What is database marketing, and why is it important?

Database marketing is defined as the collection, analysis, and meaningful interpretations of the data for effective marketing and business advantage. Customer data consists of the customer name, address, email id, contact numbers, transaction history, frequently visited sites, and customer support interaction information. The data collection uses different sources like CRM systems, data warehouses, primary market research involving questionnaires and customer interviews both in-person and social media platforms. Till recently, the vital data customer data was not utilized that effectively and was only limited to retrieval in the occurrence of any customer issue. Database marketing has pushed the boundaries of data usage by putting it to work to create unique business opportunities comprising higher engagement and interaction. As a result, you must recognize the importance of database marketing to make your business grow and develop a successful marketing strategy around it.

 Market segmentation

Database marketing involved analysis of customer data. You can understand customers better with the help of segmentation as it analyses the customer buying behavior. The four standard market segmentation techniques are demography, geography, behavioral and psychographic. The demographic segment analyzes customer characteristics such as age, gender, ethnicity, culture, social status, and occupation. Geographic segmentation is location-based on customer country, region, city, and locality. Behavioral segmentation analyses the purchasing behavior along with the brand associations. It helps you understand, what are the customer’s products of interest? Interest in any particular brand? Impact of offers and promotions on the customer buying behavior and similar other behavioral aspects relative to purchasing decisions. The psychographic analysis is fast gaining higher importance as it helps understand the value system of the customer. Ethics, sustainability and diversity, and inclusion are increasingly becoming important in business operations, influencing customer buying decisions. Psychographic help understands the customer’s values, attitude, and opinions demonstrating the customer preferences.

Target market

You can identify your target market more effectively with the help of database marketing. The target market is the consumer sections that will deliver maximum business to you. Thus, you can use the database effectively through an improved understanding of the market size to market your products and services. You can always expand to a segment higher or lower to increase your target market. However, your primary target should be the one you should concentrate on to achieve long-term value and sustainability. An example of effective target marketing is Starbucks that targeted parents with young children. The future-proof strategy not only assisted in generating revenues from the current target base of young parents and achieved sustainability by introducing the product to the younger generation with little to no investments. To expand the business, you have to analyze the projected rate of returns on different market segments.

Market Position

You can achieve a distinct competitive advantage by positioning your products and services correctly in the market. The database analysis can provide valuable information to place the product in the right places through the proper channels. It will help you capture the larger picture comprising all the market players to devise an effective market positioning strategy. Multichannel marketing is critical for the current market, which may be either online, or the real world, or the mix of both. Database marketing allows you to cater to the market demands consistently. You can use different applications comprising mobile and other devices. You can also use various online channels comprising direct marketing, social media marketing, and word of mouth (WOM) marketing to increase your product reach.

Generating a communication Loop

The primary importance of database marketing is in developing healthy consumer interaction using social media platforms. You can use the information from the database analysis to create a personalized social media strategy as per the customer demographic and interests. Modern customers emphasize more personal experience and look for interaction that identifies their interests. You can create a more directed communication strategy targeting customer sensibilities of Generation X, Generation Y (millennial), and Generation Z. While it is essential to understand the customers through data, it is also necessary to consider the customer feedback. The feedback information is vital to devise more engaging and personalized marketing techniques that include offers and promotions based on customer feedback and interest. It is imperative to develop a closed-loop enhancing the product and services through continual customer feedback with a regular database update.

Your communication loop should have three activities. Effective listening, establishing relevance in marketing strategy and customer retention through enhanced product and service offerings. Establishing relevant communication is the next phase.