Database Marketing
The intention of marketing is to enable the firm to enhance customer value. Database
marketing has emerged as an invaluable approach for achieving this purpose in today’s
competitive, information intensive, and return on investment oriented business environment
(Blattberg et al, 2008). Database marketing has become extremely pervasive, as database
technology has emerged and improved. It is often referred to as customer relationship
management.
Database Marketing Defined
Scholars have defined database marketing in various ways. Kokemuller (2020) defined
database marketing as the use of databases to gather and analyze customer data for delivery
of targeted marketing campaigns. Whereas Blattberg et al (2008) defined database marketing
as the use of customer databases to enhance marketing productivity through more effective
acquisition, retention, and development of customers. From both definitions, it can be
deduced that database marketing involves collecting customer data like names, addresses,
emails, phone numbers, transaction histories, customer support tickets, among others. This
information is then analyzed and used to create a personalized experience for each customer,
or to attract potential customers. An example of database marketing could be for instance
“ABC Bank” deciding which of its many financial products should be marketed to which of
its current customers.
Stages of effective database marketing
The aim of the database marketing is to utilize the information within the database to
implement marketing strategies so that there is an increase in the organization’s profits.
International (2016) observed that there are three main stages for effective database marketing
and these are as follows:
• Data collection
This relates to the aggregation of accurate and relevant data about both existing and
potential customers, and then ensuring the data is made available in such a way as it
available for use by the company’s marketers in their related activities (Duval, 2013). Data
is collected from various sources like sales information, email address list, promotions
etcetera.
• Converting data into useful information
Converting data into useful information requires analysing the data so that it becomes
data which can be used in effective marketing and communications (Duval, 2013). For
many businesses this involves using the information to segment existing and potential
customers so that targeted and appropriate marketing message can be created for existing
and potential customers. In other words, data is converted into useful information by using
the segmentation and targeting approach, first potential customers are found out then target
customers are found out.
• Devising business plans and strategy on the basis of the information
This involves using the data and the knowledge within a database for shaping the
strategy of the business. For instance, modifying company communications, the allocation
of resources, pricing and other concerns that will aid long-term profit in line with the
information gathered. In short, this deals with positioning of the product or service to the
existing customer to retain then as well as to acquire new customers.
Use of database marketing
Duval (2013) observed how the information collated and stored on customer databases is
used in a vast majority of ways. Here are some of the most common uses:
• Calculating customer lifetime value
This is a prediction model used in marketing that can estimate what the lifetime
relationship of an individual customer will be worth to a business. The accuracy of this model
and the calculations involved have become a lot more accurate as the methods involved in
database marketing have improved.
• Recency, frequency, monetary analysis
A marketing technique that is used to calculate the best customers of a business based on
a triumvirate of factors; how recently a customer made a purchase, how frequent they
purchase and how much they spend. The theory that drives the technique’s use is the
marketing paradigm that 80% of your business comes from 20% of your customers. This
allows the efforts of the direct marketers to be specifically targeted to the best 20% of
customers.
• Customer communications
An example of how database marketing improves customer communications include
using information to personalize correspondence, making it easier to build up a rapport and,
