Defining Database Marketing and When Can It Be Used?

The expression "database marketing" is something inexplicable for a typical business owner. However, using and understanding this method could not only optimize the work of large firms but also increase the profitability of small businesses. Let's assume that you are planning to open a new department or simply systematize the work of existing units. How to evaluate active and potential customers, analyze customer activity, make good use of relations with partners? These tasks are solved by database marketing.

What is Database Marketing?

Database marketing is a type of marketing that connects all marketing activities based on the use of an information system that acts as the main tool for working with consumers. Database marketing is widely used in connection with the transition from mass marketing to micromarketing, which focuses not on market segments and market niches, but on specific consumers, therefore the primary aim of database marketing is to cooperate with an individual client. Database marketing is the core of CRM technology. This type of marketing can also be considered as a kind of material products-databases. In modern market conditions of market saturation and fierce competition, manufacturers began to perceive each individual customer as an object of attention. In order to keep market positions, these manufacturers use integrated means of communication and telecommunications, as well as databases that serve to establish feedback from the market.

The Benefits, Advantages & Disadvantages of Database Marketing

As a rule, companies use the three main stages of effective database marketing.

  1. Identification of prospective clients. Many companies learn about potential customers by advertising their products or offers. In advertisements, there are usually provided some form of feedback to the consumer, for example, a return card or a toll-free number. With the help of this database, the company tries to identify the most promising consumers and then addresses them by mail or phone (sometimes representatives of the company personally visit such potential customers), trying to make them their actual customers.
  2. Deciding which consumers should receive the relevant offer. Companies make up a portrait of the "ideal consumer" for a specific offer. Then they look for customers in their databases with characteristics that are as close as possible to this ideal type. Carefully analyzing the reaction of any individual, the company can eventually improve the accuracy of the choice of "goal" for their marketing efforts. If the purchase has taken place, the company can continue to communicate with the buyer, for example, after a week to send a card to the client with gratitude for the purchase, offer the new product in five weeks, (if the customer did not answer) to call him and offer a special discount in ten weeks.
  3. Strengthening the loyalty of customers. Companies can purposefully shape the interest and enthusiasm of their customers by identifying their preferences, fixing them, and then sending them the appropriate information, gifts, etc.

In addition to these advantages, another plus is the ability to reactivate purchases. The database helps the company make attractive proposals for the replacement or improvement of goods already purchased, especially at the moment when buyers are most likely ready for action.

Speaking about the shortcomings of this tool, it is worth noting that like many other marketing tools, database-based marketing requires special investment. Companies have to invest in computer equipment, software to support the database, analytical programs, communication channels and qualified personnel. The database created should be "user-friendly" and accessible to everyone who is more or less involved in the marketing process, especially those responsible for managing specific products and brands, developing new products, advertising and marketing, direct mailing, telemarketing, field sales, order fulfillment and customer service. A well-organized database should provide such an increase in sales, which would more than cover the cost of its creation and operation.

Database Marketing Examples

Pioneer Hi-Bred, a seed trading company, has created a database that contains information about both customers/farmers and crops, both common and at the level of a single farmer across the United States. The company can inform the farmer about the harvest he collected last year, how much is this in relation to the national and regional average indicators, and what crop can he expect this season based on regional weather forecasts, soil conditions and a number of other factors. Thanks to this information, sellers provide the farmer with considerable value.

Thus, in addition to the basic data on transactions/sales, the database should contain information relating to the relationship between the seller and the consumer. Databases should provide information that allows the company to create and maintain relationships with profitable customers.

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