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Database Marketing
Database marketing is now an essential part of marketing in many industries. The main principle of database marketing is that at least part of the communication organizations have with their consumers is direct. From this simple principle has grown a whole new discipline. However, it has not grown that quickly. The seeds of database marketing as we use it today were sown in the 19th century by the US mail order industry, which served so well the needs of remote farmers, ranchers, settlers and new townships.

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Database marketing has three further important characteristics:

It is based on direct responses. Database marketing communications invite consumers to respond - by mail, telephone, Internet, redeemable retail vouchers and so on. The response may range from enquiry and giving information to ordering. This opportunity for monitoring feedback is critical to database marketing.

Database marketing is measurable. In any database marketing campaign, responses are measured, evaluated and analyzed. Responses can be through any medium - telephone, mail, Internet hits or whatever. Measuring responses leads to accountability. All costs can be related to response. Return on investment can be calculated. Traditional advertising relies mainly on market research techniques based on samples to measure effectiveness, although for some campaigns sales results can be accurately measured (for example, if the campaign is run in test areas only). Database marketers use transaction data to measure. This is one reason database marketing has been called scientific advertising. Database marketers conduct their tests in controlled environments. While environments do change, database marketing is as near to a science as marketing achieves.

Database marketing usually requires the organization to build and maintain a database of consumers and prospects. This gives it better understanding of the market and can give it competitive advantage.

Technical Definition
Database marketing is the planned implementation, recording, analysis and tracking of consumers' direct response behavior over time to derive future marketing strategies, for developing long-term consumer loyalty and ensuring continued business growth. Let's consider this definition in more detail:

1. Planning marketing activity. All database marketing should form part of a controlled marketing strategy, which has been produced as a result of market and competitor analysis and in relation to achievable objectives.

2. Targeting consumers. Consumer information should be stored and capable of manipulation and retrieval from the consumer database, to contact existing consumers. Analysis of this also helps the organization to identify characteristics of future consumers.

3. Measuring your marketing activity. The results of database marketing should be measured, to tell you what works and what does not.

4. Tracking. This involves monitoring consumers' responses over time, for as long as the relationship with them lasts. This allows the organization to measure their value, and understand how much of it results from how it marketed to them.

5. Consumer behavior. Tracking the spending patterns and general behavior of consumers can help the organization establish which products are popular and which are not. This can help it determine future products and strategy.

6. Future strategies. One aim of marketing is to maximize the value of the organization's consumers to it. The previous steps will ensure it has the information to plan effective and efficient marketing to achieve this aim.

7. Developing long-term loyalty. By targeting the right consumers, offering them what they want, and encouraging them to take more of your products, an organization can protect its consumer base. Its consumers will be more likely to stay with it for longer.

8. Encouraging profitable growth. This is achieved by increasing the number of loyal and valuable consumers the organization has, and limiting the number of consumers with low value and/or high risk. This increases turnover and profit, which can be re-invested to ensure service and product standards are maintained and that consumers stay happy.

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Planning Database Marketing Activity
There are three key areas to consider in planning what campaigns to run with your consumers:

acquisition - recruiting new consumers;
database management - storing and manipulating consumer information;
retention and development - consumer care/loyalty and other programs to keep and develop existing consumers.

Acquisition Marketing
This involves:
Deciding what kinds of consumers you want - your target market.
Finding out who they are, how many of them are there and where they are - this is assessing the market opportunity.
Understanding what motivates them - using market research and feedback to identify your key selling points and USP if you have one.
Determining which media to use to talk to them. What media do they consume? What papers do they buy, when do they have time to think about your proposition?
Developing communication and executing campaigns - what tone of voice to use, which paper and formats are cost-effective and appropriate, when is the best time to communicate with them, when do sales have to come in by.
Converting prospects to consumers - the sale. What information supports this conversion, whether it takes place remotely, by letter or through a contact centre? How should sales staff be trained to do this? What material should be sent to the consumer to achieve and confirm the sale?

Database management
This involves:
Obtaining relevant consumer information - who are the best consumers, what attributes do they have, how many prospects are available like them?
Storing the information in a usable, retrievable and secure format.
Enhancing this information over time - making sure systems feed into the database so it is kept up to date.
Analysis of the information to identify consumers - when and what they last bought, their value, the segment they belong to, products held.
Selection of target segments of consumers for campaigns - certain segments may warrant different actions for different reasons.
Recording sales and response - it is important to know what works and what does not.
Evaluating, measurement and future business planning - for strategies to maximize the value of the database.

Retention and Development
This involves:
Giving consumers service and product quality that meets their needs.
Building loyalty over time.
Maximizing the length and value of the relationship with consumers.
Communicating to them regularly at the right time (that is right for them!).
Deepening the relationship with consumers by encouraging them to buy different types of product, to upgrade and renew.
Monitoring profitability.

Source of Reference:
Merlin Stone and Alison Bond, Consumer Insight: How to Use Data and Market Research to Get Closer to Your Customer, Kogan Page. You can obtain this excellent book here

You can download powerpoint slide on marketing management and strategy here.