Database in Direct Marketing

1. Database in Direct Marketing

2. Chapter
Objectives
• To further explore basic concepts
and applications of marketing
databases.
• To examine the process for
evaluating the feasibility of using
databases in the direct marketing
plan.
• To demonstrate the utility of the
database as a strategic integrating
element of an organization.

3. Review of Marketing Databases
• A Marketing Database is a file containing
information about customers or potential
customers that enhances marketing functions.
• The goal in establishing the database is to allow
customer information to be accessed and
manipulated rapidly and accurately in order to
meet customer needs and organizational
objectives.

4. Examples of Databases
• A very simple database may be the customer
information retained in the memory of a street
vendor.
• He knows the first name of a customer, how she
takes her coffee, and how much cream cheese
to put on her raisin bagel.
• Retaining this information helps him serve his
customers more personally and quickly so that
they can get to work on time.

5. Examples of Databases
•Problems arise with a mental database when the
customer base increases.
•With thousands of customers and many customer
characteristics, it becomes impossible to hold their
characteristics in memory.

6. Storing
Customer
Information
:
•Merchants have always retained
information about customers. Without a
computer, information about customers
could be stored in:
• Memory
• Index Cards
• Rolodex

7. Storing Customer
Information
• Many hair styling organizations now have
computerized databases of customers.
• A hairstylist may record customer
names, addresses, phone numbers,
appointment dates, coloring and
treatment formulations, and hair care
product purchases
• This information makes the organization
more responsive to the needs of
individual customers.

8. Hypothetical Database of a
Shoe Reseller (25,000 names)
• Many other data fields and variables could be
added to this database such e-mail addresses,
phone numbers and a complete history of
purchases.
NAME ADDRESS LAST PURCHASE AMOUNT
P. James 4 Oak Lane Pappagallo-162 129.50
K. Lang 7 Maple St. Easy Spirit-200 68.90
T. Clark 3 Pine Drive MootsieTootsie-87 48.88

9. More Complex Databases May
Contain Information on…
Customer Demographics
• gender
• age
• income
• family characteristics
• occupation, etc.

10. Customer Psychographics
• activities
• interests
• opinions
• hobbies
• recreational activities
• political and social opinions
More Complex Databases May
Contain Information on…

11. Customer Purchase Behavior
• previous purchases by product
category
• payment history
• purchase frequency
• purchase amount
More Complex Databases May
Contain Information on…

12. Customer Databases
versus Other Marketing
Databases
• Databases that contain information on
individual customers. That is, the
customer database allows us to reach
customers directly.
• Prospecting databases also
contain data on individuals, but
these individuals are not
customers. When individuals from
the prospecting database respond
to an offer, their names are moved
to the customer database.

13. How Marketing Databases Fit into
the Marketing Planning Process
• Many organizations develop some type of
marketing plan as a means of reaching
organizational objectives and satisfying
customers.
• It is important to consider how marketing
databases may fit into the planning process.
• The plan allows for a systematic evaluation of
the utility of the database for reaching
organizational objectives.

14. Some Advantages of
Strategic Planning
• Points to potential and existing problems, opportunities, threats in the market
environment
• Defines organizational strengths and weakness
• Plots the acquisition and use of resources
• Details methods to obtain goals and objectives
• Assists in implementation of strategies
• Regulates growth
• Establishes roles and functions of departments and individuals
• Makes better use of resources
• Establishes tasks and timing
• Helps achieve personal goals of individual employees
• Stimulates thinking and communication within the organization

15. Comments on
Strategic Planning
• Argument against strategic planning for
entrepreneurs and businesses in the “new
economy.”
• Strategic thinking versus the planning document.
• Focus on a direction for the organization rather
than “hit or miss.”

