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Introduction to Database Marketing

excerpt from presentation by Robert Shaw of Arthur Andersen Consulting in Montreux .

Database Marketing is a powerful competitive weapon for companies - especially large ones.

The growth of database marketing is rooted in the small business philosophy ofstaying close tothe customers, under-standing and meeting their needs and treating them well after the sale.

Much corporate marketing is tied to big, general marketing or advertising campaigns with asingle message - the same for everyone. This message may be based on the companies Unique

Selling Proposition (USP). However, customers have different needs and a single USP spelt out

to the whole market is no longer enough.

Messages must be tailored to specific segments of the market and ultimately to the market

segment of one, the individual customer. Computerising the customer database makes it possible

to address messages more specifically and market additional products to each customer.

What is Database Marketing?

There is no universal definition of Database Marketing ( DBM ); try this one ...

DBM is an interactive approach to marketing communication, which uses addressable

communications media (mail, telephone, fax, sales force etc) to extend help to its target

audience, to stimulate their demand, and stay close to them by recording and keeping an

electronic database memory of customer, prospect and all communication and commercialcontacts, to help improve all future contacts.

The characteristics of fully fledged database marketing are ....

1. Each actual or potential customer is identified as a record on the marketing database; marketsand market segments are groups of individual customers.

2. Each customer record contains not only identification and access information but also a range

of marketing information. It also includes information about past transactions and about

campaign communications.

3. The information is available to the company during the process of each transaction with the

customer, to enable it to decide how to respond to the customer's needs.

4. The database is used to record customer responses to company initiatives.

5. The information is available to marketing policy makers to enable them to decide such things

as which target markets/ segments are appropriate for each product/service etc.

6. In large companies, selling many products to each customer, the database is used to ensure

that the approach to the customer is co-ordinated; and a consistent approach developed.

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7. The database eventually replaces market research. Marketing campaigns are devised such that

the response of customers to the campaign provides information which the company is looking

for.

8. Marketing Management automation is developed to handle the vast amount of information

generated by DBM. This identifies opportunities and threats more or less automatically!

This is fully fledged marketing automation. Very few companies have succeeded in doing this;

but many have it as their goal.

DBM presents many challenges to management. It requires careful maintenance of greatvolumes of detailed customer data. Accessing the data, interpreting it, and using it to drive or

support the marketing function requires a long-term marketing systems development policy.

It also requires computing and marketing people to work together, often educating each other.And, it may well require most people in the company to forget their traditional way of doing

business.

DBM will only work if dealing with customers is viewed as an on-going process (CustomerContact Process).

The Ladder of Loyalty

The ladder of loyalty is a key concept in DBM.

1. No awareness of company or product/service.

2. Awareness of company

3. Awareness of product/service

4. Positive perception

5. Recognition of personal benefit

6. Enquiry

7. Objections overcome

8. Sale of product or service

9. Entry into continued relationship.

DBM is used to move customers up the ladder.

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The essence of database marketing is communicating directly with the customers and asking

them to repond in a tangible way. It provides the means for the customer to respond and is set up

to measure and fulfil the response.

It sets up or reinforces a relationship with the customer, which is "fulfilled" when we follow up a

customer's response to our communication. Fulfilment may be in many ways; a telephoneconversation, sending literature, a sales visit, attendance at a sales seminar, exhibition or store, or

sending products to the customer.

So DBM is a broad discipline, not a separate marketing communications medium, but a way of

using any medium to elicit the desired response.

The Phases of Development of Database Marketing

In any business function, automation tends to go in phases. In DBM, we see four phases - thesephases are not jumps, each covers a broad spectrum of approaches. They evolve into each other,

but their philosophy is very different.

Phase 1. Mystery L ists.

In this phase, marketing databases are basic sales databases. They are often organised by

product; a customer may appear many different times under different product categories. It may

be hard to identify that it is the same customer. These databases tend to grow from accountssystems and they are hard to analyse for marketing purposes. There is usually conflict with other

functions ... they see no reason for changing database structure to meet marketing needs! Lists of

potential customers are brought in and not integrated with the sales database/s. They may be used

once, to identify potential customers for a particular product, and then discarded. Whether a

campaign is successful or not does not affect the rest of marketing.

Phase 2. Buyer Databases.

In this phase, sales and marketing databases are well organised, but there may be many

databases. If a company uses several channels of distribution, there may be a database for eachchannel. Customer focus is possible; we can identify the nature of our relationship with a

particular customer across different products. Databases can be analysed to develop strategy.

Each database campaign is well planned and executed in itself, but may overlap, or even conflict,with other campaigns. Increased effectiveness without overall co-ordination leads to more

conflict. The conflict may be within the marketing function; or with sales or inventory

management.

From Phase 2, we learn which data are important, which kinds of data we need to use together,

which conflicts and stresses we must resolve and how to use DBM professionally.

Phase 3. Co-ordinated Customer Communication.

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In this phase, one database drives all customer communication and management. Computer

systems are used to co-ordinate and drive campaigns. The emphasis is not on the database,

though this is the powerful tool that makes it all possible. The emphasis is on customers. Ourfirst questions are: who are our customers, what are their needs, and how shall we plan and co-

ordinate all our communications efforts to meet them? In phase 3, we plan campaigns using the

database. A campaign mangement system ensures that all involved in a campaign know theschedule. We review past performance, we test, we inform other functions of our proposedactivity, we use automation to evaluate the campaign; all campaign

information automatically enriches the database.

Phase 4. Integrated Marketing.

Many functions automate within closed loops but need information from other areas. It may

never be possible to link every function automatically, but each functional subsystem

automatically gets the information it needs from every other subsystem. But we can go a long

way to ensuring that the critical links are made at key stages.

It is not possible to maintain a good database without a call centre. Calling and talking to your

customers and prospects is the only way to keep the information relevant and timely.