Introduction to Database Marketing  

excerpt from presentation by Robert Shaw of Arthur Andersen Consulting in Montreux .

Database Marketing is a powerful competitive weapon for companies - especially large ones.
The growth of database marketing is rooted in the small business philosophy of staying close to
the customers, under-standing and meeting their needs and treating them well after the sale.

Much corporate marketing is tied to big, general marketing or advertising campaigns with a
single message - the same for everyone. This message may be based on the companies Unique
Selling Proposition (USP). However, customers have different needs and a single USP spelt out
to the whole market is no longer enough.

Messages must be tailored to specific segments of the market and ultimately to the market
segment of one, the individual customer. Computerising the customer database makes it possible
to address messages more specifically and market additional products to each customer.

What is Database Marketing?

There is no universal definition of Database Marketing ( DBM ); try this one ...

DBM is an interactive approach to marketing communication, which uses addressable

communications media (mail, telephone, fax, sales force etc) to extend help to its target
audience, to stimulate their demand, and stay close to them by recording and keeping an
electronic database memory of customer, prospect and all communication and commercial
contacts, to help improve all future contacts.

The characteristics of fully fledged database marketing are ....

1. Each actual or potential customer is identified as a record on the marketing database; markets
and market segments are groups of individual customers.

2. Each customer record contains not only identification and access information but also a range
of marketing information. It also includes information about past transactions and about
campaign communications.

3. The information is available to the company during the process of each transaction with the
customer, to enable it to decide how to respond to the customer's needs.

4. The database is used to record customer responses to company initiatives.

5. The information is available to marketing policy makers to enable them to decide such things
as which target markets/ segments are appropriate for each product/service etc.
6. In large companies, selling many products to each customer, the database is used to ensure
that the approach to the customer is co-ordinated; and a consistent approach developed.

7. The database eventually replaces market research. Marketing campaigns are devised such that
the response of customers to the campaign provides information which the company is looking
for.

8. Marketing Management automation is developed to handle the vast amount of information

generated by DBM. This identifies opportunities and threats more or less automatically!

This is fully fledged marketing automation. Very few companies have succeeded in doing this;
but many have it as their goal.

DBM presents many challenges to management. It requires careful maintenance of great

volumes of detailed customer data. Accessing the data, interpreting it, and using it to drive or
support the marketing function requires a long-term marketing systems development policy.

It also requires computing and marketing people to work together, often educating each other.
And, it may well require most people in the company to forget their traditional way of doing
business.

DBM will only work if dealing with customers is viewed as an on-going process (Customer
Contact Process).

The Ladder of Loyalty

The ladder of loyalty is a key concept in DBM.

1. No awareness of company or product/service.

2. Awareness of company

3. Awareness of product/service

4. Positive perception

5. Recognition of personal benefit

6. Enquiry

7. Objections overcome

8. Sale of product or service

9. Entry into continued relationship.

DBM is used to move customers up the ladder.

The essence of database marketing is communicating directly with the customers and asking
them to repond in a tangible way. It provides the means for the customer to respond and is set up
to measure and fulfil the response.

It sets up or reinforces a relationship with the customer, which is "fulfilled" when we follow up a
customer's response to our communication. Fulfilment may be in many ways; a telephone
conversation, sending literature, a sales visit, attendance at a sales seminar, exhibition or store, or
sending products to the customer.

So DBM is a broad discipline, not a separate marketing communications medium, but a way of
using any medium to elicit the desired response.

The Phases of Development of Database Marketing

In any business function, automation tends to go in phases. In DBM, we see four phases - these
phases are not jumps, each covers a broad spectrum of approaches. They evolve into each other,
but their philosophy is very different.

Phase 1. Mystery Lists.

In this phase, marketing databases are basic sales databases. They are often organized by
product; a customer may appear many different times under different product categories. It may
be hard to identify that it is the same customer. These databases tend to grow from accounts
systems and they are hard to analyse for marketing purposes. There is usually conflict with other
functions ... they see no reason for changing database structure to meet marketing needs! Lists of
potential customers are brought in and not integrated with the sales database/s. They may be used
once, to identify potential customers for a particular product, and then discarded. Whether a
campaign is successful or not does not affect the rest of marketing.

Phase 2. Buyer Databases.

In this phase, sales and marketing databases are well organised, but there may be many
databases. If a company uses several channels of distribution, there may be a database for each
channel. Customer focus is possible; we can identify the nature of our relationship with a
particular customer across different products. Databases can be analysed to develop strategy.
Each database campaign is well planned and executed in itself, but may overlap, or even conflict,
with other campaigns. Increased effectiveness without overall co-ordination leads to more
conflict. The conflict may be within the marketing function; or with sales or inventory
management.

From Phase 2, we learn which data are important, which kinds of data we need to use together,
which conflicts and stresseswe must resolve and how to use DBM professionally.

Phase 3. Co-ordinated Customer Communication.

In this phase, one database drives all customer communication and management. Computer
systems are used to co-ordinate and drive campaigns. The emphasis is not on the database,
though this is the powerful tool that makes it all possible. The emphasis is on customers. Our
first questions are: who are our customers, what are their needs, and how shall we plan and co-
ordinate all our communications efforts to meet them? In phase 3, we plan campaigns using the
database. A campaign mangement system ensures that all involved in a campaign know the
schedule. We review past performance, we test, we inform other functions of our proposed
activity, we use automation to evaluate the campaign; all campaign
information automaticallyenriches the database.

