CUSTOMER RELATIONSHIP MANAGEMENT

Project Report

A Technical Note on Database Marketing.

09 March, 2014

Submitted To:-

Prof. Tripurasundari Joshi

Submitted by:-

Ranotosh Banerjee (121242)

MBA FT II

DEFINITION OF DATABASE MARKETING

(Roberts 1997):

“Database marketing is the application of statistical analysis and modeling techniques to

computerized, individuallevel data sets. It is used tosupport the development of costeffective

marketing programs that communicate directly with identified customers and prospects, and to

track and evaluate the results of specific promotional efforts. Database marketing implies

planned communication with individually targeted customers and prospects over an extended

period of time to promote repeat purchases of related goods and services.”

(Stone and Shaw 1987):

“Database marketing is an interactive approach to marketing communication, which uses

addressable communications media (such as mail, telephone, and the sales force) to target its

audience, to stimulate their demand, and to stay close to them by recording and keeping an

electronic database memory of customer, prospects and all communication and commercial

contacts, to help improve all future contacts.”

(Shani and Chalasani 1992):

“Database marketing, simply put, involves the collection of information about past, current and

potential customers to build a database to improve the marketing effort. The information

includes: demographic profiles; consumer likes and dislikes; taste; purchase behavior and

lifestyle.”

(Esters 1996):

“An interactive system of marketing that ascertains, creates and satisfies the insurance wants and

needs of people by performing organized tasks affecting the transfer of goods and services

between buyers and sellers, using one or more media for the purpose of soliciting a response by

phone, mail, or personal visit from a prospector customer; maintaining complete information

oneach transaction in a database and doing so at a profit.”

(Gama 1997):

“Marketing aided by current technology that allow us to measure an individual commercial

relationship in its varied aspects, including historic, environmental, geographic, demographicand

psychographic variable. Some of its technologies also help us extrapolate individual relationship

data to manage each relationship optimally and to leverage accumulated knowledge in

prospective ways.

(Tucker 1997): database marketing “generally, it is the art of using data you’ve already gathered

to generate new money making ideas. Database marketing can be defined as gathering, saving

and using the maximum amount of useful knowledge about your customers and prospects...to

their benefit and your profit.”

(Cross and Smith 1994): “databasedriven marketing is an interactive, relationshipbuilding kind

of marketing built around a core of customer information.” Stan Rapp describes this as “any

marketing process in which useful, behavioral, psychographic or demographic information about

prospects or customers is stored in the company’s database and is used to enhance or prolong the

relationship or to stimulate sales.”

(Fletcher and Wright 1997): “database marketing stores this response and adds other customer

information (lifestyles, transaction history, etc.) on an electronic database memory and uses it as

basis for longer term customer loyalty programs, to facilitate future contacts, and to enable

planning of all marketing.”

UTILITY & APPLICATION

Royal (1995) states: "When used effectively, database marketing promises companies increased

sales to their current customers and a wellqualified prospect list. Despite the boomin database

development, few organizations are using their massive collections of customer facts and figures

to their full potential."

Lewington et al. (1996) adds, "some organizations have been able to harness the power of

database marketing systems to achieve competitive advantage in theirmarketplaces; conversely,

others have found themselves inhibited by the intricate human, technical and organizational

problems created by the adoption of these systems"

Rosenfield (1998) uses the term "the myth of database marketing", when talking about the gap

between its promise and its practice.Even though database marketing in many companies is not

living up to its potential, its allureremains high. Much of this allure is related to the significant

competitive advantages available to companies that can put database marketing into practice.

Database marketing supports the development of a relationship marketing strategy. Often,

the two terms are used interchangeably but they are different. Database marketing is a

tool to support (among other things) relationship marketing. It provides marketers with a

means of developing an ongoing, personalized stream of communication between acompany and

its customers (Shani and Chalasani 1992).

