Most people are familiar with traditional or direct marketing and common practices like sending promotional mail to customers in hopes the mail spurs them to buy a product. However, advances in computer system technology have created a new form of direct marketing in database marketing.

Data has become one of the most valuable commodities in many industries, but the marketing industry places a high premium on data as many marketing strategies, especially database marketing, are heavily reliant on data. Database marketing uses a company's database consisting of customer data such as names, emails, phone numbers, addresses, purchase history, customer support tickets, and more. This data is then analyzed and used to build a personalized experience for customers in an effort to attract new business. Database marketing aims to improve the impersonal shotgun approach of direct marketing by understanding how customers want to be marketed to and using those insights to meet the customer's needs while still advertising products.

Benefits of Database Marketing

Customers have come to expect a personalized experience when interacting with businesses. Every customer has a particular way they would prefer to receive marketing, but until database marketing, it was not feasible for a business to customize content for each customer. Data may seem impersonal, but through data analysis, a company can build a profile for each customer and tailor their marketing campaigns to suit a customer's preferences in hopes of encouraging the customer to purchase a product.

The customer database is what allows database marketing to work; without the customer data, you cannot use database marketing. A customer database can help make marketing easier and more effective in a few key ways.

Data analysis can identify different groups of customers such as long-time customers, high-value customers, first-time customers, and occasional customers. Businesses tend to market to each of these customer groups differently. For example, a business might offer loyal customers a promotion but not extend the same offer to first-time customers.

Customer demographic information can also be used to group customers with similar customers to make marketing more efficient and effective. A customer database can group customers together based on their location to send marketing materials promoting cold-weather clothing to customers who live in cold climates. This also saves a business from spending money to send customers materials that are unlikely to invoke a positive response.

One of the simplest ways a business can make marketing content more personalized is by adding a field where a customer's name or other basic information can be slotted in by the customer database. You can add more personalization by referencing the state a customer lives in or offering a special deal for being a customer for a certain amount of time. Customers also tend to prefer certain methods of marketing. For example, some people would rather receive an email than a flyer in the mail. Most customers will tell a business their preferences in their account settings making it easy for the database to identify which marketing method a customer would like to be sent.

Database marketing can also benefit a business's customer support department. By providing customer service agents with a customer's full profile, they are able to better help the customer. A customer service agent can look up a customer's previous interactions with customer support to verify information or follow up with a customer who interacted with a different agent without missing any details. 

Challenges of Database Marketing

Database marketing can be a wonderful tool for businesses to improve their marketing strategies, but the practice comes with a few challenges, such as data accuracy and security. Database marketing is only effective if the database houses accurate data.

Customer data changes over time as people move or change their names, emails, and phone numbers which could leave your database filled with inaccurate data. Even well-managed databases experience data decay at a rate of between 2-3% a month, which could render a third of the database's data invalid after a year. Certain data fields are more likely to change than others with customer's names and phone numbers being less likely to change over time when compared to addresses or emails.

Customers can also enter their information incorrectly. Typos or incomplete data can affect a significant portion of a database, so it is worth exploring options like drop-down menus or checkboxes to reduce human error.

Databases take a long time to compile, so it is in your best interest to ensure your company's database is secure. Invest in surge protection to guard against potential electric fires and keep the computer that houses the database in a secure location where you can track who has access. Also, control who can digitally access the database to prevent accidents or malicious attacks. You can also hire a security service to protect your data with more sophisticated methods.

Database marketing can drastically improve a company's marketing effectiveness. By using customer data, you can pair customers with the type of marketing they would like to receive which can entice them to spend money with your business.