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You go to a cyber cafe to check your mail and log on to the reedier site. As soon as the home page of the website appears on your screen, there’s a set of attractive offers vying for your attention – a VS. player for RSI 1999, a set of three shirts just for RSI 400, a Walkway for RSI 550, a set of 10 audio CDC for RSI 300. Why are these offers coming your way? When you reach home and open your letterbox, you find a colorful catalog addressed to you from Big Bazaar, displaying the pictures and prices of hundreds of products at very attractive prices.
As you walk into the house, casually turning the pages of the catalog, the phone rings and a female voice at the other end introduces herself as a marketing executive of HEAD Bank. She coaxes you to spare a few minutes to which you reluctantly agree. Almost against your wish, you find yourself listening as she speaks to you Of all the benefits you would receive if you open an account in HEAD Bank and asks whether you would be interested in opening an account with the bank. What are these various companies, reedier, Big Bazaar, HEAD Bank, doing?
They are marketing their goods and services available directly to customers. This approach in marketing is termed as direct marketing. Companies traditionally relied on advertisements, sales promotion, personal selling, etc. To reach customers. However, because of competitive pressures, companies began to realize the need to compress or eliminate the intermediary channels, reduce the costs in reaching customers, pass on the savings or benefits to their customers, and maximize their reach.
At the same time, they advertisements, sales promotion, personal selling, etc. To reach customers. However, because of competitive pressures, companies began to realize the need to compress r eliminate the intermediary channels, reduce the costs in reaching customers, pass on the savings or benefits to their customers, and maximize their reach. At the same time, they can also learn more about their customers and their needs and wants. Therefore, more and more companies are now adopting direct marketing to provide their product and services directly to customers .
Direct marketing is similar to traditional marketing activities except that it has following three additional features:(How Direct Marketing differs from Traditional Marketing): 1. In direct marketing, marketers invite customers to respond to their marketing efforts through the telephone, email, etc. 2. The effectiveness of direct marketing can be measured easily because direct feedback is available to marketers from customers. 3. An direct marketing, generally, a database Of customers is maintained. This helps marketers understand customers and serve them better, and eventually gives the marketer a competitive advantage.
Direct marketing evaluates the direct response patterns of customers, enables company to formulate future marketing strategies for building customer loyalty and for profitable business growth. Committee of Direct Marketing Association(DAM), a trade association developed the most widely accepted definition of direct marketing: “Direct Marketing is an interactive system of marketing which uses one or more advertising media to effect a measurable response and/or transaction at any location. There are three key elements of this definition: First, direct marketing is interactive in that marketer and prospective customer engage in two-way communication. In other types of marketing, a “general marketer” provides the target audience with a one-way communication of information (or an emotional theme); but the audience is to encouraged to respond via a telephone call or by returning a coupon. In contrast, direct marketing activities give the target market of the, communication an opportunity to respond. That response. R non response- related information, can then be used in planning the next direct marketing program. Second, all direct marketing activities are significantly more measurable than traditional general advertising and sales promotion. A response, or lack thereof; can be associated with each catalog mailing, each direct-response television’ advertisement, or each direct mail piece. Direct marketers use direct marketing . Databases of stored purchase behavior and other information about individuals and households to analyze customer characteristics and plan new campaigns.
These databases are the foundation Of effective direct marketing. They allow the direct, marketer to identify the specific communication that prompted a response, which provides an opportunity to know exactly which communication the customer: responded to and the nature of that response, including whether it was a sale or a request for more information. Third, activities connected with direct marketing communications can take place at any location. It is not necessary for prospects to come into a retail store or; to be visited by a salesperson.
The contact can be made by mail, over the phone; by fax, or online via a PC. From a company perspective, direct marketing is an efficient way to promote and Sell products and services because it has a record of proven profitability, { addresses the growing concern over accountability in how marketing dollars are spent, it allows careful use of a firm’s resources in an age of downsized firms, and it is particularly good at reaching fragmented markets with special needs.
While there IS no consensus about the definition of database marketing, it IS widely acknowledged that computerized databases are fundamental to success in direct marketing today. As the costs associated with such databases have dropped, firms of all sizes have created customer records that include purchase and other information. They have also developed databases of uncustomary who represent prospects at whom to target direct marketing efforts. The result is a revolutionary way of doing business that includes new definition of the 2 relationship between a company and its customers.
Definition of Database: Database is the sum total of all information that an organization keeps. Marketing Database: an organized collection of comprehensive data about individual customers, prospects, that is current, accessible & actionable for such marketing purpose. According to Shaw and Stone, database marketing is an interactive approach to marketing that uses individually addressable marketing media and channels such as mad, telephone, and the sales force: C]To extend help to a firm’s target audience members.
TOT stimulate target audience demand . C] To stay close to a firm’s target audience through database records of customers, prospects, and all communication and commercial contacts, to help improve future contacts and ensure better marketing planning. Database marketing works by creating information records about’ individual customers’ orders and inquiries, which are used to analyze patterns for more effective targeting of product or service offerings.