Database marketing is inextricably tied to the technology that supports it. This has created

confusion among some marketing practitioners who are unfamiliar with the underlying

technology (Vavra 1993; Rosenfield 1998).

Marketing databases supports the use of many leading edge tactical marketing tools such

as segmentation, profiling, modeling, and data fusion. However, as only a smallpercentage of

companies are using advanced statistical techniques (InfoWorks 1997),these concepts are not

likely to improve the general understanding of database marketing.

DRIVERS OF DATABASE MARKETING

Reasons for Growth of Database Marketing :

The growth of database marketing is driven by a number of environmental issues. Fletcher,

Wheeler and Wright (1991) classified these issues into four main categories:

1. Changing role ofdirect marketing

2. Changing cost structures

3. Changing technology; and

4. Changing market

DRIVER 1: THE CHANGING ROLE OF DIRECT MARKETING

The move to relationship marketing for competitive advantage.

The decline in the effectiveness of traditional media.

The overcrowding and myopia of existing sales channels.

The desire to measure the impact of marketing efforts.

DRIVER 2: CHANGING COST STRUCTURES

The decline in electronic processing costs.

The increase in marketing costs.

DRIVER 3: CHANGING TECHNOLOGY

The advent of new methods of shopping and paying.

The development of economical methods for differentiating customer communication.

DRIVER 4: CHANGING ECONOMIC CONDITIONS

The fragmentation of consumer and business markets.

The reduction in consumer leisure time.

The rise of the information society.

The increase in competition.

Characteristics of Database Marketing :

1. Market can be segmented and reached independently and efficiently.

2. Product/service has short life cycle and must be resold often

3. Range of products/services provides opportunities for cross-selling.

4. Periodic, repeat purchase of products or services where it is possible to capture name and address at the point of sale.

5. Affinity groups with common interests can be constructed

6. Frequent buyer rewards systems can be developed

7. Product/service markup is sufficient to support building a relationship

8. Purchases are made fairly often and can be predicted.

9. Higher the lifetime value of the customer the greater the potential return from database marketing

10. The lower the cost of information acquisition (or capture) the more attractive database marketing

11. The more difficult and expensive alternative brand loyalty programs the more attractive database marketing

12. The lower the cost of incremental communication with customers the more attractive database marketing

13. The greater the opportunity for market differentiation the greater the return from database marketing

ADVANTAGES OF DATABASE MARKETING :

Track customer buying patterns and understand their motives.

Target marketing efforts.

Vary messages to different customer groups.

Customize promotions, prices and services to individual consumers;

Reduce marketing costs and increase profits.

Improve customer retention through loyalty programs;

Coordinate the delivery of multiple services to the same customer.

Augment core offerings with valued incentives.

Personalize dialogue.

Increase customer awareness and sales.

Minimize communication errors and breakdowns with customer.

Efficiently monitor customer credit.

Predict response and project life

Time value of individual customers

Conduct market research and testing

Apply statistical techniques to improve understanding of customer groups

Track and measure the outcome of different marketing programs.

Future Trends In Database Marketing

Point Of purchase data capture will increase, particularly at retailer location

More marketers will contribute customer information to compiled databases

This will become an increasingly valuable source of pre-qualified prospects

Technology will provide additional channels for marketing and communicating with

customers

Database marketing will continue to expand into new industries and companies

Technological advances will continue to drive the cost of computing down and the

processing efficiency up.

Increased information will become available to marketers

Data will become more accurate and lessexpensive.

Analytical models will become more sophisticated and easier to use

Consumer privacy concerns will grow as more data is captured and sharedDatabase

marketing will be employed more often to improve customer service

A primary use of database marketing systems will be to support loyalty programs

Database Marketing as a Source of Strategic Competitive Advantage

Porter Identified five strategic areas of competitive opportunity for information technology:

(1) Changing the basis of competition;(2) Strengthening customer relationships(3) Overcoming supplier problems(4) Building barriers against new entrants; and (5) Generating new products.

