Marketing Decision Making

BM032-3-3

Chapter 4
The Use of Database in
Marketing
 LEARNING OUTCOME

The role of information stored in marketing

decision making
Types and uses of databases
Availability of different database and direct
marketing
Applications of databases

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 The Marketing Database
Comprehensive collection of interrelated data
Arranged around each customer ...
Allow timely and accurate retrieval ...
Support analytical, predictive, operational
needs ...
Serving multiple applications

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 Active Database:
An Integrated Business
Resource
Marketing

Customer
Finance
Service

Database

Research Sales

Distribution

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 Information is Power:
Active databases drive the business

Identify your best customers

profitability analysis, clustering
Develop new customers and cross-sell
similar to current, identify competitors customers
Improve delivery of sales promotion
response modeling / targeting
Personalize message
based on purchase patterns, volume
Use as a research tool across the organization
customer, product, market research

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 What is Database Marketing?

Determine Objectives
Collect Data
Build Data Warehouse
Data Mining
Develop Marketing Programs
Evaluate Programs/Evaluate Data
Warehouse

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 Customer-centric Database
Every database is a collection of records
Each record is a collection of fields
Here, one record per customer and/or prospect
unique identifier
general customer/account information
including demographic, psychographic,
socio-economic
our offers+communications to the customer
customers actions: response, purchase,
payment
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 What Data To Hold
Too often, data is collected based on
availability, and not based on projected need
Should accumulate internally
data that can be used to support current and
future strategies (mktg and otherwise, e.g.,
operations)
. data that may be valuable to other
organizations
Should source external data
unavailable internally
too expensive to maintain/update

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 Data Sources : Internal

Operations / Sales
past usage/purchase, e.g., amount, variability
Finance
payments, e.g., timeliness, amounts
Customer service
e.g., inquiries, complaints
Other data collection methods:
sales/orders, promotions/drawings, inquiries, surveys,
warranty cards, research panels...

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 Data Sources: Distribution
Channels

Many companies use distributors, retailers

Problem: lack of direct communications with

end-customer, no relationship

Part-solution 1: keep tabs on channel +

aggregate statistics on customers

More aggressive solution: special marketing

programs to reach customers
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 Data Sources : External Lists

50% of U.S. DMers sell their lists

Use to enlarge universe : new names
can buy segments by specific features (model)
Enhance data : cross information
U.S. census data
enhance data
Credit bureau
John Smith 60 10.2
Various marketers of related products Eric Cohen 35 1.3
Jack Marshal 20 0
List compilers / maintainers / sellers

enlarge
universe
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 Other Data Sources

Mass-advertised offers
TV call-ins, direct response
Joint offers with other merchants
take-one brochures in banks, restaurants
drawings
Trade shows, happenings, community
activity
Referrals!
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 DIRECT MARKETING

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 Defining Direct Marketing & the
Importance of Direct Marketing
Direct marketing is a system of marketing by which
organizations directly communicate with the target customer/s to
generate a response or transaction. This response may take the
form of an inquiry, a purchase or even a vote.
Direct Marketing is the total of activities by which the seller in
effecting the exchange of goods and/or services with the buyer,
directs efforts to target audience using one or more media(direct
selling, direct mail, telemarketing, direct-action advertising,
catalogue selling, cable TV selling, mobile marketing etc) for the
purpose of soliciting a response by phone, mail or personal visit
from a prospect or customer.
- Peter Bennet

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 Direct Marketing involves all activities of marketing: Marketing
Research, Segmentation, Target Marketing, Evaluation.
Direct Marketing is an interactive system of marketing which uses
one or more media to effect the measurable response or
transaction at any level.
D.M. is used for Niche products, Service Products or Programs.
Traditionally Direct Marketing was performed using Catalogues,
Direct mail, Telemarketing.
Strategies of D.M.- uses a number of media and each medium
performs specific functions. Generally, they follow-
One-Step Approach- the medium is used directly to obtain an
order. Goal is to generate immediate sale.
Two-Step Approach- can involve the use of more than one
medium. The first effort- to screen or qualify potential buyers. The
second effort generates the response. Telemarketing + Direct
Mail.

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 Direct Marketing Defined

The total of activities by which the seller directs efforts to a target audience
using one or more media for the purpose of soliciting a response by phone,
mail, or personal visit from a prospect or customer

TV Selling
Radio

Direct Mail
Telemarketing

Direct Selling Magazine and Newspaper

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 Growth of Direct Marketing

Direct Marketing Consumer

Syndicates Credit Cards

Miscellaneous Changing
factors Structure of
Society

Changing
Structure of Technological
Markets Advances

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 Direct Marketing Combines With . . .

Advertising

Internet Public Relations

Direct
Marketing
Support Media Personal Selling

Sales Promotions

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 How Database Marketing Works

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 A Comprehensive Consumer Database

Name Gender Occupation

Address/ Marital Transaction

Zip Code Status History

Telephone Family Promotion

Number Data History

Length of Inquiry
Education
Residence History

Unique
Age Income
Identifier

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 A Business-to-Business Database

Industrial Headquarters
Contact Info
Classification Location

Contact Size of Purchase

Title Business History

Telephone Promotion
Revenues
Number History
Source of
Number of Inquiry
order, inquiry,
Employees History
referral
Credit Time in Unique
History Business Identifier

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 Objectives of Database Marketing

