Strategic Database Marketing
(Arthur M. Hughes)
Strategic Database Marketing
Arthur M. Hughes
Strategic Database Marketing is about using Data mining and information gathered from data to determine the best ways to model marketing campaigns. Hughes?s main proposition is that the most profits from marketing campaigns come not from the acquisition of new customers, but the retention of old customers. Old, loyal customers are most often the ones that visit the most, spend the most, and have the greatest values in terms of profitability.
The tricky part is determining who exactly is one of these loyal customers and how to make all the customers loyal customers. Hughes believes that database marketing can be the most effective way of determining these key characterizations. He advocates the creation of large customer data filled databases in which the marketer can run things such as RFM analysis, statistical regressions, etc. to mine patterns out of data.
RFM analysis stands for recency, frequency, and monetary analysis. A marketer, by putting in data regarding a customer?s most recent purchases, frequencies of purchases, and monetary analysis regarding the amount of the purchase, the formulate an RFM score. The higher the score, the more likely the customer is to buy the product.
Developing an RFM score is not enough Hughes says, it is also important to characterize the customer into several different possible pools. There are transaction customers that simply buy for the sake of the deal, there are relationship buyers that buy because they feel they are being treated well and the company will consistently have something to offer them. There are program buyers and bargain hunters- groups of buyers that are large in size and either have too little clout or too much clout in price setting. Understand what classification a firm?s customers fall under is key to database marketing.
From there it?s important to just keep in mind the strategies a marketer should pursue to develop good relations with the customer. The marketer can pursue a lot of different strategies like sending cards, customer perks, and special services that will target the old and loyal customers. By doing this, a company can maximize its gains and maximize its profits through strategic marketing.
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