Practical aspects of database marketing - Marketing Management

Illustrations are provided below of basic principles and applications of database marketing. This is not an exhaustive or definitive list, but it serves to illustrate the main principles:

  • Consider characteristics your best customers have in common so you can target your next programmes to prospects with similar characteristics. Evaluate which market segments buy from you. You might think you know this, but analysis could uncover market segments you have sold a significant amount to, but did not realize it. This process enables the firm to improve its segmentation by refocusing and redefining existing segments or it may highlight unexpected new segments.
  • Ascertain whether different market segments buy different products. This allows you to spend marketing and sales resources more effectively by marketing each of your products to the best potential industries, firms or prospects. Study which market segments bring most revenue and which ones bring highest average revenue. This is the application of differentiated marketing, which divides the total market into segments, and then has a slightly different marketing strategy for each segment.
  • Find out what types of industries, firms or individuals respond to which types of marketing communication, so you can decide where to spend advertising and marketing resources next time. Ascertain that they not only respond to your programmes, but also actually buy, and which customers buy from you repeatedly. These might have been different demographic profiles or different in some other way, which might be commercially exploitable, and you may then decide to modify your targeting tactics and only market to segments that buy more frequently.
  • Calculate the average lifetime value of customers. This can be done using discounted cash flow (DCF) procedures which is a method of valuing a project, company, or an asset using the time value of money. Here, future cash flows are estimated and discounted to obtain their current present values. This information can be used to find out which customers are not achieving their potential. Programmes can then be devised to encourage more purchases. Reward the most frequent buyers and buyers that bring the highest revenue. The concept of lifetime value is central to the idea of customer retention and long-term relationship marketing.

Database marketing has grown because more and more information about individuals and households can be collected, stored, retrieved and analysed. Moreover, developments in computing technology and systems mean that data storage and analysis is now more cost effective.

Databases can be readily combined to provide detailed profiles of customers including for example data on purchasing patterns, life styles, credit ratings, incomes and even health and medical histories. Database marketing has grown to the extent that data collection and analysis is an industry in its own right. The marketer can purchase any number of data types from companies that specialize in providing this type of information.

Marketers, however, need to be careful about what to collect, handle, analyse and disseminate on consumers. Most countries have strict regulations about data protection and the penalties for contravening these can be severe.

All rights reserved © 2018 Wisdom IT Services India Pvt. Ltd Protection Status

Marketing Management Topics