Database Marketing

What is Database Marketing?

Database marketing is a form of direct marketing using databases of customers or potential customers to generate personalized communications in order to promote a product or service for marketing purposes. The method of communication can be any addressable medium, as in direct marketing.

History & Concept of Database Marketing

The data base marketing emerged in the 1980s as a new, improved form of direct marketing. During the period traditional “list broking” was under pressure to modernize, because it was offline and tape-based, and because lists tended to hold limited data.

Robert D. “Bob” and Kate Kestnbaum were trailblazing pioneers of the new direct marketing, who were credited with developing new metrics including customer lifetime value, and applying financial modelling and econometrics to marketing strategies.

Shaw incorporated new features into the Kestnbaum approach, including telephone and field sales channel automation, contact strategy optimization, campaign management and coordination, marketing resource management, marketing accountability and marketing analytics. The designs of these systems have been widely copied subsequently and incorporated into CRM and MRM packages in the 1990s and later.

The earliest recorded definition of Database Marketing was in 1988 in the book of the same name (Shaw and Stone 1988 Database Marketing):

“Database Marketing is an interactive approach to marketing, which uses the individually addressable marketing media and channels (such as mail, telephone and the sales force):

• to extend help to a company’s target audience;
• to stimulate their demand; and
• to stay close to them by recording and keeping an electronic database memory of the customer, prospect and all commercial contacts,
• to help improve all future contacts and
• to ensure more realistic of all marketing.”

Growth and Evolution 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 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.
     
     
2. Changing cost structures
   • The decline in electronic processing costs.
   • The increase in marketing costs.
     
     
3. Changing technology
   • The advent of new methods of shopping and paying.
   • The development of economical methods for differentiating customer communication.
     
     
4. Changing market conditions
   • The desire to measure the impact of marketing efforts.
   • The fragmentation of consumer and business markets.

Shaw and Stone (1988) noted that companies go through evolutionary phases in the developing their database marketing systems. They identify the four phases of database development as:

1. Mystery lists;
2. Buyer databases;
3. Coordinated customer communication; and
4. Integrated marketing.