Marketing Communications

DATABASE MARKETING 441

used to give a score (the likelihood of response or, in other words, the need of every customer

for the product or service offered in the mailing) to every potential prospect. Those prospects

for whom the estimated returns (based on response chance) would be higher than the mailing

cost are then selected for mailing. Product-driven database marketing uses customer information

to select the right customers for a certain product or service. This is a more targeted form of

direct marketing offering more relevant propositions to consumers and lowering mailing

costs for the direct marketer.

The disadvantages of this strategy are that too great a focus on action-driven mailings could

lead to cannibalisation, i.e. stealing sales from some of the other products of the company,

and incentives and loyalty systems could subsidise consumers who would have bought the

products without these incentives. This has a negative influence on profits.

Stage 3: Client-driven mailings

To take the negative aspects of product-driven database marketing into account, a measure

for individual client relationship value can be developed. The decision to contact certain

customers will depend on the change in this relationship value rather than the profits on

individual actions. Only customers who increase their relationship after a certain action

are targeted. This intro duces the concept of lifetime value^55 or the expected return a certain

customer will deliver during the years that he or she has a relationship with the company. This

implies an estimation of the lifetime of a client as well as the profitability of every individual

customer (share of wallet).^56 In this stage, the direct marketer tries to target the right customers

with the right products.

Stage 4: Multi-channel database marketing

This database marketing technique integrates the knowledge on channel sensitivity into

marketing activities. Some prospects are more open to direct mail than others. In this approach,

actions to sell the same kind of products or services are sent through different sales channels

(direct sales, personal selling, etc.). Which combination of sales channels will be used depends

on the sensitivity of every individual customer and the costs of each channel. Both types of

data are stored in the marketing database. Multi-channel marketing uses the database to offer

the right product to the right client through the best channel.

Stage 5: Event-driven database marketing

In stage 4, products and services are promoted and proposed during the action period. But

consumers’ needs are not always met during this action period. The chance of a mailing

arriving just in time, i.e. when the consumers are actually considering a certain purchase, is

slim. By the time they are planning the purchase, there is only a slight chance that they will

remember the mailing, and the action of competitors could get more attention. To avoid

this, it is necessary to adjust the timing of mailings and other marketing actions to the

moment when customers’ needs become prevalent. Needs often arise as a consequence of

certain events in the life of a customer (marriage, buying a house, birth of a child, moving,

etc.), or they are related to the relation between the client and the company (e.g. an infor-

mation request two weeks ago, €2500 in a customer’s bank account, etc.). In event-driven

database marketing, customers are actively followed to detect changes in needs and to offer

them the right products at the right moment (through the right channel). Smart chip cards,

Internet and call centres may be used to keep track of these changes. Instead of traditional

promotion planning done by a marketer, all actions take place at the most effective moment

for each individual client.

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