Improve Selection of Market

Segments

Stimulate Repeat Purchases

Objectives
Cross-selling Other Products

Customer Relationship
Management

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 Track Customer Purchases and group them on
Purchase History
Build a data base
Keep track of communication preferences
Let customers decide how to give feedback
Empower staff to make decisions
Track Staff actions and make improvements
Try new ways to leverage customer intelligence
Always add to customer intelligence
Develop customer intelligence on past customers
Do it now

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 Direct-Marketing Media

Infomercials Telemarketing

Print, catalogs Broadcast

Teleshopping TV Spots

Home shopping Direct Mail

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 Direct Marketing Advantages

Selective reach

Segmentation capabilities

Frequency potential

Flexibility

Timing

Personalization

Costs

Measures of effectiveness

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 Direct Marketing Disadvantages

Accuracy

Image Content
factors support

Do Not Rising
Contact lists costs

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 Basic Reasons for the Growth of Direct
Marketing
Changing Market Place:
Growth of delivery systems and media fragmentation.
Affordable computing power & growth of databases
(databases used for future purpose of marketing).
Changing Role of Direct Marketing & Business focus:
Building & maintaining customer relationship
To maximize sales
To maximize customer loyalty
Changing Cost Structures:
It is getting to be more expensive to use mass-media.
Advertising is done thro line extensions- since advt. is
above- the- line expenditure.
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 Increasing clutter in media.
Technological development: (Advances & Innovations)
Changes in the market place- B2B selling- it has
increased or has seen tremendous growth.
The change place of market- e.g. home, office etc.
Alternative distribution channels.
Changing lifestyles and demographics.
Evolving economy and international competition.
Direct marketing is an interactive system of
marketing which uses one or more advertising media
to effect a measurable response and/or transaction
at any location.
There are three key elements of this definition. They are as
follows:
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 First, direct marketing is interactive in that marketer
and prospective customer engage in two-way
communication. The response or non-response of the
customer completes the communication loop in the direct
marketing process. E.g. filling in the response coupon by
the customer and mailing it. That is, direct marketing
activities give the target market of the communication an
opportunity to respond.
Second, all direct marketing activities are significantly
more measurable than traditional general advertising
and sales promotion. A response or the lack of it can be
associated with each direct mail piece, each catalog
mailing, or each direct response television
advertisement. Direct marketers use direct marketing
databases of stored purchase behavior and

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 other information about individuals & households to
analyze customer characteristics and plan new
campaigns. These databases are the foundation of
effective direct marketing.
Third, direct marketing activities can take place from any
location. Marketer can interact with the customer over
phone, through mail, Internet, by fax.
WHY DIRECT MARKETING?
The environment has become more complex.
Bargaining power of the consumer has increased.
Market has become more competitive.
Cost of marketing a product has increased. The retail
shelf cost at outlets in major cities is costly.

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 Advertising budgets are high.
Less customer loyalty.
DM helps companies focus on their marketing efforts.
Consumer lifestyle has changed. Today, customers look
out for convenience in shopping. Tele-shopping, home
shopping, catalog marketing and online marketing cater
to core customer value.
Globalization has facilitated the growth of direct
marketing.
Niche markets with distinct preferences- DM
Technology has changed and enhanced the DM activity.

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 Competencies of Direct Marketing
Direct marketers seeks to persuade people to buy
products or services, like other forms of promotion.
Virtually, all of direct marketings special competencies
derive from the fact that the communications are directed
at specific individuals and not at mass markets via mass
media. This includes the combination of advertising and
selling into a single function, the prominence of customer
service, the ability to precisely target individuals, and the
ability to create personalized messages that call for
immediate action. Finally, the results of direct marketing
campaigns can be monitored and measured.

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 Competencies of Direct Marketing
Direct marketers seeks to persuade people to buy
products or services, like other forms of promotion.
Virtually, all of direct marketings special competencies
derive from the fact that the communications are directed
at specific individuals and not at mass markets via mass
media. This includes the combination of advertising and
selling into a single function, the prominence of customer
service, the ability to precisely target individuals, and the
ability to create personalized messages that call for
immediate action. Finally, the results of direct marketing
campaigns can be monitored and measured.

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 Mass Marketing Vs One-to- One
Marketing
MASS MARKETING ONE TO ONE MARKETING
Average customer Individual customer
Customer anonymity Customer profile
Standard product Customized market offerings
Mass production Customized production
Mass distribution Individualized distribution
Mass advertising Individualized messages
Mass promotion Individualized incentives
One way communication Two way communication
Economies of scale Economies of scope
Share of market Share of customers
All customers Profitable customers
Customer attraction Customer retention

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 Benefits of Direct marketing
Home shopping- hassle free & fun, convenient.
Saves time.
Introduces a customer to a large variety of products at a
time.
Comparative shopping is possible by browsing through
mail order catalogues & online shopping.
Can order goods for ourselves & others also.
Sellers also benefit, they can personalize, customize
messages.
Direct marketers can build a continuous relationship with
each customer. E.g. Parents of newborn babies may
receive periodic mailings on clothes, toys etc as the child
grows. Nestle baby division builds a database
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 continuously of new mothers and sends personalized
packages of gifts and advice at the key stages in the
babys life.
Direct marketing strategies can be timed to reach
prospects at the right time and moments. Thus, DM
receives a higher readership because it is sent to more
interested prospects.
Direct marketing strategies & offer benefit the marketer
since it is less visible to the competitors.
Direct marketing helps in building effective long-term
relationships with the customers and this helps in getting
customers to stay loyal.
The measurable response to direct marketing campaigns
help to decide the more profitable ones.

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