Beyond identifying existing and prospective customers, the direct marketer can further subdivide the database in, specialized segments such as recent customers, customers who have not made purchase in the last year or two and customers who have pent a lot of money with the firm over a certain period of time. When a firm’s database includes enough information about individual customers to determine why they are customers, the firm can tailor direct marketing appeals to individuals or businesses. Ideally, firms gather enough demographic cryptographic or other information about known customers to be able to compare them with non customers.
Creating a profile of typical current customers helps firm identify the prospects most likely to become customers. This becomes the basis for a search among the prospects for hose who match that profile, In this way, customers may be “cloned. ” The firm’s subsequent marketing efforts are targeted directly at those prospects with the highest probability of responding to . 1 offer by placing an order. The Strengths of Database Marketing Database marketing provides benefits over other forms of marketing that make it the preferred way of doing business for a growing number of Finns.
According to Shaw and Stone, database marketing has the following special strengths It is measurable. Responses to campaigns are measured, enabling firms to identify the effectiveness o(different approaches . It is testable. Firms can test the effectiveness of different elements of their approach the product, the communications medium, the offer (how the product is packaged to appeal to the customer), the target market, and so on. Tests can be carried out quickly, so firms can take quick action on the results. Firms can use test campaign results to forecast sales more precisely, helping them to manage inventory more effectively 3.
It is selective. Firms can focus campaigns accurately, because they communicate with specific customers 4. Firms can personalize communication to each customer, by including details elevate to them and 3 not to others. This usually raises the response rate. 5. It is flexible Firms can time their, campaign to have their effect exactly when they want The Weaknesses of Database Marketing While database marketing provides benefits over other forms of marketing. It also has some weaknesses, in particular, the expenses associated with creating and managing the database.
Firms frequently need to purchase large amounts of Computer equipment and hire highly trained (and expensive) new staff members. It is also difficult and time’: consuming to keep the customer ND prospect records up-to-date. However, on balance, the benefits far outweigh the expenses and problems associated with making direct marketing databases a fundamental part of a firm’s ongoing business operations. Uses of Databases A database facilitates such direct marketing tasks as selecting market segments, increasing repeat purchases by building customer relationships, enhancing cross-selling, and gaining competitive superiority 1 .
Selection of Market Segments Databases make possible the implementation of sophisticated market segmentations based on such characteristics as demographics, geographic action, previous purchase behavior, and likelihood of placing an order. Because members of targeted segments are more responsive to a firm’s direct marketing efforts than consumers or businesses that are not members, the results of database marketing include increased productivity and lower costs. 2.
Repeat Purchases Repeat purchases are facilitated when databases help build ongoing relationships between a firm and its customers. Sometimes repeat purchases are generated through frequent communications between the two parties, with or without a selling purpose. For example, firms selling book club memberships or magazines use continuity offers that include some form of ongoing agreement from the customer to continue receiving shipments 3. Cross-selling When a direct marketing firm owns several businesses that share a common database, it can use that database to engage in cross-selling.
For example, Time Warner owns several book and magazine businesses. As a result, it has millions of names to which it can market various magazines, books, and videotapes. This synergy benefits all of the firm’s businesses each can enjoy greater sales and lower operating costs as a result of sharing information and there resources 4. Competitive Superiority A business can establish a position of competitive superiority by building and exploiting a database containing information about its existing and potential customers.
Databases can even become a competitive weapon when they are used in marketing efforts directed at owners of a particular competitor’s product. 4 Categories of database There are many different ways in which we can classify a database, the three most common being 1 . The platform on which they are designed to run 2. The functions they are designed to perform 3. Their underlying architecture. 1. Platform There are several products currently on the market, each designed to run on a different platform.
There are PC-based products such as debase, Access, and Paradox. There are also client server systems such as Oracle and Sybase and minicomputer databases such as 3RD and SQUALL. In the case of organizations requiring a much greater storage capacity there are also mainframe database management systems such as DB and DIMS. 2. Database functions Master customers file – This database stores essential customer information such as the name, address, and purchase history of a given individual or organizations. Operational database – This database is concerned with the management of service transactions containing data such as order, shipping, and accounting records. It is likely to be widely accessed by individuals throughout the firm and is particularly essential to the management of the fulfillment and billing functions, since if often provides real-time information in respect of the state of customer’s order and account. The operational database usually contains details of all the transactions a customer might have with an organization independent of specific product categories.
Customers database – The customer database is often built form the operational database, it contains a detailed profile of each individual customer and the transactions recorded from the operational database are carefully merged and cleaned to ensure a high degree of accuracy. The customer database will also contain data in respect of the policies the organization adopts in dealing with each customers and m the case of a business-dubiousness database, the detail of any relationship that might exist between various company personnel and those working for the customer.
