Customer Databases arid Direct Marketing

Table 22.1 lists the main differences between mass marketing and so-called one-to-one 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.

customer database An organised collection ofcoffipreftensfcue data about individual customers or prospects, including guog raphic, demographic, psychogruphic and buying behaviour data.

Successful direct marketing begins with a good eustomer database. The customer database is an organized collection of comprehensive data about individual customers or prospects, including geographic, demogiaphic, psycho-graphic and buying behaviour data. The database can be used to locate good potential customers, tailor products and services to the special needs of targeted consumers, and maintain long-term 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 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 database 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 business-to-business 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, birthdays), psychographics (activities, interests and opinions), buying behaviour (past purchases, buying preferences) and other relevant information. Companies must distinguish between transaction-based and custom-built 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, custom-built databases 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 cost-effective 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,

Rusiness-to-business marketers and service retailers (e.g. hotels, banks and airlines) are among the most frequent users of database marketing. Increasingly, however, consumer packaged-goods 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 fine-tuned 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 non-retail shopping. More consumers will use electronic shopping to search for the information and products 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

The major forms of direct marketing include face-to-face selling, direct mail marketing, catalogue marketing, telemarketing, direct-response 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 nonstore retail channels - to elicit sales. Many of these techniques were first developed 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 countries 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 pan-European 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 Ell-wide 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 American-style direct-mail 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.

Face-to-Face Selling

The original and oldest form of direct marketing is the sales call, which we examined in Chapter 20. Most bnsiness-to-busmess marketers rely heavily on a professional sales force to locate prospects, develop them into customers, build lasting relationships and grow the business. Or they hire manufacturers' representatives and agents to carry out the direct selling task. Many consumer companies also use a direct selling force to reach final consumers. Door-Co-door selling, which started centuries ago with roving pedlars, has grown into a huge industry today. The image of door-to-door selling improved greatly when Avon Cosmetics entered the industry witb its Avon representative - the homemaker's friend and beauty consultant. In the UK, Avon leads in the face-to-face selling and direct-to-door distribution of cosmetics and personal care products. Vacuum cleaners manu-acturer Elcctrolux has a direct sales business in Europe. Betterware, a British direct-sell ing household products company, has seen strong sales growth in recent years and has expanded its operations into continental European countries, such as France. Others, notably Tuppcrware, Ladybird Books and Oriflame Cosmetics, have also helped to popularize home selling, through home-sales parties or party plans, in which several friends and neighbours attend a party at a private home where products are demonstrated and sold directly to a group of people. Tnppenvare has been particularly successful in a number of countries across Europe and in Asian markets, notably Japan, Indeed, Japan represents the world's largest direct sales market with sales estimated at over S20 billion a year.10

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Readers' Questions

  • Leonie
    What is a customer database?
    1 year ago
  • A customer database is a structured collection of customer records containing data such as contact information, purchase records, and other details about customers. Customer databases are used to store, organize and manage customer data, allowing businesses to analyze customer behavior and identify trends in order to better serve their customers and grow their business.