16. Levels Of Planning
Corporate
Divisional
Functional (Marketing)
Operating Level
(Sales, Advertising, Distribution, etc.)
Individual Personnel

17. Marketing Planning Starts with the
Corporate Strategic Plan
• Prior to developing the marketing plan,
marketing must review the company’s …
• mission
• objectives
• strategies
• resources, etc.

18. Marketing Planning Starts with the Corporate
Strategic Plan
If databases are being considered as a component of the marketing
plan, it is necessary to review the corporate plan.
The marketing manager needs to know if the introduction or expansion
of a marketing database is consistent with the corporate plan.

19. For example…
• Does the company have the resources to support
a database system?
• Are the financial objectives of the organization
compatible with developing a customer database
that will take 5 years before returns on
investments are realized?
• Is the corporate strategy of diversification
consistent with the expansion of the current
customer database?

20. Steps in the Marketing
Planning Process
• Perform Situational Analysis
• Specify Objectives
• Develop Strategies
• Implement Tactics (Programs)
• Monitor and Control
Note: Marketing planning is a continual
process which requires constant review.

21. The Marketing
Planning Process:
Situational Analysis
Situational Analysis includes analysis of …
• General environmental factors: global,
cultural, economic, legal, political, social,
demographic, technological, and so on
• Internal resources: technology, human
resources, marketing, production, etc.
• Present and future markets: evolving and
established segments
• Target market characteristics: demographics,
psychographics, purchase patterns
• Competitors’ characteristics: direct and
indirect

22. The Marketing
Planning Process:
Situational Analysis
The strengths,
weaknesses,
opportunities and
threats of the
organization are
evaluated within the
context of the
environment.

23. The Marketing Planning
Process: Situational
Analysis
By examining each variable of the
situational analysis, we can begin to access
the feasibility of developing the database
within our organizational objectives.

24. The Marketing Planning
Process: Situational Analysis
For example, growing competition at the retail level
may be affecting growth in a product category. An
analysis of the competition and the purchasing habits
of our target market may point to an opportunity for
using direct channels of promotion and distribution.

25. Establishing Marketing Objectives
• After performing a situational analysis, an
organization has the necessary information to
establish marketing objectives.
• General marketing objectives can reflect sales
volume, profitability, and market share.
• Objectives are quantitative and time-specified.

26. • An example of a marketing
objective might be:
Increase in sales volume by 10%
in the next year
Establishing Marketing Objectives

27. • Quantification of objectives is necessary for
evaluation and control. How can you track
your success on an objective of “increasing
sales”? Is a 1% increase over 5 years
sufficient?
• The advantage of implementing databases is
that they allow clear, quantitative, and
continual tracking of objectives.
Establishing Marketing Objectives

28. The Marketing Planning Process:
Strategy Development
• Strategy is the longer-term direction to influence
customers and achieve marketing objectives. It
involves developing products to meet customer needs
and positioning products (i.e., communicating about
benefits) to target segments.
• The situational analysis provides a guide to strategy
development. Market segments, potential targets,
competition, internal resources, etc. are considered
when developing strategies.

29. • General strategies in marketing include
marketing penetration, market
development, product development, and
diversification.
• The next slides show the relationships
between markets, products and strategies.
The Marketing Planning Process:
Strategy Development

30. Market Penetration
Product
Development
Market Development Diversification
Existing Products New Products
Existing
Markets
New
Markets
Product/Market Strategy Grid

31. Relating Strategy to
Database Implementation
The marketing manager should evaluate how the
database may assist in the strategy.
• Market Penetration
• Market Development
• Product Development
• Diversification

32. • Involves increasing product use for existing
customers or non-customers with similar
profiles.
• Products are not modified with market
penetration strategy.
• A database may assist in reaching existing
customers in a more efficient and effective
manner or in modeling current customers in
order to find new ones.
Market Penetration Strategy

33. Market Development Strategy
• Existing products are offered to new markets.
• For example, a producer of an industrial cleaner
that primarily sells to manufacturing
organizations, could acquire lists of customers
in other industries (e.g., health care,
hospitality).
• The list could be the foundation for a customer
contact database.

