell to place an order for a computer.

• The computer, which was based upon customer specification, would be sent direct, eliminating the need for a distributor. JIT production means that the computers can be manufactured in four hours.

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• First Direct moved into telephone banking in 1989. Its success was based on customer dissatisfaction with traditional branch banks that offered short opening hours, queues and bank charges.

• By centralizing banking operations and offering direct access by telephone, it was able to offer high level of customer service at low cost. The new service offered 24-hour access and free banking. The operation has proved to be a huge success, with the number of customers far exceeding target and high level of customer satisfaction of any bank.

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• Direct Line saw a market opportunity in motor insurance. Traditional insurance companies used insurance brokers situated in towns/cities to provide the link to customers.

• Direct Line placed advertisements on TV, in print media to persuade prospects to phone their telemarketing operation with inducement of a much cheaper quotation.

• Entire transaction is conducted over telephone with the form being sent to the customer simply for signature. By eliminating broker, It’s cost structure enables it to reduce costs and pass on some of the saving to its customers.

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‘Advertising’, says Regis McKenna (2011), ‘serves no useful purpose…The new marketing requires a feedback loop; it is this element that

is missing from the monologue of advertising but that is built into the dialogue of marketing.’ The

database provides the feedback loop.

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Database Marketing• At its simplest, the database answers three questions:

Who? What? And Where?

• If the database gave us no more than the answers to these questions it would be very useful. But marketers are demanding and want database to achieve stardom.

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Who?

Where? What?

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Database Marketing• Now we can get our database to provide two more

useful answers.

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Who?

Where? What?

Why? How much?

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Database Marketing

• It is defined as an interactive approach which uses individually addressable marketing media and channels (such as mail, telephone and the sales-force) to:

– Provide information to a target audience

– Stimulate demand

– Stay close to customers by recording and storing an electronic database memory of customers, prospects and all communication and transactional data.

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Database Marketing

• Much DM activity requires accurate information on customers so that they can be targeted through direct mail or telemarketing campaigns.

• This information is stored on a marketing database which comprises an electronic filing cabinet containing a list of names, addresses and transactional behaviors.

• Information such as type of purchase, frequency of purchase, value and responsiveness to promotional offers may be held in database.

• This allows future campaigns to be targeted at those people who are most likely to respond.

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Database Marketing

• A marketing database can also be used to strengthen relationships with customers. For example, Highland Distillers switched all of its promotional budget for its McAllen whisky brand from advertising to DM.

• It build a database of 1,00,000 of its more frequent drinkers (those who consume at least five bottles a year), mailing them every few months with interesting facts about the brand, whisky memorabilia and offers.

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Database Marketing

• UK supermarket Tesco has build a huge database through its successful loyalty card, ‘Tesco Club card’.

• Database is used to define market segments such as discount-driven ‘price sensitive’, ‘foodies’, ‘heavy category users’ and ‘brand loyalists’, testing response to promotions, for example, targeting dog food offers to dog owners, sending direct mail to specific segments as ‘healthy living’ types and tailoring email campaigns.

• Product assortment in stores can also be fine-tuned according to the buying habits of customers.

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Database Marketing

• A customer profile can be built up by including postcodes in the addresses of customers and employing the services of an agency that conducts geo-demographic analysis, such as A Classification of Residential Neighborhoods (ACORN).

• Direct mail can then be targeted at people with similar geo-demographic profiles.

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Database Marketing

• Typical information stored on a database includes the following:

– Information on actual and potential customers

– Transactional information

– Promotional information

– Product information

– Geo-demographic information

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Importance of Database Marketing

Importance of DM is reflected in its applications:

• Direct mail

• Telemarketing

• Loyalty marketing

• Campaign planning

• Target marketing

• Distribution management systems

• Marketing evaluation

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7 & 8 database marketing

Leadership & Management

Transcript of 7 & 8 database marketing