The Dictionary in the American Marketing Association website defines Database Marketing as, “An approach by which computer database technologies are harnessed to design, create, and manage customer data lists containing information about each customer's characteristics and history of interactions with the company.” It goes on to say, “The lists are used as needed for locating, selecting, targeting, servicing, and establishing relationships with customers in order to enhance the long-term value of these customers to the company.
The techniques used for managing lists include:
- Database manipulation methods such as select and join,
- Statistical methods for predicting each customer's likelihood of future purchases of specific items based on his/her history of past purchases, and
- Measures for computing the life-time value of a customer on an ongoing basis."
Whew! Sound complicated? Well, the basic concept is actually pretty simple. It’s the execution of that concept that gets complicated. The basic idea is that your marketing is bound to be more successful if you send personal offers to people that are based on information you know about them … versus sending mass marketing offers that speak to everyone as if they are the same. We know people are different – demographically, geographically, psychographically, and economically – and data in each of these areas can be extremely powerful when used to target the right message, to the right prospective buyer.
Database marketing can be as simple as remembering to suppress current customers from a direct mail solicitation designed to acquire new customers. It’s not cost-effective to waste marketing dollars on selling your products to those who have already bought … and it can do damage to your customer relationships when customers don’t think you know they are a customer. At the very least, you might generate unwanted customer phone calls from customers who are afraid they aren’t listed correctly as a customer – instead of generating leads for new customer acquisitions, you end up using all your precious resources to conserve your existing customer base. Simply suppressing existing customers is a basic principle of direct marketing that can save lots of headaches.
More complex uses of database marketing build predictive response models that score a number of factors, including demographic, behavioral, psychographic, economic, and geographical things like age, zip code, household wealth indicators to identify prospects who most closely share statistically significant characteristics with current customers. This kind of database marketing is extremely sophisticated and often uses Ph.D. level statistical analysis to determine which characteristics are predictive and to validate that prediction.
Database marketing is also known as smart marketing. As in the simple provided in the first section – simply eliminating your current customers can save you money and headaches. Other things like targeting only the ages who are most likely to purchase your products (versus those too young or too old) can create efficiencies. The reality is, if you’re using direct mail in your marketing activities, you should be capturing as much data as you possibly can about your responders … and use that data to help you better target your prospect files. It’s just a waste of time and money to mail people who aren’t very likely to purchase your products … and you absolutely want to eliminate everyone from the mailing who isn’t eligible for your product. Whether it’s because they’re already a customer, they don’t have the disposable income, aren’t the required ages, or don’t live in areas where you provide services … excluding people based on these types of characteristics makes sense. Even if you’re not sophisticated enough to target who you want to mail using database marketing techniques … you should have the ability to exclude people from your mailing who you shouldn’t be targeting.
The bottom line is this – paper costs continue to rise, as does postage – so if you’re spending money to send a mailing to someone, you should take the time to make sure that you have a good name and address file, and that you apply some basic direct marketing techniques to tilt the scale in your favor. That’s just smart marketing.
If you’re wanting to leverage some of the more sophisticated database marketing techniques for use in targeting the right prospects – and using the data you capture to personalize messages in your mailings – you should get some professional help. This is an area where the experts are highly specialized, and the savings you justify by generating higher response rates and sales for every mailing you send will justify hiring professionals to help you.
That being said, if you’re just doing a small amount of direct mail, you can handle some of the basic suppression steps manually. There are companies that will provide list cleansing via the Internet – and these companies will typically also offer the ability to pre-sort your mailing and bump it against the National Change of Address (NCOA) database to get the most recent address for your prospects. These services help you qualify for the highest postage discounts – and ensure that your list contains valid names and addresses. A site that provide this type of service is: http://www.satorisoftware.com/US/MailRoomToolKit/index.asp. Also, the major data companies and list brokers like Experien, FirstUnion, Equifax, and others also offer data cleansing services.
Tips for Do-It-Yourself Database Marketing:
- CLEAN. Apply basic list cleansing or data hygiene processes to remove duplicate names and ensure that you have the most recent address for your target prospects. This includes cleaning and updating names, addresses and telephone numbers to ensure that your communications are personalized, accurate and deliverable:
- Address Validation - Validate, correct and update address information using reference files.
- Movers - Provide new, up-to-date contact names and/or addresses for consumers or businesses that have moved.
- Age Information - Provide actual date of birth and modeled age information for consumers.
- VALIDATE. Validate individual and business contact information to ensure that direct mail is deliverable and will reach the intended recipient:
- Individual Residency or Business Validation - Verify that an individual/business is present at an address.
- Telephone Number Validation – Validate that a telephone number for an individual or business is complete and up-to-date.
- SUPPRESS. Identify individuals that are not eligible for your products – who you should exclude from your mailing. These may include:
- Current Customers (if they cannot take advantage of the offer or would be offended)
- Those who are too old or too young
- Those who live outside your geographical area of operation or who are not eligible because of where they live.
There are two different types of resources you should seek, depending on your objective:
- If you are primarily wanting to use only the basic database marketing tools and not wanting to do sophisticated targeting, then you should seek out list cleansing and data validation companies. These services can be relatively inexpensive, and can often be found via the Internet.
- Try using the post office’s site. The US postal service offers a great deal of list cleansing functionality via their website, and for very little cost Depending on your level of sophistication, they may have everything you need. Visit http://www.usps.com/business/addressverification/welcome.htm. In addition to services available through the post office, you’ll also find links to providers who are licensed and certified through the USPS.
- IMS, a subsidiary of the Direct Marketing Association, can be found at: http://preference.the-dma.org/. IMS manages for the DMA, the world’s largest consumer preference database of nearly 15,000,000 consumers. Additionally, as the processing arm of the DMA, IMS manages the “do not call” list for the states of Pennsylvania, Maine and Wyoming. They provide innovative list and database management software and services designed to help businesses succeed in their marketing efforts by mitigating the challenges imposed by privacy and consumer opt-out legislation. As part of their offering, they can perform web-based file cleaning and database services.
- If you are looking for help in targeting prospects, building models, and leveraging sophisticated database marketing tools, then you should seek a full-service analytics or database marketing agency. The American Marketing Association publishes an annual directory of direct marketing services. The link below will take you to a page on their website where the annual directory can be viewed and downloaded: http://www.marketingpower.com/ResourceLibrary. This directory is a comprehensive guide to US companies providing direct marketing and database marketing services.