Database marketing can offer competitive opportunities in all these areas.

Change the basis of competition

By creating and maintaining a database and using it to: win customers from the competition;

transform how a field sales force works; or provide a costeffective means of serving small

customers.

Provide a means of strengthening customer relationships

Through individualizedrelationships with consumers that will assist companies in not only

acquiring anddefending customers but in stimulating revenue growth.

Supplier Problems

Provide companies with alternative sales channels so they canovercome supplier problems

and achieve a lower cost of sale, through applications such as, telemarketing,mail order, and

inquiry management.

Barriers to Market Entry

Be a unique asset and present barriers to market entry. Conversely, databasemarketing

capabilities can also be used to break into new markets.

Be used to generate new products and services

Superior customer information available through a marketing database allows a company to spot

emerging trends and be first to market with new products or services. Further, the information in

the database can be seen as a product in its own right.

CHALLENGES IN DATABASEMARKETING

Tracking their online behavior has become the most effective means for most organizations to

understand what is top-of-mind for their target audience. Message and offer, finely tuned to

audience, have been and remain the key to effective database marketing.

To build an effective online database marketing system, it’s necessary to use a robust targeting

platform that integrates online behavioral data with any essential customer data.

It’s a very rare database marketer that wants to target based on simple aggregations like visits,

page views or time on site. These just aren’t meaningful database marketing aggregations

Web analytics systems evolved primarily as reporting and site analysis systems. As a

consequence, Web analytics systems don’t generally work at the correct fundamental data level –

the visitor.

The volume of data can be enormous and mining the data would be a costly affair.

Targeting a Single Communication: Understanding what a visitor cares about most Targeting

against a basket of interests: Creating Fuzzy-Logic Marketing organizations have learned and re-

learned that working within the vendor SaS model is faster, cheaper and ultimately better than

getting involved with big IT.

The addition of Score into Visitor Data Mart isn’t just the addition of a separate methodology

for doing selections. It’s a deep integration where scores become another input available to

Segments.

While real-time business intelligence is a reality for select companies, it remains elusive to many

as it is dependent on these premises: the percentage of the business that is online, and the degree

of level of sophistication of the software.

A major challenge for databases is the reality of obsolescence - including the lag time between when

data was acquired and when the database is used.

References :

"Database Marketing, Part 2: Preparing for the Next Generation." Gartner Group ResearchReport, August 1996.

."Database Marketing, Part 4: Evaluating Database Marketing Solution Providers." GartnerGroup Research Report, August 1996.

Poulos, Nick. "Laying the Foundation; Exploring Database Marketing Pitfalls."DirectMarketing Aug. 1997.

Purple, B. Robert. "Delivering relevance: The keyto database marketing."BankManagement, May/June 1995.

Nixon, Brian. "Exploring database marketing." Savings & Community Banker, Oct. 1993: 53

Passavant, Pierre. "The Strategic DatabaseDirect MarketingMay 1990: 40

Pearson, David "Marketing for Survival", CIOApril 15, 1998:12 (13) pp. 44

Deighton, John, and Don Peppers, and Martha Rogers. "ConsumerTransaction Databases:Present Status and Prospects."

The Marketing Information Revolution.Ed.Robert C. Blattberg,Rashi Glazer and John D. Little. Boston: Harvard Business School Press 1994: 58

Delk, Mary and Timothy Keane. "Customer Knowledge,The Key to Sustainable RevenueGrowth." National Center for Database Marketing Conference Proceedings July 1998.

DeTienne, Kristen, and Jeffery A. Thompson. "Database Marketing and organizational learningtheory: toward a research agenda." Journalof Consumer Marketing13 (1996): 12

Direct Marketing Association. "Managing Database Marketing Technology for Success." NewYork: Direct Marketing Association, 1992. Direct Marketing Association. "Profitable Retailing Using Relationship and DatabaseMarketing." New York: Direct Marketing Association, 1994.