Customer Databases and Direct Marketing

More marketers are harnessing information technology to build sophisticated customer databases and shift from mass marketing to highly targeted, one-to-one marketing (see Table 6.4).4 As discussed in Chapter 4, a customer database is an organized collection of comprehensive data about individual customers or prospects that is current, accessible, and actionable for such marketing purposes as lead generation, lead qualification, sale of a product or service, or maintenance of customer relationships. Database marketing is the process of building, maintaining, and using customer databases and other databases (products, suppliers, resellers) for the purpose of contacting and transacting.

Database marketing is mostly frequently used by business marketers and service retailers, although Nabisco and other consumer packaged-goods companies have been experimenting with it. Armed with the information in its database, a company can achieve more target market precision than it can with mass marketing, segment marketing, or niche marketing. Companies use their databases in four ways:

Table 6.4 Mass Marketing versus One-to-One Marketing

Mass Marketing

One-to-One Marketing

Average customer Customer anonymity

Individual customer Customer profile Customized market offering Customized production Individualized distribution Individualized message Individualized incentives Two-way messages Economies of scope Share of customer Profitable customers Customer retention

Standard product Mass production Mass distribution Mass advertising Mass promotion One-way message

Economies of scale

Share of market All customers

Customer attraction

Source: Adapted from Don Peppers and Martha Rogers, The One-to-One Future (New York: Doubleday/Currency, 1993). See their Web site: www.ltol.com/articles/subscribe.html.

1. To identify prospects: Many companies generate sales leads by advertising their product or offer and building a database from the responses that come in. The firm can sort through this database to identify the best prospects and then contact them by mail, phone, e-mail, or personal sales call in an attempt to convert them into customers.

2. To decide which customers should receive a particular offer: Companies set up criteria describing the ideal target customer for an offer, then search their customer databases for those most closely resembling the ideal type. Companies such as The Limited and U S West are also comparing the marketing and servicing costs that go into retaining each customer versus the revenues he or she represents. Twice a year, for example, U S West sifts through its database looking for customers with more profit potential. By looking at demographic profiles, the mix of local versus longdistance calls, and the mix of services used, U S West can estimate potential spending. Next, the company determines how much of the customer's likely telecom budget is already coming its way. Armed with that knowledge, U S West sets a cutoff point for marketing spending on this customer.5

3. To deepen customer loyalty: Companies can build interest and enthusiasm by remembering customer preferences and by sending gifts, coupons, and special information. Consider Mars, a market leader not only in candy but also in pet food. In Germany, Mars has compiled the names of virtually every cat-owning German family by contacting veterinarians and by advertising a free cat-care booklet to consumers who fill out a questionnaire. As a result, Mars knows the cat's name, age, and birthday. Mars now sends a birthday card to each cat in Germany each year, along with a new-cat-food sample or money-saving coupons for Mars brands.

4. To reactivate customer purchases: Companies can use automatic mailing programs to send customers birthday or anniversary cards, holiday shopping reminders, off-season promotions, or other timely offers. For example, Streamline is a Boston-based on-line delivery service (www.streamline.com) that contracts with local groceries, video stores, and dry cleaners to fill and deliver orders when customers send in their shop ping lists. Streamline also keeps a database on what customers buy and when. Based on each customer's past behavior, the firm's software creates a profile and automatically sends e-mail reorder reminders when a customer is probably low on certain items. The result: Streamline's customers, who spend an average $6,000 a year, come back for more 90 percent of the time.6

Continue reading here: Public and Ethical Issues in Direct Marketing

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