Phase 4. Integrated Marketing.

Many functions automate within closed loops but need information from other areas. It may
never be possible to link every function automatically, but each functional subsystem
automatically gets the information it needs from every other subsystem. But we can go a long
way to ensuring that the critical links are made at key stages.

It is not possible to maintain a good database without a call centre. Calling and talking to your
customers and prospects is theonly way to keep the information relevant and timely.

Back to Managers Files

CONSUMER BEHAVIOR: 
THE PSYCHOLOGY OF MARKETING
Introduction
The study of consumers helps firms and organizations improve their marketing
strategies by understanding issues such as how

 The psychology of how consumers

think, feel, reason, and select between
different alternatives (e.g., brands,
products, and retailers);
  The psychology of how the consumer is
influenced by his or her environment
(e.g., culture, family, signs, media);
 The behavior of consumers while
shopping or making other marketing
decisions;
 Limitations in consumer knowledge or
information processing abilities
influence decisions and marketing
outcome; 
 How consumer motivation and decision
strategies differ between products that
differ in their level of importance or
interest that they entail for the
consumer; and
 How marketers can adapt and improve
their marketing campaigns and
marketing strategies to more
effectively reach the consumer.

One "official" definition of consumer behavior is "The study of individuals, groups, or

organizations and the processes they use to select, secure, use, and dispose of
products, services, experiences, or ideas to satisfy needs and the impacts that these
processes have on the consumer and society." Although it is not necessary to
memorize this definition, it brings up some useful points:

 Behavior occurs either for the

individual, or in the context of a group
(e.g., friends influence what kinds of
clothes a person wears) or an
organization (people on the job make
decisions as to which products the firm
should use).
 Consumer behavior involves the use and
disposal of products as well as the
study of how they are purchased.
Product use is often of great interest to
the marketer, because this may
influence how a product is best
positioned or how we can encourage
increased consumption. Since many
environmental problems result from
product disposal (e.g., motor oil being
sent into sewage systems to save the
recycling fee, or garbage piling up at
landfills) this is also an area of interest.
  Consumer behavior involves services
and ideas as well as tangible products.

 The impact of consumer behavior on

society is also of relevance. For
example, aggressive marketing of high
fat foods, or aggressive marketing of
easy credit, may have serious
repercussions for the national health
and economy.

There are four main applications of consumer behavior:

 The most obvious is for marketing

strategy—i.e., for making better
marketing campaigns. For example, by
understanding that consumers are more
receptive to food advertising when they
are hungry, we learn to schedule snack
advertisements late in the afternoon.
By understanding that new products are
usually initially adopted by a few
consumers and only spread later, and
then only gradually, to the rest of the
population, we learn that (1)
companies that introduce new products
must be well financed so that they can
stay afloat until their products become
a commercial success and (2) it is
important to please initial customers,
since they will in turn influence many
subsequent customers’ brand choices.
 A second application is public policy. In
the 1980s, Accutane, a near miracle
cure for acne, was introduced.
Unfortunately, Accutane resulted in
severe birth defects if taken by
pregnant women. Although physicians
were instructed to warn their female
patients of this, a number still became
pregnant while taking the drug. To get
consumers’ attention, the Federal Drug
Administration (FDA) took the step of
requiring that very graphic pictures of
deformed babies be shown on the
medicine containers.
  Social marketing involves getting ideas
across to consumers rather than selling
something. Marty Fishbein, a marketing
professor, went on sabbatical to work
for the Centers for Disease Control
trying to reduce the incidence of
transmission of diseases through illegal
drug use. The best solution, obviously,
would be if we could get illegal drug
users to stop. This, however, was
deemed to be infeasible. It was also
determined that the practice of sharing
needles was too ingrained in the drug
culture to be stopped. As a result,
using knowledge of consumer attitudes,
Dr.Fishbein created a campaign that
encouraged the cleaning of needles in
bleach before sharing them, a goal that
was believed to be more realistic.
 As a final benefit, studying consumer
behavior should make us better
consumers. Common sense suggests, for
example, that if you buy a 64 liquid
ounce bottle of laundry detergent, you
should pay less per ounce than if you
bought two 32 ounce bottles. In
practice, however, you often pay a
size premium by buying the larger
quantity. In other words, in this case,
knowing this fact will sensitize you to
the need to check the unit cost labels
to determine if you are really getting a
bargain.

There are several units in the market that can be analyzed. Our main thrust in this
course is the consumer. However, we will also need to analyze our own firm’s
strengths and weaknesses and those of competing firms. Suppose, for example, that
we make a product aimed at older consumers, a growing segment. A competing firm
that targets babies, a shrinking market, is likely to consider repositioning toward our
market. To assess a competing firm’s potential threat, we need to examine its assets
(e.g., technology, patents, market knowledge, awareness of its brands) against
pressures it faces from the market. Finally, we need to assess conditions (the
marketing environment). For example, although we may have developed a product
that offers great appeal for consumers, a recession may cut demand dramatically.