Database Marketing

Database marketing is an approach to communicating with customers and prospective customers that relies on the use of sophisticated customer databases. A customer database is a comprehensive collection of information about customers and prospective customers that includes geographic, demographic, and behavioral information. A customer database is much more than a mailing list, which normally contains only contact information. A true customer database is an interactive tool that is constantly updated with new information about individual customer purchase behaviors, inquiries, or other contacts with the company. Thus it allows a company to engage in dialog with customers, rather than simply to carry on one-way conversations.

Customer databases are used both in business-to-business (B2B) and in business-to-consumer (B2C) situations. An example of a B2B customer database might be one maintained by a supplier of disposable hospital supplies. A typical customer entry in this database would include products the hospital has bought previously, the timing of those purchases, key contacts, information about what competitors are providing to the hospital, any current or pending contracts between the hospital and the supplier, and customer service information including “complaint and resolution” history. This database would be particularly useful for sales representatives from the disposable hospital supply company, who would access this information to develop strategic sales plans, and who would constantly update this database to keep it current. An effective salesperson would access this database both before a call on the customer, to keep abreast of any recent purchase information or customer service issues, and after the call, to update the database with new competitor intelligence or changing [Page 127]customer needs. With current information such as this, market analysts can examine buying patterns at different types of hospitals, as well as positions of strength and weakness of key competitors. Such information is also crucial to help this company forecast future sales, which is critical to effective supply chain management.

An example of effective B2C database marketing would be a physician who maintains a comprehensive database of patients and who can use that database to proactively communicate with those patients. Something as simple as a phone call to a patient reminding him or her that it's time to schedule an annual physical exam is an example of B2C database marketing at work. Such a database would also allow physicians to identify all patients who have been prescribed a particular medication and, should a superior medication become available, to inform those patients of the change.

Companies can use database marketing in a number of ways to build customer loyalty and to enhance sales. A very popular use of customer databases is to “profile” customers based on previous purchases and to decide which customers should receive particular offers. A well-known example of a company that uses this approach very effectively is http://Amazon.com. Amazon uses sophisticated statistical techniques to “cluster” customers into different categories based on previous purchases. Then, when a new product becomes available that would potentially appeal to this cluster of customers, an email message is sent out, informing those customers of the new product. Such database marketing can significantly enhance a company's ability to build loyalty in its customer base. A database can also help companies identify customers who may need upgrades or replacements for previously purchased products. For example, General Electric (GE) Medical Imaging Systems maintains a comprehensive customer database that includes the installation date of each of its imaging systems. This allows GE to identify customers who may need replacements or upgrades to their current equipment and to proactively propose such new solutions.

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