Database marketing is a type of marketing that collects customer data such as names, contact details, purchase history, etc for developing personalized marketing strategies to pull in, engage and convert potential customers.
It is the process of organizing, interpreting, and analyzing new and existing customer data to learn more about them to promote the product or service in a more customized and result-driven manner. It is a form of direct marketing that utilizes databases heavily, plus its emphasis is on the effective use of statistical techniques.
What is Database Marketing?
Definition: Database marketing is defined as a personalized marketing campaign that accomplishes its personalization goals by using databases of existing and potential customers while promoting a product or service.
Customer relationship management or database marketing collects data on your potential clients to develop personalized communication that addresses the customers’ wants or needs. The database contains all types of data like demographic data and even purchase history.
It allows the marketer to learn more about its potential clients. Based on such information, it is easy to develop the best ways to approach diverse customers.
Simply collecting data on a customer is not database marketing. A crucial aspect of database marketing is understanding consumer behavior. Once a marketer understands the behaviors of a consumer, solutions offered are specific to those consumers. Solutions include tutorials, videos, a particular product, or service.
Types of Database Marketing
Database marketing is of two types: consumer database marketing and business database marketing.
1. Customer Database Marketing
This type of marketing caters to B2C marketers. The strategies applied by them to obtain such data are host contests, giveaways, discount codes, etc. Once the database is ready, the marketer can build personalized offers and send them to individual customers via email, social media, etc.
2. Business Database Marketing
Business database marketing caters to the needs of those companies that are in business with other companies. The data collection process involves gathering data from numerous sources like industry reports, event registrations, demos, etc.
Importance of Database Marketing
Nowadays, businesses have the access to a great amount of customer data than ever before and that is why the result-oriented use of those data is very crucial. Database marketing helps in utilizing the sea of data for running more personalized marketing campaigns that resonate with target audiences more effectively and optimize the sales potential.
Some of the common reasons behind the growing importance of database marketing are-
- Optimizes the customer segmentation process by separating existing customers from new leads
- Helps in prioritizing your most valuable accounts and enables you to get the ability to predict customer behavior.
- Assists you in testing new ideas and products for instance Google first rolls out new features to a few specific advertisers before launching them to everyone
- Alleviates the process of gathering feedback and understanding your customers’ needs
- Empowers your brand to be relevant by optimizing engagement, plus also optimizes customer retention by building relationships
- Helps in thought leadership credibility and builds brand affinity, plus it can be used for promotional campaigns of the future
How does Database Marketing Strategy Work?
The first step of database marketing is collecting customer data. There exist various sources to gather data. These include website history, purchase history, campaign response, customer survey, correspondence history, etc.
The numerous sources of data combined make a holistic database. It is essential to keep the database up-to-date as one assumption should always be a constant. Consumer taste and preference evolves.
Different sources of customer data for database marketing are- acquisition data, demographic data, Website/app activity history, Purchase/spend history, Campaign response history, Loyalty program data, Customer surveys and questionnaires, Correspondence history, Location data, Social media activity, Third-party adtech data, etc.
Some of the key steps that you need to follow for building a marketing database are-
How to build a Marketing Database?
1. Create thought leadership articles
You should come up with such articles around industry topics and then use that in the form of content which is a type of content that a reader can access only by sharing contact details.
2. Offer free trials
By offering free trials, businesses can compel their users to share some basic details, then you can run ads to target those users who opted for free trials.
3. Design a free tool
By using this technique, you can build a customer database for marketing, as this way, you will be able to get details of audiences who have an inclination towards your product or service.
4. Collect customer information
For building a marketing database, marketers should incorporate mechanisms to collect customer information at the time of checkout
5. Acquire a business contact database
Businesses might connect with a data provider to get the business contact database of their prospects
6. Collect website visitor data
Marketers can use online cookies for collecting the data of the website visitors
7. Create a Chatbot on your business page
Using a normal chatbot or Facebook chatbot will not only assist you in collecting customer data but also help you grow your subscriber lists
Database Marketing Strategies
Some of the best strategies to optimize the effectiveness of your database marketing campaigns are-
1. Start with identifying your target market
If you want to master segmenting your database, you must first realize who is your target audience. What are the demographics of your fictional ideal buyers? What is their income level? What are they interested in? Create a thorough and detailed profile of this shopper. The various points that you have focused on while building your ideal customer are the only data that is truly relevant for your business. As a result, your focus should then be to collect data for only those features of your potential clientele.
2. Collaborate With Other Departments to Gather and Cross-reference Data
This step is quite crucial as it can save a lot of time even though it may, at first at least, seem time-consuming. By sharing information across departments, your database only gets more prosperous and, hopefully, as accurate as it can be.
3. Finding the Right Home for Your Database
Choosing the wrong software can be detrimental to all the efforts you take henceforth in your journey of database maintenance. It would help if you had comprehensive and reliable database software. It should be customizable and have a strong backup. Frequent glitches are counterproductive to your efforts. Your software should be equipped with all-sufficient tools to make the data collection and maintenance process as smooth as possible.