It may also be a. Source of data in respect of customer inventory in those cases where delivery and shipment are programmed to arrive just in time for manufacture. D. Marketing Database – The marketing database will also contain a detailed profile of each customer. In the case of consumer database with other pertinent variables such as stereographic or lifestyle data, It will also contain details of each customer’s response to promotional activity, their lifetime value and indeed any additional data that might be necessary to manage a customer relationship over time. E.
Data warehouse – A data warehouse is an amalgam of those listed above. It is built for the purpose f analysis or as a central resource that other applications might share. It could be a batch warehouse (I. E. Constructed for a specific purpose) or an on- line warehouse designed to provide support for a range of on limitlessness. 5 Data Mining:is an extraction of previously unknown yet comprehensible & actionable information from large repositories of data, used to make crucial business decisions & support their implementation including formulating tactical & strategic marketing initiatives & measuring their success.
Data mining techniques are applied in context of a data warehouse & they incorporate a variety of tactical tools & techniques that provide the answer’s that the marketer is looking out for. 3. Database Architecture The term ‘database architecture’ is simple way of saying, “how the database will be built? ” (a) Sequential files: For customer data to be accessed and reported on it must be stored in very specific format along the lines depicted. Each customer record must be created and data entered according to these particular specifications.
An individual customer in the file, it would seem sensible to search the NAME field for the individual we were interested In. Sequential file databases have the merit of being relatively low cost, particularly in terms of their initial development, and the technology is well proven having been used successfully for a number of years. The biggest problem with sequential file databases, however, is that relationships that are likely to be of interest must be specified in advance. Thus, a gas company would have to decide in advance the fields that will be searchable.
Other problems include the fact that since the outputs from this type of database arc limited, so too are opportunities for integration with other systems (b) Relational database Relational databases first emerged in the early sass and products such as Oracle were welcomed by a direct marketing industry that was hungry for more powerful systems. A relational database should really be regarded as a series of groups of tables, rather than records per SE. Data from these tables can be combined as and when required by the user.
Table joins or relations (hence the term ‘relational’) do not have to be decided when the database is being constructed. Rather, the user employs specialist software to create the relations at later date. For marketers this is a significant development, since hey do not have to specify from the outset, perhaps when they are unfamiliar with the true power of the data, the relation that will be of interest RELATIONSHIP MARKETING As marketing has seen different eras of development, the outlook of companies toward customers has also totally changed in these eras.
In the sales era, companies concentrated only on pushing products to customers and services were virtually nonexistent. Then the marketing era began. Companies started focusing on customer needs and wants. But every player started focusing on them as well. Therefore, companies started wondering 6 “what next? They realized that they needed to focus on the long-term profitability of customers. This is possible only when marketers develop a long-term relationship with the customers.
Relationship marketing refers to understanding and responding to customer needs and preferences to build more meaningful and long-term connections with customers. It involves entering into a relationship with customers, giving them a sense of satisfaction with the purchase decision they have made, letting them know that the firm recognizes and ,values their business, and showing them the firm understands their needs and will respond to their concerns.
The objective is to make them feel special – needed & wanted not just as consumers or prospects but as individuals. Marketers want customers for life. Effective marketers work to build long- term relationship with their customers. The term relationship marketing communicates the idea that a major goal of marketing is to build a longer relationship between the company and the parties who contribute the company’s success Effective managers view making a sale not as an end of a process but as a start of an organization relationship with a customer.
Relationship marketing means the marketing activities aimed at building long ERM relationship with people (especially customers) and organization that contribute to the company’s success. The focus of marketing has shifted from one single transaction to over all buyer-seller relationship – a focus known as relationship marketing. Relationship Marketing is the ongoing process Of identifying and creating new value with individual customers and then sharing the benefits from this over a lifetime of association.
It involves the understanding focusing and management of ongoing collaboration between suppliers and selected customers for mutual value creation and sharing wrought interdependence and organizational alignment. Marketers try to build a long term, a trusting “Win-win” relationship with valued customers, dealers, distributors, and suppliers. Relationship marketing results in strong economic, technical and social ties amongst the parties. The ultimate outcome of relationship marketing is the building up of a unique company asset called “marketing network”.
By establishing strong working relations suppliers and customers can work together to improve distribution process and other joint activity. Many organizations form strategic alliances or informal partnerships with their customers. Characteristics of Relationship Marketing Seeks to create new value for customers and then share the value so created between producer and consumer. Recognizes the key role individual customers have not only as purchasers, but in defining the value they want.
Previously, companies would be expected to identify and provide this value in what the company would consider a “product. ” With Relationship Marketing, the customer helps the company provide the benefit bundle that the customer values. Value is thus created with customers, not for them. 3. Requires that a company, as a consequence of its business strategy and customer focus, design and align its business processes, communications, technology and people in support of the value individual customers want.
Is a continuously cooperative effort between buyer and seller. As such, it operates in real time. Recognizes the value of customers over their purchasing lifetimes, rather than as individual customers or organizations that must he resold on each purchasing occasion. In recognizing lifetime value.