In the database marketing approach, the entrepreneur or business owner learns a lot more about the customers and is able to provide better specialized offerings.
The concept behind online database marketing is to create a database that stores customer and/or prospect names, addresses, emails, purchasing data, and contact information, plus all other relevant business information.
Such information is collected at the point of sale. These could also include, among others, business transactions, income, assets, and investment goals. It is important to determine in advance the type of information to collect, and to ensure it is accurate and consistent. Since database marketing begins at the point of sale, without accurate, consistent and complete information, marketing will not work effectively.
Database Marketing Has Five Key Components:
Gathering of customer data,
Categorizing customers into specific groups in relation to the business,
Building the customer database,
Creating targeted offers for the particular customer category groups, and
Taking account or tracking the results to improve customer responses.
Four Ways Database Marketing Can Improve Your Business:
Create Models That Tell What Your Customers Are Like. A marketing database can be used to create descriptive and/or predictive models of your customers. This model provides a picture or tells you what your customers are like, as well as which of them are most loyal or most likely to defect. Once you have identified, for instance, a potential defector then you can do something to prevent this: through phone calls, emails, or other special offers to make them stay.
Improve Communications. It is significantly used to interact with customers in messages that are welcomed, to build loyalty and improve up-sales. It can also be used to boost the retention rate, increase assets per customer and reduce acquisition costs. Ask your customers how they would like to receive communications. It's their preference if they want letters, phone calls or emails. In addition, they might welcome a monthly newsletter or prefer to visit Web sites regularly. All relevant answers should be stored in your database.
Use as Repository of Customer Preferences. You get this information from your customers and prospects. All you need to do is ask. For example: What is your customer investing his money for? Is your customer’s money being earmarked for retirement? Do they have other options what to do with their money? And so forth. These answers are stored in the database for use as necessary.
Use the Database for Prospecting. Compile a list of your mail-responsive prospects and store these names into your created ‘prospect database.’ You can mail to them an offer, perhaps a free copy of a report on a timely topic that might be of interest to them and beneficial to your business. In return for the report, ensure that you ask them to respond. This works for you because responses will highlight who your interested prospects are.
It's easy to see how any normal business could be overwhelmed by this follow-up of customers’ and prospects’ information if handled manually. Database marketing can help your business manage this complexity with ease by generating communications that you can dispatch either in batches or automatically. Best of all, a lot of information that is valuable for business can be learned through database marketing.
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