4. Have the Right Balance of Data
Your data needs to be a mix of acquisition, demographic, technographic, activity, transaction, correspondence, and psychographic data. Such a mixture should ideally be in your mind when you are creating the ideal customer. This mixture can open numerous windows of opportunity for creative thinking in the world of marketing.
5. Respect the Sanctity of a Customer’s Privacy
The whole purpose of maintaining the database in the first place is to augment personalization. However, in the day and age when there exists so much debate over data privacy, how personal is too personal? This is just ONE example of the various issues surrounding customer privacy. Another issue regarding the same could be concerning the safety of your database. These issues must be addressed by the company engaging in this practice. If the consumer does not feel that their data will be safe with your company, they may not choose to divulge true information about themselves. This again leads to inaccurate data, which increases expenses for the company.
Database Marketing Examples
1) Facebook Customer Database
The way Facebook segments its user data is one of the key database marketing examples. For ensuring personalized experiences, Facebook segments user data based upon their location, first name, last name, phone number, email, date of birth, gender, and interests.
This personalized database of Facebook is further quite useful for advertisers and marketers who use Facebook to run ads. As per a rough estimate, Facebook currently incorporates data of more than 2 billion people.
2) LinkedIn Customer Database
The use of database marketing can also be seen in LinkedIn that comprises a customer database of around 660 million business professionals.
LinkedIn utilizes its database with a variety of monetization strategies like LinkedIn Premium, Talent Solutions, Sales Navigator, and LinkedIn Ads that took its database marketing to the next level. Marketers use LinkedIn customer base for running their b2b ads and marketing campaigns.
Challenges of Database Marketing
As compelling as the benefits of database marketing are, many do not know how to exploit its benefits to the fullest. That leads to various challenges such as:
1. The Inevitable Data Degradation
Data degradation, data rot, or simply data decay refers to the loss of data within the database over time. Whenever a customer moves to a new address, changes their email address, gets a promotion, etc., it alters their profile. Data decay can happen even due to mechanical failures.
Data decay would happen almost every day, even if you had nothing to do with it on a mechanical level. You need a rock-solid backup to combat mechanical data decay. Statistics reveal that about a third of your data can become invalid in a year and 2-3% in a month. That translates into a lot of highly unreliable data and a wastage of many chasing solutions based on that data.
Data is time sensitive so having an up-to-date database is not a choice; it is imperative. One way to combat this issue is to focus the campaign on information that is likely to stay the same or predictable. This includes demographic data and contact information over business email ids.
2. Inaccurate Data Collection
It is prudent to keep in mind that customers may not be forthcoming about the data they choose to share with the businesses they engage with. This implies that customers may not provide accurate information about themselves. It does not always have to be intentional. Inaccurate data collection can also arise due to illegible handwriting, typos, incomplete information, etc.
One way to limit such inaccuracies is to provide options like checkboxes or drop-down menus. Studies show that dirty data can cost businesses around 15% of their revenue. Limiting data hoarding and instead focusing on being data-driven will help with having an accurate database.
3. Inability to Capitalize the Data Efficiently
It is essential to collect accurate data that is updated as frequently as possible; however, step number one. A business is collecting data for a purpose. If it is unable to capitalize the data collected, then the whole exercise is futile.
It is exceedingly significant that the business can capitalize the data quickly to maximize its interaction with the brand. This is a way to at least postpone the effect of logical data decay.
4. Database Collection and Maintenance is an Expensive Endeavor
Here, the term expensive are both considered in a subjective and an objective outlook. Objectively, yes, it is expensive to collect and maintain a myriad of data.
Subjectively, the cost of management of the database becomes unjustifiable if it extracts no value. It simply implies that if your data from your database cannot add any material value for the number of efforts that go into it, then the database is just a waste of money.
Advantages of Database Marketing
Database marketing can help marketers, consumers, and advertisers alike by:
- Identifying customer groups is a great way to categorize your customers into who is a first-time shopper and who is a loyal customer.
- Having a database helps marketers to figure out the best channels to contact potential clients.
- A database can help you to prioritize accounts that are more vital to your business.
- It provides access to a myriad of resources to increase customer retention.
- It is more cost-effective as you do not waste money on individuals that are unlikely to respond.
- It allows the marketer to create more relevant messages targeted to individual customers as per their tastes and preferences.
- Through deep insight into customer behavior, a marketer can predict customer behavior.
- The database can additionally be used to gather feedback.
The primary goal behind running a database marketing campaign is to create targeted or personalized content to generate quality leads and optimize conversions.
The effectiveness of such campaigns depends upon how target audiences are reacting to the campaign. Businesses need to check if their database marketing has led to the desired number of conversions or not.
On the concluding note, it is clear that database marketing gives you enough ways alongside data and information to contact potential clients and convert them. Marketers need to find ways to use that information to be on the mind of target audiences.
What are your thoughts about the effectiveness of database marketing in running personalized marketing campaigns?