Database Marketing

Explore the Strategy of Database Marketing

database marketing

Imagine that you work for a company specializing in electronic devices and gadgets. You have several new products arriving in your stores this week, and to spread the word, you decide to implement a direct mail campaign to neighborhoods near your stores. But is mailing to everybody the most effective approach? And what about technology and gadget customers who live just outside of those neighborhoods?

If there were only a way you could just hit a button on a computer, and generate a list of all the people in these areas who might have a genuine interest in your product…

What is database marketing?

Database marketing is a form of direct marketing that uses databases of customers to generate targeted lists for direct marketing communications(See also Direct Marketing). Such databases include customers’ names and addresses, phone numbers, e-mails, purchase histories, information requests, and any other data that can be legally and accurately collected Information for these databases might be obtained through application forms for free products, credit applications, contest entry forms, product warranty cards, and subscriptions to product newsletters.

Using our opening example, a database at a technology store might well be able to produce a list of customers who had purchased similar products and might be interested in a new promotion. These databases, once built, allow businesses to identify and contact customers with a relevant marketing communication.

Who employs database marketing?

2011 Database Excellence Award Winners

  • Farmers Insurance—Analytics and Modeling
  • Microsoft—Technology Solutions
  • Zions Bancorporation—Marketing Strategies

Source: National Center for Database Marketing Conference and Exhibition

Various businesses use database techniques to refine their direct marketing campaigns, including finance companies, retailers, technology vendors, internet service companies, insurance companies, and B2B companies.

Database marketing is particularly useful for large firms, which have large customer bases that generate huge amounts of transaction data. The larger the initial data set, the more opportunities that exist to find groups of customers and/or prospects that can be reached with customized communication.

Many of those larger companies attended the Direct Marketing Association’s annual National Center for Database Marketing Conference and Exhibition, where companies network and discuss how to improve database marketing. Exhibitors at the 2011 conference included American Express, Experian Marketing, Pitney Bowes, and the SAS Institute. Companies recognized for excellent performance with database marketing included Microsoft, Farmers Insurance, General Motors, IBM, and the Whirlpool Corporation.

For what kinds of customers is database marketing effective?

As with other forms of direct marketing, the most responsive customers to database marketing are those who have opted in to mailing lists—such as when an online shopper checks a box marked “Send me information on future promotions.” Such customers have already expressed interest in the company’s products, and as such as more likely to be interested in new products and sales from that company. (See also Permission Marketing)

However, careful database analysis can produce many other lists of customers based upon other activity, who will be just as (or more) likely to respond to a particular direct marketing message. The whole point of database marketing is to make sure that marketing communications are being directed toward the most receptive groups. For one campaign, this may be buyers of mobile devices and gadgets; for another campaign, the target group might be couples in the “empty nest” phase; while a third campaign might be directed at singles who are politically active. Proper maintenance of data and opt-out options reduces the number of people who have no interest in receiving such communication.

How is a database marketing campaign developed?

Database marketing begins with… data. The more useful data available, the more effective the campaign.

Such data comes from a number of sources. Many businesses collect data as part of a typical business transaction. For example, since finance and insurance companies already must collect name, address, and other information for a sale, it takes little extra effort to retain this information in a database. Online retailers can also easily collect such information, as well as purchase histories; offline retailers may use club-card systems to accomplish the same thing. Additional data comes in from customer service, which can keep a record of all their customer communications. Meanwhile, marketing and sales leads create additional customer records.

While data on existing customers can be collected through transactions, data on prospects is largely obtained (purchased) from third parties. Different countries have various laws controlling what information can and cannot be sold, often restricting it to name, address, telephone number, and perhaps some demographics. Many businesses will readily sell this information to marketers; others may have privacy agreements with their customers that prevent them from doing so.

Occasionally, transaction histories may also be sold. When Borders bookstores went out of business, the company sold customer records to Barnes and Noble, which was then able to market directly to Borders’ former customers (for example, by offering Barnes and Noble member cards to those who had previously purchases Borders cards). In addition to third parties, prospect data can also be obtained through sweepstakes, on-line registrations, and other methods.

