Customer Databases arid Direct Marketing

Customer Databases arid Direct Marketing

Table 22.1 lists the main differences between mass marketing and so­called one­ to­one marketing.' Companies that know about individual customer needs and characteristics can customize their offers, messages, delivery modes and payment methods to maximize customer value and satisfaction. Today's companies have a very powerful tool for accessing the names, addresses, preferences and other pertinent information about individual customers and prospects: the customer database.

Successful direct marketing begins with a good eustomer database. The customer database

customer database is an organized collection of comprehensive data about indi­ An organised collection

vidual customers or prospects, including geographic, demogiaphic, psycho­ of coffipreftensfcue data

graphic and buying behaviour data. The database can be used to locate good about individual

potential customers, tailor products and services to the special needs of targeted customers or prospects,

consumers, and maintain long­term customer relationships. Database marketing including guog raphic, is the process of building, maintaining and using customer databases and other demographic,

psychogruphic and databases (products, suppliers, resellers) for the purpose of contacting and trans­

buying behaviour data.

acting with customers.

Although many companies are now building find using customer databases for targeting marketing coin muni cations and selling efforts at the individual customer, data protection regulations in some countries may slow down growth in

database marketing practices. For example, usage in the United States and the United Kingdom is far more widespread, with data laws being much more open

compared to the rest of Europe. But the international race is on to exploit data­ base marketing and few businesses can afford to ignore this important vehicle

for competitive success. As Tom Peters comments in Thriving on Ctiaoti, 'A market has never bought things. Customers buy things. That's why database

marketing's ability to target the individual customer in the crowded marketplace is so valuable.' s

Many companies confuse a customer mailing list with a customer database. A customer mailing list is simply a set of names, addresses and telephone numbers.

A customer database contains much more information. In business­to­business marketing, the salesperson's customer profile might contain information such as the products and services that the customer has bought; past volumes and prices; key contacts (and their ages, birthdays, hobbies and favourite foods); competitive suppliers; status of current contracts; estimated customer expenditures for the next few years; and assessments of competitive strengths and weaknesses in selling and servicing the account. In consumer marketing, the eustomer database might contain a customer's demographics (age, income, family members, birth­ days), psychographics (activities, interests and opinions), buying behaviour (past purchases, buying preferences) and other relevant information. Companies must distinguish between transaction­based and custom­built marketing databases. Transactional databases are put in by an accounts department for the purpose of sending in voices/bills out and getting money back. By contrast, custom­built data­ bases focus on what the firm's marketing people need to know to serve and satisfy customers profitably and better than the competition can — for example, the most cost­effective way to reach target customers, the net worth of a transaction, customers' requirements and lifetime values, lapsed customers and why they departed, why competitors are making inroads and where,

Rusiness­to­business marketers and service retailers (e.g. hotels, banks and airlines) are among the most frequent users of database marketing. Increasingly, however, consumer packaged­goods companies and other retailers are also employing database marketing. Armed with the information in their databases,

these companies ean identify small groups of customers to receive fine­tuned marketing offers and communications (see Marketing Highlight 22.1).

As more companies move into database marketing, the nature of marketing will change. Mass marketing and mass retailing will continue, but their prevalence and power may diminish as more buyers turn to non­retail shopping. More consumers will use electronic shopping to search for the information and prod­ ucts they need. Online services will provide more objective information about the comparative merits of different brands. Consequently, marketers will need to

think of new ways to create effective online messages, as well as new channels for delivering products and services efficiently.

Forms of Direct Marketing • 955

Forms of Direct Marketing

The major forms of direct marketing include face­to­face selling, direct mail marketing, catalogue marketing, telemarketing, direct­response television (DRTV) marketing and online shopping. These forms of marketing can be used as communications tools to convey messages to target customers ­ as well as non­ store retail channels ­ to elicit sales. Many of these techniques were first devel­ oped in the United States, but in recent times they have become increasingly popular in Europe. In the EU, some forms of direct marketing ­ notably direct mail and telemarketing ­ are forecast to grow. In practice, however, the impact of

a unified Europe has been limited by Che labyrinth of legislation across the L'nion, which means that certain direct marketing techniques are feasible in some coun­ tries but not others.

For example, telemarketing is widely practised in some countries, but virtually illegal in Germany. Differences in postal systems, standards and rates for different countries pose problems for pan­European direct­ mailing programmes. Direct mail is strong in countries with efficient and

inexpensive postal systems (e.g. the UK, Sweden) and weak where the post is slow and delivery unreliable (e.g. Spain, Italy). Until Ell­wide uniformity of postal prices and standards is achieved, the growth of pan­

European direct marketing will be restricted. 1 ' Even etiquette is a

problem. The bright, brash American­style direct­mail methods used in the United Kingdom would be considered anything but courteous in

France. On the other hand, the flowery phrases of a formal letter in France would definitely be de trop on the other side of the channel.