Strategic Database Marketing 4e: The Masterplan for Starting and Managing a Profitable, Customer-Based Marketing Program [NOOK Book]

Strategic Database Marketing

The McGraw-Hill Companies, Inc.

Excerpt

How Database Marketing Has Changed

But it's not just the stores. It's the social life. The Internet lets us sort ourselves into interest groups and communities that have no relation to geography.

I know dozens of married couples that met through online villages of one sort or another. Only a few of them met through dating or matchmaking services. Most of them were posting on forums. It was as if they had all been invited to an online party, and, liking each other's public conversation, they went off into a corner and had a long, private chat.

—Orson Scott Card

The purpose of database marketing is the same today as it has always been: to create and maintain a bond of loyalty between you and your customers that will last a lifetime. The goal has not changed, but the methods have. We still maintain information about our customers in a database and use it as a basis for our communications with them. In the past we used direct mail, catalogs, and phone calls to communicate. Today we use these plus e-mails, Web sites, cell phone text, voice messages, and social media. These new developments make communications much less expensive and more frequent, but they are also much more complex. Most companies have found it useful to hire a service bureau to maintain their database, and an e-mail service provider (ESP) to send their e- mails and cell phone messages.

The process begins with a marketing database that keeps all sorts of information about customers: not only what they buy, but their demographics, families, responses, and preferences. Information storage has become much more sophisticated—using relational databases—and much less expensive. Moore's law describes a long-term trend in the history of computing hardware. The number of transistors that can be placed inexpensively on an integrated circuit doubles approximately every two years. The trend has continued for more than half a century and is not expected to stop until 2020 or later. This same trend has affected disk storage and transmission speed and capacity. The result is that you can afford to retain and use all the information you can collect about a customer in your marketing programs. The only limitation is human creative ability and the willingness to devise methods for using the data. This is the problem that we address in this book.

The biggest change in database marketing in the last decade has been the arrival of Web sites, e-mail, and mobile marketing. At first these seemed like a godsend. The main problem with database marketing was the high cost of communications with customers—$600 per thousand messages. You had all this wonderful information in your database that you could use to build relationships, but you were limited, in most cases, to about one letter a month because of the cost. In the last 10 years, with Web sites including social media, e-mail, and the iPhone, you can send messages to your subscribers and customers for less than $6.00 per thousand—a cost so low that the delivery cost is inconsequential.

E-mail has become the primary way for companies to communicate with their customers. Direct mail is still alive and well, but e-mail is gaining on it. But there is a third communication method that is also growing: one-third of consumers in both the United States and the United Kingdom are viewing their e- mails on their iPhone or similar mobile devices. The use of mobile e-mail is most prevalent among younger consumers, with over half of them spending a significant part of every day glued to their phones. Mobile use is exploding in all directions. All these new communications methods can make use of the information in a customer marketing database. Here, at last, is a way to use your database to build really close relationships with each customer using the data you have collected. What we had not figured on was that the low cost of e- mail and mobile messages has become a curse because marketers have discovered that e-mails are so inexpensive that you can afford to send messages to your customers every week or even every day. The more you send, the more revenue you gain. More and more major corporations in the United States and elsewhere have been sending e-mails, and sometimes mobile messages, to all their subscribers all the time.

Subscriber inboxes are overflowing. The big problem is that the messages, while they can be and sometimes are personalized, are seldom filled with dynamic content based on what we know about each customer. We have these rich databases, but we do not use the rich data that they hold. To use it requires many creative staff members who dream up the dynamic content. The thought is, "Subscribers who are over 65 have certain interests, while other subscribers are college students who have different interests. We will vary our messages based on this knowledge, and also do that for about a half-dozen other subscriber segments to make our relationships richer for them and more profitable for us." This makes a lot of sense, but few marketers today are doing anything like that. They are blasting identical content to every subscriber or customer whose e-mail or address they can get their hands on.

Using the data to target specific customer groups sounds great, doesn't it? That has always been the promise of database marketing. We could send dynamic content when we were sending one message a month. We cannot afford to do this today if we are sending one message to each person every day. The problem boils down to one simple fact: The lift we get from dynamic content does not seem to be as great as the lift we get from frequent communications. You can't afford to do both, so you go with the most profitable.

In the pages of this book, we deal with the ramifications of this tradeoff between frequency and dynamic content. There are many solutions, and we point them out. To help you understand what is going on today, we present the actual results of 80 large marketers who together send more than 1.2 billion e-mail and mobile messages to their 174 million subscribers every month. There are graphs that show how these 80 companies are generating more than $5.4 billion in annual sales resulting from these electronic messages. This $5.4 billion probably represents about only 5 to 7 percent of their total annual sales in all channels. The companies in these charts include major airlines, car rental companies, sports associations, and scores of major familiar retailers. You will learn what is going on in the real electronic marketing world in a way that is available nowhere else. You will learn how your company can use similar methods to yield comparable results.

Take a good look at Figure 1.1. It tells a story that is spelled out in detail in this book. It explains a lot about what has happened to strategic database marketing.

The Old Corner Grocer

In my seven previous books on database marketing, I described the customer relationships of the Old Corner Grocer and how his loyalty-building methods are carried out today by modern database marketing. The analogy is still true.

Back in the days before there were supermarkets, all the groceries in the United States were sold in small corner grocery stores. In many cases, the proprietor could be seen at the entrance to his store, greeting the customers by name. "Hello Mrs. Hughes. Are your son and his family coming for Thanksgiving again this year?"

These guys built the loyalty of their customers by recognizing them by name, by greeting them, by knowing them, by doing favors for them. They helped by carrying heavy packages out to customers' cars (there were no shopping carts in those days). These veterans no longer exist.

---

Excerpted from Strategic Database Marketing by ARTHUR M. HUGHES. Copyright © 2012 by Arthur Middleton Hughes. Excerpted by permission of The McGraw-Hill Companies, Inc..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

---