Larger companies will often manage all the data they collect from varying sources through a data warehouse. The warehouse receives diverse data sets from different departments and companies, integrates it into one mega-database (often several terabytes in size), and then parses it back out into smaller databases used for various functions. The use of a data warehouse allows a business to process much greater amounts of data—and again, the more data available, the more opportunities for finding groups of customers that will respond to a customized message.

At this point the real work of database marketing is done. Database analysts develop programs for filtering and mining the data for actionable information. They may segment customers based upon a number of different demographic and behavior factors. For example, they might use RFM analysis—segmenting groups by how recent, frequent, or how much monetary value customers’ purchases are. They may also use statistical models, such as logistic regression, to predict future behavior and create customer lists.

In addition to direct marketing, database information can also be used in some systems to pull up customer information while interacting with the customer (known as real-time business intelligence), which allows for greater personalization. Additionally, databases fuel Customer Relationship Management (CRM) systems, which use the information to present personalized offerings of products and services.

The extent to which database systems can be effectively employed depends upon a number of factors—how up-to-date the information is, what analytics are used, and the software network and level of connectivity in the business. Major information technology companies, such as Google and Apple, are most effective at using their databases for real-time intelligence and personalization of business. (See also One-to-One Marketing)

What career titles work with database marketing strategies?

Database Marketing Manager

What do they do?

What Kind of Salary Can I Expect?

  • Database Marketing Manager
    median salary: $91,249
  • Manager of Direct Marketing
    median salary: $70,000
  • Mailing List Compiler
    median salary: $42,000

Sources: indeed.com and salary.com

  • build and/or manage databases composed from marketing lists
  • use database software to generate targeted marketing lists
  • propose marketing solutions based upon data collected and analyzed through database software
  • negotiate communication between the marketing and database departments

Education and experience

Database marketers often have a bachelor’s degree in marketing and/or information technology, and experience planning and running marketing campaigns. They must also have a solid understanding of the computer hardware and software involved. Technical and communications skills are both important, in order to communicate with the marketing department as well as database operators and service bureaus.

Manager of Direct Marketing

What do they do?

  • initiate market research, including database formation, to guide direct marketing campaigns
  • use database information to identify target markets for a campaign
  • coordinate marketing teams so that feedback is continually entered into the marketing database
  • select direct marketing strategies based upon database information and analysis

Education and experience

Marketing managers need at least a bachelor’s degree, generally in marketing or business management, and an established record of success with marketing initiatives and team leadership. A background in information technology or relational databases helps them to be more effective coordinating database campaigns.

List Compiler / Broker

What do they do?

  • capture data from commercial and public sources to create mailing/marketing lists for database marketing campaigns
  • compile lists with multiple data points for entry into marketing databases
  • compile databases that can produce marketing/mailing lists based upon target criteria
  • help plan database marketing campaigns, and analyze responses

Education and experience

List brokers need at least a bachelor’s degree in marketing or a related field. Strong computer and communications skills are also required. In addition to successful sales experience, brokers must have experience in developing sources for names, and some methodology for improving the accuracy of lists.

How can a marketing school help you in this field?

The actual creation and maintenance of database systems may be the province of the computer programmer; however, it requires the knowledge and skills of the marketer to put that data to good use. Many marketing programs train you to gather and understand data, and then act upon that data to create meaningful and persuasive messages for driving business. (See also Computational Marketing)

Coursework in market research, statistics, and analytics will equip you to deal with the vast amount of information available to businesses. You will learn how to acquire good data, and how to make inferences and predictions based upon that data. A large database is only an asset if you can reduce the data to easily understandable, actionable information. A company unable to do that finds itself data-rich and information-poor. In a good marketing program, you’ll be able to learn the latest and most effective methods for turning raw data into useful information.

Additional courses will equip you to navigate the market environment. Instructors in economics, finance, business management, and consumer behavior classes will provide you with the necessary knowledge base for operating a business, and for expanding that business in a competitive market.

Since marketing is fundamentally about communication, marketing programs emphasize such skills, as well as require students to practice and develop communications and presentation skills in their other classes. You will have honed your presentation skill set long before making your first presentation to a marketing executive—or to the consumer.

To learn more about what a marketing school can do for you, start by requesting information from schools with degrees in marketing, and begin collecting the data that will help you decide on your future career.

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