34. Product Development Strategy
• The database can help in product
development through the use of systematic
testing paradigms.
• Discovering that current customers have
certain hobbies or are involved in certain
activities may provide clues for product
development.
• Potential product offerings can be evaluated
through “hypothetical” offerings.
• More about testing later.

35. Diversification
• Diversification occurs when organizations move
into new markets with new products.
• Diversification strategy is usually the riskiest,
because the organization is moving away from both
markets and products they know.
• For example, an organization that sells commercial
ovens may be interested in developing products for
the home gourmet kitchen. A database of potential
customers could be developed based on variables
such as subscriptions to gourmet magazines and
recent home purchases.
• Database methods could reduce diversification risk
by using a direct distribution channel and testing
the new products on a selected list of potential
customers.

36. Strategy Development,
Targeting and Positioning
• Strategy also must be developed at the level of
the target market. After the market is
segmented a target group is selected.
• Positioning a product relates to how the target
group perceives the product and its benefits
relative to competitors.
• The desired characteristics are incorporate
into the product
• A database can help expedite the segmentation
process and specify the needs of customer for
positioning.

37. The Marketing
Planning Process:
Marketing Tactics
• Marketing tactics (also called
marketing programs) are the specific
means to implement the marketing
strategy.
• Each relevant element of the
marketing mix (promotion, price,
distribution, product) should be
considered.
• For example, a market penetration
strategy may be implemented by
increasing distribution or promotion
to the existing target market.

38. The Marketing Planning Process
Marketing Tactics
Distribution
• Target new customers by mailing to lists of
potential customers who do not currently have
easy access to your existing retail channel.
• A database system can also be used to track
the performance of channel members through
incentive programs.
• The distribution program should include how the
lists will be accessed and a plan for testing the
lists.

39. The Marketing Planning Process
Marketing Tactics
Promotion
• Develop a relevant mail communication based
on the benefits this target group is seeking.
• For example, this new segment may be more
responsive to the durability of your product as
compared to the fashion orientation of your
current customers.
• The database might provide a more
personalize message to an under-served
segment.

40. The Marketing Planning Process
Marketing Tactics
Price
• Pricing levels for this new segment could be systematically tested.
• Because of the establishment of a direct distribution channel, the marketer may have
more pricing flexibility for this segment

41. The Marketing Planning Process
Marketing Tactics
Monitor and Control
• Marketers must constantly monitor marketing
programs. Performance is compared to
objectives. If performance does not reach
objectives at specific milestones, the program
or strategy may need to be modified.
• Performance deficits may occur due to
improper analysis, over-optimistic objectives,
inappropriate strategy, or poor implementation.

42. The Marketing
Planning Process
Marketing Tactics
Monitor and
Control
Database marketers can track
performance rapidly and accurately.
This allows a quicker response to
problems. Additional, testing of
programs can be more extensive
and less expensive relative to mass
marketing through retail channels.

43. Databases and the Planning Process
• Ideally, the possibilities of database
development or expansion should be
considered at all levels of the planning
process.
• However, some organizations are not
strategically oriented.

44. Databases and the Planning Process
• A database may be developed to solve an
immediate tactical problem without much
consideration of longer-term strategies or
objectives.
• For example, a database may be developed
to support a specific promotional campaign
for product introduction. The re-use of the
database after the promotion is not
anticipated.

45. Databases Are Best Utilized
For the Long-term
• While the temporary use of a database may
help achieve some short-term objectives,
the real power of databases are in their
ability to track and evaluate customers over
the long-term.
• Databases can help develop relationships
between the customer and marketer by
making the marketer aware of changing
needs.

46. Databases Are Best
Utilized For the Long-
term
From a performance perspective,
databases can be used to evaluate
marketing programs over time and
determine the lifetime value (LTV) of the
customer to the organization.